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EXHIBIT 4(e)(1)
FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT
RE:
CREDIT ACCEPTANCE CORPORATION
7.77% SENIOR NOTES DUE OCTOBER 1, 2001
Dated as of December 12, 1997
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 $71,750,000 in aggregate unpaid principal amount of its 7.77%
Senior Notes due October 1, 2001 (the "Notes") which it issued pursuant to the
separate Note Purchase Agreements, each dated as of March 25, 1997
(collectively, the "Agreement"), entered into by the Company with each of you,
respectively. Terms used herein but not otherwise defined herein shall have
the meanings assigned thereto in the Agreement.
1.2 PURPOSE OF AMENDMENT. The Company and you desire to amend the
Agreement to modify various covenants in and add certain definitions to the
Agreement.
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 First Amendment to Note
Purchase Agreement (the "First Amendment"), effective as of September 30, 1997,
in the following respects:
2.1 SECTION 6.1
(A) The heading for Section 6.1 is hereby modified to read "Debt and
Advances".
(B) Paragraph (a) of Section 6.1 is hereby amended and restated in its
entirety as follows:
"(A) TOTAL DEBT. The Company will not at any time
permit Consolidated Total Debt to exceed any of the following:
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(i) two hundred seventy-five percent (275%) of
Consolidated Tangible Net Worth;
(ii) ninety percent (90%) of Advances; or
(iii) sixty percent (60%) of Gross Current
Installment Contract Receivables."
(C) Section 6.1 is hereby further amended by adding, immediately after
paragraph (e), the following:
"(F) GROSS ADVANCES. The Company will not at any time permit
Gross Advances to exceed sixty-five percent (65%) of Net Installment
Contract Receivables."
2.2 SECTION 6.2 Section 6.2 is hereby amended and restated in its entirety
as follows:
"The Company will not at any time permit the ratio of
(a) Consolidated Income Available for Fixed Charges for the
period of four (4) consecutive fiscal quarters of the Company most
recently ended at such time to
(b) Consolidated Fixed Charges for such period
to be less than (i) 2.5 to 1.0 for any period of four fiscal
quarters ended on or prior to September 30, 1997, (ii) 1.9 to 1.0 for
the four fiscal quarters ended December 31, 1997, (iii) 1.7 to 1.0 for
the four fiscal quarters ended March 31, 1998, (iv) 1.6 to 1.0 for the
four fiscal quarters ended June 30, 1998, and (v) 2.0 to 1.0 for any
four fiscal quarters ended on or after September 30, 1998."
2.3 SECTION 9.1
(A) The definition of "Consolidated Income Available for Fixed
Charges" in Section 9.1 of the Agreement is hereby amended by adding
immediately after clause (b) and before the final clause of such definition
the following:
"plus (c) with respect to the periods ending September 30,
1997, December 31, 1997, March 31, 1998 and June 30, 1998, $30,000,000
representing the portion of the non-cash charge recorded by the
Company during the period ended September 30, 1997 attributable to the
present valuing of future cash flows consistent with Statement of
Financial
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Accounting Standards No. 114 "Accounting by Creditors for
Impairment of a Loan","
(B) The definition of "Net Dealer Holdbacks" in Section 9.1 of the
Agreement is hereby amended by deleting the definitions of "Advances,"
"Charged-Off Advances," "Established Dealer" and "Trailing Twelve Months
Payments" therefrom.
(C) The following new definitions are added to Section 9.1 of the
Agreement:
"ADVANCES means, at any time, the dollar amount of advances, as
such amount would appear in the footnotes to the financial statements
of the Company and the Restricted Subsidiaries prepared in accordance
with GAAP (if such amount would not appear net of reserves, then net
of any reserves established by the Company as an allowance for credit
losses related to such advances not expected to be recovered),
provided that Advances shall not include Charged-Off Advances to the
extent that such Charged-Off Advances exceed the portion of the
Company"s allowance for credit losses related to reserves against
advances not expected to be recovered as such allowance would appear
in the footnotes to the financial statements of the Company and the
Restricted Subsidiaries prepared in accordance with GAAP and provided
further, that Advances shall not include Excess New Dealer Advances."
"CHARGED-OFF ADVANCES means, with respect to an Established
Dealer, at any time, the dollar amount of the advance balance related
to the pool of installment contract receivables of such Established
Dealer which exceeds the Trailing Twelve Months Payments for such pool
multiplied by three (3)."
"ESTABLISHED DEALER means, at any time, a dealer that has
participated in the Company"s program of financing and collecting
installment contract receivables for the immediately preceding period
of twelve (12) consecutive complete calendar months and has an advance
balance in excess of Ten Thousand Dollars ($10,000) at such time."
"EXCESS NEW DEALER ADVANCES means, at any time, the aggregate
amount of advances to New Dealers to the extent such amount exceeds
10% of Gross Advances."
"GROSS ADVANCES means, as of any applicable date of
determination, the dollar amount of Advances (without giving effect to
the last proviso to the definition of such term), plus any reserves
established by the Company as an allowance for credit losses related
to such advances not expected to be
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recovered, plus Charged-Off Advances to the extent Charged-Off
Advances exceed the amount of such reserves."
"GROSS CURRENT INSTALLMENT CONTRACT RECEIVABLES means, as of
any applicable date of determination, the aggregate amount of Net
Installment Contract Receivables, plus unearned finance charges, plus
allowance for credit losses, minus the amount of such receivables
which can be classified as being on "non-accrual" under the "90 days
measured on a recency basis" method."
"INVESTMENT GRADE RATING means a rating of at least, but not
lower than:
(i) "Baa3" by Xxxxx'x Investors Service, Inc.,
(ii) "BBB-" by Standard & Poor's Ratings Group,
(iii) a category "1" or category "2"
designation from the National Association of Insurance
Commissioners, and
(iv) "BBB-" by Fitch Investors Services, Inc."
"NEW DEALER means, at any time, a dealer who participates in
the Company"s program of financing and collecting installment
contract receivables, whose oldest pool of installment contracts held
by the Company is dated as of a date which is not more than six months
prior to such time and who has an advance balance in excess of ten
thousand dollars ($10,000) at such time."
"RESTRICTED PAYMENT means (x) any dividend or other
distribution, direct or indirect and whether payable in cash or
property, on account of any capital stock or other equity interest of
the Company or any of its Restricted Subsidiaries and (y) any
redemption, retirement, purchase, or other acquisition, direct or
indirect, of any capital stock or other equity interests of the
Company or any of its Restricted Subsidiaries now or hereafter
outstanding, or of any warrants, rights or options to acquire any such
capital stock or other equity interests or any securities convertible
into such capital stock or other equity interests, except to the
extent that any such dividend or distribution, or any such redemption,
retirement, purchase or other acquisition (i) is payable to the
Company or any of its Restricted Subsidiaries or (ii) is payable
solely in capital stock or other equity interests of the Company or
any such Restricted Subsidiary."
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"TRAILING TWELVE MONTHS PAYMENTS means, at any
time, the gross amount of payments on installment contract receivables
received by the Company for the account of an Established Dealer during
the immediately preceding period of twelve (12) consecutive complete
calendar months."
2.4 INTEREST RATE APPLICABLE TO NOTES.
(A) Notwithstanding anything to the contrary set forth in the Agreement or
in the Notes, the interest rate applicable to the Notes shall be 8.27% per
annum effective as of October 23, 1997; provided, however, that such interest
rate shall be 7.77% per annum effective as of the first date that at least two
of the following four organizations shall have assigned an Investment Grade
Rating to the Company, the Notes or any other senior unsecured debt obligation
of the Company: Xxxxx'x Investors Service, Inc., Standard & Poor's Ratings
Group, the National Association of Insurance Commissioners (the "NAIC"), or
Fitch Investors Services, Inc.
(B) The signatories hereto specifically acknowledge that the NAIC is not
in any way a rating agency with functions such as those performed by Xxxxx'x
Investors Service, Inc., Standard & Poor's Ratings Group, or Fitch Investors
Services, Inc. Further, the signatories hereto specifically acknowledge that
any rating given to the Notes by the NAIC is not to be interpreted as an
expression by the NAIC with respect to the suitability of an investment in the
Notes or the likelihood of any payment in respect thereof. In addition, the
signatories hereto specifically affirm that the holders of the Notes will not
obtain any benefit from satisfaction of the condition set forth in the proviso
to Section 2.4(a) or in Section 2.5.
2.5 RESTRICTED PAYMENTS. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, declare, make, set apart any
funds or other property for, or incur any liability to make any Restricted
Payment unless, at the time of such action, at least two of the following four
organizations shall have assigned an Investment Grade Rating to the Company,
the Notes or any other senior unsecured debt obligation of the Company: Xxxxx'x
Investors Service, Inc., Standard & Poor's Ratings Group, the NAIC, or Fitch
Investors Services, Inc.
2.6 ADVERSE ACTION. If the NAIC makes specific reference to this First
Amendment and states that it will withdraw any rating or designation of
the Notes, or will take any other action adverse to any one or more of the
holders of the Notes, as a result of the agreement set forth in Section 2.4(a)
or in Section 2.5, the parties hereto hereby agree that (x) the proviso to
Section 2.4(a) and Section 2.5 shall, in lieu of the requirement set forth
therein, be deemed to require an Investment Grade Rating from at least two of
the following three organizations: Xxxxx'x Investors Service, Inc., Standard &
Poor's Ratings Group, or Fitch Investors Services, Inc. and (y) clause (iii) of
the definition of "Investment Grade Rating" shall be deemed to have been
deleted. Such changes shall take effect upon delivery of written notice to
the Company by the Required Holders referring to such proposed withdrawal or
other action and stating that the condition set forth in this Section 2.6 has
occurred.
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SECTION 3. MISCELLANEOUS
3.1 COUNTERPARTS. This First Amendment may be executed in any number of
counterparts, each executed counterpart constituting an original, but all
together only one First Amendment.
3.2 HEADINGS. The headings of the sections of this First 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 First 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
Amendment and (b) the terms and provisions of the Agreement, as amended by this
First 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 First Amendment and under the Notes issued
thereunder.
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 First Amendment may refer to the Agreement without
making specific reference to this First Amendment but nevertheless all such
references shall be deemed to include, to the extent applicable, this First
Amendment unless the context shall otherwise require.
3.6 COMPLIANCE. The Company certifies that immediately before and after
giving effect to this First Amendment, no Default or Event of Default exists or
would exist after giving effect hereto.
3.7 FEE. In consideration of the amendment set forth herein, the Company
agrees to pay, promptly following the execution hereof, to each holder of a
Note a fee in an amount equal to 0.05% of the outstanding principal amount of
each Note held by such holder as of the date hereof.
3.8 EFFECTIVENESS. This First Amendment shall become effective
(retroactive to September 30, 1997) at the time the Second Amendment to the
Credit Agreement becomes effective, provided that such effectiveness shall
occur on or before December 31, 1997.
3.9 AMENDMENT TO CREDIT AGREEMENT. The Company represents that the Second
Amendment to the Credit Agreement is in the form attached as Exhibit A hereto.
[Remainder of page intentionally blank. Next page is signature page.]
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ACCEPTED: THE GUARDIAN LIFE INSURANCE COMPANY
OF AMERICA
By /S/ Xxxxxx. X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: Vice President
[Signature Page to First Amendment to Note Purchase Agreement in respect of
7.77% Senior Notes Due October 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: NATIONWIDE LIFE INSURANCE COMPANY
By /S/ Xxxxx X. XxXxxxxxxx, Xx.
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Name: Xxxxx X. XxXxxxxxxx, Xx.
Title: Vice President Fixed Income Securities
[Signature Page to First Amendment to Note Purchase Agreement in respect of
7.77% Senior Notes Due October 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: AID ASSOCIATION FOR LUTHERANS
By /S/ Xxxxx Xxxxx
----------------------------------------------
Name: Xxxxx Xxxxx
Title: Vice President - Investments
By /S/ R. Xxxxx Xxxxxx
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Name: R. Xxxxx Xxxxxx
Title: Second Vice President - Securities
[Signature Page to First Amendment to Note Purchase Agreement in respect of
7.77% Senior Notes Due October 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: AMERICAN BANKERS INSURANCE COMPANY
OF FLORIDA
By /S/ Xxx Xxxxxxxxx
-----------------------------------
Name: Xxx Xxxxxxxxx
Title: Director of Investments
VOYAGER PROPERTY & CASUALTY
INSURANCE COMPANY
By /S/ Xxx Xxxxxxxxx
-----------------------------------
Name: Xxx Xxxxxxxxx
Title: Director of Investments
[Signature Page to First Amendment to Note Purchase Agreement in respect of
7.77% Senior Notes Due October 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: FARM BUREAU LIFE INSURANCE COMPANY
By /S/ Xxxxxxx X. Warming
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Name: Xxxxxxx X. Warming
Title: VP - Chief Investment Officer
FARM BUREAU MUTUAL INSURANCE
COMPANY
By /S/ Xxxxxxx X. Warming
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Name: Xxxxxxx X. Warming
Title: VP - Chief Investment Officer
[Signature Page to First Amendment to Note Purchase Agreement in respect of
7.77% Senior Notes Due October 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: GENERAL AMERICAN LIFE INSURANCE
COMPANY
By: Corning Asset Management Company
By /S/ Xxxxxxx X. Xxxxxxx
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Name: Xxxxxxx X. Xxxxxxx
Title: Senior Vice President
[Signature Page to First Amendment to Note Purchase Agreement in respect of
7.77% Senior Notes Due October 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: ASSET ALLOCATION & MANAGEMENT
COMPANY AS AGENT FOR PHYSICIANS
LIFE INSURANCE COMPANY VISTA 500
By /S/ Xxxxx Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT
COMPANY AS AGENT FOR WORLD
INSURANCE COMPANY
By /S/ Xxxxx Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT
COMPANY AS AGENT FOR UNITED
TEACHERS ASSOCIATES INSURANCE
COMPANY
By /S/ Xxxxx Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Portfolio Manager
[Signature Page to First Amendment to Note Purchase Agreement in respect of
7.77% Senior Notes Due October 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: ASSET ALLOCATION & MANAGEMENT
COMPANY AS AGENT FOR AMERICAN
PIONEER LIFE INSURANCE COMPANY
OF NEW YORK
By /S/ Xxxxx Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT
COMPANY AS AGENT FOR AMERICAN
PROGRESSIVE LIFE AND HEALTH
INSURANCE COMPANY OF NEW YORK
By /S/ Xxxxx Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT
COMPANY AS AGENT FOR FEDERATED
RURAL ELECTRIC INSURANCE CORP.
By /S/ Xxxxx Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT
COMPANY AS AGENT FOR TOWER LIFE
INSURANCE COMPANY
By /S/ Xxxxx Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Portfolio Manager
[Signature Page to First Amendment to Note Purchase Agreement in respect of
7.77% Senior Notes Due October 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By /S/ Xxxxxxx X. Xxxxxxx XX
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Name: Xxxxxxx X. Xxxxxxx XX
Title: Managing Director
[Signature Page to First Amendment to Note Purchase Agreement in respect of
7.77% Senior Notes Due October 1, 2001 of Credit Acceptance Corporation]
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