SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-12
CREDIT ACCEPTANCE CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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(CREDIT ACCEPTANCE LOGO)
CREDIT ACCEPTANCE CORPORATION
25505 WEST TWELVE MILE ROAD
SOUTHFIELD, MICHIGAN 48034-8339
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 11, 2006
---------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Credit
Acceptance Corporation, a Michigan corporation, will be held at 1500 Town Center
Drive, Southfield, Michigan 48075, on Thursday, May 11, 2006, at 8:00 a.m.,
local time, for the following purposes.
1. To elect six directors to serve until the 2007 Annual Meeting of
Shareholders;
2. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Shareholders of record on March 20, 2006 will be entitled to notice of and
to vote at this meeting. You are invited to attend the meeting. Whether or not
you plan to attend in person, you are urged to sign and return immediately the
enclosed Proxy in the envelope provided. No postage is required if the envelope
is mailed in the United States. The Proxy is revocable and will not affect your
right to vote in person if you are a shareholder of record and attend the
meeting.
By Order of the Board of Directors,
Charles A. Pearce
Corporate Secretary
Southfield, Michigan
April 18, 2006
(CREDIT ACCEPTANCE LOGO)
CREDIT ACCEPTANCE CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 11, 2006
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Credit Acceptance Corporation, a Michigan
corporation (the "Company"), to be used at the Annual Meeting of Shareholders of
the Company to be held on Thursday, May 11, 2006, for the purposes set forth in
the accompanying Notice of Annual Meeting of Shareholders and in this Proxy
Statement. This Proxy Statement and the enclosed form of Proxy were first sent
or given to security holders on or about April 18, 2006.
Only shareholders of record at the close of business on March 20, 2006 (the
"Record Date") will be entitled to vote at the meeting or any adjournment or
postponement thereof. Each holder of the 33,175,410 issued and outstanding
shares of the Company's common stock (the "Common Stock") on the Record Date is
entitled to one vote per share. The presence, either in person or by properly
executed proxy, of the holders of a majority of the outstanding shares of Common
Stock is necessary to constitute a quorum at the Annual Meeting.
A proxy may be revoked at any time before it is exercised by giving a
written notice to the Secretary of the Company bearing a later date than the
proxy, by submitting a later-dated proxy or, if you are a shareholder of record
or hold legal authority from a shareholder of record, by voting the shares
represented by the proxy in person at the Annual Meeting. Unless revoked, the
shares represented by each duly executed, timely delivered proxy will be voted
in accordance with the specifications made. IF NO SPECIFICATIONS ARE MADE, SUCH
SHARES WILL BE VOTED FOR THE ELECTION OF DIRECTORS NAMED IN THIS PROXY
STATEMENT. The Board of Directors does not intend to present any other matters
at the Annual Meeting. However, should any other matters properly come before
the Annual Meeting, it is the intention of such proxy holders to vote the proxy
in accordance with their best judgment to the extent permitted by law.
If you withhold your vote with respect to the election of the directors,
your shares will be counted for purposes of determining a quorum. Withheld votes
will be excluded entirely from the vote on the election of directors and will
therefore have no effect on the election.
If you own shares through a bank or broker in street name, you may instruct
your bank or broker how to vote your shares. "Broker non-votes" occur when a
bank, broker or other nominee holder has not received voting instructions with
respect to a particular matter and the nominee holder does not have
discretionary power to vote on that matter. The election of directors is
considered a routine matter, so your bank or broker will have discretionary
authority to vote your shares held in street name on that proposal.
The expenses of soliciting proxies will be paid by the Company. In addition
to solicitation by mail, the officers and employees of the Company, who will
receive no extra compensation therefor, may solicit proxies personally or by
telephone. The Company will reimburse brokerage houses, custodians, nominees and
fiduciaries for their expense in mailing proxy materials to principals.
1
COMMON STOCK OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 20, 2006 concerning
beneficial ownership by all directors and nominees, by each of the executive
officers named in the Summary Compensation Table, by all directors and executive
officers as a group, and by all other beneficial owners of more than 5% of the
outstanding shares of Common Stock. The number of shares beneficially owned is
determined under rules of the Securities and Exchange Commission ("SEC"), and
the information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares as to
which the individual has sole or shared voting power or investment power and
also any shares which the individual has the right to acquire on March 20, 2006
or within 60 days thereafter through the exercise of any stock option or other
right. Unless otherwise indicated, each holder has sole investment and voting
power with respect to the shares set forth in the following table.
NUMBER
OF SHARES PERCENT OF
BENEFICIALLY OWNED OUTSTANDING SHARES
------------------ ------------------
Donald A. Foss...................................... 22,836,898(a) 69.2%
Brett A. Roberts.................................... 876,817(b) 2.6%
Steven M. Jones..................................... 134,448(b) *
Michael W. Knoblauch................................ 452,600(b) 1.4 %
Keith P. McCluskey.................................. 1,157,800(b)(c) 3.4 %
Harry E. Craig...................................... 10,000(d) *
Glenda J. Chamberlain............................... 44,000(b) *
Daniel P. Leff...................................... 100,000(b) *
Thomas N. Tryforos.................................. 434,842 1.3%
All Directors and Executive Officers as a Group (14
persons).......................................... 26,255,844(e) 73.4%
Thomas W. Smith..................................... 4,759,478(f) 14.4%
Scott J. Vassalluzzo................................ 4,136,555(f) 12.5%
Idoya Partners...................................... 1,943,403(f) 5.9 %
* Less than 1%.
(a) Shares are held by Donald A. Foss and Donald A. Foss Revocable Living Trust
dated January 26, 1984 as to which Mr. Foss is the trustee. Karol A. Foss
as trustee of the Karol A. Foss Revocable Trust Under Agreement dated
January 16, 1981, as amended and restated on January 26, 1984, June 28,
1990, December 10, 1997 and April 1, 2005, and Allan Apple as trustee of
the Karol A. Foss 2005 Grantor Retained Annuity Trust under Agreement dated
November 11, 2005, are the record owners of 11,368,587 of these shares of
which Mr. Foss has sole voting power and dispositive power of such shares
pursuant to an agreement dated December 6, 2001. In addition, Mr. Foss has
shared voting and dispositive power with respect to 83,166 shares which are
owned by a limited liability company in which he has a 20% interest. Mr.
Foss' business address is 25505 West Twelve Mile Road, Southfield, Michigan
48034-8339.
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(b) Includes shares which the individual has the right to acquire upon exercise
of employee or director stock options and restricted shares as to which the
individual has voting power but which are subject to forfeiture and
restrictions on transfer until the related vesting conditions have been
satisfied, as follows:
EMPLOYEE OR DIRECTOR
STOCK OPTIONS RESTRICTED SHARES
-------------------- -----------------
Brett A. Roberts.................................... 757,470 51,347
Steven M. Jones..................................... 128,000 6,448
Michael W. Knoblauch................................ 450,000 --
Keith P. McCluskey.................................. 1,000,000 32,800
Glenda J. Chamberlain............................... 40,000 --
Daniel P. Leff...................................... 100,000 --
All Directors and Executive Officers as a Group (14
persons).......................................... 2,761,470 93,025
(c) Mr. McCluskey has shared voting and dispositive power with respect to
83,166 shares which are owned by a limited liability company in which he
has an 80% interest.
(d) Shares are held by the Craig Living Trust as to which Mr. Craig is the
trustee.
(e) Includes shares referenced in (a), (b), (c) and (d) above.
(f) The number of shares is based on information obtained from Messrs. Smith
and Vassalluzzo as of March 20, 2006. Mr. Smith reported that he has shared
voting and dispositive power over 3,941,658 shares, sole voting power over
517,970 shares, and sole dispositive power over 817,820 shares. Mr.
Vassalluzzo reported that he has shared voting and dispositive power over
3,941,658 shares, sole voting power over 44,000 shares, and sole
dispositive power over 194,897 shares. Idoya Partners, a New York limited
partnership for which Messrs. Smith and Vassalluzzo are each a general
partner, has the sole power to vote or direct the vote and dispose or to
direct the disposition of 1,943,403 shares. The business address of Idoya
Partners, Mr. Smith and Mr. Vassalluzzo is 323 Railroad Avenue, Greenwich,
Connecticut 06830.
MATTERS TO COME BEFORE THE MEETING
(1) ELECTION OF DIRECTORS
DESCRIPTION OF NOMINEES
Six directors, constituting the entire Board of Directors, are to be
elected at the Annual Meeting. Each director holds office until the next annual
meeting of shareholders and until his or her successor has been elected and
qualified. The nominees named below have been selected by the Board of Directors
of the Company as recommended by the Nominating Committee of the Board of
Directors. If, due to circumstances not now foreseen, any of the nominees named
below will not be available for election, the proxies will be voted for such
other person or persons as the Board of Directors may select. Each of the
nominees is currently a director of the Company.
The following sets forth information as to each nominee for election at the
Annual Meeting, including their age, present principal occupation, other
business experience during the last five years, directorships in other
publicly-held companies, membership on committees of the Board of Directors and
period of service as a director of the Company. The Board of Directors
recommends a vote FOR each of the nominees for election. EXECUTED PROXIES WILL
BE VOTED FOR THE ELECTION OF THE BOARD'S NOMINEES UNLESS SHAREHOLDERS SPECIFY
OTHERWISE IN THEIR PROXIES. The election of directors requires a plurality of
the votes cast, so that only votes cast "for" directors are counted in
determining which directors are elected. The six directors receiving the most
"for" votes will be elected. Broker non-votes and withheld votes will be treated
as shares present for purposes of determining the presence of a quorum but will
have no effect on the vote for the election of directors.
3
DONALD A. FOSS; AGE 61; CHAIRMAN OF THE BOARD.
Mr. Foss is the founder and principal shareholder of the Company, in
addition to owning and operating companies engaged in the sale of used vehicles.
He was formally named Chairman of the Board and Chief Executive Officer of the
Company in March 1992 and vacated the Chief Executive Officer position effective
January 1, 2002.
GLENDA J. CHAMBERLAIN; AGE 52; EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER, WHOLE FOODS MARKET, INC.
Ms. Chamberlain is the Executive Vice President and Chief Financial Officer
of Whole Foods Market, Inc., the largest natural and organic foods supermarket
retailer in the United States. Ms. Chamberlain joined Whole Foods Market in 1988
as Chief Financial Officer, prior to which she held positions in public
accounting, retail and business consulting. Ms. Chamberlain became a director of
the Company in March 2004.
HARRY E. CRAIG; AGE 78; INDEPENDENT PERSONNEL CONSULTANT.
Mr. Craig has been a self-employed consultant providing management training
services since 1986. Mr. Craig served in various managerial and other capacities
with Ford Motor Company for 30 years, most recently as Director, Personnel and
Organization Office of Ford Aerospace & Communications Corporation. Mr. Craig
became a director of the Company in June 1992.
DANIEL P. LEFF; AGE 46; MANAGING MEMBER, THE PLACID GROUP, LLC.
Mr. Leff is currently Managing Member of The Placid Group, LLC. The Placid
Group, which he established in January 2004, provides advisory services to
public and private companies. From January, 2005 through September, 2005 Mr.
Leff participated with Xavier Sussex, LLC, exploring private equity
opportunities in the international energy sector. Prior to that, Mr. Leff had
been Chief Operating Officer of Invensys Energy Management, a position to which
he was appointed in May 2002. Prior to joining Invensys, Mr. Leff was Chairman
and Chief Executive Officer of Enron Energy Services, a role to which he was
appointed in December 2001 by new management following the Chapter 11 bankruptcy
filing by Enron and its subsidiaries, including Enron Energy Services. From 1997
to 2001, Mr. Leff served in other management capacities at Enron Energy
Services. Prior to 1997, Mr. Leff was President and Chief Executive Officer of
FMES, Incorporated, a company he founded in 1993 and sold to Enron Energy
Services in 1997. Mr. Leff became a director of the Company in June 2001.
BRETT A. ROBERTS; AGE 39; CHIEF EXECUTIVE OFFICER.
Mr. Roberts joined the Company in 1991 as Corporate Controller and was
named Assistant Treasurer in March 1992 and Vice President-Finance in April
1993. He was named Chief Financial Officer and Treasurer in August 1995. He was
named Executive Vice President and Chief Financial Officer in January 1997,
Co-President in January 2000, Executive Vice President of Finance and Operations
in October 2000, Chief Operating Officer in January 2001, and to his present
position in January 2002. Mr. Roberts became a director of the Company in March
2002.
THOMAS N. TRYFOROS; AGE 46; PRIVATE INVESTOR.
Mr. Tryforos is presently a private investor. Between May 1991 and
September 2004, Mr. Tryforos was employed as a General Partner at Prescott
Investors, Inc., a private investment firm based in Connecticut. Mr. Tryforos
became a director of the Company in July 1999.
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OTHER EXECUTIVE OFFICERS
KEITH P. MCCLUSKEY; AGE 46; PRESIDENT.
Mr. McCluskey joined the Company in May 1999 as President of the Company's
auto leasing subsidiary. He was named Chief Marketing Officer in February 2001
while remaining President of the Company's auto leasing subsidiary and to his
present position in January 2002. Since June 1983, Mr. McCluskey has owned and
operated companies engaged in the sale and lease of new and used vehicles.
MICHAEL W. KNOBLAUCH; AGE 42; CHIEF OPERATING OFFICER.
Mr. Knoblauch joined the Company in 1992. He served as the Company's
collection manager from May 1994 to August 1995. He was named Vice
President -- Collections in August 1995, Chief Operating Officer in July 1999,
Co-President in January 2000, President in October 2000, and to his present
position in January 2002.
STEVEN M. JONES; AGE 42; CHIEF ANALYTICS OFFICER.
Mr. Jones joined the Company in October 1997 as Manager of the Debt
Recovery Department for Credit Acceptance Corporation UK Limited, in which
position he served until November 1999 when he was named Deputy Managing
Director, Credit Acceptance Corporation UK Limited. In December 2001, he was
named Managing Director Credit Acceptance Corporation UK Limited in which he was
responsible for the operations of the Company's United Kingdom business segment.
Mr. Jones was named Chief Administrative Officer in November 2003 and to his
present position in December 2004.
DAVID S. SIMMET; AGE 41; CHIEF INFORMATION OFFICER.
Mr. Simmet joined the Company in August 1992 as Manager of Information
Systems. He was named Director of Information Systems in April 1995. He was
named Vice President -- Information Systems in October 1997 and to his present
position in February 2001.
KENNETH S. BOOTH; AGE 38; CHIEF FINANCIAL OFFICER.
Mr. Booth joined the Company in January 2004 as Director of Internal Audit.
He was named Chief Accounting Officer in May 2004 and to his present position in
December 2004. From August 1991 until joining the Company, Mr. Booth worked in
public accounting, most recently as a senior manager at PricewaterhouseCoopers
LLP.
CHARLES A. PEARCE; AGE 41; CHIEF LEGAL OFFICER.
Mr. Pearce joined the Company in January 1996 as General Counsel. He was
named Vice President -- General Counsel in January 1997; Vice
President -- General Counsel and Corporate Secretary in June 1999 and to his
present position in December 2004.
STEVEN M. DION; AGE 37; CHIEF HUMAN RESOURCES OFFICER.
Mr. Dion joined the Company in November 2001 as Vice President -- Human
Resources and was promoted to his present position in December 2004. Prior to
joining the Company, Mr. Dion worked for Plastipak Packaging as the Director of
Human Resources from August 2001 to November 2001. From June of 1995 through
July of 2001, Mr. Dion worked at Avery Dennison. He joined Avery Dennison in
June 1995 as Human Resources Manager and began his last position as Director of
Human Resources in July 1999.
DOUGLAS W. BUSK; AGE 45; TREASURER.
Mr. Busk joined the Company in November 1996 and was named Vice President
and Treasurer in January 1997. He was named Chief Financial Officer in January
2000. Mr. Busk served as Chief Financial Officer and Treasurer until August
2001, when he was named President of the Company's Capital Services
5
unit. He resumed his duties as Chief Financial Officer and Treasurer in December
2001 and was named to his present position in May 2004.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four meetings during 2005. All directors
attended at least 75% of the total number of meetings of the Board and any
committees of the board on which he or she served during 2005, which were held
during the period that he or she served. Directors are expected to use their
best efforts to be present at the annual meeting of shareholders. The Company
did not hold an annual meeting of shareholders in 2005.
Standing committees of the Board during all of 2005 included the Executive
Compensation Committee, the Audit Committee and the Nominating Committee. The
members of the committees during 2005 were Messrs. Craig, Leff, and Tryforos and
Ms. Chamberlain. The Board of Directors has determined that all of the
directors, other than Mr. Foss and Mr. Roberts, including all of the members of
the standing committees, are "independent directors" as defined in Marketplace
Rule 4200(a)(15) of The Nasdaq Stock Market ("Nasdaq").
The Board has adopted charters for each of the three standing committees.
The charters are available on the Company's website at creditacceptance.com
through the "Corporate Governance" link on the "Investor Relations" page.
The Executive Compensation Committee held four meetings in 2005. Thomas
Tryforos served as chairman in 2005. The Executive Compensation Committee's
principal responsibilities include: (a) reviewing and approving on an annual
basis the compensation of all executive officers of the Company, (b) making
recommendations to the Board regarding compensation of non-employee directors,
and (c) reviewing and administering all benefit plans pursuant to which Company
securities (including stock options and restricted stock grants) are granted to
the Company's executive officers or directors.
The Nominating Committee met two times in 2005. Thomas Tryforos served as
chairman in 2005. The Nominating Committee's principal responsibilities include:
(a) establishing criteria for the selection of new Board members and conducting
searches and interviews for individuals qualified to become Board members; (b)
making recommendations to the Board regarding director nominees for the next
annual shareholders meeting from the pool of identified qualified individuals;
and (c) recommending to the Board which directors should serve on the various
committees of the Board. The Nominating Committee may use various methods to
identify director candidates, including recommendations from existing Board
members, management, shareholders, search firms and other sources outside the
Company. Director candidates need not possess any specific minimum
qualifications. Rather, a candidate's suitability for nomination and election to
the Board will be evaluated in light of the portfolio of skills, experience,
perspective and background required for the effective functioning of the Board,
as well as the Company's strategy and its regulatory and market environments.
The Nominating Committee will consider candidates recommended by shareholders
using the same procedures and standards utilized for evaluating candidates
recommended by other sources. See "Shareholder Proposals and Nominees for 2007
Annual Meeting" for a description of the procedures for shareholders to submit
recommendations of candidates for director.
The Audit Committee met eleven times in 2005. Thomas Tryforos served as
chairman in 2005. The Audit Committee's principal responsibilities include: (a)
overseeing the integrity of the Company's financial statements and financial
reporting process, and the Company's systems of internal accounting and
financial controls; (b) overseeing the annual independent audit of the Company's
financial statements, the engagement of the independent auditors and the
evaluation of the independent auditors' qualifications, independence and
performance; (c) overseeing the Company's disclosure controls and procedures;
(d) approving in advance all audit services, to ensure that a written statement
is received from the external auditors setting forth all relationships with the
Company; (e) reviewing and approving any related party transactions; (f)
periodically meeting with the Chief Legal Officer and the appropriate legal
staff to review material legal affairs of the Company; and (g) acting as the
Qualified Legal Compliance Committee. The Board of Directors has adopted a
written charter for the Audit Committee, which is available by going to the
Company's website
6
at ir.creditacceptance.com/governance/home.cfm. The Board has determined that
each of the members of the Audit Committee is "independent", as independence is
defined in the applicable Nasdaq rules for Audit Committee members. The Board
has also determined that Mr. Tryforos and Ms. Chamberlain are "audit committee
financial experts" as defined by applicable SEC rules and that each of the Audit
Committee members satisfies all other qualifications for Audit Committee members
set forth in the applicable Nasdaq and SEC rules.
REPORT OF THE AUDIT COMMITTEE
In accordance with its written charter, the Audit Committee provides
assistance to the Board in fulfilling its responsibility to the shareholders,
potential shareholders and investment community relating to corporate
accounting, reporting practices and the quality and integrity of the financial
reports of the Company.
In discharging its oversight responsibility as to the audit process, the
Audit Committee received from the independent auditors and reviewed a formal
written statement describing all relationships between the auditors and the
Company that might reasonably be thought to bear on the auditors' independence
consistent with Independence Standards Board Standard No. 1, "Independence
Discussions with Audit Committees", discussed with the auditors any
relationships that may reasonably be thought to impact their objectivity and
independence and satisfied itself as to the auditors' independence.
The Audit Committee discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees," and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements. The Audit Committee also discussed the results of the
internal audit examinations.
The Audit Committee reviewed and discussed with management and the
independent auditors the audited financial statements of the Company as of and
for the fiscal year ended December 31, 2005.
Based on the above-mentioned reviews and discussions with management and
the independent auditors, the Audit Committee recommended to the Board of
Directors that the Company's audited financial statements be included in its
Annual Report on Form 10-K for the year ended December 31, 2005 for filing with
the SEC. The Audit Committee also reappointed Grant Thornton LLP as the
independent auditors for the fiscal year ended December 31, 2006.
AUDIT COMMITTEE:
GLENDA J. CHAMBERLAIN HARRY E. CRAIG DANIEL P. LEFF THOMAS N. TRYFOROS
SHAREHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Shareholders desiring to communicate with the board of directors or any
individual director may call 1-866-396-0556 or e-mail the board of directors by
going to the Company's website at ir.creditacceptance.com/contact-board.cfm
Telephone calls will be taped and summarized by the third party provider which
monitors the hotline service. A summary of the calls received will be sent to
the Chief Legal Officer, the Director of Internal Audit, the Chairman of the
Audit Committee, and to any director to whom communications are addressed.
Communications submitted to the board through the Company's website will be
received by the Company's Chief Legal Officer, the Director of Internal Audit,
the Chairman of the Audit Committee, and any directors to whom the communication
was addressed.
CODES OF ETHICS
The Company has adopted codes of ethics that apply to the Company's
directors, executive officers and other employees. The codes of ethics are
available on the Company's website at creditacceptance.com through the
"Corporate Governance" link on the "Investor Relations" page. Shareholders may
also obtain a written copy of the codes of ethics, without charge, by sending a
written request to the Investor Relations Department, Credit Acceptance
Corporation, P.O. Box 513, Southfield, Michigan 48037. We will disclose any
amendments
7
to, or waivers from, the provisions of the codes of ethics applicable to our
directors or executive officers on our website.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY
The following table sets forth certain summary information for the years
indicated concerning the compensation awarded to, earned by, or paid to the
Chief Executive Officer, and the other four most highly compensated executive
officers of the Company (based on combined salary and bonus for 2005)
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
-------------------------- ---------------------------------
RESTRICTED SECURITIES ALL OTHER
NAME AND SALARY BONUS STOCK AWARDS UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(A) ($)(B) OPTIONS/SARS(#)(C) ($)(D)
------------------ ---- -------- -------- ------------ ------------------ ------------
Donald A. Foss............ 2005 $475,000 $ -- $ -- -- $ 1,250
Chairman of the Board 2004 475,000 -- -- -- 1,250
2003 475,000 -- -- -- 625
Brett A. Roberts.......... 2005 $400,000 $645,300 $1,017,954 -- $ 1,250
Chief Executive Officer 2004 400,000 566,850 -- -- 1,250
2003 386,000 240,000 -- -- 625
Keith P. McCluskey........ 2005 $325,000 $516,240 $ 650,260 -- $ 1,250
President 2004 300,000 453,480 -- -- 1,250
2003 254,000 152,000 -- -- --
Michael W. Knoblauch...... 2005 $275,000 $322,650 $ -- -- $ 1,250
Chief Operating Officer 2004 258,000 283,425 -- -- 1,250
2003 258,000 155,000 -- -- 625
Steven M. Jones........... 2005 $240,000 $458,120 $ 127,532 -- $ --
Chief Analytics Officer 2004 225,000 226,740 -- -- 22,702
2003 243,000 135,000 -- 120,000 80,461
(a) Annual bonus amounts are generally earned and accrued during the fiscal
years indicated and paid in subsequent years, although Mr. Jones received
$100,000 of his 2005 bonus during 2005.
(b) The restricted stock awards were determined in accordance with the formula
determined by the Compensation Committee in accordance with the Company's
Incentive Compensation Plan, which was approved by shareholders on May 13,
2004 and previously filed as Exhibit 10(q) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2004. The formula,
including the restricted stock multiplier, was previously filed as Exhibit
10(q)(3) to the Company's Current Report on Form 8-K dated March 29, 2005.
The amount disclosed in the table for each individual reflects the value on
the date of grant and was calculated using the average of the high and low
market prices of the Company's Common Stock on March 30, 2005, which was
$19.825 per share. The amount for Mr. Roberts reflects 51,347 shares, all
of which were unvested at December 31, 2005 with a value of $834,389. The
amount for Mr. McCluskey reflects 32,800 shares, all of which were unvested
at December 31, 2005 with a value of $533,000. The amount for Mr. Jones
reflects 6,448 shares, all of which were unvested at December 31, 2005 with
a value of $104,780. If any dividends or distributions are paid in common
stock to Messrs. Roberts, McCluskey or Jones, during the restricted period,
the dividend or other distribution shall be subject to the same
restrictions on transferability as the shares of Common Stock with respect
to which they were paid. The restricted stock awards were granted pursuant
to a restricted stock grant agreement, the form of which was previously
filed as Exhibit 10(q)(2) to the Company's Current Report on Form 8-K dated
February 24, 2005. The restricted stock awarded vests in
8
full or in part based on the Company's satisfaction of certain
performance-related criteria, which are described more fully in the form of
the restricted stock grant agreement.
(c) These options vest based upon the Company attaining specific levels of
economic profit, or immediately upon a change of control of the Company.
(d) The amounts disclosed in this column for Messrs. Foss, Roberts, Knoblauch
and McCluskey consist of the Company's matching contribution for the 401(k)
Profit Sharing Plan. The 2004 amount disclosed in this column for Mr. Jones
consists of reimbursed relocation expenses. The 2003 amount in this column
for Mr. Jones consists of the Company's retirement contribution of $34,286,
reimbursed relocation expenses of $34,461, and reimbursed housing expenses
of $11,714. Perquisites paid by the Company to the Named Executive Officers
for the years shown in the table did not exceed the lesser of $50,000 or
10% of salary and bonus paid for the year and, therefore, have been
excluded pursuant to applicable SEC rules.
OPTIONS
There were no option grants to any of the Named Executive Officers and no
option exercises by the Named Executive Officers during 2005. The following
table provides information with respect to unexercised options held as of
December 31, 2005 by the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBERS OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT FISCAL YEAR-END AT FISCAL YEAR-END ($)(A)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Donald A. Foss................................. -- -- $ -- $ --
Brett A. Roberts............................... 802,470 -- 6,760,993 --
Steven M. Jones................................ 128,000 10,000 778,440 84,300
Michael W. Knoblauch........................... 450,000 -- 4,345,850 --
Keith P. McCluskey............................. 1,000,000 -- 10,160,000 --
(a) Value is equal to the difference between the option exercise price and the
average of the high and low price of $16.25 per share on The Pink Sheets
Electronic Quotation Service, on December 31, 2005, multiplied by the number
of in the money options held.
EMPLOYMENT AGREEMENT
Effective April 19, 2001, the Company entered into an employment agreement
with Mr. McCluskey as Chief Marketing Officer, which replaced the prior
agreement dated May 29, 1999. Under the terms of this agreement, Mr. McCluskey
is to be paid an annual base salary of $250,000 to be reviewed by the Executive
Compensation Committee from time to time. Mr. McCluskey is entitled to
participate in the bonus program and the other fringe benefit programs for
salaried employees. In addition, Mr. McCluskey was granted 1,000,000 options
with an exercise price of $6.09 under the Company's 1992 Stock Option Plan, with
vesting of such options subject to the Company achieving certain performance
criteria, and was provided a $478,000 loan. Refer to "Certain Relationships and
Transactions" section for further information on the terms of this agreement.
The term of this employment agreement will continue indefinitely, with a right
of termination by either the Company or Mr. McCluskey under any circumstances
upon 30 days written notice. Upon such termination the Company is obligated to
pay Mr. McCluskey all salary and other compensation accrued through and
including the date of such termination, and any options which have not yet
vested and become exercisable shall be cancelled. In the event of a "change of
control" of the Company (as defined in the 1992 Stock Option Plan), each option
shall be cancelled in exchange for payment in cash of an amount equal to the
excess of the change of control price (as defined in Mr. McCluskey's option
agreement) over the exercise
9
price thereof, unless such option is honored or assumed, or new rights
substituted therefore immediately following the change of control.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee, comprised of directors who are not
employees of the Company, annually reviews and makes recommendations to the
Board of Directors regarding executive compensation for the Chief Executive
Officer and other executive officers of the Company as well as reviews and gives
input into the compensation philosophies and programs for all employees. It is
the philosophy of the Executive Compensation Committee that the executive
compensation program should align the financial interests of the Company's
executives with the long term interests of the Company and its shareholders and
should attract and retain qualified executives to lead the Company toward its
goals. It is the Executive Compensation Committee's philosophy to treat
executive officers as owners of the Company through the way their compensation
is calculated including base salary and variable compensation in the form of
cash and equity participation through grants of restricted shares. The Executive
Compensation Committee delegates compensation decisions with regard to all other
officers to the Chief Executive Officer.
BASE SALARY. The Executive Compensation Committee, based on a variety of
factors, including individual performance, competitive practices and industry
norms, has reviewed the Company's compensation policy and has set the base
salaries for the executive officers consistent with this policy. The Company's
policy is to establish base salary compensation levels for all non-executive
officers that are competitive with other companies representing labor markets
where the Company competes for business and employment, including consumer
finance, finance/banking, or cross-industry sectors. Base salary levels for
executive officers are determined by aligning external labor market information
with the executive officer's responsibilities, skills, and individual
performance. Salaries are reviewed annually and are adjusted based on the
recommendation of management.
VARIABLE COMPENSATION. The Company adopted a new Incentive Compensation
Plan in 2004 (the "Plan"), which was approved by the shareholders at the 2004
Annual Meeting. The intention of the Plan is to closely align the payment of
variable compensation with individual and Company performance with a view to
attracting and retaining highly competent, effective and loyal employees in
order to create per share intrinsic value for shareholders. Under the terms of
the Plan, variable compensation is awarded both in cash and equity (paid in the
form of restricted stock). The degree to which individual and Company
performance impacts variable compensation and the cash and equity mix under the
Plan is a function of the level of employee. The Plan intentionally seeks to
more closely align payment of variable compensation to Company performance and
to leverage equity ownership to management and executive level employees. The
Executive Compensation Committee intends to use restricted stock grants rather
than stock options to provide equity compensation under the Plan and there were
no stock options granted to any executive officers in 2005. These grants are an
integrated component of the Company's variable compensation program and are
awarded based upon the attainment of certain performance goals.
Early in 2005, the Executive Compensation Committee determined that
variable compensation awards for 2005 for the executive officers, other than Mr.
Foss, who does not receive variable compensation, and the Treasurer, would be
based on a percent of the change in adjusted Economic Profit generated by the
Company. The Company defines Economic Profit as net income (adjusted for
non-recurring items) less a cost of equity equal to 10% of average equity. The
Executive Compensation Committee believes that variable compensation awards
based on measures that directly impact Economic Profit properly align the
executives' incentives with the Company's performance, because the Executive
Compensation Committee believes that improvements in Economic Profit will create
increased shareholder value. The cash portion of the Named Executive Officers
2005 Bonuses (other than Mr. Foss) were calculated as follows: 5% of the change
in Economic Profit year over year for the Chief Executive Officer; 4% for the
President; 2.5% for the Chief Operating Officer; and 2% for the Chief Analytics
Officer. The remaining executive officers (other than the Treasurer) received
cash bonuses ranging between .5% and 1% of the change in Economic Profit year
over year. Restricted stock awards were determined based upon a multiplier of
the cash portion of the variable compensation award, less current stock option
carrying costs for the individual. The process of considering previous stock
option grants
10
provides a method to ensure the Company's costs are aligned with the employee's
organization level and performance. For the Named Executive Officers, the
multipliers were 3.5 for the Chief Executive Officer; 3.5 for the President; 1.5
for the Chief Operating Officer; and 1.5 for the Chief Analytics Officer. The
multiplier for the remaining executive officers (other than the Treasurer) was
1. The amount of the restricted stock awarded is then converted into shares
based upon the fair market value at the time of the grant. Restricted stock
awards for all executive officers (other than the Treasurer) contain a vesting
schedule based on meeting earnings per share targets established by the
Executive Compensation Committee.
For the Treasurer and all non-executive officers, the 2005 formula was
based upon the employee's achievement of individual performance objectives and
predefined business measures that directly impact Economic Profit, including
profitability, loan origination quality, growth in the number of loans
originated, and loan portfolio performance. Bonus amounts yielded by the formula
are paid one-half in cash and one-half in restricted stock (less current stock
option carrying costs for the individual) converted to shares based upon the
fair market value at the time of the grant. Restricted stock grants for the
Treasurer and all non-executive officers will have a five year, back-end loaded
time-based vesting schedule.
THE CHIEF EXECUTIVE OFFICER'S 2005 COMPENSATION. Mr. Roberts, the
Company's Chief Executive Officer, is compensated on a basis similar to that
described above. Mr. Roberts' base salary for 2005 remained unchanged at
$400,000. The Company believes this is consistent with external labor market
data for chief executive officers in similarly sized companies, in similar
industries, or in other successful companies. Early in 2005, the Executive
Compensation Committee approved the basis upon which bonus awards to Mr. Roberts
would be made. The variable compensation award for Mr. Roberts was based on a
percent of the change in adjusted Economic Profit generated by the Company
similar to that of the other executive officers. The amount shown in the Summary
Compensation Table includes the full amount earned for 2005 based on the above
formula.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION. Section 162(m) of the Internal
Revenue Code of 1986, as amended, restricts the deductibility of executive
compensation paid to the Company's Chief Executive Officer and any of the four
other most highly compensated executive officers at the end of any fiscal year
to not more than $1 million in annual compensation (including gains from the
exercise of certain stock option grants). Certain performance-based compensation
is exempt from this limitation if it complies with the various conditions
described in Section 162(m). The Plan has been structured to cause compensation
paid under the Plan to comply with these conditions and be exempt from the
Section 162(m) restriction on deductibility.
It is possible that other components of the Company's compensation program
may result in payments to executive officers that would exceed the restriction
on deductibility. The Executive Compensation Committee intends to continue to
evaluate from time to time the advisability of qualifying future executive
compensation programs for exemption from the Section 162(m) restriction on
deductibility.
EXECUTIVE COMPENSATION COMMITTEE:
GLENDA J. CHAMBERLAIN HARRY E. CRAIG DANIEL P. LEFF THOMAS N. TRYFOROS
DIRECTOR COMPENSATION
For 2005, all outside Board members received $1,500 for each Board meeting
attended plus $500 for each committee meeting attended and were reimbursed for
travel related expenses. Non-employee directors were also eligible to
participate in the Company's Incentive Compensation Plan. There were no equity
awards made under the Incentive Compensation Plan in 2005 to non-employee
directors.
11
STOCK PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative total
shareholder return on the Company's Common Stock during the period beginning on
January 1, 2001 and ending on December 31, 2005 with the cumulative total return
on the Nasdaq Market index and a peer group index based upon the approximately
100 companies included in the Dow Jones -- US General Financial Index. The
comparison assumes that $100 was invested on December 31, 2000 in the Company's
Common Stock and in the foregoing indices and assumes the reinvestment of
dividends.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG CREDIT ACCEPTANCE CORP.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
[PERFORMANCE GRAPH]
ASSUMES $100 INVESTED ON JAN. 1, 2001
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2005
--------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005
--------------------------------------------------------------------------------------
Credit Acceptance
Corp 100.00 148.33 106.35 255.00 424.17 230.83
--------------------------------------------------------------------------------------
DJ US General
Financial Index 100.00 91.42 73.11 100.07 110.23 118.97
--------------------------------------------------------------------------------------
NASDAQ Market Index 100.00 79.71 55.60 83.60 90.63 92.62
--------------------------------------------------------------------------------------
12
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In the normal course of business, the Company has maintained business
relationships and engaged in certain transactions with companies owned by Donald
Foss, the Company's majority shareholder and Chairman and a member of Mr. Foss'
immediate family (the "Foss Companies"), and with certain automotive dealerships
owned by Keith McCluskey, the Company's President (the "McCluskey Dealerships").
CONTRACT ASSIGNMENTS AND FEES
In the normal course of its business, the Company makes Dealer Loans to the
Foss Companies, which totaled approximately $8.9 million at December 31, 2005.
The total amount of cash advanced for the year ended December 31, 2005 was $6.0
million. The Company makes Dealer Loans to the Foss Companies and nonaffiliated
dealer-partners on the same basis.
In the normal course of its business, the Company makes Dealer Loans to the
McCluskey Dealerships, which totaled approximately $4.0 million at December 31,
2005. The total amount of cash advanced for the year ended December 31, 2005 was
$3.6 million. The Company makes Dealer Loans to the McCluskey Dealerships and
nonaffiliated dealer-partners on the same basis.
Total CAPS (the Company's patented Internet-based Credit Approval
Processing System) and dealer enrollment fees earned from the Foss Companies and
the McCluskey Dealerships during 2005 were $28,000 and $30,000, respectively.
INDEBTEDNESS
Pursuant to an employment agreement with the Company's President dated
April 19, 2001, the Company loaned the McCluskey Dealerships approximately
$850,000. The note, including all principal and interest, is due on April 19,
2011, bears interest at 5.22%, is unsecured, and is personally guaranteed by the
Company's President. The balance of the note including accrued but unpaid
interest was $1,154,147 as of March 31, 2006. In addition, pursuant to the
employment agreement, the Company loaned the President $478,000. The note,
including all principal and interest, is due on April 19, 2011, bears interest
at 5.22% beginning January 1, 2002, and is unsecured. The balance of the note
including accrued interest was approximately $585,283 as of March 31, 2006.
OTHER
The Company paid for air transportation services provided by a company
owned by the Company's majority shareholder and Chairman totaling $0.1 million
for the year ended December 31, 2005.
Beginning in 2000, the Company offered a line of credit arrangement to
certain dealerships who were not participating in the Company's core program.
The Company ceased offering this program to new dealerships in the third quarter
of 2001 and has been reducing the amount of capital invested in this program
since that time. Beginning in 2002, entities owned by the Company's majority
shareholder and Chairman began offering secured lines of credit to third parties
in a manner similar to the Company's prior program. In December of 2004, the
Company's majority shareholder and Chairman sold his ownership interest in these
entities but he continues to have indirect control over these entities and has
the right or obligation to reacquire the entities under certain circumstances
until December 31, 2014 or the repayment of the related purchase money note.
13
INDEPENDENT ACCOUNTANTS
GENERAL
The Audit Committee has appointed Grant Thornton LLP ("Grant Thornton") as
the Company's independent accountants to perform an integrated audit of the
consolidated financial statements of the Company and the effectiveness of the
Company's internal controls over financial reporting for 2006. Grant Thornton
has served as the Company's independent accountants since their appointment by
the Audit Committee on July 20, 2005, and acted as the Company's independent
accountant in 2005 to audit the financial statements included in the Company's
Annual Reports on Form 10-K for the years ended December 31, 2005 and 2004.
Representatives of Grant Thornton will be present at the meeting to respond to
questions from the shareholders and will be given the opportunity to make a
statement.
CHANGE IN INDEPENDENT ACCOUNTANTS
On June 24, 2005, the Audit Committee dismissed Deloitte & Touche LLP
("Deloitte") as its independent registered public accounting firm, and on July
21, 2005 engaged Grant Thornton as its new independent registered public
accounting firm to audit the Company's financial statements for the year ended
December 31, 2005.
Deloitte did not issue an opinion with respect to the Company's financial
statements for the year ended December 31, 2004. The audit report of Deloitte on
the consolidated financial statements of the Company for the year ended December
31, 2003 did not contain an adverse opinion or a disclaimer of opinion, nor was
it qualified or modified as to uncertainty, audit scope, or accounting
principles.
During the two most recent fiscal years and the subsequent interim period
through the date of Deloitte's dismissal, there were no disagreements with
Deloitte on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreement(s), if
not resolved to the satisfaction of Deloitte, would have caused Deloitte to make
reference to the subject matter of the disagreement(s) in connection with its
reports on the Company's financial statements for such years, except as
described in the following two paragraphs:
On April 8, 2005, Deloitte informed the Company that it believed the
Company should not account for loans as an originator of loans to consumers
("Consumer Loans") but should instead account for its loans as a lender to its
dealer-partners ("Dealer Loans"). The Company has historically accounted for
Consumer Loans as a loan originator, and believed such accounting was in
accordance with GAAP. The Company did not believe that there was only a single
proper interpretation of GAAP for the Company's core business model given its
unique characteristics, and accordingly, believed that both the Company's
current methodology and Deloitte's proposed methodology were acceptable under
GAAP. Deloitte notified the Company that their proposed methodology, whereby the
Company originates Dealer Loans, is the only methodology consistent with GAAP.
On April 26, 2005, the Company submitted a letter to the staff of the
Office of the Chief Accountant of the Securities and Exchange Commission
requesting guidance from the SEC related to the proper accounting methodology
for the Company's loan portfolio. On June 24, 2005, the Company received a
response from the SEC to its request. The SEC informed the Company that it saw
no reason to take positions different from those of Deloitte as the Company's
auditors with respect to the proper method for recording automobile loans. In
view of Deloitte's and the SEC's positions, the Company agreed to change its
method for recording such loans and, as a result, was required to restate its
previously reported financial results. The Audit Committee discussed the subject
matter of the disagreement with Deloitte, and the Company authorized Deloitte to
respond fully to the inquiries of the Company's successor auditors concerning
this disagreement.
14
During the two most recent fiscal years and the subsequent interim period
through the date of Deloitte's dismissal, there have been no "reportable
events," as defined in Item 304(a)(1)(v) of Regulation S-K, except as noted in
the following paragraph:
During the course of the Company's 2004 year-end closing process, the
Company identified errors in its accounting for income taxes in prior periods
related primarily to its foreign subsidiaries. As a result of these errors, the
Company concluded that a deficiency in internal controls related to income taxes
existed at December 31, 2004, and that such deficiency constituted a material
weakness, as defined by the Public Company Accounting Oversight Board's Auditing
Standard No. 2. As a result of the material weakness related to income taxes,
management was unable to conclude that the Company's internal controls over
financial reporting were effective as of December 31, 2004. As a result of these
errors, Deloitte advised the Company and the Audit Committee that it believed
that the Company's financial statements for the year ended December 31, 2003
should be restated. Deloitte also communicated to the Audit Committee of the
Board of Directors that it believed these errors were a result of a material
weakness in internal control over accounting for income taxes. The Company
concurred with Deloitte's conclusions.
The Company provided Deloitte with a copy of the foregoing disclosures. The
Company requested that Deloitte furnish it with a letter addressed to the SEC
stating whether or not it agrees with the above statements and if not, the
respects in which it does not agree. Deloitte has provided such a letter.
During the years ended December 31, 2003, and December 31, 2004, and
through July 20, 2005, neither the Company nor anyone acting on its behalf
consulted with Grant Thornton regarding either: (i) the application of
accounting principles to a specified transaction, either completed or proposed;
or the type of audit opinion that might be rendered on the Company's financial
statements; or (ii) any matter that was either the subject of a disagreement (as
defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or
a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K). During
2003, prior to becoming the Company's independent accountants, the Company
discussed a draft response to a routine SEC comment letter with Grant Thornton.
The Company was charged approximately $1,000 for the discussions with Grant
Thornton.
FEES PAID TO INDEPENDENT ACCOUNTANTS
The following table provides a summary of the aggregate fees billed by
Grant Thornton for 2005 and 2004 (in thousands):
2005 2004
---- ------
Audit fees(1)............................................... $653 $1,914
Audit-related fees.......................................... -- --
Tax fees.................................................... -- --
All other fees.............................................. -- --
---- ------
Total fees................................................ $653 $1,914
==== ======
(1) 2004 audit fees were for the audit of the Company's consolidated balance
sheets as of December 31, 2004 and 2003, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 2004 and for the audit of the
effectiveness of the Company's internal controls over financial reporting as
of December 31, 2004. 2005 audit fees were for the same services but for the
period ended December 31, 2005.
The Audit Committee has considered whether the provision of these services
is compatible with maintaining the independence of Grant Thornton and satisfied
itself as to the maintenance of the auditors' independence.
15
POLICY FOR PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES
The Audit Committee's policy is to pre-approve all audit services and all
non-audit services that our independent accountants are permitted to perform for
us under applicable federal securities regulations. The Audit Committee's policy
utilizes an annual review and general pre-approval of certain categories of
specified services that may be provided by the independent accountants, up to
predetermined fee levels. Any proposed services not qualifying as a pre-approved
specified service, and pre-approved services exceeding the predetermined fee
levels, require further specific pre-approval by the Audit Committee. The Audit
Committee has delegated to the Chairman of the Audit Committee the authority to
pre-approve audit and non-audit services proposed to be performed by the
independent accountants. Since May 6, 2003, all services provided by the
Company's independent auditors were pre-approved by the Audit Committee. The
policy has not been waived in any instance.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's officers and directors, and persons who own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the SEC. Officers, directors and greater
than 10% shareholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on its review of the
copies of such forms received since March 31, 2006, and written representations
from certain reporting persons, the Company believes that all filing
requirements applicable to its officers, directors, and greater than 10%
beneficial owners were complied with except that Messrs. McCluskey, Jones,
Simmet, Booth, Busk, Pearce, Leff and Ms. Chamberlain each filed late one Form 4
reporting one transaction, and Messrs. Roberts and Knoblauch each filed one late
Form 4 reporting two transactions. In each case, the late-reported transactions
involved only the vesting of certain performance-based stock options granted and
reported in prior years.
OTHER BUSINESS MATTERS
The only matters which management intends to present to the meeting are set
forth in the Notice of Annual Meeting. Management knows of no other matters
which will be brought before the meeting by any other person. However, if any
other matters are properly brought before the meeting, the persons named on the
enclosed form of proxy intend to vote on such matters in accordance with their
best judgment on such matters.
Enclosed with the Notice of Annual Meeting and this Proxy Statement is a
copy of the Company's Annual Report on Form 10-K. The Company has also published
a formal annual report which is available without charge to shareholders upon
request. Address all requests, in writing, to the Investor Relations Department,
Credit Acceptance Corporation, P.O. Box 513, Southfield, Michigan 48037.
SHAREHOLDER PROPOSALS AND NOMINEES FOR 2007 ANNUAL MEETING
SHAREHOLDER PROPOSALS
Proposals by shareholders which are intended to be presented at the 2007
Annual Meeting of Shareholders must be submitted to the Secretary of the Company
no later than December 19, 2006 in order to be considered for inclusion in the
Company's 2007 proxy materials. The Company expects the persons named as proxies
for the 2007 Annual Meeting of Shareholders to use their discretionary voting
authority, to the extent permitted by law, with respect to any proposal
presented at that meeting by a shareholder who does not provide the Company with
written notice of such proposal on or before March 4, 2007.
16
SHAREHOLDER NOMINEES
Shareholders desiring to recommend candidates for consideration and
evaluation by the Nominating Committee for the 2007 Annual Meeting should submit
such recommendations to the Chief Legal Officer of the Company not later than
November 14, 2006. The recommendation should be accompanied by (i) the name and
address of the shareholder recommending the candidate, (ii) evidence of the
shareholder's ownership of Company shares along with an undertaking that the
shareholder will continue to own such shares through the date of the Annual
Meeting, (iii) all information regarding the candidate that would be required to
be disclosed in the Company's Annual Meeting Proxy Statement if the candidate is
nominated by the Board, and (iv) the candidate's consent to serve as a director
if elected. The Chief Legal Officer will forward any recommendations to the
Nominating Committee. The Nominating Committee may seek additional biographical
and background information from any candidate that must be received on a timely
basis to be considered by the Nominating Committee.
By Order of the Board of Directors,
Charles A. Pearce
Corporate Secretary
April 18, 2006
17
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PROXY - CREDIT ACCEPTANCE CORPORATION
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS MAY 11, 2006
The undersigned hereby constitutes and appoints Donald A. Foss and Brett A.
Roberts, and each of them, attorneys and proxies, with the power of substitution
in each of them, to vote all the shares of Common Stock of Credit Acceptance
Corporation that the undersigned is entitled to vote at the Annual Meeting of
Shareholders of the Corporation to be held on May 11, 2006 at 8:00 a.m., local
time, and at any adjournments or postponements thereof, upon all matters
properly coming before the meeting including, without limitation, those set
forth in the related Notice of Meeting and Proxy Statement. This Proxy, when
properly executed, will be voted in the manner directed. IF NO SPECIFICATION IS
MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEES NAMED ON THE OTHER SIDE. In
their discretion, to the extent permitted by law, the proxies are also
authorized to vote upon such other matters as may properly come before the
meeting, including the election of any person to the Board of Directors where a
nominee named in the Proxy Statement dated April 18, 2006 is unable to serve or,
for good cause, will not serve. The undersigned acknowledges receipt of the
Notice of Annual Meeting of Shareholders and the Proxy Statement dated April 18,
2006, and the 2005 Annual Report to Shareholders, and ratifies all that the
proxies or either of them or their substitutes may lawfully do or cause to be
done by virtue hereof and revokes all former proxies.
YOUR VOTE IS IMPORTANT! PLEASE MARK, SIGN, DATE THIS PROXY ON THE REVERSE SIDE
AND RETURN IT IN THE ACCOMPANYING ENVELOPE.
(Continued and to be voted on reverse side.)
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/ / Mark this box with an
X if you have made
changes to your name
or address details
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ANNUAL MEETING PROXY CARD
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/A/ ELECTION OF DIRECTORS
1. The Board of Directors recommends a vote FOR the listed nominees.
FOR WITHHOLD FOR WITHHOLD
01 - Donald A. Foss / / / / 04 - Daniel P. Leff / / / /
02 - Harry E. Craig / / / / 05 - Brett A. Roberts / / / /
03 - Glenda J. Chamberlain / / / / 06 - Thomas N. Tryforos / / / /
/B/ ATTENDANCE
Mark this box with an X if you plan to attend the meeting. / /
/C/ AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR
INSTRUCTIONS TO BE EXECUTED.
NOTE: Please sign your name(s) EXACTLY as your name(s) appear(s) on this proxy.
All joint holders must sign. When signing as attorney, trustee, executor,
administrator, guardian or corporate officer, please provide your FULL title.
Signature 1 - Please keep signature within the box Signature 2 - Please keep signature within the box Date (mm/dd/yyyy)
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