<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 000-20202
CREDIT ACCEPTANCE CORPORATION
(Exact name of registrant as specified in its charter)
MICHIGAN 38-1999511
(State or other jurisdiction of (IRS Employer Identification)
incorporation or organization)
25505 WEST TWELVE MILE ROAD, SUITE 3000
SOUTHFIELD, MICHIGAN 48034-8339
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: 248-353-2700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/. No / /.
Indicate the number of shares outstanding of each of the issuer's class
of common stock, as of the latest practicable date.
The number of shares outstanding of Common Stock, par value $.01, on May 12,
2000 was 44,723,054.
<PAGE> 2
TABLE OF CONTENTS
PART I. - FINANCIAL INFORMATION
<TABLE>
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets -
As of December 31, 1999 and March 31, 2000................................................ 1
Consolidated Income Statements -
Three months ended March 31, 1999 and March 31, 2000...................................... 2
Consolidated Statements of Cash Flows -
Three months ended March 31, 1999 and March 31, 2000...................................... 3
Consolidated Statement of Shareholders' Equity -
Three months ended March 31, 2000......................................................... 4
Notes to Consolidated Financial Statements...................................................... 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS....................................................................... 6
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS..................................... 13
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS............................................................................... 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................................ 15
SIGNATURES ................................................................................................... 16
INDEX OF EXHIBITS............................................................................................. 17
EXHIBITS...................................................................................................... 18
</TABLE>
<PAGE> 3
PART I. - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of
-------------------------------------
(Dollars in thousands) December 31, 1999 March 31, 2000
----------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents.......................................... $ 11,122 $ 11,900
Investments........................................................ 11,569 11,740
Installment contracts receivable................................... 573,120 582,911
Allowance for credit losses........................................ (4,742) (4,435)
-------------- --------------
Installment contracts receivable, net.......................... 568,378 578,476
------------- -------------
Retained interest in securitization................................ 4,105 4,428
Floor plan receivables............................................. 15,492 12,121
Notes receivable................................................... 3,610 4,508
Property and equipment, net........................................ 18,243 17,870
Investment in operating leases, net................................ 8,162 19,264
Income taxes receivable............................................ 12,686 2,370
Other assets....................................................... 6,873 7,720
------------- -------------
TOTAL ASSETS............................................................ $ 660,240 $ 670,397
============= =============
LIABILITIES:
Senior notes....................................................... $ 30,579 $ 30,579
Lines of credit.................................................... 36,994 65,306
Mortgage loan payable to bank...................................... 8,215 8,062
Secured financing.................................................. 83,197 57,563
Accounts payable and accrued liabilities........................... 25,813 27,758
Deferred dealer enrollment fees, net............................... 524 701
Dealer holdbacks, net.............................................. 202,143 209,067
Deferred income taxes, net......................................... 9,800 9,051
------------- -------------
TOTAL LIABILITIES....................................................... 397,265 408,087
------------- -------------
SHAREHOLDERS' EQUITY
Common stock....................................................... 461 449
Paid-in capital.................................................... 128,917 123,799
Retained earnings.................................................. 132,303 138,029
Accumulated other comprehensive income-cumulative
translation adjustment........................................... 1,294 33
------------- -------------
TOTAL SHAREHOLDERS' EQUITY............................................... 262,975 262,310
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............................. $ 660,240 $ 670,397
============= =============
</TABLE>
1
<PAGE> 4
CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED INCOME STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------------
(Dollars in thousands, except per share data) 1999 2000
-------------------- ----------------
<S> <C> <C>
REVENUE:
Finance charges............................................. $ 19,405 $ 20,039
Premiums earned............................................. 2,445 2,601
Lease revenue............................................... - 1,590
Other income................................................ 8,511 5,237
----------- -----------
Total revenue........................................... 30,361 29,467
COSTS AND EXPENSES:
Operating expenses.......................................... 14,549 12,691
Provision for credit losses................................. 2,136 2,447
Provision for claims........................................ 831 776
Depreciation of leased vehicles............................. - 640
Interest.................................................... 4,527 4,193
----------- -----------
Total costs and expenses................................ 22,043 20,747
----------- -----------
Operating income................................................. 8,318 8,720
----------- -----------
Foreign exchange loss....................................... (45) (14)
------------ ------------
Income before provision for income taxes......................... 8,273 8,706
Provision for income taxes.................................. 2,894 2,980
----------- -----------
Net income....................................................... $ 5,379 $ 5,726
=========== ===========
Net income per common share:
Basic....................................................... $ 0.12 $ 0.13
========== ==========
Diluted..................................................... $ 0.12 $ 0.13
========== ==========
Weighted average shares outstanding:
Basic....................................................... 46,298,904 45,363,107
========== ==========
Diluted..................................................... 46,705,859 45,630,601
========== ==========
</TABLE>
2
<PAGE> 5
CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in thousands) Three Months Ended
March 31,
----------------------------------
1999 2000
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income.......................................................... $ 5,379 $ 5,726
Adjustments to reconcile net income to net cash
provided by operating activities -
Credit for deferred income taxes........................... (1,100) (749)
Depreciation of property and equipment..................... 1,099 1,026
Depreciation of leased vehicles............................ - 640
Amortization on retained interest in securitization........ (502) (49)
Provision for credit losses................................ 2,136 2,276
Provision for residual losses.............................. - 171
Dealer stock option plan expense........................... 33 11
Change in operating assets and liabilities -
Unearned insurance premiums, insurance reserves and fees... (1,372) (81)
Income taxes receivable.................................... - 10,316
Other assets............................................... 1,057 (1,045)
Accounts payable and accrued liabilities................... 3,926 1,945
Income taxes payable....................................... 3,758 -
Deferred dealer enrollment fees, net....................... (111) 177
--------------- -------------
Net cash provided by operating activities.............. 14,303 20,364
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collected on installment contracts receivable............. 94,350 82,822
Advances to dealers and payments of dealer holdback................. (66,062) (88,465)
Operating lease originations........................................ (80) (12,046)
Operating lease liquidations........................................ - 331
Net purchases of investments held to maturity....................... (180) (171)
Decrease (increase) in floor plan receivables....................... (1,857) 3,371
Decrease (increase) in notes receivable............................. 39 (898)
Purchase of property and equipment.................................. (835) (653)
--------------- --------------
Net cash provided by (used in) investing activities.... 25,375 (15,709)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under mortgage loan payable to bank.................. (62) (153)
Net borrowings (repayments) under line of credit agreement.......... (32,098) 28,312
Repayments of secured financing..................................... - (25,634)
Repurchase of common stock.......................................... - (5,178)
Proceeds from stock options exercised............................... 77 37
-------------- -------------
Net cash used in financing activities.................. (32,083) (2,616)
--------------- --------------
Effect of exchange rate changes on cash................ (2,062) (1,261)
--------------- --------------
NET INCREASE IN CASH..................................................... 5,533 778
Cash and cash equivalents - beginning of period..................... 13,775 11,122
-------------- -------------
Cash and cash equivalents - end of period........................... $ 19,308 $ 11,900
============== =============
</TABLE>
3
<PAGE> 6
CREDIT ACCEPTANCE CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in thousands) Accumulated
Total Other
Shareholders' Comprehensive Common Paid In Retained Comprehensive
Equity Income Stock Capital Earnings Income
------------- ------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1999............. $ 262,975 $ 461 $ 128,917 $ 132,303 $ 1,294
Comprehensive income:
Net income......................... 5,726 $ 5,726 5,726
----------
Other comprehensive income:
Foreign currency translation (1,261)
adjustment..................... (1,261) (1,261)
Tax on other comprehensive
loss........................... 441
----------
Other comprehensive loss......... (820)
-----------
Total comprehensive income............ $ 4,906
==========
Repurchase and retirement of
common stock........................ (5,178) (12) (5,166)
Stock options exercised............... 37 37
Dealer stock option plan expense...... 11 11
----------- ----------- ----------- ----------- ----------
Balance - March 31, 2000................ $ 262,310 $ 449 $ 123,799 $ 138,029 $ 33
=========== =========== =========== =========== ==========
</TABLE>
4
<PAGE> 7
CREDIT ACCEPTANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The results of operations for interim periods are not necessarily
indicative of actual results achieved for full fiscal years. The consolidated
balance sheet at December 31, 1999 has been derived from the audited financial
statements at that date but does not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. Certain amounts in the 1999 financial statements have been
reclassified to conform to the 2000 presentation. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. NET INCOME PER SHARE
Basic net income per share amounts are based on the weighted average
number of common shares outstanding. Diluted net income per share amounts are
based on the weighted average number of common shares and potentially dilutive
securities outstanding. Potentially dilutive securities included in the
computation represent shares issuable upon assumed exercise of stock options
which would have a dilutive effect.
3. BUSINESS SEGMENT INFORMATION
The Company operates in two reportable business segments: CAC North America and
CAC United Kingdom. Selected segment information is set forth below (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1999 2000
----------- -------------
<S> <C> <C>
Total revenue:
CAC North America...................................................... $ 22,738 $ 23,308
CAC United Kingdom..................................................... 4,023 4,821
Other.................................................................. 3,600 1,338
----------- -------------
30,361 29,467
=========== =============
Income before interest and taxes:
CAC North America...................................................... 9,926 11,090
CAC United Kingdom..................................................... 1,922 1,668
Other.................................................................. 952 141
----------- -------------
$ 12,800 $ 12,899
=========== =============
Reconciliation of total income before interest and taxes to consolidated income
before provision for income taxes:
Total income before interest and taxes................................. 12,800 12,899
Interest expense....................................................... (4,527) (4,193)
------------ --------------
Consolidated income before provision for income taxes....................... $ 8,273 $ 8,706
=========== =============
</TABLE>
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31,
2000
TOTAL REVENUE. Total revenue consists of i) finance charges on installment
contracts; ii) premiums earned on service contracts, credit life and collateral
protection insurance programs; iii) lease revenue on investments in operating
leases; and iv) other income, which consists primarily of fees earned on third
party service contract products, floor plan financing interest income and fees
and dealer enrollment fees and, during the three months ended March 31, 1999,
also consisted of revenue from the Company's credit reporting and auction
services subsidiaries which were sold on May 7, 1999 and December 15, 1999,
respectively. As a result of the following factors, total revenue decreased from
$30.4 million for the three months ended March 31, 1999 to $29.5 million for the
same period in 2000, representing a decrease of 2.9%.
Finance charges increased from $19.4 million for the three months ended March
31, 1999 to $20.0 million for the same period in 2000, representing an increase
of 3.3%. This increase is primarily the result of the increase in the average
annualized yield on the Company's installment contract portfolio and, to a
lesser extent, the increase in contract originations for the period. The volume
of contract originations for the Company's North America operations increased
from $114.4 million for the three months ended March 31, 1999 to $135.3 million
for the same period in 2000. The volume of contract originations for the
Company's United Kingdom operations increased from $13.5 million for the three
months ended March 31, 1999 to $30.2 million for the same period in 2000. Based
upon reviews of dealer profitability and improvements in credit quality on
installment contracts originated since the fourth quarter of 1997, in an effort
to increase origination volumes, the Company has introduced new advance
programs, both in the United States and United Kingdom, which have increased the
Company's overall advance rates. The Company's advances to dealers and payment
of dealer holdback, as a percent of gross installment contracts accepted,
increased from 51.6% for the three months ended March 31, 1999 to 53.5% for the
same period in 2000. There can be no assurance that higher advance rates will
lead to increased origination volumes in future periods or that advance rates
will not need to be reduced in future periods based on continued review of
dealer profitability and credit quality. While management expects the increased
advance rates to have a positive effect on the Company's results, higher advance
rates increase the Company's risk of loss on dealer advances.
The average annualized yield on the Company's installment contract portfolio,
calculated using finance charge revenue divided by average installment contracts
receivable, was approximately 12.1% and 13.9% for the three months ended March
31, 1999 and 2000, respectively. The increase in the average yield is due to a
decrease in the percentage of installment contracts which were in non-accrual
status. The percentage of installment contracts which were in non-accrual status
was 29.1% and 20.8% as of March 31, 1999 and 2000, respectively.
Premiums earned increased, from $2.4 million for the three months ended March
31, 1999 to $2.6 million for the same period in 2000, representing an increase
of 6.4%. Premiums on the Company's service contract program are earned on a
straight-line basis over the life of the service contracts. Premiums reinsured
under the Company's credit life program are earned over the life of the
contracts using the pro rata and sum-of-digits methods. The increase in premiums
earned is consistent with the increase in finance charges and results primarily
from the increase in origination volumes.
Lease revenue represents income from the Company's automotive leasing business
unit, which began operations in 1999. Income from operating lease assets is
recognized on a straight-line basis over the scheduled lease term. Lease
originations were $80,000 for the three months ended March 31, 1999 compared to
$12.0 million for the same period in 2000.
Other income decreased from $8.5 million for the three months ended March 31,
1999 to $5.2 million for the same period in 2000, representing a decrease of
38.5%. The decrease is primarily due to the absence of revenues from the
Company's credit reporting and auction services subsidiaries, which were sold on
May 7, 1999 and December 15, 1999, respectively. The decrease is partially
offset by an increase in fees earned on third party service contract products
offered by dealers on installment contracts, as the volume of this business has
increased proportionately with the increase in
6
<PAGE> 9
installment contract originations.
OPERATING EXPENSES. Operating expenses, as a percent of total revenue, decreased
from 47.9% for the three months ended March 31, 1999 to 43.1% for the same
period in 2000. Operating expenses consist of salaries and wages, general and
administrative, and sales and marketing expenses.
The decrease, as a percent of revenue, is primarily due to a decrease in general
and administrative expenses and salaries and wages. General and administrative
expenses and salaries and wages decreased primarily due to the sale of the
Company's credit reporting and auction services subsidiaries in 1999. These
subsidiaries required proportionately higher operating expenses than the
Company's other businesses. The decrease is partially offset by i) operating
expenses from the Company's automotive leasing business unit, which began
operations in 1999; and ii) increases in the Company's average wage rates
necessary to attract and retain skilled personnel.
The decrease in general and administrative and salaries and wages expenses are
partially offset by an increase in sales and marketing expenses for the three
months ended March 31, 2000. This expense increased primarily due to additional
sales commissions as a result of higher contract origination volumes, increases
in the Company's total sales force and an increase in sales related travel
expenses.
PROVISION FOR CREDIT LOSSES. The provision for credit losses consists of three
components: (i) a provision for losses on advances to dealers that are not
expected to be recovered through collections on the related installment contract
receivable portfolio; (ii) a provision for earned but unpaid revenue on
installment contracts which were transferred to non-accrual status during the
period; and (iii) a provision for expected losses on the investment in operating
leases. The provision for credit losses increased from $2,136,000 for the three
months ended March 31, 1999 to $2,447,000 for the same period in 2000,
representing a 14.6% increase. The increase is primarily due to an increase in
the provision for expected losses on the investment in operating leases
resulting from the significant increase in operating lease originations.
The amount provided for advance losses was comparable during the three months
ended March 31, 1999 and 2000. The advance provision is based on managements'
analysis of loan performance utilizing the Company's loan servicing system,
which allows management to estimate future collections for each dealer pool
using historical loss experience and a dealer by dealer static pool analysis.
The amount provided, as a percent of new contract originations, decreased from
1.7% for the three months ended March 31, 1999 to 1.4% for the same period in
2000. The decrease is the result of continued improvements in the quality of
business originated, based on managements' analysis.
PROVISION FOR CLAIMS. The amount provided for insurance and service contract
claims, as a percent of total revenue, decreased from 2.7% during the three
months ended March 31, 1999 to 2.6% during the same period in 2000. The claims
reserves are based on accumulated estimates of claims reported but unpaid plus
estimates of incurred but unreported claims.
DEPRECIATION OF LEASED VEHICLES. Depreciation of leased vehicles is recorded on
a straight-line basis to the residual value of the vehicle over the scheduled
lease term. The depreciation expense recorded on leased vehicles was $640,000
for the three months ended March 31, 2000.
INTEREST EXPENSE. Interest expense, as a percent of total revenue, decreased
from 14.9% for the three months ended March 31, 1999 to 14.2% for the same
period in 2000. The decrease in interest expense is primarily the result of a
decrease in the amount of average outstanding borrowings, which resulted from
the positive cash flow generated from i) collections on installment contracts
receivable exceeding cash advances to dealers and payments of dealer holdbacks;
ii) proceeds from the sale of the Company's credit reporting services
subsidiary; and iii) a reduction in federal tax payments as a result of the
taxable loss in 1999. The decrease was partially offset by higher average
interest rates. The weighted average interest rate increased from 8.9% for the
three months ended March 31, 1999 to 10.9% for the same period in 2000. The
increase in the average interest rates is the result of i) the impact of fixed
borrowing costs, such as facility fees, up front fees and other costs on average
interest rates when average outstanding borrowings are decreasing and ii) an
increase on December 1, 1999 and January 15, 2000 of 50 and 75 basis points,
respectively, in the interest rate on outstanding borrowings under the Company's
senior notes resulting from amendments to the note purchase agreements due to
the $47.3 million pre-tax charge in the third quarter of 1999.
OPERATING INCOME. As a result of the aforementioned factors, operating income
increased from $8.3 million for the three months ended March 31, 1999 to $8.7
million for the same period in 2000, representing an increase of 4.8%.
FOREIGN EXCHANGE LOSS. The Company incurred foreign exchange losses of $45,000
for the three months ended
7
<PAGE> 10
March 31, 1999 and $14,000 for the same period in 2000. The losses result from
the effect of exchange rate fluctuations between the U.S. dollar and foreign
currencies on unhedged intercompany balances between the Company and its foreign
subsidiaries.
PROVISION FOR INCOME TAXES. The provision for income taxes increased from $2.9
million during the three months ended March 31, 1999 to $3.0 million during the
same period in 2000. The increase is primarily due to an increase in pre-tax
income in 2000. For the three months ended March 31, the effective tax rate was
35.0% in 1999 and 34.2% in 2000. The decrease in the effective tax rate is
primarily due to a reduction in the United Kingdom's statutory tax rates in
April 1999, as well as a reduction in state income taxes resulting from the sale
of the Company's credit reporting services subsidiary in May 1999.
INSTALLMENT CONTRACTS RECEIVABLE
The following table summarizes the composition of installment contracts
receivable at the dates indicated (dollars in thousands):
<TABLE>
<CAPTION>
As of
-----------------------------------
December 31, 1999 March 31, 2000
----------------- --------------
(Unaudited)
<S> <C> <C>
Gross installment contracts receivable.................................... $ 679,201 $ 693,703
Unearned finance charges.................................................. (99,174) (103,966)
Unearned insurance premiums, insurance reserves, and fees................. (6,907) (6,826)
-------------- -------------
Installment contracts receivable.......................................... $ 573,120 $ 582,911
============== =============
</TABLE>
A summary of changes in gross installment contracts receivable is as
follows (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1999 2000
------------- ------------
(Unaudited)
<S> <C> <C>
Balance - beginning of period.............................................. $ 794,831 $ 679,201
Gross amount of installment contracts originated........................... 127,980 165,468
Cash collections on installment contracts originated....................... (111,503) (106,046)
Charge offs................................................................ (82,543) (42,026)
Currency translation....................................................... (3,819) (2,894)
-------------- -------------
Balance - end of period.................................................... $ 724,946 $ 693,703
============= ============
</TABLE>
8
<PAGE> 11
INVESTMENT IN OPERATING LEASES
The following table summarizes the composition of investment in
operating leases, net (dollars in thousands):
<TABLE>
<CAPTION>
As of
---------------------------------
December 31, 1999 March 31, 2000
----------------- --------------
(Unaudited)
<S> <C> <C>
Gross leased vehicles...................................................... $ 8,442 $ 20,060
Accumulated depreciation................................................... (453) (1,054)
Lease payments receivable.................................................. 264 461
------------- ------------
Investment in operating leases............................................. 8,253 19,467
Less: Allowance for lease vehicle losses.................................. (91) (203)
-------------- -------------
Investment in operating leases, net........................................ $ 8,162 $ 19,264
============= ============
</TABLE>
A summary of changes in gross leased vehicles is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1999 2000
------------- ------------
(Unaudited)
<S> <C> <C>
Balance - beginning of period.............................................. $ - $ 8,442
Gross operating leases originated.......................................... 80 12,046
Operating lease liquidations............................................... - (428)
------------- -------------
Balance - end of period.................................................... $ 80 $ 20,060
============= ============
</TABLE>
DEALER HOLDBACKS
The following table summarizes the composition of dealer holdbacks at
the dates indicated (dollars in thousands):
<TABLE>
<CAPTION>
As of
--------------------------------------
December 31, 1999 March 31, 2000
----------------- --------------
(Unaudited)
<S> <C> <C>
Dealer holdbacks.......................................................... $ 540,799 $ 552,329
Less: Advances (net of reserves of $4,329 and $6,292 at December 31,
1999 and March 31, 2000, respectively).................................... (338,656) (343,262)
------------ -------------
Dealer holdbacks, net..................................................... $ 202,143 $ 209,067
============ =============
</TABLE>
CREDIT POLICY AND EXPERIENCE
When an installment contract is assigned to the Company by a
participating dealer, the Company generally pays a cash advance to the dealer.
The Company maintains a reserve against advances to dealers that are not
expected to be recovered through collections on the related installment contract
portfolio. For purposes of establishing the reserve, future collections are
reduced to present-value in order to achieve a level yield over the remaining
term of the advance equal to the expected yield at the origination of the
impaired advance. The Company's loan servicing system allows the Company to
estimate future collections for each dealer pool using historical loss
experience and a dealer by dealer static pool analysis. Future reserve
requirements will depend in part on the magnitude of the variance between
management's estimate of future collections and the actual collections that are
realized. The Company charges off dealer advances against the reserve at such
time and to the extent that the Company's static pool analysis determines that
the advance is completely or partially impaired.
9
<PAGE> 12
The Company maintains an allowance for credit losses which, in the
opinion of management, adequately reserves against losses in the portfolio of
receivables. The risk of loss to the Company related to the installment
contracts receivable balances relates primarily to the earned but unpaid revenue
on installment contracts which were transferred to non-accrual status during the
period. Servicing fees, which are booked as finance charges, are recognized
under the interest method of accounting until the underlying obligation is 90
days past due on a recency basis. At such time, the Company suspends the accrual
of revenue and makes a provision for credit losses equal to the earned but
unpaid revenue. In all cases, contracts on which no material payment has been
received for nine months are charged off against dealer holdbacks, unearned
finance charges and the allowance for credit losses.
The Company also maintains a reserve on investment in operating leases
based on appraisals and estimates of the value of vehicles at the end of the
lease contracts. Management reviews residual values on a regular basis.
Ultimate losses may vary from current estimates and the amount of
provision, which is a current expense, may be either greater or less than actual
charge offs.
The following tables set forth information relating to charge offs, the
allowance for credit losses, the reserve on advances, and the reserve on
investment in operating leases (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1999 2000
--------------- ---------------
(Unaudited)
<S> <C> <C>
CHARGE OFFS
Charged against dealer holdbacks.......................................... $ 66,053 $ 33,516
Charged against unearned finance charges.................................. 15,107 7,932
Charged against allowance for credit losses............................... 1,383 578
--------------- ---------------
Total contracts charged off............................................... $ 82,543 $ 42,026
=============== ===============
Net charge offs against the reserve on advances........................... $ 4,882 $ -
=============== ===============
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1999 2000
--------------- ---------------
(Unaudited)
<S> <C> <C>
ALLOWANCE FOR CREDIT LOSSES
Balance - beginning of period............................................. $ 7,075 $ 4,742
Provision for credit losses............................................... 192 285
Charge offs............................................................... (1,383) (578)
Currency translation...................................................... (35) (14)
--------------- ---------------
Balance - end of period................................................... $ 5,849 $ 4,435
=============== ===============
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
1999 2000
--------------- ---------------
(Unaudited)
<S> <C> <C>
RESERVE ON ADVANCES
Balance - beginning of period............................................. $ 19,954 $ 4,329
Provision for advance losses.............................................. 1,944 1,991
Advance reserve fees...................................................... 4 -
Charge offs............................................................... (4,882) -
Currency translation...................................................... (136) (28)
--------------- ---------------
Balance - end of period................................................... $ 16,884 $ 6,292
=============== ===============
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
1999 2000
--------------- ---------------
(Unaudited)
<S> <C> <C>
RESERVE ON INVESTMENT IN OPERATING LEASES
Balance - beginning of period............................................ $ - $ 91
Provision for lease vehicle losses....................................... - 171
Charge offs.............................................................. - (59)
--------------- ---------------
Balance - end of period.................................................. $ - $ 203
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
As of
-------------------------------------
December 31, 1999 March 31, 2000
----------------- --------------
<S> <C> <C>
CREDIT RATIOS (Unaudited)
Allowance for credit losses as a percent of gross installment contracts
receivable............................................................ 0.7% 0.6%
Reserve on advances as a percent of advances............................. 1.3% 1.8%
Gross dealer holdbacks as a percent of gross installment contracts
receivable............................................................ 79.6% 79.6%
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal need for capital is to fund cash advances made
to dealers in connection with the acceptance of installment contracts, for the
payment of dealer holdbacks to dealers who have repaid their advance balances
and to fund the purchase of used vehicle leases. These cash outflows to dealers
increased from $66.1 million during the three months ended March 31, 1999 to
$100.5 million during the same period in 2000. These amounts have historically
been funded from cash collections on installment contracts, cash provided by
operating activities and borrowings under the Company's credit agreements. The
Company maintains a significant dealer holdback on installment contracts
accepted which assists the Company in funding its long-term cash flow
requirements. During the first three months of 2000, the Company's total balance
sheet indebtedness increased from $159.0 million as of December 31, 1999 to
$161.5 million as of March 31, 2000.
The Company has a $125 million credit agreement with a commercial bank
syndicate. The facility has a commitment period through June 13, 2000 and is
subject to annual extensions for additional one year periods at the request of
the Company with the consent of each of the banks in the facility. The agreement
provides that interest is payable at the Eurocurrency rate plus 140 basis
points, or at the prime rate. The Eurocurrency borrowings may be fixed for
periods up to six months. The credit agreement has certain restrictive
covenants, including limits on the ratio of the Company's debt to equity, debt
to advances, debt to installment contracts receivable, advances to installment
contracts receivable, fixed charges to net income, limits on the Company's
investment in its foreign subsidiaries and requirements that the Company
maintain a specified minimum level of net worth. Borrowings under the credit
agreement are secured through a lien on most of the Company's assets on an equal
and ratable basis with the Company's senior notes. As of March 31, 2000, there
was approximately $65.3 million outstanding under this facility.
11
<PAGE> 14
On August 5, 1999, the Company's Board of Directors authorized a common
stock repurchase program of up to 1,000,000 shares of the Company's common
stock. On February 7, 2000, the Company's Board of Directors authorized an
increase in the Company's stock repurchase program from 1,000,000 to 2,000,000
shares. The 2,000,000 shares, which can be repurchased through the open market
or in privately negotiated transactions, represent approximately 4% of the
outstanding common shares. As of March 31, 2000, the Company has repurchased
approximately 1,427,000 shares under this program.
As the Company's $125 million credit facility expires on June 13, 2000,
the Company will be required to renew the facility or refinance any amounts
outstanding under this facility on or before such date. As of March 31, 2000,
there was approximately $65.3 million outstanding under this facility. The
Company believes that the credit facility will be renewed with similar terms. In
addition, in 2000, the Company has $14.6 million of principal maturing on its
senior notes, which the Company expects to repay from cash generated from
operations and various financing alternatives available.
The Company's short and long-term cash flow requirements are materially
dependent on future levels of originations. During the first quarter of 2000,
the Company experienced an increase in originations over 1999. The Company
expects this trend to continue in future periods and, to the extent this trend
does continue, the Company will experience an increase in its need for capital.
Based upon anticipated cash flows, management believes that amounts
available under its credit agreement, cash flow from operations and various
financing alternatives available will provide sufficient financing for current
debt maturities and for future operations. If the various financing alternatives
were to become limited or unavailable to the Company, the Company's operations
could be materially adversely affected.
FORWARD-LOOKING STATEMENTS
The foregoing discussion and analysis contains a number of forward
looking statements within the meaning of the Securities Act of 1933 and the
Securities Exchange Act of 1934, both as amended, with respect to expectations
for future periods which are subject to various risks and uncertainties. The
risks and uncertainties are detailed from time to time in reports filed by the
Company with the Securities and Exchange Commission, including forms 8-K, 10-Q,
and 10-K, and include, among others, competition from traditional financing
sources and from non-traditional lenders, availability of funding at competitive
rates of interest, adverse changes in applicable laws and regulations, adverse
changes in economic conditions, adverse changes in the automobile or finance
industries or in the non-prime consumer finance market, the Company's ability to
maintain or increase the volume of installment contracts accepted, the Company's
inability to accurately forecast and estimate future collections and historical
collection rates and the Company's ability to complete various financing
alternatives.
12
<PAGE> 15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Refer to the Company's Annual Report on Form 10-K for the year ended
December 31, 1999 for a complete discussion of the Company's market risk. There
have been no material changes to the market risk information included in the
Company's 1999 Annual Report on Form 10-K.
13
<PAGE> 16
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously disclosed in the Company's 1999 Annual Report on Form
10-K , during the first quarter of 1998, several putative class action
complaints were filed by shareholders against the Company and certain officers
and directors of the Company in the United States District Court for the Eastern
District of Michigan seeking money damages for alleged violations of the federal
securities laws. On August 14, 1998, a Consolidated Class Action Complaint,
consolidating the claims asserted in those cases, was filed. The Complaint
generally alleged that the Company's financial statements issued during the
period August 14, 1995 through October 22, 1997 did not accurately reflect the
Company's true financial condition and results of operations because such
reported results failed to be in accordance with generally accepted accounting
principles and such results contained material accounting irregularities in that
they failed to reflect adequate reserves for credit losses. The Complaint
further alleged that the Company issued public statements during the alleged
class period which fraudulently created the impression that the Company's
accounting practices were proper. On April 23, 1999, the Court granted the
Company's and the defendant officers' and directors' motion to dismiss the
Complaint and entered a final judgment dismissing the action with prejudice. On
May 6, 1999, plaintiffs filed a motion for reconsideration of the order
dismissing the Complaint or, in the alternative, for leave to file an amended
complaint. On July 13, 1999, the Court granted the plaintiffs' motion for
reconsideration and granted the plaintiffs leave to file an amended complaint.
Plaintiffs filed their First Amended Consolidated Class Action Complaint on
August 2, 1999. On September 30, 1999, the Company and the defendant officers
and directors filed a motion to dismiss that complaint. On or about November 10,
1999, plaintiffs sought and were granted leave to file a Second Amended
Consolidated Class Action Complaint. A hearing on the defendants' motion to
dismiss the Second Amended Consolidated Class Action Complaint was held on March
1, 2000 and on March 24, 2000 the Court granted the Company's and the defendant
officers' and directors' motion to dismiss the Second Amended Consolidated Class
Action Complaint and entered a final judgment dismissing the action with
prejudiced. On April 7, 2000, plaintiffs filed a notice of appeal from the
District Court's judgment. The Company and the defendant officers and directors
will continue to vigorously defend this action. While the Company believes it
has meritorious legal and factual defenses, an adverse ultimate disposition of
this litigation could have a material negative impact on the Company's financial
position, liquidity and results of operations.
14
<PAGE> 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Index of Exhibits following the signature page.
(b) Reports on Form 8-K
The Company was not required to file a current report on
Form 8-K during the quarter ended March 31, 2000 and none
were filed during that period.
15
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CREDIT ACCEPTANCE CORPORATION
(Registrant)
/S/ DOUGLAS W. BUSK
---------------------------------------------
DOUGLAS W. BUSK
Chief Financial Officer
May 12, 2000
(Principal Financial Officer and Duly Authorized
Officer)
/S/ JOHN P. CAVANAUGH
---------------------------------------------
JOHN P. CAVANAUGH
Corporate Controller and Assistant Secretary
May 12, 2000
(Principal Accounting Officer)
16
<PAGE> 19
INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
4(a)(8) Seventh Amendment dated April 27, 2000 to Note Purchase
Agreement dated October 1, 1994 between various
insurance companies and the Company.
4(b)(6) Fifth Amendment dated April 27, 2000 to Note Purchase
Agreement dated August 1, 1996 between various insurance
companies and the Company.
4 (c)(7) Second Amendment dated April 28, 2000 to the Third
Amended and Restated Credit Agreement dated as of June
15, 1999 between the Company, Comerica Bank as
Administrative Agent and Collateral Agent, NationsBank,
N.A., as Syndications Agent and Banc of America
Securities, LLC as Sole Lead Arranger and Sole Bank
Manager.
4 (e) (6) Fifth Amendment dated April 27, 2000 to Note Purchase
Agreement dated March 25, 1997 between various insurance
companies and the Company.
27 Financial Data Schedule
- ----------------------
17
<PAGE> 1
EXHIBIT 4(a)(8)
SEVENTH AMENDMENT TO NOTE PURCHASE AGREEMENT
RE:
CREDIT ACCEPTANCE CORPORATION
SECOND AMENDED AND RESTATED
10.37% SENIOR NOTES DUE NOVEMBER 1, 2001
Dated as of April 27, 2000
Effective as of December 1, 1999
To the Noteholders listed on Annex I hereto
Ladies and Gentlemen:
Credit Acceptance Corporation, a Michigan corporation (together with its
successors and assigns, the "Company"), hereby agrees with you as follows:
SECTION 1. INTRODUCTORY MATTERS.
1.1 DESCRIPTION OF OUTSTANDING NOTES. The Company currently has outstanding
its Second Amended and Restated 10.37% Senior Notes due July 1, 2001
(collectively, the "Notes") which it issued pursuant to the separate Note
Purchase Agreements, each dated as of October 1, 1994 (collectively, as amended
by the First Amendment to Note Purchase Agreement, dated as of November 15,
1995, the Second Amendment to Note Purchase Agreement, dated as of August 29,
1996, the Third Amendment to Note Purchase Agreement, dated as of December 12,
1997, the Fourth Amendment to Note Purchase Agreement, dated as of July 1, 1998,
the Fifth Amendment to Note Purchase Agreement, dated as of April 13, 1999, and
the Sixth Amendment, dated as of December 1, 1999, the "Agreement"), entered
into by the Company with each of the original holders of the Notes listed on
Annex 1 thereto, respectively. Terms used herein but not otherwise defined
herein shall have the meanings assigned thereto in the Agreement, as amended
hereby.
1.2 PURPOSE OF AMENDMENT. The Company and you desire to amend the Agreement
as set forth in Section 2 hereof.
SECTION 2. AMENDMENT TO THE AGREEMENT.
Pursuant to Section 10.5 of the Agreement, the Company hereby agrees with
you that the Agreement shall be amended by this Seventh Amendment to Note
Purchase Agreement (this "Seventh Amendment") in the following respect:
2.1 SECTION 6.1(B). Clause (i) of Section 6.1(b) is hereby amended in its
entirety as follows:
<PAGE> 2
EXHIBIT 4(a)(8)
(i) two hundred percent (200%) of Consolidated Tangible Net Worth
at such time, provided that for purposes of this test, Consolidated
Senior Funded Debt shall be calculated by including all Debt incurred
by a Special Purpose Subsidiary, whether or not included therein under
GAAP, or
2.2 SECTION 6.1(C). Section 6.1(c) is hereby amended in its entirety as
follows:
(C) SUBORDINATED FUNDED DEBT. The Company will not at any time
permit Consolidated Subordinated Funded Debt to exceed one hundred
fifty percent (150%) of Consolidated Tangible Net Worth at such time,
provided that for purposes of this test, Consolidated Subordinated
Funded Debt shall be calculated by including all Debt incurred by a
Special Purpose Subsidiary, whether or not included therein under
GAAP.
2.3 SECTION 9.1. The definition of Consolidated Tangible Net Worth in
Section 9.1 is hereby amended and restated in its entirety as set forth below.
CONSOLIDATED TANGIBLE NET WORTH -- means, at any time, the result of
(a) the shareholders' equity of the Company and its Subsidiaries,
minus
(b) the retained earnings of the Unrestricted Subsidiaries, minus
(c) all Intangible Assets of the Company and the Subsidiaries, minus
(d) without duplication, any excess servicing asset resulting from
the Transfer, pursuant to a Permitted Securitization, of
Advances, Leased Vehicles, Installment Contracts (whether
assigned outright or related to Advances) or Leases (whether
assigned outright or related to Leased Vehicles),
in each case as would be reflected on a consolidated balance sheet of such
Persons at such time. As used in this definition, "Consolidated Net Worth"
means, at any time, the amount of "consolidated total assets" less the amount of
"consolidated total liabilities", as each would be reflected on a consolidated
balance sheet of the Company and its Subsidiaries at such time, prepared in
accordance with GAAP.
SECTION 3. MISCELLANEOUS
3.1 COUNTERPARTS. This Seventh Amendment may be executed in any number of
counterparts, each executed counterpart constituting an original, but all
together only one Seventh Amendment.
2
<PAGE> 3
EXHIBIT 4(a)(8)
3.2 HEADINGS. The headings of the sections of this Seventh Amendment are
for purposes of convenience only and shall not be construed to affect the
meaning or construction of any of the provisions hereof.
3.3 GOVERNING LAW. This Seventh Amendment shall be governed by and
construed in accordance with the internal laws of the State of Connecticut.
3.4 EFFECT OF AMENDMENT. Except as expressly provided herein (a) no other
terms and provisions of the Agreement shall be modified or changed by this
Seventh Amendment and (b) the terms and provisions of the Agreement, as amended
by this Seventh Amendment, shall continue in full force and effect. The Company
hereby acknowledges and reaffirms all of its obligations and duties under the
Agreement, as modified by this Seventh Amendment, and the Notes.
3.5 REFERENCES TO THE AGREEMENT. Any and all notices, requests,
certificates and other instruments executed and delivered concurrently with or
after the execution of the Seventh Amendment may refer to the Agreement without
making specific reference to this Seventh Amendment but nevertheless all such
references shall be deemed to include, to the extent applicable, this Seventh
Amendment unless the context shall otherwise require.
3.6 COMPLIANCE. The Company certifies that immediately before and after
giving effect to this Seventh Amendment, no Default or Event of Default exists
or would exist after giving effect hereto; provided that the Company is not in
compliance with the covenant contained in Section 6.3 before giving effect to
this Seventh Amendment.
3.7 EFFECTIVENESS OF AMENDMENTS. The amendments to the Agreement
contemplated by Section 2 hereof shall (in accordance with Section 10.5(a) of
the Agreement) become effective (retroactive to December 1, 1999), if at all, at
such time as the Company and the Required Holders of the Notes shall have
indicated their written consent to such amendments by executing and delivering
the applicable counterparts of this Seventh Amendment. It is understood that any
holder of Notes may withhold its consent for any reason, including, without
limitation, any failure of the Company to satisfy all of the following
conditions:
(a) This Seventh Amendment shall have been executed and delivered by
the Company and each of the Required Holders of the Notes.
(b) The execution, delivery and effectiveness of an agreement, signed
by the Company and the requisite holders of the Company's Second Amended
and Restated 9.49% Senior Notes due July 1, 2001 issued under Note Purchase
Agreements dated as of August 1, 1996, containing an amendment to such Note
Purchase Agreements identical in substance to the amendment set forth in
Section 2 hereof.
3
<PAGE> 4
EXHIBIT 4(a)(8)
(c) The execution, delivery and effectiveness of an agreement, signed
by the Company and the requisite holders of the Company's Second Amended
and Restated 9.27% Senior Notes due October 1, 2001 issued under Note
Purchase Agreements dated as of March 25, 1997, containing an amendment to
such Note Purchase Agreements identical in substance to the amendment set
forth in Section 2 hereof.
(d) The Company shall have paid the statement for reasonable fees and
disbursements of Bingham Dana LLP, your special counsel, presented to the
Company on or prior to the effective date of this Seventh Amendment.
3.8 AMENDMENT TO CREDIT AGREEMENT. The Company represents that the Second
Amendment to the Credit Agreement, as in effect on the date of the effectiveness
of this Seventh Amendment, is in the form attached as Attachment 1 hereto.
3.9 FULL DISCLOSURE. The Company warrants and represents to you that, as of
the effective date hereof, none of the written statements, documents or other
written materials furnished by, or on behalf of, the Company to you in
connection with the negotiation, execution and delivery of this Seventh
Amendment contain any untrue statement of a material fact or omit a material
fact necessary to make the statements contained therein or herein not misleading
in light of the circumstances in which they were made. There is no fact of which
any of the Company's executive officers has actual knowledge which the Company
has not disclosed to you which materially affects adversely or, so far as the
Company can now reasonably foresee, will materially affect adversely the
business, prospects, profits, Properties or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or the ability of the
Company to perform its obligations set forth in the Agreement (after giving
effect to this Seventh Amendment) and the Notes.
[Remainder of page intentionally blank. Next page is signature page.]
4
<PAGE> 5
EXHIBIT 4(a)(8)
If this Seventh Amendment is satisfactory to you, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this Seventh Amendment shall become binding between us in
accordance with its terms.
Very truly yours,
CREDIT ACCEPTANCE CORPORATION
By /S/BRETT A. ROBERTS
---------------------------------
Name: Brett A. Roberts
Title: Co-President
[Signature Page to Seventh Amendment to Note Purchase Agreement in respect of
10.37% Senior Notes Due November 1, 2001 of Credit Acceptance Corporation]
5
<PAGE> 6
EXHIBIT 4(a)(8)
ACCEPTED: ALLSTATE LIFE INSURANCE CO.
By /S/RONALD A. MENDEL
--------------------------------------------------
Name: Ronald A. Mendel
Title: Authorized Signatory
By /S/PATRICIA W. WILSON
--------------------------------------------------
Name: Patricia W. Wilson
Title: Authorized Signatory
WILLIAM BLAIR & COMPANY, LLC
By William Blair & Company, LLC, Attorney-
in-Fact
By /S/JAMES D. MCKINNEY
--------------------------------------------------
Name: James D. McKinney
Title: Principal and Manager
Fixed Income Department
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY
BY CIGNA INVESTMENTS, INC. (authorized agent)
By /S/JAMES R. KUZEMCHAK
---------------------------------------------------
Name: James R. Kuzemchak
Title: Managing Director
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY,
ON BEHALF OF ONE OR MORE SEPARATE ACCOUNTS
BY CIGNA INVESTMENTS, INC. (authorized agent)
By /S/JAMES R. KUZEMCHAK
---------------------------------------------------
Name: James R. Kuzemchak
Title: Managing Director
[Signature Page to Seventh Amendment to Note Purchase Agreement in respect of
10.37% Senior Notes Due November 1, 2001 of Credit Acceptance Corporation]
6
<PAGE> 7
EXHIBIT 4(a)(8)
ACCEPTED: ACE PROPERTY AND CASUALTY
INSURANCE COMPANY (F.K.A. CIGNA
PROPERTY AND CASUALTY INSURANCE COMPANY)
BY CIGNA INVESTMENTS, INC. (authorized agent)
By /S/JAMES R. KUZEMCHAK
---------------------------------------------------
Name: James R. Kuzemchak
Title: Managing Director
PHOENIX HOME LIFE MUTUAL
INSURANCE COMPANY
BY: PHOENIX INVESTMENT COUNSEL, INC.
By /S/ROSEMARY T. STREKEL
---------------------------------------------------
Name: Rosemary T. Strekel
Title: Senior Managing Director
[Signature Page to Seventh Amendment to Note Purchase Agreement in respect of
10.37% Senior Notes Due November 1, 2001 of Credit Acceptance Corporation]
7
<PAGE> 8
EXHIBIT 4(a)(8)
ANNEX I
SECOND AMENDED AND RESTATED 10.37% SENIOR NOTES
DUE NOVEMBER 1, 2001
Allstate Life Insurance Company
Connecticut General Life Insurance Company
Ace Property and Casualty Insurance Company (f.k.a CIGNA Property and Casualty
Insurance Company)
Phoenix Home Life Mutual Insurance Company
William Blair & Company, LLC
8
<PAGE> 1
EXHIBIT 4(b)(6)
FIFTH AMENDMENT TO NOTE PURCHASE AGREEMENT
RE:
CREDIT ACCEPTANCE CORPORATION
SECOND AMENDED AND RESTATED 9.49% SENIOR NOTES DUE JULY 1, 2001
Dated as of April 27, 2000
Effective as of December 1, 1999
To the Noteholders listed on Annex I hereto
Ladies and Gentlemen:
Credit Acceptance Corporation, a Michigan corporation (together with its
successors and assigns, the "Company"), hereby agrees with you as follows:
SECTION 1. INTRODUCTORY MATTERS.
1.1 DESCRIPTION OF OUTSTANDING NOTES. The Company currently has
outstanding its Second Amended and Restated 9.49% Senior Notes due July 1, 2001
(collectively, the "Notes") which it issued pursuant to the separate Note
Purchase Agreements, each dated as of August 1, 1996 (collectively, as amended
by the First Amendment to Note Purchase Agreement, dated as of December 12,
1997, the Second Amendment to Note Purchase Agreement, dated as of July 1, 1998,
the Third Amendment to Note Purchase Agreement, dated as of April 13, 1999, and
the Fourth Amendment, dated as of December 1, 1999, the "Agreement"), entered
into by the Company with each of the original holders of the Notes listed on
Annex 1 thereto, respectively. Terms used herein but not otherwise defined
herein shall have the meanings assigned thereto in the Agreement, as amended
hereby.
1.2 PURPOSE OF AMENDMENT. The Company and you desire to amend the
Agreement as set forth in Section 2 hereof.
SECTION 2. AMENDMENT TO THE AGREEMENT.
Pursuant to Section 10.5 of the Agreement, the Company hereby agrees with
you that the Agreement shall be amended by this Fifth Amendment to Note Purchase
Agreement (this "Fifth Amendment") in the following respect:
2.1 SECTION 6.1(B). Clause (i) of Section 6.1(b) is hereby amended in
its entirety as follows:
(i) two hundred percent (200%) of Consolidated Tangible Net
Worth at such time, provided that for purposes of this test,
Consolidated Senior Funded Debt shall be calculated by including
all
<PAGE> 2
EXHIBIT 4(b)(6)
Debt incurred by a Special Purpose Subsidiary, whether or not
included therein under GAAP, or
2.2 SECTION 6.1(C). Section 6.1(c) is hereby amended in its entirety
as follows:
(C) SUBORDINATED FUNDED DEBT. The Company will not at any
time permit Consolidated Subordinated Funded Debt to exceed one
hundred fifty percent (150%) of Consolidated Tangible Net Worth
at such time, provided that for purposes of this test,
Consolidated Subordinated Funded Debt shall be calculated by
including all Debt incurred by a Special Purpose Subsidiary,
whether or not included therein under GAAP.
2.3 SECTION 9.1. The definition of Consolidated Tangible Net Worth in
Section 9.1 is hereby amended and restated in its entirety as set forth below.
CONSOLIDATED TANGIBLE NET WORTH -- means, at any time, the result of
(a) the shareholders' equity of the Company and its
Subsidiaries, minus
(b) the retained earnings of the Unrestricted Subsidiaries,
minus
(c) all Intangible Assets of the Company and the Subsidiaries,
minus
(d) without duplication, any excess servicing asset
resulting from the Transfer, pursuant to a Permitted
Securitization, of Advances, Leased Vehicles, Installment
Contracts (whether assigned outright or related to Advances)
or Leases (whether assigned outright or related to Leased
Vehicles),
in each case as would be reflected on a consolidated balance sheet of such
Persons at such time. As used in this definition, "Consolidated Net Worth"
means, at any time, the amount of "consolidated total assets" less the amount of
"consolidated total liabilities", as each would be reflected on a consolidated
balance sheet of the Company and its Subsidiaries at such time, prepared in
accordance with GAAP.
SECTION 3. MISCELLANEOUS
3.1 COUNTERPARTS. This Fifth Amendment may be executed in any number
of counterparts, each executed counterpart constituting an original, but all
together only one Fifth Amendment.
2
<PAGE> 3
EXHIBIT 4(b)(6)
3.2 HEADINGS. The headings of the sections of this Fifth Amendment
are for purposes of convenience only and shall not be construed to affect the
meaning or construction of any of the provisions hereof.
3.3 GOVERNING LAW. This Fifth Amendment shall be governed by and
construed in accordance with the internal laws of the State of Connecticut.
3.4 EFFECT OF AMENDMENT. Except as expressly provided herein (a) no
other terms and provisions of the Agreement shall be modified or changed by this
Fifth Amendment and (b) the terms and provisions of the Agreement, as amended by
this Fifth Amendment, shall continue in full force and effect. The Company
hereby acknowledges and reaffirms all of its obligations and duties under the
Agreement, as modified by this Fifth Amendment, and the Notes.
3.5 REFERENCES TO THE AGREEMENT. Any and all notices, requests,
certificates and other instruments executed and delivered concurrently with or
after the execution of the Fifth Amendment may refer to the Agreement without
making specific reference to this Fifth Amendment but nevertheless all such
references shall be deemed to include, to the extent applicable, this Fifth
Amendment unless the context shall otherwise require.
3.6 COMPLIANCE. The Company certifies that immediately before and
after giving effect to this Fifth Amendment, no Default or Event of Default
exists or would exist after giving effect hereto; provided that the Company is
not in compliance with the covenant contained in Section 6.3 before giving
effect to this Fifth Amendment.
3.7 EFFECTIVENESS OF AMENDMENTS. The amendments to the Agreement
contemplated by Section 2 hereof shall (in accordance with Section 10.5(a) of
the Agreement) become effective (retroactive to December 1, 1999), if at all, at
such time as the Company and the Required Holders of the Notes shall have
indicated their written consent to such amendments by executing and delivering
the applicable counterparts of this Fifth Amendment. It is understood that any
holder of Notes may withhold its consent for any reason, including, without
limitation, any failure of the Company to satisfy all of the following
conditions:
(a) This Fifth Amendment shall have been executed and delivered
by the Company and each of the Required Holders of the Notes.
(b) The execution, delivery and effectiveness of an agreement,
signed by the Company and the requisite holders of the Company's Second
Amended and Restated 10.37% Senior Notes due November 1, 2001 issued under
Note Purchase Agreements dated as of October 1, 1994, containing an
amendment to such Note Purchase Agreements identical in substance to the
amendment set forth in Section 2 hereof.
(c) The execution, delivery and effectiveness of an agreement,
signed by the Company and the requisite holders of the Company's Second
Amended and Restated 9.27%
3
<PAGE> 4
EXHIBIT 4(b)(6)
Senior Notes due October 1, 2001 issued under Note Purchase Agreements
dated as of March 25, 1997, containing an amendment to such Note Purchase
Agreements identical in substance to the amendment set forth in Section 2
hereof.
(d) The Company shall have paid the statement for reasonable
fees and disbursements of Bingham Dana LLP, your special counsel, presented
to the Company on or prior to the effective date of this Fifth Amendment.
3.8 AMENDMENT TO CREDIT AGREEMENT. The Company represents that the
Second Amendment to the Credit Agreement, as in effect on the date of the
effectiveness of this Fifth Amendment, is in the form attached as Attachment 1
hereto.
3.9 FULL DISCLOSURE. The Company warrants and represents to you that,
as of the effective date hereof, none of the written statements, documents or
other written materials furnished by, or on behalf of, the Company to you in
connection with the negotiation, execution and delivery of this Fifth Amendment
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein or herein not misleading in
light of the circumstances in which they were made. There is no fact of which
any of the Company's executive officers has actual knowledge which the Company
has not disclosed to you which materially affects adversely or, so far as the
Company can now reasonably foresee, will materially affect adversely the
business, prospects, profits, Properties or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or the ability of the
Company to perform its obligations set forth in the Agreement (after giving
effect to this Fifth Amendment) and the Notes.
[Remainder of page intentionally blank. Next page is signature page.]
4
<PAGE> 5
EXHIBIT 4(b)(6)
If this Fifth Amendment is satisfactory to you, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this Fifth Amendment shall become binding between us in
accordance with its terms.
Very truly yours,
CREDIT ACCEPTANCE CORPORATION
By /S/ BRETT A. ROBERTS
------------------------
Name: Brett A. Roberts
Title: Co-President
[Signature Page to Fifth Amendment to Note Purchase Agreement in respect of
9.49% Senior Notes Due July 1, 2001 of Credit Acceptance Corporation]
5
<PAGE> 6
EXHIBIT 4(b)(6)
ACCEPTED: ASSET ALLOCATION & MANAGEMENT COMPANY AS
AGENT FOR CENTRAL STATES HEALTH & LIFE
COMPANY OF OMAHA
By /S/ K. LANGE
-------------------------
Name: Kathy Lange
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT COMPANY AS
AGENT FOR THE CHARLES SCHWAB TRUST COMPANY
FBO GUARANTY INCOME LIFE INSURANCE COMPANY
By /S/ K. LANGE
-------------------------
Name: Kathy Lange
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT COMPANY AS
AGENT FOR AMERICAN COMMUNITY MUTUAL INSURANCE
By /S/ K. LANGE
-------------------------
Name: Kathy Lange
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT COMPANY AS
AGENT FOR CENTRAL RE CORP. & PHOENIX
By /S/ K. LANGE
-------------------------
Name: Kathy Lange
Title: Portfolio Manager
[Signature Page to Fifth Amendment to Note Purchase Agreement in respect of
9.49% Senior Notes Due July 1, 2001 of Credit Acceptance Corporation]
6
<PAGE> 7
EXHIBIT 4(b)(6)
ACCEPTED: ASSET ALLOCATION & MANAGEMENT COMPANY AS
AGENT FOR OLD GUARD MUTUAL INSURANCE COMPANY
By /S/ K. LANGE
--------------------------
Name: Kathy Lange
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT COMPANY AS
AGENT FOR OZARK NATIONAL LIFE INSURANCE
COMPANY
By /S/ K. LANGE
--------------------------
Name: Kathy Lange
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT COMPANY AS
AGENT FOR CSA FRATERNAL LIFE
By /S/ K. LANGE
--------------------------
Name: Kathy Lange
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT COMPANY AS
AGENT FOR KANAWHA INSURANCE COMPANY
By /S/ K. LANGE
--------------------------
Name: Kathy Lange
Title: Portfolio Manager
[Signature Page to Fifth Amendment to Note Purchase Agreement in respect of
9.49% Senior Notes Due July 1, 2001 of Credit Acceptance Corporation]
7
<PAGE> 8
EXHIBIT 4(b)(6)
ACCEPTED: CONNECTICUT GENERAL LIFE INSURANCE COMPANY
BY CIGNA INVESTMENTS, INC. (authorized agent)
By /S/ JAMES R. KUZEMCHAK
--------------------------
Name: James R. Kuzemchak
Title: Managing Director
CONNECTICUT GENERAL LIFE INSURANCE COMPANY,
ON BEHALF OF ONE OR MORE SEPARATE ACCOUNTS
BY CIGNA INVESTMENTS, INC. (authorized agent)
By /S/ JAMES R. KUZEMCHAK
--------------------------
Name: James R. Kuzemchak
Title: Managing Director
PAN AMERICAN LIFE INSURANCE COMPANY
By /S/ ROBERT NAGEL
----------------------
Name: Robert Nagel
Title: Vice President
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
BY: PHOENIX INVESTMENT COUNSEL, INC.
By /S/ ROSEMARY T. STREKEL
--------------------------------
Name: Rosemary T. Strekel
Title: Senior Managing Director
[Signature Page to Fifth Amendment to Note Purchase Agreement in respect of
9.49% Senior Notes Due July 1, 2001 of Credit Acceptance Corporation]
8
<PAGE> 9
EXHIBIT 4(b)(6)
ANNEX I
SECOND AMENDED AND RESTATED 9.49% SENIOR NOTES DUE JULY 1, 2001
Central States Health & Life Company of Omaha
The Charles Schwab Trust Company fbo Guaranty Income Life Insurance Company
American Community Mutual Insurance
Central Re Corp. & Phoenix
Ozark National Life Insurance Company
CSA Fraternal Life
Kanawha Insurance Company
Old Guard Mutual Insurance Company
Connecticut General Life Insurance Company
Pan American Life Insurance Company
Phoenix Home Life Mutual Insurance Company
9
<PAGE> 1
EXHIBIT 4(c)(7)
SECOND AMENDMENT
TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
("Second Amendment") is made as of this 28th day of April, 2000 by and among
Credit Acceptance Corporation, a Michigan corporation ("Company"), the Permitted
Borrowers signatory hereto (each, a "Permitted Borrower" and collectively, the
"Permitted Borrowers"), Comerica Bank and the other banks signatory hereto
(individually, a "Bank" and collectively, the "Banks") and Comerica Bank, as
agent for the Banks (in such capacity, "Agent").
RECITALS
A. Company, Permitted Borrowers, Agent and the Banks entered into that
certain Third Amended and Restated Credit Agreement dated as of June 15, 1999
and a First Amendment dated as of December 10, 1999 (collectively, the "Credit
Agreement") under which the Banks renewed and extended (or committed to extend)
credit to the Company and the Permitted Borrowers, as set forth therein.
B. The Company and the Permitted Borrowers have requested that Agent and
the Banks agree to a further amendment to the Credit Agreement and Agent and the
Banks are willing to do so, but only on the terms and conditions set forth in
this Second Amendment.
NOW, THEREFORE, Company, Permitted Borrowers, Agent and the Banks agree:
l. The definition of Consolidated Tangible Net Worth in Section 1 of the
Credit Agreement is hereby amended and restated in its entirety as set
forth below, effective as of December 10, 1999:
"Consolidated Tangible Net Worth" shall mean the total
preferred shareholders' investment and common shareholders'
investment (common stock, paid in capital and retained earnings)
as computed under GAAP, less assets properly classified as
intangible assets according to GAAP, but excluding from the
determination thereof, without duplication, any excess servicing
asset resulting from the transfer, pursuant to a Permitted
Securitization, of Advances to Dealers, Leased Vehicles,
Installment Contracts (whether assigned outright or related to
Advances to Dealers) or Leases (whether assigned outright or
related to Leased Vehicles)."
2. Sections 7.5 and 7.6 of the Credit Agreement are amended, effective as
of December 10, 1999, to change the word "excluding" (in the
parenthetical phrase in the second line of each such section) to the
word "including".
<PAGE> 2
EXHIBIT 4(c)(7)
3. This Second Amendment shall become effective, according to the terms
and as of the date hereof, upon satisfaction by the Company and the
Permitted Borrowers, on or before May 1, 2000, of the following
conditions:
(a) Agent shall have received counterpart originals of this Second
Amendment, in each case duly executed and delivered by Company,
the Permitted Borrowers and the requisite Banks, in form
satisfactory to Agent and the Banks;
(b) Agent shall have received from the Company and each of the
Permitted Borrowers a certification (i) that all necessary
actions have been taken by such parties to authorize execution
and delivery of this Second Amendment, supported by such
resolutions or other evidence of corporate authority or action as
reasonably required by Agent and the Majority Banks and that no
consents or other authorizations of any third parties are
required in connection therewith; and (ii) that, after giving
effect to this Second Amendment, no Default or Event of Default
has occurred and is continuing on the proposed effective date of
the Second Amendment;
(c) Agent shall have received, with a copy for each of the Banks,
amendments to the Senior Debt Documents executed and delivered by
the Company and the requisite holders of the Senior Debt, such
amendments to be in form and substance satisfactory to the Agent
and the Majority Banks; and
If the foregoing conditions have not been satisfied or waived on or
before May 1, 2000, this Second Amendment shall lapse and be of no
further force and effect.
4. Each of the Company and the Permitted Borrowers ratifies and confirms,
as of the date hereof and after giving effect to the amendments
contained herein, each of the representations and warranties set forth
in Sections 6.1 through 6.22, inclusive, of the Credit Agreement and
acknowledges that such representations and warranties are and shall
remain continuing representations and warranties during the entire
life of the Credit Agreement.
5. Except as specifically set forth above, this Second Amendment shall
not be deemed to amend or alter in any respect the terms and
conditions of the Credit Agreement, any of the Notes issued thereunder
or any of the other Loan Documents, or to constitute a waiver by the
Banks or Agent of any right or remedy under or a consent to any
transaction not meeting the terms and conditions of the Credit
Agreement, any of the Notes issued thereunder or any of the other Loan
Documents.
6. Unless otherwise defined to the contrary herein, all capitalized terms
used in this Second Amendment shall have the meaning set forth in the
Credit Agreement.
<PAGE> 3
EXHIBIT 4(c)(7)
7. This Second Amendment may be executed in counterpart in accordance
with Section 13.10 of the Credit Agreement.
8. Comerica Bank - Canada having been designated by Comerica Bank, in its
capacity as swing line bank (and as a Bank) under the Credit Agreement
to fund Comerica Bank's advances in $C pursuant to Section 11.12 of
the Credit Agreement, has executed this Second Amendment to evidence
its approval of the terms and conditions thereof.
9. This Second Amendment shall be construed in accordance with and
governed by the laws of the State of Michigan.
[SIGNATURES FOLLOW ON SUCCEEDING PAGES]
<PAGE> 4
EXHIBIT 4(c)(7)
WITNESS the due execution hereof as of the day and year first above
written.
COMERICA BANK, as Agent CREDIT ACCEPTANCE CORPORATION
By: /S/ SCOTTIE S. KNIGHT By: /S/ BRETT A. ROBERTS
------------------------ -----------------------
Name: Scottie S. Knight Name: Brett A. Roberts
Its: Vice President Its: Co-President
One Detroit Center
500 Woodward Avenue
Detroit, Michigan 48226
Attention: Michael P. Stapleton
COMERICA BANK - CANADA CREDIT ACCEPTANCE CORPORATION
UK LIMITED
By: /S/ SCOTTIE S. KNIGHT By: /S/ BRETT A. ROBERTS
------------------------ -----------------------
Name: Scottie S. Knight Name: Brett A. Roberts
Its: Vice President Its: Co-President
CAC OF CANADA LIMITED
By: /S/ BRETT A. ROBERTS
-----------------------
Name: Brett A. Roberts
Its: Co-President
CREDIT ACCEPTANCE CORPORATION
IRELAND LIMITED
By: /S/ BRETT A. ROBERTS
-----------------------
Name: Brett A. Roberts
Its: Co-President
<PAGE> 5
EXHIBIT 4(c)(7)
BANKS: COMERICA BANK
By: /S/ SCOTTIE S. KNIGHT
------------------------
Name: Scottie S. Knight
Its: Vice President
LASALLE BANK NATIONAL ASSOCIATION
By: /S/ LISA MUN
--------------------------------
Name: Lisa Mun
Its: Assistant Vice President
HARRIS TRUST AND SAVINGS BANK
By: /S/ MICHAEL CAMELI
---------------------
Name: Michael Cameli
Its: Vice President
NATIONAL CITY BANK OF MINNEAPOLIS
By: /S/ STEVEN R. BERGLUND
-------------------------------
Name: Steven R Berglund
Its: Assistant Vice President
BANK OF AMERICA, N.A.
By: /S/ ELIZABETH KURLECZ
------------------------
Name: Elizabeth Kurlecz
Its: Managing Director
THE BANK OF NOVA SCOTIA
By: /S/ J. ERIC BERGREN
---------------------------
Name: J. Eric Bergren
Its: Relationship Manager
Signature Page For
CAC Second Amendment
<PAGE> 1
EXHIBIT 4(e)(6)
FIFTH AMENDMENT TO NOTE PURCHASE AGREEMENT
RE:
CREDIT ACCEPTANCE CORPORATION
SECOND AMENDED AND RESTATED 9.27% SENIOR NOTES DUE OCTOBER 1, 2001
Dated as of April 27, 2000
Effective as of December 1, 1999
To the Noteholders listed on Annex I hereto
Ladies and Gentlemen:
Credit Acceptance Corporation, a Michigan corporation (together with its
successors and assigns, the "Company"), hereby agrees with you as follows:
SECTION 1. INTRODUCTORY MATTERS.
1.1 DESCRIPTION OF OUTSTANDING NOTES. The Company currently has
outstanding its Second Amended and Restated 9.27% Senior Notes due October 1,
2001 (collectively, the "Notes") which it issued pursuant to the separate Note
Purchase Agreements, each dated as of March 25, 1997 (collectively, as amended
by the First Amendment to Note Purchase Agreement, dated as of December 12,
1997, the Second Amendment to Note Purchase Agreement, dated as of July 1, 1998,
the Third Amendment to Note Purchase Agreement, dated as of April 13, 1999, and
the Fourth Amendment, dated as of December 1, 1999, the "Agreement"), entered
into by the Company with each of the original holders of the Notes listed on
Annex 1 thereto, respectively. Terms used herein but not otherwise defined
herein shall have the meanings assigned thereto in the Agreement, as amended
hereby.
1.2 PURPOSE OF AMENDMENT. The Company and you desire to amend the
Agreement as set forth in Section 2 hereof.
SECTION 2. AMENDMENT TO THE AGREEMENT.
Pursuant to Section 10.5 of the Agreement, the Company hereby agrees with
you that the Agreement shall be amended by this Fifth Amendment to Note Purchase
Agreement (this "Fifth Amendment") in the following respect:
2.1 SECTION 6.1(B). Clause (i) of Section 6.1(b) is hereby amended in
its entirety as follows:
(i) two hundred percent (200%) of Consolidated Tangible Net
Worth at such time, provided that for purposes of this test,
Consolidated Senior Funded Debt shall be calculated by including
all
<PAGE> 2
EXHIBIT 4(e)(6)
Debt incurred by a Special Purpose Subsidiary, whether or not
included therein under GAAP, or
2.2 SECTION 6.1(C). Section 6.1(c) is hereby amended in its entirety
as follows:
(C) SUBORDINATED FUNDED DEBT. The Company will not at any
time permit Consolidated Subordinated Funded Debt to exceed one
hundred fifty percent (150%) of Consolidated Tangible Net Worth
at such time, provided that for purposes of this test,
Consolidated Subordinated Funded Debt shall be calculated by
including all Debt incurred by a Special Purpose Subsidiary,
whether or not included therein under GAAP.
2.3 SECTION 9.1. The definition of Consolidated Tangible Net Worth in
Section 9.1 is hereby amended and restated in its entirety as set forth below.
CONSOLIDATED TANGIBLE NET WORTH -- means, at any time, the result of
(a) the shareholders' equity of the Company and its
Subsidiaries, minus
(b) the retained earnings of the Unrestricted Subsidiaries,
minus
(c) all Intangible Assets of the Company and the Subsidiaries,
minus
(d) without duplication, any excess servicing asset resulting
from the Transfer, pursuant to a Permitted Securitization,
of Advances, Leased Vehicles, Installment Contracts (whether
assigned outright or related to Advances) or Leases (whether
assigned outright or related to Leased Vehicles),
in each case as would be reflected on a consolidated balance sheet of such
Persons at such time. As used in this definition, "Consolidated Net Worth"
means, at any time, the amount of "consolidated total assets" less the amount of
"consolidated total liabilities", as each would be reflected on a consolidated
balance sheet of the Company and its Subsidiaries at such time, prepared in
accordance with GAAP.
SECTION 3. MISCELLANEOUS
3.1 COUNTERPARTS. This Fifth Amendment may be executed in any number
of counterparts, each executed counterpart constituting an original, but all
together only one Fifth Amendment.
2
<PAGE> 3
EXHIBIT 4(e)(6)
3.2 HEADINGS. The headings of the sections of this Fifth Amendment
are for purposes of convenience only and shall not be construed to affect the
meaning or construction of any of the provisions hereof.
3.3 GOVERNING LAW. This Fifth Amendment shall be governed by and
construed in accordance with the internal laws of the State of New York.
3.4 EFFECT OF AMENDMENT. Except as expressly provided herein (a) no
other terms and provisions of the Agreement shall be modified or changed by this
Fifth Amendment and (b) the terms and provisions of the Agreement, as amended by
this Fifth Amendment, shall continue in full force and effect. The Company
hereby acknowledges and reaffirms all of its obligations and duties under the
Agreement, as modified by this Fifth Amendment, and the Notes.
3.5 REFERENCES TO THE AGREEMENT. Any and all notices, requests,
certificates and other instruments executed and delivered concurrently with or
after the execution of the Fifth Amendment may refer to the Agreement without
making specific reference to this Fifth Amendment but nevertheless all such
references shall be deemed to include, to the extent applicable, this Fifth
Amendment unless the context shall otherwise require.
3.6 COMPLIANCE. The Company certifies that immediately before and
after giving effect to this Fifth Amendment, no Default or Event of Default
exists or would exist after giving effect hereto; provided that the Company is
not in compliance with the covenant contained in Section 6.3 before giving
effect to this Fifth Amendment.
3.7 EFFECTIVENESS OF AMENDMENTS. The amendments to the Agreement
contemplated by Section 2 hereof shall (in accordance with Section 10.5(a) of
the Agreement) become effective (retroactive to December 1, 1999), if at all, at
such time as the Company and the Required Holders of the Notes shall have
indicated their written consent to such amendments by executing and delivering
the applicable counterparts of this Fifth Amendment. It is understood that any
holder of Notes may withhold its consent for any reason, including, without
limitation, any failure of the Company to satisfy all of the following
conditions:
(a) This Fifth Amendment shall have been executed and delivered
by the Company and each of the Required Holders of the Notes.
(b) The execution, delivery and effectiveness of an agreement,
signed by the Company and the requisite holders of the Company's Second
Amended and Restated 10.37% Senior Notes due November 1, 2001 issued under
Note Purchase Agreements dated as of October 1, 1994, containing an
amendment to such Note Purchase Agreements identical in substance to the
amendment set forth in Section 2 hereof.
(c) The execution, delivery and effectiveness of an agreement,
signed by the Company and the requisite holders of the Company's Second
Amended and Restated 9.49%
3
<PAGE> 4
EXHIBIT 4(e)(6)
Senior Notes due July 1, 2001 issued under Note Purchase Agreements dated
as of August 1, 1996, containing an amendment to such Note Purchase
Agreements identical in substance to the amendment set forth in Section 2
hereof.
(d) The Company shall have paid the statement for reasonable fees
and disbursements of Bingham Dana LLP, your special counsel, presented to
the Company on or prior to the effective date of this Fifth Amendment.
3.8 AMENDMENT TO CREDIT AGREEMENT. The Company represents that the
Second Amendment to the Credit Agreement, as in effect on the date of the
effectiveness of this Fifth Amendment, is in the form attached as Attachment 1
hereto.
3.9 FULL DISCLOSURE. The Company warrants and represents to you that,
as of the effective date hereof, none of the written statements, documents or
other written materials furnished by, or on behalf of, the Company to you in
connection with the negotiation, execution and delivery of this Fifth Amendment
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein or herein not misleading in
light of the circumstances in which they were made. There is no fact of which
any of the Company's executive officers has actual knowledge which the Company
has not disclosed to you which materially affects adversely or, so far as the
Company can now reasonably foresee, will materially affect adversely the
business, prospects, profits, Properties or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or the ability of the
Company to perform its obligations set forth in the Agreement (after giving
effect to this Fifth Amendment) and the Notes.
[Remainder of page intentionally blank. Next page is signature page.]
4
<PAGE> 5
EXHIBIT 4(e)(6)
If this Fifth Amendment is satisfactory to you, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this Fifth Amendment shall become binding between us in
accordance with its terms.
Very truly yours,
CREDIT ACCEPTANCE CORPORATION
By /S/ BRETT A. ROBERTS
-----------------------
Name: Brett A. Roberts
Title: Co-President
[Signature Page to Fifth Amendment to Note Purchase Agreement in respect of
9.27% Senior Notes Due October 1, 2001 of Credit Acceptance Corporation]
5
<PAGE> 6
EXHIBIT 4(e)(6)
ACCEPTED: ASSET ALLOCATION & MANAGEMENT COMPANY AS
AGENT FOR AMERICAN PIONEER LIFE INSURANCE
COMPANY OF NEW YORK
By: /S/ K. LANGE
-----------------------------
Name: Kathy Lange
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT COMPANY AS
AGENT FOR AMERICAN PROGRESSIVE LIFE AND
HEALTH INSURANCE COMPANY OF NEW YORK
By: /S/ K. LANGE
-------------------------
Name: Kathy Lange
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT COMPANY AS
AGENT FOR FEDERATED RURAL ELECTRIC INSURANCE
CORP.
By: /S/ K. LANGE
-------------------------
Name: Kathy Lange
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT COMPANY AS
AGENT FOR TOWER LIFE INSURANCE COMPANY
By: /S/ K. LANGE
-------------------------
Name: Kathy Lange
Title: Portfolio Manager
[Signature Page to Fifth Amendment to Note Purchase Agreement in respect of
9.27% Senior Notes Due October 1, 2001 of Credit Acceptance Corporation]
6
<PAGE> 7
EXHIBIT 4(e)(6)
ACCEPTED: ASSET ALLOCATION & MANAGEMENT COMPANY AS
AGENT FOR MUTUAL PROTECTIVE INSURANCE COMPANY
By: /S/ K. LANGE
-------------------------
Name: Kathy Lange
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT COMPANY AS
AGENT FOR PHYSICIANS LIFE INSURANCE COMPANY
VISTA 500
By: /S/ K. LANGE
-------------------------
Name: Kathy Lange
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT COMPANY AS
AGENT FOR WORLD INSURANCE COMPANY
By: /S/ K. LANGE
-------------------------
Name: Kathy Lange
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT COMPANY AS
AGENT FOR UNITED TEACHERS ASSOCIATES
INSURANCE COMPANY
By: /S/ K. LANGE
-------------------------
Name: Kathy Lange
Title: Portfolio Manager
[Signature Page to Fifth Amendment to Note Purchase Agreement in respect of
9.27% Senior Notes Due October 1, 2001 of Credit Acceptance Corporation]
7
<PAGE> 8
EXHIBIT 4(e)(6)
ACCEPTED: ASSET ALLOCATION & MANAGEMENT COMPANY AS
AGENT FOR MEDICO LIFE INSURANCE COMPANY
By: /S/ K. LANGE
-------------------------
Name: Kathy Lange
Title: Portfolio Manager
[Signature Page to Fifth Amendment to Note Purchase Agreement in respect of
9.27% Senior Notes Due October 1, 2001 of Credit Acceptance Corporation]
8
<PAGE> 9
EXHIBIT 4(e)(6)
ANNEX I
SECOND AMENDED AND RESTATED 9.27% SENIOR NOTES
DUE OCTOBER 1, 2001
American Pioneer Life Insurance Company of New York
American Progressive Life and Health Insurance Company of New York
Federated Rural Electric Insurance Corp.
Tower Life Insurance Company
Physicians Life Insurance Company Vista 500
World Insurance Company
United Teachers Associates Insurance Company
Mutual Protective Insurance Company
Medico Life Insurance Company
9
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 11,900
<SECURITIES> 11,740
<RECEIVABLES> 582,911
<ALLOWANCES> 4,435
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 30,809
<DEPRECIATION> 12,939
<TOTAL-ASSETS> 670,392
<CURRENT-LIABILITIES> 0
<BONDS> 96,204
0
0
<COMMON> 449
<OTHER-SE> 261,861
<TOTAL-LIABILITY-AND-EQUITY> 670,397
<SALES> 0
<TOTAL-REVENUES> 29,467
<CGS> 0
<TOTAL-COSTS> 12,691
<OTHER-EXPENSES> 776
<LOSS-PROVISION> 2,447
<INTEREST-EXPENSE> 4,193
<INCOME-PRETAX> 8,706
<INCOME-TAX> 2,980
<INCOME-CONTINUING> 5,726
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,726
<EPS-BASIC> 0.13
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</TABLE>
