<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-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 14a-6(i)(1) 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 the 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
[CREDIT ACCEPTANCE CORPORATION LETTERHEAD]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held May 24, 1999
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 24,
1999, at 9:00 a.m., local time, for the following purposes.
1. To elect five directors to serve until the 2000 Annual Meeting of
Shareholders;
2. To approve a proposal to amend the 1992 Stock Option Plan to
increase the number of shares subject to the plan from 5,000,000
to 8,000,000 and to increase the number of options that may be
granted to any individual salaried employee in any three-year
period from 500,000 to 1,000,000; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record on April 5, 1999 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 14, 1999
<PAGE> 3
[CREDIT ACCEPTANCE CORPORATION LETTERHEAD]
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 24, 1999
----------------------------------
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 24, 1999, 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 14, 1999.
Only shareholders of record at the close of business on April 5, 1999
(the "Record Date") will be entitled to vote at the meeting or any adjournment
thereof. Each holder of the 46,298,904 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 named in this Proxy Statement
and for the proposal described 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 therefore, 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, 1999
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, 1999
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 ......................................................... 24,020,100 (a) 51.9%
Brett A. Roberts........................................................ 248,666 (b) *
Thomas A. FitzSimmons .................................................. 52,650 (c) *
Michael W. Knoblauch.................................................... 122,600 (d) *
Richard G. Vanderport................................................... 60,666 (e) *
Harry E. Craig.......................................................... 10,000 *
David T. Harrison....................................................... 4,800 *
Sam M. LaFata .......................................................... 9,000 (f) *
All Directors and Executive Officers as a Group (14 persons)............ 24,802,041 (g) 53.6%
Thomas W. Smith......................................................... 4,741,700 (h) 10.2%
Thomas N. Tryforos...................................................... 4,127,398 (h) 8.9%
Capital Guardian Trust Company.......................................... 3,145,000 (i) 6.8%
</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 235,666 shares which Mr. Roberts has the right to acquire upon
exercise of employee stock options.
(c) Includes 50,000 shares which Mr. FitzSimmons has the right to acquire
upon exercise of employee stock options.
(d) Includes 120,000 shares which Mr. Knoblauch has the right to acquire upon
exercise of employee stock options.
(e) Includes 50,666 shares which Mr. Vanderport 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 702,466 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 13-D
filed with the Securities and Exchange Commission by Mr. Thomas W. Smith
and Mr. Thomas N. Tryforos which reflect their beneficial ownership of
shares of Common Stock as of January 19, 1999. Mr. Thomas W. Smith
reported that he may be deemed to have sole voting power and dispositive
power over 642,200 shares and shared voting and dispositive power over
4,099,500 shares with Mr. Thomas N. Tryforos. Mr. Tryforos reported that
he has sole voting and dispositive power over 27,898 shares. Mr. Smith's
and Mr. Tryforos's business address is 323 Railroad Avenue, Greenwich,
Connecticut 06830.
(i) The number of shares is based on information contained in a Schedule 13-G
filed with the Securities and Exchange Commission by Capital Guardian
Trust Company which reflects its beneficial ownership of shares of Common
Stock as of December 31, 1998. Capital Guardian Trust Company reported
that it may be deemed to have sole voting power over 3,065,000 shares and
sole dispositive power over the entire 3,145,000 shares. Capital Guardian
Trust Company's business address is 11100 Santa Monica Boulevard, Los
Angeles, California 90025.
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. EXECUTED PROXIES WILL
BE VOTED 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 54; CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER OF THE COMPANY
Mr. Foss is the founder and principal shareholder of the Company, in
addition to owning and operating an affiliated company engaged in the sale of
used vehicles. He was formally named Chairman of the Board and Chief Executive
Officer of the Company in March 1992.
HARRY E. CRAIG, AGE 71; INDEPENDENT PERSONNEL CONSULTANT
Mr. Craig has been a self-employed consultant providing management
training services since 1986. Mr. Craig served in various managerial and other
capacities with Ford Motor Company for 30 years, most recently as Director,
Personnel and Organization Office of Ford Aerospace & Communications
Corporation. Mr. Craig became a director of the Company in June 1992.
THOMAS A. FITZSIMMONS; AGE 55; 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 its 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 56; PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
CLARKSTON STATE BANK
Mr. Harrison has been the President and Chief Executive Officer of
Clarkston State Bank since December 1998 and has been a director of Clarkston
Financial Corporation, the public holding company for Clarkston State Bank,
since December 1998. He 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 Trophy Homes, Inc., a residential builder, since
October 1996. 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 65; GENERAL MANAGER OF MANHEIM METRO DETROIT AUTO
AUCTION
Mr. LaFata has been General Manager of Manheim Metro Detroit Auto
Auction since February 1991 and has more than 30 years of experience in the
automotive sales industry. Mr. LaFata has served as a director of the Company
since June 1992.
3
<PAGE> 6
OTHER EXECUTIVE OFFICERS
BRETT A. ROBERTS; AGE 32; EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
Mr. Roberts 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.
DOUGLAS W. BUSK; AGE 38; VICE PRESIDENT AND TREASURER
Mr. Busk joined the Company in November 1996 and has been Vice
President 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 33; CORPORATE CONTROLLER AND ASSISTANT SECRETARY
Mr. Cavanaugh has been the Company's corporate controller since
joining the Company in 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.
ROBERT A. DERWA; AGE 62; 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 35; VICE PRESIDENT - COLLECTIONS
Mr. Knoblauch has been employed by the Company since 1992. He was
named Vice President - Collections in August 1995. He served as the Company's
collection manager from May 1994 to August 1995. Before joining the Company,
Mr. Knoblauch was on the financial staff of General Motors Corporation, Service
Parts Division.
CHARLES A. PEARCE; AGE 34; 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 employed
with the law firm of Rhoades, McKee, Boer, Goodrich and Titta from May 1990
until joining the Company in January 1996.
DAVID S. SIMMET; AGE 34; 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.
RICHARD G. VANDERPORT; AGE 50; VICE PRESIDENT - SALES
Mr. Vanderport was Vice President - Sales from 1989 to 1995. In 1995,
he was named president of an affiliated company and served in that capacity
until 1997. In December 1997, Mr. Vanderport rejoined the Company as Vice
President - Sales. Before joining the Company, Mr. Vanderport operated a used
car dealership and was enrolled as a dealer in the Company's financing program.
4
<PAGE> 7
ALLAN V. APPLE; AGE 58; 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.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held eleven meetings during 1998. 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.
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 1998.
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 1998.
(2) PROPOSAL TO APPROVE AN AMENDMENT TO THE 1992 STOCK OPTION PLAN
Proposed Amendment. The Board of Directors is seeking approval of an
amendment to the 1992 Stock Option Plan (the "Option Plan") which will increase
the number of shares subject to the Option Plan from 5,000,000 to 8,000,000
shares and which will increase the number of options that may be granted to any
individual salaried employee in any three-year period from 500,000 to 1,000,000
(subject to adjustment for stock split and certain other corporate events). The
amendment has been approved by the Board of Directors, subject to shareholder
approval. Approval of the Option Plan amendment requires the affirmative vote of
the holders of a majority of the shares of Common Stock voting on the proposal.
Abstentions and broker non-votes will have no effect with respect to this
proposal. The Board of Directors recommends a vote FOR the approval of the
proposal. Mr. Foss, who beneficially owns 51.9% of the Common Stock outstanding,
intends to vote for approval of the proposal. EXECUTED PROXIES WILL BE VOTED FOR
THE PROPOSAL TO AMEND THE OPTION PLAN UNLESS SHAREHOLDERS SPECIFY OTHERWISE IN
THEIR PROXIES.
Reasons for Proposed Amendment. The Option Plan is a key element of the
Company's compensation program. The purpose of this program is to attract and
retain executive officers and employees to lead the Company toward its goals
while aligning the financial interests of the Company's executive officers and
employees with the long term interests of the Company and its shareholders. The
Board of Directors believes that additional shares of Common Stock should be
made subject to the Option Plan and that the number of shares that may be
granted to any individual salaried employee should be increased to facilitate
future grants under the Option Plan consistent with the philosophy and
objectives of the Company's compensation program. Establishing limits on the
number of options that may be granted to any individual salaried employee is
necessary to exempt compensation realized in connection with future exercises of
such options from the $1 million cap on compensation imposed by Section 162(m)
of the Internal Revenue Code of 1986 (See "Compensation of Executive Officers --
Report of the Executive Compensation Committee -- Deductibility of Executive
Compensation"). The increase in the permitted size of option awards to a single
individual is based on the Board's determination of an increase in the maximum
number of option shares which would be required to be granted in any three-year
period to retain or attract an executive officer of the Company. The approval of
shareholders of the proposed amendment to the Option Plan will permit the
Company to continue to grant stock options as part of its compensation program.
A total of 5,000,000 shares of Common Stock have been set aside for
issuance upon exercise of options under
5
<PAGE> 8
the Option Plan. As of March 31, 1999, options for 3,926,954 shares are
outstanding, options for 974,487 shares have been exercised, and 98,559 shares
are available for future option grants to employees of the Company and its
subsidiaries. All 421 full-time U.S. employees are eligible to receive options
under the Option Plan. Options may be granted under the Option Plan until March
1, 2002.
Description of Option Plan. The Option Plan is administered by the
Executive Compensation Committee (the "Committee"). The Committee may delegate
to one or more officers or managers of the Company the authority to administer
the Option Plan with respect to participants who are not officers or directors
for purposes of Section 16 of the Securities Exchange Act of 1934 (the "Exchange
Act").
Options to be granted under the Option Plan may be incentive stock
options ("ISOs") meeting the requirements of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or may be options other than ISOs
(non-qualified options or "NQSOs"). The exercise price of an ISO will generally
be equal to the fair market value (as defined in the Option Plan) per share of
the Common Stock on the date of the grant, but will be higher if the grantee is
a substantial shareholder of the Company. The aggregate fair market value of the
Common Stock on the date of grant for which any participant may be granted ISOs
first exercisable in any year may not exceed $100,000. The exercise price of
NQSOs will be determined by the Committee but may not be less than 85% of the
fair market value per share of the Common Stock on the date of grant. The
closing price per share of the Common Stock on March 31, 1999 was $5-11/16. The
exercise price is required to be paid in full at the time of exercise in cash or
its equivalent or, in shares of Common Stock. ISOs and NQSOs granted under the
Option Plan will be exercisable for a term of not more than ten years as
determined by the Committee and, unless otherwise provided in the stock option
agreement relating to a particular option, will terminate upon the participant's
termination of employment to the extent not then exercisable. Options that have
become exercisable on or prior to the date of termination of employment
terminate at the earlier of: (i) the expiration date of the option; or (ii)
where such termination occurs other than as a result of death or disability,
three months after termination by employment. Options granted under the Option
Plan are not transferable by the grantee other than by will, the laws of descent
and distribution and, in the case of NQSOs, pursuant to a qualified domestic
relations order. All other terms, including the time or times at which an option
becomes exercisable, are determined by the Committee in its discretion. The
Committee, however, currently may not grant options to purchase more than
500,000 shares to any salaried employee in any three-year period. The approval
of shareholders of the proposed amendment to the Option Plan will increase that
limit to 1,000,000 shares. The Option Plan may be amended from time to time by
the Board of Directors.
Grants Under Option Plan. The following table sets forth the number of
shares subject to options granted under the Option Plan to the Officers named in
the "Summary Compensation Table" under "Compensation of Executive Officers," all
persons who received 5% or more of the options granted (other than persons whose
relationship with the Company has terminated), all current executive officers as
a group and all current employees as a group. No options have been granted under
the option plan to outside directors or to associates of directors or executive
officers of the Company. The exercise prices of all options granted under the
Option Plan (other than options granted on July 15, 1992), ranging from $2.17 to
$22.25, were at least equal to the fair market value of the Common Stock as of
the respective grant dates. The options granted on July 15, 1992, which was the
initial grant date, were granted at an exercise price of $2.17, which was the
initial public offering price of the Company's Common Stock. The granting of the
options on July 15, 1992 at a price different than the fair market value of the
Common Stock was approved by shareholders at the Company's 1993 Annual Meeting.
All options granted under the Option Plan vest over a three to five year period
and terminate ten years after the date of grant or earlier if employment is
terminated.
6
<PAGE> 9
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
SUBJECT TO OPTIONS
NAME OF PERSON OR GROUP PREVIOUSLY GRANTED
----------------------- ------------------
<S> <C>
Donald A. Foss................................................ 0
Brett A. Roberts.............................................. 515,000 (a)
Thomas A. FitzSimmons......................................... 225,000
Richard G. Vanderport......................................... 280,000 (b)
Michael W. Knoblauch.......................................... 310,000 (c)
Richard M. Roth............................................... 500,000
All Executive Officers as a Group............................. 2,067,000 (d)
All Other Employees as a Group................................ 2,478,792 (e)
</TABLE>
- ------------------------------
(a) Includes 36,000 exercised options.
(b) Includes 80,000 exercised options.
(c) Includes 10,000 exercised options.
(d) Includes 314,000 exercised options.
(e) Includes 304,838 exercised options.
Federal Income Tax Consequences. Under the Code as now in effect, at
the time an ISO is granted or exercised, the optionee will not be deemed to
receive any income and the Company will not be entitled to any deduction.
However, the difference between the exercise price and the fair market value of
the shares of Common Stock on the date of exercise is a tax preference item,
which may subject the optionee to the alternative minimum tax in the year of
exercise. The holder of an ISO generally will be accorded capital gain or loss
treatment on the disposition of Common Stock acquired by exercise of an ISO,
provided the disposition occurs more than two years after the date of grant and
more than one year after exercise. An optionee who disposes of shares acquired
upon exercise of an ISO prior to the expiration of the foregoing holding periods
recognizes ordinary income upon the disposition equal to the difference between
the exercise price and the lesser of the fair market value of the shares on the
date of exercise or the disposition price. To the extent ordinary income is
recognized by the optionee, the Company may deduct a corresponding amount as
compensation expense. Payment of the exercise price by surrendering shares of
Common Stock generally will not result in the recognition of a capital gain or
loss on the shares surrendered.
Upon the exercise of a NQSO, an optionee will recognize ordinary income
equal to the difference between the exercise price and the fair market value of
the Common Stock acquired and the Company will receive a corresponding deduction
upon withholding for income and employment taxes. Payment of the exercise price
by surrendering shares of Common Stock generally will not result in the
recognition of a capital gain or loss on the shares surrendered. When the
optionee disposes of the shares acquired by the exercise of the option, any
amount received in excess of the fair market value of the shares on the date of
exercise will be treated as capital gain.
7
<PAGE> 10
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 1998)
(collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
------------------------------------------
OTHER SECURITIES
NAME AND ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($)(A) COMPENSATION($)(B) OPTIONS/SARS (#) COMPENSATION($)(C)
------------------ ---- --------- ----------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C> <C>
Donald A. Foss............... 1998 $475,000 $ - $19,678 - $625
Chairman of the Board, 1997 450,000 - 16,076 - 625
President and 1996 400,000 150,000 10,000 - 625
Chief Executive Officer
Brett A. Roberts............. 1998 $255,000 $ - $ - 100,000 $895
Executive Vice President and 1997 225,000 - - 350,000 (d) 895
Chief Financial Officer 1996 150,000 135,000 - - 895
Thomas A. FitzSimmons (e).... 1998 $260,000 $ - $60,924 75,000 $ -
Managing Director 1997 58,000 - - 150,000 -
Credit Acceptance Corporation
U.K. Limited
Richard G. Vanderport (e).... 1998 $250,000 $ - $ - 10,000 $625
Vice President - Sales 1997 12,500 - - 150,000 -
Michael W. Knoblauch......... 1998 $200,000 $ - $ - 50,000 $895
Vice President - Collections 1997 170,000 - - 300,000 (d) 895
1996 120,000 125,000 - - 895
</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 for Mr. Foss are comprised of
automobile allowances and related tax "gross ups". The amount disclosed in
this column for Mr. FitzSimmons consists of overseas housing reimbursements
of $32,525, automobile allowances of $2,800 and tax gross-ups of $25,599.
(c) The amounts disclosed in this column for 1998 are comprised of the
Company's matching contribution for the 401(k) Profit Sharing Plan of $625
for each officer and $270 paid for split beneficiary life insurance
policies for Messrs. Roberts and Knoblauch.
(d) These amounts include new option grants, options granted in prior years and
repriced, and options granted in 1997 and repriced but does not deduct
options granted previously and subsequently cancelled pursuant to a
repricing. Options cancelled and repriced in 1997 were 225,000 and 200,000
for Messrs. Roberts and Knoblauch, respectively.
(e) Mr. FitzSimmons joined the Company in October 1997. Mr. Vanderport joined
the Company in December 1997.
8
<PAGE> 11
OPTIONS
The following table provides information on option grants during 1998
to the Named Executive Officers. All such options were granted under the
Company's Option Plan.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------------------
PERCENT
OF TOTAL POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
NUMBER OF SECURITIES OPTIONS/SARS FOR OPTION TERM (A)
UNDERLYING OPTIONS/ GRANTED TO EMPLOYEES EXERCISE PRICE EXPIRATION ---------------
NAME SARS GRANTED (#) IN FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
---- ---------------- -------------- --------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Donald A. Foss......... - -% $ - - $ - $ -
Brett A. Roberts....... 100,000 (a) 7.05% 8.313 03/06/08 527,850 1,332,919
Thomas A. FitzSimmons.. 75,000 (b) 5.28% 7.3125 12/31/08 337,274 861,910
Richard G. Vanderport.. 10,000 (a) 0.70% 8.313 03/06/08 52,785 133,292
Michael W. Knoblauch... 50,000 (a) 3.52% 8.313 03/06/08 263,925 666,459
</TABLE>
- -----------------------
(a) These options granted vest on a five year graduated basis at 6.67%, 13.33%,
20.00%, 26.67% and 33.33% starting on March 6, 1999, or immediately upon a
change of control of the Company.
(b) The options granted vest in three equal annual installments beginning
December 31, 1999, or immediately upon a change of control of the Company.
(c) 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.
The following table provides information with respect to the
unexercised options held as of December 31, 1998 by the Named Executive
Officers. There were no options exercised by the Named Executive Officers during
1998.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(A)
--------------------- ------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Donald A. Foss.......... - - $ - $ -
Brett A. Roberts........ 235,666 243,334 376,316 196,875
Thomas A. FitzSimmons... 50,000 175,000 65,625 131,250
Richard G. Vanderport... 50,666 149,334 161,252 96,250
Michael W. Knoblauch.... 120,000 180,000 87,500 175,000
</TABLE>
- ------------------------
(a) Values are based on the December 31, 1998 closing price of $7.3125 per
share on The Nasdaq Stock Market's National Market.
9
<PAGE> 12
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.
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 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 1998 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. As a result of this
evaluation and based principally on the Company's low return on equity, his 1998
base salary was established at $475,000, representing only a 5.6% increase over
the previous year's base salary of $450,000. Mr. Foss is eligible for the
Company's bonus and stock option programs. Mr. Foss did not receive a bonus or
stock options in 1998 as the Company did not meet the specific return on equity
targets established under the bonus plan.
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
10
<PAGE> 13
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.
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
DIRECTOR COMPENSATION
For 1998, 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, 1994 and ending on December 31, 1998 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, 1993 in the Company's Common Stock and in the foregoing indices and
assumes the reinvestment of dividends.
<TABLE>
<CAPTION>
[PERFORMANCE GRAPH]
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
------------- ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Credit Acceptance Corporation $100.00 $144.90 $169.39 $191.84 $ 63.27 $ 59.69
----------------------------------- ------------- ------------ ------------ ------------ ------------- ------------
Nasdaq Market Index 100.00 93.91 147.64 197.03 302.61 353.32
----------------------------------- ------------- ------------ ------------ ------------ ------------- ------------
Peer Group 100.00 104.99 136.18 169.23 207.00 291.96
----------------------------------- ------------- ------------ ------------ ------------ ------------- ------------
</TABLE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In the normal course of business, the Company has maintained business
relationships and engaged in certain transactions 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
$10.0 million in 1998, and represented approximately 2% of gross installment
contracts receivable as of December 31, 1998. The Company accepted contracts
from the affiliated company on the same terms as those accepted from
unaffiliated dealers.
12
<PAGE> 15
INDEBTEDNESS
During 1998, the affiliated company was indebted to the Company for
borrowings used for working capital purposes. The largest amount of such
indebtedness outstanding during 1998 was $682,000. As of March 31, 1999, all
such indebtedness had been repaid. The indebtedness was due on demand, bore
interest at prime plus 4% and was secured by cash collections on contracts
accepted from the affiliated company.
Pursuant to floor plan arrangements, as of December 31, 1998, the
affiliated company was indebted to the Company for $4.6 million. The largest
amount of such indebtedness outstanding during 1998, including accrued interest,
was $11.6 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 and 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 and the
affiliated company will share specified services, including services relating to
insurance management, payroll, tax return preparation and retaining
professionals. The Company and the affiliated company reimburse each other for
the cost of such services which 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 costs include 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 1998, the Company charged the affiliated company
approximately $248,000 and was charged approximately $80,000 under the Services
Agreement.
INDEPENDENT ACCOUNTANTS
On April 16, 1998, Arthur Andersen LLP informed the Company that the
client-auditor relationship between Arthur Andersen LLP and the Company had
ceased. Although the Company had not communicated such fact to Arthur Andersen
LLP, this notification followed the Company's determination to seek competitive
bids from independent accounting firms, including Arthur Andersen LLP, with
respect to the engagement of independent accountants to audit the Company's
financial statements for the year ending December 31, 1998. The Company and
Arthur Andersen LLP concur that such notification constitutes an indication by
Arthur Andersen LLP that it declines to stand for re-election within the meaning
of Item 4 (a) of Form 8-K, although the Company is not required to seek
shareholder approval or ratification of the appointment of independent
accountants. In selecting independent accountants for its fiscal year ending
December 31, 1998, the Company placed no limitations on Arthur Andersen LLP in
responding fully to inquiries of the successor accountant.
The reports of Arthur Andersen LLP on the Company's financial
statements for each of the years in the two year period ended December 31, 1997
contained no adverse opinion or disclaimer of opinion and were not qualified or
modified as to uncertainty, audit scope or accounting principle.
In connection with its audits for each of the two years ended December
31, 1997 and from January 1, 1998 through April 16, 1998, (i) there were no
disagreements between the Company and Arthur Andersen LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements if not resolved to the satisfaction of
Arthur Andersen LLP would have caused them to make reference thereto in their
report on the financial statements for such fiscal years and (ii) there were no
reportable events as defined in Regulation S-K Item 304 (a)(1)(v).
13
<PAGE> 16
The Company provided Arthur Andersen LLP with a copy of the above
disclosures which the Company made in response to Item 304 (a) of Regulation
S-K. Arthur Anderson LLP furnished the Securities and Exchange Commission a
letter stating it agrees with such disclosures.
The Company engaged Deloitte & Touche LLP as its new independent
accountants as of June 24, 1998. During the two fiscal years ending December 31,
1997 and through June 24, 1998, the Company had not consulted with Deloitte &
Touche LLP regarding either (i) (A) the application of accounting principles to
a specified translation, either completed or proposed; or (B) the type of audit
opinion that might be rendered on the Company's financial statements, and either
a written report was provided to the Company or oral advice was provided that
Deloitte & Touche LLP concluded was an important factor considered by the
Company in reaching a decision as to the accounting, auditing or financial
reporting issue; or (ii) any matter that was either the subject of disagreement
(as the term is defined in Item 304 (a) (1) (iv) of Regulation S-K and the
related instructions to Item 304 of Regulation S-K) or a reportable event (as
that term is described in Item 304 (a) (1) (v) of Regulation S-K).
The Board of Directors, upon the recommendation of the Company's Audit
Committee, has appointed Deloitte & Touche LLP as the Company's independent
accountants to audit the consolidated financial statements of the Company for
the 1999 fiscal year. Representatives of Deloitte & Touche LLP will be present
at the meeting to respond to appropriate questions from the shareholders and
will be given the opportunity to make a statement should they desire to do so.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's officers and directors, and persons who own more
than 10% of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission ("SEC"). Officers, directors and greater than 10% shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
received by it since January 1, 1998, or written representations from certain
reporting persons that no Forms 5 were required for those persons, the Company
believes that all filing requirements applicable to its officers, directors, and
greater than 10% beneficial owners were complied with, except that David T.
Harrison, member of the Board of Directors, filed one late report disclosing one
transaction.
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 the Notice of Annual Meeting and this Proxy Statement is
a copy of the Company's 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.
14
<PAGE> 17
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals by shareholders which are intended to be presented at the
2000 Annual Meeting of Shareholders must be submitted to the Secretary of the
Company no later than December 16, 1999 in order to be considered for inclusion
in the Company's 2000 proxy materials.
By Order of the Board of Directors,
Donald A. Foss
Chairman, President and Chief Executive Officer
April 14, 1999
15
<PAGE> 18
CREDIT ACCEPTANCE CORPORATION
1992 STOCK OPTION PLAN
(as amended and restated May 1997)
1. PURPOSE. The purpose of the Plan is to promote the best
interests of the Company and its shareholders by giving participants a greater
personal interest in the success of the Company in order to create additional
incentive for participants to make greater efforts on behalf of the Company.
2. ADMINISTRATION. (a) The selection of participants in the Plan
and decisions concerning the timing, pricing and amount of any grant of options
under the Plan shall be made by the Committee. Except as provided in Section 12
of the Plan, the Committee shall interpret the Plan, prescribe, amend, and
rescind rules and regulations relating to the Plan, and make all other
determinations necessary or advisable for its administration. The decision of
the Committee on any question concerning the interpretation of the Plan or any
option granted under the Plan shall be final and binding upon all participants.
(b) The Committee may delegate to one or more officers or
managers of the Company or a committee of such officers or managers, the
authority, subject to such terms and limitations as the Committee shall
determine, to grant options to, or to cancel, modify, waive rights with respect
to, alter, discontinue or terminate options held by participants who are not
officers or directors of the Company for purposes of Section 16 of the
Securities Exchange Act of 1934, as amended.
3. PARTICIPANTS. Participants in the Plan shall be such key
Employees as the Committee may select from time to time. The Committee may grant
options to an individual upon the condition that the individual become an
Employee, provided that the option shall be deemed to be granted only on the
date the individual becomes an Employee.
4. STOCK. The stock subject to options under the Plan shall be
the Common Stock, and may be either authorized and unissued shares or treasury
shares held by the Company. The total amount of Common Stock on which options
may be granted under the Plan shall not exceed 5,000,000 shares (as adjusted for
all stock splits through January 1, 1995), subject to adjustment in accordance
with Section 10. Shares subject to any unexercised portion of a terminated,
cancelled or expired option granted under the Plan may again be subjected to
options under the Plan.
5. AWARD OF OPTIONS. Subject to the limitations set forth in the
Plan, the Committee from time to time may grant options to such participants and
for such number of shares of Common Stock and upon such other terms (including,
without limitation, the exercise price and the times at which the option may be
exercised) as it shall designate; provided that during any three-year period, no
salaried Employee shall receive options to purchase more than 500,000 shares of
Common Stock (as adjusted from time to time upon the occurrence of a corporate
transaction or event described in the first sentence of Section 10). Each option
shall be evidenced by a stock option agreement in such form and containing such
provisions as the Committee shall deem appropriate, provided that such terms
shall not be inconsistent with the Plan. The Committee may designate any option
granted as either an Incentive Stock Option or a Nonqualified Stock Option, or
the Committee may designate a portion of an option as an Incentive Stock Option
or a Nonqualified Stock Option. Any participant may hold more than one option
under the Plan and any other stock option plan of the Company. The date on which
an option is granted shall be the date of the Committee's authorization of the
option or such later date as shall be determined by the Committee at the time
the option is authorized.
Any option intended to constitute an Incentive Stock Option
shall comply with the following requirements in addition to the other
requirements of the Plan: (a) the exercise price per share for each Incentive
Stock Option granted under the Plan shall be equal to the Fair Market Value per
share of Common Stock on the date the option is granted; provided that no
Incentive Stock Option shall be granted to any participant who owns (within the
meaning of Section 424(d) of the Code) stock of the Company, or any Parent or
Subsidiary, possessing more than 10% of the total combined voting power of all
classes of stock of such Company, Parent or Subsidiary unless, at the date of
grant of an option to such participant, the exercise price for the option is at
least 110% of the Fair Market Value of the shares
<PAGE> 19
subject to option and the option, by its terms, is not exercisable more than
five years after the date of grant; (b) the aggregate Fair Market Value of the
underlying Common Stock at the time of grant as to which Incentive Stock Options
under the Plan (or a plan of a Subsidiary) may first be exercised by a
participant in any calendar year shall not exceed $100,000 (to the extent that
an option intended to constitute an Incentive Stock Option shall exceed the
$100,000 limitation, the portion of the option that exceeds such limitation
shall be deemed to constitute a Nonqualified Stock Option); and (c) an Incentive
Stock Option shall not be exercisable after the tenth anniversary of the date of
grant or such lesser period as the Committee may specify from time to time.
A Nonqualified Stock Option shall be exercisable for a term not
to exceed 10 years, or such lesser period as the Committee shall determine. The
exercise price per share of a Nonqualified Stock Option shall not be less than
85% of the Fair Market Value of the Common Stock on the date the option is
granted.
6. PAYMENT FOR SHARES. The purchase price for shares of Common
Stock to be acquired upon exercise of an option granted hereunder shall be paid
in full, at the time of exercise, in any of the following ways: (a) in cash, (b)
by certified check, bank draft or money order, (c) by tendering to the Company
shares of Common Stock then owned by the participant, duly endorsed for transfer
or with duly executed stock power attached, which shares shall be valued at
their Fair Market Value as of the date of such exercise and payment or (d) by
delivery to the Company of a properly executed exercise notice, acceptable to
the Company, together with irrevocable instructions to the participant's broker
to deliver to the Company a sufficient amount of cash to pay the exercise price
and any applicable income and employment withholding taxes, in accordance with a
written agreement between the Company and the brokerage firm ("Cashless
Exercise") if, at the time of exercise, the Company has entered into such an
agreement.
7. WITHHOLDING TAXES.
The Company shall have the right to withhold from a
participant's compensation or require a participant to remit sufficient funds to
satisfy applicable withholding for income and employment taxes upon the exercise
of an option. A participant may make an election, notice of which shall be in
writing, to tender previously-acquired shares of Common Stock or have shares of
Common Stock withheld from the exercise, provided that the shares have an
aggregate Fair Market Value on the date of exercise of the option sufficient to
satisfy in whole or in part the applicable withholding taxes, or the Cashless
Exercise procedure described in Section 6 may be utilized to satisfy the
withholding requirements related to the exercise of an option.
8. NON-ASSIGNABILITY. No option shall be transferable by a
participant except by will or the laws of descent and distribution or, in the
case of a Nonqualified Stock Option, pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder. During the lifetime of a participant, an
option shall be exercised only by the optionee. No transfer of an option shall
be effective to bind the Company unless the Company shall have been furnished
with written notice thereof and such evidence as the Company may deem necessary
to establish the validity of the transfer and the acceptance by the transferee
of the terms and conditions of the option.
9. TERMINATION OF EMPLOYMENT. Unless otherwise provided in the
stock option agreement relating to a particular option: (a) if, prior to the
date that such option shall first become exercisable, the participant's
Employment shall be terminated, with or without cause, or by the act, death,
Disability, or retirement of the participant, the participant's right to
exercise the option shall terminate and all rights thereunder shall cease; and
(b) if, on or after the date that such option shall first become exercisable, a
participant's Employment shall be terminated for any reason other than death or
Disability, the participant shall have the right, prior to the earlier of (i)
the expiration of the option or (ii) three months after such termination of
Employment, to exercise the option to the extent that it was exercisable and is
unexercised on the date of such termination of Employment, subject to any other
limitation on the exercise of the option in effect at the date of exercise; and
(c) if, on or after the date that such option shall have become exercisable, the
participant shall die or become Disabled while an Employee or while such option
remains exercisable, the participant or the executor or administrator of the
estate of the participant (as the case may be), or the person or persons to whom
the option shall have been transferred by will or by the laws of descent and
distribution, shall have the right, prior to
2
<PAGE> 20
the earlier of (i) the expiration of the option or (ii) one year from the date
of the participant's death or termination due to such Disability to exercise the
option to the extent that it was exercisable and unexercised on the date of
death, subject to any other limitation on exercise in effect at the date of
exercise
.
The transfer of an Employee from one corporation to another
among the Company, any Parent and any Subsidiary, or a leave of absence with the
written consent of the Company, shall not constitute a termination of Employment
for purposes of the Plan.
10. ADJUSTMENTS. In the event that the Committee shall determine
that any dividend or other distribution (whether in the form of cash, Common
Stock, other securities, or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Common Stock or other securities of the
Company, issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event
affects the Common Stock such that an adjustment is determined by the Committee
to be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(a) the number and type of shares of Common Stock which thereafter may be made
the subject of options, (b) the number and type of shares of Common Stock
subject to outstanding options, and (c) the exercise price with respect to any
option, or, if deemed appropriate, make provision for a cash payment to the
holder of an outstanding option; provided, however, in each case, that with
respect to Incentive Stock Options no such adjustment shall be authorized to the
extent that such authority would cause the Plan to violate Section 422 of the
Code or any successor provision thereto; and provided further, however, that the
number of shares of Common Stock subject to any option shall always be a whole
number. In the event of a Change of Control, options under the Plan shall be
treated as the Committee may determine (including acceleration of vesting and
settlements of options) at the time of grant or at a subsequent date as provided
in the stock option agreement reflecting the grant of such options.
11. RIGHTS PRIOR TO ISSUANCE OF SHARES. No participant shall
have any rights as a shareholder with respect to any shares covered by an option
until the issuance of a stock certificate to the participant for such shares. No
adjustment shall be made for dividends or other rights with respect to such
shares for which the record date is prior to the date such certificate is
issued.
12. TERMINATION AND AMENDMENT. The Board of Directors (the
"Board") may terminate the Plan, or the granting of options under the Plan, at
any time. No Incentive Stock Option shall be granted under the Plan after March
1, 2002. Termination of the Plan shall not affect the rights of the holders of
any options previously granted.
The Board may amend or modify the Plan at any time and from time
to time. No amendment, modification, or termination of the Plan shall in any
manner affect any option granted under the Plan without the consent of the
participant holding the option.
13. APPROVAL OF PLAN. The Plan shall be subject to the approval
of the holders of at least a majority of the shares of Common Stock of the
Company present and entitled to vote at a meeting of shareholders of the Company
held within 12 months after adoption of the Plan by the Board. No option granted
under the Plan may be exercised in whole or in part until the Plan has been
approved by the shareholders as provided herein. If not approved by shareholders
within such 12-month period, the Plan and any options granted hereunder shall
become void and of no effect.
14. EFFECT ON EMPLOYMENT. Neither the adoption of the Plan nor
the granting of any option pursuant to it shall be deemed to create any right in
any individual to be retained as an Employee.
15. CERTAIN DEFINITIONS. A "Change in Control" shall mean (i)
consummation of any merger or consolidation with respect to which the Company or
any Parent is a constituent corporation (other than a transaction for the
purpose of changing the
3
<PAGE> 21
Company's corporate domicile), any liquidation or dissolution of the Company
or any sale of all or substantially all of the Company's assets or (ii) a change
in the identity of a majority of the members of the Company's Board of Directors
within any twelve-month period, which change or changes are not recommended by
the incumbent directors immediately prior to any such change or changes.
The "Code" is the Internal Revenue Code of 1986, as amended.
The "Committee" is a committee of two or more directors of the
Company, each of whom is a "non-employee director" as defined in Rule 16b-3
under the Exchange Act.
The "Common Stock" is the common stock of the Company.
The "Company" is Credit Acceptance Corporation, a Michigan
corporation.
"Disabled" or "Disability" means permanently disabled as defined
in Section 22(e)(3) of the Code.
"Employee" means an individual with an "employment relationship"
with the Company, or any Parent or Subsidiary, as defined in Regulation
1.421-7(h) promulgated under the Code, and shall include, without limitation,
employees who are directors of the Company, or any Parent or Subsidiary.
"Employment" means the state of being an Employee.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean the average of the high and low
sale prices per share of the Common Stock reported in the Wall Street Journal
for the last preceding day on which the Common Stock was traded prior to the
date with respect to which the fair market value is to be determined, as
determined by the Committee in its sole discretion; provided, however, that Fair
Market Value with respect to the initial option grants approved by the Committee
on July 15, 1992 shall be deemed to be the initial public offering price per
share of the Company's Common Stock of $13.00 ($6.50 after adjustment for the
two-for-one stock split paid March 17, 1993).
An "Incentive Stock Option" is an option intended to meet the
requirements of Section 422 of the Code.
A "Nonqualified Stock Option" is an option granted under the
Plan other than an Incentive Stock Option.
"Parent" means any "parent corporation" of the Company as
defined in Section 424(e) of the Code.
The "Plan" is the 1992 Stock Option Plan.
"Subsidiary" means any "subsidiary corporation" of the Company
as defined in Section 424(f) of the Code.
4
<PAGE> 22
<TABLE>
<S><C>
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| |
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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
-----------------------------------------------------------------------------------------------------------------------
--- --- ---
2. To approve the proposal to amend the 1992 Stock Option Plan. FOR |X| AGAINST |X| ABSTAIN |X|
--- --- ---
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 ---
(X) IN BLACK OR BLUE INK. | |
---
(PLEASE SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
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 Brett A. Roberts, 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 24, 1999 at 9:00 a.m., local time,
and at any adjournments thereof, upon the matters proposed by the Company and listed on the other side of this proxy.
This Proxy, when properly executed, will be voted in the manner directed. IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR THE NOMINEES NAMED AND FOR THE PROPOSALS ON THE OTHER SIDE. 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 14, 1999 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 14, 1999 and ratifies all that the proxies or either of them or 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
</TABLE>
