Exhibit 1
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SECURITIES PURCHASE AGREEMENT
By and Among
NATIONAL AUTO FINANCE COMPANY, INC.,
THE 1818 MEZZANINE FUND, L.P.,
PC INVESTMENT COMPANY,
PROGRESSIVE INVESTMENT COMPANY, INC.
and
MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
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Dated December 22, 1997
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TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS...............................................1
1.1 Definitions...............................................1
1.2 Accounting Terms; Financial Covenants....................15
ARTICLE 2 PURCHASE AND SALE........................................16
2.1 Purchase and Sale of Senior Subordinated Notes, Warrants
and Shares...............................................16
2.2 Fees.....................................................16
2.3 Closing..................................................17
ARTICLE 3 CONDITIONS TO THE OBLIGATION OF THE
PURCHASERS TO CLOSE......................................17
3.1 Representations and Warranties True......................17
3.2 Compliance with this Agreement...........................17
3.3 Officer's Certificate....................................18
3.4 Secretary's Certificate..................................18
3.5 Documents................................................18
3.6 Purchase Permitted by Applicable Laws; Legal Investment..18
3.7 Opinion of Counsel.......................................18
3.8 Approval of Counsel to the Purchaser.....................18
3.9 Consents and Approvals...................................18
3.10 No Material Adverse Change...............................19
3.11 Employment Agreements....................................19
3.12 Registration Rights Agreement............................19
3.13 Certificate of Incorporation and By-Laws of the Company
and its Subsidiaries.....................................19
3.14 Market Conditions........................................19
3.15 No Default or Breach.....................................19
3.16 Fees.....................................................19
3.17 ▇▇▇▇▇▇...................................................19
3.18 Termination of Other Registration Rights Agreements......20
3.19 Credit Agreement Waiver..................................20
3.20 Simultaneous Purchases...................................20
3.21 Subordination............................................20
3.22 National Auto Finance Company, L.P.......................20
3.23 Confirmation from Nasdaq National Market.................20
ARTICLE 4 CONDITIONS TO THE OBLIGATION OF THE
COMPANY TO CLOSE ......................................21
4.1 Representations and Warranties True......................21
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4.2 Compliance with this Agreement...........................21
4.3 Approval of Counsel to the Company.......................21
4.4 Consents and Approvals...................................21
4.5 Amendments of Registration Rights Agreements.............21
4.6 Credit Agreement Waiver..................................21
4.7 General Partner's Certificate............................22
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF
THE COMPANY..............................................22
5.1 Corporate Existence and Power............................22
5.2 Corporate Authorization; No Contravention................22
5.3 Governmental Authorization; Third Party Consents.........23
5.4 Binding Effect...........................................23
5.5 No Legal Bar.............................................23
5.6 Litigation...............................................24
5.7 No Default or Breach.....................................24
5.8 Title to Properties......................................24
5.9 Financial Condition; No Undisclosed Liabilities..........24
5.10 No Material Adverse Change...............................25
5.11 Investment Company.......................................25
5.12 Subsidiaries.............................................25
5.13 Capitalization...........................................25
5.14 Solvency.................................................26
5.15 Private Offering.........................................26
5.16 Broker's, Finder's or Similar Fees.......................26
5.17 Full Disclosure..........................................26
5.18 Anti-Dilution Protection.................................27
5.19 Registration Rights Agreements...........................27
5.20 Labor Relations..........................................27
5.21 ERISA and Employee Benefit Plans.........................27
5.22 Environmental Matters....................................28
5.23 Taxes....................................................28
5.24 Patents, Trademarks, Etc.................................29
5.25 Potential Conflicts of Interest..........................30
5.26 Trade Relations..........................................30
5.27 Indebtedness.............................................30
5.28 Material Contracts.......................................30
5.29 Insurance................................................31
5.30 Projections..............................................31
5.31 Commission Documents.....................................31
5.32 Lending Activities.......................................31
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ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF
THE PURCHASER............................................32
6.1 Existence and Power......................................32
6.2 Authorization; No Contravention..........................32
6.3 Binding Effect...........................................32
6.4 No Legal Bar.............................................33
6.5 Purchase for Own Account.................................33
6.6 Investment Company.......................................34
6.7 Broker's, Finder's or Similar Fees.......................34
ARTICLE 7 INDEMNIFICATION..........................................34
7.1 Indemnification by the Company...........................34
7.2 Notification.............................................35
7.3 Registration Rights Agreement............................36
ARTICLE 8 PRE-CLOSING AFFIRMATIVE COVENANTS........................36
8.1 Operation of Company.....................................36
8.2 Exclusivity..............................................36
ARTICLE 9 AFFIRMATIVE COVENANTS....................................36
9.1 Financial Statements.....................................36
9.2 Certificates; Other Information..........................37
9.3 Preservation of Corporate Existence......................38
9.4 Payment of Obligations...................................38
9.5 Compliance with Laws.....................................38
9.6 Notices..................................................39
9.7 Issue Taxes..............................................39
9.8 Reservation of Shares....................................39
9.9 Inspection...............................................40
9.10 Board Representation; Visitation Rights..................41
9.11 Registration and Listing.................................42
9.12 Use of Proceeds..........................................42
9.13 Payment of Notes.........................................43
9.14 Sale of Company..........................................43
9.15 Allocation for Tax Purposes..............................43
9.16 Information on Internal Rate of Return...................43
ARTICLE 10 NEGATIVE AND FINANCIAL COVENANTS.........................44
10.1 Minimum Consolidated Net Worth...........................44
10.2 Adjusted Interest Expense................................44
10.3 Consolidations and Mergers...............................44
10.4 Transactions with Affiliates.............................45
10.5 No Inconsistent Agreements...............................45
10.6 Limitation on Indebtedness...............................45
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10.7 Limitation on Liens......................................46
10.8 Investments..............................................47
10.9 Limitations on Restricted Payments.......................48
10.10 Dispositions of Assets...................................48
10.11 Future Issuances of Preferred Stock......................49
10.12 Certificate of Incorporation and By-Laws of the Company
and its Subsidiaries.....................................49
10.13 Line of Business.........................................49
10.14 Vehicle Loan Policy......................................49
ARTICLE 11 DEFAULTS AND REMEDIES....................................49
11.1 Events of Default........................................49
11.2 Acceleration.............................................51
ARTICLE 12 SUBORDINATION............................................52
12.1 Definitions..............................................52
12.2 General..................................................53
12.3 Limitation on Payment and Remedies.......................53
12.4 Subordination Upon Certain Events........................55
12.5 Payments and Distributions Received......................55
12.6 Subrogation..............................................55
12.7 Relative Rights..........................................56
12.8 Subordination May Not Be Impaired by the Company.........56
12.9 Payments.................................................56
12.10 Section Not to Prevent Events of Default.................56
12.11 Defense to Enforcement...................................56
12.12 Further Covenants........................................57
12.13 Freedom of Dealing.......................................57
12.14 Subordinated Indebtedness Voting Rights..................57
12.15 Subordinated Indebtedness Unsecured......................58
12.16 Modification or Sale of the Subordinated Indebtedness....58
12.17 Termination of Subordination.............................58
12.18 Notices to Holders of Senior Indebtedness................59
ARTICLE 13 PREPAYMENT...............................................59
ARTICLE 14 MISCELLANEOUS............................................59
14.1 Survival of Provisions...................................59
14.2 Notices..................................................60
14.3 Successors and Assigns...................................61
14.4 Assignments..............................................62
14.5 Amendment and Waiver.....................................63
14.6 Counterparts.............................................64
14.7 Headings.................................................64
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14.8 Determinations...........................................64
14.9 Governing Law............................................64
14.10 Jurisdiction.............................................64
14.11 Severability.............................................65
14.12 Rules of Construction....................................65
14.13 Remedies.................................................65
14.14 Entire Agreement.........................................65
14.15 Attorneys' Fees..........................................65
14.16 Publicity................................................66
14.17 Expenses.................................................66
EXHIBITS
Exhibit A Form of Senior Subordinated Note
Exhibit B Form of Warrant
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Legal Opinion of Weil, Gotshal & ▇▇▇▇▇▇
Exhibit E Form of Legal Opinion of In-House Counsel
SCHEDULES
Schedule 2.1A List of Purchasers and Principal Amount
Schedule 2.1B List of Purchasers and Warrants
Schedule 2.1C List of Purchasers and Shares
Schedule 5.10 Material Adverse Change
Schedule 5.13 Capitalization Matters
Schedule 5.21 ERISA
Schedule 5.25 Potential Conflicts of Interest
Schedule 5.27 Indebtedness
Schedule 5.28 Material Contracts
Schedule 5.29 Insurance
Schedule 5.30 Projections
Schedule 5.32(b) Current Policies Regarding Purchase of
Retail Installment Vehicle Loans
Schedule 10.4 Transactions with Affiliates
Schedule 10.7 Liens
Schedule 10.8A Investments
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SECURITIES PURCHASE AGREEMENT, dated as of December 22, 1997, by and
among NATIONAL AUTO FINANCE COMPANY, INC., a corporation organized under the
laws of Delaware (the "COMPANY"), THE 1818 MEZZANINE FUND, L.P., a limited
partnership organized under the laws of Delaware (the "FUND"), PC INVESTMENT
COMPANY, a corporation organized under the laws of Delaware ("PCI"), PROGRESSIVE
INVESTMENT COMPANY, INC., a corporation organized under the laws of Delaware
("PROGRESSIVE," and together with PCI, the "PROGRESSIVE ENTITIES"), and
MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.), a corporation organized under the
laws of Michigan ("ML," and together with the Fund and the Progressive Entities,
the "PURCHASERS").
WHEREAS, the Company proposes to issue and sell (A) to the Fund, PCI
and ML (i) Senior Subordinated Promissory Notes with a final maturity of
December 22, 2004 in the aggregate principal amount of $40,000,000.00 (the
"SENIOR SUBORDINATED NOTES" and, together with all notes issued in connection
with the substitution, replacement or transfer thereof, the "NOTES") and (ii)
1,038,924 detachable warrants (the "WARRANTS") exercisable immediately to
purchase initially 1,038,924 shares of the Company's Common Stock, par value
$.01 per share (the "COMMON STOCK"), at an exercise price of $.01 per share and
(B) to the Fund and Progressive, 1,904,762 shares (the "SHARES") of the
Company's Common Stock, in each case upon the terms and subject to the
conditions set forth in this Agreement.
In consideration of the mutual covenants and agreements set forth
herein and for other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"AFFILIATE" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act.
"AGREEMENT" means this Agreement, as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"BBH & CO." means ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ and Co., a New York
limited partnership.
2
"BUSINESS DAY" means any day other than a Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or required
by law or executive order to close.
"CAPITAL LEASE OBLIGATIONS" means, as to any Person, any obligation
of such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligation is required to be classified and accounted
for as a capital lease on a balance sheet of such Person under GAAP and, for the
purposes of the Notes, the amount of any such obligation at any time shall be
the capitalized amount thereof at such time determined in accordance with GAAP
consistently applied.
"CAPITAL STOCK" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of such Person's
capital stock (or equivalent ownership interests in a Person not a corporation)
whether now outstanding or hereafter issued, including, without limitation, all
common stock and preferred stock and any rights, warrants or options to purchase
such Person's capital stock.
"CLOSING" has the meaning assigned to that term in Section 2.3.
"CLOSING DATE" has the meaning assigned to such term in Section 2.3.
"CLOSING PRICE" means, for any day, the last reported sale price or,
in case no such sale takes place on such day, the highest reported bid quotation
for the Common Stock, in either case as reported on Nasdaq's automatic quotation
system.
"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor statute thereto.
"COMMISSION" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"COMMON STOCK" has the meaning assigned to that term in the first
Whereas clause.
"CONSOLIDATED NET WORTH" means, as of the date of determination with
respect to any Person, the consolidated stockholders' equity (excluding any
reductions resulting from mergers accounted for as a pooling-of-interests in
accordance with GAAP) of such Person and its Subsidiaries, determined in
accordance with GAAP.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean, as of the date of
determination with respect to the Company, the Consolidated Net Worth of the
Company PLUS the aggregate amount of Junior Subordinated Indebtedness of the
Company MINUS the total book value of all assets of the Company and its
Subsidiaries properly classified as intangible assets under GAAP.
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"CONSOLIDATED TOTAL INTEREST EXPENSE" means for any period, the
aggregate amount of (a) interest scheduled to be paid or accrued by the Company
and its Subsidiaries during such period on all Funded Debt of the Company and
its Subsidiaries outstanding during all or any part of such period, whether such
interest was or is required to be reflected as an item of expense or
capitalized, including payments consisting of interest in respect of Capital
Lease Obligations PLUS (b) the net amount payable (or minus the net amount
receivable) under Rate Hedging Agreements during such period (whether or not
actually paid or received during such period) PLUS (c) dividends to be paid or
declared by the Company and its Subsidiaries during such period on all shares of
Preferred Stock and its Subsidiaries outstanding during all or any part of such
period.
"CONTINGENT OBLIGATION" means, as to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, guaranty or other obligation (each a "PRIMARY OBLIGATION") of another
Person (the "PRIMARY OBLIGOR"), whether or not contingent, including, without
limitation, any agreement (a) to purchase, repurchase or otherwise acquire any
such primary obligation or any property constituting direct or indirect security
therefor, or (b) to advance or provide funds (i) for the payment or discharge of
any such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor in respect of any such primary obligation or
otherwise to maintain the net worth or solvency or any balance sheet item, level
of income or financial condition of such primary obligor, or (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor in respect
thereof to make payment of such primary obligation, or (d) otherwise to assure
or hold harmless the owner of any such primary obligation against loss or
failure or inability to perform in respect thereof. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof.
"CONTRACTUAL OBLIGATIONS" means as to any Person, any provision of
any security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
"CREDIT AGREEMENT" means the Revolving Credit Agreement, dated as of
September 29, 1997, among the Company, the financial institutions party thereto
(the "BANKS") and BankBoston, N.A., a national banking association, as agent for
the Banks (the "AGENT"), as well as the notes, security documents and other
agreements entered into in connection therewith, each as amended, supplemented
or modified from time to time in accordance with its terms and including any
extensions, replacements, refinancings or refundings thereof, whether with same
or different lenders and/or agents and evidenced by one or more agreements.
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"CURRENT MARKET PRICE" has the meaning assigned such term in the
Warrants.
"CURRENT POLICIES REGARDING PURCHASE OF RETAIL INSTALLMENT VEHICLE
LOANS" means the Company's policies regarding the origination and purchase of
such retail installment car loans in the form of SCHEDULE 5.32(B) hereto, as
such policies may be amended, restated, supplemented, or otherwise modified from
time to time.
"DEFAULT" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"DISPOSITION" means any sale, lease, transfer or other disposition
by the Company or its Subsidiaries of their properties, assets, rights, licenses
and franchises to any Person (including, without limitation, dispositions in
exchange for similar assets and properties and commonly referred to as "asset
swaps").
"EBIT" shall mean, with respect to any Person for any period, the
sum of (a) Net Income for such period (excluding therefrom, to the extent
included in determining Net Income, any items of extraordinary gain (or loss),
including net gains (or losses) on sale of assets other than asset sales in the
ordinary course of business), (b) Consolidated Total Interest Expense deducted
from revenue in determining such Net Income and (c) Federal, state and local
income and franchise taxes deducted from revenue in determining such Net Income.
All references contained herein to EBIT of the Company shall be to the EBIT of
the Company and its Subsidiaries, determined on a consolidated basis.
"ENVIRONMENT" means navigable waters, waters of the contiguous zone,
ocean waters, natural resources, surface waters, ground water, drinking water
supply, land surface, subsurface strata, ambient air, both inside and outside of
buildings and structures, man-made buildings and structures, and plant and
animal life on earth.
"ENVIRONMENTAL CLAIMS" means any notification, whether direct or
indirect, formal or informal, written or oral, pursuant to Safety and
Environmental Laws or principles of common law relating to pollution, protection
of the Environment or health and safety, that any of the current or past
operations of the Company or any of its Subsidiaries, or any by-product thereof,
or any of the property currently or formerly owned, leased or operated by the
Company or any of its Subsidiaries, or the operations or property of any
predecessor of the Company or any of its Subsidiaries, is or may be implicated
in or subject to any claim, Requirement of Law, hearing, notice, agreement or
evaluation by any Governmental Authority or any other Person.
"ENVIRONMENTAL COMPLIANCE COSTS" means any expenditures, costs,
assessments or expenses (including any expenditures, costs, assessments or
expenses in connection with the conduct of any Remedial Action, as well as
reasonable fees, disbursements and expenses of attorneys, experts, personnel and
consultants), whether
5
direct or indirect, necessary to cause the operations, real property, assets,
equipment or facilities owned, leased, operated or used by the Company or any of
its Subsidiaries to be in compliance with any and all requirements, as in effect
at the Closing Date, of Safety and Environmental Laws, principles of common law
concerning pollution, protection of the Environment or health and safety, or
Permits issued pursuant to Safety and Environmental laws; PROVIDED, HOWEVER,
that Environmental Compliance Costs do not include expenditures, costs,
assessments or expenses necessary in connection with normal maintenance of such
real property, assets, equipment or facilities or the replacement of equipment
in the normal course of events due to ordinary wear and tear.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EVENT OF DEFAULT" has the meaning assigned such term in
Section 11.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission hereunder.
"EXISTING JUNIOR SUBORDINATED INDEBTEDNESS" shall mean the Junior
Subordinated Indebtedness of the Company existing as of the date hereof and
evidenced by the ▇▇▇▇▇ Note, NFC Note, Nova Note, ▇▇▇▇ Note and ▇▇▇▇▇▇▇ Note.
"EXISTING SECURITIZATION TRANSACTION" means the securitization
program in existence as of the Closing Date comprised of the Company's sale,
assignment, pledge or contribution of some of its Vehicle Loans to a Special
Purpose Subsidiary as part of a securitization of such Vehicle Loans.
"FINANCIALS" has the meaning assigned to that term in Section 5.9.
"FISCAL YEAR" means the fiscal year for the Company. As of the date
of this Agreement, the fiscal year for the Company ends December 31.
"FSA REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated October 1, 1997, between the Company and FSA Portfolio
Management, Inc.
"FUND" has the meaning assigned to that term in the preamble of this
Agreement.
"FUNDED DEBT" means with respect to any Person and as at any date of
determination thereof, without duplication, (a) all Indebtedness of such Person
as at such date for money borrowed, (b) the principal component of all Capital
Lease Obligations, (c) all Indebtedness for the deferred purchase price of
property or services represented by a note or other security (other than in
respect of any trade
6
payable) or other Indebtedness arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), and
(d) all Indebtedness of such Person secured by a purchase money mortgage or
other lien to secure all or part of the purchase price of property subject to
such mortgage or lien.
"GAAP" means generally accepted United States accounting principles
in effect from time to time.
"GOVERNMENTAL AUTHORITY" means the government of any nation, state,
city, locality or other political subdivision of any thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"▇▇▇▇▇ NOTE" means the Amended and Restated Promissory Note, dated
as of January 3, 1997, issued by National Auto Finance Company, L.P., to ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇ in the aggregate principal amount, as of July 1, 1997, of $34,387 and
maturing on January 31, 2002, as assigned to, and assumed by the Company,
including the same as such may be amended, supplemented or modified from time to
time in accordance with its terms and the terms hereof.
"HAZARDOUS SUBSTANCE" means any toxic waste, pollutant, contaminant,
hazardous substance, toxic substance, hazardous waste, special waste, industrial
substance or waste, petroleum or petroleum-derived substance or waste,
radioactive substance or waste, or any constituent of any such substance or
waste, or any other substance regulated under or defined by any Safety and
Environmental Law.
"HOLDER" means the Purchasers and any subsequent transferee or
transferees of Notes, Warrants, Warrant Shares or Shares, as reflected on the
books and records of the Company, other than a transferee who has acquired
Notes, Warrants, Warrant Shares or Shares that have been the subject of a
distribution pursuant to a registered public offering, or, in the case of Notes,
Warrants, Warrant Shares or Shares, a transferee who has acquired such Notes,
Warrants, Warrant Shares or Shares after such securities have been sold pursuant
to Rule 144 under the Securities Act or otherwise distributed under
circumstances not requiring a legend.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended.
"INDEBTEDNESS" means as to any Person, (a) all obligations of such
Person for borrowed money (including, without limitation, reimbursement and all
other obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured), (b) all obligations evidenced by notes,
bonds, debentures or similar instruments, (c) all obligations to pay the
deferred purchase
7
price of property or services, except trade accounts payable and accrued
liabilities arising in the ordinary course of business, (d) all interest rate
and currency swaps and similar agreements under which payments are obligated to
be made, whether periodically or upon the happening of a contingency, (e) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (f)
all obligations under Capital Lease Obligations, (g) all indebtedness secured by
any Lien on any property or asset owned or held by that Person regardless of
whether the indebtedness secured thereby shall have been assumed by that Person
or is non-recourse to the credit of that Person, and (h) any Contingent
Obligation.
"INTERCOMPANY INDEBTEDNESS" means Indebtedness of the Company to any
Subsidiary, directly or indirectly, wholly owned by the Company and Indebtedness
of any Subsidiary of the Company to the Company or another Subsidiary of the
Company.
"INTERIM FINANCIALS" has the meaning assigned to such term in
Section 5.9.
"INVESTMENT" means (i) the acquisition (whether for cash, property,
services, securities or otherwise) of Capital Stock, bonds, notes, debentures,
partner ship or other ownership interests or other securities of any other
Person or any agreement to make any such acquisition; and (ii) the making of any
advance, loan or other extension of credit to, any Person (including the
purchase of property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such Person, but
excluding any accounts receivable created in the ordinary course of business).
"JUNIOR SECURITIES" has the meaning assigned to such term in
Section 12.1.
"JUNIOR SUBORDINATED INDEBTEDNESS" shall mean Indebtedness that is
expressly subordinated and made junior to the payment and performance in full of
the Notes, has a Stated Maturity later than December 19, 2004, and is evidenced
as such by a written instrument containing subordination provisions in form and
substance approved by the holders of a majority in interest of the aggregate
principal amount of the Notes whose consent shall not be unreasonably withheld;
PROVIDED that any such subordination provisions shall be deemed reasonable so
long as the holder of the Junior Subordinated Indebtedness agrees to be
subordinated to the Notes at least to the same extent as the Existing Junior
Subordinated Indebtedness is subordinated to the Notes pursuant to the Junior
Subordination Agreement (except that nothing contained in this proviso shall be
deemed to permit the Stated Maturity of any such Junior Subordinated
Indebtedness to be earlier than December 20, 2004). Notwithstanding anything to
the contrary contained in the foregoing, however, Junior Subordinated
8
Indebtedness shall be deemed to include the Existing Junior Subordinated
Indebtedness even though the Stated Maturity of such Indebtedness is January 31,
2002. The fact that the Stated Maturity of the Existing Junior Subordinated
Indebtedness is January 31, 2002 shall not be deemed to be a violation of the
terms of this Agreement.
"JUNIOR SUBORDINATION AGREEMENT" means the Junior Subordination
Agreement, dated as of the date hereof, among the Purchasers, Bank Boston, N.A.,
a national banking association, as agent for the Banks, other "Senior Creditors"
identified on the signature pages thereto and "Subordinating Creditors" as
identified on Schedule I thereto, including the same as such may be amended,
supplemented or modified from time to time.
"LIABILITIES" has the meaning assigned to such term in Section 5.9.
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock or equity related preferences),
including, without limitation, those created by, arising under or evidenced by
any conditional sale or other title retention agreement, any interest of a
lessor under a capital lease, or any financing lease having substantially the
same economic effect as any of the foregoing.
"MATERIAL ADVERSE EFFECT" has the meaning assigned to such term in
Section 3.10.
"ML" has the meaning assigned to that term in the preamble of this
Agreement.
"▇▇▇▇▇▇ NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement,
dated as of August 9, 1996, among the Company as successor by assumption to
National Auto Finance Company, L.P. and the "Purchasers" identified on the
signature pages thereto, including the same as such may be amended, supplemented
or modified from time to time.
"▇▇▇▇▇▇ REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated August 9, 1996, among the Company as successor by assumption to
National Auto Finance Company, L.P. and the "Investors" identified on Schedule I
thereto.
"NASDAQ" means the National Market System of Nasdaq Stock Market.
"NET INCOME" shall mean for any period, the net income (loss) of any
Person, determined in accordance with GAAP, after deducting all operating
expenses, provisions for taxes and reserves and all other proper deductions in
accordance with GAAP. All references contained herein to the Net Income of the
Company shall be
9
to the Net Income of the Company and its Subsidiaries, determined on a
consolidated basis.
"NET SALE PROCEEDS" means with respect to any Disposition, the
aggregate amount of all cash payments received by the Company or its
Subsidiaries, directly or indirectly, in connection with such Disposition,
whether at the time thereof or after such Disposition under deferred payment
arrangements or Investments entered into or received in connection with such
Disposition, MINUS the aggregate amount of any reasonable and customary legal,
accounting, regulatory, title and recording tax expenses, transfer taxes,
commissions and other fees and expenses paid at any time by the Company or its
Subsidiaries in connection with such Disposition, and MINUS any cash income
taxes payable by the Company and its Subsidiaries in connection with such
Disposition. For purposes of this paragraph, the Company shall not be deemed to
have received any amounts held in escrow by a third party in connection with a
Disposition until the time, and only to the extent, such amounts are released to
the Company.
"NFC NOTE" means the Amended and Restated Promissory Note, dated as
of January 3, 1997, issued by National Auto Finance Company, L.P. to Nova
Financial Corporation in the aggregate principal amount, as of July 1, 1997, of
$27,789 and maturing on January 31, 2002, as assigned to, and assumed by the
Company, including the same as such may be amended, supplemented or modified
from time to time in accordance with its terms and the terms hereof.
"NOTES" has the meaning assigned to that term in the first Whereas
clause.
"NOVA NOTE" means the Amended and Restated Promissory Note, issued
by National Auto Finance Company, L.P. to Nova Corporation in the aggregate
principal amount, as of July 1, 1997, of $497,383 and maturing on January 31,
2002, as assigned to, and assumed by, the Company, including the same as such
may be amended, supplemented or modified from time to time in accordance with
its terms and the terms hereof.
"NYSE" means the New York Stock Exchange, Inc.
"OMNI" means Omni Financial Services of America, Inc., as assignee
of World Omni Financial Corporation, a Florida corporation.
"OMNI AGREEMENT" means the Fourth Amendment to the Amended and
Restated Servicing Agreement, dated as of October 12, 1997, by and between Omni
Financial Services of America, Inc. and National Auto Finance Company, Inc.
"▇▇▇▇ NOTE" means the Amended and Restated Promissory Note, dated as
of January 3, 1997, issued by National Auto Finance Company, L.P. to ▇▇▇▇▇ ▇▇▇▇
in the aggregate principal amount, as of July 1, 1997, of $980,895 and maturing
on
10
January 31, 2002, as assigned to, and assumed by, the Company, including the
same as such may be amended, supplemented or modified from time to time in
accordance with its terms and the terms hereof.
"PCI" has the meaning assigned to that term in the preamble of this
Agreement.
"PERMIT" means any license, permit, exemption, consent, waiver,
authorization, right, order or approval of, and required registration with, any
Governmental Authority.
"PERMITTED LIENS" has the meaning assigned to that term in Section
10.7.
"PERMITTED REFINANCING INDEBTEDNESS" means Junior Subordinated
Indebtedness issued in exchange for, or the net proceeds of which are used to
extend, refinance, replace, defease or refund any other Junior Subordinated
Indebtedness of the Company permitted to be incurred under this Agreement, but
only to the extent that such Indebtedness does not shorten the Stated Maturity
(or weighted average life to maturity) of such Indebtedness.
"PERMITTED SECURITIZATION TRANSACTION" means (a) the Existing
Securitization Transaction and (b) any similar transaction (including any whole
loan sales or similar transactions in the ordinary course of business) hereafter
entered into by the Company or any of its Subsidiaries provided that at the time
such similar transaction is consummated no Default or Event of Default shall
have occurred and be continuing or would occur immediately after giving effect
thereto.
"PERSON" means any individual, firm, corporation, division, part
nership, trust, incorporated or unincorporated association, joint venture, joint
stock company, Governmental Authority or other entity of any kind, and shall
include any successor (by merger or otherwise) of any such entity.
"PREDECESSOR FINANCIALS" has the meaning assigned to that term in
Section 5.9.
"PREFERRED STOCK" means any Capital Stock of a Person, however
designated, which entitles the holders thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"PROGRESSIVE" has the meaning assigned to that term in the preamble
of this Agreement.
"PROGRESSIVE ENTITIES" has the meaning assigned to that term in the
preamble of this Agreement.
11
"PROXY STATEMENT" has the meaning assigned to that term in Section
8.3.
"PUBLIC OFFERING" means the sale in any offering by the Company or
any of its Subsidiaries of their Capital Stock pursuant to a registration
statement on Form ▇-▇, ▇▇▇▇ ▇-▇ or otherwise under the Securities Act.
"PURCHASE PRICE" shall mean the Unit Purchase Price PLUS the Stock
Purchase Price.
"PURCHASER SHARES" means, with respect to the Fund and the
Progressive Entities, the sum of the shares of Common Stock initially issuable
upon exercise of the Warrants (subject to any adjustments pursuant to the terms
thereof) plus the Shares and, with respect to ML, the shares of Common Stock
initially issuable upon exercise of the Warrants (subject to any adjustments
pursuant to the terms thereof) in each case issued thereto pursuant to this
Agreement.
"PURCHASERS" has the meaning assigned to that term in the preamble
of this Agreement.
"RATE HEDGING AGREEMENTS" means any written agreements evidencing
Rate Hedging Obligations.
"RATE HEDGING OBLIGATIONS" means any and all obligations of the
Company or any of its Subsidiaries, whether direct or indirect and whether
absolute or contingent, at any time created, arising, evidenced or acquired
(including all renewals, extensions, modifications and amendments thereof and
all substitutions therefor), in respect of: (a) any and all agreements,
arrangements, devices and instruments designed or intended to protect at least
one of the parties thereto from the fluctuations of interest rates, exchange
rates or forward rates applicable to such party's assets, liabilities or
exchange transactions, including without limitation dollar-denominated or cross
currency interest rate exchange agreements, forward rate currency or interest
rate options, puts and warrants and so-called "rate swap" agreements; and (b)
any and all cancellations, buy-backs, reversals, terminations or assignments of
any of the foregoing.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement substantially in the form attached hereto as EXHIBIT C, as the same
may be amended or modified from time to time in accordance with its terms.
"RELEASE" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
or through the indoor or outdoor Environment or into, through or out of any
property, including the movement of Hazardous Substances through or in the air,
soil, surface water, ground water or property.
12
"REMEDIAL ACTION" means all actions, whether voluntary or
involuntary, reasonably necessary to comply with, or discharge any obligation
under, Safety and Environmental Laws to (i) clean up, remove, treat, cover or in
any other way adjust Hazardous Substances in the indoor or outdoor Environment;
(ii) prevent or control the Release of Hazardous Substances so that they do not
migrate or endanger or threaten to endanger public health or welfare or the
Environment; or (iii) perform remedial studies, investigations, restoration and
post-remedial studies, investigations and monitoring on, about or in any real
property.
"REQUIREMENTS OF LAW" means, as to any Person, any law, treaty, rule
or regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"RESTRICTED PAYMENT" means (a) any dividend (or other distribution
of evidences of Indebtedness, assets or other property) on any share of the
Company's or any Subsidiary's Capital Stock (except dividends payable solely in
shares of their Capital Stock or dividends paid to the Company or a wholly-owned
Subsidiary of the Company by a wholly-owned direct or indirect Subsidiary of the
Company) or (b) any payment by the Company or any of its Subsidiaries on account
of the direct or indirect purchase, redemption, retirement or other acquisition
of (i) any shares of the Company's or any such Subsidiary's Capital Stock
(except (x) the Warrants and (y) shares acquired upon the conversion, exchange
or exercise thereof into or for other shares of their Capital Stock), or (ii)
any Indebtedness of the Company or any such Subsidiary prior to any date set
forth for mandatory repayment or redemption of principal or interest thereon;
PROVIDED, HOWEVER, that this clause (ii) shall not apply to (w) Indebtedness
incurred pursuant to the Notes, (x) Senior Indebtedness, (y) Indebtedness that
is pari passu in right of payment to the Notes, to the extent that the Company
offers to purchase, redeem or retire the Notes pro rata with such pari passu
Indebtedness or (z) Permitted Refinancing Indebtedness in respect of Junior
Subordinated Indebtedness (other than Existing Junior Subordinated
Indebtedness)).
"SAFETY AND ENVIRONMENTAL LAWS" means all Requirements of Law
relating to pollution, protection of the Environment, public or worker health
and safety, or the emission, discharge, release or threatened release of
Hazardous Substances into the Environment or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances including the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss. 9601 ET
SEQ., the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 ET SEQ.,
the Toxic Substances Control Act, 15 U.S.C. ss. 2601 ET SEQ., the Federal Water
Pollution Control Act, 33 U.S.C. ss. 1251 ET SEQ., the Clean Air Act, 42 U.S.C.
ss. 7401 ET SEQ., the Federal Insecticide, Fungicide anD Rodenticide Act, 7
U.S.C. ss. 121 ET SEQ., the Occupational Safety and Health Act, 29 U.S.C. ss.
651 ET SEQ., the Asbestos Hazard Emergency Response Act, 15 U.S.C. ss. 2601 ET
SEQ., the Safe Drinking Water Act, 42 U.S.C. ss. 300f ET SEQ., the Oil
13
Pollution Act of 1990, 33 U.S.C. ss. 2701 ET SEQ., and analogous legislation and
regulation by any Governmental Authority.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"SENIOR DEFAULT" has the meaning assigned to such term in
Section 12.1.
"SENIOR EVENT OF DEFAULT" has the meaning assigned to such term in
Section 12.1.
"SENIOR INDEBTEDNESS" has the meaning assigned to such term in
Section 12.1.
"SENIOR PAYMENT DEFAULT" has the meaning assigned to such term in
Section 12.1.
"SENIOR SUBORDINATED NOTES" has the meaning assigned to such term in
the first Whereas clause.
"SERIES A PREFERRED STOCK" means the Company's Series A Preferred
Stock, $.01 par value per share.
"▇▇▇▇▇▇▇ NOTE" means the Amended and Restated Promissory Note, dated
as of January 3, 1997, issued by National Auto Finance Company, L.P. to ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ in the aggregate principal amount of $436,846 and maturing on January
31, 2002, as assigned to, and assumed by, the Company, including the same as
such may be amended, supplemented or modified from time to time in accordance
with its terms and the terms hereof.
"SHARES" has the meaning assigned to such term in the first Whereas
clause, as the same may be adjusted appropriately for any stock dividend, stock
split, reclassification or other similar event.
"SOLVENT" means, as to any Person, that the fair saleable value on a
going concern basis of the assets and property of such Person and its
Subsidiaries, taken as a whole, is, on the date of determination, greater than
the total amount of liabilities (including contingent and unliquidated
liabilities) of such Person as of such date and that, as of such date, such
Person is able to pay all liabilities of such Person as such liabilities mature.
In computing the amount of contingent or unliquidated liabilities at any time,
such liabilities will be computed as the amount which, in light of all the facts
and circumstances existing at such time, represents the amount that is probable
to become an actual or matured liability.
14
"SPECIAL PURPOSE SUBSIDIARY" means any special purpose entity
including, without limitation, a wholly-owned Subsidiary of the Company or
trust, established in connection with a Permitted Securitization Transaction.
"STATED MATURITY" means, with respect to any Junior Subordinated
Indebtedness, the date on which the payment of the principal thereon is due and
payable, including pursuant to any mandatory redemption provision.
"STOCK PURCHASE PRICE" has the meaning assigned to such term in
Section 2.1(b).
"STOCK PURCHASERS" means, collectively, the Fund and Progressive.
"SUBORDINATED INDEBTEDNESS" has the meaning assigned to such term in
Section 12.1.
"SUBSIDIARY" means, with respect to any Person, a corporation or
other entity of which 50% or more of the voting power for the election of
directors under ordinary circumstances is exercisable, directly or indirectly,
by such Person; PROVIDED that the term Subsidiary shall not include a Special
Purpose Subsidiary.
"TAX" or "TAXES" means all federal, state, county, local, foreign
and other taxes (including, without limitation, income, profits, premium,
estimated, excise, sales, use, occupancy, gross receipts, franchise, ad valorem,
severance, capital levy, production, transfer, withholding, employment,
unemployment compensation, payroll-related and property taxes, import duties and
other governmental charges and assessments), whether or not measured in whole or
in part by net income, and including deficiencies, interest, additions to tax or
interest, and penalties with respect thereto, and including expenses associated
with any proposed adjustment relating to any of the foregoing (including advice
in connection with contesting such adjustment).
"TEMPORARY CASH INVESTMENT" means any Investment in (i) marketable
direct or guaranteed obligations of the United States of America that mature
within one (1) year from the date of purchase by the Company; (ii) demand
deposits in, or certificates of deposit, bankers acceptances and time deposits
of United States banks having total assets in excess of $1,000,000,000; and
(iii) securities commonly known as "commercial paper" issued by a corporation
organized and existing under the laws of the United States of America or any
state thereof that at the time of purchase have been rated and the ratings for
which are not less than "P 1" by ▇▇▇▇▇'▇ Investors Services, Inc., or not less
than "A 1" by Standard and Poor's.
"TOTAL INDEBTEDNESS" shall mean Funded Debt of the Company and its
Subsidiaries on a consolidated basis LESS Junior Subordinated Indebtedness.
15
"TRANSACTION DOCUMENTS" has the meaning assigned to that term in
Section 5.17.
"UNIT PURCHASE PRICE" has the meaning assigned to that term in
Section 2.1(a).
"VEHICLE LOAN" means a motor vehicle installment sales contract
assigned to the Company that is secured by title to, security interests in, or
liens on a motor vehicle under applicable provisions of the motor vehicle or
other similar law of the jurisdiction in which the motor vehicle is title and
registered by the purchaser at the time the contract is originated or purchased.
"VOIDED PAYMENT" has the meaning assigned to that term in
Section 12.17.
"WARRANTS" has the meaning assigned to that term in the first
Whereas clause.
"WARRANT SHARES" has the meaning assigned to that term in
Section 5.13.
1.2 ACCOUNTING TERMS; FINANCIAL COVENANTS. All accounting terms used
herein not expressly defined in this Agreement shall have the respective
meanings given to them in accordance with sound accounting practice. The term
"sound accounting practice" shall mean such accounting practice as, in the
opinion of the independent accountants regularly retained by the Company,
conforms at the time to GAAP applied on a consistent basis. If any changes in
accounting principles are hereafter occasioned by promulgation of rules,
regulations, pronouncements or opin ions by or are otherwise required by the
Financial Accounting Standards Board or the American Institute of Certified
Public Accountants (or successors thereto or agencies with similar functions),
and any of such changes results in a change in the method of calculation of, or
affects the results of such calculation of, any of the financial cove nants,
standards or terms found herein, then the parties hereto agree to enter into and
diligently pursue in good faith negotiations in order to amend such financial
covenants, standards or terms so as to reflect fairly and equitably such
changes, with the desired result that the criteria for evaluating the Company's
financial condition and results of operations shall be the same as nearly as
practicable after such changes as if such changes had not been made.
16
ARTICLE 2
PURCHASE AND SALE
2.1 PURCHASE AND SALE OF SENIOR SUBORDINATED NOTES, WARRANTS AND
SHARES.
(a) Subject to the terms and conditions set forth herein, the
Company agrees that it will issue to each of the Fund, PCI and ML, and each of
the Fund, PCI and ML agrees that it will acquire from the Company, at the
Closing, (i) the principal amounts of the Senior Subordinated Notes set forth
opposite the name of such Purchaser on SCHEDULE 2.1A hereto, with such Senior
Subordinated Notes being substantially in the form attached hereto as EXHIBIT A,
appropriately completed in conformity herewith and (ii) Warrants to purchase
initially the number of shares of Common Stock set forth opposite the name of
such Purchaser on SCHEDULE 2.1B hereto, with such Warrants being substantially
in the form attached hereto as EXHIBIT B, for its portion of the aggregate
purchase price of $40,000,000 (the "UNIT PURCHASE PRICE") set forth next to such
Purchaser's name on SCHEDULE 2.1A, in cash, by wire transfer of immediately
available funds to an account designated in a notice delivered to such
Purchasers not later than two Business Days prior to the Closing Date.
(b) Subject to the terms and conditions set forth herein, the
Company agrees that it will issue to the Stock Purchasers, and each Stock
Purchaser agrees that it will acquire from the Company, at the Closing, the
number of shares of Common Stock set forth opposite the name of such Stock
Purchaser on SCHEDULE 2.1C hereto, for its portion of the aggregate purchase
price of $10,000,000 (the "STOCK PURCHASE PRICE") set forth next to such Stock
Purchaser's name on SCHEDULE 2.1C, in cash, by wire transfer of immediately
available funds to an account designated in a notice delivered to such
Purchasers not later than two Business Days prior to the Closing Date.
2.2 FEES. The Company hereby agrees that it will pay to the Fund,
PCI and ML, at the Closing, a facility fee of $400,000 (less any portion thereof
previously paid by the Company to such Purchasers), payable $160,000 to the
Fund, $140,000 to PCI and $100,000 to ML, and an equity placement fee of
$300,000, payable $257,142.75 to the Fund and $42,857.25 to Progressive, in each
case in cash by wire transfer of immediately available funds to an account
designated in a notice delivered to the Company not later than two Business Days
prior to the Closing Date. At the Company's option, by notice to the Fund, PCI,
Progressive and ML at least two Business Days prior to the Closing Date, such
facility fee and placement fee may be paid by each such Purchaser by deducting
such amount from the Unit Purchase Price.
17
2.3 CLOSING.
The purchase and issuance of the Senior Subordinated Notes, the
Warrants and the Shares shall take place at the closing (the "CLOSING") to be
held at the offices of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, 1285 Avenue of
the Americas, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ on December 19, 1997, at 10:00 a.m.,
New York City time, or on such other date and at such other time as the
Purchasers and the Company may mutually agree (the "CLOSING DATE"). At the
Closing, subject to the terms and conditions set forth herein, the Company shall
sell the Senior Subordinated Notes and the Warrants to the Fund, PCI and ML by
delivering to the Fund, PCI and ML, the Senior Subordinated Notes and the
Warrants registered in the names of such Purchasers, with appropriate issue
stamps, if any, affixed at the expense of the Company, free and clear, upon
issuance, of any Lien (other than as may be created by such Purchasers), and
such Purchasers shall, severally and not jointly, purchase the Senior
Subordinated Notes and the Warrants for the Unit Purchase Price. At the Closing,
subject to the terms and conditions set forth herein, the Company shall sell the
Shares to the Stock Purchasers by delivering to the Stock Purchasers the Shares
registered in the name of the Stock Purchasers, with appropriate issue stamps,
if any, affixed at the expense of the Company, free and clear, upon issuance, of
any Lien (other than as may be created by the Stock Purchasers), and the Stock
Purchasers shall, severally and not jointly, purchase the Shares for the Stock
Purchase Price.
ARTICLE 3
CONDITIONS TO THE OBLIGATION
OF THE PURCHASERS TO CLOSE
The obligation of the Purchasers to purchase the Senior Subordinated
Notes, the Warrants and the Shares, as the case may be, to pay the Purchase
Price therefor at the Closing, and to perform any of their obligations hereunder
in respect of transactions contemplated to occur on the Closing Date shall be
subject to the satisfaction or waiver of the following conditions on or before
the Closing Date:
3.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Company contained in Article 5 hereof shall be true and
correct in all material respects (unless any representation or warranty is
qualified by its terms as to materiality, in which case such representation or
warranty shall be true and correct) at and as of the Closing Date, as if made at
and as of such date.
3.2 COMPLIANCE WITH THIS AGREEMENT. The Company shall have performed
and complied with all of its agreements and conditions set forth or contemplated
herein that are required to be performed or complied with by the Company on or
before the Closing Date.
18
3.3 OFFICER'S CERTIFICATE. The Purchasers shall have received a
certificate, dated the Closing Date and signed by the Chief Executive Officer,
Vice Chairman or Chief Financial Officer of the Company, certifying that the
conditions set forth in Sections 3.1 and 3.2 hereof have been satisfied on and
as of such date.
3.4 SECRETARY'S CERTIFICATE. The Purchasers shall have received a
certificate, dated the Closing Date and signed by the Secretary or an Assistant
Secretary of the Company, attaching a good standing certificate from the
Delaware Secretary of State with respect to the Company, and certifying the
correctness of attached copies of the certificate of incorporation and by-laws
of the Company and resolutions of the Board of Directors of the Company
approving this Agreement and the transactions contemplated hereby.
3.5 DOCUMENTS. The Purchasers shall have received copies of such
documents as they reasonably may request in connection with the sale of the
Senior Subordinated Notes, the Warrants and the Shares and the transactions
contemplated hereby, all in form and substance reasonably satisfactory to the
Purchasers.
3.6 PURCHASE PERMITTED BY APPLICABLE LAWS; LEGAL INVESTMENT. The
acquisition of and payment for the Senior Subordinated Notes, the Warrants and
the Shares and the consummation of the transactions contemplated hereby (a)
shall not be prohibited by any applicable law or governmental regulation, (b)
shall not subject the Purchasers to any penalty or, in their reasonable
judgment, other onerous condition under or pursuant to any applicable law or
governmental regulation and (c) shall be permitted by the laws and regulations
of the jurisdictions to which they are subject.
3.7 OPINION OF COUNSEL. The Purchasers shall have received the
opinion of Weil, Gotshal & ▇▇▇▇▇▇ LLP, counsel to the Company, dated the Closing
Date, substantially in the form attached hereto as EXHIBIT D. The Purchasers
shall have received the opinion of in-house counsel to the Company, dated the
Closing Date, substantially in the form of the attached hereto as EXHIBIT E.
3.8 APPROVAL OF COUNSEL TO THE PURCHASER. All actions and
proceedings hereunder and all documents required to be delivered by the Company
hereunder or in connection with the consummation of the transactions
contemplated hereby, and all other related matters, shall have been reasonably
acceptable to ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to the
Purchasers, as to their form and substance.
3.9 CONSENTS AND APPROVALS. All consents, waivers, exemptions,
authorizations (including, without limitation, stockholder approval), or other
actions by, or notices to, or filings with, Governmental Authorities and other
Persons necessary or required in connection with the execution, delivery or
performance by the Company or enforcement against the Company of this Agreement
or any other Transaction Document shall have been obtained and be in full force
and effect, and the Purchasers shall have been furnished with appropriate
evidence thereof.
19
3.10 NO MATERIAL ADVERSE CHANGE. Since December 31, 1996, except as
disclosed in SCHEDULE 5.10, there shall have been no change, that has, or would
have, a material adverse effect on the assets, business, properties, operations
or financial or other condition of the Company and its Subsidiaries, taken as a
whole (a "MATERIAL ADVERSE EFFECT"), nor shall any such change be threatened.
3.11 EMPLOYMENT AGREEMENTS. Each of ▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ shall have duly executed and delivered employment agreements with the
Company, the terms and conditions of which are reasonably acceptable to the
Purchasers.
3.12 REGISTRATION RIGHTS AGREEMENT. The Company shall have duly
executed and delivered to the Purchasers the Registration Rights Agreement.
3.13 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE COMPANY AND ITS
SUBSIDIARIES. No amendments to the certificate of incorporation or by-laws of
the Company as in effect on the date hereof shall have been effected.
3.14 MARKET CONDITIONS. On or prior to the Closing Date, (a) trading
in securities generally on the NYSE shall not have been suspended or limited or
minimum or maximum prices shall not have been generally established on such
exchange, or additional material governmental restrictions, not in force on the
date of this Agreement, shall not have been imposed upon trading in securities
generally by such exchange or by order of the Commission or any court or other
Governmental Authority, (b) a general banking moratorium shall not have been
declared by either federal or New York State authorities or (c) any material
adverse change in the financial or securities markets in the United States or in
political, financial or economic conditions in the United States or any outbreak
or material escalation of hostilities or declaration by the United States of a
national emergency or war or other calamity or crisis shall not have occurred.
3.15 NO DEFAULT OR BREACH. The Company shall not be or have been in
Default under this Agreement, any of the other Transaction Documents or any
Indebtedness and, after giving effect to the transactions contemplated hereby
and thereby, the Company will not be in Default under any of the Transaction
Documents or any Indebtedness.
3.16 FEES. The Company shall have paid or shall concurrently pay to
the Fund, PCI, Progressive and ML the fees provided for in Section 2.2 hereof.
3.17 ▇▇▇▇▇▇. The Company shall have delivered to the Purchasers, in
form and substance reasonably satisfactory to the Purchasers, evidence that the
Indebtedness incurred under the ▇▇▇▇▇▇ Note Purchase Agreement has been repaid
in full by the Company.
20
3.18 TERMINATION OF OTHER REGISTRATION RIGHTS AGREEMENTS. The
Company shall have delivered to the Purchasers, in form and substance reasonably
satisfactory to the Purchasers, evidence of termination of each of the ▇▇▇▇▇▇
Registration Rights Agreement, the FSA Registration Rights Agreement and Article
VI of the Second Amended and Restated Agreement of Limited Partnership, dated as
of September 1, 1995, of National Auto Finance Company, L.P., and each party to
such agreements shall have executed and delivered the Registration Rights
Agreement.
3.19 CREDIT AGREEMENT WAIVER. The Company shall have delivered to
the Purchasers, in form and substance reasonably satisfactory to the Purchasers,
a waiver of any provisions of the Credit Agreement prohibiting or otherwise
restricting the ability of the Company to enter into and perform its obligations
under this Agreement or any other Transaction Document.
3.20 SIMULTANEOUS PURCHASES. Each Purchaser's obligation to purchase
its agreed upon amount of the Senior Subordinated Notes, the Warrants and the
Shares, as the case may be, is hereby expressly conditioned upon the other
Purchasers simultaneously purchasing their agreed upon amount of the Senior
Subordinated Notes, the Warrants and the Shares, as the case may be.
3.21 SUBORDINATION. The Junior Subordination Agreement, dated as of
September 29, 1997, among BankBoston, N.A., ▇▇▇▇▇▇ Guaranty Trust Company of New
York, the Company and the other parties named therein shall have been amended in
form and substance reasonably satisfactory to the Purchasers.
3.22 NATIONAL AUTO FINANCE COMPANY, L.P. The Company shall have
delivered to the Fund and the Progressive Entities, in form and substance
reasonably satisfactory to the Fund and the Progressive Entities, an agreement
duly executed and delivered by National Auto Finance Company, L.P. pursuant to
which it agrees to vote its shares of Common Stock in favor of the Persons to be
nominated to the Company's Board of Directors by each of the Fund and the
Progressive Entities pursuant to the provisions of Section 9.10 hereof.
3.23 CONFIRMATION FROM NASDAQ NATIONAL MARKET. The Company shall
have delivered to the Purchasers, in form and substance reasonably satisfactory
to the Purchasers, written confirmation from The Nasdaq Stock Market evidencing
that no stockholder approval is required in order to close the transactions
contemplated to occur on the Closing Date.
21
ARTICLE 4
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE
The obligations of the Company to issue and sell the Senior
Subordinated Notes, the Warrants and the Shares and to perform any of its other
obligations hereunder in respect of transactions contemplated to occur on the
Closing Date, shall be subject to the satisfaction or waiver of the following
conditions on or before the Closing Date:
4.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Purchasers contained in Article 6 hereof shall be true and
correct in all material respects (unless any representation or warranty is
qualified by its terms as to materiality, in which case such representation or
warranty shall be true and correct) at and as of the Closing Date as if made at
and as of such date.
4.2 COMPLIANCE WITH THIS AGREEMENT. The Purchasers shall have
performed and complied with all of its agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by the
Purchasers on or before the Closing Date.
4.3 APPROVAL OF COUNSEL TO THE COMPANY. All actions and proceedings
hereunder and all documents required to be delivered by the Purchasers hereunder
or in connection with the consummation of the transactions contemplated hereby,
and all other related matters, shall have been reasonably acceptable to Weil,
Gotshal & ▇▇▇▇▇▇ LLP, counsel to the Company, as to their form and substance.
4.4 CONSENTS AND APPROVALS. All consents, exemptions,
authorizations, waivers or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons necessary or required in connection
with the execution, delivery or performance by the Purchasers or the Company or
enforcement against the Purchasers of this Agreement shall have been obtained
and be in full force and effect, and the Company shall have been furnished with
appropriate evidence thereof.
4.5 AMENDMENTS OF REGISTRATION RIGHTS AGREEMENTS. The parties to
each of the ▇▇▇▇▇▇ Registration Rights Agreement, the FSA Registration Rights
Agreement and the Second Amended and Restated Agreement of Limited Partnership,
dated as of September 1, 1995, of National Auto Finance Company, L.P., shall
have agreed to terminate the registration rights granted under each such
agreement and each party to such agreements shall have executed and delivered
the Registration Rights Agreement.
4.6 CREDIT AGREEMENT WAIVER. The Company shall have obtained a
waiver of any provisions of the Credit Agreement prohibiting or otherwise
restricting
22
the ability of the Company to enter into and perform its obligations under this
Agreement or any other Transaction Document.
4.7 GENERAL PARTNER'S CERTIFICATE. The Company shall have received
from each Purchaser a certificate, dated the Closing Date and signed by the
general partner or an appropriate officer of each such Purchaser, certifying
that the conditions set forth in Sections 4.1 and 4.2 hereof have been satisfied
on and as of such date with respect to such Purchaser.
ARTICLE 5
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchasers as
follows:
5.1 CORPORATE EXISTENCE AND POWER. The Company:
(a) is, and after giving effect to the transactions
contemplated by the Transaction Documents, will be duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization;
(b) has, and after giving effect to the transactions
contemplated hereby, will have (i) full corporate power and authority and (ii)
all Permits to own and operate its property, to lease the property it operates
as lessee and to conduct the business in which it is currently, or is currently
proposed to be, engaged;
(c) is, and after giving effect to the transactions
contemplated hereby, will be duly qualified as a foreign corporation, licensed
and in good standing under the laws of each jurisdiction where its ownership,
lease or operation of property or the conduct of its business requires such
qualification; and
(d) is, and after giving effect to the transactions
contemplated hereby, will be in compliance with (i) its certificate of
incorporation and by-laws or other organizational or governing documents and
(ii) all Requirements of Law;
except, in the case of (b)(ii), (c) or (d)(ii) of this Section 5.1, to the
extent that the failure to do, or be, so would not have a Material Adverse
Effect.
5.2 CORPORATE AUTHORIZATION; NO CONTRAVENTION. The execution,
delivery and performance by the Company of this Agreement, the Registration
Rights Agreement, any other Transaction Document and the transactions
contemplated
23
hereby and thereby, including without limitation, the issuance of the Senior
Subordinated Notes, the Warrants and the Shares:
(a) is within the Company's corporate power and authority and
has been duly authorized by all necessary corporate action; and
(b) does not, and will not after giving effect to the
transactions contemplated hereby, contravene the terms of the certificate of
incorporation or by-laws or other organizational or governing documents or any
amendment thereof of the Company; and
(c) does not, and will not after giving effect to the
transactions contemplated hereby, violate, conflict with or result in any breach
of, contravention of or the creation of any Lien under, any Contractual
Obligation of the Company or any order or decree directly relating to the
Company.
5.3 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS. No approval,
consent, exemption, authorization, or other action by, or notice to, or filing
with, any Governmental Authority or any other Person, is necessary or required
in connection with the execution, delivery or performance by the Company or
enforcement against the Company of this Agreement, the Senior Subordinated
Notes, the Warrants, the Registration Rights Agreement, any other Transaction
Document or the transactions contemplated hereby or thereby, other than those
that have been obtained or made on or prior to the Closing.
5.4 BINDING EFFECT. This Agreement has been duly executed and
delivered by the Company, and at the Closing the Senior Subordinated Notes, the
Registration Rights Agreement, the Warrants and each other Transaction Document
will be duly executed and delivered by the Company, and this Agreement
constitutes the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, and at the Closing the
Registration Rights Agreement, the Senior Subordinated Notes and the Warrants
will constitute the legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
5.5 NO LEGAL BAR. Neither the execution, delivery and performance of
this Agreement, the Registration Rights Agreement, or any other Transaction
Document nor the issuance of or performance of the terms of the Senior
Subordinated Notes or the Warrants will violate any Requirement of Law.
24
5.6 LITIGATION. There are no actions, suits, proceedings, claims or
disputes pending, or to the knowledge of the Company, threatened, at law, in
equity, in arbitration or before any Governmental Authority against the Company:
(a) with respect to any Transaction Document or any of the
transactions contemplated thereby; or
(b) which would, if adversely determined, (i) have a Material
Adverse Effect or (ii) have a material adverse effect on the ability of the
Company to perform its obligations under this Agreement, the Senior Subordinated
Notes, the Warrants, the Registration Rights Agreement or any other Transaction
Document. No injunction, writ, temporary restraining order, decree or any order
of any nature has been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution, delivery and performance of this
Agreement, the Senior Subordinated Notes, the Warrants, the Registration Rights
Agreement or any other Transaction Document.
5.7 NO DEFAULT OR BREACH. No event has occurred and is continuing or
would result from the incurring of obligations by the Company under this
Agreement, the Registration Rights Agreement or any other Transaction Document
which constitutes a default under or breach of any of the provisions hereof or
of the Notes and no such event will occur or will be continuing immediately
after giving effect to the transactions contemplated hereby. The Company is not,
and after giving effect to the transactions contemplated by the Transaction
Documents will not be, in Default under or with respect to any Transaction
Document in any respect.
5.8 TITLE TO PROPERTIES. The Company has, and after giving effect to
the transactions contemplated by the Transaction Documents will have, good
record and marketable title to, or hold leases in full force and effect in all
its real property, except for such defects in title as could not, individually
or in the aggregate, have a Material Adverse Effect.
5.9 FINANCIAL CONDITION; NO UNDISCLOSED LIABILITIES. The Company
heretofore has delivered to the Purchasers true and correct copies of (i) the
audited consolidated balance sheets of National Auto Finance Company, L.P. and
its Subsidiaries for the fiscal years ended December 31, 1996 and December 31,
1995 and the related consolidated statements of income (loss), partners' capital
and cash flows for the years ended December 31, 1996 and December 31, 1995 and
for the period from October 1, 1994 (date of inception) to December 31, 1994
(the "PREDECESSOR FINANCIALS"), (ii) the unaudited pro forma balance sheet of
the Company for the fiscal year ended December 31, 1996 and an unaudited pro
forma statement of income for the year ended December 31, 1996 (the
"FINANCIALS") and (iii) the unaudited balance sheet of the Company as of
September 30, 1997 and the related statements of income, cash flows and
stockholder's equity, together with notes thereto, for the nine month period
then ended (the "INTERIM FINANCIALS"), certified, as stated in the immediately
following sentence, by the Treasurer or Chief Financial
25
Officer of the Company. Except as disclosed therein, the Predecessor Financials,
the Financials and the Interim Financials have been prepared in accordance with
GAAP applied consistently throughout the periods covered thereby (except to the
extent of any inconsistency resulting from the fact that the Company's
predecessor was a limited partnership), and present fairly in all material
respects the financial condition of the Company (or its predecessor, as the case
may be) as of the dates thereof, and the results of operations of the Company
(or its predecessor, as the case may be) for the periods then ended. After
giving effect to the transactions contemplated hereby, will not have any
material direct or indirect Indebtedness or liability, whether known or unknown,
fixed or unfixed, contingent or otherwise, of a kind required by GAAP to be set
forth on a financial statement (collectively "LIABILITIES"), other than (i)
Liabilities fully and adequately reflected on the Financials and the Interim
Financials, (ii) those incurred since the date of the Interim Financials in the
ordinary course of business and (iii) Liabilities incurred pursuant to the
Senior Subordinated Notes.
5.10 NO MATERIAL ADVERSE CHANGE. Except as set forth on SCHEDULE
5.10, since December 31, 1996, there has not been any material adverse change,
nor to the knowledge of the Company is any such change threatened, in the
assets, business, properties, prospects, operations or financial or other
condition of the Company.
5.11 INVESTMENT COMPANY. Neither the Company nor National Auto
Finance Company, L.P. is, and after giving effect to the transactions
contemplated hereby will not be, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
5.12 SUBSIDIARIES. The Company has no Subsidiaries.
5.13 CAPITALIZATION. At Closing, after giving effect to the
transactions contemplated hereby, (i) the authorized capital stock of the
Company will consist of 20,000,000 shares of Common Stock and 1,000,000 shares
of Series A Preferred Stock and (ii) no shares of Common Stock or Series A
Preferred Stock will be held in the Company's treasury. As of the Closing, after
giving effect to the transactions contemplated hereby, 9,030,762 shares of
Common Stock and 2,295 shares of Series A Preferred Stock will be issued and
outstanding. All such shares of Capital Stock of the Company have been duly
authorized and all of the issued and outstanding shares of Common Stock and
Series A Preferred Stock as of the date hereof are fully paid and
non-assessable. The Warrants (assuming all such Warrants are exercised) to be
issued at the Closing will constitute 11.99% of the Common Stock (excluding the
Shares) on a fully diluted basis (assuming exercise, exchange or conversion, as
the case may be, of all options (including options reserved for issuance but not
yet issued), warrants, convertible or exchangeable securities or other Common
Stock equivalents) as of the Closing Date. The Warrants (assuming all such
Warrants are exercised) to be issued at the Closing and the Shares would
constitute, in the aggregate, 27.85% of the Common Stock on a fully diluted
basis (assuming exercise,
26
exchange or conversion, as the case may be, of all options (including options
reserved for issuance but not yet issued), warrants, convertible or exchangeable
securities or other Common Stock equivalents) as of the Closing Date. Except as
set forth in SCHEDULE 5.13 or as reserved for issuance in connection with the
exercise of the Warrants and the sale of the Shares, there are no shares of
Capital Stock of the Company reserved for issuance. The Common Stock issuable
upon exercise of the Warrants (the "WARRANT SHARES") will be duly authorized,
and, when issued against payment therefor, the Warrant Shares will be fully paid
and non-assessable. The Shares are duly authorized and, when issued against
payment therefor, will be fully paid and non-assessable. Except for the Warrants
and as set forth in SCHEDULE 5.13, there are no options, warrants or other
rights to purchase shares of Capital Stock or any other securities of the
Company, nor is the Company obligated in any manner to issue shares of its
Capital Stock or other securities. Except as contemplated hereby and for
relevant state and federal securities laws, there are no restrictions on the
Company's ability to transfer shares of Capital Stock of the Company.
5.14 SOLVENCY. On and as of the Closing, after giving effect to the
transactions contemplated hereby, the Company will be Solvent.
5.15 PRIVATE OFFERING. No form of general solicitation or general
advertising was used by the Company or, to its knowledge, its representatives in
connection with the offer or sale of the Senior Subordinated Notes, the Warrants
or the Shares. No registration of the Senior Subordinated Notes, the Warrants,
the Warrant Shares or the Shares pursuant to the provisions of the Securities
Act or any state securities or "blue sky" laws will be required by the offer,
sale or issuance of any such securities pursuant to the transactions
contemplated hereby. The Company agrees that neither it, nor anyone acting on
its behalf, will offer or sell the Senior Subordinated Notes, the Warrants, the
Shares, or any other security in such a manner so as to require the registration
of the Senior Subordinated Notes, the Warrants or the Shares pursuant to the
provisions of the Securities Act or any state securities or "blue sky" laws.
5.16 BROKER'S, FINDER'S OR SIMILAR FEES. Except for the Company's
agreement with First Union Capital Markets which requires the Company to pay
fees totaling $1,400,000, and the Company's agreement with National Financial
Companies LLC which requires the Company to pay fees totaling $300,000, which
fees shall be paid by the Company at Closing, and except for the facility fee
payable to the Purchasers pursuant to Section 2.2 hereof, there are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
with the offer or sale of the Senior Subordinated Notes, the Warrants or the
Shares contemplated hereby based on any agreement, arrangement or understanding
with the Company, or any action taken by the Company.
5.17 FULL DISCLOSURE. No statement by the Company contained in this
Agreement (including all Schedules hereto), the Senior Subordinated Notes, the
Warrants, the Registration Rights Agreement, the Subordination Agreement or the
27
certificates referred to in Sections 3.3 and 3.4 hereof (collectively,
"TRANSACTION DOCUMENTS") delivered to the Purchasers in connection with the
purchase and sale of the Senior Subordinated Notes, the Warrants and the Shares
at or prior to the Closing contains (or will contain) an untrue statement of a
material fact or omits (or will omit) to state a material fact required to be
stated therein or necessary to make the statements made, in light of the
circumstances in which made, not materially false or misleading.
5.18 ANTI-DILUTION PROTECTION. No holder of shares of Common Stock
(or securities convertible into or exchangeable or exercisable for any of the
foregoing) has any rights to purchase or receive additional or other securities
upon the occurrence of an event that might dilute such holder's percentage
interest in the Company.
5.19 REGISTRATION RIGHTS AGREEMENTS. Upon execution of the
amendments referred to in Section 3.21 of this Agreement, the Company will not
be a party to any agreement granting any registration rights to any Person other
than the Registration Rights Agreement.
5.20 LABOR RELATIONS. The Company is not engaged in any unfair labor
practice. There is (a) no unfair labor practice complaint pending or, to the
knowledge of the Company, threatened against the Company before the National
Labor Relations Board or any other Governmental Authority and no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement is pending or, to the knowledge of the Company, threatened, (b) no
strike, labor dispute, slowdown or stoppage pending or, to the knowledge of the
Company, threatened against the Company and (c) no union representation question
existing with respect to the employees of the Company and, to the knowledge of
the Company, no union organizing activities are taking place.
5.21 ERISA AND EMPLOYEE BENEFIT PLANS.
(a) There are no employee benefit plans or material employee
benefit arrangements, policies or commitments of any type (including, but not
limited to, plans described in section 3(3) of ERISA) maintained by the Company,
or with respect to which the Company has or could have any direct or indirect
liability, other than those described in SCHEDULE 5.21 ("BENEFIT PLANS").
(b) Accurate and complete copies of all plan text and
agreements, the most recent annual report, the most recent annual and periodic
accounting of plan assets, and the most recent actuarial valuation with respect
to each Benefit Plan have been delivered to the Purchasers.
(c) No Benefit Plan is subject to Title IV of ERISA or section
412 of the Code. No Benefit Plan is a "multiple employer plan" within the
meaning of the Code or ERISA.
28
(d) With respect to each Benefit Plan, except as set forth in
SCHEDULE 5.21: (i) if it is intended to qualify under section 401(a) or 403(a)
of the Code, such plan so qualifies and has in effect a current determination
letter; (ii) such Benefit Plan has been maintained and administered at all times
in compliance in all material respects with its terms and applicable laws and
regulations; (iii) no event has occurred and there exists no circumstances under
which the Company could incur material liability under ERISA, the Code or
otherwise (other than routine claims for benefits) with respect to such plan or
with respect to any other entity's employee benefit plan; and (iv) all
contributions and premiums due with respect to such plan have been made on a
timely basis.
(e) With respect to each Benefit Plan that is a "welfare plan"
(as defined in ERISA section 3(1)): (i) no such plan provides medical or death
benefits with respect to current or former employees of the Company beyond their
termination of employment (other than as required to avoid an excise tax under
Code section 4980B); and (ii) the Company has complied in all material respects
with the requirements of Code section 4980B.
(f) The consummation of the transactions contemplated by this
Agreement will not: (i) entitle any individual to severance or termination pay;
(ii) accelerate the time of payment or vesting, or increase the amount of
compensation due to any individual; or (iii) result in the payment that will be
taken into account in determining whether there is an "excess parachute payment"
under Code section 280G(b)(1).
5.22 ENVIRONMENTAL MATTERS. (i) The Company is and has been in
compliance in all material respects with all applicable Safety and Environmental
Laws; (ii) there is no Environmental Claim pending or, to the knowledge of the
Company, threatened against the Company, and there is no civil, criminal or
administrative judgement or notice of violation against the Company pursuant to
Safety and Environmental Laws or principles of common law relating to pollution,
protection of the Environment or health and safety; and (iii) there are no past
or present events, conditions, circumstances, activities, practices, incidents,
agreements, actions or plans which may prevent compliance with Environmental
Laws, or which have given rise to or will give rise to Environmental Claims,
individually or in the aggregate, in excess of $125,000 or to Environmental
Compliance Costs, individually or in the aggregate, in excess of $125,000.
5.23 TAXES.
(a) The Company has timely filed all returns with respect to
Taxes required to be filed through the date hereof in a manner consistent with
prior years and applicable laws and regulations and all such Tax returns are
true and complete in all material respects. The Company timely paid all Taxes
shown on such returns as are due through the date hereof, or that are claimed or
asserted by any taxing authority to be due through the date hereof, except for
those Taxes that are
29
being contested in good faith by appropriate proceedings and with respect to
which adequate reserves have been established. With respect to any period for
which Tax returns have not yet been filed, or for which Taxes are not yet due or
owing, the Company has no liability for Taxes in each case other than Taxes
incurred in the ordinary course of business or for which accruals are reflected
in the Financials or the Interim Financials.
(b) No audit or other proceeding by any court, taxing
authority, or similar person is pending or, to the knowledge of the Company,
threatened with respect to any Taxes due from or with respect to the operations
of the Company, or any Tax return filed by or with respect to the operations of
the Company. No assessment of Taxes is proposed against the Company or any of
its assets.
5.24 PATENTS, TRADEMARKS, ETC.
(a) The Company owns or has licensed or otherwise has the
right to use all patents, trademarks, service marks, trade names, copyrights,
licenses, franchises and other rights that are material to the operation of its
business as presently conducted or proposed to be conducted.
(b) The Company owns, licenses or otherwise has the right to
use all computer software, including the source codes thereto, that is material
to the operation of its business as presently conducted or proposed to be
conducted. All computer software owned by the Company, including the source
codes thereto, is free and clear of all Liens (except Permitted Liens), has not
in any material way been divulged to any third party and represents unique work
product to which the Company has good and marketable title. The Company uses and
has used its best efforts to secure and maintain its intellectual property
rights in any and all computer software it owns. Duplicates of all such computer
software, including the source codes thereto, are at a secure off-site location.
(c) No product, process, method, substance or other material
presently owned, sold, licensed or employed by the Company, or which the Company
contemplates owning, selling, licensing or employing, (i) infringes upon the
patents, trademarks, service marks, copyrights or licenses that are owned by
others or (ii) to the knowledge of the Company, is being infringed upon by any
other Person. No liti gation is pending and no claim has been made against the
Company or, to the knowledge of the Company, is threatened, contesting the right
of the Company to own, sell, license or use any product, process, method,
substance or other material presently owned, sold, licensed or employed by the
Company or which the Company intends to acquire an ownership interest in, sell,
license or employ. To the knowledge of the Company, no patent, invention,
device, principle or any statute, law, rule, regulation, standard or code is
pending or proposed which would be reasonably likely to have a Material Adverse
Effect.
30
5.25 POTENTIAL CONFLICTS OF INTEREST. To the knowledge of the
Company, except as set forth on SCHEDULE 5.25, no officer, director or Affiliate
of the Company, and no relative or spouse of any such officer, director or
Affiliate: (a) owns, directly or indirectly, any interest in (excepting less
than 1% stock holdings for investment purposes in securities of publicly held
and traded companies), or is an officer, director, employee or consultant of,
any Person which is, or is engaged in business as, a competitor, lessor, lessee,
supplier, distributor, sales agent or customer of, or lender to or borrower
from, the Company; (b) owns, directly or indirectly, in whole or in part, any
tangible or intangible property that the Company uses in the conduct of its
business; or (c) has any cause of action or other claim whatsoever against, or
owes any amount to, the Company, except for claims in the ordinary course of
business such as for accrued vacation pay, accrued benefits under employee
benefit plans, and similar matters and agreements arising in the ordinary course
of business.
5.26 TRADE RELATIONS. To the knowledge of the Company, there exists
no actual or threatened termination, cancellation or limitation of, or any
adverse modification or change in, the business relationship or business of the
Company, or its business with any customer or any group of customers whose use
of its services are individually or in the aggregate material to the business of
the Company, or with any material supplier, and there exists no condition or
state of facts or circumstances that would have a Material Adverse Effect or
prevent the Company from conducting its business after the consummation of the
transactions contemplated by the Trans action Documents in substantially the
same manner in which it heretofore has been conducted.
5.27 INDEBTEDNESS. SCHEDULE 5.27 lists (i) the principal amount of
all Indebtedness of the Company (other than the Senior Subordinated Notes), (ii)
the Liens that relate to such Indebtedness of the Company and that encumber the
assets of the Company and (iii) the name of each lender thereof.
5.28 MATERIAL CONTRACTS. SCHEDULE 5.28 lists all contracts,
agreements and commitments of the Company (other than the Transaction Documents)
that are, or are required to be, filed as exhibits to any registration
statement, proxy statement, report or other document filed, or to be filed, by
the Company under the Securities Act or Exchange Act, and which have not, by
their terms, expired or lapsed. All such contracts, agreements and commitments
of the Company are in full force and effect and, to the knowledge of the Company
with respect to other parties thereto, are binding upon the parties thereto in
accordance with their terms. The Company is not in default under any such
contract, agreement or commitment to which it is a party, nor does any condition
exist that with notice or lapse of time or both would constitute a default
thereunder. Except with respect to the Omni Agreement, the Company has no
knowledge of any proposed, pending, or likely cancellation or termination of any
such contract, agreement or commitment.
31
5.29 INSURANCE. SCHEDULE 5.29 sets forth all policies or binders of
fire, liability, ▇▇▇▇▇▇▇'▇ compensation, vehicular or other insurance held by or
on behalf of the Company (specifying the insurer, the policy number of covering
note numbers with respect to binders and describing each pending claim
thereunder of more than $10,000, other than any claim arising in the ordinary
course of business under the Company's vendor single interest insurance
policies). To the Company's knowledge, such policies and binders are in full
force and effect. The Company is not in default in any material respect with
respect to any provision contained in any such policy or binder and has not
failed to give any notice or present any claim under such policy or binder in
due and timely fashion.
5.30 PROJECTIONS. Prior to the date hereof, the Company delivered to
the Purchasers financial projections as set forth in SCHEDULE 5.30 (the
"PROJECTIONS"). The assumptions used in preparation of the Projections were
reasonable when made and continue to be reasonable as of the date hereof and as
of the Closing Date. The Projections have been prepared in good faith and the
Projections give effect to the transactions contemplated by the Transaction
Documents. The Purchasers acknowledge that the Projections contain assumptions
about future events and that actual results during the period or periods covered
may differ from the data and results contained in such Projections.
5.31 COMMISSION DOCUMENTS. The Company has filed all registration
statements, proxy statements, reports and other documents required to be filed
by it under the Securities Act and the Exchange Act, and all amendments thereto
(collectively, the "COMMISSION DOCUMENTS"), and the Company has furnished to the
Purchasers correct and complete copies of all Commission Documents, each as
filed with the Commission. Each Commission Document was true and accurate in all
material respects when filed with the Commission and in compliance in all
material respects with the requirements of its respective report form.
5.32 LENDING ACTIVITIES.
(a) All Vehicle Loans and all advertising, origination and
servicing activities, procedures and materials with regard to all Vehicle Loans
or accounts made, created, acquired, assumed, collected or serviced by Omni or
the Company comply in all material respects with all applicable federal, state
and local laws, ordinances, rules and regulations, including but not limited to
those related to usury, truth-in-lending, consumer protection, equal credit
opportunity, fair debt collection, rescission rights and disclosures, except
where failure to comply would not have a Material Adverse Effect.
(b) SCHEDULE 5.32(B) hereto completely and accurately
describes the Company's Current Policies Regarding Purchase of Retail
Installment Vehicle Loans as in effect on the date hereof, and all existing
Vehicle Loans comply in all material respects with such policies.
32
ARTICLE 6
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASERS
Each Purchaser, severally and not jointly, represents and warrants
to, and covenants and agrees with, the Company as follows:
6.1 EXISTENCE AND POWER. Such Purchaser:
(a) is duly organized and validly existing under the laws of
the jurisdiction of its organization; and
(b) has the power and authority to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently, or is currently proposed to be, engaged and
to enter into this Agreement and the other Transaction Documents to which it is
a party and perform its obligations hereunder and thereunder.
6.2 AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and
performance by such Purchaser of this Agreement and the Registration Rights
Agreement:
(a) is within such Purchaser's power and authority and has
been duly authorized by all necessary partnership or corporate action, as the
case may be;
(b) does not contravene the terms of such Purchaser's
partnership agreement or certificate of incorporation, as the case may be, or
other organizational documents, or any amendment thereof;
(c) will not violate, conflict with or result in any breach or
contravention of or the creation of any Lien under, any Contractual Obligation
of such Purchaser, or any order or decree directly relating to such Purchaser;
and
(d) does not require approval, consent, exemption,
authorization or other action by, or notice to, or filing with, any Governmental
Authority or any other Person, other than those that have been obtained or made
on or prior to Closing.
6.3 BINDING EFFECT. Each of this Agreement and the Registration
Rights Agreement has been duly executed and delivered by such Purchaser, and
constitutes the legal, valid and binding obligation of such Purchaser
enforceable against it in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, or similar laws affecting
the enforcement of creditors' rights generally or by equitable principles
relating to enforceability.
33
6.4 NO LEGAL BAR. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement will not violate any Requirement
of Law.
6.5 PURCHASE FOR OWN ACCOUNT. The Purchasers acknowledge that the
Company intends to rely on the provisions of Regulation D under the Securities
Act and file a notice on Form D with the Commission and similar notices with
applicable state securities authorities in connection with the initial issuance
and sale of the Senior Subordinated Notes, the Warrants, the Warrant Shares and
the Shares. The Senior Subordinated Notes, the Warrants (including, for purposes
of this Section 6.5, the Warrant Shares) and the Shares to be acquired, as
applicable, by each Purchaser pursuant to this Agreement are being acquired for
its own account and with no intention of distributing or reselling such
securities or any part thereof in any transaction that would be in violation of
the securities laws of the United States of America, or any state, without
prejudice, however, to the rights of such Purchaser at all times to sell or
otherwise dispose of all or any part of the Senior Subordinated Notes, the
Warrants, the Warrant Shares and the Shares, as the case may be, under an
effective registration statement under the Securities Act, an exemption from
such registration available under the Securities Act, or registration or an
exemption from registration pursuant to any applicable state securities laws,
and subject, nevertheless, to the disposition of such Purchaser's property being
at all times within its control. If such Purchaser should in the future decide
to dispose of any of the Senior Subordinated Notes, the Warrants, the Warrant
Shares or the Shares such Purchaser understands and agrees that it may do so
only in compliance with the Securities Act and applicable state securities laws,
as then in effect, and that stop-transfer instructions to that effect, where
applicable, will be in effect with respect to such securities. If such Purchaser
should decide to dispose of such securities (other than pursuant to its
registration rights under the Registration Rights Agreement), the Purchaser, if
requested by the Company, will have the obligation in connection with such
disposition, at such Purchaser's expense, of delivering an opinion of counsel of
recognized standing in securities law, in connection with such disposition to
the effect that the proposed disposition of such securities would not be in
violation of the Secu rities Act or any applicable state securities laws and,
assuming such opinion is required and is otherwise appropriate in form and
substance under the circumstances, the Company will accept, and will recommend
to any applicable transfer agent or trustee for such securities that it accept,
such opinion. Such Purchaser agrees to the imprinting, so long as, in the
reasonable opinion of the Company and its counsel (but only in the event a legal
opinion of the type specified in the preceding sentence has not been delivered
to the Company by such Purchaser), required by law of a legend on certificates
representing the Senior Subordinated Notes, the Warrants, the Shares and the
Warrant Shares to the following effect: "THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED, QUALIFIED, APPROVED OR DISAPPROVED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND
34
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS. NEITHER THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER FEDERAL OR STATE REGULATORY
AUTHORITY HAS PASSED ON OR ENDORSED THE MERITS OF THESE SECURITIES."
6.6 INVESTMENT COMPANY. Neither such Purchaser nor any Person
controlling such Purchaser is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
6.7 BROKER'S, FINDER'S OR SIMILAR FEES. Except as otherwise set
forth in this Agreement, there are no brokerage commissions, finder's fees or
similar fees or commissions payable in connection with the offer or sale of the
Senior Subordinated Notes, the Warrants and the Shares contemplated hereby based
on any agreement, arrangement or understanding with such Purchaser or any action
taken by such Purchaser.
ARTICLE 7
INDEMNIFICATION
7.1 INDEMNIFICATION BY THE COMPANY. In addition to all other sums
due hereunder or provided for in this Agreement, the Company agrees to indemnify
and hold harmless the Purchasers and their respective Affiliates (including,
without limitation, BBH & Co.) and their respective officers, directors, agents,
employees and partners (each, an "INDEMNIFIED PARTY") to the fullest extent
permitted by law from and against any and all losses, claims, damages, expenses
(including reasonable fees, disbursements and other charges of counsel) or other
liabilities ("LOSSES") resulting from any breach of any representation or
warranty, covenant or agreement of the Company in the Transaction Documents or
any legal, administrative or other actions (including actions brought by any
equity holders of the Company or derivative actions brought by any Person
claiming through the Company or in the Company's name), proceedings or
investigations (whether formal or informal), or written threats thereof, based
upon, relating to or arising out of this Agreement, the Senior Subordinated
Notes, the Warrants, the Registration Rights Agreement, any other Transaction
Document, the transactions contemplated hereby, or any indemnified party's role
therein or in the transactions contemplated hereby; PROVIDED, HOWEVER, that the
Company shall not be liable under this Section 7.1: (a) for any amount paid in
settlement of claims without the Company's consent (which consent shall not be
unreasonably withheld), (b) with respect to Losses arising solely out of actions
brought by the partners of the Fund or Progressive against an indemnified party
or by one indemnified party against another or (c) to the extent that it is
finally judicially determined that such Losses resulted primarily from the
willful misconduct, bad faith or gross negligence of such indemnified party or a
breach of the indemnified party's
35
representations in Article 6; PROVIDED, FURTHER, that if and to the extent that
such indemnification is unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of such indemnified
liability which shall be permissible under applicable laws. In connection with
the obligation of the Company to indemnify for expenses as set forth above, the
Company further agrees to reimburse each indemnified party for all such
documented expenses (including reasonable fees, disbursements and other charges
of counsel) as they are incurred by such indemnified party; PROVIDED, HOWEVER,
that if an indemnified party is reimbursed hereunder for any expenses, such
reimbursement of expenses shall be refunded to the extent it is finally
judicially determined that the Losses in question resulted primarily from the
willful misconduct, bad faith or gross negligence of such indemnified party.
7.2 NOTIFICATION. Each indemnified party under this Article 7 will,
promptly after the receipt of notice of the commencement of any action or other
proceeding against such indemnified party in respect of which indemnity may be
sought from the Company under this Article 7, notify the Company in writing of
the commencement thereof. The omission of any indemnified party so to notify the
Company of any such action shall not relieve the Company from any liability
which it may have to such indemnified party other than pursuant to this Article
7 or, unless, and only to the extent that, such omission results in the
Company's forfeiture of substantive rights or defenses. In case any such action
or other proceeding shall be brought against any indemnified party and it shall
notify the Company of the commencement thereof, the Company shall be entitled to
participate therein and, to the extent that it may wish, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
PROVIDED, HOWEVER, that any indemnified party may, at its own expense, retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
in any action or proceeding in which both the Company and an indemnified party
is, or is reasonably likely to become, a party, such indemnified party shall
have the right to employ separate counsel at the Company's expense and to
control its own defense of such action or proceeding if, in the reasonable
opinion of counsel to such indemnified party, any conflict or potential conflict
exists between the Company and such indemnified party that would make such
separate representation advisable; PROVIDED, HOWEVER, that in no event shall the
Company be required to pay fees and expenses under this Section 7 for more than
one firm of attorneys in any jurisdiction in any one legal action or group of
related legal actions. The Company shall not, without the consent of the
indemnified party (which consent shall not be unreasonably withheld), consent to
the entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation or which requires action other than the payment of money by the
Company. The rights accorded to indemnified parties hereunder shall be in
addition to any rights that any indemnified party may have at common law, by
separate agreement or otherwise.
36
7.3 REGISTRATION RIGHTS AGREEMENT. Notwithstanding anything to the
contrary in this Article 7, the indemnification and contribution provisions of
the Registration Rights Agreement shall govern any claim made with respect to
registration statements filed pursuant thereto or offers or sales made
thereunder.
ARTICLE 8
PRE-CLOSING AFFIRMATIVE COVENANTS
8.1 OPERATION OF COMPANY. From and after the date hereof through the
Closing, the Company shall not enter into any transaction or take any action
other than in the ordinary course of business, except that the Company may enter
into such transactions and take such other actions outside of the ordinary
course of business, in each case as may be specifically approved in writing by
the Purchasers.
8.2 EXCLUSIVITY. From the date hereof through the earlier of the
Closing Date or January 31, 1998, the Company shall not enter into discussions
or negotiations with any Persons other than the Purchasers in respect of any
transaction similar in nature to any transaction contemplated by this Agreement;
PROVIDED, HOWEVER, that the Company may have discussions or negotiations with a
potential "underwriter" (as defined in Section 2(11) of the Securities Act) in
connection with a Public Offering by the Company.
ARTICLE 9
AFFIRMATIVE COVENANTS
Until the payment of all principal of and interest on the Notes and
all other amounts due at the time of payment of such principal and interest
under this Agreement, including, without limitation, all expenses and amounts
due at such time in respect of indemnity obligations under Article 7 (except
with respect to Sections 9.1(c), 9.7, 9.8, 9.9(a), 9.9(b), 9.10, 9.11 and 9.14,
which shall survive in accordance with the terms thereof), the Company hereby
covenants and agrees (a) with the Purchasers, with respect to all of this
Article 9, and (b) with all other Holders, with respect to all of this Article 9
except Sections 9.1(c), 9.9, 9.10 and 9.14 that, unless the Purchasers or such
other Holders, as the case may be, waives compliance in writing:
9.1 FINANCIAL STATEMENTS. The Company shall deliver to the
Purchasers and any other Holder:
(a) as soon as available, but not later than ninety (90) days
after the end of each fiscal year of the Company, a copy of the audited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such year and the
37
related consolidated statements of income and cash flows for such fiscal year,
setting forth in each case in comparative form the figures for the previous
year, all in reasonable detail and accompanied by a management summary and
analysis of the operations of the Company and its Subsidiaries for such fiscal
year and by the opinion of a nationally recognized independent public accounting
firm which report shall state that such consolidated financial statements
present fairly in all material respects the financial position for the periods
indicated in conformity with GAAP applied on a basis consistent with prior years
(except to the extent of any inconsistency resulting solely from the fact that
the Company's predecessor was a limited partnership);
(b) as soon as available and, in any event within 45 days of
each of the first three fiscal quarters of each year commencing with the fiscal
quarter ended March 31, 1998, the unaudited consolidated balance sheet of the
Company and its Subsidiaries, and the related consolidated statements of income
and cash flow for such quarter and for the period commencing on the first day of
the fiscal year and ending on the last day of such quarter, all certified by an
appropriate officer of the Company;
(c) budgets, documentation of material financial transactions,
projections, operating reports, acquisition analyses, presentations to banks,
financial institutions or potential investors, consultants' reports and such
other financial and operating data of the Company and its Subsidiaries as the
Fund or Progressive reasonably may request (any such information to be subject
to the provisions of Section 9.9(b)) (PROVIDED that this Section 9.1(c) shall
only require the Company to furnish the information specified herein to the
Purchasers and shall only be binding upon the Company with respect to each of
the Fund, the Progressive Entities and ML so long as the Fund, the Progressive
Entities or ML, as the case may be, holds (i) more than 33% of its or their
Purchaser Shares or (ii) any of the Notes);
(d) at any time when it is not subject to Section 13 or 15(d)
of the Exchange Act, upon request, to the Purchasers and any prospective
purchaser of Notes, Warrants, Warrant Shares or Shares, information of the type
that would satisfy the requirement of subsection (d)(4)(i) of Rule 144A (or any
similar successor provision) under the Securities Act; and
(e) except as otherwise provided in Section 9.1(a) and (b),
promptly after the same are filed, copies of all reports, statements and other
documents filed with the Commission.
9.2 CERTIFICATES; OTHER INFORMATION. The Company shall furnish to
the Purchasers and to any other Holder:
(a) concurrently with the delivery of the financial statements
referred to in Section 9.1(a) and (b) above, a certificate of the Company's
Chief Financial Officer stating that, to the best of such officer's knowledge,
there exists no
38
Default under or breach of Articles 9 and 10, except as specified in such
certificates; and
(b) concurrently with the delivery of the financial statements
referred to in Sections 9.1(a) and (b) above, a certificate of an officer of the
Company including calculations set forth in reasonable detail showing the
Company's compliance with the financial covenants contained in Sections 10.1,
10.2 and 10.6.
9.3 PRESERVATION OF CORPORATE EXISTENCE. The Company shall, and
shall cause each of its Subsidiaries to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its jurisdiction of
incorporation or organization (except (i) in the event that the Company merges
or consolidates into another Person in a transaction in compliance with Section
10.3 hereof, or (ii) in the event of a merger of wholly owned Subsidiaries of
the Company with or into each other; PROVIDED that in each case the surviving
Person shall preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its jurisdiction of incorporation
or organization); and
(b) preserve and maintain in full force and effect all
material rights, privileges, qualifications, licenses and franchises necessary
in the normal conduct of its business.
9.4 PAYMENT OF OBLIGATIONS. The Company shall, and shall cause each
of its Subsidiaries to, pay and discharge as the same shall become due and
payable, all their respective obligations and liabilities, including without
limitation:
(a) all Tax liabilities, assessments and governmental charges
or levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which the Company and each of its
Subsidiaries are obligated to pay, which are due and which, if unpaid, might by
law become a Lien (other than a Permitted Lien) upon its property unless the
same are being contested in good faith by appropriate proceedings and adequate
reserves in accordance with GAAP are being maintained by the Company or such
Subsidiary; and
(c) all payments of principal and interest when due (giving
effect to any grace periods relating thereto) on Indebtedness.
9.5 COMPLIANCE WITH LAWS. The Company shall comply, and shall cause
each of its Subsidiaries to comply, in all material respects with its articles
or certificate of incorporation and by-laws or other organizational or governing
documents and all Requirements of Law and with the directions of any
Governmental
39
Authority having jurisdiction over it or its business, except such as to which
such failure to comply would not have a Material Adverse Effect.
9.6 NOTICES. Upon knowledge of the Chief Executive Officer, the
President, the Chairman, the Vice Chairman, any Executive Vice-President or the
Chief Financial Officer of the Company of the events described below, the
Company shall give prompt written notice (but in any event within 10 days) to
each holder of Notes:
(a) of the occurrence of any Default under, or breach of,
any of the provisions of Articles 9 or 10;
(b) of any (i) material default or event of default under any
Senior Indebtedness, Indebtedness pari passu in respect of payment with the
Notes or any other material Contractual Obligation of the Company or any of its
Subsidiaries, or (ii) material dispute, litigation, investigation, proceeding or
suspension which may exist at any time between the Company or any of its
Subsidiaries and any Governmental Authority; and
(c) Each notice pursuant to this Section 9.6 shall be
accompanied by a statement by the Chief Executive Officer, President or Chief
Financial Officer of the Company setting forth details of the occurrence
referred to therein and stating what action the Company has taken or proposes to
take with respect thereto.
9.7 ISSUE TAXES. Until the earlier of (x) the exercise of all of the
Warrants and issuance of the Warrant Shares or (y) the expiration of the
Warrants in accordance with their terms, the Company shall pay, or cause to be
paid, all documentary and similar taxes (excluding income or capital gains
taxes) levied under the laws of any applicable jurisdiction in connection with
the initial issuance of the Senior Subordinated Notes, the Warrants, the Warrant
Shares and the Shares and the execution and delivery of the other agreements and
documents contemplated hereby and any modification of the Senior Subordinated
Notes, the Warrants or such other agreements and documents and will hold the
Purchasers harmless, without limitation as to time, against any and all
liabilities with respect to all such taxes.
9.8 RESERVATION OF SHARES. Until the earlier of (x) the exercise of
all of the Warrants and the issuance of the Warrant Shares or (y) the expiration
of the Warrants in accordance with their terms, the Company shall at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issue or delivery upon exercise of all outstanding Warrants as
provided therein, such number of shares of Common Stock as shall then be
issuable or deliverable upon the exercise of all outstanding Warrants. Such
shares of Common Stock shall, when issued or delivered against payment therefor
in accordance with the terms of the Warrants, be duly and validly issued and
fully paid and non-assessable.
40
9.9 INSPECTION; CONFIDENTIALITY.
(a) So long as any of the Fund, the Progressive Entities or
ML, as the case may be, holds (i) more than 33% of its or their Purchaser Shares
or (ii) any of the Notes, the Company will permit, and will cause each of its
Subsidiaries to permit, representatives of such Purchaser(s) to visit and
inspect any of its properties, to examine its corporate, financial and operating
records and make copies thereof or abstracts therefrom, and to discuss its
affairs, finances and accounts with their respective directors, officers and
independent public accountants, all at such reasonable times during normal
business hours without interfering with the normal conduct of the Company's
business or operations and as often as may be reasonably requested, upon
reasonable advance notice to the Company. All expenses incurred by each
Purchaser in connection with the foregoing shall be payable by such Purchaser;
PROVIDED, HOWEVER, that if any Default or Event of Default shall have occurred
and be continuing, all such expenses shall be payable by the Company.
(b) Each Purchaser will maintain as confidential any
confidential or proprietary information obtained from the Company pursuant to
Section 9.9(a) or 9.1(c) (other than information which (i) at the time of
disclosure or thereafter is generally available to and known by the public
(other than as a result of a disclosure directly or indirectly by any of the
Purchasers or any of their representa tives), (ii) is available to such
Purchaser on a non-confidential basis from a source other than the Company or
its Subsidiaries, provided that such source was not known by such Purchaser to
be bound by a confidentiality agreement with, or other duty of confidentiality
to, the Company or any of its Subsidiaries, (iii) has been independently
developed by such Purchaser or (iv) which was obtained more than one year prior
to such disclosure), and shall not disclose any information obtained from the
Company pursuant to Section 9.9(a) or 9.1(c) and required to be maintained as
confidential pursuant hereto, except (a) after advising them of the confidential
nature of such information and their responsibility to maintain such
confidentiality, by the Fund to BBH & Co. and its advisors, representatives,
agents, partners and employees who need to know such information to perform
their duties, (b) after advising them of the confidential nature of such
information and their responsibility to maintain such confidentiality, to the
respective advisors, representatives, agents, partners (and their
representatives and advisors) and employees of each Purchaser who need to know
such information to perform their duties, (c) to any prospective transferee of
the Senior Subordinated Notes, the Warrants, the Warrant Shares or the Shares or
of an interest in the Fund, the Progressive Entities or ML or in a successor to
the Fund sponsored by BBH & Co., upon the execution of a confidentiality
agreement in form and substance reasonably satisfactory to the Company, (d) as
may be required by law (including a court order, subpoena or other
administrative order or process) or applicable regulations to which such
Purchaser is or becomes subject, as, and only to the extent, determined by
outside legal counsel and only following, if practicable, prior notice to the
Company (but excluding any obligation of disclosure with respect to information
furnished pursuant to Section 9.1(c) hereof, to the extent arising solely from
the fact that a Purchaser desires to offer or sell all or any part of the Notes,
41
Warrants, Warrant Shares or Shares), (e) in connection with any litigation
arising out of or related to this Agreement, (f) to the executive officers of
the Company or any of its Subsidiaries, or (g) with the consent of the Company.
In connection with clauses (a) and (b) of the preceding sentence, it is
understood and agreed that each Purchaser shall be responsible for any breach of
the provisions of this Section 9.9(b) by any of its advisors, representatives,
agents, partners and employees.
9.10 BOARD REPRESENTATION; VISITATION RIGHTS.
(a) The Company shall at or prior to the Closing Date cause
two vacancies to be created on its Board of Directors (by increasing the number
of members of the Board of Directors or otherwise) and at the Closing Date shall
cause the persons designated by the Fund and the Progressive Entities to be
elected to its Board of Directors. Such designees shall serve until the annual
meeting of stock holders of the Company immediately following the election of
such person to the Board of Directors.
(b) Commencing with the annual meeting of stockholders of the
Company immediately following the election of such persons to the Board of
Directors, and at each annual meeting of stockholders of the Company thereafter,
each of (i) the Fund and (ii) the Progressive Entities shall be entitled to
nominate (in addition to any rights granted to the holders of Common Stock as
set forth in the Company's articles or certificate of incorporation), from time
to time, one director to the Company's Board of Directors; PROVIDED, THAT each
of (i) the Fund and (ii) the Progressive Entities shall be entitled to nominate
a director to the Board of Directors only so long as the Fund or the Progressive
Entities, as the case may be, holds either (x) at least 50% of the aggregate
outstanding principal amount of the Notes initially issued to such Purchaser(s)
or (y) at least 50% of the Purchaser Shares initially issued to such
Purchaser(s). The Company shall cause such nominees of the Fund and the
Progressive Entities to be included in the slate of nominees recommended by the
Board to the Company's stockholders for election as directors, and the Company
shall use its reasonable best efforts to cause the election of such nominees,
including voting all shares for which the Company holds proxies (excluding any
proxy submitted by a stockholder with other directions) or is otherwise entitled
to vote, in favor of the election of such person.
(c) In the event any such nominee of either the Fund or the
Progressive Entities shall cease to serve as a director for any reason, other
than by reason of such Purchaser(s) not being entitled to nominate a nominee as
provided in Section 9.10(b), the Company shall use its reasonable best efforts
to cause the vacancy resulting thereby to be filled by a nominee of such
Purchaser(s).
(d) In the event that the Board of Directors of the Company
establishes committees from time to time, the nominee of the Fund shall have the
right, upon the Fund's request, to serve on each such committee. If the Fund (a)
is not entitled to nominate a nominee as provided in Section 9.10(b) or (b)
elects not to
42
nominate its nominee to any such committee, but, in each case the Progressive
Entities are still entitled to nominate a nominee as provided in Section
9.10(b), the nominee of the Progressive Entities shall have the right, upon the
Progressive Entities' request, to serve on each such committee. If the Company
creates any Subsidiaries, each Subsidiary's Board of Directors (and each
committee thereof) shall consist of the same members as the Company's Board of
Directors (and each analogous committee thereof).
(e) So long as the Fund, the Progressive Entities or ML, as
the case may be, owns more than 25% of (i) the aggregate outstanding principal
amount of the Notes initially issued to such Purchaser(s) or (ii) the number of
Purchaser Shares initially issued to such Purchaser(s), in addition to the
rights granted pursuant to Sections 9.10(a) and (b) above, such Purchaser(s)
shall have the right to have a representative attend all regular and special
meetings of the Board of Directors of the Company and its Subsidiaries and any
committees thereof. The visitation rights set forth above shall include the
right to receive the same notice and materials provided to members of the Board
of Directors of the Company and each committee thereto.
9.11 REGISTRATION AND LISTING. If any Warrant Shares require
registration with or approval of any Governmental Authority under any federal or
state or other applicable law before such shares of Common Stock may be issued
or delivered upon exercise of the Warrants, the Company will in good faith and
as expeditiously as possible endeavor to cause such shares of Common Stock to be
duly registered or approved, as the case may be, unless such registration or
approval is required solely because of a breach of such Purchasers'
representation contained in Section 6.5. In the event that, and so long as, the
Common Stock (or any series or class of Capital Stock into which the Common
Stock is reorganized, reclassified, reconstituted or otherwise changed) is
listed on the NYSE or quoted or listed on any other national securities exchange
or Nasdaq, the Company will, if permitted by the rules of such system or
exchange, quote or list and keep quoted or listed on such exchange or Nasdaq,
upon official notice of issuance, the Shares and all Warrant Shares. In
addition, the Company will in good faith and as expeditiously as possible
endeavor to obtain private placement numbers for the Notes, the Purchaser Shares
and the Warrants (or any series or class of Capital Stock into which the
Purchaser Shares are, or may be, reorganized, reclassified, reconstituted or
otherwise changed), as assigned by the CUSIP Service Bureau of Standard & Poor's
Corporation. The covenant provided in this Section 9.11 shall survive until
there are no Holders.
9.12 USE OF PROCEEDS. The proceeds of the Senior Subordinated Notes,
the Warrants and the Shares shall be used by the Company only (a) to fund the
purchase of Vehicle Loans by the Company in the ordinary course of business and
in a manner consistent with past practice (including cash deposits in connection
therewith), (b) for working capital requirements, (c) for general corporate
purposes (including repayment of outstanding borrowings under the $8.0 million
principal amount working capital subfacility of the Credit Agreement), (d) cash
deposits in
43
connection with Permitted Securitization Transactions, (e) for the repayment of
up to $12,170,958 of Indebtedness of the Company outstanding under the ▇▇▇▇▇▇
Note Purchase Agreement and (f) for the payment of fees and expenses in
connection with the transactions contemplated in the Transaction Documents.
9.13 PAYMENT OF NOTES. The Company shall pay the principal of,
interest on and other amounts due in respect of, the Notes on the dates and in
the manner provided herein and in the Notes.
9.14 SALE OF COMPANY. Until the Purchasers do not hold any Warrants
(whether as a result of exercise or expiration), in the event of a contemplated
sale of all of the Capital Stock of the Company (by way of merger or otherwise),
the Company shall, if requested by the Purchasers, use its reasonable best
efforts to cause such sale transaction to be structured in a manner that
requires the purchaser(s) to purchase the Warrants from the Purchasers at a
price equal to the consideration the Purchasers would have received had it
exercised the Warrants immediately prior to the consummation of such sale
transaction less the exercise price of such Warrants.
9.15 ALLOCATION FOR TAX PURPOSES. For purposes of Treasury
Regulation section 1.1273-2(h), the Senior Subordinated Notes and the Warrants
shall be treated as an investment unit. The amount of the Unit Purchase Price
which is allocable to the Senior Subordinated Notes shall equal $36,883,228, and
the amount of the Unit Purchase Price which is allocable to the Warrants shall
equal $3,116,772. The parties hereto shall file all returns and statements in
respect of Taxes in a manner which is consistent with the foregoing allocation.
9.16 INFORMATION ON INTERNAL RATE OF RETURN. Upon the occurrence of
an event that (i) permits the holders of the Notes to require a Mandatory
Redemption and (ii) that would require the Company to consider the "internal
rate of return" of any of the Purchasers pursuant to the second paragraph of
Section 3.1 of the Notes, each of the Purchasers shall promptly deliver to the
Company, but in any event within 5 Business Days after receiving a written
request, a certificate setting forth in reasonable detail the calculation of its
"internal rate of return," including any documents reasonably supporting such
calculation. The determination of "internal rate of return" set forth in such
certificate, which shall be prepared in good faith, shall be conclusive and
binding on the Company in the absence of manifest error. The Company shall
maintain as confidential any information contained in such certificate or
obtained from the Purchasers in connection with the determination of the
Purchasers "internal rate of return" under terms and conditions substantially
identical to Section 9.9(b) hereof.
44
ARTICLE 10
NEGATIVE AND FINANCIAL COVENANTS
Until the payment of all principal of and interest on the Notes and
all other amounts due at the time of payment of such principal and interest
under this Agreement, including, without limitation, all expenses and amounts
due at such time in respect of indemnity obligations under Article 7 (except
with respect to Sections 10.4, 10.13 and 10.14, which shall be binding upon the
Company until the sale by the Purchasers of more than 66% of the aggregate
amount of the Purchaser Shares), the Company covenants and agrees as follows:
10.1 MINIMUM CONSOLIDATED NET WORTH. The Company shall not permit
Consolidated Net Worth for any fiscal quarter to be less than (a) $25,890,000
PLUS (b) on a cumulative basis commencing with the fiscal quarter ending March
31, 1998, fifty percent (50%) of Net Income (if positive) for each fiscal
quarter of the Company and its Subsidiaries ending on and after March 31, 1998
PLUS (c) one hundred percent (100%) of the proceeds (after payment of the
Company's fees and expenses) received by the Company from any Public Offering or
private placement of Capital Stock after the Closing Date (including the
issuance and sale of the Shares).
10.2 ADJUSTED INTEREST EXPENSE. The Company's EBIT DIVIDED by
Consolidated Total Interest Expense for each period of four consecutive fiscal
quarters ending December 31, 1997 and thereafter shall be at least 1.4:1.0.
10.3 CONSOLIDATIONS AND MERGERS. The Company shall not merge,
consolidate with or into, or convey, transfer, lease or otherwise dispose of
(whether in one transaction or in a series of transactions) all or substantially
all of its assets (whenever acquired), except the Company may consolidate or
merge with or into, or sell all or substantially all of its assets to, any
Person if:
(a) The corporation or partnership formed by such
consolidation or surviving such merger or the Person which acquires all or
substantially all of the assets of the Company shall be (after giving effect to
such transaction) a Solvent corporation or partnership organized or formed, as
the case may be, and existing under, the laws of the United States, any state
thereof, or the District of Columbia and shall expressly assume in writing all
of the obligations of the Company under this Agreement, the Notes, the Warrants
and the Registration Rights Agreement;
(b) immediately after giving effect to such transaction, (i)
no default under the provisions of Articles 9 and 10 exists and (ii) the
corporation or partnership formed by such consolidation or surviving such merger
or the Person which acquires all or substantially all of the assets of the
Company shall not be prohibited from incurring at least $1.00 of additional
Indebtedness without violating any of the provisions of this Agreement;
45
(c) the corporation or partnership formed by or surviving any
such transaction or the Person that acquires all or substantially all of the
assets of the Company shall have a Consolidated Net Worth at least equal to the
Consolidated Net Worth of the Company immediately prior to such transaction; and
(d) the Company shall have furnished to the Holders (i) an
opinion of outside counsel reasonably satisfactory to the holders of a majority
in interest of the Notes, addressing the matters (other than solvency) set forth
in clause (a) above and (ii) the certificate of the Chief Financial Officer of
the Company to the effect that such transaction has been consummated in
compliance with the foregoing requirements; PROVIDED that nothing in this
Section 10.3 shall affect the rights of any holder of the Notes, the Warrants or
the Common Stock under this Agreement, the Notes, the Warrants or the
Registration Rights Agreement.
10.4 TRANSACTIONS WITH AFFILIATES. Except as set forth in SCHEDULE
10.4 and for payments permitted under Section 10.9, the Company shall not, and
shall not permit any of its Subsidiaries to, enter into any transaction with any
Affiliate of the Company (other than the Company's Subsidiaries) or of any such
Subsidiary (other than the Company), except (i) in the ordinary course of
business and pursuant to the reasonable requirements of the business of the
Company or such Subsidiary, (ii) on terms no less favorable to the Company or
such Subsidiary than those the Company or such Subsidiary would obtain in a
comparable arm's-length transaction with a Person not an Affiliate of the
Company or such Subsidiary and (iii) following the prior approval of a majority
of the members of the Board of Directors of the Company.
10.5 NO INCONSISTENT AGREEMENTS. Neither the Company nor any of its
Subsidiaries shall (a) enter into any loan or other agreement after the date
hereof or (b) amend or modify any currently existing loan or other agreement,
which in each case by its terms restricts or prohibits the ability of the
Company to pay the principal of or interest on the Notes or to issue the Warrant
Shares in accordance with the terms of this Agreement and the Warrants;
PROVIDED, HOWEVER, that the foregoing shall not prevent the Company from
entering into loan or other agreements that contain, or any amendment or other
modification to any currently existing credit agreement to provide, restrictions
on the ability of the Company to optionally redeem or prepay the Notes,
following the occurrence of a default or event of default under such agreements.
10.6 LIMITATION ON INDEBTEDNESS.
(a) Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, issue, assume or otherwise incur any Indebtedness, other
than: (i) Indebtedness under this Agreement and the Notes, (ii) Junior
Subordinated Indebtedness, (iii) Intercompany Indebtedness, (iv) Indebtedness
under the Credit Agreement or other similar facilities in an amount not
exceeding $100 million, which increases to an amount equal to the product of the
Consolidated Tangible Net Worth
46
of the Company multiplied by five multiplied by 0.6, and (v) Senior Indebtedness
(to the extent not incurred under subsection (iv) of this Section 10.6) and
Indebtedness that is pari passu with the Indebtedness incurred under the Notes,
but only to the extent that, in the case of this clause (v), immediately after
giving effect thereto, the ratio of Total Indebtedness to Consolidated Tangible
Net Worth does not exceed 5.0:1.0).
(b) The Company shall not incur any Indebtedness if such
Indebtedness is subordinate or junior in right of payment to Senior Indebtedness
(as defined in Article 12) unless such Indebtedness is pari passu with the
Indebtedness incurred under the Notes or is Junior Subordinated Indebtedness.
10.7 LIMITATION ON LIENS. Neither the Company nor any of its
Subsidiaries shall create, incur, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired by it, other than: (i) Liens in favor of
the Company or its Subsidiaries; (ii) Liens to secure Taxes, assessments and
other governmental charges in respect of obligations not overdue or being
contested in good faith by appropriate proceedings or Liens on properties to
secure claims for labor, material or supplies in respect of obligations not
overdue or being contested in good faith by appropriate proceedings; (iii)
deposits or pledges made in connection with, or to secure payment of, workmen's
compensation, unemployment insurance, old age pensions or other social security
obligations; (iv) Liens on properties in respect of judgments or awards, (a) the
Indebtedness with respect to which is in respect of judgments or awards that
have been in force for less than the applicable period for taking an appeal so
long as execution is not levied thereunder or in respect of which the Company
shall at the time in good faith be prosecuting an appeal or proceedings for
review and in respect of which a stay of execution shall have been obtained
pending such appeal or review or (b) that would not give rise to a Default under
Section 11.1(ix); (v) Liens of carriers, warehousemen, mechanics and
materialmen, and other like Liens on properties in respect of obligations not
overdue or being contested in good faith by appropriate proceedings; (vi)
encumbrances consisting of easements, rights of way, zoning restrictions,
restrictions on the use of real property and defects and irregularities in the
title thereto, landlord's or lessor's liens under leases to which the Company or
a Subsidiary of the Company is a party, and other minor Liens or encumbrances
none of which in the opinion of the Company interferes materially with the use
of the property affected in the ordinary conduct of the business of the Company
and its Subsidiaries, which defects do not individually or in the aggregate have
a materially adverse effect on the business of the Company individually or of
the Company and its Subsidiaries on a consolidated basis; (vii) presently
outstanding Liens listed on SCHEDULE 10.7 hereto; (viii) any Lien on equipment,
software or real property securing Indebtedness incurred or assumed for the sole
purpose of financing all or part of the cost of acquiring such equipment or real
property, PROVIDED that such Lien attaches to such asset concurrently with or
within 10 days after the acquisition thereof; (ix) Liens in respect of Senior
Indebtedness permitted to be incurred under Section 10.6 of this Agreement; (x)
Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds, tenders, bids, leases
47
or other obligations of a like nature incurred in the ordinary course of
business by the Company or its Subsidiaries; (xi) Liens on property of a Person
existing at the time such Person becomes a Subsidiary of the Company, its assets
are acquired by a Subsidiary of the Company, or such Person and the Company
merge or consolidate in a transaction in compliance with Section 10.3; PROVIDED
that such Liens were in existence prior to the contemplation of such merger,
acquisition or consolidation and do not extend to any assets other than those of
the Person merging or consolidating with the Company; (xii) Liens on property
existing at the time of acquisition thereof by the Company or any of its
Subsidiaries, PROVIDED that such Liens were in existence prior to the
contemplation of such acquisition and do not extend to any property other than
that being acquired; (xiii) Liens on cash deposits made for the purpose of
enhancing the credit of Special Purpose Subsidiaries; and (xiv) other Liens
arising in the ordinary course of and incidental to the conduct of the business
of the Company and its Subsidiaries, which in the aggregate do not materially
impair the use of such properties for the purposes for which such properties are
held by the Company or its Subsidiaries, PROVIDED that the aggregate amount of
the obligations secured by Liens permitted under this clause (xiv) shall not
exceed $100,000 at any one time outstanding (collectively, "PERMITTED LIENS").
10.8 INVESTMENTS. Neither the Company nor any of its Subsidiaries
shall make any Investment, except for (i) Investments in Temporary Cash
Investments; (ii) Investments existing as of the date hereof and listed on
SCHEDULE 10.8A; (iii) Investments by the Company in Subsidiaries of the Company
existing on the Closing Date; (iv) Investments consisting of non-cash
consideration received as proceeds of Dispositions permitted by Section 10.10;
(v) Investments consisting of loans and advances to employees for moving,
entertainment and travel (other than ordinary course business expenses) not to
exceed $250,000 in the aggregate at any time outstanding; (vi) Investments in
Special Purpose Subsidiaries formed for the purpose of effectuating Permitted
Securitization Transactions; (vii) purchases of Vehicle Loans consistent with
the Company's Current Policies Regarding Purchase of Retail Installment Vehicle
Loans as in effect from time to time that are made pursuant to good ▇▇▇▇▇ ▇▇▇▇
fide transactions; (viii) Investments by the Company in Subsidiaries of the
Company engaging in the commercial or consumer finance and/or related service
businesses, all as approved in advance by a majority of the members of the Board
of Directors of the Company and in an amount in any Fiscal Year not in excess of
30% of the Consolidated Net Worth of the Company based on the most recent
audited financial statements of the Company; (ix) Investments by the Company or
its Subsidiaries as a result of the bankruptcy or reorganization of customers,
suppliers, auto dealers and referral salesmen and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in the
ordinary course of business of the Company or its Subsidiaries; (x) Investments
consisting of advances to customers, suppliers, auto dealers and referral
salesmen, in each case if created, acquired or made in the ordinary course of
business, payable or dischargeable in accordance with customary trade terms, and
in accordance with past practice; and (xi) additional Investments not to exceed
$100,000 in the aggregate.
48
10.9 LIMITATIONS ON RESTRICTED PAYMENTS. Neither the Company nor any
of its Subsidiaries will declare or make any Restricted Payment, except that the
Company may, so long as no Default or Event of Default shall have occurred and
be continuing or would occur as a result of any such Restricted Payment, (i)
purchase, redeem, retire or otherwise acquire or pay dividends in respect of
shares of the Company's Capital Stock in an amount not to exceed $250,000 in any
12-month period; (ii) pay dividends to the holders of the Company's or any
Subsidiary's Preferred Stock; (iii) purchase, redeem or retire Junior
Subordinated Indebtedness in exchange for Capital Stock of the Company, PROVIDED
that any shares of Common Stock or securities convertible into or exchangeable
or exercisable for Common Stock issued in exchange for (A) Existing Junior
Subordinated Indebtedness if issued (x) on or prior to March 31, 1998, shall
have an issue, exchange, exercise or conversion price, as the case may be, equal
to the greater of $5.25 per share (subject to appropriate adjustments for stock
splits, stock dividends and the like) or Current Market Price at the time a
definitive agreement to exchange is entered into or (y) after March 31, 1998,
shall have an issue, exchange, exercise or conversion price, as the case may be,
equal to no less than the Current Market Price at the time a definitive
agreement to exchange is entered into, and (B) Junior Subordinated Indebtedness
(other than the Existing Junior Subordinated Indebtedness) shall be issued at an
issue, exchange, exercise or conversion price, as the case may be, equal to no
less than the Current Market Price at the time a definitive agreement to
exchange is entered into; (iv) purchase, redeem or retire Existing Junior
Subordinated Indebtedness in exchange for cash to the extent that such Existing
Junior Subordinated Indebtedness is purchased, redeemed or retired only at its
stated and scheduled maturity and no sooner; and (v) purchase, redeem or retire
Preferred Stock of the Company (x) in exchange for shares of Common Stock of the
Company, but only so long as such shares of Common Stock are to be issued at a
price no less than the Current Market Price of the Common Stock at the time a
definitive agreement relating to such purchase, redemption or retirement is
executed or (y) with the proceeds of the issuance and sale of additional shares
of Preferred Stock, but only so long as such shares of Preferred Stock are
issued in a transaction approved by a majority of the non-employee directors of
the Company (EXCLUDING, HOWEVER, in all cases, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇).
10.10 DISPOSITIONS OF ASSETS. The Company shall not, and shall not
permit any of its Subsidiaries to, make any Disposition (excluding any
transaction made in compliance with Section 10.3 hereof) unless (i) the Company
(or the Subsidiary, as the case may be) receives consideration at the time of
such disposition at least equal to the fair market value of the assets sold or
otherwise disposed of and, in the case of a lease of assets, a lease providing
for rent and other conditions which are no less favorable than the then
prevailing market conditions, (ii) the Company shall apply, or cause a
Subsidiary to apply, the Net Sale Proceeds from such disposition within 180 days
of receipt thereof (A) to make Investments in assets or properties that will be
used in the business of the Company and its Subsidiaries consistent with Section
10.13 hereto or (B) to repay any Indebtedness of the Company, and (iii) no
Default or Event of Default shall have occurred and be
49
continuing or would occur as a result of any such Disposition. Notwithstanding
the foregoing sentence, the Company may sell or transfer its assets or
properties in the ordinary course of business consistent with past practice,
including transfers made in a Permitted Securitization Transaction and such
transactions shall not be subject to the conditions set forth in the previous
sentence.
10.11 FUTURE ISSUANCES OF PREFERRED STOCK. The Company shall not,
and shall not permit any of its Subsidiaries to, issue any shares of Preferred
Stock unless (i) no Default or Event of Default shall have occurred and be
continuing or would occur as a result of any such issuance; and (ii) if the
shares of Preferred Stock are convertible or exchangeable into shares of the
Company's Common Stock, the conversion or exchange price of such Preferred Stock
shall be no less than 120% of the Current Market Price on the date a definitive
purchase agreement with respect to the issuance of such Preferred Stock is
executed.
10.12 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE COMPANY AND
ITS SUBSIDIARIES. Except with the prior written consent of the Purchasers, no
amendments to the articles or certificate of incorporation or by-laws of the
Company or any of its Subsidiaries that would adversely affect the Company's
obligation to pay the principal of and interest on the Notes shall be effected.
10.13 LINE OF BUSINESS. The Company shall not, and shall not permit
any of its Subsidiaries to, engage in the conduct of any business other than the
business of the Company and its Subsidiaries in connection with the purchase and
securitization of Vehicle Loans as such businesses exist on the Closing Date or
in other commercial or consumer finance and/or related service businesses.
10.14 VEHICLE LOAN POLICY. Except with the prior approval of the
majority of the Board of Directors of the Company, the Company shall not
materially modify or amend its Current Policies Regarding Purchase of Retail
Installment Vehicle Loans.
ARTICLE 11
DEFAULTS AND REMEDIES
11.1 EVENTS OF DEFAULT. An "Event of Default" shall occur if:
(i) the Company shall default in the payment of any
installment of principal of any Note, when and as the same shall become due and
payable, whether at maturity or at a date fixed for prepayment or by
acceleration or otherwise; or
(ii) the Company shall default in the payment of any
installment of interest on any Note according to the terms thereof, when and as
the
50
same shall become due and payable and such default shall continue for a period
of five days; or
(iii) the Company or any of its Subsidiaries shall default in
the due observance or performance of any covenant to be observed or performed
pursuant to Sections 9.1(a), 9.1(b), 9.8, 9.10 or Article 10 (except for
Sections 10.4 and 10.5) hereof; or
(iv) the Company or any of its Subsidiaries, as the case may
be, shall default in the due observance or performance of any other covenant,
condition or agreement on the part of the Company or any of its Subsidiaries to
be observed or performed pursuant to the terms of this Agreement, and such
default shall continue for 5 days with respect to Sections 10.4 and 10.5 hereof,
or 30 days with respect to any such other covenant, in each case after the
earlier of (A) the date the Company obtains knowledge of such default, or (B)
the date written notice thereof shall have been given to the Company by the
holder of any of the Notes; or
(v) any representation, warranty, certification or statement
made by or on behalf of the Company in this Agreement or in any certificate or
other document delivered pursuant hereto shall have been incorrect in any
material respect when made; or
(vi) any (A) default in any payment of principal of or
interest of any Indebtedness (other than Indebtedness under the Credit
Agreement) of the Company or any of its Subsidiaries which Indebtedness has an
aggregate principal amount outstanding equal to or exceeding $1,000,000, and
such default shall continue beyond any applicable grace period or (B) default in
the observance or performance of any other agreement or condition relating to
any such Indebtedness or relating to Indebtedness under the Credit Agreement or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition actually results in the acceleration of such
Indebtedness (including Indebtedness under the Credit Agreement) prior to its
stated maturity; or
(vii) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction seeking
(a) relief in respect of the Company or any of its Subsidiaries, or of a
substantial part of their property or assets, under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other Federal or
state bankruptcy, insolvency, receivership or similar law, (b) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Company or any of its Subsidiaries, or for a substantial part of their
property or assets, or (c) the winding up or liquidation of the Company or any
of its Subsidiaries; and such proceeding or petition shall continue undismissed
for 60 days, or an order or decree approving or ordering any of the foregoing
shall be entered; or
51
(viii) the Company or any Subsidiary thereof shall (a)
voluntarily commence any proceeding or file any petition seeking relief under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other Federal or state bankruptcy, insolvency, receivership or similar law,
(b) consent to the institution of or the entry of an order for relief against
it, or fail to contest in a timely and appropriate manner, any proceeding or the
filing of any petition described in paragraph (vii) of this Section 11.1, (c)
apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Company or any of its
Subsidiaries, or for a substantial part of their property or assets, (d) file an
answer admitting the material allegations of a petition filed against it in any
such proceeding, (e) make a general assignment for the benefit of creditors, or
(f) take any action for the purpose of effecting any of the foregoing; or
(ix) one or more final judgments for the payment of money in
an aggregate amount in excess of $750,000 (to the extent not covered by
insurance) shall be rendered against the Company or any of its Subsidiaries and
the same shall remain in force, undischarged, unstayed, unsatisfied, unvacated
or unbonded for more than 30 days, or any action, which is not quashed or
remains unstayed for a period in excess of fifteen days, shall be legally taken
by a judgment creditor to levy upon assets or properties of the Company or any
of its Subsidiaries to enforce any such judgment; or
(x) the Company or any Subsidiary thereof shall become
unable, admit in writing its inability or fail generally to pay its debts as
they become due.
11.2 ACCELERATION. If an Event of Default occurs under clauses (vii)
or (viii) of Section 11.1, then the outstanding principal of and all accrued
interest on the Notes and all other amounts owing under this Agreement and the
Notes shall automatically become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which are expressly
waived. If any other Event of Default occurs and is continuing, subject to
Section 12.3(d), the holders of 51% of the aggregate principal amount of the
Notes outstanding, by written notice to the Company, may declare the principal
of and accrued interest on the Notes and all other amounts owing under this
Agreement to be due and payable immediately. Upon such declaration, such
principal and interest and other amounts shall become immediately due and
payable. The holders of 51% of the aggregate principal amount of the Notes
outstanding may rescind an acceleration and its consequences if all existing
Events of Default have been cured or waived, except nonpayment of principal or
interest or other amounts that has become due solely because of the
acceleration, and if the rescission would not conflict with any judgment or
decree. Any notice or rescission shall be given in the manner specified in
Section 14.2 hereof.
52
ARTICLE 12
SUBORDINATION
The Notes shall at all times be wholly subordinate and junior in
right of payment to all Senior Indebtedness to the extent and in the manner
provided in this Article 12.
12.1 DEFINITIONS. As used in this Article 12, the following terms
shall have the following meanings:
"JUNIOR SECURITIES" means any debt or equity securities distributed
to the holders of the Notes, but only if they are subordinated to at least the
same extent as the Subordinated Indebtedness is subordinated to the Senior
Indebtedness and any securities issued in exchange for Senior Indebtedness.
"SENIOR DEFAULT" shall mean a Senior Payment Default or a Senior
Event of Default.
"SENIOR EVENT OF DEFAULT" shall mean an event of default, other than
a Senior Payment Default, that occurs and is continuing with respect to Senior
Indebtedness that permits the holders thereof to accelerate the maturity of such
Senior Indebtedness.
"SENIOR INDEBTEDNESS" shall mean (i) the principal of and interest
on (including without limitation any interest that accrues after the
commencement of any case, proceeding or other legal action relating to the
bankruptcy, insolvency or reorganization of the Company to the extent such
interest constitutes an allowed claim) (a) all Indebtedness of the Company
(including Indebtedness of others guaranteed by the Company) which is (x) for
money borrowed or (y) evidenced by a note or similar instrument given in
connection with the acquisition of any businesses, properties or assets of any
kind and (b) amendments, renewals, extensions, modifications and refundings of
any such Indebtedness, whether such Indebtedness described in (a) or (b) is
outstanding on the date hereof or hereafter created, incurred or assumed, but
only if (a) such Indebtedness is permitted to be incurred under Section 10.6 and
(b) the instrument creating or evidencing any such Indebtedness pursuant to
which the same is outstanding expressly provides that such Indebtedness is
superior in right of payment to the Notes, and (ii) any other monetary
obligations of the Company arising out of or in connection with the Indebtedness
described in clause (i) above.
"SENIOR PAYMENT DEFAULT" shall mean an event of default in the
payment of any Senior Indebtedness that occurs and is continuing beyond any
applicable period of grace.
53
"SUBORDINATED INDEBTEDNESS" shall mean (i) the principal of and
interest on the Notes; and (ii) any other monetary obligations of the Company
arising out of or in connection with this Agreement or the Notes.
12.2 GENERAL. Subject to the rights of the holders of the
Subordinated Indebtedness to receive Junior Securities and any distributions
provided in Section 12.4(c), upon the maturity of any Senior Indebtedness by
lapse of time, acceleration, required prepayment or otherwise, all Senior
Indebtedness then so due and payable shall first be paid in full in cash, before
any payment is made or provided for on account of the Subordinated Indebtedness
then so due and payable or any Notes issued pursuant to this Agreement are
redeemed.
12.3 LIMITATION ON PAYMENT AND REMEDIES.
(a) Upon receipt by the Company and the holders of the Notes
of a Blockage Notice (as defined below), then unless and until (i) all Senior
Defaults that gave rise to the Blockage Notice shall have been remedied or
effectively waived in writing or shall have ceased to exist or (ii) the Senior
Indebtedness in respect of which such Senior Defaults shall have occurred shall
have been paid in full in cash, no direct or indirect payment (in cash,
property, securities or by set-off or otherwise) of or on account of any
regularly scheduled principal of or interest on the Notes (and specifically
excluding any Optional Redemption or repayment of the Notes), with the exception
of Junior Securities, shall be made during any period prior to the expiration of
the Blockage Period (as defined below).
(b) For purposes of this Agreement, a "BLOCKAGE NOTICE" is a
notice of a Senior Default that in fact has occurred and is continuing, given to
the Company and the holders of the Notes (or their authorized Agent) by the
holders of the requisite principal amount of the Senior Indebtedness under which
such Senior Default has occurred (or their authorized agent); PROVIDED, HOWEVER,
that (i) no such notice shall be effective as a Blockage Notice if an effective
Blockage Notice shall have been given within 360 days (measured as of the
commencement date of the prior notice) prior thereto and (ii) no such notice
shall be effective as a Blockage Notice if based upon a Senior Default that was
the basis of a prior effective Blockage Notice and such Senior Default has not
been cured or waived for a period of at least 90 days.
(c) For purposes of this Section 3, a "BLOCKAGE PERIOD" with
respect to a Blockage Notice is the period commencing upon the Company's receipt
of such Blockage Notice and having a duration as follows:
(1) 225 days if the Senior Default to which the Blockage
Notice refers is a Senior Payment Default; or
(2) 180 days if the Senior Default to which the Blockage
Notice refers is a Senior Covenant Default.
54
Upon the expiration or termination of any Blockage Period, the
holders of the Notes shall be entitled to be paid accrued but unpaid interest
then due on the Notes.
(d) As long as any Senior Indebtedness remains outstanding,
upon the occurrence of an Event of Default under this Agreement, the holders of
the Subordinated Indebtedness shall not declare or join in any declaration of
the Notes to be due and payable by reason of such Event of Default or otherwise
take any action against the Company prior to the expiration of 45 days (a
"REMEDY STANDSTILL PERIOD") after the written notice of intention to accelerate
on account of the occurrence of such Event of Default, specifying same (the
"REMEDY NOTICE") shall have been given by the holders of the principal amount of
the Subordinated Indebtedness necessary to cause acceleration thereof to the
Company and the holders of the Senior Indebtedness (or their authorized agent)
unless the holders of any Senior Indebtedness shall have caused such Senior
Indebtedness to become due prior to its stated maturity or any Event of Default
pursuant to Section 11.1(vii) or 11.1(viii) of this Agreement shall have
occurred; PROVIDED, HOWEVER, that such Remedy Standstill Period shall be
extended to 150 days from the date of such Remedy Notice if, at the time the
Remedy Standstill Period would otherwise expire, there exists any Senior Default
and an effective Blockage Notice is given in accordance with, and subject to the
limitations of Agreement. Upon the expiration or termination of any Remedy
Standstill Period, the holders of the Notes shall be entitled to exercise any of
their rights with respect to the Notes other than any right to accelerate the
maturity date of the Notes based upon the occurrence of any Event of Default
which has been cured or otherwise remedied during the Remedy Standstill Period.
(e) Notwithstanding the foregoing, any Blockage Period or
Remedy Standstill Period shall be inapplicable or cease to be effective if an
Event of Default pursuant to Section 11.1(vii) or 11.1(viii) of this Agreement
shall have occurred. In addition, any Blockage Period or Remedy Standstill
Period shall cease to be effective if at any time during such period: (i) 37.5%
or more of the assets of the Company are sold or otherwise disposed of (in one
transaction or a series of related transactions) outside of the ordinary course
of business for less than fair value; (ii) payment or any distribution of any
character, whether in cash, securities or other property of the Company shall be
made to or received by any creditor on any Indebtedness which is on the same
level of priority with or junior and subordinate in right of payment to the
Notes or (iii) acceleration of the maturity of any Senior Indebtedness.
Notwithstanding any provision of any instrument evidencing any Subordinated
Indebtedness or any other provisions contained in this Agreement to the
contrary, no holder of Subordinated Indebtedness shall have any right to
accelerate or declare a default under any Subordinated Indebtedness, and no
purported default or acceleration of any Subordinated Indebtedness shall have
any effect, to the extent that such default or acceleration is premised upon the
existence of a default or event of default under the Senior Indebtedness.
55
12.4 SUBORDINATION UPON CERTAIN EVENTS. Upon the occurrence of any
Event of Default under Sections 11.1(vii) or (viii) of this Agreement:
(a) Upon any payment or distribution of assets of the Company
to creditors of the Company, holders of Senior Indebtedness shall be entitled to
receive payment in full in cash before the holders of Subordinated Indebtedness
shall be entitled to receive any payment in respect of the Subordinated
Indebtedness, except that the holders of Subordinated Indebtedness may receive
Junior Securities.
(b) Until all Senior Indebtedness is paid in full in cash, any
distribution to which the holders of Subordinated Indebtedness would be entitled
but for this Agreement shall be made to holders of Senior Indebtedness, as their
interests may appear, except that the holders of Subordinated Indebtedness may
receive Junior Securities.
(c) Notwithstanding the foregoing provisions of this Section
12.4, if payment or delivery by the Company of Junior Securities to the holders
of Subordinated Indebtedness is authorized by an order or decree giving effect,
and stating in such order or decree that effect is given, to the subordination
of the Subordinated Indebtedness to the Senior Indebtedness, and made by a court
of competent jurisdiction in a proceeding under any applicable bankruptcy or
reorganization law, payment or delivery by the Company of such Junior Securities
shall be made to the holders of the Subordinated Indebtedness in accordance with
such order or decree.
12.5 PAYMENTS AND DISTRIBUTIONS RECEIVED. If the holders of the
Subordinated Indebtedness shall have received any payment from or distribution
of assets of the Company in respect of the Subordinated Indebtedness in
contravention of the terms of this Article 12 before all Senior Indebtedness is
paid in full in cash, then and in such event such payment or distribution shall
be received and held in trust for and shall be promptly paid over or delivered
to the holders of Senior Indebtedness (or their authorized agent(s)) in the same
form of payment received, with appropriate endorsements, to the extent necessary
to pay all such Senior Indebtedness in full in cash, or any such assets as
collateral for the Senior Indebtedness.
12.6 SUBROGATION. After all amounts payable under or in respect of
Senior Indebtedness are paid in full in cash, the holders of the Subordinated
Indebtedness shall have the right to be subrogated to the rights of holders of
Senior Indebtedness to receive payments or distributions applicable to Senior
Indebtedness to the extent that distributions otherwise payable to the holders
of the Subordinated Indebtedness have been applied to the payment of Senior
Indebtedness. A distribution made under this Agreement to a holder of Senior
Indebtedness which otherwise would have been made to the holders of the
Subordinated Indebtedness is not, as between the Company and the holders of the
Subordinated Indebtedness, a payment by the Company on Subordinated
Indebtedness.
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12.7 RELATIVE RIGHTS. This Agreement defines the relative rights of
the holders of the Subordinated Indebtedness and the holders of Senior
Indebtedness. Nothing in this Section shall: (i) impair, as between the Company
and the holders of the Subordinated Indebtedness, the obligation of the Company,
which is absolute and unconditional, to pay principal of and interest (including
default interest) on Subordinated Indebtedness in accordance with its terms;
(ii) effect the relative rights of holders of Subordinated Indebtedness and
creditors of the Company other than holders of Senior Indebtedness; or (iii)
except as expressly provided herein, prevent the holders of Subordinated
Indebtedness from exercising their available remedies upon a Default or Event of
Default, subject to the rights, if any, under this Article 12 of holders of
Senior Indebtedness.
12.8 SUBORDINATION MAY NOT BE IMPAIRED BY THE COMPANY. No right of
any holder of any Senior Indebtedness to enforce the subordination of the
Subordinated Indebtedness shall be impaired by any failure by the Company to
comply with this Agreement.
12.9 PAYMENTS. Subject to Section 12.3, a payment with respect to
principal of or interest on the Subordinated Indebtedness shall include, without
limitation, payment of principal of, and interest on the Subordinated
Indebtedness, any depositing of funds for the defeasance of the Subordinated
Indebtedness and any payment on account of mandatory prepayment or optional
prepayment provisions.
12.10 SECTION NOT TO PREVENT EVENTS OF DEFAULT. The failure to make
a payment on account of principal of or interest on or other amounts
constituting Subordinated Indebtedness by reason of any provision of this
Agreement shall not be construed as preventing the occurrence of an Event of
Default under Article 11 of this Agreement.
12.11 DEFENSE TO ENFORCEMENT. If the Holder of any Note, in
contravention of the terms of this Article 12, shall commence, prosecute or
participate in any suit, action or proceeding against the Company, then the
Company may interpose as a defense or plea the making of the agreement contained
in this Article 12, and any holder of Senior Indebtedness may intervene and
interpose such defense or plea in its name or in the name of the Company. If the
Holder of any Note, in contravention of the terms of this Agreement, shall
attempt to collect any of the Subordinated Indebtedness or enforce any of its
rights under the Notes or Article 12 of this Agreement, then any holder of
Senior Indebtedness or the Company may, by virtue of this Article 12, restrain
the enforcement thereof in the name of such holders of Senior Indebtedness or in
the name of the Company. If the Holder of any Note, in contravention of the
terms of this Article 12, obtains any cash or other assets of the Company as a
result of any administrative, legal or equitable actions, or otherwise, such
holder agrees forthwith to pay, deliver and assign to the holders of Senior
Indebtedness, with appropriate endorsements, any such cash for application to
Senior Indebtedness and any such other assets as collateral for Senior
Indebtedness.
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12.12 FURTHER COVENANTS.
(a) Each Holder of Notes agrees, upon request of a holder of
Senior Indebtedness at any time and from time to time, to execute such other
documents or instruments as may reasonably be requested to evidence of public
record or otherwise the senior priority of the Senior Indebtedness as
contemplated hereby.
(b) Each Holder of Notes further agrees to maintain on its
books and records such notations as may reasonably be requested to reflect the
subordination contemplated hereby and to perfect or preserve the rights of the
holders of Senior Indebtedness hereunder.
12.13 FREEDOM OF DEALING. Each Holder of a Note agrees, with respect
to Senior Indebtedness and any and all collateral therefor or guaranties
thereof, that the Company and the holders of Senior Indebtedness may, subject to
the limitations contained in Section 10.6 of this Agreement, agree to increase
the amount of the Senior Indebtedness or otherwise modify the terms of the
Senior Indebtedness, and the holders of Senior Indebtedness may grant extensions
of the time of payment or performance to and make compromises, including
releases of collateral or guaranties, and settlements with the Company and all
other Persons, in each case without the consent of the Holders of the Notes or
the Company and without affecting the agreements of the Holders of the Notes or
the Company contained in this Article 12; PROVIDED, HOWEVER, that nothing
contained in this Section 12.13 shall constitute a waiver of the right of the
Company itself to agree or consent to a settlement or compromise of a claim
which holders of Senior Indebtedness may have against the Company.
12.14 SUBORDINATED INDEBTEDNESS VOTING RIGHTS. At any meeting of
creditors of the Company or in the event of any case or proceeding, voluntary or
involuntary, for the distribution, division or application of all or part of the
assets of the Company or the proceeds thereof, whether such case or proceeding
be for the liquidation, dissolution or winding up of the Company or its
business, a receivership, insolvency or bankruptcy case or proceeding, an
assignment for the benefit of creditors or a proceeding by or against the
Company for relief under any bankruptcy or reorganization law or any other law
relating to the relief of debtors, readjustment of indebtedness, reorganization,
arrangement, composition or extension or marshaling of assets or otherwise, the
holders of Subordinated Indebtedness shall retain the right to vote and
otherwise act with respect to the Subordinated Indebtedness (including, without
limitation, the right to vote to accept or reject any plan of partial or
complete liquidation, reorganization, arrangement, composition or extension),
PROVIDED that, absent fraud or misrepresentation by the holders of Senior
Indebtedness with respect to the Senior Indebtedness or conduct on the part of
the holders of Senior Indebtedness which would be sufficient to support a claim
of equitable subordination with respect to Senior Indebtedness under
ss.510(c)(1) of the Bankruptcy Code (Title 11 U.S.C.), the holders of
Subordinated Indebtedness shall not vote with respect to
58
any such plan or take any other action in any way so as to contest (i) the
validity of any Senior Indebtedness or any collateral therefor or guaranties
thereof, (ii) the relative rights and duties of any holders of any Senior
Indebtedness established in any instruments or agreements creating or evidencing
any of the Senior Indebtedness with respect to any of such collateral or
guaranties or (iii) the obligations and agreements of the holders of
Subordinated Indebtedness set forth in this Article 12.
12.15 SUBORDINATED INDEBTEDNESS UNSECURED. The holders of the
Subordinated Indebtedness hereby acknowledge and agree that the Subordinated
Indebtedness is unsecured.
12.16 MODIFICATION OR SALE OF THE SUBORDINATED INDEBTEDNESS. The
holders of Subordinated Indebtedness will not, at any time while this Agreement
is in effect, modify any of the terms of this Article 12, Sections 10.1, 10.2,
10.6, any of the definitions relevant to any of the foregoing, or any other
provision of this Agreement if such amendment, supplement or modification would
impose more restrictive terms on the Company and would have an adverse effect on
the rights and remedies of the holders of the Senior Indebtedness; nor will the
holders of Subordinated Indebtedness sell, transfer, pledge, assign, hypothecate
or otherwise dispose of any or all of the Subordinated Indebtedness to any
person other than a person who agrees in writing reasonably satisfactory in form
and substance to the holders of the Senior Indebtedness, to become a party
hereto and to succeed to the rights and to be bound by all of the obligations of
the holders of the Subordinated Indebtedness under this Article 12. In the case
of any such sale or other disposition by the holders of Subordinated
Indebtedness, the holders of Subordinated Indebtedness will notify the holders
of Subordinated Indebtedness at least five (5) Business Days prior to the date
of any of such intended sale or other disposition.
12.17 TERMINATION OF SUBORDINATION. This Article 12 shall continue
in full force and effect, and the obligations and agreements of the holders of
Subordinated Indebtedness and the Company hereunder shall continue to be fully
operative, until all of the Senior Indebtedness shall have been paid or provided
for in full in cash and such provision or payment shall be final and not
avoidable. To the extent that the Company or any guarantor of or provider of
collateral for the Senior Indebtedness makes any payment on the Senior
Indebtedness that is subsequently invalidated, declared to be fraudulent or
preferential or set aside or is required to be repaid to a trustee, receiver or
any other party under any bankruptcy, insolvency or reorganization act, state or
federal law, common law or equitable cause (such payment being hereinafter
referred to as a "VOIDED PAYMENT"), then to the extent of such Voided Payment,
that portion of the Senior Indebtedness that had been previously satisfied by
such Voided Payment shall be revived and continue in full force and effect as if
such Voided Payment had never been made. In the event that a Voided Payment is
recovered from any holder of Senior Indebtedness, an event of default shall be
deemed to have existed and to be continuing under the applicable Senior
Indebtedness from the date of such holder's initial receipt of such Voided
Payment until the full amount of such Voided Payment is restored to such holder
of
59
Senior Indebtedness. During any continuance of any such event of default, this
Agreement shall be in full force and effect with respect to the Subordinated
Indebtedness. To the extent that any holder of Subordinated Indebtedness has
received any payments with respect to the Subordinated Indebtedness subsequent
to the date of any holder's Senior Indebtedness initial receipt of such Voided
Payment and such payments have not been invalidated, declared to be fraudulent
or preferential or set aside or are required to be repaid to a trustee,
receiver, or any other party under any bankruptcy act, state or federal law,
common law or equitable cause, such holder of Subordinated Indebtedness shall be
obligated and hereby agrees that any such payment so made or received shall be
deemed to have been received in trust for the benefit of the holders of Senior
Indebtedness, and the holders of Subordinated Indebtedness hereby agree to pay
to the holders of Senior Indebtedness upon demand, the full amount so received
by the Subordinated Indebtedness during such period of time to the extent
necessary fully to restore to the holders of Senior Indebtedness the amount of
such Voided Payment.
12.18 NOTICES TO HOLDERS OF SENIOR INDEBTEDNESS. The holders of
Subordinated Indebtedness shall provide notices required to be given under this
Article 12 to holders of Senior Indebtedness in the manner provided in Section
14.2 of this Agreement to the addresses of holders of Senior Indebtedness
specified in the Credit Agreement or other documents evidencing any such
Indebtedness.
ARTICLE 13
PREPAYMENT
The Company shall prepay outstanding principal (together with
accrued interest) on the Notes in accordance with the "Mandatory Prepayment"
provisions set forth in Section 3 of the Notes. The Company may prepay
outstanding principal (together with accrued interest) on the Notes only if the
Notes are prepaid in accordance with the "Optional Prepayment" provisions set
forth in Section 4 of the Notes.
ARTICLE 14
MISCELLANEOUS
14.1 SURVIVAL OF PROVISIONS. All of the representations and
warranties made herein shall survive the execution and delivery of this
Agreement, any investigation by or on behalf of the Purchasers or any Affiliate,
acceptance of the Senior Subordinated Notes, Warrants, Shares and Warrant Shares
and payment therefor, payment of the Senior Subordinated Note upon redemption or
otherwise, and exercise of the Warrants.
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14.2 NOTICES. All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
services or personal delivery to the following addresses, or to such other
addresses as shall be designated from time to time by a party in accordance with
this Section 14.2:
(a) if to the Fund:
The 1818 Mezzanine Fund, L.P.
c/o Brown Brothers ▇▇▇▇▇▇▇▇ & Co.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
1285 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to PCI or Progressive:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
3200 National City Center
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
61
(c) if to ML:
c/o ManuLife Financial
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Manufacturers Life Insurance Company
Corporate Law Department
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telecopier No: (▇▇▇) ▇▇▇-▇▇▇▇
(d) if to the Company:
National Auto Finance Company, Inc.
▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; when delivered to a
courier, if delivered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, if mailed; and when
confirmation of receipt is acknowledged, if telecopied.
14.3 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns and
permitted
62
transferees of the parties hereto. Except as provided in Articles 7 and 12, no
Person other than the parties hereto and their successors and permitted assigns
is intended to be a beneficiary of this Agreement, the Notes and the Warrants.
14.4 ASSIGNMENTS.
(a) The Company may not assign any of its rights or
obligations under this Agreement (other than in connection with a transaction
permitted pursuant to Section 10.3 hereof) without the written consent of the
Purchasers (prior to Closing) or the holders of a majority (x) in aggregate
principal amount of the Notes outstanding (following Closing) and (y) of the
aggregate number of Purchaser Shares then held by Holders.
(b) Subject to the other limitations contained in the Notes,
the Warrants and herein, including but not limited to Section 6.5, the
Purchasers and any subsequent Holder of Notes, Shares, Warrant Shares or
Warrants may, at any time or from time to time sell, agree to sell or assign to
one or more other Persons who agree to be bound by all of the terms of this
Agreement, all or any portion of the Notes, Warrants, Shares or Warrant Shares.
Subject to the other limitations contained in the Notes and this Agreement,
including but not limited to Section 6.5, in the event of any such sale or
assignment of a Note, upon surrender for exchange of any Note at the office of
the Company designated for notices in accordance with Section 14.2, the Company
shall execute and deliver in exchange therefor, without expense to the holder
(provided the Company shall not be responsible for any transfer taxes in
connection with any such sale or assignment), one or more new Notes in the same
aggregate principal amount as the then unpaid principal amount of the Note so
surrendered as such holder shall specify, dated as of the date to which interest
has been paid on the Note so surrendered (or, if no interest has been paid, the
date of such surrendered Note), in the name of such Person or Persons as may be
designated by such holder in writing, and otherwise of the same form and tenor
as the Note so surrendered for exchange. Subject to the limitation contained in
the Warrants (solely with respect to the Warrants), certificates representing
the Shares or Warrant Shares (solely with respect to the Shares or Warrant
Shares, as applicable) and this Agreement, including but not limited to Section
6.5 hereof, in the event of any sale or assignment of any Warrants, Shares or
Warrant Shares, upon surrender for exchange of any Warrant or certificate
representing any of the Shares or Warrant Shares at the office of the Company
designated for notices in accordance with Section 14.2, the Company shall
execute and deliver in exchange therefor, without expense to the holder
(provided the Company shall not be responsible for any transfer taxes in
connection with any such sale or assignment), one or more Warrants or
certificates representing Shares or Warrant Shares, as applicable, in the same
amount as surrendered as such holder shall specify in the name of such Person or
Persons as may be designated by such holder in writing, and otherwise of the
same form. Every Note, Warrant or certificate representing any Shares or Warrant
Shares surrendered for transfer shall be duly endorsed, or accompanied by a
written instrument of
63
transfer duly executed by the holder of such Note, Warrant or certificate
representing any Shares or Warrant Shares or its attorney duly authorized in
writing.
14.5 AMENDMENT AND WAIVER.
(a) No failure or delay on the part of any Holder, in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy.
(b) Any amendment, supplement or modification of or to any
provision of this Agreement or the Notes, any waiver of any provision of this
Agreement or the Notes, and any consent to any departure by the Company from the
terms of any provision of this Agreement or the Notes, shall be effective (i)
only if it is made or given in writing and signed by the Company and the holders
of 66% of the aggregate principal amount of the Notes outstanding, and (ii) only
in the specific instance and for the specific purpose for which made or given.
Notwithstanding the foregoing, without the consent of each holder of a Note
affected, an amendment may not:
(1) reduce the rate of or extend the time for payment
of interest on any Note;
(2) reduce the principal of or extend the maturity of
any Note;
(3) change the time at which any Note shall or may be
prepaid in accordance with Sections 3 and 4 of the
Notes;
(4) make any Note payable in money other than that
stated in the Notes;
(5) make any change in Article 12 that adversely
affects the rights of any holder of a Note under
Article 12; or
(6) make any change in the first or second sentence of
this Section 14.5(b).
(c) Any amendment, supplement or modification of or to any of
the terms provided in Article 8, Sections 9.1(c), 9.7, 9.9, 9.10, 9.11, 9.15,
10.4, 10.13 and 10.14 and Article 14, and any definitions in Article 1 relating
to such provisions, and any consent to any departure by the Company from such
provisions, shall be effective (i) only if it is made or given in writing and
signed by the Company
64
and the Holders of at least 51% of the Purchaser Shares held by Holders, and
(ii) only in the specific instance and for the specific purpose for which made
or given.
(d) In addition to the foregoing, any amendment, supplement or
modification of or to any of the terms provided in Sections 9.8, 9.11 or 9.14,
and any consent to any departure by the Company from any such provisions, shall
be effective (i) only if it is made or given in writing and signed by the
Company and the Holders of at least 51% of the Warrants (based on the number of
Warrant Shares issuable upon the exercise of unexercised Warrants) held by
Holders, and (ii) only in the specific instance and for the specific purpose for
which made or given.
(e) Except where notice is specifically required by this
Agreement, no notice to or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances.
14.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
14.7 HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
14.8 DETERMINATIONS. All determinations to be made by the Company,
the Purchasers or any Holder hereunder in its opinion or judgment or with its
approval or otherwise shall be made by it in its sole discretion, unless
otherwise specified herein.
14.9 GOVERNING LAW. This Agreement has been negotiated, executed and
delivered in the State of New York and shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
14.10 JURISDICTION. Each party to this Agreement hereby irrevocably
agrees that any legal action or proceeding arising out of or relating to this
Agreement or any agreements or transactions contemplated hereby may be brought
in the courts of the State of New York located in New York City or of the United
States of America for the Southern District of New York and hereby expressly
submits to the personal jurisdiction and venue of such courts for the purposes
thereof and expressly waives any claim of improper venue and any claim that such
courts are an inconvenient forum. Each party hereby irrevocably consents to the
service of process of any of the aforementioned courts pursuant to a contractual
provision in any such suit, action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to the address set
forth in Section 14.2, such service to become effective 10 days after such
mailing. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED,
EACH PARTY HEREBY
65
WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT
OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
AGREEMENT OR THE SUBJECT MATTER HEREOF OR ANY FUNDAMENTAL DOCUMENT, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR
OTHERWISE.
14.11 SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired,
unless the provisions held invalid, illegal or unenforceable shall substantially
impair the benefits of the remaining provisions hereof.
14.12 RULES OF CONSTRUCTION. Unless the context otherwise requires,
"or" is not exclusive, and references to sections or subsections refer to
sections or subsections of this Agreement.
14.13 REMEDIES. If a breach of this Agreement, the Notes or the
Warrants by the Company occurs and is continuing, the Purchasers or any Holder
may pursue any available remedy by proceeding at law or in equity to enforce the
performance (including, without limitation, the specific performance) of any
provision of the Notes, the Warrants or this Agreement. The Purchasers or any
Holder may maintain a proceeding even if it does not possess any of the Notes or
Warrants or does not produce any of them in the proceeding. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
14.14 ENTIRE AGREEMENT. This Agreement, together with the exhibits
and schedules hereto, the Senior Subordinated Notes, the Warrants and the Regis
tration Rights Agreement is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein or
therein. This Agreement, together with the exhibits and schedules hereto, the
Senior Subordinated Notes, the Warrants and the Registration Rights Agreement
supersede all prior agreements and under standings among the parties with
respect to such subject matter.
14.15 ATTORNEYS' FEES. In any action or proceeding brought to
enforce any provision of this Agreement, the Notes, the Warrants and the
Registration Rights Agreement or any other document or instrument contemplated
hereby or thereby, or where any provision hereof or thereof is validly asserted
as a defense, the successful
66
party shall be entitled to recover reasonable attorneys' fees, charges and
disbursements in addition to any other available remedy.
14.16 PUBLICITY. Except as may be required by applicable law or a
listing agreement with any securities exchange or Nasdaq, no party hereto shall
issue a publicity release or announcement or otherwise make any public
disclosure concerning this Agreement or the transactions contemplated hereby,
without prior approval by the other parties hereto. If any announcement is
required by law to be made by a party hereto, prior to making such announcement
such party will deliver a draft of such announcement to the other parties and
shall give the other parties an opportunity to comment thereon.
14.17 EXPENSES. The Company acknowledges and agrees that whether or
not the transactions contemplated hereby are consummated, the Company shall
reimburse the Purchasers for (a) all out-of-pocket expenses of the Purchasers in
connection with any preparation and filing of any notification and report forms
filed in compliance with the HSR Act in connection with the transactions
contemplated hereby and (b) all out-of-pocket expenses, and all legal fees and
expenses of the Purchasers incurred in connection with the negotiation,
execution and delivery of this Agreement and the other Transaction Documents.
67
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective officers or partners hereunto duly
authorized as of the date first above written.
NATIONAL AUTO FINANCE COMPANY, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice Chairman and Treasurer
THE 1818 MEZZANINE FUND, L.P.
By: ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co.,
its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Name:
PROGRESSIVE INVESTMENT COMPANY, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Investment Officer
PC INVESTMENT COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Investment Officer
68
MANUFACTURERS LIFE INSURANCE
COMPANY (U.S.A.)
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: V.P.
SCHEDULE 2.1A
PRINCIPAL AMOUNT OF SENIOR SUBORDINATED NOTES
PRINCIPAL AMOUNT OF
NAME OF PURCHASER SENIOR SUBORDINATED NOTES
----------------------------- ---------------------------------------
The 1818 Mezzanine Fund, L.P. $16,000,000
PC Investment Company $14,000,000
Manufacturers Life Insurance $10,000,000
Company (U.S.A.)
---------------------------------------
Total: $40,000,000
=======================================
SCHEDULE 2.1B
WARRANTS
NUMBER OF SHARES OF COMMON STOCK
NAME OF PURCHASER TO BE PURCHASED BY THE WARRANTS
----------------------------- ---------------------------------------
The 1818 Mezzanine Fund, L.P. 415,570
PC Investment Company* 363,623
Manufacturers Life Insurance 259,731
Company (U.S.A.)
---------------------------------------
Total: 1,038,924
=======================================
* Immediately following the Closing, PC Investment Company will assign the
Warrants to The Progressive Investment Company, Inc.
SCHEDULE 2.1C
COMMON STOCK
NAME OF STOCK PURCHASER NUMBER OF SHARES OF COMMON STOCK
----------------------------- ---------------------------------------
The 1818 Mezzanine Fund, L.P. 761,905
Progressive Investment Company, 1,142,857
Inc.
---------------------------------------
Total: 1,904,762
=======================================