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EXHIBIT 10(p)(2)
SECOND AMENDMENT TO NOTE PURCHASE AGREEMENT
Re: Credit Acceptance Corporation $60,000,000 8.87% Senior
Notes Due November 1, 2001
Dated as of August 29, 1996
To the Noteholders listed on
Annex 1 hereto
Ladies and Gentlemen:
Credit Acceptance Corporation, a Michigan corporation (together with
its successors and assigns, the "Company"), hereby agrees with you as follows:
SECTION 1. INTRODUCTORY MATTERS.
1.1. DESCRIPTION OF OUTSTANDING NOTES. The Company currently has
outstanding $60,000,000 in aggregate unpaid principal amount of its 8.87%
Senior Notes due November 1, 2001 which it issued pursuant to the separate Note
Purchase Agreements dated as of October 1, 1994 and amended as of November 15,
1995 (collectively and as amended, 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. PURPOSES OF AMENDMENT. The Company and you desire to amend
the Agreement to adjust certain financial covenants and to designate CAC of
Canada, Limited as a Restricted Subsidiary.
SECTION 2. AMENDMENTS 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 Second Amendment to Note
Purchase Agreement (the "Second Amendment") in the following respects:
2.1. SECTION 6.1. Paragraph (d) of Section 6.1 of the Agreement is
hereby amended in its entirety to read and the same shall hereafter read as
follows:
"(D) RESTRICTED SUBSIDIARY DEBT. The Company will not at
any time permit the sum of (i) Total Restricted Subsidiary Debt at
such time plus, without duplication, (ii) the aggregate amount of all
Debt and other obligations outstanding at such time secured by Liens
permitted by clause (v), clause (vi) and clause (vii) of Section
6.6(a) to exceed (A) on or before July 31, 1997, fifteen percent (15%)
of Consolidated Tangible Net Worth or (B) on or after August 1, 1997,
twenty percent (20%) of Consolidated Tangible Net Worth."
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2.2. SECTION 6.2. Section 6.2 of the Agreement is hereby amended
in its entirety to read and the same shall hereafter read as follows:
"6.2 FIXED CHARGE COVERAGE.
The Company will not at any time permit the ratio of
(a) Consolidated Income Available for Fixed
Charges for the period of four (4) consecutive fiscal quarters
of the Company most recently ended at such time to
(b) Consolidated Fixed Charges for such period
to be less than 2.5 to 1.0."
2.3. SECTION 6.6. Section 6.6(a)(vii) of the Agreement is hereby
amended in its entirety to read and the same shall hereafter read as follows:
"(vii) Liens on Property not otherwise permitted under
clause (i) through clause (vi) of this Section 6.6(a) if the
obligations secured by such Liens, when added to (A) the obligations
secured by Liens pursuant to clause (v) and clause (vi) of this
Section 6.6(a) plus, without duplication, (B) Total Restricted
Subsidiary Debt at such time, do not exceed (1) on or before July 31,
1997, fifteen percent (15%) of Consolidated Tangible Net Worth or (2)
on or after August 1, 1997, twenty percent (20%) of Consolidated
Tangible Net Worth."
2.4. SECTION 6.9. The first sentence of Section 6.9 of the
Agreement is hereby amended to read in its entirety and the same shall
hereafter read as follows:
"The Company will not, and will not permit any Restricted
Subsidiary to, engage in, or make any Investment in any business
engaged in, the provision of property and casualty insurance unless
the Company or such Restricted Subsidiary shall maintain reinsurance
of its underwriting risk, with one or more reinsurers rated "A-" or
better by Standard & Poor's Ratings Group or "A 3" or better by
▇▇▇▇▇'▇ Investors Service, Inc., for all of the Company's or such
Restricted Subsidiary's exposure in excess of one hundred percent
(100%) of the premiums written by the Company or such Restricted
Subsidiary."
2.5. SECTION 6.18. The Agreement is hereby amended to add a new
Section 6.18 to read in its entirety as follows:
"6.18. AMENDMENT OF BANK TERM DEBT OR SUBORDINATED DEBT
DOCUMENTS; TERMINATION OF RESTRICTION ON BANK TERM DEBT AMENDMENTS; NO
FURTHER RESTRICTIONS ON AMENDMENTS OF THIS AGREEMENT.
(A) AMENDMENT OF BANK TERM DEBT OR SUBORDINATED DEBT
DOCUMENTS. The Company will not amend, modify or otherwise alter (or
suffer to be amended, modified or altered), or waive (or permit to be
waived), in any material respect, any of the terms or provisions of
any document or instrument:
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(i) evidencing or otherwise relating to any Bank
Term Debt so as to shorten the maturity or original
amortization of such Bank Term Debt, or
(ii) evidencing or otherwise relating to any
Subordinated Debt so as to increase the original interest rate
on, or the principal amount of, such Subordinated Debt,
shorten the original amortization of such Subordinated Debt,
change any other repayment terms or any default or remedial
provisions in any such document or instrument, or change the
subordination provisions contained in any such document or
instrument,
in each case without the prior written approval of the Required Holders.
(B) TERMINATION OF RESTRICTION ON BANK TERM DEBT
AMENDMENTS. Subject to Section 6.18(c), the provisions of Section
6.18(a), insofar as such provisions relate to amendments,
modifications, alterations or waivers of Bank Term Debt, will
terminate and be of no further force or effect at such time as the
Company causes to be delivered to each holder of Notes a duly executed
copy of an amendment or modification of the Credit Agreement (or any
new agreement contemplated by Section 6.18(c)(ii) below) deleting
Section 8.13 of the Credit Agreement (or the comparable provision in
such new agreement) effective on or prior to the date of such
delivery.
(C) NO FURTHER RESTRICTIONS ON AMENDMENTS OF THIS
AGREEMENT. The Company will not:
(i) amend, modify or otherwise alter (or suffer
to be amended, modified or altered) the Credit Agreement
(including, without limitation, Section 8.13 thereof) or any
document or instrument relating thereto to include any
covenant or other provision (other than Section 8.13 of the
Credit Agreement as in effect on the Closing Date) that
requires, as a condition to the amendment of any term or
provision of this Agreement, or the waiver of any term or
provision herein, the approval or consent of any other
creditor of the Company; or
(ii) enter into any other agreement (or suffer to
be amended, modified or altered any other agreement to which
the Company is a party) that requires, as a condition to the
amendment of any term or provision of this Agreement, or the
waiver of any term or provision herein, the approval or
consent of any other creditor of the Company; provided that if
(A) any such agreement is entered into to replace, refinance
or supplement the Credit Agreement and (B) Section 8.13 of the
Credit Agreement (as in effect on the Closing Date) shall not
have been deleted from the Credit Agreement as of the time
such new agreement is to be entered into, such new agreement
may include a covenant substantially the same as (and not more
onerous on the Company than) Section 8.13 of the Credit
Agreement (as in effect on the Closing Date).
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2.6. SECTION 8.1. Section 8.1(c) of the Agreement is hereby
amended in its entirety to read and the same shall hereafter read as follows:
(C) PARTICULAR COVENANT DEFAULTS -- the Company or any
Subsidiary shall fail to perform or observe any covenant contained in
Section 6.1 through Section 6.8, inclusive, or in Section 6.18,
Section 7.1(h) or Section 7.1(i) of this Agreement;
2.7. SECTION 9.1.
(A) NEW DEFINED TERMS. Section 9.1 of the Agreement is
hereby amended to add the following defined terms to read as follows:
"BANK TERM DEBT -- means term Debt of the Company or
any Restricted Subsidiary owed to banks and having an initial
maturity of more than one (1) year and a fixed amortization
schedule, but in any event excluding any Debt which by its
terms is permitted to be readvanced or reborrowed, whether or
not subject to mandatory reductions or stepdowns in the
availability thereof."
"CAC INTERNATIONAL -- means CAC International, Inc.,
a wholly-owned Subsidiary of the Company."
"CAC UK -- means Credit Acceptance Corporation UK
Limited, a wholly-owned Subsidiary of the Company incorporated
under the laws of England for the purpose of acquiring
substantially all of the assets of CAC International."
"CREDIT AGREEMENT -- means the unsecured Amended and
Restated Credit Agreement, dated as of January 8, 1996, as
amended, restated or otherwise modified from time to time
subject to Section 6.18(c) hereof, among the Company, CAC UK,
Comerica Bank, as agent (or any successor agent), and the
financial institutions from time to time parties thereto.
"SUBORDINATED DEBT -- means, at any time, unsecured
Debt of the Company that is junior and subordinate in right of
payment to the Notes on terms and conditions satisfactory to
the Required Holders, as evidenced by their written consent."
(B) RESTRICTED INVESTMENT. Paragraphs (c), (d) and (k)
of the definition of "Restricted Investment" in Section 9.1 of the
Agreement are hereby amended in their entirety to read as follows:
"(c) Investments by the Company in the ordinary
course of its business in one or more Restricted Subsidiaries
or any corporation that concurrently with such Investment
becomes a Restricted Subsidiary, provided that the aggregate
amount of all Investments made pursuant to this paragraph (c)
and paragraph (d) of this definition (excluding Guaranties by
the Company of Debt of Restricted Subsidiaries) does not at
any time exceed twenty-five percent (25%) of
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Consolidated Tangible Net Worth (it being understood that
loans and advances to any Restricted Subsidiary by any
Person other than the Company or any other Restricted
Subsidiary, regardless of whether such loans and advances are
guaranteed by the Company or any other Restricted Subsidiary,
shall not be taken into account in determining the aggregate
amount of Investments made pursuant to this paragraph (c) and
paragraph (d) of this definition);"
"(d) Investments consisting of loans by the
Company or any Restricted Subsidiary, and advances from the
Company or any Restricted Subsidiary, in each case to the
Company or any Restricted Subsidiary in the ordinary course of
business of the Company and the Restricted Subsidiaries,
provided that the aggregate amount of all Investments made
pursuant to paragraph (c) of this definition and this
paragraph (d) (excluding Guarantees by the Company of Debt of
Restricted Subsidiaries) does not at any time exceed
twenty-five percent (25%) of Consolidated Tangible Net Worth
(it being understood that loans and advances to any Restricted
Subsidiary by any Person other than the Company or any other
Restricted Subsidiary, regardless of whether such loans and
advances are guaranteed by the Company or any other Restricted
Subsidiary, shall not be taken into account in determining the
aggregate amount of Investments made pursuant to this
paragraph (d) and paragraph (c) of this definition);"
"(k) Investments in receivables arising from floor
plan receivables and note receivables due from dealers in the
ordinary course of business of the Company and the Restricted
Subsidiaries, provided that the aggregate amount of all such
Investments does not at any time exceed ten percent (10%) of
Consolidated Total Assets; and"
(C) RESTRICTED SUBSIDIARY. The definition of "Restricted
Subsidiary" is hereby amended in its entirety to read as follows:
"RESTRICTED SUBSIDIARY -- means any Subsidiary (a) in
respect of which the Company owns, directly or indirectly, (i)
at least eighty percent (80%) (by number of votes) of each
class of such Subsidiary's Voting Stock, or (ii) in the case
of CAC Insurance Agency of Ohio, Inc., at least 99% of the
shares of capital stock issued and outstanding of all classes
in the aggregate, (b) that is organized under the laws of the
United States of America or any jurisdiction thereof, the
United Kingdom or any jurisdiction thereof (including, without
limitation, England, Scotland and Wales), Canada or any
jurisdiction thereof or the Republic of Ireland or any
jurisdiction thereof, and that conducts all of its business
in, and has all of its Property located in, the ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ and/or the Republic of
Ireland and (c) that is not an Unrestricted Subsidiary. Any
Restricted Subsidiary in compliance with the requirements set
forth in the first sentence of this definition and designated
as a Restricted Subsidiary on the Closing Date shall be deemed
to have been a Restricted Subsidiary for all periods prior to
the Closing Date. Notwithstanding any provision in Section
6.17 to the contrary, CAC International and CAC UK shall be
deemed Restricted Subsidiaries as of October 1, 1995 and CAC
of Canada, Limited and any Subsidiary formed
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by the Company to provide property and casualty insurance shall
each be deemed a Restricted Subsidiary as of the date of its
formation."
SECTION 3. MISCELLANEOUS
3.1. COUNTERPARTS. This Second Amendment may be executed in any
number of counterparts, each executed counterpart constituting an original, but
all together only one Second Amendment.
3.2. HEADINGS. The headings of the sections of this Second 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 Second 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 Amendment and (b) the terms and provisions of the Agreement, as amended by
this 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 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 Second Amendment may refer to the Agreement without
making specific reference to this Second Amendment but nevertheless all such
references shall be deemed to include, to the extent applicable, this Second
Amendment unless the context shall otherwise require.
3.6 COMPLIANCE. Pursuant to the provisions of Section 6.17(c) of the
Agreement, the Company certifies that immediately before and after, and after
giving effect to the designation of CAC of Canada, Limited as a Restricted
Subsidiary, no Default or Event of Default exists.
[Remainder of page intentionally blank. Next page is signature page.]
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If this Second Amendment is satisfactory to you, please so indicate by
signing the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Second Amendment shall become
binding between us in accordance with its terms.
Very truly yours,
CREDIT ACCEPTANCE CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Chief Operating Officer
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ACCEPTED:
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
BY CIGNA INVESTMENTS, INC.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Managing Director
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY,
ON BEHALF OF ONE OR MORE SEPARATE
ACCOUNTS
BY CIGNA INVESTMENTS, INC.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Managing Director
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THE MUTUAL LIFE INSURANCE COMPANY OF
NEW YORK
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
MONY LIFE INSURANCE COMPANY OF AMERICA
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
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AID ASSOCIATION FOR LUTHERANS
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Assistant Vice President
- Securities
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▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ LIFE INSURANCE
COMPANY
By /s/ ▇▇▇▇▇▇▇ ▇. Warming
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. Warming
Title: Vice President - Chief
Investment Officer
FBL INSURANCE COMPANY
By /s/ ▇▇▇▇▇▇▇ ▇. Warming
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. Warming
Title: Vice President - Chief
Investment Officer
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THE OHIO CASUALTY INSURANCE COMPANY
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Investment
Officer
THE OHIO LIFE INSURANCE COMPANY
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Investment
Officer
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WASHINGTON NATIONAL INSURANCE COMPANY
By /s/ C. ▇▇▇▇▇ ▇▇▇▇
----------------------------
Name: C. ▇▇▇▇▇ ▇▇▇▇
Title: Director of Investments
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ANNEX 1
Connecticut General Life Insurance Company
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Connecticut General Life Insurance Company,
on behalf of one or more separate accounts
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The Mutual Life Insurance Company of New York
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
MONY Life Insurance Company of America
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Aid Association for Lutherans
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Western Farm Bureau Life Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FBL Insurance Company
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The Ohio Casualty Insurance Company
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
The Ohio Life Insurance Company
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▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Washington National Insurance Company
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▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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