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EXHIBIT 4(b)(1)
FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT
RE:
CREDIT ACCEPTANCE CORPORATION
7.99% SENIOR NOTES DUE JULY 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 $57,500,000 in aggregate unpaid principal amount of its 7.99%
Senior Notes due July 1, 2001 (the "Notes") which it issued pursuant to the
separate Note Purchase Agreements, each dated as of August 1, 1996
(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 8.49% per annum effective as of October 23, 1997; provided, however,
that such interest rate shall be 7.99% 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 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 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: CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
By Cigna Investments, Inc.
By /S/ Xxxxx X. Xxxxxxx, Xx.
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Name: Xxxxx X. Xxxxxxx, Xx.
Title: Managing Director
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
On behalf of one ore more separate
accounts
By Cigna Investments, Inc.
By /S/ Xxxxx X. Xxxxxxx, Xx.
------------------------------------
Name: Xxxxx X. Xxxxxxx, Xx.
Title: Managing Director
[Signature Page to First Amendment to Note Purchase Agreement in respect of
7.99% Senior Notes Due July 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
7.99% Senior Notes Due July 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: PHOENIX HOME LIFE MUTUAL INSURANCE
COMPANY
By Phoenix Investment Counsel, Inc.
By /S/ Xxxxxxxx X. Xxxxxxx
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Name: Xxxxxxxx X. Xxxxxxx
Title: Senior Vice President
[Signature Page to First Amendment to Note Purchase Agreement in respect of
7.99% Senior Notes Due July 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: AID ASSOCIATION FOR LUTHERANS
By /S/ Xxxxx Xxxxx
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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
7.99% Senior Notes Due July 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: SECURITY BENEFIT LIFE INSURANCE
COMPANY
By /S/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
Title: Second VP - Portfolio
Manager
[Signature Page to First Amendment to Note Purchase Agreement in respect of
7.99% Senior Notes Due July 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: COMBINED INSURANCE COMPANY OF
AMERICA
BY: AON ADVISORS, INC.
By /S/ Xxxxx Xxxxxx
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Name: Xxxxx Xxxxxx
Title: Senior Portfolio Manager
[Signature Page to First Amendment to Note Purchase Agreement in respect of
7.99% Senior Notes Due July 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: PAN AMERICAN LIFE INSURANCE
COMPANY
By /S/ X. Xxxxxxxx Xxxxx
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Name: X. Xxxxxxxx Stone
Title: Vice President Corporate
Securities
[Signature Page to First Amendment to Note Purchase Agreement in respect of
7.99% Senior Notes Due July 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: ASSET ALLOCATION & MANAGEMENT
COMPANY AS AGENT FOR CENTRAL
STATES HEALTH & LIFE COMPANY OF
OMAHA
By /S/ Xxxxx Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT
COMPANY AS AGENT FOR THE XXXXXXX
XXXXXX TRUST COMPANY FBO GUARANTY
INCOME LIFE INSURANCE COMPANY
By /S/ Xxxxx Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT
COMPANY AS AGENT FOR AMERICAN
COMMUNITY MUTUAL INSURANCE
By /S/ Xxxxx Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT
COMPANY AS AGENT FOR CENTRAL RE
CORP. & PHOENIX
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
7.99% Senior Notes Due July 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: ASSET ALLOCATION & MANAGEMENT
COMPANY AS AGENT FOR LONE STAR
LIFE INSURANCE COMPANY
By /S/ Xxxxx Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT
COMPANY AS AGENT FOR OZARK
NATIONAL LIFE INSURANCE COMPANY
By /S/ Xxxxx Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT
COMPANY AS AGENT FOR CSA
FRATERNAL LIFE
By /S/ Xxxxx Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Portfolio Manager
ASSET ALLOCATION & MANAGEMENT
COMPANY AS AGENT FOR KANAWHA
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
7.99% Senior Notes Due July 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: ASSET ALLOCATION & MANAGEMENT
COMPANY AS AGENT FOR OLD GUARD
MUTUAL 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
7.99% Senior Notes Due July 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
Title: Managing Director
CM LIFE INSURANCE COMPANY
By /S/ Xxxxxx Xx
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Name: Xxxxxx Xx
Title: Managing Director
Signature Page to First Amendment to Note Purchase Agreement in respect of
7.99% Senior Notes Due July 1, 2001 of Credit Acceptance Corporation]
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