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Exhibit 4(a)(3)
THIRD AMENDMENT TO NOTE PURCHASE AGREEMENT
RE:
CREDIT ACCEPTANCE CORPORATION
8.87% SENIOR NOTES DUE NOVEMBER 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 $45,900,000 in aggregate unpaid principal amount of its 8.87% Senior
Notes due November 1, 2001 (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 and the Second Amendment to Note Purchase Agreement dated as of August
29, 1996, 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 Third Amendment to Note
Purchase Agreement (the "Third 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:
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"(a) TOTAL DEBT. The Company will not at any time
permit Consolidated Total Debt to exceed any of the following:
(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
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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 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
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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 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
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or (ii) is payable solely in capital stock or other equity
interests of the Company or any such Restricted Subsidiary."
"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
9.37% per annum effective as of October 23, 1997; provided, however, that such
interest rate shall be 8.87% 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 Third
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
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proposed withdrawal or other action and stating that the condition set forth in
this Section 2.6 has occurred.
SECTION 3. MISCELLANEOUS
3.1 COUNTERPARTS. This Third Amendment may be executed in any number of
counterparts, each executed counterpart constituting an original, but all
together only one Third Amendment.
3.2 HEADINGS. The headings of the sections of this Third 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 Third 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
Third 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 Third 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 Third Amendment may refer to the Agreement without
making specific reference to this Third Amendment but nevertheless all such
references shall be deemed to include, to the extent applicable, this Third
Amendment unless the context shall otherwise require.
3.6 COMPLIANCE. The Company certifies that immediately before and after
giving effect to this Third 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 Third 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.
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[Remainder of page intentionally blank. Next page is signature page.]
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ACCEPTED: J. ROMEO & CO.
By /S/ Xxxxxx Xxxxxxx
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Name: Xxxxxx Xxxxxxx
Title: Director of Investments
[Signature Page to Third Amendment to Note Purchase Agreement in respect of
8.87% Senior Notes Due November 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 Third Amendment to Note Purchase Agreement in respect of
8.87% Senior Notes Due November 1, 2001 of Credit Acceptance Corporation]
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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.
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Name: Xxxxx X. Xxxxxxx, Xx.
Title: Managing Director
[Signature Page to Third Amendment to Note Purchase Agreement in respect of
8.87% Senior Notes Due November 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: THE OHIO CASUALTY INSURANCE
COMPANY
By /S/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: CFO and Treasurer
THE OHIO LIFE INSURANCE COMPANY
By /S/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: CFO and Treasurer
[Signature Page to Third Amendment to Note Purchase Agreement in respect of
8.87% Senior Notes Due November 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: WESTERN 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 LIFE INSURANCE COMPANY
By /S/ Xxxxxxx X. Warming
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Name: Xxxxxxx X. Warming
Title: VP - Chief Investment Officer
[Signature Page to Third Amendment to Note Purchase Agreement in respect of
8.87% Senior Notes Due November 1, 2001 of Credit Acceptance Corporation]
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ACCEPTED: WASHINGTON NATIONAL INSURANCE
COMPANY
By /S/ C. Xxxxx Xxxx
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Name: X. Xxxxx Dunnl
Title: Director of Investments
[Signature Page to Third Amendment to Note Purchase Agreement in respect of
8.87% Senior Notes Due November 1, 2001 of Credit Acceptance Corporation]
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