SECURITIES PURCHASE AGREEMENT
By and Between
NATIONAL AUTO FINANCE COMPANY, INC.,
and
THE STRUCTURED FINANCE HIGH YIELD FUND, LLC
------------------------------
Dated March 27, 1998
------------------------------
Table of Contents
Page
ARTICLE 1
DEFINITIONS................ 1
1.1 Definitions............................................. 1
1.2 Accounting Terms; Financial Covenants................... 16
ARTICLE 2
PURCHASE AND SALE............. 17
2.1 Purchase and Sale of Senior Subordinated Notes and
Warrants................................................ 17
2.2 Fees.................................................... 17
2.3 Closing................................................. 17
ARTICLE 3
CONDITIONS TO THE OBLIGATION
OF THE PURCHASER TO CLOSE.................... 18
3.1 Representations and Warranties True..................... 18
3.2 Compliance with this Agreement.......................... 18
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. 19
3.7 Opinion of Counsel...................................... 19
3.8 Approval of Counsel to the Purchaser.................... 19
3.9 Consents and Approvals.................................. 19
3.10 No Material Adverse Change.............................. 19
3.11 Intentionally Deleted................................... 19
3.12 Registration Rights Agreement........................... 20
3.13 Certificate of Incorporation and By-Laws of the Company
and its Subsidiaries.................................... 20
3.14 Market Conditions....................................... 20
3.15 No Default or Breach.................................... 20
3.16 Fees.................................................... 20
3.17 Side Letter............................................. 20
3.18 Credit Agreement Waiver................................. 20
3.19 Securities Purchase Agreement Waiver.................... 21
3.20 Intentionally Deleted................................... 21
3.21 Subordination........................................... 21
3.22 National Auto Finance Company, L.P...................... 21
ARTICLE 4
CONDITIONS TO THE OBLIGATION
Page
OF THE COMPANY TO CLOSE ......... 21
4.1 Representations and Warranties True..................... 21
4.2 Compliance with this Agreement.......................... 21
4.3 Approval of Counsel to the Company...................... 22
4.4 Consents and Approvals.................................. 22
4.5 The Registration Rights Agreement....................... 22
4.6 Credit Agreement Waiver................................. 22
4.7 Intentionally Deleted................................... 22
4.8 General Partner's Certificate........................... 22
ARTICLE 5
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY......... 23
5.1 Corporate Existence and Power........................... 23
5.2 Corporate Authorization; No Contravention............... 23
5.3 Governmental Authorization; Third Party Consents........ 24
5.4 Binding Effect.......................................... 24
5.5 No Legal Bar............................................ 24
5.6 Litigation.............................................. 25
5.7 No Default or Breach.................................... 25
5.8 Title to Properties..................................... 25
5.9 Financial Condition; No Undisclosed Liabilities......... 25
5.10 No Material Adverse Change.............................. 26
5.11 Investment Company...................................... 27
5.12 Subsidiaries............................................ 27
5.13 Capitalization.......................................... 27
5.14 Solvency................................................ 27
5.15 Private Offering........................................ 27
5.16 Broker's, Finder's or Similar Fees...................... 28
5.17 Full Disclosure......................................... 28
5.18 Anti-Dilution Protection................................ 28
5.19 Registration Rights Agreements.......................... 29
5.20 Labor Relations......................................... 29
5.21 ERISA and Employee Benefit Plans........................ 29
5.22 Environmental Matters................................... 30
5.23 Taxes................................................... 30
5.24 Patents, Trademarks, Etc................................ 31
5.25 Potential Conflicts of Interest......................... 32
5.26 Trade Relations......................................... 32
5.27 Indebtedness............................................ 32
5.28 Material Contracts...................................... 32
5.29 Insurance............................................... 33
Page
5.30 Projections............................................. 33
5.31 Commission Documents.................................... 33
5.32 Lending Activities...................................... 34
ARTICLE 6
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASER........ 34
6.1 Nature of Purchase...................................... 34
6.2 Source of Funds......................................... 34
ARTICLE 7
INDEMNIFICATION.............. 35
7.1 Indemnification by the Company.......................... 35
7.2 Notification............................................ 36
7.3 Registration Rights Agreement........................... 36
ARTICLE 8
PRE-CLOSING AFFIRMATIVE COVENANTS..... 37
8.1 Operation of Company.................................... 37
8.2 Exclusivity............................................. 37
ARTICLE 9
AFFIRMATIVE COVENANTS........... 37
9.1 Financial Statements.................................... 37
9.2 Certificates; Other Information......................... 39
9.3 Preservation of Corporate Existence..................... 39
9.4 Payment of Obligations.................................. 39
9.5 Compliance with Laws.................................... 40
9.6 Notices................................................. 40
9.7 Issue Taxes............................................. 40
9.8 Reservation of Shares................................... 41
9.9 Inspection.............................................. 41
9.10 Board Representation; Visitation Rights................. 42
9.11 Registration and Listing................................ 43
9.12 Use of Proceeds......................................... 44
9.13 Payment of Notes........................................ 44
9.14 Sale of Company......................................... 44
9.15 Allocation for Tax Purposes............................. 45
9.16 Information on Internal Rate of Return.................. 45
ARTICLE 10
NEGATIVE AND FINANCIAL COVENANTS...... 45
10.1 Minimum Consolidated Net Worth.......................... 45
10.2 Adjusted Interest Expense............................... 46
10.3 Consolidations and Mergers.............................. 46
10.4 Transactions with Affiliates............................ 47
10.5 No Inconsistent Agreements.............................. 47
10.6 Limitation on Indebtedness.............................. 47
10.7 Limitation on Liens..................................... 48
10.8 Investments............................................. 49
10.9 Limitations on Restricted Payments...................... 50
10.10 Dispositions of Assets.................................. 50
10.11 Future Issuances of Preferred Stock..................... 51
10.12 Certificate of Incorporation and By-Laws of the Company
and its Subsidiaries.................................... 51
10.13 Line of Business........................................ 51
10.14 Vehicle Loan Policy..................................... 51
ARTICLE 11
DEFAULTS AND REMEDIES........... 52
11.1 Events of Default....................................... 52
11.2 Acceleration............................................ 53
ARTICLE 12
SUBORDINATION............... 54
12.1 Definitions............................................. 54
12.2 General................................................. 55
12.3 Limitation on Payment and Remedies...................... 55
12.4 Subordination Upon Certain Events....................... 57
12.5 Payments and Distributions Received..................... 58
12.6 Subrogation............................................. 58
12.7 Relative Rights......................................... 58
12.8 Subordination May Not Be Impaired by the Company........ 59
12.9 Payments................................................ 59
12.10 Section Not to Prevent Events of Default................ 59
12.11 Defense to Enforcement.................................. 59
12.12 Further Covenants....................................... 59
12.13 Freedom of Dealing...................................... 60
12.14 Subordinated Indebtedness Voting Rights................. 60
12.15 Subordinated Indebtedness Unsecured..................... 61
12.16 Modification or Sale of the Subordinated Indebtedness... 61
12.17 Termination of Subordination............................ 61
12.18 Notices to Holders of Senior Indebtedness............... 62
ARTICLE 13
PREPAYMENT................. 62
ARTICLE 14
MISCELLANEOUS............... 63
14.1 Survival of Provisions.................................. 63
14.2 Notices................................................. 63
14.3 Successors and Assigns.................................. 65
14.4 Assignments............................................. 65
14.5 Amendment and Waiver.................................... 66
14.6 Counterparts............................................ 68
14.7 Headings................................................ 68
14.8 Determinations.......................................... 68
14.9 Governing Law........................................... 68
14.10 Jurisdiction............................................ 68
14.11 Severability............................................ 69
14.12 Rules of Construction................................... 69
14.13 Remedies................................................ 69
14.14 Entire Agreement........................................ 69
14.15 Attorneys' Fees......................................... 69
14.16 Publicity............................................... 70
14.17 Expenses................................................ 70
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 3.10 Material Adverse Change
Schedule 5.10 Material Adverse Event
Schedule 5.13 Capitalization Matters
Schedule 5.21 ERISA and Employee Benefit Plans
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
SECURITIES PURCHASE AGREEMENT, dated as of March 27, 1998, by
and between NATIONAL AUTO FINANCE COMPANY, INC., a corporation organized under
the laws of Delaware (the "Company"), and THE STRUCTURED FINANCE HIGH YIELD
FUND, LLC, a limited liability company organized under the laws of Delaware (the
"Purchaser").
WHEREAS, the Company proposes to issue and sell to the
Purchaser (i) Senior Subordinated Promissory Notes with a final maturity of
December 22, 2004 in the aggregate principal amount of $20,000,000.00 (the
"Senior Subordinated Notes" and, together with all notes issued in connection
with the substitution, replacement or transfer thereof, the "Notes") and (ii)
[593,671] detachable warrants (the "Warrants") exercisable immediately to
purchase initially [593,671] shares of the Company's Common Stock, par value
$.01 per share (the "Common Stock"), at an exercise price of $.01 per share, 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.
"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.
2
"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
3
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.
"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.
"December Holder" means the Purchasers (as defined in the
December Securities Purchase Agreement) and any subsequent transferee or
transferees of December Notes, December Warrants or December Warrant Shares, as
reflected on the books and records of the Company, other than a transferee who
has acquired December Notes, December Warrants or December Warrant Shares that
have been the subject of a distribution pursuant to a registered public
offering, or, in the case of December Notes, December Warrants or December
Warrant Shares, a transferee who has acquired such December Notes, December
Warrants or December Warrant Shares after such securities have been sold
pursuant to Rule 144 under the Securities Act or otherwise distributed under
circumstances not requiring a legend.
"December Notes" means the Notes issued pursuant to the
December Securities Purchase Agreement and replacements thereof.
"December Purchaser Shares" means the shares (as defined in
the December Securities Purchase Agreement) and the shares of Common Stock
issuable upon exercise of the December Warrants (subject to any adjustments
pursuant to the terms thereof).
"December Securities Purchase Agreement" shall mean that
certain Securities Purchase Agreement, dated as of December 22, 1997, by and
among the Company, The 1818 Mezzanine Fund, L.P., PC Investment Company, The
Progressive Investment Company, Inc. and Manufacturers Life Insurance Company
(U.S.A.), as the same may be amended, supplemented or modified from time to time
in accordance with its terms.
"December Warrants" means the Warrants issued pursuant to the
December Securities Purchase Agreement.
4
"December Warrants Shares" shall mean the shares of Common
Stock issuable upon exercise of the December Warrants.
"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 direct
5
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.
"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 payable) or other Indebtedness arising under any
conditional sale or other title retention agreement with respect to property
acquired by
6
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 Purchaser 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.
7
"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 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, partnership 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 22, 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
8
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 22, 2004). Notwithstanding
anything to the contrary contained in the foregoing, however, Junior
Subordinated 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 Purchaser, 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.
"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 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
9
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 January 31, 2002, as assigned to, and assumed by, the Company,
including the same as such may be
10
amended, supplemented or modified from time to time in accordance with its terms
and the terms hereof.
"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,
partnership, 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.
"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 S-1, Form S- 3 or otherwise under the Securities
Act.
11
"Purchaser Shares" means the shares of Common Stock initially
issuable upon exercise of the Warrants (subject to any adjustments pursuant to
the terms thereof).
"Purchaser" 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.
"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.
12
"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 the December 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 to the
repayment of the December Notes in accordance with the terms of their terms and
the terms of the December Securities Purchase Agreement 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 Pollution
Act of 1990, 33 U.S.C. ss. 2701 et seq., and analogous legislation and
regulation by any Governmental Authority.
13
"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.
"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.
"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.
14
"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.
"Subordinated Indebtedness" has the meaning assigned to such
term in Section 12.1.
"Subordinated Notes" means the Senior Subordinated Notes and
the December Notes.
"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 opinions 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 covenants,
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 and
Warrants. Subject to the terms and conditions set forth herein, the Company
agrees that it will issue to Purchaser, and Purchaser agrees that it will
acquire from the Company, at the Closing, (i) $20,000,000 aggregate principal
amount of Senior Subordinated Notes, 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 [593,671] shares
of Common Stock, with such Warrants being substantially in the form attached
hereto as Exhibit B, for the aggregate purchase price of $20,000,000 (the "Unit
Purchase Price") in cash, by wire transfer of immediately available funds to an
account designated in a notice delivered to such Purchaser not later than two
Business Days prior to the Closing Date.
2.2 Fees. The Company hereby agrees that it will pay to the
Purchaser, at the Closing, a facility fee of $200,000 to the Purchaser (less any
portion thereof previously paid by the Company to the Purchaser) 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.
2.3 Closing. The purchase and issuance of the Senior
Subordinated Notes and the Warrants shall take place at the closing (the
"Closing") to be held at the offices of Weil, Gotshal & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ on March 27, 1998, at 10:00 a.m., New York City
time, or on such other date and at such other time as the Purchaser 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 Purchaser by delivering to the
Purchaser, the Senior Subordinated Notes and the Warrants registered in the name
of the Purchaser, 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 Purchaser), and the Purchaser shall purchase the Senior
Subordinated Notes and the Warrants for the Unit Purchase Price.
17
ARTICLE 3
CONDITIONS TO THE OBLIGATION
OF THE PURCHASER TO CLOSE
The obligation of the Purchaser to purchase the Senior
Subordinated Notes and the Warrants to pay the Unit Purchase Price therefor at
the Closing, and to perform any of its 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.
3.3 Officer's Certificate. The Purchaser 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 Purchaser 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 Purchaser shall have received copies of
such documents as it reasonably may request in connection with the sale of the
Senior Subordinated Notes and the Warrants and the transactions contemplated
hereby, all in form and substance reasonably satisfactory to the Purchaser.
18
3.6 Purchase Permitted by Applicable Laws; Legal Investment.
The acquisition of and payment for the Senior Subordinated Notes and the
Warrants 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 Purchaser 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 Purchaser 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 Purchaser
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 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Assistant Counsel, the Prudential Insurance
Company of America, counsel to the Purchaser, 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 Purchaser shall have been furnished with appropriate
evidence thereof.
3.10 No Material Adverse Change. Since December 31, 1996,
except as disclosed in Schedule 3.10, 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 Intentionally Deleted.
19
3.12 Registration Rights Agreement. The Registration Rights
Agreement shall have been duly executed and delivered to the Purchaser by each
of the other parties thereto.
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 Purchaser the fees provided for in Section 2.2 hereof.
3.17 Side Letter. The Company shall have executed and
delivered a side letter regarding confidential information and transfer of
Senior Subordinated Notes and Warrants in form and substance reasonably
satisfactory to the Purchaser (the "Side Letter").
3.18 Credit Agreement Waiver. The Company shall have delivered
to the Purchaser, in form and substance reasonably satisfactory to the
Purchaser, 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.
20
3.19 Securities Purchase Agreement Waiver. The Company shall
have delivered to the Purchaser, in form and substance reasonably satisfactory
to the Purchaser, a waiver of any provisions of the December Securities Purchase
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 Intentionally Deleted.
3.21 Subordination. The Company shall have executed and
delivered the Junior Subordination Agreement, in form and substance reasonably
satisfactory to the Purchaser.
3.22 National Auto Finance Company, L.P. The Company shall
have delivered to the Purchaser, in form and substance reasonably satisfactory
to the Purchaser, 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 Person to be nominated to the Company's Board of Directors
by the Purchaser pursuant to the provisions of Section 9.10 hereof.
ARTICLE 4
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE
The obligations of the Company to issue and sell the Senior
Subordinated Notes and the Warrants 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 Purchaser 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 Purchaser shall have
performed and complied with all of its agreements and conditions set forth or
contemplated herein that
21
are required to be performed or complied with by the Purchaser 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
Purchaser 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 Purchaser or the Company or
enforcement against the Purchaser 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 The Registration Rights Agreement. The Registration Rights
Agreement shall have been duly executed and delivered to the Company by each of
the other parties thereto.
4.6 Credit Agreement Waiver. The Company shall have obtained 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.
4.7 Intentionally Deleted
4.8 General Partner's Certificate. The Company shall have
received from the Purchaser a certificate, dated the Closing Date and signed by
the manager of the 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 the Purchaser.
22
ARTICLE 5
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser 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 hereby and thereby, including without limitation, the issuance of
the Senior Subordinated Notes and the Warrants:
(a) is within the Company's corporate power and
authority and has been duly authorized by all necessary corporate
action; and
23
(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 consents required pursuant to the Credit Agreement, Registration Rights
Agreement and December Securities Purchase Agreement or 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 Purchaser 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
25
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 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; provided, however, the Purchaser
acknowledges that the application of FAS 125 and its effects on securitization
assets, including the Company's assets, and the use of "gain-on-sale"
accounting, in general, are presently under review by the Company's accountants
and the accounting profession as a whole. The Purchaser further acknowledges
that any change in the interpretation or application of FAS 125 to the
gain-on-sale accounting policies utilized by the Company and the assumptions
underlying those policies may affect the financial condition and operating
results of the Company for 1997 and in the future. After giving effect to the
transactions contemplated hereby, the Company 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 and the December 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; provided, however, the Purchaser acknowledges that the
application of FAS 125 and its effects on securitization assets, including the
Company's assets, and the use of "gain-on-sale" accounting, in general, are
presently under review by the Company's accountants and the accounting
profession as a whole. The Purchaser further acknowledges that any change in the
interpretation or application of FAS 125 to the gain-on-sale accounting policies
utilized by the Company and the assumptions underlying those policies may affect
the financial condition and operating results of the Company for 1997 and in the
future.
26
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 nonassessable.
The Warrants (assuming all such Warrants are exercised) to be issued at the
Closing will constitute _____% of the Common Stock 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. Except as set forth in Schedule 5.13 or as reserved for
issuance in connection with the exercise of the Warrants and December Warrants,
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 nonassessable. Except for the Warrants and
December 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 or the Warrants. No registration of the Senior Subordinated Notes, the
Warrants or the Warrant Shares pursuant to the provisions of the
27
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 or the Warrants or
any other security in such a manner so as to require the registration of the
Senior Subordinated Notes or the Warrants 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 $400,000 and the Company's agreement with National
Financial Companies LLC which requires the Company to pay fees totaling
$200,000, which fees shall be paid by the Company at Closing, and except for the
facility fee payable to the Purchaser 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 or the
Warrants 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 certificates referred to in Sections 3.3 and 3.4 hereof (collectively,
"Transaction Documents") or in any other written material delivered to the
Purchaser in connection with the purchase and sale of the Senior Subordinated
Notes and the Warrants 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;
provided, however, the Purchaser acknowledges that the application of FAS 125
and its effects on securitization assets, including the Company's assets, and
the use of "gain-on-sale" accounting, in general, are presently under review by
the Company's accountants and the accounting profession as a whole. The
Purchaser further acknowledges that any change in the interpretation or
application of FAS 125 to the gain-on-sale accounting policies utilized by the
Company and the assumptions underlying those policies may affect the financial
condition and operating results of the Company for 1997 and in the future.
5.18 Anti-Dilution Protection. Except for the December
Warrants as to which , 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.
28
5.19 Registration Rights Agreements. Upon execution of the
Registration Rights Agreement 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 Purchaser.
(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.
(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
29
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 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
30
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 litigation 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.
31
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 Transaction 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
32
Omni Agreement, the Company has no knowledge of any proposed, pending, or likely
cancellation or termination of any such contract, agreement or commitment.
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 Purchaser 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; provided, however, the Purchaser acknowledges that the
application of FAS 125 and its effects on securitization assets, including the
Company's assets, and the use of "gain-on-sale" accounting, in general, are
presently under review by the Company's accountants and the accounting
profession as a whole. The Purchaser further acknowledges that any change in the
interpretation or application of FAS 125 to the gain-on-sale accounting policies
utilized by the Company and the assumptions underlying those policies may affect
the financial condition and operating results of the Company for 1997 and in the
future. The Projections have been prepared in good faith. The Purchaser further
acknowledges that the Projections contain assumptions about future events,
including but not limited to the interpretation and application of FAS 125 to
the gain-on-sale accounting policies utilized by the Company, 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 Purchaser 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; provided, however, the Purchaser acknowledges that the application
of FAS 125 and its effects on securitization assets, including the Company's
assets, and the use of "gain-
33
on-sale" accounting, in general, are presently under review by the Company's
accountants and the accounting profession as a whole. The Purchaser further
acknowledges that any change in the interpretation or application of FAS 125 to
the gain-on-sale accounting policies utilized by the Company and the assumptions
underlying those policies may affect the financial condition and operating
results of the Company for 1997 and in the future..
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.
ARTICLE 6
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to, and covenants and
agrees with, the Company as follows:
6.1 Nature of Purchase. The Purchaser is not acquiring the
Notes and Warrants to be purchased by it hereunder with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities
Act, provided that the disposition of the Purchaser's property shall at all
times be and remain within its control.
6.2 Source of Funds. No part of the funds being used by the
Purchaser to pay the purchase price of the Notes and Warrants being purchased by
the purchaser hereunder constitutes assets of any employee benefit plan. For the
purpose of this section
34
6.2, the term "employee benefit plan" shall have the meaning specified in
section 3 of ERISA.
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 Purchaser and its Affiliates, 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 Purchaser 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 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.
35
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.
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.
36
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 Purchaser.
8.2 Exclusivity. From the date hereof through the earlier of
the Closing Date or March 31, 1998, the Company shall not enter into discussions
or negotiations with any Persons other than the Purchaser 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 Purchaser, 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 Purchaser or such
other Holders, as the case may be, waives compliance in writing:
9.1 Financial Statements. The Company shall deliver to the
Purchaser 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 related consolidated
statements of income and cash flows for such fiscal year, setting forth
in
37
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 Purchaser 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 Purchaser
and shall only be binding upon the Company so long as the Purchaser
holds (i) more than 33% of its 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 Purchaser and any
prospective purchaser of Notes, Warrants or Warrant 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.
38
9.2 Certificates; Other Information. The Company shall
furnish to the Purchaser 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 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;
39
(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 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
40
(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 and the Warrant 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 Purchaser 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 nonassessable.
9.9 Inspection; Confidentiality.
(a) So long as the Purchaser holds (i) more than
33% of its Purchaser Shares or (ii) any of the Notes, the Company will permit,
and will cause each of its Subsidiaries to permit, representatives of the
Purchaser 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 the Purchaser in connection with the foregoing shall be payable by the
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) The 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 the Purchaser
or any of its representatives), (ii) is available to the Purchaser on a non-
confidential basis from a source other than the Company or its Subsidiaries,
provided that such source was not known by the Purchaser to be bound by a
confidentiality agreement with, or other duty of confidentiality to, the Company
or any of its Subsidiaries, (iii) has
41
been independently developed by the 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, to the respective advisors, representatives, agents,
partners (and their representatives and advisors) and employees of the Purchaser
who need to know such information to perform their duties, (b) to any
prospective transferee of the Senior Subordinated Notes, the Warrants or the
Warrant Shares or of an interest in the Purchaser or in a successor to the
Purchaser sponsored by any Affiliate of the Purchaser, upon the execution of a
confidentiality agreement in form and substance reasonably satisfactory to the
Company, (c) as may be required by law (including a court order, subpoena or
other administrative order or process) or applicable regulations to which the
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 the Purchaser desires to offer or sell all or any part of the
Notes, Warrants or Warrant Shares), (d) in connection with any litigation
arising out of or related to this Agreement, (e) to the executive officers of
the Company or any of its Subsidiaries, or (f) with the consent of the Company.
In connection with clause (a) of the preceding sentence, it is understood and
agreed that the 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 a vacancy 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 person designated by the Purchaser to be elected to its
Board of Directors. Such designee shall serve until the annual meeting of
stockholders 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, the Purchaser 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 the Purchaser shall be entitled
to nominate a director to the Board of Directors only so long as the Purchaser
holds either
42
(x) at least 50% of the aggregate outstanding principal amount of the Notes
initially issued to the Purchaser or (y) at least 50% of the Purchaser Shares
initially issued to the Purchaser. The Company shall cause such nominee of the
Purchaser 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 the
Purchaser shall cease to serve as a director for any reason, other than by
reason of the Purchaser 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 the Purchaser.
(d) In the event that the Board of Directors of
the Company establishes committees from time to time, the nominee of the
Purchaser shall have the right, upon the Purchaser's request, to serve on each
such committee. If the Company creates any Subsidiaries, each Subsidiary's Board
of Directors shall consist of the same members as the Company's Board of
Directors.
(e) So long as the Purchaser owns more than 25%
of (i) the aggregate outstanding principal amount of the Notes initially issued
to the Purchaser or (ii) the number of Purchaser Shares initially issued to the
Purchaser, in addition to the rights granted pursuant to Sections 9.10(a) and
(b) above, the Purchaser 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 Purchaser's
representation contained in Section 6.2. 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, Warrant Shares. In addition, the Company will
in good faith and as expeditiously as possible endeavor to obtain private
43
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 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 Credit
Agreement), (d) cash deposits in connection with Permitted Securitization
Transactions and (e) for the payment of fees and expenses in connection with the
transactions contemplated in the Transaction Documents. Neither the Company nor
any Subsidiary owns or has any present intention of acquiring any "margin stock"
as defined in Regulation G (12 CFR Part 270) of the Board of Governors of the
Federal Reserve System ("margin stock"). None of such proceeds of the sale of
Notes or Warrants will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any margin stock or
for the purpose of maintaining, reducing or retiring any Indebtedness which was
originally incurred to purchase or carry any stock that is currently a margin
stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of such Regulation G. Neither the Company
nor any agent acting on its behalf has taken or will take any action which might
cause this Agreement or the Notes or Warrants to violate Regulation G,
Regulation T or any other regulation of the Board of Governors of the Federal
Reserve System in each case as in effect now or as the same may hereafter be in
effect.
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 Purchaser does 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 Purchaser, 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
Purchaser at a price equal to the consideration the Purchaser would have
received had it
44
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 $18,441,614, and
the amount of the Unit Purchase Price which is allocable to the Warrants shall
equal $1,558,836. 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 the Purchaser pursuant to the second paragraph of
Section 3.1 of the Notes, the Purchaser 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
Purchaser in connection with the determination of the Purchaser's "internal rate
of return" under terms and conditions substantially identical to Section 9.9(b)
hereof.
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 Purchaser 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
45
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 (as defined in the December Securities Purchase Agreement)).
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;
(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
46
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
and the December Securities Purchase Agreement and the December 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 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
47
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,
48
bids, leases 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
49
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.
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
50
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 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 Purchaser, 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.
51
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 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
52
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
(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
53
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.
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.
54
"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.
"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
55
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.
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
56
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.
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.
57
(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.
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.
58
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.
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.
59
(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 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
60
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 Senior Indebtedness. During any continuance of any
61
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.
62
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 Purchaser or any Affiliate,
acceptance of the Notes, Warrants and Warrant Shares and payment therefor,
payment of the Note upon redemption or otherwise, and exercise of the Warrants.
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 Purchaser:
(1) All payments shall be made by wire
transfer of immediately available funds for
credit to:
The Structured Finance High Yield Fund, LLC
Account No. ▇▇▇-▇▇▇▇-▇▇▇
Bank of New York
New York, New York
ABA: ▇▇▇-▇▇▇-▇▇▇
(2) Address for all notices relating to
payments: with a copy to:
The Structured Finance High Yield Fund, LLC
c/o Prudential Investments - Structured Finance Group
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Managing Director
Telephone No.: 973/▇▇▇-▇▇▇▇
Telecopier No.: 973/802-2147
63
The Prudential Insurance Company of America
▇/▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone No.: 973/▇▇▇-▇▇▇▇
Telecopier No.: 973/802-9245
(3) Address for all other communications and
notices:
The Structured Finance High Yield Fund, LLC
c/o Prudential Investments - Structured Finance Group
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Managing Director
Telephone No.: 973/▇▇▇-▇▇▇▇
Telecopier No.: 973/802-2147
(b) if to the Company:
National Auto Finance Company, Inc.
▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
64
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 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
Purchaser (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 Purchaser 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
65
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 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 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 Warrant Shares
surrendered for transfer shall be duly endorsed, or accompanied by a written
instrument of transfer duly executed by the holder of such Note, Warrant or
certificate representing any 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 holders of 66% of the aggregate principal amount of the Subordinated
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:
66
(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 and Holders and December Holders of at least
51% of the Purchaser Shares and the December Purchaser Shares, in the aggregate
held by Holders and December 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 Holders and December Holders of at least 51% of the
Warrants and the December Warrants (based on the number of shares issuable upon
the exercise of unexercised Warrants and December Warrants) held by Holders and
December Holders, and (ii) only in the specific instance and for the specific
purpose for which made or given.
(e) Notwithstanding the foregoing, no amendment,
supplement or modification hereunder shall become effective unless an equivalent
amendment, modification
67
or waiver under the December Securities Purchase Agreement becomes effective
simultaneously therewith.
(f) 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 Purchaser 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 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
68
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 Purchaser 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
Purchaser 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 Notes, the Warrants and the Registration
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 Notes, the
Warrants and the Registration Rights Agreement supersede all prior agreements
and understandings 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 party shall be entitled to recover reasonable
attorneys' fees, charges and disbursements in addition to any other available
remedy.
69
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 Purchaser for (a) all out-of-pocket expenses of the
Purchaser 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 Purchaser incurred in connection with the
negotiation, execution and delivery of this Agreement and the other Transaction
Documents.
70
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:
Name:
Title:
THE STRUCTURED FINANCE HIGH YIELD
FUND, LLC
By:
Name:
Partner
71