NATIONAL AUTO FINANCE COMPANY L.P.
NOTE PURCHASE AGREEMENT
$12,000,000
Senior Subordinated Notes
TABLE OF CONTENTS
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.............................. 1
1.1 Description of Notes.................................................. 1
1.2 Repayment of Principal................................................ 3
1.3 Commitment, Closing Date.............................................. 4
1.4 Other Agreements...................................................... 4
1.5 Paying and Exchange Agents............................................ 4
1.6 Restrictions on Transfer.............................................. 5
SECTION 2. PREPAYMENT AND REDEMPTION OF NOTES............................... 7
2.1 Prepayment at the Election of the Company............................. 7
2.2 Prepayment Following the Occurrence of a Change in Control Event...... 7
2.3 Prepayment Following the Company's Receipt of a Put Notice............ 8
2.4 Notice of Prepayments................................................. 10
2.5 Allocation of Prepayments............................................. 10
2.6 Notes Prepaid in Part................................................. 10
2.7 Direct Payment........................................................ 11
SECTION 3. REPRESENTATIONS.................................................. 11
3.1 Representations of the Company........................................ 11
3.2 Representations of the Purchasers..................................... 17
SECTION 4. CLOSING CONDITIONS................................................ 19
4.1 Purchasers' Conditions................................................ 19
4.2 Company's Conditions.................................................. 21
SECTION 5. COVENANTS........................................................ 21
5.1 Financial and Other Reports........................................... 21
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5.2 Books and Records..................................................... 24
5.3 Payments.............................................................. 25
5.4 Company Existence, Etc................................................ 25
5.5 Payment of Taxes...................................................... 25
5.6 Insurance............................................................. 25
5.7 Consolidation, Merger and Sale of Assets.............................. 25
5.8 Limitation on Indebtedness............................................ 26
5.9 Limitation on Liens................................................... 27
5.10 Limitation on Dividends and Other Restricted Payments................ 27
5.11 Limitations on Advances, Investments and Loans....................... 27
5.12 Notice to Holders.................................................... 28
5.13 Compliance with Law.................................................. 29
5.14 Compliance with Agreements........................................... 29
5.15 Environmental Covenant............................................... 29
5.16 Maintenance, Etc..................................................... 29
5.17 Transactions with Affiliates and Related Persons..................... 29
5.18 Use of Proceeds...................................................... 31
5.19 Continuance of Business.............................................. 31
5.20 Governmental Authorizations.......................................... 31
5.21 Further Assurances................................................... 31
5.22 Integration.......................................................... 32
5.23 Rule 10b-6........................................................... 32
5.24 Tangible Net Worth.................................................. 32
5.25 Visitation Rights.................................................... 32
5.26. Plan Assets......................................................... 33
5.27 Qualified Public Offering............................................ 33
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5.28 Put Event Equity Redemption.......................................... 33
5.29 Board of Directors................................................... 34
5.30 Sales of New Insider Equity Interests................................ 34
5.31 Amendments to Partnership Agreement.................................. 34
5.32 Amendments to Certain Other Documents................................ 34
SECTION 6. EXCHANGE OF DEFERRED ADDITIONAL INTEREST NOTES................... 35
6.1 Automatic Exchange.................................................... 35
6.2 Partial Optional Exchange............................................. 36
6.3 Optional Exchange Upon Disposition.................................... 37
6.4 Optional Exchange Upon Non-Qualified Public Offering.................. 38
6.5 Optional Exchange Upon IronBrand Redemption........................... 39
6.6 Exchange Rate and Termination of Exchange Rights...................... 40
6.7 Asset Sales; Liquidation Decisions; Share Sales....................... 41
6.8 Fractional Equity Interests........................................... 43
6.9 Notice of Certain Actions............................................. 43
6.10 Company to Keep Available Equity Interests and Not
to Enter into Restrictive Agreements............................... 43
6.11 Taxes on Exchange.................................................... 44
6.12 Covenant as to Equity Interests...................................... 44
6.13 Cancellation of Exchanged Deferred Additional Interest Notes......... 44
6.14 Reclassification, Reorganization, Consolidation, Merger
or Sale of Assets.................................................. 44
SECTION 7. EVENTS OF DEFAULT AND REMEDIES THEREFOR.......................... 45
7.1 Events of Default..................................................... 45
7.2 Acceleration of Maturities............................................ 47
7.3 Remedies Cumulative................................................... 48
7.4 Remedies Not Waived................................................... 48
7.5 Rescission of Acceleration............................................ 48
7.6 Subordination......................................................... 49
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SECTION 8. SUBORDINATION OF NOTES........................................... 49
SECTION 9. PREEMPTIVE RIGHTS................................................ 49
9.1 Preemptive Rights with respect to New Insider Equity Interests........ 49
9.2 Preemptive Rights with respect to Pari Passu Indebtedness and
Related Equity Interests............................................ 49
9.3 Preemptive Procedures................................................. 50
9.4 All Necessary Action.................................................. 51
SECTION 10. AMENDMENTS, WAIVERS AND CONSENTS................................ 51
10.1 Consent Required.................................................... 51
10.2 Effect of Amendment or Waiver....................................... 51
10.3 Solicitation of Holders.............................................. 51
SECTION 11. INTERPRETATION OF AGREEMENT; DEFINITIONS........................ 52
11.1 Definitions.......................................................... 52
11.2 Accounting Principles................................................ 71
11.3 Directly or Indirectly............................................... 71
SECTION 12. MISCELLANEOUS................................................... 71
12.1 Effect of Conversion to Corporate Form............................... 71
12.2 Registered Notes..................................................... 71
12.3 Exchange of Notes.................................................... 72
12.4 Loss, Theft, Etc. of Notes........................................... 72
12.5 Treasury Notes....................................................... 73
12.6 Expenses, Stamp Tax Indemnity........................................ 73
12.7 Powers and Rights Not Waived; Remedies Cumulative.................... 73
12.8 Notices.............................................................. 73
12.9 Successors and Assigns............................................... 74
12.10 Survival of Covenants and Representations........................... 74
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12.11 Severability........................................................ 74
12.12 GOVERNING LAW....................................................... 74
12.13 SUBMISSION TO JURISDICTION.......................................... 74
12.14 Captions............................................................ 75
12.15 Indemnification Provisions.......................................... 75
12.16 WAIVER OF JURY TRIAL................................................ 75
12.17 Time of the Essence................................................. 76
12.18 FINAL AGREEMENT..................................................... 76
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NATIONAL AUTO FINANCE COMPANY L.P.
NOTE PURCHASE AGREEMENT
$12,000,000
Senior Subordinated Notes
Dated as of
August 9, 1996
To the Purchaser Identified
on the Signature Page hereof
Ladies and Gentlemen:
National Auto Finance Company L.P., a Delaware limited partnership (the
"Company"), hereby agrees with you as follows:
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT
1.1 Description of Notes.
(a) The Company has authorized the issuance, sale and delivery of
$12,000,000 aggregate principal amount of its Senior Subordinated Notes (the
"Senior Subordinated Notes," which term includes each Senior Subordinated Note
delivered pursuant to this Agreement and the other Note Purchase Agreements with
the other purchasers named in Schedule I), and the related issuance, sale and
delivery of its Deferred Additional Interest Notes (the "Deferred Additional
Interest Notes," which term includes each Deferred Additional Interest Note
delivered pursuant to this Agreement and the other Note Purchase Agreements with
the other purchasers named in Schedule I; together with the Senior Subordinated
Notes, the "Notes"). The Senior Subordinated Notes and the Deferred Additional
Interest Notes shall be offered and sold to you without being registered under
the Securities Act of 1933, as amended (the "Securities Act"), in reliance on
the exemption therefrom provided by Section 4(2) thereof. You and the other
purchasers named in Schedule I are hereinafter sometimes referred to as the
"Purchasers". The terms which are capitalized
herein shall have the meanings set forth in Section 11.1 unless the context
shall otherwise require.
(b) The Senior Subordinated Notes shall be dated the date of issue, shall
bear interest on the unpaid portion of the principal amount thereof (subject to
the last two sentences of Section 1.1(c) and to Section 6), from such date of
issue (or from the date to which interest has been paid) until such unpaid
portion of such principal amount shall have become due and payable (whether on
the Senior Subordinated Note Repayment Date, by acceleration or otherwise). The
rate of interest on the Senior Subordinated Notes shall be equal to the sum of
the Senior Subordinated Interest Rate plus the Deferred Additional Interest Rate
(interest payable on the Senior Subordinated Notes at the Deferred Additional
Interest Rate, "Deferred Additional Interest"), and shall be payable (except for
Deferred Additional Interest, which shall be accrued and added to the unpaid
portion of the principal amount of the related Deferred Additional Interest
Notes, as provided in Section 1.1(c)) quarterly in arrears on the 31st day of
each July, October and January and the 30th day of each April in each year (or
the next succeeding Business Day if such date is not a Business Day), commencing
October 31, 1996 (or the next succeeding Business Day if such date is not a
Business Day) (each an "Interest Payment Date"). Interest on the Senior
Subordinated Notes shall be payable to the persons in whose names the Senior
Subordinated Notes are registered five days prior to any such Interest Payment
Date, until and including July 31, 2001 (unless the principal amount thereof has
been prepaid in its entirety earlier in accordance herewith) and shall bear
interest on overdue principal, on any overdue amounts arising out of a required
or optional prepayment of principal and (to the extent not prohibited by
applicable law) on any overdue installment of interest at the Overdue Rate after
the date on which such amounts are due and payable, whether by acceleration or
otherwise, until paid. The principal amount of the Senior Subordinated Notes
shall be repaid in accordance with Section 1.2(a).
(c) The Company shall, on each Interest Payment Date prior to the exchange
of the Deferred Additional Interest Note issued in connection with such Senior
Subordinated Note in its entirety for Equity Interests, in lieu of paying the
Deferred Additional Interest, add such Deferred Additional Interest otherwise
payable on such related Senior Subordinated Note on such Interest Payment Dates
to the principal balance of such related Deferred Additional Interest Note
(which such amount shall be treated as principal for all purposes thereafter).
After such an exchange, the Deferred Additional Interest Rate shall no longer be
payable on such Senior Subordinated Note and such Senior Subordinated Note shall
bear interest at only the Senior Subordinated Interest Rate. Notwithstanding
anything to the contrary contained in this Agreement or the Notes, upon a
partial exchange other than on an Interest Payment Date of any Deferred
Additional Interest Notes pursuant to Section 6.2, 6.3, 6.4 or 6.5, for purposes
of calculating the amount of Deferred Additional Interest to be added to the
principal amount of the New PAR Note, the New TAG Note, the New NQPO Note or (in
the case of Section 6.5) the unredeemed portion of the Deferred Additional
Interest Note on the Interest Payment Date immediately following the date of
such exchange, the exchange shall be deemed to have been effected on the
Interest Payment Date immediately preceding the date of such exchange.
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(d) The Deferred Additional Interest Notes shall be dated the date of
issue, shall bear interest on the unpaid portion of the principal amount thereof
(which principal amount shall include any Deferred Additional Interest added to
such principal amount pursuant to Section 1.1(c) and Deferred Additional
Interest Note Interest added to such principal amount pursuant to this Section
1.1(d)) from such date of issue (or from the date Deferred Additional Interest
Note Interest has been added to the principal balance of the Deferred Additional
Interest Notes (as provided below)) until the earlier of the Deferred Additional
Interest Note Repayment Date or the exchange of such Deferred Additional
Interest Notes for Equity Interests in their entirety pursuant to Section 6, at
the Deferred Additional Interest Rate quarterly in arrears on the Interest
Payment Dates, which interest, in lieu of being paid in cash, shall be added to
the principal balance of the Deferred Additional Interest Notes (which such
amount shall be treated as principal for all purposes thereafter) (such interest
when added to the principal balance of the Deferred Additional Interest Notes,
"Deferred Additional Interest Note Interest"). Deferred Additional Interest Note
Interest shall be due and payable on the Deferred Additional Interest Note
Repayment Date, if the Deferred Additional Interest Notes have not previously
been exchanged for Equity Interests in their entirety pursuant to Section 6, to
the person in whose name the Deferred Additional Interest Note is registered
five days prior to such Deferred Additional Interest Note Repayment Date, and
shall bear interest on overdue principal at the Overdue Rate after the date on
which such principal is due and payable, until paid. The principal amount of the
Deferred Additional Interest Notes shall be repaid in accordance with Section
1.2(b).
(e) The holder of a Deferred Additional Interest Note shall record each
addition to the principal thereof on Schedule I thereto, which such notation
shall be endorsed by the Company.
(f) The Senior Subordinated Notes shall be issuable in registered form
without interest coupons in minimum initial denominations of $100,000 and
integral multiples of $1,000 in excess of such amount and shall be substantially
in the form attached hereto as Exhibit A. The Deferred Additional Interest Notes
shall be issuable in registered form without interest coupons and without
initial denominations and shall be substantially in the form attached hereto as
Exhibit B. Interest on the Notes shall be computed on a 360-day year of twelve
30-day months. The Notes are subject to prepayment or redemption in advance of
the scheduled Senior Subordinated Note Repayment Date on the terms and
conditions and in the amounts and at the price set forth in Section 2 of this
Agreement.
1.2 Repayment of Principal.
(a) The entire principal amount of each Senior Subordinated Note shall be
repaid to each holder of Senior Subordinated Notes, together with any accrued
but unpaid interest thereon, on July 31, 2001 (the "Senior Subordinated Note
Repayment Date").
(b) Payments of principal on the Deferred Additional Interest Notes
(including all Deferred Additional Interest and Deferred Additional Interest
Note Interest added to such principal) shall be repaid to each holder of
Deferred Additional Interest Notes, together with
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any accrued but unpaid interest thereon, on July 31, 2006 (the "Deferred
Additional Interest Note Repayment Date" and, together with the Senior
Subordinated Note Repayment Date, the "Repayment Dates"); provided, that if the
Deferred Additional Interest Notes have previously been exchanged in their
entirety for Equity Interests pursuant to Section 6, no such payments shall be
made. The Company shall give written notice to the holders of Deferred
Additional Interest Notes (as such notice is described in Section 12.8) not less
than thirty (30) days nor more than sixty (60) days before the Deferred
Additional Interest Note Repayment Date, which notice shall state (a) such date,
(b) the amount of principal of such Deferred Additional Interest Notes which
such holder shall receive on such date and (c) the aggregate principal amount of
the Deferred Additional Interest Notes held by such holder and the total
principal amount of all Deferred Additional Interest Notes outstanding (in each
case as of the date of such notice).
1.3 Commitment, Closing Date.
(a) Subject to the terms and conditions hereof and on the basis of the
representations and warranties hereinafter set forth, the Company agrees to
issue and sell to you, and you agree to purchase from the Company, on the
Closing Date hereinafter mentioned, Senior Subordinated Notes and Deferred
Additional Interest Notes in the aggregate principal amounts set forth below
your name in Schedule I, at a price of 100% of the principal amount of such
Senior Subordinated Notes.
(b) Delivery of the Notes shall be made at the offices of Cleary, Gottlieb,
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, against payment
therefor in U.S. Federal or other funds currently and immediately available to
the account of the Company at First Union National Bank, Charlotte, N.C., ABA
#▇▇▇▇▇▇▇▇▇, A/C #2000000717537 (transmitted via wire transfer in accordance with
a letter of instructions to be delivered to you at least one (1) Business Day
prior to the Closing Date), in the amount of the purchase price prior to 5:00
p.m., New York City time, on August 9, 1996 or such date as shall be mutually
agreed upon by the Company and you (the "Closing Date"). The Notes delivered to
you on the Closing Date shall be delivered to you in the form of a Senior
Subordinated Note or Notes and Deferred Additional Interest Note or Notes for
the full amount of your purchase (as you have specified in Schedule I), without
interest coupons and registered in your name or in the name of such nominee (for
your benefit) as you have specified in Schedule I.
1.4 Other Agreements. Simultaneously with the execution and delivery of
this Agreement, the Company is entering into similar agreements with the other
Purchasers under which such other Purchasers agree to purchase from the Company
Senior Subordinated Notes and Deferred Additional Interest Notes, in the
aggregate principal amount(s) set forth below such Purchasers' names in Schedule
I (this Agreement and such other agreements collectively, the "Note Purchase
Agreements"). The obligations of each Purchaser shall be several and not joint,
and no Purchaser shall be liable or responsible for the acts of any other
Purchaser.
1.5 Paying and Exchange Agents1.5 Paying and Exchange Agents. The Company
may appoint an office or agency where Notes may be presented or surrendered for
payment, where Notes may be
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surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Notes may be served (the
"Paying Agent"), and the Company may appoint an office or agency where Deferred
Additional Interest Notes may be surrendered in exchange for Equity Interests
(the "Exchange Agent"). If the Company does not appoint a Paying Agent or
Exchange Agent, then the Company shall act as Paying Agent or Exchange Agent, as
the case may be, at its principal executive office located at ▇▇▇ ▇▇ ▇▇▇▇ ▇▇.,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇. If the Company does appoint a Paying Agent or
Exchange Agent, each such office or agency shall be a state or national bank or
trust company organized under the laws of the United States of America or any
state thereof or the District of Columbia and having capital, surplus and
undivided profits aggregating at least $50,000,000, and shall maintain the
appointed office or agency in the Borough of Manhattan, the City of New York,
New York (or such other major U.S. financial center as shall be agreed by the
Company and, with respect to the Paying Agent, the holders of at least a
majority in the then outstanding principal amount of the Notes and, with respect
to the Exchange Agent, the holders of at least a majority in the then
outstanding principal amount of the Deferred Additional Interest Notes).
The Company may also from time to time designate one or more other offices
or agencies meeting the criteria set forth above where the Notes may be
presented or surrendered for any or all of the foregoing purposes and may from
time to time rescind such designations; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligations set forth in this Section 1.5. The Company shall give prompt written
notice to each holder of the Notes (in the manner provided for in Section 12.8)
of any such designation or rescission and of any change in the location of any
such other office or agency.
1.6 Restrictions on Transfer.
(a) The Deferred Interest Notes shall not be transferable apart from the
related Senior Subordinated Notes and vice versa; provided, however, that a
Deferred Additional Interest Note shall be transferable if the Senior
Subordinated Note issued in connection therewith is no longer outstanding and
vice versa. The Purchasers agree not to sell or transfer the Notes to a Third
Party Investor prior to the first anniversary of the Closing Date. As of and
after such anniversary and subject to Section 1.6(b), a Purchaser or Purchasers
may transfer Notes to a Third Party Investor reasonably acceptable to the
Company; provided, however, that the Notes may be transferred only in amounts
greater than 50% of the aggregate original principal balance of all the Notes,
or equal to 100% of the aggregate outstanding principal balance of the Notes
issued to any Purchaser; and provided, further, that no such transfer of Notes
by means of an interdealer quotation system that regularly disseminates firm buy
or sell quotations by identified brokers or dealers by electronic means or
otherwise shall be permitted if such transfer would result in the creation of a
"publicly traded partnership", as defined in Section 7704 of the Code.
(b) Prior to proposing to sell or transfer Notes to a Third Party Investor,
a holder of Notes shall first offer such Notes to the Company in accordance with
the following provisions:
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(i) The holder shall deliver written notice (the "Offer Notice") to
the Company stating (A) its bona fide intention to offer to sell or transfer
such Notes to a Third Party Investor, (B) the aggregate principal amount of each
Note to be offered, (C) the proposed price and other proposed terms and
conditions on which each Note is to be offered and (D) all information which it
proposes to distribute to the offeree(s) of such Notes. Within 30 days after the
mailing of the Offer Notice, the Company may elect to bid for such Notes at a
price determined by the Company (such price, the "Company Bid Price") by
providing such bid in writing to the holder of such Notes.
(ii) If the Company elects to bid for such Notes and the Company Bid
Price is at least equal to the proposed price set forth in the Offer Notice and
the other material terms and conditions of the Company's bid are at least as
favorable to such holder as those in the Offer Notice, such holder shall be
bound to sell such Notes to the Company at such price and terms.
(iii) If the Company elects to bid at a Company Bid Price lower than
the proposed price set forth in the Offer Notice or the other material terms and
conditions of the Company's bid are not at least as favorable to such holder as
those in the Offer Notice, the holder may accept such bid and sell such Notes to
the Company at the Company Bid Price or, for a period of 60 days after receipt
by the holder of the Company's bid, solicit bids from Third Party Investors to
purchase such Notes. If the holder receives bid(s) from one or more Third Party
Investors, the holder shall provide written notice to the Company of the prices
offered in such bid(s) no later than five days after such 60th day. The Company
shall then have the right (unless prohibited by applicable Laws), by providing
written notice to the holder no later than ten days after such 60th day, to
purchase such Notes from the holder (A) at the Company Bid Price, if no bid
price by a Third Party Investor is higher than the Company Bid Price, or (B) at
a price equal to 110% of the highest Third Party Investor bid price, if such
Third Party Investor bid price is higher than the Company Bid Price.
(c) If a Third Party Investor proposes to purchase any Notes from a holder
of Notes (outside of a bidding process conducted under Section 1.6(b)(iii)),
such holder of Notes shall, promptly upon receipt of any such proposal, notify
the Company thereof. If such holder intends to sell or transfer its Notes to
such Third Party Investor, such holder shall, promptly after making its decision
to sell its Notes to such Third Party Investor and in any event prior to
consummating a sale or transfer of such Notes to such Third Party Investor,
offer to sell or transfer such Notes to the Company in accordance with the
following provisions:
(i) The holder shall deliver written notice (the "Sale Notice") to the
Company stating (A) its bona fide intention to sell or transfer such Notes to
such Third Party Investor, (B) the aggregate principal amount of each Note to be
sold or transferred, (C) the price for which and other material terms and
conditions upon which it proposes to sell or transfer such Notes, (D) all
information such holder has provided to the Third Party Investor and (E) the
identity of the Third Party Investor, and shall attach to such notice copies of
any written proposal for such sale or transfer (whether such proposal was
prepared by the holder or the Third Party Investor).
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(ii) The Company shall then have the right (unless prohibited by
applicable Laws), by providing written notice to the holder no later than ten
(10) Business Days after receiving such Sale Notice, to elect to purchase such
Notes from the holder at the price for which and in accordance with the other
material terms and conditions upon which the holder proposed to sell or transfer
such Notes to such Third Party Investor. Failure of the Company to give notice
of election of purchase within the required period shall be deemed a waiver of
the Company's right to elect to purchase such Notes with respect only to the
sale or transfer in question.
SECTION 2. PREPAYMENT AND REDEMPTION OF NOTES
No prepayment or redemption of the Notes may be made except to the extent
and in the manner expressly provided in this Section 2.
2.1 Prepayment at the Election of the Company.
(a) The Company may prepay the Senior Subordinated Notes at any time on or
after the earlier to occur of (i) August 9, 1999 and (ii) a Sale Event, in each
case at the option of the Company exercised by written notice to each holder in
accordance with Section 2.4, in whole or from time to time in part in a minimum
amount of $100,000 and in integral multiples of $1,000 in excess of such amount,
by payment of the Prepayment Call Price to each holder of the Senior
Subordinated Notes.
(b) The Deferred Additional Interest Notes may not be prepaid at the
election of the Company at any time.
2.2 Prepayment Following the Occurrence of a Change in Control Event.
(a) Upon the occurrence of a Change in Control Event, the Company shall
prepay such of the Notes or portion of the Notes as the holders thereof shall
have elected prepayment with respect thereto pursuant to this Section 2.2, by
payment of the Change in Control Event Prepayment Price on, subject to the last
sentence of this Section 2.2, the related Change in Control Event Prepayment
Date.
(b) Not later than three (3) Business Days following the date on which the
Company obtains knowledge of the occurrence of a Change in Control Event, the
Company shall give written notice (a "Change in Control Event Notice") by
facsimile or other same-day written communication to all holders of Notes
stating (a) a brief description of the Change in Control Event and of the
prepayment right pursuant to this Section 2.2, (b) the first and last days of
the Change in Control Event Prepayment Period related to the Change in Control
Event, and (c) that the prepayment right may be exercised as to all (or a
portion of) a holder's Notes.
(c) To elect prepayment with respect to any Change in Control Event, the
holder of any Note to be prepaid in whole or in part must give, not less than
ten (10) Business Days after receipt of the Change in Control Event Notice (or
such earlier date as the holders of at
7
least a majority in the then outstanding principal amount of the Notes give
written notice to the Company that a Change in Control Event has occurred),
written notice to the Company stating that the holder elects to have the Company
prepay such Note in whole or in part. If less than all holders of the Notes
elect prepayment or if any holder elects prepayment of its Notes only in part,
the Company shall, three (3) Business Days after such tenth Business Day, give
same-day written notice thereof to all holders electing partial prepayment of
their Notes, in which event such other holders may then elect full prepayment of
their Notes by giving written notice to the Company not more than five (5)
Business Days after the date of such additional notice, stating that such holder
elects to have the Company prepay such Note in whole. Failure of a holder to
give notice of election of prepayment within the required notice period shall be
deemed a waiver of such holder's right to elect prepayment with respect only to
the Change in Control Event in question. On the Change in Control Event
Prepayment Date the aggregate amount of the Notes as to which the holders
thereof have elected prepayment shall become due and payable at the Change in
Control Event Prepayment Price; provided, however, that in the case of a Change
in Control Event described in clause (ii) of the definition thereof, such Notes
shall become due and payable, and the Company shall be obligated to pay the
Change in Control Prepayment Price, immediately preceding or simultaneously with
the consummation of the transaction that results in a Change in Control Event
pursuant to clause (i) of the definition thereof as contemplated in clause (ii)
of the definition thereof.
(d) For the sake of clarity, if an Automatic Exchange Event is also a
Change in Control Event, Deferred Additional Interest Notes shall not be prepaid
pursuant to Section 2.2, as they will automatically have been exchanged for
Equity Interests pursuant to Section 6.
2.3 Prepayment Following the Company's Receipt of a Put Notice.
(a) Upon the Company's receipt of a Put Notice, the Company shall prepay
the Senior Subordinated Notes and/or the Deferred Additional Interest Notes
pursuant to this Section 2.3, by payment of the Put Event Prepayment Price
immediately preceding any redemption of or any distribution on IronBrand's
Equity Interests.
(b) Not later than two (2) Business Days after the date on which the
Company receives a Put Notice (but in no event not less than two (2) Business
Days before the Company redeems or makes distributions in connection with such
Put Notice on IronBrand's Equity Interests pursuant to Article XI of the
Partnership Agreement), the Company shall give written notice (a "Put Event
Notice") by facsimile or other same-day written communication to all holders of
Notes stating (i) a brief description of the Put Event (as defined in Section
11.5 of the Partnership Agreement) and of the prepayment right pursuant to this
Section 2.3, (ii) whether the Company has decided to redeem IronBrand's Equity
Interests pursuant to Section 11.3 of the Partnership Agreement or cause the
Company to effect a Sale Transaction (as defined in Section 11.6 of the
Partnership Agreement), which such decision shall be binding on the Company and
irrevocable at the time provided in Section 2.3(d) and (iii) that the prepayment
right must be exercised as to all of a holder's Senior Subordinated Notes and/or
Deferred Additional Interest Notes but (A) that a holder's Senior Subordinated
Notes or Deferred Additional Interest Notes will not be so prepaid unless
holders of at least a majority
8
of the then outstanding principal amount of the Senior Subordinated Notes or
Deferred Additional Interest Notes, as the case may be, elect such prepayment
and (B) that if such holder does not elect such prepayment, such holder's Senior
Subordinated Notes or Deferred Additional Interest Notes will in any event be so
prepaid if a majority of the then outstanding principal amount of the Senior
Subordinated Notes or Deferred Additional Interest Notes, as the case may be,
elects such prepayment.
(c) (i) To elect prepayment with respect to any Put Event, a holder of
Notes must give, not later than two (2) Business Days after receipt of the Put
Event Notice, written notice to the Company stating that the holder elects to
have the Company prepay all Senior Subordinated and/or Deferred Additional
Interest Notes held by such holder.
(ii) If the holders of at least a majority of the then outstanding
principal amount of the Senior Subordinated Notes or of at least a majority of
the then outstanding principal amount of the Deferred Additional Interest Notes
elect prepayment, all outstanding Senior Subordinated Notes or outstanding
Deferred Additional Interest Notes, as the case may be, shall be prepaid in
accordance with the provisions of this Section 2.3 and the Company shall, within
two (2) Business Days after such second Business Day, give same-day written
notice thereof to all holders of such class of Notes that such Notes shall be so
prepaid.
(iii) If the holders of less than a majority in the then outstanding
principal amount of the Senior Subordinated Notes or less than a majority in the
then outstanding principal amount of the Deferred Additional Interest Notes
elect prepayment, the Company shall, two (2) Business Days after such second
Business Day, give same-day written notice thereof to all holders of such class
of Notes that no such Notes shall be prepaid unless at least such a majority
elects prepayment, in which event such holders not previously electing to have
such Notes prepaid may elect prepayment of their Notes by giving written notice
to the Company not more than two (2) Business Days after the date of such
additional notice, stating that such holder elects to have the Company prepay
all of such holder's Notes. If, after such two (2) Business Days, the holders of
at least a majority in the then outstanding principal amount of the Senior
Subordinated Notes or at least a majority in the then outstanding principal
amount of the Deferred Additional Interest Notes elect prepayment, all
outstanding Senior Subordinated Notes or outstanding Deferred Additional
Interest Notes, as the case may be, shall be prepaid in accordance with the
provisions of this Section 2.3.
(d) If after providing a Put Event Notice and prior to at least the fifth
Business Day preceding any redemption of or distribution on IronBrand's Equity
Interests pursuant to Article XI of the Partnership Agreement, the Company
changes its decision referred to in Section 2.3(b)(ii) (which such decision may
only be changed prior to such fifth day), the Company shall provide same-day
facsimile or other written notice to the holders of all Notes and any holder
may, notwithstanding any other provision of this Section 2.3, change its
decision as to whether to elect prepayment of its Notes by providing same-day
facsimile or other written notice to the Company. After such fifth Business Day,
all of the Senior Subordinated Notes and all of the Deferred Additional Interest
Notes shall be redeemed if the holders of at least a majority of the then
outstanding principal amount of such class of Notes
9
has ultimately elected prepayment of such Notes or shall not be redeemed if the
holders of at least a majority of the then outstanding principal amount of such
class of Notes has ultimately not elected prepayment of such Notes. Subject to
the preceding provisions of this Section 2.3(d), the failure of a holder to give
notice of election of prepayment within the required notice period shall be
deemed a waiver of such holder's right to elect prepayment with respect to the
Company's receipt of a Put Notice. Immediately preceding any redemption of or
distribution on IronBrand's Equity Interests pursuant to Article XI of the
Partnership Agreement, the aggregate amount of the Notes as to which the holders
thereof have elected prepayment shall become due and payable at the Put Event
Prepayment Price.
The Company hereby agrees not to redeem IronBrand's Equity Interests
pursuant to Section 11.3 of the Partnership Agreement and not to distribute to
any Persons owning Equity Interests in the Company the net consideration
received by the Company in connection with any Sale Transaction until the end of
the notice process in this Section 2.3 and until the Company has paid in full
the Put Event Prepayment Price to each holder of Notes electing prepayment
pursuant to this Section 2.3, subject to Section 5.28 in respect of any Equity
Interests issued to any holder in exchange for any Deferred Additional Interest
Notes being redeemed pursuant to Section 5.28 in connection herewith.
2.4 Notice of Prepayments. The Company shall give written notice (as such
notice is described in Section 12.8) of any prepayment of the Notes at the
option of the Company pursuant to Section 2.1 or 5.7(b), as the case may be, to
each holder thereof, not less than thirty (30) days nor more than sixty (60)
days before the date fixed for such optional prepayment, specifying (a) such
date (referred to herein as a "Prepayment Date"), (b) the principal amount of
the holder's Notes to be prepaid on such date, (c) the Prepayment Call Price and
(d) the place or places where such Notes are to be surrendered for payment of
the Prepayment Call Price. Notice of prepayment having been so given, the
Prepayment Call Price specified in such notice thereon shall become due and
payable on the Prepayment Date.
2.5 Allocation of Prepayments. Any prepayments of Senior Subordinated Notes
in part pursuant to Sections 2.1 or 5.7(b), as the case may be, shall be applied
on all outstanding Senior Subordinated Notes ratably in accordance with the
unpaid principal amounts thereof, determined as of the date notice is given to
the holders of the Notes pursuant to Section 2.4.
2.6 Notes Prepaid in Part. Any Note which is to be prepaid only in part
shall be surrendered at an office or agency of the Company maintained for that
purpose pursuant to Section 1.5 (with, if the Company so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company duly executed by the holder thereof or his attorney duly authorized in
writing), and the Company shall execute and deliver to the holder of such Note
without service charge, a new Note or Notes, of any denomination requested by
such holder, in an aggregate principal amount equal to and in exchange for the
portion of the principal of the Note so surrendered which has not been prepaid.
10
2.7 Direct Payment. Notwithstanding anything to the contrary in Section 1.5
or Section 12.2 or in the Notes, in the case of any Note owned by a Purchaser or
its nominee or owned by any other holder of the Notes who has given written
notice to the Company requesting that the provisions of this Section 2.7 shall
apply, the Company shall promptly and punctually pay or cause any Paying Agent
to pay, when due, the principal thereof, interest thereon, or Prepayment Call
Price or Change in Control Event Prepayment Price with respect thereto, if any,
without any presentment thereof, directly to such Purchaser or such subsequent
holder at the address of such Purchaser set forth in Schedule I or at such other
address as such Purchaser or such subsequent holder may from time to time
designate in writing to the Company or, if a bank account is designated for such
Purchaser on Schedule I hereto or in any written notice to the Company from such
Purchaser or any such subsequent holder, the Company shall make such payments in
current and immediately available funds which at the time of payment shall be
legal tender in the United States of America for the payment of public and
private debts to such bank account, marked for attention as indicated, or in
such other manner or to such other account of such Purchaser or such holder in
any bank in the United States as the Purchaser or any such holder may from time
to time direct in writing; provided, however, that any Note paid or prepaid in
full shall promptly be surrendered to the Company at its principal executive
office at ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or, if
applicable, at the office or agency maintained pursuant to Section 1.5, upon
such payment or prepayment. The holder of any Notes to which this Section 2.7
applies agrees that it shall make a notation thereon of all principal, if any,
prepaid in part on such Notes and shall also note thereon the date to which
interest has been paid on such Notes and that if requested by the Company or any
Paying Agent, shall verify to the Company and any Paying Agent such notations on
the Notes by the delivery in the manner contemplated by Section 12.8 of a
photocopy of such notations as they appear on the Notes. With respect to Notes
to which this Section 2.7 applies, the Company shall be entitled to presume
conclusively for all purposes hereunder that the Purchaser or such subsequent
holder as shall have requested the provisions hereof to apply to its Notes
remains the holder of such Notes until (a) the Company shall have received from
the transferor written notice of the transfer of such Notes, and of the name and
address of the transferee, or (b) such Notes shall have been presented to the
Company as evidence of the transfer.
SECTION 3. REPRESENTATIONS
3.1 Representations of the Company. The Company represents and warrants
that as of the date hereof:
(a) (i) The Company and each Subsidiary (other than the Trusts) (A) are
limited partnerships duly organized and validly existing under the Laws of the
respective jurisdictions of their organization, (B) are not in liquidation, (C)
have the requisite partnership powers and governmental licenses, authorizations,
consents and approvals required to own or lease or operate their properties and
to carry on their business as now conducted and as presently proposed to be
conducted, except where the failure to have obtained such licenses,
authorizations, consents or approvals would not have a Material Adverse Effect,
and (D) have been duly qualified to conduct business in each jurisdiction where
required by the conduct of
11
their business or their ownership of properties, except where the failure to be
so qualified would not have a Material Adverse Effect.
(ii) The Trusts (A) are trusts validly existing under applicable Laws,
(B) are not in liquidation, (C) have the requisite trust powers and governmental
licenses, authorizations, consents and approvals required to own or lease or
operate their properties and to carry on their business as now conducted and as
presently proposed to be conducted, except where the failure to have obtained
such licenses, authorizations, consents or approvals would not have a Material
Adverse Effect, and (D) have been duly qualified to conduct business in each
jurisdiction where required by the conduct of their business or their ownership
of properties, except where the failure to be so qualified would not have a
Material Adverse Effect.
(b) (i) The Company and each Subsidiary (other than the Trusts) have good
and valid title in fee simple to all real property and good and valid title to
all personal property owned by them, in each case free and clear of all Liens
and defects, except for Permissible Liens and such individual Liens as do not
secure Indebtedness in excess of $100,000, and any real property and buildings
held under lease by the Company and each Subsidiary are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material to the Company and its Subsidiaries taken as a whole. The aggregate
amount of Indebtedness of the Company and its Subsidiaries taken as a whole that
is secured by Liens does not exceed $1,000,000.
(ii) The Trusts have good and valid title to all property owned by
them, in each case free and clear of all Liens and defects, except for Liens
securing debt incurred in connection with securitizations of assets, which such
securitizations were in the ordinary course of business.
(c) The execution, delivery and performance of this Agreement, the Notes
and the Registration Rights Agreement, the exchange of the Deferred Additional
Interest Notes for Equity Interests as provided herein and in the Deferred
Additional Interest Notes and the issuance of such Equity Interests, and the
consummation of the transactions contemplated hereby and thereby are within the
powers of the Company and have been duly authorized by all necessary partnership
action on the part of the Company. On the Closing Date, this Agreement, the
Notes and the Registration Rights Agreement will be valid and legally binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, subject as to enforcement only to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of
general applicability relating to or affecting creditors' rights generally and
to general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(d) The Audited Financial Statements and the unaudited consolidated
financial statements of the Group for the six-month period ended June 30, 1996,
have been prepared in accordance with generally accepted accounting principles
and practices applied on a consistent basis and fairly present the financial
condition and the results of operations of the Group at and
12
for the periods covered thereby. Since December 31, 1995, there has not been any
material adverse change in the business, condition (financial or otherwise),
operations, liabilities, assets or prospects of the Company or of the Group.
(e) The Company and each of its Subsidiaries (other than the Trusts) have
filed all tax returns or extensions and all information or similar reports
required by law to have been filed by them and have paid all taxes and other
governmental charges which they are required to have paid, other than taxes and
governmental charges the amount of which is being contested in good faith and by
appropriate proceedings and for which appropriate reserves have been taken in
accordance with generally accepted accounting principles.
(f) The Company has taken all action within its powers that is necessary to
reserve a sufficient number of Equity Interests for issuance upon exchange of
the Deferred Additional Interest Notes in accordance with the terms of such
Notes and this Agreement. The Company has taken all action within its powers
that is necessary as of the date hereof to duly and validly authorize the
issuance of such Equity Interests upon such exchange in accordance with all
applicable Laws and the Company's organizational documents. The Equity Interests
initially issuable upon exchange of the Deferred Additional Interest Notes, when
issued and delivered upon exchange of the Deferred Additional Interest Notes in
accordance with the provisions of the Deferred Additional Interest Notes and
this Agreement, will be validly issued, fully paid and nonassessable, and the
issuance of such Equity Interests upon such exchange is not subject to
preemptive or similar rights.
(g) None of the issuance and sale of the Notes, the execution, delivery or
performance of this Agreement by the Company, or the consummation by the Company
of the transactions contemplated hereby or thereby (i) requires any consent,
approval, authorization or other order of or registration or filing with, any
Governmental Authority (except for such consent, approval, authorization or
other order, registration or filing (A) that has been obtained or made, as the
case may be, on or prior to the Closing Date, or (B) that may be required in
connection with future registered offerings pursuant to the Registration Rights
Agreement or (C) that may be required under any federal or state securities law
in connection with the issuance of Equity Interests upon the exchange of the
Deferred Additional Interest Notes), (ii) conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, (A) the
certificate of limited partnership or partnership agreement, or other
organizational documents, of the Company or any of its Subsidiaries, or (B)
except for any such conflict, breach or default in respect of which a consent
has been obtained on or prior to the Closing Date, any agreement, indenture,
lease or other instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any of their
properties may be bound, (iii) violates or will violate any existing Law
applicable to the Company or any of its Subsidiaries or any of their properties,
or (iv) results or will result in the creation or imposition of any Lien, upon
any property or assets of the Company or any of its Subsidiaries pursuant to the
terms of any agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries may
be bound or to which any of their property or assets is subject except, in the
case of clauses (ii)(B), (iii) and (iv), for conflicts, violations, breaches or
defaults which individually and in
13
the aggregate would neither hinder or impair the transactions contemplated
hereby nor have a Material Adverse Effect.
(h) Neither the Company nor any Subsidiary is in violation of its
certificate of limited partnership or partnership agreement, or other
organizational documents, or in violation in any material respect of any Laws
applicable to it. There are no legal or governmental proceedings pending or, to
the knowledge of the Company, threatened, against the Company, any of its
Subsidiaries or any officer thereof, or to which the Company or any of its
Subsidiaries or any of its or their properties is subject, that if adversely
determined, would have a Material Adverse Effect.
(i) Neither the Confidential Private Placement Memorandum dated May 1, 1996
(the "Private Placement Memorandum"), including any Exhibits thereto, as amended
or supplemented to the date hereof, nor any other written material provided by
or on behalf of the Company to the Purchasers, its auditors, attorneys,
employees, agents or any other representatives on or prior to the Closing Date,
contained as of its date or contains as of the date hereof any untrue statement
of a material fact or omitted as of its date or omits as of the date hereof to
state a material fact necessary in order to make the statements made therein, in
the light of the circumstances in which they were made, not misleading.
(j) Neither the Company nor anyone acting on its behalf has offered the
Notes or any similar securities to, or solicited any offer to purchase the same
from, or otherwise approached or negotiated in respect thereof with, any Person,
or has taken any other action, which in all cases mentioned above would require
the registration of the Notes under Section 5 of the Securities Act or under the
registration and qualification provisions of any securities or "blue sky" law of
any applicable jurisdiction. The Notes satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act.
(k) The Company is not, and is not directly or indirectly controlled by or
acting on behalf of any person which is, required to register as an "investment
company" under the Investment Company Act of 1940, as amended.
(l) Neither the Company nor any of its Subsidiaries has any contingent
liabilities, including without limitation any Contingent Liabilities and
liabilities under contracts of the type referred to in Section 3.1(r), that
would be material to the Company or to the Company and any of its Subsidiaries
on a consolidated basis and are not disclosed in the financial statements
described in Section 3.1(d).
(m) The Company and its Subsidiaries are and have been in compliance with
all applicable Laws (including, without limitation, Environmental Laws) in
respect of the operation of all properties (including, without limitation,
leased or owned facilities) by the Company and its Subsidiaries and the conduct
of its and their business.
(n) There is no Environmental Condition in respect of the Company and its
Subsidiaries.
14
(o) (i) Assuming the accuracy of the representation set forth in Section
3.2(b), the execution and delivery of this Agreement and the issue and purchase
of the Notes hereunder will not, as of the date hereof, involve any transaction
that is prohibited under Section 406(a) of ERISA or which is a "prohibited
transaction" as defined in Section 4975(c)(1) of the Code, in either case for
which a statutory or administrative exemption is not available.
(ii) Neither the Company nor any Subsidiary maintains, contributes to
or has liability (contingent or otherwise) with respect to any Plan or
Multiemployer Plan.
(iii) Neither the Company nor any Subsidiary has any ERISA Affiliates
(other than the Company, its Subsidiaries and National Auto Finance
Corporation).
(iv) Each employee benefit plan (within the meaning of Section 3(3) of
ERISA) maintained by the Company or any of its Subsidiaries complies in all
material respects with the currently applicable provisions of the Code and
ERISA, and the Company and each of its Subsidiaries has timely made all
contributions and other payments required to be made by such Persons to each
such employee benefit plan.
(v) Neither the Company, any of its Subsidiaries nor any employee
benefit plan maintained by any such Person provides post-employment medical or
life insurance benefits that are not accrued as liabilities on the books of the
Company or any of its Subsidiaries in accordance with generally accepted
accounting principles.
(vi) No Person or employee benefit plan maintained by the Company or
any of its Subsidiaries has engaged in a transaction that could, directly or
indirectly, result in any material liability of the Company or any Subsidiary,
individually or taken as a whole, under ERISA (including without limitation
Sections 409, 502(i) and 502(1) thereof) or Section 4975 of the Code or pursuant
to any statute or agreement under which the Company or any of its Subsidiaries
has agreed to indemnify or is required to indemnify any Person against liability
incurred under, or for a violation or failure to satisfy the requirements of,
ERISA or Section 4975 of the Code, as the case may be.
(p) Other than ACCH and the Trusts, the Company has no Subsidiaries,
corporate or otherwise and does not own, directly or through any Subsidiary, any
interest in any partnership, joint venture or other entity.
(q) Set forth in Schedule 3.1(q) of the Disclosure Letter is a list of all
agreements, contracts, commitments, leases and other instruments, documents and
undertakings material to the business or assets of the Company or any of its
Subsidiaries (collectively, the "Contracts"). Each of the Contracts is valid and
enforceable in accordance with its terms except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other similar Laws affecting creditors' rights generally and by
general principles of equity (regardless of whether enforceability is considered
in a proceeding in equity or at law). Neither the Company nor any of its
Subsidiaries is, and to the Company's and all of its Subsidiaries' knowledge no
other party thereto is, in default in the performance,
15
observance or fulfillment of any material obligation, covenant or condition
contained in any such Contract, and no event has occurred which with or without
the giving of notice or lapse of time, or both, would constitute a material
default thereunder. Furthermore, no such Contract, in the reasonable opinion of
the Company and its Subsidiaries, contains any material contractual requirement
with which there is a reasonable likelihood the Company or any of its
Subsidiaries will be unable to comply.
(r) Except for the Amended and Restated Services Agreement between the
Company and World Omni Financial Corp. dated as of December 5, 1994, a copy of
which has been provided to the Purchasers, neither the Company nor any of its
Subsidiaries has entered into, is a party to, or has any obligations under, any
material contract for the purchase of materials, supplies or other property or
services, if such contract requires that payment be made by it regardless of
whether or not delivery is ever made of such materials, supplies or other
property or services.
(s) All of the Company's transactions and relationships with its
Subsidiaries and the Company's and its Subsidiaries' transactions and
relationships with Affiliates are on fair and reasonable terms comparable to
those that would be obtained in an arm's-length transaction between unrelated
third parties and have been disclosed to the Purchasers, it being understood
that the transactions and relationships set forth in Schedule 3.1(s) to the
Disclosure Letter shall be considered fair and on reasonable terms comparable to
those that would be obtained in an arm's length transaction between unrelated
third parties.
(t) Except for a fee payable to First Union Capital Markets Corporation as
placement agent (the "Placement Agent") in connection with the issuance and sale
of the Notes, no broker's or finder's fee or commission will be payable by the
Company or any of its Subsidiaries with respect to the issuance and sale of the
Notes or the transactions contemplated hereby. The Company shall hold the
holders of the Notes harmless from any claim, demand or liability for any such
broker's or finder's fees or commission alleged to have been incurred by,
through or on behalf of the Company in connection herewith.
(u) From the date of the formation of the Company and each Subsidiary
through the Closing Date, there have been no strikes or other labor disputes or
grievances against the Company or any of its Subsidiaries which have had, either
in any case or in the aggregate, a Material Adverse Effect. Neither the Company
nor any Subsidiary has ever been subject to the provisions of any collective
bargaining agreement.
(v) No Default or Event of Default has occurred and is continuing on the
date hereof. Neither the Company nor any Subsidiary is in default in the payment
of principal or interest on any Indebtedness and is not otherwise in default
under any instrument or instruments or agreements under and subject to which any
Indebtedness has been incurred. No event has occurred and is continuing under
the provisions of any such instrument or agreement that with the passage of time
or the giving of notice, or both, would constitute an event of default
thereunder.
16
(w) Except as set forth in the Partnership Agreement, neither the Company
nor any Subsidiary has entered into or agreed to any side letter or similar
arrangement or other agreement with any holder or prospective holder of any
securities of the Company or any of its Subsidiaries providing for registration
rights with respect to the securities of the Company or any of its Subsidiaries
that confers rights or benefits more favorable than the rights and benefits to
be conferred upon the holders of the Registrable Securities under the
Registration Rights Agreement.
(x) The Company and its Subsidiaries own, possess or have the right to use
(as such use is described in the Private Placement Memorandum) all patents,
trademarks, trademark registrations, service marks, service ▇▇▇▇ registrations,
trade names, copyrights, licenses, inventions, trade secrets and similar rights
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures, trademarks, service marks and
tradenames) which are described in the Private Placement Memorandum as being
owned, possessed or used (as so described) by them or which are reasonably
necessary for the conduct of their business, and neither the Company nor any of
its Subsidiaries is aware of any infringing uses that would have a Material
Adverse Effect.
(y) Exhibit C sets forth the number and type of all existing Equity
Interests and the holders thereof.
(z) Except for the Partnership Agreement, there are no existing agreements,
options, commitments or rights with, of or to any third party to acquire any of
the Company's or any of its Subsidiaries' assets (other than any of the Trusts'
assets), except for those arising in the ordinary course of business and those
not material to the Company and its Subsidiaries taken as a whole.
3.2 Representations of the Purchasers.
(a) You represent and warrant to the Company, and in entering into this
Agreement the Company understands, that (i) you (or any investor or investors
for whom you are acting as a fiduciary or agent in purchasing the Notes) are an
"accredited investor" within the meaning of Rule 501(a) under the Securities
Act, (ii) you are acquiring the Notes for your own account (or for the account
of one or more investors for whom you are acting as a fiduciary or agent), for
investment purposes only and not with a view to distribution (as such term is
used under Section 2(11) of the Securities Act) thereof (provided, that the
disposition of your property shall at all times be and remain within your
control), and (iii) JPMIM retained no broker or finder in connection with the
issuance and sale of the Notes, no broker's or finder's fee or commission is
payable by JPMIM with respect to the issuance and sale of the Notes or the
transactions contemplated hereby and the holders of the Notes shall hold the
Company harmless from any claim, demand or liability for any such broker's or
finder's fees or commission alleged to have been incurred by, through or on
behalf of JPMIM in connection herewith. Without limiting the foregoing, you
acknowledge that the Notes and the Equity Interests issuable upon exchange of
the Deferred Additional Interest Notes have not and will not be registered under
the Securities Act and you agree that you shall only re-offer or resell
17
the Notes purchased by you under this Agreement and the Equity Interests
issuable upon exchange of Deferred Additional Interest Notes, (x) pursuant to an
effective registration statement under the Securities Act and applicable state
securities laws, (y) in compliance with the requirements of Rule 144 or
Regulation S promulgated under the Securities Act or (z) in accordance with any
other available exemption from the requirements of Section 5 of the Securities
Act and from any applicable state securities laws. Each Purchaser acknowledges
that upon issuance of the Notes, and until such time, if any, as the Company
shall agree that it is no longer necessary or advisable, the Notes shall bear
the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN AND WILL
NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND,
ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
RESOLD, PLEDGED, OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY
OTHER APPLICABLE SECURITIES LAWS, SUBJECT IN ANY SUCH CASE TO THE
RIGHT OF EACH HOLDER TO CONTROL THE DISPOSITION OF THE HOLDER'S
PROPERTY. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY PURSUANT TO SECTIONS 3.2(a) AND 12.2 OF THE NOTE
PURCHASE AGREEMENT DATED AS OF AUGUST 9, 1996 BETWEEN NATIONAL AUTO
FINANCE COMPANY L.P. (THE "COMPANY") AND THE PURCHASER LISTED ON THE
SIGNATURE PAGE THEREOF. A COMPLETE AND CORRECT CONFORMED COPY OF SUCH
NOTE PURCHASE AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
EXECUTIVE OFFICE OF THE COMPANY AND WILL BE FURNISHED TO THE HOLDER OF
THIS NOTE UPON WRITTEN REQUEST AND WITHOUT CHARGE."
If you are purchasing the Notes as fiduciary or agent for one or more investors,
you represent and warrant that you are acting in the capacity specified on the
signature page hereof.
(b) You further represent and warrant to the Company that, with respect to
each source of funds to be used by you to purchase Notes hereunder (each being
referred to as the "Source"), at least one of the following statements is now
and will be accurate as of the Closing Date:
(i) the Source is not the assets of any "plan" (as such term is
defined in Section 4975(e)(1) of the Code) subject to Section 4975 of the Code,
or any "employee benefit plan" (as such term is defined in Section 3(3) of
ERISA) subject to Section 406 of ERISA (each such plan and employee benefit
plan, being referred to as a "Benefit Plan") or otherwise out of "plan assets"
within the meaning of United States Department of Labor regulation Section
2510.3-101, 29 CFR Section 2510.3-101 or other applicable law;
18
(ii) the Source is the assets of a "governmental plan" (as such term
is defined in Section 3(32) of ERISA);
(iii) you are a bank and the Source is assets of a collective
investment fund as defined in Section IV(e) of Prohibited Transaction Class
Exemption ("PTCE") 91-38 and you have disclosed to the Company in writing (x)
the identity of each Benefit Plan whose assets in such collective investment
fund exceed or are expected to exceed 10% of the total assets of such collective
investment fund or (y) that no Benefit Plan has assets in such separate account
which exceed 10% of the total assets of such separate account as of the Closing
Date (for purposes of this clause (iii), all Benefit Plans maintained by the
same employer or employee organization are deemed to be a single plan);
(iv) the Source is assets of an "investment fund" managed by a
"qualified professional asset manager" or "QPAM" (as such terms are defined in
Part V of PTCE 84-14), and the conditions set forth in Sections I(c), (d), (e)
and (g) of PTCE 84-14 have been satisfied; or
(v) the Source is assets of a Benefit Plan or a separate account
comprised of Benefit Plans, which Benefit Plans have been identified in writing
to the Company pursuant to this clause (v).
(c) You further represent and warrant to the Company that, the execution
and delivery of this Agreement are within your powers and have been duly
authorized by all necessary action on your part and that, on the Closing Date,
this Agreement will be your valid and legally binding obligation enforceable
against you in accordance with its terms, subject as to enforcement only to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar Laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
SECTION 4. CLOSING CONDITIONS
4.1 Purchasers' Conditions. Your obligation to purchase the Notes on the
Closing Date shall be subject to the truth and accuracy of the representations
and warranties contained in Section 3.1 on and as of the Closing Date, to the
performance by the Company of its agreements hereunder which by the terms hereof
are to be performed at or prior to the time of delivery of the Notes and to the
following further conditions precedent:
(a) Company's Closing Certificate. Concurrently with the delivery of Notes
to you on the Closing Date, you shall have received a certificate signed by an
Executive Officer of the Company to the effect that the representations and
warranties of the Company contained in Sections 3.1 and 9.3 are true on and as
of the Closing Date, that no Default or Event of Default has occurred and is
continuing and that the Company has complied with the Note Purchase Agreement
and satisfied all the conditions on its part to be performed or satisfied at or
prior to the Closing Date.
19
(b) Legal Opinion. Concurrently with the delivery of Notes to you on the
Closing Date, you shall have received from counsel to the Company, certain
opinions, each dated the Closing Date, in the forms attached hereto as Exhibit
D.
(c) You shall have received the Company's Audited Financial Statements
together with the auditor's report thereon from KPMG Peat Marwick, and you shall
receive the Company's unaudited financial statements for the six-month period
ended June 30, 1996.
(d) Event of Default. No Default or Event of Default shall have occurred
and be continuing.
(e) Provision of Documents. You shall have received a copy (executed or
certified as may be appropriate) of all legal documents or proceedings taken in
connection with the consummation of the transactions contemplated by this
Agreement, and your counsel shall have received such documents as they
reasonably require, including, without limitation, (i) evidence of all necessary
action having been taken (including without limitation all necessary consents by
the holders of Equity Interests), in form and substance reasonably satisfactory
to them, authorizing the execution, delivery and performance of this Agreement
(including without limitation the authorization of the exchange of the Deferred
Additional Interest Notes for Equity Interests and the taking of all action
within the Company's powers that is necessary to reserve a sufficient number of
Equity Interests to be issued upon such exchange), the Registration Rights
Agreement, and the Notes and any other documents contemplated hereby, and (ii) a
certificate from an Executive Officer of the Company, as of the Closing Date,
(A) certifying the actions referred to in clause (i) and stating that such
actions thereby certified have not been amended, modified, revoked or rescinded
as of the date of such certificate, (B) attaching the certificate of limited
partnership and the limited partnership agreement of the Company and certifying
that each such document is a true and correct copy of such document as in effect
on the Closing Date and (C) certifying that each person who, as a representative
of the Company, signed any of the Note Purchase Agreements, Notes or
Registration Rights Agreement and any other instrument or certificate delivered
on the date thereof or prior thereto in connection with the sale of the Notes
was, at the respective time of such signing and delivery, and is as of the
Closing Date, duly appointed, qualified and acting as such representative and
the signatures appearing on such documents are their genuine signatures. Without
limiting the foregoing, (i) this Agreement shall have been executed by the
Company and delivered to you and (ii) the Registration Rights Agreement shall
have been executed by the Company and delivered to you.
(f) Legality. On the Closing Date (i) the Notes to be purchased by you
hereunder shall be a legal investment for you under the Laws of each
jurisdiction to which you may be subject, (ii) the purchase of and payment for
said Notes shall not violate any applicable Laws and shall not subject you to
any tax, penalty, liability or other onerous condition under or pursuant to any
applicable Laws (as to which the Company makes no representation), and (iii) you
shall have received such certificates or other evidence as you may reasonably
request demonstrating the legality of such purchase under such Laws.
20
(g) Fees. The Company shall have paid (subject to later adjustment to
reflect the actual amount) the estimate of reasonable legal fees and expenses
incurred by the Purchasers in connection with the sale and purchase of the
Notes; provided, that an estimate of such fees and expenses shall have been
submitted by the Purchasers to the Company at least one (1) Business Day prior
to closing.
(h) Waiver of Conditions. If on the Closing Date the Company fails to
tender to you the Notes to be sold to you on such date or if the conditions
specified in this Section 4 have not been fulfilled, you may thereupon elect to
be relieved of all further obligations, including the making of payment for the
Notes, under this Agreement. Without limiting the foregoing, if the conditions
specified in this Section 4 have not been fulfilled, you may waive compliance by
the Company with any such conditions to such extent as you may in your sole
discretion determine. Nothing in this Section 4.1(h) shall operate to relieve
the Company of any of its obligations hereunder (including, without limitation,
its obligations under Section 12.6) or to waive any of your rights against the
Company.
4.2 Company's Conditions. The Company's obligations to sell the Notes on
the Closing Date and to otherwise perform its obligations hereunder shall be
subject (a) to the truth and accuracy of the representations and warranties of
the Purchaser set forth in Section 3.2 on and as of the Closing Date, (b) to
payment for the Notes having been received pursuant to Section 1.3(b)
concurrently with the delivery of the Notes by the Company to the Purchasers and
(c) at or prior to the time of delivery of the Notes, to the conditions
precedent (subject to the right of the Company, in its sole discretion, to waive
compliance with such conditions) that (i) the Company shall have received a copy
(executed or certified as may be appropriate) of all legal documents or
proceedings taken by the Purchaser in connection with the consummation of the
transactions contemplated by this Agreement and (ii) the Company's counsel shall
have received such documents as they reasonably require.
SECTION 5. COVENANTS
From and after the Closing Date and continuing so long as, unless otherwise
specifically provided for below, any amount remains unpaid on any Note:
5.1 Financial and Other Reports.
(a) The Company shall furnish to each holder of Notes (i) as promptly as
practicable upon publication, and in any event within 90 days after the end of
each of the Company's fiscal years, the audited consolidated financial
statements of the Group for such fiscal year, prepared in accordance with
generally accepted accounting principles, together with the reports of the
general partner of the Company and the Auditors' reports thereon; (ii)
quarterly, promptly upon publication, and in any event within 45 days after the
end of the period covered thereby, unaudited interim consolidated financial
statements for the Group; (iii) until such time as an Initial Public Offering is
consummated, monthly, promptly upon publication, and in any event within 30 days
after the end of the period covered thereby, unaudited financial statements for
the Group prepared in accordance with generally accepted accounting principles;
and (iv) until such time as an Initial Public Offering is consummated, no
21
later than November 30 of each year a proposed operating budget for the Company
and the Group for the following fiscal year prepared on a monthly and
year-to-date basis (including income and expense projections) and no later than
December 31 of each year a final operating budget for the Company and the Group
for the following fiscal year, which shall set forth in reasonable detail the
projected operating expenses, capital expenditures, cash flow and income
projections for the following fiscal year for the Company and the Group on
projected monthly and year-to-date bases;
(b) The Company shall file with the Commission, and transmit to holders of
Notes, such information, documents and other reports, and such summaries
thereof, as may be required pursuant to the Exchange Act at the times and in the
manner provided pursuant to such Act. The Company shall transmit to the holders
of Notes copies of each communication from the Company to holders of Equity
Interests in the Company generally at the same time as the Company makes such
communication;
(c) Within the periods provided in clauses (a)(i) and (a)(ii) above, the
Company shall furnish to each holder of Notes a certificate of an Executive
Officer (i) stating, with respect to such year or quarter, as the case may be,
that such officer has reviewed the provisions of this Agreement and setting
forth whether there existed as of the date of such financial statements and
whether, to the best of such Executive Officer's knowledge, there exists on the
date of the certificate or existed at any time during the period covered by such
financial statements, any Default or Event of Default, and, if any such
condition or event exists on the date of the certificate, specifying the nature
and period of existence thereof and the action the Company is taking or proposes
to take with respect thereto, and (ii) containing a full description of all
events with respect to such year or quarter, alone or taken as a whole together
with all past events, that have had or would have with the passage of time a
Material Adverse Effect;
(d) Simultaneously with the delivery of each set of financial statements
referred to in subsection (a)(i) above, the Company shall, for only so long as
any Senior Subordinated Note is outstanding, furnish to each holder of Notes a
statement of the firm of independent certified public accountants that reported
on such statements (i) stating that their audit examination has included a
review of this Agreement and the Notes as they relate to financial or accounting
matters, (ii) confirming the mathematical accuracy of any notice received by the
holders of Notes from an Executive Officer pursuant to Section 5.8 during the
time period covered by such set of financial statements, and (iii) stating
whether anything has come to their attention to cause them to believe that there
existed on the date of such statements any Default or Event of Default;
(e) The Company shall furnish to each holder of Notes promptly after
receipt thereof, copies of each report submitted to the Company by independent
certified public accountants in connection with any annual, interim or special
audit made by them of the books of the Company, including, without limitation,
each report submitted to the Company concerning its accounting practices and
systems and any final comment letter submitted by such accountants to management
in connection with the annual audit of the Company;
22
(f) Within 15 days after (i) the formation, activation or acquisition of
any Material Subsidiary of the Company and (ii) any change in the list of its
respective Material Subsidiaries and, additionally, at the time of delivery of
the reports described in Sections 5.1(a) and 5.1(b), the Company shall, for only
so long as any Senior Subordinated Note is outstanding, furnish to each holder
of Notes a written report of any changes in the list of its respective Material
Subsidiaries (including the identity of the other general partners in any such
partnership and the identity of the participants in any such joint venture);
(g) The Company shall, for only so long as any Senior Subordinated Note is
outstanding and, after such time, if the Company adopts a Plan and the holders
of at least a majority in the then outstanding principal amount of the Deferred
Additional Interest Notes requests in writing, furnish the following to each
holder of Notes:
(i) as soon as possible and in any event (A) within 20 days after the
Company, any Subsidiary or any ERISA Affiliate knows or has reason to know that
any Termination Event described in clause (i) of the definition of Termination
Event with respect to any Plan has occurred and (B) within 10 days after the
Company, any Subsidiary or any ERISA Affiliate knows or has reason to know that
any other Termination Event with respect to any Plan has occurred, a statement
of the chief financial officer of the Company describing such Termination Event
and the action, if any, that the Company, such Subsidiary or such ERISA
Affiliate proposes to take with respect thereto;
(ii) promptly and in any event within two Business Days after
application therefor by the Company, any Subsidiary or any ERISA Affiliate,
copies of any application for a waiver of the minimum funding standard under
Section 412 of the Code;
(iii) promptly and in any event within two Business Days after receipt
thereof by the Company, any Subsidiary or any ERISA Affiliate, copies of each
notice received by the Company, any Subsidiary or any ERISA Affiliate from the
PBGC stating its intention to administer any Plan or to have a trustee appointed
to administer any Plan or to impose any liability (other than for premiums under
Section 4007 of ERISA) in respect of any Plan;
(iv) promptly and in any event within 30 days after the filing thereof
with the Internal Revenue Service, copies of each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) with respect to each Plan;
(v) at the time notice is given or required to be given to the PBGC
under Section 302(f)(4)(A) of ERISA or Section 412(n)(4)(A) of the Code of the
failure to make timely payments to a Plan, a copy of any such notice filed and a
statement of the chief financial officer of the Company setting forth (A)
sufficient information necessary to determine the amount of the lien under
Section 302(f)(3) of ERISA or Section 412(n)(3) of the Code, (B) the reason for
the failure to make the required payments and (C) the action, if any, which the
Company, any Subsidiary or its ERISA Affiliate proposes to take with respect
thereto; and
23
(vi) promptly and in any event within five Business Days after receipt
thereof by the Company, any Subsidiary or any ERISA Affiliate from the sponsor
of a Multiemployer Plan, a copy of each notice received by the Company, any
Subsidiary or any ERISA Affiliate concerning (A) the imposition of Withdrawal
Liability by a Multiemployer Plan, (B) the determination that a Multiemployer
Plan is, or is expected to be, insolvent or in reorganization within the meaning
of Title IV of ERISA, (C) the termination of a Multiemployer Plan within the
meaning of Title IV of ERISA or (D) the amount of liability incurred, or
expected to be incurred, by the Company, any Subsidiary or any ERISA Affiliate
in connection with any event described in clause (A), (B) or (C) above; and
(h) on or prior to the Closing Date and within 90 days after the
commencement of each fiscal year, (i) a complete and accurate list of the
officers and directors of the Company and (ii) within 30 days of any change in
the identity of any such officer or director, a notice specifying such change in
personnel.
5.2 Books and Records. The Company shall keep, and shall cause each of its
Subsidiaries to keep, proper accounting records in accordance with generally
accepted accounting principles. Each Purchaser and each subsequent holder of
Notes shall have the right to receive such financial and other information
relating to the Company or the performance by the Company of its obligations
under the Note Purchase Agreements and Notes, including without limitation
information concerning the Company's and its Subsidiaries' loan receivables
portfolios and the Master Trust, as such holder shall reasonably deem necessary
and such holder shall, upon prior request, subject to reasonable notice, during
regular business hours and without interfering with the normal conduct of the
Company's business or operations, have the right to visit the headquarters of
the Company or arrange a telephone conference call or video conference in order
to discuss the affairs, finances and financial statements of the Company or any
of its Subsidiaries with the appropriate officers of the Company and, in the
presence or with the participation of a representative of the Company, with its
auditors. All expenses incurred by any holder of Notes in connection with the
foregoing shall be solely for the account of such holder; provided, however,
that if any Default shall have occurred and be continuing, all such expenses
shall be for the account of the Company in accordance with Section 12.5.
You and each other holder of any Note by its acceptance hereof agree that
any information obtained by such Person pursuant to this Section 5.2 shall be
treated as confidential; provided, however, that nothing herein contained shall
limit or impair the right or obligation of any holder of the Notes to disclose
such information: (i) with notice to the Company, to such holder's auditors,
attorneys, employees or agents; provided, that such holder's auditors,
attorneys, employees or agents shall have agreed for the benefit of the Company
to keep such information confidential subject to the exceptions set forth in
this paragraph; (ii) with notice to the Company, when required by any Law,
governmental investigation or any regulatory authority request; provided, that
such Person shall request confidential treatment for such information; (iii)
with notice to the Company, as may be required in any report, statement or
testimony required by Law to be submitted to any Governmental Authority having
or claiming to have jurisdiction over such holder or similar
24
organizations or their successors; provided that such Person shall request
confidential treatment for such information; (iv) which is publicly available or
which is received by any holder of the Notes from a Person which is under no
duty to keep the same confidential; (v) with notice to the Company, in
connection with any proceeding, case or matter pending before any Governmental
Authority; provided, that such Person shall request confidential treatment for
such information; or (vi) with at least five days prior written notice to the
Company, to the extent necessary in connection with any contemplated transfer of
any of the Notes by a holder thereof (it being understood and agreed that any
such prospective transferee which purchases such Notes shall have agreed in
writing to be bound by the terms and provisions hereof upon transfer of any of
the Notes to such transferee); provided, that such disclosure shall not be made
if the Company reasonably objects to such disclosure within such five-day
period.
5.3 Payments. The Company shall duly and punctually pay the principal of,
interest on or applicable Prepayment Call Price or Change in Control Event
Prepayment Price with respect to, and any other amounts payable in respect of,
the Notes in accordance with their terms and the terms hereof.
5.4 Company Existence, Etc. The Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its existence and
that of its Material Subsidiaries, and to maintain all licenses, franchises and
permits necessary to the conduct of its or their business and the ownership of
its or their properties, except where the failure to maintain such licenses,
franchises and permits would not have a Material Adverse Effect; provided,
however, that the provisions of this Section 5.4 shall not prevent the Company
from effecting any transaction permitted pursuant to Section 5.7.
5.5 Payment of Taxes. The Company shall timely file, and shall cause all of
its Subsidiaries (other than the Trusts) to timely file, all tax returns or
extensions and all information or similar reports required by law to be filed by
them, and shall pay all applicable taxes and other governmental charges required
to be paid.
5.6 Insurance. For only so long as any Senior Subordinated Note is
outstanding, the Company shall carry and maintain in full force and effect, and
shall cause all of its Subsidiaries to carry and maintain in full force and
effect, at all times with financially sound and reputable institutions,
insurance in such forms and amounts and against such risks as may be reasonable
and prudent in the circumstances for a group of companies of established
reputation engaged in the same or a similar business and owning and operating
properties similar to those of the Company and any of its Subsidiaries and in
any event as may be required by applicable Laws.
5.7 Consolidation, Merger and Sale of Assets.
(a) The Company shall not, and shall not permit any of its Subsidiaries to,
consolidate with or merge into another Person or sell, convey, transfer or lease
its properties or assets substantially as an entirety to any Person, unless:
25
(i) the Person formed by such consolidation or into which the Company
is merged or the Person which acquires by conveyance or transfer, or which
leases, the properties and assets of the Company substantially as an entirety
shall be a corporation or a partnership, shall be organized and validly existing
under the Laws of the United States of America, any State thereof or the
District of Columbia (or any other jurisdiction if the Company shall have
obtained and furnished to the holders of Notes an opinion of Independent Legal
Counsel that organization in such jurisdiction would have no material adverse
U.S. tax consequences to the holders of the Notes) and shall expressly assume
the due and punctual payment of the principal of, interest on or applicable
Prepayment Call Price (if any) or Change In Control Event Prepayment Price (if
any) with respect to the Notes (and the payment of any other amounts payable in
respect thereof pursuant to the terms hereof) and the performance of every other
covenant of the Company under the Notes, this Agreement and the Registration
Rights Agreement;
(ii) immediately after giving effect to such transaction, no Event of
Default and no Default shall have occurred and be continuing; and
(iii) immediately after giving effect to such transaction, for only so
long as any Senior Subordinated Note is outstanding, the Person formed by such
consolidation or into which the Company is merged or the Person which acquires
its assets would be able to incur at least one dollar of additional Senior
Indebtedness pursuant to Section 5.8.
(b) For only so long as any Senior Subordinated Note is outstanding, except
(i) to effect the Conversion, (ii) for sales of automobile loan receivables to
the Trusts, (iii) for mergers, consolidations or the Company's or any
Subsidiary's sale, conveyance, transfer or lease of its properties or assets
substantially as an entirety to any Person permitted by Section 5.7(a), (iv) for
an Asset Sale or (v) for a Sale Transaction in connection with a Put Notice, the
Company shall not, and shall not permit any Subsidiary to, dispose of all or any
part of its interest in any material asset, unless such sale or disposition is
both (i) on an arm's length basis and (ii) either in the ordinary course of
business or, if not in the ordinary course of business, the proceeds of such
sale or disposition are, within 180 days of such sale or disposition, either (A)
reinvested in businesses that are related, incidental or complimentary to the
business in which the Company or such Subsidiary is currently engaged, or (B)
used to prepay, first, Senior Indebtedness of the Company to the extent required
by the holders of such Senior Indebtedness and, second, the Senior Subordinated
Notes by payment of the Prepayment Call Price in accordance with Sections 2.4,
2.5, 2.6 and 2.7; provided, however, that the Trusts shall be permitted to sell
assets in connection with any securitization of receivables.
5.8 Limitation on Indebtedness. The Company shall not, and shall not permit
any of its Subsidiaries (other than the Trusts) to, incur, for only so long as
any Senior Subordinated Note is outstanding, (i) any Senior Indebtedness other
than any Senior Indebtedness, secured or otherwise, existing as of the date
hereof, and any amendments, modifications, restatements, replacements and
refinancings thereof and (ii) any other Indebtedness other than (A) warehousing
facilities secured by Non-Prime Loans, capital leases
26
or purchase money debt, in each case incurred in the ordinary course of
business; (B) Indebtedness incurred by the Company or any Subsidiary to finance
the purchase, lease or improvement of personal property, fixtures or equipment
reasonably necessary for the conduct of the Company's or such Subsidiary's
business and in the ordinary course thereof and (C) subject to Section 9, other
Indebtedness pari passu with the Senior Subordinated Notes or other Subordinated
Indebtedness; provided, that, upon the incurrence of such other Indebtedness
pursuant to clause (C), (x) the amount of all outstanding obligations of the
Company under such Indebtedness pari passu with the Senior Subordinated Notes or
other Subordinated Indebtedness does not exceed the Debt Limit and (y) the sum
of the amount of the Senior Subordinated Notes and all other Indebtedness pari
passu with the Senior Subordinated Notes does not exceed 50% of the Debt Limit.
For the sake of clarity, there shall be no limit on the Company's ability to
incur any amount of Indebtedness described in clause (ii)(A) and (B) above.
5.9 Limitation on Liens. For only so long as any Senior Subordinated Note
is outstanding, except for Permissible Liens, the Company shall not, and shall
not permit any Subsidiary to, create or permit to be created or suffer to exist
any Lien on any of the Company's or any Subsidiary's present or future
properties or revenues to secure Indebtedness of the Company, any Subsidiary or
any other Person unless, simultaneously therewith, all obligations and
liabilities of the Company under this Agreement shall be equally and ratably
secured.
5.10 Limitation on Dividends and Other Restricted Payments. The Company
shall not, and shall not permit any of its Subsidiaries (other than the Trusts)
to make any Restricted Payment prior to the exchange of the Deferred Additional
Interest Notes in their entirety for Equity Interests pursuant to Section 6.
Without limiting the preceding sentence, following the consummation of an
Initial Public Offering, so long as any amount remains unpaid on any Note, the
Company shall not, and shall not permit any of its Subsidiaries (other than the
Trusts) to, make any Restricted Payment if, after making such Restricted
Payment, the aggregate amount of such Restricted Payments from and after such
consummation would exceed (a) 50% of the aggregate net income of the Group for
each fiscal year or portion thereof following the first day of the calendar
quarter in which such consummation occurs minus (b) 100% of the losses of the
Group for each fiscal year or portion thereof following the first day of the
calendar quarter in which such consummation occurs; provided, however, that
notwithstanding the above, the Company may use the aggregate net proceeds to the
Company of an Initial Public Offering and subsequent Public Offerings, in an
amount equal to the lesser of $6,000,000 and 30% of such net proceeds, to make
payments of principal on the Partner Promissory Notes. For purposes of this
Section 5.10, net income means the difference of revenues minus (a) expenses and
(b) taxes, only if such difference is a positive number; and losses means the
absolute value of the difference of revenues minus (a) expenses and (b) taxes,
only if such difference is a negative number, in each case calculated in
accordance with generally accepted accounting principles.
5.11 Limitations on Advances, Investments and Loans. Except as necessary to
effect the Conversion, and only for so long as any Senior Subordinated Note is
outstanding,
27
the Company shall not, and shall not permit any of its Subsidiaries to, lend
money or credit or make advances to any Person, or purchase or acquire any
stock, obligations or securities of, or any other interest in, or make any
capital contribution to, any Person, except:
(a) investments in Cash and Eligible Investments;
(b) investments having been made prior to the Closing Date;
(c) receivables owing to the Company or any of its Subsidiaries and
advances to customers, suppliers, auto dealers and referral salesmen, in each
case if created, acquired or made in the ordinary course of business, payable or
dischargeable in accordance with customary trade terms and in accordance with
past practice;
(d) fees payable pursuant to the Referral Agreement, the Management
Agreement and the Services Agreement;
(e) investments in the lines of business of the Company or any of its
Subsidiaries as of the Closing Date or businesses that are related, incidental
or complimentary thereto;
(f) investments received in connection with 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;
(g) advances made by the Company to its employees, officers or directors in
the ordinary course of business not to exceed $20,000 in the aggregate
outstanding at any one time;
(h) advances, investments and loans made in connection with the formation
of a Trust; and
(i) acquisitions of obligations by a Trust in the ordinary course of its
business.
5.12 Notice to Holders. Upon the Company obtaining knowledge of (a) a
Default or an Event of Default, (b) the existence of any pending or threatened
actions, suits, investigations, litigation, or other judicial or administrative
proceedings which, if adversely determined, would reasonably be expected to have
a Material Adverse Effect, (c) the default by the Company or any of its
Subsidiaries under any instrument pursuant to which the Company or any such
Subsidiary, as the case may be, incurred Indebtedness of at least $1,000,000, or
(d) the amendment of any instrument pursuant to which the Company or any of its
Subsidiaries incurred Indebtedness and which Indebtedness, amendment or
instrument is material to the business, assets, operations, prospects,
liabilities or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, the Company shall deliver promptly (and in any
event within five Business Days after the obtaining of such knowledge) to each
holder of any Note a certificate of an Executive Officer of the Company, with
respect to clauses (a), (b) and (c), specifying the nature and period of
existence thereof and what
28
action the Company proposes to take with respect thereto and, with respect to
clause (d), attaching a copy of the amendment and specifying the effect such
amendment is expected to have on the business, assets, operations, prospects,
liabilities and condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole.
5.13 Compliance with Law. The Company shall, and shall cause each
Subsidiary to, comply with all applicable Laws in respect of the operation of
all properties (including without limitation leased or owned facilities) by them
and the conduct of their business (including, without limitation, Laws with
respect to ERISA and Environmental Laws) other than any such non-compliance
which would not have a Material Adverse Effect.
5.14 Compliance with Agreements. The Company shall comply with all of the
provisions of, and perform each of its obligations under, the Registration
Rights Agreement.
5.15 Environmental Covenant. The Company shall, and shall cause each
Subsidiary to, use its best efforts to avoid the occurrence of any Environmental
Condition either on the properties (including leased facilities) operated by it
or them or otherwise related in any way to the Company, its Subsidiaries or
their activities. In the event any such Environmental Condition occurs, the
Company shall take prompt action to respond to and rectify such Environmental
Condition. The Company shall, and shall cause each Subsidiary to, treat,
dispose, or arrange for treatment or disposal of Hazardous Materials only at
third-party treatment and disposal facilities which to the best of the Company's
knowledge, after reasonably diligent inquiry, maintain valid permits and are
operating in compliance with all applicable Environmental Laws and permits.
5.16 Maintenance, Etc. The Company shall, in all material respects,
maintain, preserve and keep, and cause each Subsidiary to maintain, preserve and
keep, its or their properties which are used or useful in the conduct of its or
their business (whether owned in fee or a leasehold interest) in good repair and
working order (ordinary wear and tear excepted) and from time to time shall make
all necessary repairs, replacements, renewals and additions so that at all times
the economic efficiency thereof shall be maintained, in each case, in the
ordinary course of business. The Company shall maintain, preserve and keep, and
shall cause each Subsidiary to maintain, preserve and keep, its or their rights
under or in all material patents, trademarks, trademark registrations, service
marks, service ▇▇▇▇ registrations, trade names, copyrights, licenses,
inventions, trade secrets and rights (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures, trademarks, service marks and tradenames) which are described in
the Private Placement Memorandum as being owned by them or which are reasonably
necessary for the conduct of their business, and the Company shall protect and
defend, and cause each Subsidiary to protect and defend, such rights against any
infringing uses that would have a Material Adverse Effect.
5.17 Transactions with Affiliates and Related Persons
(a) The Company shall not, and shall not permit any Subsidiary to, enter
into or be a party to any transaction or arrangement with First Union or its
Affiliates, any Affiliate of
29
the Company, Related Person of the Company or Related Person of any Affiliate of
the Company (including without limitation, the purchase from, sale to or
exchange of property with, or the rendering of any service by or for, any such
parties) (all such transactions or arrangements other than Insider Compensation
Increases, "Related Party Transactions"), with the exception of transactions or
arrangements under (i) the Management Agreement, (ii) the Services Agreement,
(iii) the Referral Agreement (subject, however, to Section 5.17(d)), (iv) the
Partner Promissory Notes and (v) the agreements between the Company and the
Trusts set forth in Schedule 3.1(s) to the Disclosure Letter, unless (x) the
Related Party Transaction is in the ordinary course of and pursuant to the
reasonable requirements of the Company's or such Subsidiary's business and upon
fair and reasonable terms no less favorable to the Company or such Subsidiary
than would be obtained in a comparable arm's-length transaction between
unrelated third parties and (y) if the fair market value of the property to be
transferred or service to be rendered is greater than $25,000, such Related
Party Transaction has been approved by the Board of Directors; provided,
however, that the Company may, and may permit any Subsidiary to, enter into or
be a party to any Related Party Transaction with the prior written consent of
the holders of at least a majority in the then outstanding principal amount of
the Notes; and provided, further, that, in any event, any arrangements with
First Union or its Affiliates for commercial banking, investment banking,
placement agency, underwriting and any other financial advisory services shall
not require such consent and shall be excluded for purposes of clause (y) above.
(b) Without limitation of Section 5.17(a), the Company shall not, and shall
not permit any Subsidiary (other than the Trusts) to, increase the salary, fee,
bonus or other compensation or amount payable to any director or officer (such
increases, "Insider Compensation Increases"), unless (A) the Insider
Compensation Increase is given in the ordinary course of business and, in
respect of amounts and timing, in accordance with past or industry practice, (B)
the Insider Compensation Increase has been approved by the Board of Directors
and (C) the aggregate amount of all Insider Compensation Increases in the fiscal
year in which such increase is made is less than $250,000 in 1996, $300,000 in
1997, $400,000 in 1998, $450,000 in 1999 and $500,000 in 2000 and thereafter;
provided, however, that the Company may, and may permit any Subsidiary to, make
any Insider Compensation Increase with the prior written consent of the holders
of at least a majority in the then outstanding principal amount of the Notes;
and provided, further, that compensation that will not be reported on such
director's or officer's Form W-2 shall not be included for purposes of clause
(C).
(c) Without limitation of Section 5.17(a) or 5.17(b), the Company shall
not, and shall not permit any Subsidiary to, pay fees to National Auto Finance
Corporation or any of its Affiliates in any calendar year pursuant to the
Management Agreement or in connection with the Services Agreement in an
aggregate amount greater than $540,000 in 1996, which such amount may increase
by no more than 12% per year thereafter if such increase is approved by the
Board of Directors and described in a resolution of the Board of Directors.
30
(d) The Company shall not amend the Referral Agreement unless such
amendment is pursuant to the reasonable requirements of the Company's business
and the result of arm's length negotiations between the parties thereto.
5.18 Use of Proceeds. None of the proceeds of the sale of the Notes shall
be used, directly or indirectly, for the purpose, whether immediate, incidental
or ultimate, of purchasing or carrying any "margin stock" as defined in
Regulation G (12 CFR Part 207) of the Board of Governors of the Federal Reserve
System (herein called "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 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 shall take any action which might cause this Agreement or the Notes to
violate Regulation G, Regulation T, Regulation U or Regulation X of the Board of
Governors of the Federal Reserve System or to violate Section 7 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in each case
as in effect now or as the same may hereafter be in effect. The proceeds from
the sale of the Notes by the Company shall be used to fund the purchase and/or
financing of Non-Prime Loans for the Company and its Subsidiaries, to provide
for working capital requirements of the Company and its Subsidiaries and to pay
fees and expenses in connection with the issuance and sale of the Notes. The
Company shall invest the unused balance of such net proceeds in Eligible
Investments. This Section 5.18 shall apply for only so long as any Senior
Subordinated Note is outstanding.
5.19 Continuance of Business. The Company shall, and shall cause each
Subsidiary to, limit itself to, and continue to conduct, the businesses in which
the Company and such Subsidiaries are engaged as of the Closing Date; provided,
however, that the Company and its Subsidiaries shall not be prohibited from
entering businesses that are related, incidental or complementary to the
businesses in which the Company or its Subsidiaries are engaged as of the
Closing Date; and provided, further, that the Company shall be permitted to
consummate the Conversion as contemplated in Section 12.1; and provided,
further, that the provisions of this Section 5.19 shall not prevent the Company
from effecting any transaction permitted pursuant to Section 5.7(a).
5.20 Governmental Authorizations. The Company shall obtain, make and keep
in full force and effect, and shall cause each Subsidiary to obtain, make and
keep in full force and effect, all authorizations from and registrations with
Governmental Authorities that may be required for the validity or enforceability
against it of this Agreement and the Notes and for the operation of its
business, as conducted now or as will be conducted in the future, except where
the failure to do so would not have a Material Adverse Effect.
5.21 Further Assurances. The Company shall promptly execute and deliver all
further instruments and documents, and take all further action that may be
necessary or that the Purchasers, or any subsequent holders of any Notes or
Registrable Securities, individually or collectively, may reasonably request in
order more fully to give effect to the provisions of this Agreement.
31
5.22 Integration. For only so long as any Senior Subordinated Note is
outstanding, the Company shall take all actions that are appropriate or
necessary to assure that its offerings of securities other than the Notes will
not be integrated for purposes of the Securities Act with the offerings of Notes
by the Company to the Purchasers contemplated hereby in any manner that would
require the registration of such securities under the Securities Act.
5.23 Rule 10b-6 For only so long as any Senior Subordinated Note is
outstanding, the Company shall not take any action prohibited by Rule 10b-6
under the Exchange Act, in connection with the distribution of the Notes by the
Company to the Purchasers contemplated hereby.
5.24 Tangible Net Worth. The Company shall maintain at all times, but only
so long as any Senior Subordinated Note is outstanding, a Tangible Net Worth
equal to or exceeding the sum of (a) $2,100,000, (b) (i) prior to the Company
becoming a Corporate Company, 50% of the aggregate net income of the Company, as
reduced by 50% of any distributions to partners in the Company required in order
to permit such partners to pay federal income taxes, to the extent that such
distributions are not in excess of the amount of cash distributed pursuant to
Section 9.2(A)(1) of the Partnership Agreement, in each case measured from June
30, 1996 to the end of the most recent preceding fiscal quarter or (ii) as of
and after the Company has become a Corporate Company, 50% of aggregate net
income (after-tax) of the Company measured from June 30, 1996 to the end of the
most recent preceding fiscal quarter, plus (c) 50% of the Net Proceeds of any
offering by the Company.
5.25 Visitation Rights. The Company shall provide the holders of the
Deferred Additional Interest Notes with notice of, and a representative of each
such holder shall have the right to attend (in person or by telephone) and
participate in, all meetings of the Board of Directors, whether such meetings
occur in person or by telephone or similar means authorized by the Company's
organizational documents and shall have the same confidentiality obligation with
respect to such meetings as if each such representative were a director;
provided, however, that such representatives shall have no right to vote at such
meetings. The Company shall pay all expenses of the such representatives in
connection with their attendance at such meetings. Notice of action proposed to
be taken by written consent of the Board of Directors without a meeting shall be
given to the holders of the Deferred Additional Interest Notes at the same time
as to the members of the Board of Directors, and notice of the effectiveness of
any such action shall be given to such holders promptly following the taking of
such action. The Company shall also send to each holder any materials made
available to the members of the Board of Directors. Notwithstanding anything to
the contrary above, the Company may, in its reasonable discretion, determine
that an issue to be discussed at a meeting of the Board of Directors or a
written consent of the Board of Directors would involve a conflict of interest
for a holder of the Deferred Additional Interest Notes and exclude such holder
from attending such meeting or participating in such written consent, as the
case may be; provided, that in such an event, the Company shall provide to such
holders the minutes of each such meeting or a copy of each such consent, as the
case may be.
32
5.26. Plan Assets.
(a) Unless required to the contrary by changes in law after the date
hereof, the Company shall treat the Notes as indebtedness of the Company for
U.S. federal income tax purposes, and, in the event of a challenge to such
treatment, shall assert such position in good faith.
(b) The Company shall not take any action after the occurrence of an
Automatic Exchange Event described in clause (v) of the definition thereof that
would cause the assets of the Company to be considered the assets of any
employee benefit plan that holds, directly or indirectly, an Equity Interest for
purposes of Part 4 of Title I of ERISA, except to the extent the Company is
required to redeem an Equity Interest pursuant to the Partnership Agreement as
in effect on the date hereof. The Company and the Purchasers represent to one
another that they have conferred with their respective counsel and, as of the
Closing Date, will treat the Notes as debt for purposes of the plan asset
regulations of the Department of Labor under ERISA.
5.27 Qualified Public Offering. The Company shall use its reasonable best
efforts to, and shall cause each underwriter participating in any Public
Offering to use its reasonable best efforts to, cause any Public Offering to be
a Qualified Public Offering.
5.28 Put Event Equity Redemption. If the Company receives a Put Notice
pursuant to Section 11.1 of the Partnership Agreement after the exchange of any
Deferred Additional Interest Note (in whole or in part) for Equity Interests,
not later than two (2) Business Days after the date on which the Company
receives a Put Notice, the Company shall give written notice by facsimile or
other same day written communication to all holders of Equity Interests
previously issued in exchange for Deferred Additional Interest Notes stating (a)
a brief description of the Put Event (as defined in Section 11.5 of the
Partnership Agreement), (b) that such holders may elect to put their Equity
Interests previously issued in exchange for Deferred Additional Interest Notes
on the same basis as IronBrand if any such holder so elects by providing written
notice to the Company and (c) that the put right must be exercised as to all of
a holder's Equity Interests previously issued in exchange for Deferred
Additional Interest Notes but (A) that a holder's Equity Interests will not be
so prepaid unless holders of at least a majority of the Equity Interests
previously issued in exchange for Deferred Additional Interest Notes elect such
put and (B) that if such holder does not elect such prepayment, such holder's
Equity Interests will in any event be so put if the holders of a majority of the
Equity Interests previously issued in exchange for Deferred Additional Interest
Notes elects such put. The following procedures shall apply with respect to such
redemptions of such Equity Interests.
(i) To put its Equity Interests, a holder of such Equity Interests
must give, not later than two (2) Business Days after receipt of the Company's
notice with respect to the Put Event, written notice to the Company stating that
the holder elects to put such Equity Interests on the same terms as IronBrand.
33
(ii) If the holders of at least a majority of such Equity Interests
elect such put, all such outstanding Equity Interests shall be deemed to have
been put on such terms and the Company shall give same-day facsimile or other
written notice thereof to all holders of such Equity Interests that such Equity
Interests have been deemed to have been so put.
(iii) If the holders of less than a majority of such Equity Interests
elect such put, the Company shall, two (2) Business Days after such second
Business Day, give same-day written notice thereof to all holders of such Equity
Interests, in which event such holders not previously electing to put such
Equity Interests may so put such Equity Interests by giving written notice to
the Company not more than two (2) Business Days after the date of such
additional notice, stating that such holder elects to put such Equity Interests.
If, after such two (2) Business Days, the holders of at least a majority of such
Equity Interests so elect to put such Equity Interests, all such outstanding
Equity Interests shall be deemed to have been so put. If such an election is
made, the Company shall cause no redemption of or distributions to be made to
IronBrand pursuant to Article XI of the Partnership Agreement unless pro rata
redemptions of such Equity Interests or pro rata distributions are made to the
holders holding such Equity Interests, as the case may be.
5.29 Board of Directors. The Company shall, at all times after December 31,
1996, (i) if the Board of Directors has greater than seven members, cause at
least one-third of the members of the Board of Directors to be Persons who are
not Affiliates of the Company, Related Persons of the Company or Related Persons
of Affiliates of the Company (in each case, other than by reason of being a
director of the Company) or employees of any of the foregoing; provided that
such one-third of the members may include one director that is a designee of
First Union or any of its Affiliates, and (ii) if the Board of Directors has
seven or less members, cause at least two of such members to be Persons who are
not Affiliates of the Company, Related Persons of the Company or Related Persons
of Affiliates of the Company (in each case, other than being a director of the
Company) or employees of any of the foregoing.
5.30 Sales of New Insider Equity Interests. The Company shall not issue any
New Insider Equity Interests, unless the Independent Review Committee approves
the terms and conditions (including, without limitation, price) of such
issuance; provided, however, that such approval shall not be required if holders
of at least a majority of the then outstanding principal amount of Deferred
Additional Interest Notes agree in writing that the material terms and
conditions of such issuance are acceptable.
5.31 Amendments to Partnership Agreement. The Company shall not permit any
amendments to the Partnership Agreement that would adversely affect the holders
of the Notes without obtaining the prior written consent of the holders of at
least a majority of the then outstanding principal amount of the Notes.
5.32 Amendments to Certain Other Documents. The Company shall not permit
any amendments to the Partner Promissory Notes that would adversely affect the
holders of the
34
Notes without obtaining the prior written consent of the holders of at least a
majority of the then outstanding principal amount of the Notes.
SECTION 6. EXCHANGE OF DEFERRED ADDITIONAL INTEREST NOTES
6.1 Automatic Exchange.
(a) (i) The Company shall notify the holders of the Deferred Additional
Interest Notes in writing of an impending Automatic Exchange Event immediately
upon the Company obtaining knowledge that such an Event is likely to occur.
Immediately preceding the consummation of an Automatic Exchange Event described
in clauses (i) or (iii) of the definition thereof or immediately following the
consummation of an Automatic Exchange Event described in clause (v) of the
definition thereof or, in either case, as soon thereafter as is reasonably
practicable, the holder of a Deferred Additional Interest Note shall surrender
such Note, duly endorsed or assigned to the Company or in blank, at the office
of the Exchange Agent or at such other office or agency of the Company as may be
maintained for exchange pursuant to Section 1.5, in exchange for Equity
Interests in accordance with Section 6.6.
(ii) Immediately following the consummation of an Automatic Exchange
Event described in clause (ii) or (iv) of the definition thereof, the holder of
a Deferred Additional Interest Note shall surrender such Note, duly endorsed or
assigned to the Company or in blank, at the office of the Exchange Agent or at
such other office or agency of the Company as may be maintained for exchange
pursuant to Section 1.5, in exchange for a note (a "Liquidating Note") with the
terms described pursuant to Section 6.7.
(b) An exchange of Deferred Additional Interest Notes for Equity Interests
shall be deemed to have occurred immediately preceding the consummation of an
Automatic Exchange Event described in clauses (i), (iii) or (v) of the
definition thereof, and an exchange of Deferred Additional Interest Notes for
Liquidating Notes shall be deemed to have occurred immediately following the
consummation of an Automatic Exchange Event described in clauses (ii) or (iv) of
the definition thereof, whether or not the holders have yet physically
surrendered all of the Deferred Additional Interest Notes, and at such time the
rights of the holders of such Deferred Additional Interest Notes as holders of
Deferred Additional Interest Notes shall cease, the Person or Persons entitled
to receive the Equity Interests or Liquidating Notes, as the case may be,
issuable upon such exchange shall be treated for all purposes as the record
holder or holders of such Equity Interests or Liquidating Notes, as the case may
be, as of and after such time and, as promptly as practicable on or after the
exchange date and in any event within two Business Days, the Company shall issue
and deliver at the office of the Exchange Agent or at such other office or
agency the Equity Interests or Liquidating Notes, as the case may be, issuable
upon exchange but only, in the case of Equity Interests, if such Equity
Interests are certificated Equity Interests; provided, however, that, in the
case of an Automatic Exchange Event described in clause (i) or (iii) thereof, if
such Automatic Exchange Event is not consummated, such exchange shall be revoked
and rescinded, the Company shall execute and deliver (and shall be deemed to
have executed and delivered) to the holders of Deferred Additional Interest
Notes who so surrendered such Notes new Deferred Additional
35
Interest Notes of denominations in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Notes, the issuance of such
Equity Interests shall be void and of no effect and such holders shall return
the Equity Interests, if such Equity Interests are certificated Equity Interests
and have been previously delivered pursuant to this Section 6.1(b), to the
office of the Exchange Agent or to such other office or agency; and provided,
further, that any such voidance shall not prejudice the rights of the holders of
the Deferred Additional Interest Notes subsequently to exchange such Deferred
Additional Interest Notes for Equity Interests pursuant to this Section 6 and
such Notes shall be automatically exchanged upon the occurrence of an Automatic
Exchange Event as set forth in this Section 6.1 regardless of how soon after
such voidance such Automatic Exchange Event occurs.
6.2 Partial Optional Exchange
(a) The Company shall notify the holders of the Deferred Additional
Interest Notes in writing of an impending Partial Optional Exchange Event
immediately upon the Company obtaining knowledge that such an Event is likely to
occur. Immediately upon the consummation of a Partial Optional Exchange Event,
or as soon thereafter as is reasonably practicable, a holder of Deferred
Additional Interest Notes may, so long as the holder has provided at least ten
(10) Business Days' prior written notice to the Company, surrender all such of
its Notes ("Exchanged PAR Notes") that could be exchanged for Equity Interests
pursuant to such Partial Option Exchange Event without (i) the Company's assets
being treated as Plan assets for purposes of Title I of ERISA or Section 4975 of
the Code or (ii) income with respect to such Equity Interests being taxable as
unrelated business taxable income with respect to any tax exempt holder, other
than due to any debt of the holder, at the office of the Exchange Agent or at
such other office or agency of the Company as may be maintained for exchange
pursuant to Section 1.5, in exchange for Equity Interests in accordance with
Section 6.6. If there is more than one holder whose exchange of Deferred
Additional Interest Notes would be limited to less than all of such holder's
Notes pursuant to the preceding sentence, then the amount of such Notes eligible
for such exchange shall be apportioned among such holders pro rata to the
respective principal amounts of their Notes. In the event that a holder is able
to exchange only part of such holder's Notes, then the Company shall execute and
deliver to such holder without expense to the holder, a new Deferred Additional
Interest Note (a "New PAR Note") in an aggregate principal amount equal to the
product of (A) the aggregate principal amount of the Exchanged PAR Note
immediately preceding its exchange and (B) the applicable Partial Reduction
Fraction.
(b) If a holder exchanges a Deferred Additional Interest Note pursuant to
Section 6.3(a) for less than all of the Equity Interests issuable upon an
exchange of such Note in full, the Senior Subordinated Note issued in connection
with such Exchanged PAR Note shall bear interest, notwithstanding the provisions
of Section 1.1(b), (i) on the entire unpaid portion of the principal amount of
such Senior Subordinated Note from the date of such exchange until such unpaid
portion of such principal amount shall have become due and payable, at the
Senior Subordinated Interest Rate, and (ii) on the unpaid portion of the
principal amount thereof equal to the product of (A) the unpaid principal amount
of such Note times (B) the PAR Reduction Fraction, at the Deferred Additional
Interest Rate, and the interest borne pursuant to clauses (i)
36
and (ii) shall be payable or accrued and added to the unpaid portion of the
principal amount of the New PAR Note, respectively, as provided in Section
1.1(c).
6.3 Optional Exchange Upon Disposition.
(a) Immediately preceding the consummation of a Disposition, the holder of
a Deferred Additional Interest Note may, so long as the holder has provided at
least ten (10) Business Days prior written notice to the Company, surrender such
Note (an "Exchanged TAG Note"), duly endorsed or assigned to the Company or in
blank, at the office of the Exchange Agent or at such other office or agency of
the Company as may be maintained for exchange pursuant to Section 1.5, in
exchange for Equity Interests in accordance with Section 6.6; provided, however,
that such exchange shall only be for that number of Equity Interests that such
holder has elected to sell pursuant to the Tag Along Agreement as part of the
Disposition, and the Company shall execute and deliver to such holder, without
expense to the holder, a new Deferred Additional Interest Note (a "New TAG
Note") in an aggregate principal amount equal to the product of (A) the
aggregate principal amount of the Exchanged TAG Note immediately preceding its
exchange and (B) the applicable Tag Along Reduction Fraction.
(b) If a holder exchanges a Deferred Additional Interest Note pursuant to
Section 6.3(a) for less than all of the Equity Interests issuable upon an
exchange of such Note in full, the Senior Subordinated Note issued in connection
with such Exchanged TAG Note shall bear interest, notwithstanding the provisions
of Section 1.1(b), (i) on the entire unpaid portion of the principal amount of
such Senior Subordinated Note from the date of such exchange until such unpaid
portion of such principal amount shall have become due and payable, at the
Senior Subordinated Interest Rate, and (ii) on the unpaid portion of the
principal amount thereof equal to the product of (A) the unpaid principal amount
of such Note times (B) the Tag Along Reduction Fraction, at the Deferred
Additional Interest Rate, and the interest borne pursuant to clauses (i) and
(ii) shall be payable or accrued and added to the unpaid portion of the
principal amount of the New TAG Note, respectively, as provided in Section 1.1.
(c) An exchange of any Deferred Additional Interest Note or portion thereof
with respect to which notice has been provided to the Company pursuant to
Section 6.3(a) for Equity Interests in connection with a Disposition shall be
deemed to have occurred immediately preceding the consummation of such
Disposition, whether or not the holder has yet physically surrendered such
Deferred Additional Interest Note, and at such time the rights of the holder of
such Deferred Additional Interest Note or portion thereof as holder of such
Deferred Additional Interest Note or portion thereof shall cease, the Person or
Persons entitled to receive the Equity Interests issuable upon such exchange
shall be treated for all purposes as the record holder or holders of such Equity
Interests as of and after such time and, as promptly as practicable on or after
the exchange date and in any event within two Business Days, the Company shall
issue and deliver at the office of the Exchange Agent or at such other office or
agency the Equity Interests issuable upon exchange, if such Equity Interests are
certificated Equity Interests; provided, however, that if such Disposition is
not consummated, such exchange shall be revoked and rescinded, the Company shall
execute and deliver (and shall be deemed to have so executed and delivered) to
such holder of a Deferred Additional Interest
37
Note who so surrendered such Note a new Deferred Additional Interest Note of a
denomination in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note, the issuance of such Equity Interests shall be
void and of no effect and such holder shall return the Equity Interests, if such
Equity Interests are certificated Equity Interests and have been previously
delivered pursuant to this Section 6.3(c), to the office of the Exchange Agent
or at such other office or agency; and provided, further, that any such voidance
shall not prejudice the rights of such holder subsequently to exchange such
Deferred Additional Interest Note for Equity Interests pursuant to this Section
6 and such Note may be exchanged upon a Disposition as set forth in this Section
6.3 regardless of how soon after such voidance such Disposition occurs.
6.4 Optional Exchange Upon Non-Qualified Public Offering.
(a) Immediately preceding the consummation of a Public Offering that is not
a Qualified Public Offering, a holder of a Deferred Additional Interest Note who
has elected to exercise its registration rights pursuant to Section 1(a) or 1(b)
of the Registration Rights Agreement with respect to such Public Offering may
surrender such Note (an "Exchanged NQPO Note"), duly endorsed or assigned to the
Company or in blank, at the office of the Exchange Agent or at such other office
or agency of the Company as may be maintained for exchange pursuant to Section
1.5, in exchange for Equity Interests in accordance with Section 6.6.
(b) An exchange of any Deferred Additional Interest Note with respect to
which notice has been provided pursuant to Section 6.4(a) shall be deemed to
have occurred immediately preceding the consummation of such Public Offering,
whether or not the holder has yet physically surrendered such Deferred
Additional Interest Note, and at such time the rights of the holder of such
Deferred Additional Interest Note as holder of such Deferred Additional Interest
Note shall cease, the Person or Persons entitled to receive the Equity Interests
issuable upon such exchange shall be treated for all purposes as the record
holder or holders of such Equity Interests as of and after such time and, as
promptly as practicable on or after the exchange date and in any event within
two Business Days, the Company shall issue and deliver at the office of the
Exchange Agent or at such other office or agency the Equity Interests issuable
upon exchange, if such Equity Interests are certificated Equity Interests;
provided, however, that if such Public Offering is not consummated, such
exchange shall be revoked and rescinded and the Company shall execute and
deliver (and shall be deemed to have so executed and delivered) to such holder
of a Deferred Additional Interest Note who so surrendered such Note a new
Deferred Additional Interest Note of a denomination in aggregate principal
amount equal to the aggregate principal amount of such surrendered Note and such
holder shall return the Equity Interests, if the Equity Interests are
certificated Equity Interests and have been previously delivered pursuant to
this Section 6.4(b), to the office of the Exchange Agent or at such other office
or agency; and provided, further, that if the underwriter elects not to purchase
all of such holder's Equity Interests pursuant to Section 1(c)(iii) of the
Registration Rights Agreement, such exchange shall be revoked and rescinded with
respect to the Equity Interests not purchased by such underwriter and the
Company shall execute and deliver to such holder, without expense to the holder,
a new Deferred Additional
38
Interest Note (a "New NQPO Note") in an aggregate principal amount equal to the
product of (A) the aggregate principal amount of the Exchanged NQPO Note
immediately preceding its exchange and (B) the NQPO Reduction Fraction; and
provided, further, that any such voidance described in the first proviso above
shall not prejudice the rights of such holder to exchange such Note for Equity
Interests pursuant to this Section 6 and such Note may be exchanged upon a
Public Offering as set forth in this Section 6.4 regardless of how soon after
such voidance such Public Offering occurs.
(c) If a holder receives a New NQPO Note in an aggregate principal amount
less than the Exchanged NQPO Note pursuant to Section 6.4(b), the Senior
Subordinated Note issued in connection with such Exchanged NQPO Note shall bear
interest, notwithstanding the provisions of Section 1.1(b), (i) on the entire
unpaid portion of the principal amount of such Senior Subordinated Note from the
date of such exchange until such unpaid portion of such principal amount shall
have become due and payable, at the Senior Subordinated Interest Rate, and (ii)
on the unpaid portion of the principal amount thereof equal to the product of
(A) the unpaid principal amount of such Note times (B) the NQPO Reduction
Fraction, at the Deferred Additional Interest Rate, and the interest borne
pursuant to clauses (i) and (ii) shall be payable or accrued and added to the
unpaid portion of the principal amount of the New NQPO Note, respectively, as
provided in Section 1.1(c).
6.5 Optional Exchange Upon IronBrand Redemption.
(a) If the Company intends to redeem IronBrand's Equity Interests pursuant
to Section 11.3 of the Partnership Agreement in connection with a Put Notice (as
defined in Section 11.2 of the Partnership Agreement), the Company shall notify
the holders of Deferred Additional Interest Notes in accordance with Section
2.3.
(b) Immediately preceding any redemption of IronBrand's Equity Interests
pursuant to Section 11.3 of the Partnership Agreement, the holder of a Deferred
Additional Interest Note may, so long as the holder has provided notice in
accordance with Section 2.3, surrender such Note, duly endorsed or assigned to
the Company or in blank, at the office of the Exchange Agent or at such other
office or agency of the Company as may be maintained for exchange pursuant to
Section 1.5 in exchange for Equity Interests in accordance with Section 6.6, and
the Company shall, immediately after such exchange and simultaneously and pro
rata with the redemption of IronBrand's Equity Interests and other Equity
Interests redeemed pursuant to Section 5.28, redeem such Equity Interests, the
redemption price for which Equity Interests shall be an amount equal to the sum
of (i) the product of (A) the Percentage Interest (as defined in the Partnership
Agreement) of such holder of the Company immediately following such exchange
multiplied by (B) the value of the Company determined pursuant to and in
accordance with the procedures set forth in Section 11.3 of the Partnership
Agreement.
(c) An exchange of Deferred Additional Interest Notes with respect to which
notice has been provided to the Company pursuant to Section 6.5(b) shall be
deemed to have occurred immediately preceding the redemption of the Equity
Interests for which such Notes
39
are exchanged, whether or not the holder has yet physically surrendered such
Deferred Additional Interest Note, and at such time the rights of the holder of
such Deferred Additional Interest Note as holder of such Deferred Additional
Interest Note shall cease and the Person or Persons entitled to receive the
Equity Interests issuable upon such exchange shall be treated for all purposes
as the record holder or holders of such Equity Interests as of and after such
time.
6.6 Exchange Rate and Termination of Exchange Rights.
(a) (i) The Company shall issue an aggregate number of Equity Interests in
exchange for all of the Deferred Additional Interest Notes as provided in this
Section 6, which such number shall be equal to ten (10) percent of the
then-outstanding Applicable Fully Diluted Equity Interests (the "Exchange
Rate"); provided, however, that if any such exchange shall occur after the
Conversion, the holders of Deferred Additional Interest Notes exchanging such
Notes shall be entitled to receive that number of Equity Interests in the
Corporate Company as if such holders had exchanged such Notes for Equity
Interests immediately prior to the Conversion and then exchanged the Equity
Interests so received for Equity Interests of the Corporate Company upon
Conversion; and provided further, that if less than 100% of the assets of the
Company were transferred to the Corporate Company in effecting the Conversion,
an appropriate and equitable adjustment shall be made to such number to ensure
that the economic interest such holders would have received in the assets of the
Company had such holders exchanged their Deferred Additional Interest Notes
prior to the Conversion is not diluted; provided, further, that such number
shall be increased by an amount of Equity Interests equal to 10% of any Fully
Diluted Equity Interests issued after the Conversion and prior to the exchange
to directors, officers or other management officials of the Company or any
Subsidiary as compensation for services.
(ii) For the sake of clarity, it is understood that the intent of the
exchange mechanisms included in this Agreement is to provide the Purchasers with
the right to acquire, collectively, 10% of the fully diluted equity interests in
the Company as of the Closing Date (including all equity interests that would be
or are convertible into equity interests and including the equity interests into
which the Deferred Additional Interest Notes are exchangeable in full) and that
the Purchaser's right to acquire 10% of the Applicable Fully Diluted Equity
Interests is subject to dilution from Equity Interests issued after the Closing
Date except in the case of Equity Interests issued to management as
compensation. It is also understood that, upon the Conversion of the Company
into a corporate form, the intent of the exchange mechanism is to provide the
Purchasers with the right to acquire stock in the Corporate Company that would
have the same economic value as if the Purchasers had acquired Equity Interests
in the Company immediately prior to the Conversion, taking into account that
less than 100% of the assets of the Company may be transferred to the Corporate
Company.
(b) Upon any exchange of Deferred Additional Interest Notes for Equity
Interests prior to the Conversion, any Equity Interests received by the holder
of such Notes shall be limited partnership interests in all respects,
notwithstanding the fact that the Exchange Rate will be applied to all general
partnership and limited partnership Equity Interests.
40
(c) The exchange rights provided for in this Section 6 shall expire, as to
any Deferred Additional Interest Note, upon the prepayment or repayment in full
of such Note, whether on the Deferred Additional Interest Note Repayment Date or
otherwise.
(d) In any exchange of Deferred Additional Notes for Equity Interests, the
aggregate amount of Equity Interests shall be allocated among the holders of
such Notes participating in such exchange in proportion to the respective
unconverted portions of such holder's entitlements thereto as of the Closing
Date.
6.7 Asset Sales; Liquidation Decision; Share Sales.
(a) (i) The Company shall not consummate an Automatic Exchange Event
described in the definition thereof in clause (ii) (an "Asset Sale") or (iv) (a
"Liquidation Decision") without the Board of Directors determining in good faith
the net asset value of the Company (which, for purposes of this Section 6.7,
shall be deemed to be the fair value of the assets of the Company minus the fair
value of the liabilities of the Company minus reasonable reserves to be retained
by the Company to pay the expenses of winding down, liquidating and dissolving
the Company in the case of a Liquidation Decision only) immediately following
the Asset Sale or at the time of the Liquidation Decision; provided, however,
that in the case of a Liquidation Decision, the fair value of the Company's
assets on the date of the Liquidation Decision may be the price at which the
Company sells its assets in the course of effecting the winding down,
liquidation and dissolution contemplated thereby.
(ii) Upon an Asset Sale or a Liquidation Decision, the Company shall
issue and deliver to the holder of a Deferred Additional Interest Note, pursuant
to Section 6.1(a)(ii) in substitution therefor, a Liquidating Note in a
principal amount equal to the product of (A) the percentage of the Fully Diluted
Equity Interests represented by the Applicable Fully Diluted Equity Interests
for which such Note would be exchangeable in the event of any other Automatic
Exchange Event times (B) the net asset value of the Company, as determined
pursuant to Section 6.7(a)(i), which Liquidating Note shall have a maturity as
agreed upon by the Company and the holders of at least a majority of the then
outstanding principal amount of the Deferred Additional Interest Notes being so
exchanged but, in no event greater than 180 days, and which Note shall bear
interest for such period at a rate equal to the rate on U.S. Treasury Securities
for the same term of the Note, which such principal and interest shall be due
and payable by the Company upon the maturity date of such Liquidating Note (or
the next succeeding Business Day if such a day is not a Business Day)
(iii) The Company shall pay the principal and accrued interest on the
Liquidating Notes with the same consideration as is distributed to all other
holders of Equity Interests receiving distributions in connection with such
Asset Sale or Liquidation Decision; provided, however, that (A) the
consideration for the Liquidating Notes to be received (x) in the Asset Sale is
either cash, securities that will be listed and freely tradeable on any
nationally recognized securities exchange or on the NASDAQ national market
system within 180 days of such payment or a combination of cash and such
securities and if any such securities received as consideration do not become so
listed and freely tradeable, the Company shall purchase,
41
within five (5) Business Days of such 180th day, such securities at their fair
value at the time originally distributed to the holders of Liquidating Notes,
from the holders of Deferred Additional Interest Notes which were exchanged for
the Equity Interests sold in such Asset Sale, at such fair value as determined
by a valuation firm or investment bank or national bank of national reputation
and reasonably acceptable to the holder and (y) in connection with a Liquidation
Decision is either cash, securities that will be listed and freely tradeable on
any nationally recognized securities exchange or on the NASDAQ national market
system or a combination of cash and such securities and (B) if the consideration
for Equity Interests to be received in the Asset Sale or in connection with the
Liquidation Decision includes securities, either (x) the Company has delivered
an opinion of Independent Legal Counsel to such holders to the effect that the
receipt by such holders of such securities would not result in the assets of the
issuer of such securities being Plan assets or (y) the Company has ensured that
such holders will receive cash in lieu of such securities, which such cash
amount shall be the fair market value of such securities for which cash will be
instead received, and such fair market value has been determined by the Board of
Directors in good faith.
(b) The Company shall not consummate an Automatic Exchange Event described
in clause (iii) of the definition thereof (a "Share Sale") until the Company
causes the following conditions to be met:
(i) all Equity Interests received by the holders of Deferred
Additional Interest Notes pursuant to Section 6.1 shall be Transferred as a part
of such Automatic Exchange Event;
(ii) the holders of Deferred Additional Interest Notes shall receive,
subject to Section 6.7(b)(iv) below, the same per-Equity Interest consideration
(payable in the same manner and upon the same terms) as all other Equity
Interest holders participating in the Share Sale;
(iii) the consideration for Equity Interests to be received in the
Share Sale is, subject to Section 6.7(b)(iv) below, either cash, securities that
will be listed and freely tradable on any nationally recognized securities
exchange or on the NASDAQ national market system within 180 days of the Share
Sale or a combination of cash and such securities; provided, that if any
securities received as consideration do not become so listed and freely
tradable, the Company shall purchase, within five (5) Business Days of such
180th day, such securities at their fair market value, from the holders of
Deferred Additional Interests Notes which were exchanged for the Equity
Interests sold in such Share Sale, as such fair market value is determined by a
valuation firm or investment bank of national reputation and reasonably
acceptable to the holder; and
(iv) if the consideration for Equity Interests to be received in the
Share Sale includes securities, either (x) the Company has delivered an opinion
of Independent Legal Counsel to the holders of Deferred Additional Interest
Notes to the effect that the receipt by such holders of such securities would
not result in the assets of the issuer of such securities being Plan assets or
(y) the Company has ensured that such holders will receive cash in lieu of
42
such securities, which such cash amount shall be the fair market value of such
securities for which cash will be instead received, and such fair market value
has been determined by the Board of Directors in good faith.
6.8 Fractional Equity Interests. If Equity Interests shall not then exist
in fractions, no fractional Equity Interests or scrip representing fractional
Equity Interests shall be issued upon the exchange of the Deferred Additional
Interest Notes. In lieu of any fractional share of an Equity Interest which
would otherwise be issuable upon the exchange of any Deferred Additional
Interest Note or Notes (or specified portions thereof) pursuant to the
immediately preceding sentence, the Company shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction calculated to
the nearest $.01 of the fair market value of such Equity Interest (as determined
in good faith by the Board of Directors) at the close of business on the day of
exchange.
6.9 Notice of Certain Actions.
In the event that the Company:
(i) shall authorize the granting to the holders of its Equity
Interests of options, rights or warrants to subscribe for or purchase any Equity
Interests of the Company; or
(ii) effects any capital reorganization or reclassification of the
Equity Interests (other than a subdivision or combination of the outstanding
Equity Interests) or of any consolidation, merger or share exchange to which the
Company is a party and for which approval of any holders of Equity Interests of
the Company is required, or of the sale or transfer of all or substantially all
of the assets of the Company; or
(iii) effects any voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(iv) alters the number or kind of Equity Interests issuable upon an
exchange of Deferred Additional Interest Notes;
then the Company shall cause to be mailed to the holder, at least ten
(10) Business Days prior to the applicable record, effective or expiration date
hereinafter specified, a notice stating (x) the date on which such
reorganization, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Equity Interests of record shall
be entitled to exchange their shares of Equity Interests for securities, cash or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up,
or (y) the date on which such purchase of outstanding Equity Interests shall
take place, the consideration offered and the other material terms thereof.
6.10 Company to Keep Available Equity Interests and Not to Enter into
Restrictive Agreements. The Company shall at all times take all action within
its powers that
43
is necessary to reserve and keep available, the issuance of which upon exchange
of the Deferred Additional Interest Notes into such Equity Interests will be
free from preemptive rights, out of the authorized but unissued Equity Interests
or out of the Equity Interests held in treasury, for the purpose of effecting
the exchange of the Deferred Additional Interest Notes, the full number of
Equity Interests then issuable upon the exchange of all Deferred Additional
Interest Notes.
Until the date when no Deferred Additional Interest Notes remain
outstanding, the Company shall not enter into or become bound by any indenture,
lease, mortgage, deed of trust, loan agreement or other agreement or instrument
that would restrict, limit or impose conditions on the issuance of Equity
Interests to be issued upon exchange of the Deferred Additional Interest Notes
in accordance with this Section 6.
6.11 Taxes on Exchange. The Company shall pay any and all transfer, stamp,
documentary and other similar taxes and duties as may be payable in respect of
the issuance or delivery of Equity Interests with respect to Deferred Additional
Interest Notes exchanged pursuant hereto, and a holder exchanging a Deferred
Additional Interest Note for Equity Interests shall not be required to pay any
such transfer, stamp, documentary or other similar taxes or duties payable in
respect of the issue or delivery of the Equity Interests; provided, however,
that the holder shall be required to pay any such transfer tax or duty which may
be payable in respect of any transfer involved in the issue or delivery of the
Equity Interests in a name other than that of the holder of the Deferred
Additional Interest Note.
6.12 Covenant as to Issuance of Equity Interests. The Company covenants
that all Equity Interests which may be issued upon exchange of Deferred
Additional Interest Notes will upon issue be fully paid and nonassessable.
6.13 Cancellation of Exchanged Deferred Additional Interest Notes. All
Deferred Additional Interest Notes delivered for exchange shall be delivered to
the Company to be canceled by or at the direction of the Company,
notwithstanding that such Notes may have been deemed to have been cancelled
pursuant to this Section 6.
6.14 Reclassification, Reorganization, Consolidation, Merger or Sale of
Assets. In case of any Reorganization Transaction, the Company shall, as a
condition precedent to such transaction, cause effective provisions to be made
so that the holders of Deferred Additional Interest Notes shall have the right
thereafter, by exchanging such Notes, to receive the kind and amount of shares
of stock and other securities and property receivable upon such Reorganization
Transaction by a holder of the number of Equity Interests that might have been
received upon exchange of such Deferred Additional Interest Notes immediately
prior to such Reorganization Transaction. Any such provision shall include
provision for adjustments in respect of such shares of stock and other
securities and property that shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Agreement. The foregoing provisions of
this Section 6.14 shall similarly apply to successive Reorganization
Transactions. For purposes of this Section 6.14, "Reorganization Transaction"
shall mean any reclassification, capital reorganization or other change of
outstanding Equity Interests of the
44
Company or any consolidation or merger of the Company with or into another
corporation (other than a merger with a Subsidiary in which merger the Company
is the continuing corporation and that does not result in any reclassification,
capital reorganization or other change of outstanding Equity Interests of the
class issuable upon exchange of the Deferred Additional Interest Notes) or any
sale, lease, transfer or conveyance to another corporation of all or
substantially all of the assets of the Company; provided, however, that for
purposes hereof the Conversion shall not be a Reorganization Transaction.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES THEREFOR
7.1 Events of Default. Any one or more of the following shall constitute an
"Event of Default" as the term is used herein:
(a) except as provided for in Section 7.2(b), default shall occur in the
payment of interest on any Note on any Interest Payment Date which is not
remedied within five Business Days after such Interest Payment Date or default
shall occur in the making of the payment of the principal of any Note or of any
applicable Prepayment Call Price or Change in Control Event Prepayment Price on
the applicable scheduled Repayment Date or at any Prepayment Date or Change in
Control Event Prepayment Date or any accelerated date on which any of such
amounts are due and payable; or
(b) (i) default shall occur in the observance or performance of any
covenant set forth in Sections 5.7(a), 5.8, 5.9 (other than as set forth in
Section 7.1(b)(ii)) or 5.10 or the Company shall fail to comply with its
obligations under Section 9 of the Note Purchase Agreements or its obligations
under the Registration Rights Agreement; or
(ii) default shall occur in the observance or performance of any
covenant set forth in Section 5.9 with respect to involuntary Liens that are
suffered to exist which is not remedied within 30 days after the earlier of: (A)
receipt by the Company of written notice from a holder of Notes requiring the
same to be remedied and (B) the date on which the Company shall have obtained
knowledge of the occurrence of such Default; or
(c) default shall occur in the observance or performance of any other
obligation, covenant, undertaking, condition or provision in respect of the
Notes or contained in the Note Purchase Agreements which is not remedied within
30 days after the earlier of: (i) receipt by the Company of written notice from
a holder of Notes requiring the same to be remedied and (ii) the date on which
the Company shall have obtained knowledge of the occurrence of any Default; or
(d) the Company or any Subsidiary (i) defaults (beyond any applicable grace
period) on any payment of principal or of interest on any Indebtedness in excess
of $1,000,000 individually or in the aggregate or (ii) defaults (beyond any
applicable grace period) in the performance or observance of any provision
contained in any agreement which shall result in any Indebtedness in excess of
$1,000,000 individually or in the aggregate being declared to be due and payable
before its stated maturity; or
45
(e) there shall be entered in any court of competent jurisdiction, any
final judgment ordering the Company or any Subsidiary to pay money in excess of
$100,000 or the equivalent thereof in another currency, and such judgment shall
remain undismissed, undischarged, or unstayed pending appeal and in effect for a
period of 60 days from the entry thereof; or
(f) any representation or warranty made by the Company herein in connection
with the consummation of the issuance and delivery of the Notes shall prove to
have been false or incorrect in any respect as of the date of the making
thereof; or
(g) the Company or any Subsidiary shall become insolvent or unable to pay
its debts as they fall due, or shall stop, suspend or threaten to stop or
suspend payment of all or a material part of its debts or shall propose or make
a general assignment or an arrangement or composition with or for the benefit of
its creditors, or a moratorium shall be agreed or declared in respect of or
affecting all or a material part of the Indebtedness of the Company or any
Subsidiary; or
(h) there shall be entered an order by any competent court, or a resolution
passed, for the winding up or dissolution of the Company or any Subsidiary, save
for the purposes of reconstruction, amalgamation or reorganization on terms
approved by the holders of at least a majority in the then outstanding principal
amount of the Notes or otherwise permitted by this Agreement; or
(i) the Company or any Subsidiary shall initiate or consent to judicial
proceedings relating to itself under any applicable liquidation, bankruptcy,
insolvency, composition, reorganization or other similar Laws (including a
proceeding to appoint a receiver, trustee, custodian or other similar official
for it or for all or any material part of its assets), or there shall be
commenced against the Company or any Subsidiary any such proceeding that results
in the entry of an order for relief or remains undismissed, unbonded or unstayed
pending appeal and in effect for a period of 60 days from the date of entry
thereof; or the Company or any Subsidiary shall make a conveyance or assignment
for the benefit of, or shall enter into any composition or other arrangement
with, its creditors generally, save for the purposes of reconstruction,
amalgamation or reorganization on terms approved by holders of at least a
majority in the then outstanding principal amount of the Notes; or
(j) the Company shall take any action authorizing, or in furtherance of, or
indicating its consents to, approval of, or acquiescence in, any of the acts set
forth above in clauses (g) through (i); or
(k) any Termination Event with respect to a Plan shall have occurred and
the sum (determined as of the date of occurrence of such Termination Event) of
the Insufficiency of such Plan and the Insufficiency of any and all other Plans
with respect to which a Termination Event shall have occurred and be continuing
(or in the case of a Multiple Employer Plan with respect to which a Termination
Event described in clause (ii) of the definition of Termination Event shall have
occurred and be continuing, the liability of the Company, the Subsidiaries and
the ERISA Affiliates related thereto) is equal to or greater than $100,000; or
46
(l) the Company, any Subsidiary or any ERISA Affiliate shall fail to pay
when due any amount or amounts equal to or greater than $100,000 that it is
obligated to pay under Title IV of ERISA; or
(m) the Company, any Subsidiary or any ERISA Affiliate shall have committed
a failure described in Section 302(f)(1) of ERISA or Section 412(n)(1) of the
Code and the amount determined under Section 302(f)(3) of ERISA or Section
412(n)(3) of the Code in respect of such failure shall be equal to or greater
than $100,000; or
(n) the Company, any Subsidiary or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan in an amount that, when aggregated with all
other amounts required to be paid to Multiemployer Plans in connection with
Withdrawal Liabilities (determined as of the date of such notification), exceeds
$500,000 or requires annual payments which exceed by more than $100,000 the
annual payments required to be made by the Company, such Subsidiary or such
ERISA Affiliate to such Multiemployer Plan immediately prior to the incurrence
of such Withdrawal Liability; or
(o) the Company, any Subsidiary or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is
insolvent or in reorganization or is being terminated, within the meaning of
Title IV of ERISA, if as a result of such insolvency, reorganization or
termination the aggregate annual contributions of the Company, the Subsidiaries
and the ERISA Affiliates to all Multiemployer Plans that are then insolvent, in
reorganization or being terminated have been or will be increased over the
amounts contributed to such Multiemployer Plans for the respective plan years
that include the date hereof by an amount exceeding $100,000; or
(p) the aggregate amount of the Insufficiencies as of the last day of any
Plan year in respect of all Plans having any Insufficiency as of such date shall
exceed $1,000,000; or
(q) the Company or any Subsidiary is required to register as an "investment
company" under the Investment Company Act of 1940, as amended.
7.2 Acceleration of Maturities.
(a) Upon the occurrence and during the continuation of an Event of Default
under Section 7.1(a) above, the holder of a Note as to which such Event of
Default occurred may declare such Note to be immediately due and payable at a
price equal to the Prepayment Call Price with respect to such Note. Upon the
occurrence and during the continuation of any Event of Default other than under
Section 7.1(a) above, the holders of at least a majority in the then outstanding
principal amount of the Senior Subordinated Notes, if any, and the holders of at
least a majority in the then outstanding principal amount of the Deferred
Additional Interest Notes, may declare all Senior Subordinated Notes or all
Deferred Additional Interest Notes, as the case may be, to be immediately due
and payable at a price equal to the Prepayment Call Price with respect to such
Notes.
47
(b) Upon the occurrence and during the continuance of an event of default
by the Company of (i) the payment of any principal of or interest on any Senior
Indebtedness which results in such Senior Indebtedness being declared to be due
and payable before its stated maturity or occurs at such stated maturity or (ii)
a material covenant of the Company (other than those referenced in clause (i))
in any instrument evidencing Senior Indebtedness with respect to which the
holders of such Senior Indebtedness have provided written notice to the Company
and to the holders of the Senior Subordinated Notes specifying such event of
default, the Company may elect (the right to make such an election, the "Block
Right") not to make any payment of principal of or interest on the Notes prior
to the earlier of (x) the 179th calendar day following such event of default and
(y) the curing of such event of default to the satisfaction of the holders of
such Senior Indebtedness (such period, the "Standstill Period") and the
nonpayment of principal and interest on the Notes during the Standstill Period
shall not constitute an Event of Default under Section 7.1(a) if the Company
pays in full all such amounts that became due and payable under this Agreement
during the Standstill Period within five (5) Business Days following the end of
the Standstill Period. The Company may elect to use its Block Right no more than
once in any consecutive 365 day period.
7.3 Remedies Cumulative. No remedy herein conferred upon the holder of any
Note is intended to be exclusive of any other remedy, and each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
7.4 Remedies Not Waived. Except for such waiver or waivers as may have been
agreed to in writing in accordance with Section 10, no course of dealing between
the Company and the holder of any Note and no delay or failure in exercising any
rights hereunder or under any Note in respect thereof shall operate as a waiver
of any of the rights of any holder of such Note.
7.5 Rescission of Acceleration. The provisions of Section 7.2 are subject
to the condition that if the principal of and accrued but unpaid interest on all
or any outstanding Notes have been declared or have become immediately due and
payable by reason of the occurrence of any Event of Default described in Section
7.1, (i) with respect to an Event of Default under Section 7.1(a), the holder of
such Note or Notes who declared such Note or Notes to be due and payable, and
(ii) with respect to an Event of Default other than under Section 7.1(a), the
holders of at least a majority in the then outstanding principal amount of all
the Senior Subordinated Notes or Deferred Additional Interest Notes, as the case
may be, may, in each case by written instrument filed with the Company, rescind
and annul such declaration and the consequences thereof with respect to such
Note or Notes; provided, that at the time such declaration is annulled and
rescinded:
(a) no judgment or decree has been entered for the payment of any monies
due pursuant to the applicable Notes or this Agreement;
(b) all arrears of interest upon all the applicable Notes and all other
sums payable under the applicable Notes and under this Agreement (except any
principal or interest on the
48
Notes which has become due and payable solely by reason of such declaration
under Section 7.2) shall have been duly paid; and
(c) each and every other Event of Default shall have been cured or waived
pursuant to Section 10.1;
and provided, further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default.
7.6 Subordination. The rights of the holders arising under this Section 7
are not subject to the provisions of Section 8; provided, however, that any
right to payment to the holders pursuant to Section 7.2 shall be subject to such
Section 8.
SECTION 8. SUBORDINATION OF NOTES
The Company covenants and agrees, and each holder of a Note, by his
acceptance thereof, likewise covenants and agrees, that the indebtedness
represented by the Notes and the payment of the principal of, interest on or
applicable Prepayment Call Price or Change in Control Event Prepayment Price
with respect to each and all of the Notes including any other payment on account
of the Notes, are hereby expressly made subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness.
SECTION 9. PREEMPTIVE RIGHTS
9.1 Preemptive Rights with respect to New Insider Equity Interests. The
Company hereby grants to each Purchaser the right, subject to the provisions of
this Section 9, to purchase its pro rata share of any New Insider Equity
Interests which the Company may, from time to time, propose to issue and sell to
any person described in the definition of New Insider Equity Interests on the
same terms and conditions as offered to such persons. A Purchaser's pro rata
share of any New Insider Equity Interests, for purposes of this right, is the
ratio of (i) the Equity Interests for which the Deferred Additional Interest
Notes held by such Purchaser are exchangeable pursuant to Section 6 and the
Equity Interests held by such Purchaser to (ii) the Applicable Fully Diluted
Equity Interests. Each Purchaser electing its pre-emptive rights pursuant hereto
also shall have a right of over-allotment such that if any other Purchaser fails
to exercise its right hereunder to purchase its pro rata share of such New
Insider Equity Interests, the electing Purchasers may purchase the
non-purchasing Purchaser's portion on a pro rata basis relative to each other
within five Business Days from the end of the 10 Business Day period referred to
in Section 9.3.
The rights of each Purchaser under this Section 9.1 shall be freely
transferable by such Purchaser separately from the Deferred Additional Interest
Notes and Equity Interests to which they relate.
9.2 Preemptive Rights with respect to Pari Passu Indebtedness and Related
Equity Interests. The Company hereby grants to the Purchasers holding Senior
Subordinated Notes, for so long as such Purchasers hold collectively at least
50% of the aggregate
49
outstanding principal amount of the Senior Subordinated Notes, the right to
purchase, at the Purchasers' option and in accordance with the provisions of
Section 9.3, up to and including 50% of (a) any Indebtedness that is proposed to
be issued by the Company and is pari passu with the Senior Subordinated Notes
and (b) any Equity Interests or Convertible Interests issued by the Company in
connection with the proposed issuance of such Indebtedness, pro rata among the
Purchasers; provided, that if no such Convertible Interests or Equity Interests
are to be issued by the Company in connection with any such proposed issuance of
pari passu Indebtedness, the Purchasers shall still have the option to purchase
such Indebtedness. A Purchaser's pro rata share, for purposes of this right, is
the ratio of (i) the outstanding principal balance of Senior Subordinated Notes
held by such Purchaser to (ii) the aggregate outstanding principal balance of
the Senior Subordinated Notes held by all of the Purchasers. Each Purchaser
shall have a right of over-allotment such that if any Purchaser fails to
exercise his right hereunder to purchase his pro rata portion of such
Indebtedness, Equity Interests or Convertible Interests, the other Purchasers
may purchase the non-purchasing Purchaser's portion on a pro rata basis within 5
Business Days from the end of the 10 Business-Day period referred to in Section
9.3.
The rights of each Purchaser under this Section 9.2 are not transferable or
assignable.
9.3 Preemptive Procedures.
(a) In the event the Company proposes to undertake an issuance of Subject
Securities, it shall give the Purchasers entitled to the rights under Section
9.1 or 9.2 written notice of its intention, describing the Subject Securities,
the price and the general terms upon which the Company proposes to issue the
same. Each Purchaser shall have 10 Business Days from the date of receipt of any
such notice to agree to purchase such Purchaser's pro rata share of such Subject
Securities for the price and upon the same terms specified in the notice by
giving written notice to the Company and, if so agreed, stating therein the
quantity of such Subject Securities to be purchased (which quantity shall be
such Purchaser's pro rata share only in the case of the right under Section
9.1).
(b) In the event such Purchasers fail to exercise the rights under Section
9.1 or 9.2 within said 10-Business Day period, the Company shall have 150 days
thereafter to sell or enter into an agreement (pursuant to which the sale of
such Subject Securities covered thereby shall be closed, if at all, within 150
days from the date of said agreement) to sell such Subject Securities respecting
which such Purchasers' right was not exercised, at a price and upon material
terms not more favorable to the purchasers thereof than specified in the
Company's Notice. In the event the Company has not sold the subject securities
within said 150-day period or entered into an agreement to sell such Subject
Securities within said 150-day period (or sold and issued such Subject
Securities in accordance with the foregoing within 150 days from the date of
said agreement), the Company shall not thereafter issue or sell any such Subject
Securities without first offering such Subject Securities to such Purchasers in
the manner provided above.
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9.4 All Necessary Action. The Company hereby represents and warrants that,
as of the date hereof, the Company has taken all necessary action required to
provide the Purchasers holding Senior Subordinated Notes with all the rights
provided to such Purchasers under this Section 9 and all the benefits of the
obligations incurred by the Company under this Section 9.
SECTION 10. AMENDMENTS, WAIVERS AND CONSENTS
10.1 Consent Required. Any term, covenant, agreement or condition of this
Agreement may, with the consent of the Company, be amended or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), if the Company shall have obtained the consent
in writing of the holders of (unless otherwise provided herein) at least a
majority in the then outstanding principal amount of the Notes; provided, that
no such waiver or amendment shall be effective (a) which will change the time of
payment of the principal of, interest on or applicable Prepayment Call Price or
Change in Control Event Prepayment Price with respect to any Note or reduce the
principal amount thereof, or interest thereon, or applicable Prepayment Call
Price or Change in Control Event Prepayment Price with respect thereto, (b)
which will change any of the provisions of Section 2.1, or (c) which will change
the percentage of holders of the Notes required to consent to any such waiver or
amendment of any of the provisions of this Section 10, or Section 7, in each
case without the consent of each holder of the Notes affected thereby; and
provided, further, that no such waiver or amendment shall be effective which
will change any of the rights or obligations of holders of Deferred Additional
Interest Notes or Registrable Securities without the consent of each holder of
Deferred Additional Interest Notes and Registrable Securities, as the case may
be, affected thereby. Executed or true and correct copies of any waiver or
amendment to this Agreement shall be delivered by the Company to each holder of
outstanding Notes or Registrable Securities forthwith following the date on
which the same shall have been executed and delivered by the holder or holders
of the requisite percentage of outstanding Notes and by the holder or holders of
the Deferred Additional Interest Notes and/or Registrable Securities, as the
case may be.
10.2 Effect of Amendment or Waiver. Any amendment or waiver effected in
accordance with Section 10.1 shall apply equally to all of the holders of the
Notes or Registrable Securities and shall be binding upon them, upon each future
holder of any Note or Registrable Security and upon the Company, whether or not
such Note or Registrable Security shall have been marked to indicate such
amendment or waiver. No such amendment or waiver shall extend to or affect any
obligation not expressly amended or waived or impair any right consequent
thereon.
10.3 Solicitation of Holders. The Company shall not solicit, request or
negotiate for or with respect to any proposed waiver or amendment of any of the
provisions of this Agreement or the Notes unless each holder of the Notes
(irrespective of the amount of Notes then owned by it) and Registrable
Securities, as applicable, shall be informed thereof by the Company and shall be
afforded the opportunity of considering the same and shall be supplied by the
Company with sufficient information to enable it to make an informed decision
with
51
respect thereto. The Company shall not, directly or indirectly, pay or cause to
be paid any remuneration, whether by way of supplemental or additional interest,
fee or otherwise, to any holder of the Notes or Registrable Securities, as
applicable, as consideration for or as an inducement to the entering into by any
holder of the Notes or Registrable Securities, as applicable, of any waiver or
amendment of any of the terms and provisions of this Agreement unless such
remuneration is concurrently paid, on the same terms, ratably to the holders of
all of the Notes and Registrable Securities, as applicable, then outstanding or,
if not so paid to any such holder, was offered to be paid to such holder and
such holder declined such payment.
SECTION 11. INTERPRETATION OF AGREEMENT; DEFINITIONS
11.1 Definitions. Unless the context otherwise requires, the terms
hereinafter set forth when used herein or any Exhibit shall have the following
meanings and the following definitions shall be equally applicable to both the
singular and plural forms of any of the terms herein defined.
"ACCH" means Auto Credit Clearinghouse L.P., a limited partnership
organized under the Laws of the State of Delaware.
"Affiliate" means, as to any Person, a Person which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, the first Person; provided, however, that none of First
Union or its Affiliates shall be deemed to be an Affiliate of the Company or of
any Subsidiary thereof for purposes of this Agreement. The term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting stock, by contract or otherwise.
"Agreement" means this Agreement and all Schedules and Exhibits hereto, as
amended, extended, restated, supplemented or otherwise modified or replaced from
time to time in accordance with the terms hereof.
"Applicable Fully Diluted Equity Interests" means, at any time, the Fully
Diluted Equity Interests; provided, however, that Applicable Fully Diluted
Equity Interests shall not include Equity Interests or Convertible Interests
that are issued after the Closing Date in accordance with this Agreement; and,
provided, further, notwithstanding the preceding proviso, Applicable Fully
Diluted Equity Interests shall include Fully Diluted Equity Interests issued to
directors, officers or other management officials of the Company or any
Subsidiary as compensation for the services of such persons.
"Asset Sale" has the meaning assigned in Section 6.7(a).
"Audited Financial Statements" means the audited consolidated financial
statements of the Group for the two fiscal years ended December 31, 1994 and
1995.
"Automatic Exchange Event" means any of (i) a Qualified Public Offering
following the conversion of the Company into a Corporate Company or into a
publicly traded partnership
52
for tax purposes as defined in Section 7704 of the Code, (ii) the sale, lease or
conveyance by the Company or any Subsidiary of all or substantially all of the
assets of the Company to any other Person, including by consolidation with or
merger into such other Person other than in connection with a Conversion as
contemplated in Sections 5.7(a) and 12.1, (iii) the sale or conveyance of all or
substantially all of the Equity Interests of the Company to any other Person,
including by consolidation with or merger into such other Person, (iv) the
decision by the Board of Directors to liquidate, wind-down or dissolve the
Company, and (v) any other event such that if the holders of the Deferred
Additional Interest Notes exchanged such Notes for Equity Interests, (A) the
Company's assets would not be treated as Plan assets for purposes of Title I of
ERISA or Section 4975 of the Code, (B) any income with respect to such Equity
Interests would not be taxable as unrelated business taxable income with respect
to any tax exempt holder, other than due to any debt of the holder, and (C) an
Independent Legal Counsel provides an opinion to the effect of clauses (A) and
(B) above; provided, however, that if the holders of at least a majority in the
then outstanding principal amount of the Deferred Additional Notes reasonably
determine, based on the written opinion of an Independent Legal Counsel that an
event listed in any of clauses (i), (ii), (iii) or (iv) would result in (x) the
Company's assets being treated as Plan Assets for purposes of Title I of ERISA
or Section 4975 of the Code or (y) income with respect to such Equity Interests
would be taxable as unrelated business taxable income with respect to any tax
exempt holder, other than due to any debt of the holder, such event shall not be
an Automatic Exchange Event for purposes hereof.
"Benefit Plan" has the meaning assigned in Section 3.2(b)(i).
"Block Right" has the meaning assigned in Section 7.2(b).
"Board of Directors" means (i) prior to the Company becoming a Corporate
Company, either the board of directors of the Company's general partner (or
other body fulfilling a substantially similar function) or any duly authorized
committee of that board and (ii) after the Company becomes a Corporate Company,
either the board of directors of the Company (or other body fulfilling a
substantially similar function) or any duly authorized committee of that board.
"Business Day" means any day other than a Saturday, Sunday or other day on
which banks in New York, New York are required by law to close or are
customarily closed.
"Cash" means such coin or currency of the United States of America as at
the time shall be legal tender for payment of all public and private debts.
"Change in Control Event" means any of the following events that occur on
or prior to July 31, 2006:
(i) (a) prior to the consummation of an Initial Public Offering, the
Controlling Group shall cease to own at least 50% of the total voting power of
all classes of Equity Interests or (b) as of or after the consummation of an
Initial Public Offering, any person or group, within the meaning of Section
13(d)(3) of the Exchange Act (other than the
53
Controlling Group) together with any Affiliates and Related Persons of any
thereof, shall beneficially own, within the meaning of Rule 13d-3 under the
Exchange Act, more than 35% of the total voting power of all classes of Equity
Interests of the Company entitled to vote generally in the election of directors
of the Company; or
(ii) the Company, the general partner of the Company, the requisite
holders of Equity Interests or any Executive Officer of the Company enters into
or approves any agreement, transaction or proposal that would result in a Change
in Control Event pursuant to clause (i) (including without limitation any
agreement, transaction or proposal that would have such result with the passage
of time, upon the payment of money or other consideration, or upon the
occurrence of any contingency or contingencies).
"Change in Control Event Notice" has the meaning assigned in Section 2.2.
"Change in Control Event Prepayment Date" means, with respect to a Change
in Control Prepayment Period, the final day thereof or, if such day is not a
Business Day, the next succeeding Business Day.
"Change in Control Event Prepayment Period" means, with respect to any
Change in Control Event, the period beginning on the date on which the Company
gives the holders of Notes a Change in Control Event Notice (or such earlier
date as the holders of at least a majority in the then outstanding principal
amount of the Notes give written notice to the Company that a Change in Control
Event has occurred) and ending on the 30th day thereafter.
"Change in Control Event Prepayment Price" for the prepayment of any Note
or portion of a Note under the previsions of Section 2.2, means the sum of (i)
the accrued interest in respect of the principal amount prepaid as of the Change
in Control Event Prepayment Date plus (ii) the principal amount prepaid.
"Closing Date" has the meaning assigned in Section 1.3(b).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission as from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Exchange Act, then the Person performing
such duties at such time.
"Company" has the meaning assigned in the first paragraph of this
Agreement.
"Company Bid Price" has the meaning defined in Section 1.6(b)(ii).
"Contingent Liability" means any agreement, undertaking or arrangement by
which any Person guarantees, endorses or otherwise becomes or is contingently
liable (by direct or indirect agreement, contingent or otherwise, or by
operation of law, to provide funds for payment, to supply funds to, or otherwise
to invest in, a debtor, or otherwise to assure a
54
creditor against loss) upon or for (i) the indebtedness, obligation or any other
liability of any other Person (other than by endorsements of instruments in the
ordinary course of collection), (ii) the payment of dividends or other
distributions upon the shares or other securities of any other Person or (iii)
any undertaking of any other Person (whether by agreement to purchase any
obligations, stocks, assets, goods or services, or to supply or advance any
funds, assets, goods or services, or otherwise). For the purposes of all
computations made under this Agreement, a Contingent Liability with respect to
any Indebtedness shall be deemed to be Indebtedness equal to the principal
amount of such Indebtedness, and a Contingent Liability in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"Contracts" has the meaning assigned in Section 3.1(q).
"Controlling Group" means the Initial Equityholders, their Affiliates and
Related Persons and, after a conversion of the Company to a Corporate Company,
shall include National Auto Finance Company L.P.; provided, that whenever a
Change in Control Event occurs subsequent to the Closing Date, if any Senior
Subordinated Note remains outstanding after the Change in Control Event
Prepayment Date related to such Change in Control Event, Controlling Group shall
mean any person or group, within the meaning of Section 13(d)(3) of the Exchange
Act, together with Affiliates and Related Persons of any thereof, that
beneficially owns, within the meaning of Rule 13d-3 under the Exchange Act, more
than 50% of the total voting power of all classes of Equity Interests
immediately after the occurrence of such Change in Control Event.
"Conversion" has the meaning assigned in Section 12.1.
"Convertible Interest" means any securities or other interests that are
convertible or exchangeable (in each case with or without consideration) into,
directly or indirectly, whether at the time of issuance or upon the passage of
time or the occurrence of some future event, Equity Interests, including any
warrants, options or other rights to subscribe for or purchase any Equity
Interests.
"Convertible Preferred Interest" means any securities or other interests
that are convertible or exchangeable (in each case with or without
consideration) into, directly or indirectly, whether at the time of issuance or
upon the passage of time or the occurrence of some future event, Preferred
Equity Interests, including any warrants, options or other rights to subscribe
for or purchase any Preferred Equity Interests.
"Corporate Company" has the meaning assigned in Section 12.1.
"Debt Limit" means the product of (x) the Equity of the Company and (y) (i)
2, from the Closing Date to and including December 31, 1996; (ii) 1.25, from
January 1, 1997 to and including December 31, 1997; (iii) .9, from January 1,
1998 to and including December 31, 1998; (iv) .8, from January 1, 1999 to and
including December 31, 1999; and (v) .7, from and after January 1, 2000.
55
"Default" means any event or condition the occurrence of which would, with
the lapse of time or the giving of notice, or both, constitute an Event of
Default under Section 7.
"Deferred Additional Interest" has the meaning assigned in Section 1.1(b).
"Deferred Additional Interest Note Interest" has the meaning assigned in
Section 1.1(d).
"Deferred Additional Interest Note Repayment Date" has the meaning assigned
in Section 1.2(b).
"Deferred Additional Interest Notes" has the meaning assigned in Section
1.1(a).
"Deferred Additional Interest Rate" means 3% per annum; provided, however,
that in the event that any amount hereunder is determined to be interest in
excess of the maximum interest rate permitted by applicable law, "Deferred
Additional Interest Rate" shall mean such permitted maximum.
"Disclosure Letter" means the letter from the Company of even date
herewith, addressed to the Purchasers listed on Schedule I hereof, and attaching
schedules relating to certain representations and warranties contained in
Section 3.1 hereof, and shall include any exhibits, schedules or attachments to
such letter.
"Discount Rate" means, as of any date of determination, the arithmetic mean
of the yields set forth in the most recent Statistical Release published prior
to the date of determination under the respective headings "This Week" and "Last
Week" under the caption "Treasury Constant Maturities" for the maturity (rounded
to the nearest month) corresponding to the Life to Maturity. If no maturity so
published exactly corresponds to such Life to Maturity, yields for the two
published maturities most closely corresponding to such Life to Maturity shall
be determined in the manner specified in the immediately preceding sentence and
the Discount Rate shall be interpolated or extrapolated from such yields on a
straight-line basis, rounding in each of such relevant periods to the nearest
month.
"Disposition" has the meaning assigned in the Tag Along Agreement.
"Dollars" or "$" means the lawful currency of the United States of America.
"Eligible Investments" means any one or more of the following obligations
or securities:
(a) direct obligations of, and obligations fully guaranteed as to timely
payment by, the United States of America or any agency or instrumentality of the
United States of America, the obligations of which are expressly backed by the
full faith and credit of the United States of America;
(b) demand and time deposits in, certificates of deposit of, or banker's
acceptances issued by any depository institution or trust company incorporated
under the laws
56
of the United States of America or any state thereof and subject to supervision
and examination by federal and/or state banking authorities; provided, that the
commercial paper and/or short-term debt obligations of such depository
institution at the time of such investment or contractual commitment providing
for such investment has received a rating of at least "A-1" from S&P or at least
"P-1" from Moody's (or, in the case of the principal depository institution in a
holding company system, the long-term debt obligations of such holding company
at the time of such investment or contractual commitment providing for such
investment have received a rating of at least "AA" from S&P or at least "Aa-2"
from Moody's);
(c) repurchase obligations pursuant to a written agreement with respect to
(i) any security described in clause (a) above or (ii) any other security issued
or guaranteed by an agency or instrumentality of the United States of America,
in either case entered into with an entity whose debt obligations are assigned
the highest credit rating by both Rating Agencies;
(d) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States of America or any
state thereof whose long term unsecured debt obligations are assigned the
highest credit rating by both Rating Agencies at the time of such investment or
contractual commitment providing for such investment;
(e) commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand or on a specified
date not more than one year after the date of issuance thereof) which have been
assigned the highest credit rating by both Rating Agencies at the time of such
investment; and
(f) certificates or receipts representing ownership interests in future
interest or principal payments on obligations described in clause (a) above
which are held by a custodian on behalf of the holders of such certificates or
receipts.
"Environment" means any ambient air, workplace air, indoor air, surface
water, drinking water, groundwater, land surface strata, river sediment, plant
or animal life, natural resources, workplace, and real property and the physical
buildings, structures and fixtures thereon, including without limitation sewer,
septic and waste treatment, storage or disposal systems.
"Environmental Condition" means the release, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing into the Environment of any Hazardous Material or the presence of
any Hazardous Substance at, in or on the Environment (whether or not upon the
real property which is owned or leased by the Company or any Subsidiary or other
property of the Company or any Subsidiary and whether or not such pollution
constituted at the time thereof a violation of any Environmental Laws) as a
result of which the Company or any Subsidiary may become liable to any Person,
may become subject to a requirement for investigation or remediation or by
reason of which the real property which is owned or leased by the Company or any
Subsidiary or any of their assets reasonably may suffer or be subjected to any
Lien.
57
"Environmental Laws" means all applicable Laws relating to health, safety,
industrial hygiene, Hazardous Material or the Environment or imposing liability
or standards of conduct concerning any Hazardous Material.
"Equity" of the Company means, as of the date Equity is determined, the
amounts set forth on its consolidated balance sheet, prepared in accordance with
generally accepted accounting principles, calculated as the sum of (i) the
nominal or stated value of all outstanding equity interests (including for
purposes hereof only, any Preferred Equity Interests, but excluding any equity
interest by its terms redeemable prior to the Senior Subordinated Note Repayment
Date), (ii) capital surplus and cumulative undistributed net earnings plus (iii)
all Indebtedness represented by the Partner Promissory Notes; provided, however,
that if the latest auditors' report with respect to its balance sheet is in any
way qualified, there shall be deducted from such sum the amount which such
auditors certify to be the difference between the actual amount shown in such
balance sheet and the amount which such auditors consider, in their reasonable
opinion, to present a true and fair view of the relevant entry in such balance
sheet; and provided, further, that to the extent Deferred Additional Interest or
Deferred Additional Interest Note Interest that is added to the principal
balance of the Deferred Additional Interest Notes would be required to be
deducted from such sum in accordance with generally accepted accounting
principles, such amount shall not be so deducted.
"Equity Interest" means any partnership interests, shares of stock, limited
liability company interests or membership interests or other equity interests in
the Company, other than Preferred Equity Interests.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor statute, and the regulations
promulgated and the rulings issued thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) which, together with the Company, is treated as a single employer
under Title IV of ERISA or Section 414 of the Code.
"Event of Default" has the meaning assigned in Section 7.1
"Exchange Act" has the meaning assigned in Section 5.18.
"Exchange Agent" has the meaning given to such term in Section 1.5.
"Exchange Rate" has the meaning assigned in Section 6.6(a).
"Exchanged NQPO Note" has the meaning assigned in Section 6.4(a).
"Exchanged PAR Note" has the meaning assigned in Section 6.2(a)
"Exchanged TAG Note" has the meaning assigned in Section 6.3(a).
58
"Executive Officer" means the chief executive officer, chief financial
officer, executive vice president or secretary of the Company.
"First Union" means First Union Corporation.
"Fully Diluted Equity Interests" means, at any time, the then outstanding
Equity Interests and Equity Interests issuable, whether at such time or upon the
passage of time or the occurrence of future events, upon the exercise,
conversion or exchange of all then outstanding Convertible Interests.
"Governmental Authority" means any federal, state, local, foreign or other
political subdivision or any agency, department or governmental or
administrative (including self-regulatory) body, instrumentality, department or
agency or any court, tribunal, administrative hearing body, arbitration panel,
commission, or other similar dispute-resolving panel or body, whether now or
hereafter in existence, or any officer or official thereof.
"Group" means the Company and its consolidated Subsidiaries (not including
the Trusts).
"Hazardous Material" means any flammable, explosive or radioactive
material, hazardous, toxic or solid waste, hazardous, toxic or deleterious
substance or other such material and any other substance or material defined or
identified as a hazardous, toxic or deleterious substance, material or waste
pursuant to any Environmental Law, including without limitation:
(i) Those substances included within the definition of "hazardous
substances," "hazardous materials," "toxic substances" or "solid waste" in the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, the Resource Conservation and Recovery Act of 1976, as amended, and the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq., as
amended, and in the regulations promulgated thereunder;
(ii) Those substances listed in the United States Department of
Transportation Table (49 CFR 172.101 and all amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and all amendments thereto);
(iii) Such other substances, materials and wastes which are or become
regulated under applicable local, state or federal Laws; and
(iv) Any material, waste or substance which is (A) petroleum or any
fraction thereof, (B) asbestos, (C) polychlorinated biphenyls or (D) designated
as a "hazardous substance" pursuant to Section 311 of the Clean Water Act, 33
U.S.C. Sections 1251 et seq. (33 U.S.C. Section 1321 (A)(14)) or listed pursuant
to Section 307 of the Clean Water Act (33 U.S.C. Section 1317), all as amended.
59
"Hedging Obligations" means, with respect to any Person, all liabilities of
such Person under interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements, and all other agreements or arrangements
entered into by such Person to protect such Person against fluctuations in
interest rates or currency exchange rates.
"Indebtedness" means, with respect to any Person and without duplication,
(a) all obligations of such Person for borrowed money and all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments;
(b) all obligations, contingent or otherwise, relative to the face amount of all
letters of credit, whether or not drawn, and banker's acceptances issued for the
account of such Person; (c) all obligations of such Person as lessee under
leases that have been or should be, in accordance with generally accepted
accounting principles, recorded as capitalized lease obligations; (d) whether or
not so included as liabilities in accordance with generally accepted accounting
principles, net liabilities of such Person under all Hedging Obligations; (e)
whether or not so included as liabilities in accordance with generally accepted
accounting principles, all obligations of such Person to pay the deferred
purchase price of property or services other than in the ordinary course of
business, and indebtedness (excluding prepaid interest thereon) secured by a
Lien on property owned or being purchased by such Person (including indebtedness
arising under conditional sales or other title retention agreements), whether or
not such indebtedness shall have been assumed by such Person or is limited in
recourse; (f) all contingent liabilities, including without limitation
guarantees, of such Person in respect of any of the foregoing; and (g)
amendments, renewals, extensions, modifications and refundings of any of (a)
through (f). For all purposes of this Agreement, the Indebtedness of any Person
shall include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer.
"Independent Legal Counsel" means any legal counsel of recognized national
stature mutually agreed upon by the Company and all holders of Deferred
Additional Interest Notes.
"Independent Review Committee" means a committee of the Board of Directors
comprised of all directors of the Company who (i) are Related Persons of
IronBrand or of IronBrand's Affiliates or (ii) are not Related Persons of the
Company or (other than being a Related Person of the Company as a result of
being a director of the Company) of its Affiliates or employees of any of the
foregoing.
"Initial Equityholder" means those Persons owning Equity Interests in the
Company as of the Closing Date.
"Initial Public Offering" means the first Public Offering.
"Insider Compensation Increases" has the meaning assigned in Section
5.17(b).
"Insufficiency" means, at any time with respect to any Plan, the amount, if
any, by which (i) the present value of all benefits under such Plan (determined
as of such date on the basis of assumptions prescribed by the PBGC for purposes
of Section 4044 of ERISA),
60
exceeds (ii) the fair market value (as of such date) of all assets of such Plan
allocable to such benefits (excluding any accrued but unpaid contributions).
"Interest Payment Date" has the meaning assigned in Section 1.1(b).
"IronBrand" means IronBrand Capital LLC, a North Carolina limited liability
company, and any successors or permitted assignees of any of IronBrand's rights
under the Partnership Agreement.
"JPMIM" means ▇.▇. ▇▇▇▇▇▇ Investment Management Inc. or any Affiliate
thereof.
"Laws" means all laws, statutes, ordinances, regulations, requirements,
interpretations, judgments, rulings, orders, decrees, permits, authorizations,
licenses, variances or waivers of Governmental Authorities.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement (excluding normal banking transactions),
encumbrance, lien (statutory or otherwise), charge against or interest in
property to secure payment of a debt or performance of an obligation, or other
priority or preferential arrangement of any kind or nature whatsoever.
"Life to Maturity" of the principal amount of any Note means, with respect
to the calculation of the Prepayment Premium, the number of years (calculated to
the nearest one-twelfth) which will elapse between the date on which it was
declared due and payable and the Senior Subordinated Note Repayment Date or the
Deferred Additional Note Repayment Date, as the case may be.
"Liquidation Decision" has the meaning assigned in Section 6.7(a)(i).
"Liquidating Notes" has the meaning assigned in Section 6.1(a).
"Management Agreement" means that certain Management Agreement dated as of
December 29, 1994, by and between National Auto Finance Corporation and the
Company, as amended by the First Amendment of Management Agreement dated as of
January 1, 1996, and as further amended, extended, restated, supplemented or
otherwise modified or replaced from time to time in accordance with the terms
thereof and Section 5.32 of this Agreement.
"Master Trust" means the trust established pursuant to the Pooling and
Administration Agreement, dated as of December 8, 1994, as supplemented and
amended, among NAFCO Funding Trust, the Company and Bankers Trust Company.
"Material Adverse Effect" means a material adverse effect on (i) the
business, assets, operations, prospects, liabilities or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole, (ii) the
Company's ability to pay the Notes in accordance with the terms hereof and
thereof, or (iii) the Purchasers' rights and remedies under the Note Purchase
Agreements and the Notes.
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"Material Subsidiary" means any Subsidiary which (i) has total assets or
total liabilities (determined in accordance with generally accepted accounting
principles) in excess of $1,000,000, (ii) has annual revenues in excess of
$1,000,000, or (iii) is otherwise material to the business, condition (financial
or otherwise), operations, liabilities, assets or prospects of the Company or of
the Company and its consolidated Subsidiaries taken as a whole.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc.
"Multiemployer Plan" means, at any time, a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA to which the Company, any of its Subsidiaries or
any ERISA Affiliate is then making or accruing an obligation to make
contributions or has within any of the preceding five plan years made or accrued
an obligation to make contributions, including for these purposes any Person
which ceased to be an ERISA Affiliate during such five-year period.
"Multiple Employer Plan" means, at any time, an employee benefit plan,
other than a Multiemployer Plan, subject to Title IV of ERISA to which the
Company and any of its Subsidiaries or any ERISA Affiliate and more than one
employer other than the Company, any of its Subsidiaries or any ERISA Affiliate
is then making or accruing an obligation to make contributions, has within any
of the preceding five plan years made or accrued an obligation to make
contributions or, in the event that any such plan has been terminated, to which
the Company, any of its Subsidiaries or any ERISA Affiliate made or accrued an
obligation to make contributions during any of the five plan years preceding the
date of termination of such plan, including for these purposes any Person which
ceased to be an ERISA Affiliate during such five-year period.
"NQPO Reduction Fraction" means, with respect to an exchange of an
Exchanged NQPO Note in connection with a non-Qualified Public Offering pursuant
to Section 6.4, a fraction, the denominator of which equals the number of Equity
Interests for which such Exchanged NQPO Note was exchanged and the numerator of
which equals the number of Equity Interests for which such Exchanged NQPO Note
was exchanged that were not purchased by the underwriter and with respect to
which a New NQPO Note is issued.
"Net Proceeds" means the net proceeds realized by the Company from all
offerings by the Company as of or after the Company's inception, of any equity
interests of the Company that are not subject to any right of redemption (other
than by the Company), reduced by the amount of any cash or other consideration
provided to the holders of any equity interests of the Company as of or after
the Company's inception to redeem, repurchase, return, cancel or otherwise in
consideration of such interests.
"New Insider Equity Interests" means any Equity Interests, Convertible
Interests, Preferred Equity Interests or Convertible Preferred Interests which
the Company issues or proposes to issue after the date hereof (except any such
Interests issued to directors, officers or other management officials of the
Company or of any Subsidiary as compensation for the services of such persons)
to any of the Initial Equityholders, Related Persons of the Initial
62
Equityholders, Affiliates of the Initial Equityholders and Related Persons of
the Company or Affiliates of the Company.
"New NQPO Note" has the meaning assigned in Section 6.4(b).
"New PAR Note" has the meaning assigned in Section 6.2(a).
"New TAG Note" has the meaning assigned in Section 6.3(b).
"Non-Prime Loans" means retail installment contracts originated by
automobile dealers in connection with their sale of used and new automobiles,
vans and light duty trucks to borrowers with limited credit histories, low
incomes or identifiable past credit problems.
"Note Purchase Agreements" has the meaning assigned in Section 1.4.
"Note Register" has the meaning assigned in Section 12.2.
"Notes" has the meaning assigned in Section 1.1(a).
"Offer Notice" has the meaning assigned in Section 1.6(b)(i).
"Overdue Rate" means a rate per annum equal to the Senior Subordinated
Interest Rate or the Deferred Additional Interest Rate, as the case may be, plus
2%.
"PAR Reduction Fraction" means with respect to an exchange of an Exchange
PAR Note for Equity Interests in connection with a Partial Optional Exchange
Event pursuant to Section 6.2, a fraction, the denominator of which equals the
number of Equity Interests for which such Exchanged PAR Note was exchanged and
the numerator of which equals the number of Equity Interests not redeemed by the
Company and with respect to which a New PAR Note is issued.
"Partial Optional Exchange Event" means any event such that if the holders
of the Deferred Additional Interest Notes exchanged some but not all (when
otherwise required or permitted to sell all) of such Notes for Equity Interests,
(A) the Company's assets would not be treated as Plan assets for purposes of
Title I of ERISA or Section 4975 of the Code, (B) any income with respect to
such Equity Interests would not be taxable as unrelated business taxable income
with respect to any tax exempt holder, other than due to any debt of the holder,
and (C) an Independent Legal Counsel provides an opinion to the effect of
clauses (A) and (B) above.
"Partner Promissory Notes" means those certain Promissory Notes set forth
in Schedule 3.1(s) to the Disclosure Letter, as amended, extended, restated or
otherwise modified or replaced from time to time in accordance with the terms
thereof and Section 5.32 of this Agreement.
"Partnership Agreement" means the Second Amended and Restated Agreement of
Limited Partnership of National Auto Finance Company L.P. dated as of September
1, 1995.
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"Paying Agent" has the meaning assigned in Section 1.5.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto, or, if at any time such corporation or successor is not
existing and performing the function now assigned to it, then the Person
performing such function at such time.
"Permissible Liens" means (i) Liens securing Senior Indebtedness of the
Company permitted pursuant to Section 5.8, (ii) Liens upon any property incurred
to secure the purchase price of such property or to secure Indebtedness incurred
for the purpose of financing the acquisition of such property and any renewal or
extension of any such Lien which is limited to the original property covered
thereby and which secures any renewal or extension of the original secured
financing that are not in the aggregate material to the Company and its
Subsidiaries taken as a whole, (iii) Liens created as a result of the
capitalization of leases that are not in the aggregate material to the Company
and its Subsidiaries taken as a whole, (iv) Liens for current taxes, assessments
or other governmental charges not yet delinquent or the amount of which is being
contested in good faith and by appropriate proceedings, (v) Liens created in
connection with the issuance of trust certificates by the Trusts or warehousing
facilities secured by Non-Prime Loans, capital leases or purchase money debt, in
each case incurred in the ordinary course of business; (vi) Liens on
Indebtedness incurred to finance the purchase, lease or improvement of personal
property, fixtures or equipment reasonably necessary for the conduct of the
Company's or any Subsidiary's business and in the ordinary course thereof; and
(vii) Liens arising in or incidental to the ordinary course of business
(including without limitation mechanics' and materialmens' Liens) that are not
in the aggregate material to the Company and its Subsidiaries taken as a whole.
"Person" means an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political subdivision
thereof.
"Placement Agent" has the meaning assigned in Section 3.1(t).
"Plan" means, at any time, an employee benefit plan, other than a
Multiemployer Plan, which is subject to Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Code or Section 302 of ERISA,
and either (i) is maintained for employees of the Company, any of its
Subsidiaries or any ERISA Affiliate or in which any such employees participate
or to which contributions are made by the Company, any of its Subsidiaries or
any ERISA Affiliate, or (ii) has at any time within the preceding six years been
maintained for employees of the Company, and of its Subsidiaries or any ERISA
Affiliate or any Person which was at such time an ERISA Affiliate or in which
any such employees participated at such time, or (iii) with respect to which the
Company, any of its Subsidiaries or any ERISA Affiliate could be subjected to
any liability under Title IV of ERISA (including without limitation Section 4069
of ERISA) in the event that such plan has been or were to be terminated.
"Preferred Equity Interest" means any equity interest of the Company having
any preference as to dividends or other distributions, including in respect of
any payment or other distribution upon the liquidation, winding-up or
dissolution of the Company.
64
"Prepayment Call Price" for the prepayment or acceleration of any Note or
portion of a Note under the provisions of Section 2.1 or 7.2, as the case may
be, means the sum of (i) the accrued interest in respect of the principal amount
prepaid as of the Prepayment Date, (ii) the principal amount prepaid plus (iii)
the Prepayment Premium.
"Prepayment Date" has the meaning assigned in Section 2.4.
"Prepayment Premium" means for the prepayment or acceleration of any Note
or portion of a Note under the provisions of Section 2.1, 5.7(b) or 7.2, as the
case may be, the excess, if any, of (i) the net present value of the remaining
scheduled principal and interest payments on the Note declared due and payable
(calculated from the date on which the unpaid principal amount of the Note is
declared due and payable), discounted at a rate equal to the sum of the Discount
Rate (determined as of the date of such declaration) and 0.50%, over (ii) the
outstanding principal amount of the Note declared due and payable; provided,
however, that, in the case of a Senior Subordinated Note, the Prepayment Premium
shall not exceed an amount such that, after taking into account (i) all interest
paid in cash on such Senior Subordinated Note or portion thereof (not including
any Deferred Additional Interest) and (ii) either (A) the value of the Equity
Interests for which the pro rata portion of the Deferred Additional Interest
Note issued in connection with such Senior Subordinated Note or portion thereof
would be exchangeable pursuant to Section 6 or (B), if such Deferred Additional
Interest Note has been exchanged for Equity Interests pursuant to Section 6, the
value of the pro rata portion of such Equity Interests corresponding to such
Senior Subordinated Note or portion thereof, the holder of such Senior
Subordinated Note would achieve a greater than 30% internal rate of return on
its investment in the Senior Subordinated Note or portion thereof being prepaid
pursuant to Section 2.1, 5.7(b) or 7.2, as the case may be.
"Private Placement Memorandum" has the meaning assigned in Section 3.1(i).
"Prospectus" means the prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
"PTCE" has the meaning assigned in Section 3.2(b)(iii).
"Public Offering" means a public offering of the Company's equity
securities pursuant to an effective Registration Statement filed by the Company
with the Commission.
"Purchasers" has the meaning assigned in Section 1.1(a).
"Put Event Notice" has the meaning assigned in Section 2.3.
"Put Event Prepayment Price" means, for the prepayment of any Note under
the provisions of Section 2.3, the sum of (i) the accrued interest in respect of
the principal amount prepaid as of the Put Event Prepayment Date plus (ii) the
principal amount prepaid.
"Put Notice" has the meaning assigned in the Partnership Agreement.
65
"Qualified Public Offering" means a Public Offering as a result of which
Offering the Company has at least 100 "beneficial owners" of its equity
securities who are "independent" of the Company. For purposes hereof,
"beneficial owners" has the meaning assigned to such term in Rule 13d-3 under
the Exchange Act. For purposes hereof, "independent" means any Person who or
which is not (i) an officer, director or employee of the Company or any
Subsidiary of the Company, (ii) a Subsidiary of the Company or (iii) a Person
whose investment decision in connection with the purchase by such Person of the
Company's equity securities pursuant to such Public Offering was controlled by
the Company.
"Rating Agencies" means Moody's and S&P.
"Referral Agreement" means that certain Referral Agreement dated as of
April 15, 1996, by and between First Union and ACCH, as amended, extended,
restated, supplemented or otherwise modified or replaced from time to time in
accordance with the terms thereof.
"Registrable Equity Interests" means units of Equity Interests issued or
issuable upon exchange of the Deferred Additional Interest Notes in accordance
with the terms of the Deferred Additional Interest Notes and the Note Purchase
Agreements.
"Registrable Securities" means each Registrable Equity Interest until it
has been (i) transferred in a public offering registered under the Securities
Act or (ii) transferred in a sale made through a broker, dealer or market-maker
pursuant to Rule 144 under the Securities Act.
For all purposes of this Agreement, whenever any Person holds Deferred
Additional Interest Notes exchangeable for Registrable Equity Interests in
accordance with the terms of the Deferred Additional Interest Notes and the Note
Purchase Agreements (but disregarding any restrictions or limitations upon the
exchange of such Deferred Additional Interest Notes), whether or not such
exchange has actually been effected, such Person shall be deemed to be a holder
of such number of Registrable Securities as such Person would hold upon such
exchange at the relevant time.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Closing Date among the Company and the Purchasers and attached
hereto as Exhibit E.
"Registration Statement" means a registration statement of the Company,
filed with the Commission on an appropriate form, including any registration
statement filed pursuant to the provisions of the Registration Rights Agreement,
including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
"Related Party Transactions" has the meaning assigned in Section 5.17(a).
"Related Person" of any Person means (a) a director, nominee for election
as a director, or executive officer of such Person, (b) if such Person is a
natural person, a member of the immediate family of such Person or of a Related
Person of such Person or a trust established for the benefit of an immediate
family member of such Person, (c) one who is a
66
director or executive officer of, or has an equity interest of greater than 10%
in, any business or professional entity that, during any of the three years
prior to the date on which the status of "Related Person" is being determined,
(i) has made payments for property or services to such Person in excess of 5% of
(A) such Person's consolidated gross revenues for any such year or (B) the other
entity's consolidated gross revenues for any such year, (ii) has received from
such Person payments for property or services in excess of 5% of (A) such
Person's consolidated gross revenues for any such year or (B) the other entity's
consolidated gross revenues for any such year, or (iii) was the obligee of
indebtedness of such Person in excess of 5% of such Person's consolidated gross
revenues for any such year; provided, however, that none of First Union or its
Affiliates shall be deemed to be a Related Person of the Company or of any
Subsidiary thereof for purposes of this Agreement.
"Reorganization Transaction" has the meaning assigned in Section 6.14.
"Repayment Dates" has the meaning assigned in Section 1.2(b).
"Restricted Payment" means (a) the payment of any dividend or distribution
on any Equity Interest, (b) the repurchase, redemption or reduction of shares of
any equity interest or any warrants, rights or options to purchase or acquire
any shares of any equity interest, (c) the prepayment, payment, purchase or
redemption of the principal amount of any indebtedness pari passu or
subordinated to the Notes, (d) the payment of any amounts in respect of any
partnership or similar interest (other than under clauses (a) and (b) hereof) or
in respect of any joint venture or other interest or in respect of any
contractual or other claim (whether arising by joint venture agreement or
otherwise) (other than payments to the Company or any Subsidiary or payments
incurred in the ordinary course of business) or (e) the setting aside of funds
for any of the foregoing purposes; provided, however, that (i) if the Company
has not yet become a Corporate Company, the distributions pursuant to and in
accordance with Section 9.2(A)(1) of the Partnership Agreement, (ii) the
repurchase of equity interests in the Company from departing management
employees of the Company made by the Company as part of such management
employees' severance arrangements shall not be deemed to be a Restricted Payment
so long as (A) there is no Default or Event of Default with respect to the
Company's obligations under this Agreement as a result of such repurchase, (B)
the Company is able to incur at least one additional dollar of Indebtedness
pursuant to Section 5.8 after such repurchase and (C) the sum of the amount of
such repurchases from the Closing Date to and including such date of repurchase
does not exceed $375,000, and (iii) the redemption of IronBrand's Equity
Interests pursuant to Article XI of the Partnership Agreement shall not be
deemed to be Restricted Payments.
For the sake of clarity, notwithstanding anything to the contrary contained
herein, none of (i) payments of fees to First Union pursuant to the Referral
Agreement, (ii) payments of commercial banking, investment banking, placement
agency, underwriting or other financial advisory fees to First Union or its
Affiliates permitted by Section 5.17 or (iii) payments of fees to National
Financial Corporation or its Affiliates pursuant to the Management Agreement or
Services Agreement, shall be deemed to be a Restricted Payment.
67
"S&P" means Standard & Poor's Ratings Service, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc.
"Sale Event" means any of the following events that occur after the Closing
Date and on or prior to July 31, 2001: (i) a Change in Control Event or (ii) the
consummation of an underwritten Public Offering in connection with which the
Company has received net proceeds of not less than $15,000,000.
"Sale Notice" has the meaning assigned in Section 1.6(c)(i).
"Securities Act" has the meaning assigned in Section 1.1(a).
"Security" has the same meaning as in Section 2(1) of the Securities Act.
"Senior Indebtedness" means the principal of (and premium, if any), and
interest on (a) all Indebtedness of the Company (including Indebtedness of
others guaranteed by the Company) other than the Notes, which is (i) for money
borrowed or (ii) 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 or obligation, whether any such indebtedness or obligation
described in (a) or (b) is outstanding on the date hereof or hereafter created,
incurred or assumed, but only if the instrument creating or evidencing any such
indebtedness or obligation pursuant to which the same is outstanding expressly
provides that such indebtedness or obligation is superior in right of payment to
the Notes.
"Senior Subordinated Interest Rate" means 10% per annum; provided, however,
that in the event that any amount hereunder is determined to be interest in
excess of the maximum interest rate permitted by applicable law, "Senior
Subordinated Interest Rate" shall mean such permitted maximum.
"Senior Subordinated Note Repayment Date" has the meaning assigned in
Section 1.2(a).
"Senior Subordinated Notes" has the meaning assigned in Section 1.1(a).
"Services Agreement" means that certain Services Agreement dated as of
December 29, 1994, by and between National Auto Finance Corporation and National
Financial Corporation, as amended by the First Amendment of Services Agreement
dated as of January 1, 1996, and as further amended, extended, restated,
supplemented or otherwise modified or replaced from time to time in accordance
with the terms thereof.
"Share Sale" has the meaning assigned in Section 6.7(b).
"Source" has the meaning assigned in Section 3.2(b).
"Standstill Period" has the meaning assigned in Section 7.2(b).
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"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded U.S. Government
Securities adjusted to constant maturities or, if such statistical release is
not published at the time of any determination hereunder, then such other
reasonably comparable index, which shall be designated by holders of 50% in
aggregate principal amount of the Senior Subordinated Notes then outstanding.
"Subject Securities" means (i) any New Insider Equity Interests and (ii)(a)
any Indebtedness that is issued by the Company and is pari passu with the Senior
Subordinated Notes and (b) any Equity Interests or Convertible Interests issued
by the Company in connection with the issuance of such Indebtedness referred to
in the immediately preceding clause (ii)(a).
"Subordinated Indebtedness" means the principal of (and premium, if any),
and interest on (a) all Indebtedness of the Company (including Indebtedness of
others guaranteed by the Company) other than the Notes and Senior Indebtedness,
which is (i) for money borrowed or (ii) 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 or obligation, whether any
such indebtedness or obligation described in (a) or (b) is outstanding on the
date hereof or hereafter created, incurred or assumed, but only if the
instrument creating or evidencing any such indebtedness or obligation pursuant
to which the same is outstanding expressly provides that such indebtedness or
obligation is due after the Senior Subordinated Repayment Date.
"Subsidiary" means any corporation, partnership, joint venture,
association, company, business trust or other entity in which the Company
directly or indirectly (i) beneficially owns or controls, directly or
indirectly, a majority of the outstanding voting securities having by the terms
thereof ordinary voting power to elect a majority of the board of directors (or
other body fulfilling a substantially similar function) of such entity
(irrespective of whether or not at the time any class or classes of such voting
securities shall have or might have voting power by reason of the happening of
any contingency) or (ii) in the case of an entity which does not have a board of
directors (or other body fulfilling a substantially similar function) has the
authority to control the policies of such entity (including any partnership or
joint venture of or in which the Company or a Subsidiary is a general partner or
joint venture participant or owns or has the right to obtain a majority of
limited partnership interests).
"Tag Along Agreement" means the Agreement dated as of August 9, 1996 by and
among the Purchasers and certain Initial Equityholders and attached hereto as
Exhibit F.
"Tag Along Reduction Fraction" means, with respect to an exchange of an
Exchanged TAG Note in connection with a Disposition pursuant to Section 6.3, a
fraction, the denominator of which equals the number of Equity Interests for
which such Exchanged TAG Note would have been exchanged if exchanged in full
immediately preceding such Disposition and the numerator of which equals the
number of such Equity Interests for which such Exchanged TAG Note was not so
exchanged.
69
"Tangible Net Worth" of the Company means, as of the date Tangible Net
Worth is determined, the amounts set forth on its consolidated balance sheet,
prepared in accordance with generally accepted accounting principles, calculated
as (a) the sum of (i) the nominal or stated value of all outstanding equity
interests (excluding any equity interest by its terms redeemable prior to the
Senior Subordinated Note Repayment Date) plus (ii) capital surplus and
cumulative undistributed net earnings, less (b) (i) any amount by which the
market value of any asset is less than its book value in such balance sheet,
(ii) goodwill, (iii) licenses, patents, trademarks, trade names, copyrights,
leasehold improvements not recoverable at the expiration of a lease, and
deferred charges (including, but not limited to, unamortized debt discount and
expense, organization expenses, and experimental and development expenses) and
(iv) all other items which are properly classified as intangible under generally
accepted accounting principles; provided, however, that if the latest auditors'
report with respect to its balance sheet is in any way qualified, there shall be
further deducted from the amounts described in clause (a) the amount which such
auditors certify to be the difference between the actual amount shown in such
balance sheet and the amount which such auditors consider, in their reasonable
opinion, to present a true and fair view of the relevant entry in such balance
sheet; and provided, further, that to the extent Deferred Additional Interest or
Deferred Additional Interest Note Interest that is added to the principal
balance of the Deferred Additional Interest Notes would be required to be
deducted from the amounts described in clause (a) in accordance with generally
accepted accounting principles, such amount shall not be so deducted.
"Termination Event" means (i) a "reportable event," as such term is
described in Section 4043 of ERISA (other than a "reportable event" not subject
to the provision for 30-day notice to the PBGC), or an event described in
Section 4062(e) of ERISA, (ii) the withdrawal of the Company, any of its
Subsidiaries, or any ERISA Affiliate from a Multiple Employer Plan during a plan
year in which it was a "substantial employer" (as such term is defined in
Section 4001(a)(2) of ERISA) or the incurrence of liability by the Company, any
of its Subsidiaries, or any ERISA Affiliate under Section 4064 of ERISA upon the
termination of a Multiple Employer Plan, (iii) the filing of a notice of intent
to terminate any Plan under Section 4041 of ERISA, other than in a standard
termination within the meaning of Section 4041 of ERISA, or the treatment of a
Plan amendment as a termination under Section 4041 of ERISA, or (iv) the
institution by the PBGC of proceedings to terminate, impose liability (other
than for premiums under Section 4007 of ERISA) in respect of, or cause a trustee
to be appointed to administer, any Plan.
"Third Party Investor" means a Person or account over which the Company,
JPMIM and the Purchasers do not exercise discretionary control or fiduciary
power and which the Company, JPMIM and the Purchasers do not directly or
indirectly control through, or is not directly or indirectly controlled by, a
subsidiary or Affiliate.
"Trusts" means any special purpose business trust or other similar entity
existing or hereafter created by the Company in connection with a securitization
of Non-Prime Loans, which securitization is in the ordinary course of business
and consistent with the Company's past practices with respect to such
securitizations, including without limitation National
70
Financial Auto Funding Trust, National Financial Auto Funding Trust II, National
Financial Auto Receivables Master Trust and National Auto Finance 1995-1 Trust.
"Withdrawal Liability" has the meaning given to such term under Part I of
Subtitle E of Title IV of ERISA.
11.2 Accounting Principles. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with the
generally accepted accounting principles in effect from time to time, to the
extent applicable, except where such principles are inconsistent with the
express requirements of this Agreement including without limitation the
definitions set out in Section 11.1.
11.3 Directly or Indirectly. Where any provision in this Agreement refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether the action in question is
taken directly or indirectly by such Person.
SECTION 12. MISCELLANEOUS
12.1 Effect of Conversion to Corporate Form. The Company has advised the
Purchasers that, in connection with an Initial Public Offering, it intends to
"convert" the Company and ACCH to corporate form in a transaction or
transactions meeting the requirements of Section 5.7(a) (any such transaction or
transactions for the purpose of the foregoing, collectively, the "Conversion,"
and the entity created by such Conversion, the "Corporate Company"). The Company
shall not consummate any such Conversion unless, upon the consummation of the
Conversion, the Corporate Company expressly assumes, as set forth in Section
5.7(a), all right, title and interest of the Company in, and all of the
Company's obligations and liabilities under, this Agreement, the Notes and the
Registration Rights Agreement. After such Conversion, all such right, title and
interest and obligations and liabilities shall apply to the Corporate Company,
mutatis mutandis, and any predecessor of the Company as well as National Auto
Finance Company L.P. (and its partners) shall no longer have any such interest
in, or obligations and liabilities under, this Agreement, the Notes, the
Registration Rights Agreement and the Tag Along Agreement; provided, however,
that after the Conversion, if the Company still exists, it shall be the
Company's obligation to redeem IronBrand's Equity Interests pursuant to Section
11.3 of the Partnership Agreement, and it shall be the Corporate Company's
obligation to purchase the Purchaser's Notes or Equity Interests pursuant to
Sections 5.28 and 6.4, respectively. Notwithstanding anything to the contrary in
this Agreement other than Section 5.7(a), the Company shall be permitted to
effect the Conversion and to take any and all actions necessary or appropriate
in connection therewith.
12.2 Registered Notes. The Company shall cause to be kept at its principal
executive office located at ▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
or at the office of any Paying Agent appointed pursuant to Section 1.5, a
register for the registration
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and transfer of the Notes (the "Note Register"), and the Company shall register
or transfer or cause to be registered or transferred, as hereinafter provided
and under such reasonable regulations as it may prescribe, any Note issued
pursuant to this Agreement.
At any time and from time to time the registered holder of any Note which
has been duly registered as hereinabove provided may, subject to compliance with
applicable securities laws and the provisions of Sections 1.5 and 3.2, transfer
such Note upon surrender thereof at the principal office of the Company duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or its attorney duly authorized in writing;
provided, however, any such transfer must be consistent with the provisions of
Section 1.6.
The Person in whose name any registered Note shall be registered shall be
deemed as the owner and holder for all purposes of this Agreement,
notwithstanding any notice to the contrary. Payment of or on account of the
principal of, interest on or applicable Prepayment Call Price or Change in
Control Event Prepayment Price with respect to any registered Note shall be made
to or upon the written order of such registered holder.
12.3 Exchange of Notes. At any time and from time to time, upon not less
than three Business Days' notice to that effect given by the holder of any Note
initially delivered or of any Note substituted therefor pursuant to Section
12.2, this Section 12.3 or Section 12.4, and, upon surrender of such Note at its
office, the Company shall deliver in exchange therefor, without expense to the
holder, Notes for the same aggregate principal amount as the then unpaid
principal amount of the Note so surrendered, in integral multiples of $1,000
(or, with respect to the Deferred Additional Interest Notes, less if any such
Note's principal balance is less than $1,000) as such holder shall specify,
dated as of the date to which interest has been paid on the Note then dated as
of the date of issue, payable to such Person or Persons, or registered assigns,
as may be designated by such holder, and otherwise of the same form and tenor as
the Notes so surrendered for exchange.
12.4 Loss, Theft, Etc. of Notes. Upon receipt of evidence satisfactory to
the Company of the loss, theft, mutilation or destruction of any Note, and in
the case of any such loss, theft or destruction upon delivery of a bond of
indemnity in such form and amount as shall be reasonably satisfactory to the
Company, or in the event of such mutilation upon surrender and cancellation of
the Note, the Company shall make and deliver at the reasonable expense of the
holder thereof, a new Note, of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Note. If the Purchaser or any subsequent institutional
holder is the owner of any such lost, stolen or destroyed Note, then the
affidavit of an authorized officer of such owner, setting forth the fact of
loss, theft or destruction and of its ownership of the Note at the time of such
loss, theft or destruction shall be accepted as satisfactory evidence thereof
and an unsecured agreement of indemnity submitted to the Company by the
Purchaser or any subsequent institutional holder shall satisfy the requirement
of a bond of indemnity.
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12.5 Treasury Notes. In determining whether holders of the required
principal amount of Notes have concurred in any direction, waiver or consent,
Notes owned by the Company, a Subsidiary or an Affiliate of any thereof shall be
disregarded.
12.6 Expenses, Stamp Tax Indemnity. Whether or not the transactions herein
contemplated shall be consummated, the Company agrees to pay directly all of
your out-of-pocket expenses reasonably incurred, in connection with the
preparation, execution and delivery of this Agreement and the transactions
contemplated hereby, including but not limited to the reasonable charges and
disbursements of your legal counsel, duplicating and printing costs and all such
expenses reasonably incurred, relating to any amendments, waivers or consents
pursuant to the provisions hereof (whether or not the same are actually executed
and delivered), including, without limitation, any amendments, waivers or
consents resulting from any work-out, restructuring, enforcement or similar
proceedings relating to the performance by the Company of its obligations under
this Agreement and the Notes. The Company also agrees that it shall pay all
initial and ongoing fees and all out-of-pocket expenses of any Paying Agent or
Exchange Agent and shall pay and save you harmless against any and all liability
with respect to transfer, stamp, documentary or other similar taxes, if any,
which may be payable or which may be determined to be payable in connection with
the execution and delivery of this Agreement or the Notes, whether or not any
Notes are then outstanding.
12.7 Powers and Rights Not Waived; Remedies Cumulative. No delay or failure
on the part of the holder of any Note in the exercise of any power or right
shall operate as a waiver thereof; nor shall any single or partial exercise of
the same preclude any other or further exercise thereof, or the exercise of any
other power or right, and the rights and remedies of the holder of any Note are
cumulative to and are not exclusive of any rights or remedies any such holder
would otherwise have, and no waiver or consent, given or extended pursuant to
Section 10 or otherwise, shall extend to or affect any obligation or right not
expressly waived or consented to.
12.8 Notices. All communications provided for hereunder shall be in writing
and delivered by hand or mailed by first class mail or by overnight courier or
transmitted by facsimile communication (confirmed in writing by first class mail
or by overnight courier), in each case prepaid and addressed or transmitted (a)
if to you, at your address or to your facsimile number appearing on Schedule I
to this Agreement or such other address or facsimile number as you may designate
to the Company in writing, (b) if to any other holder of any Note, at such
address or facsimile number as such holder shall have designated to the Company
in writing, or, until any such holder so furnishes the Company an address or
facsimile number, then at the address or to the facsimile number of the last
holder of such Note who has so furnished such information, except in the case of
(a) or (b) as otherwise provided in Section 2.7 with respect to payments on
Notes held by you or any holder of Notes, or (c) if to the Company at ▇▇▇ ▇▇
▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, with a
copy to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq., Weil, Gotshal & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ or at such other address or to such facsimile number, or to
the attention of such other officer, as the Company shall have furnished to you
in writing or (d) if to the Paying or Exchange Agent, at its address furnished
to the holders of the Notes
73
pursuant to Section 1.5. Any communication so addressed and so delivered, mailed
or transmitted shall be deemed to be given when received (except as provided in
Section 12.13, and except that a facsimile communication shall be deemed to be
given upon oral confirmation of receipt if written confirmation of such receipt
shall be received by the sender within two Business Days thereof).
12.9 Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to your benefit and to
the benefit of your successors and assigns, including each successive holder or
holders of any Notes.
12.10 Survival of Covenants and Representations. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
closing, shall survive the closing and the delivery of this Agreement and the
Notes. Sections 5.28, 9.1, 9.3, 9.4, 12.1 and 12.12 shall survive the payment in
full of all the Notes.
12.11 Severability. Should any part of this Agreement for any reason be
declared invalid, such decision shall not affect the validity of any remaining
portion, which remaining portion shall remain in force and effect as if this
Agreement had been executed with the invalid portion thereof eliminated and it
is hereby declared the intention of the parties hereto that they would have
executed the remaining portion of this Agreement without including therein any
such part, parts, or portion which may, for any reason, be hereafter declared
invalid.
12.12 GOVERNING LAW. THIS AGREEMENT AND THE NOTES ISSUED OR SOLD HEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF,
EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
12.13 SUBMISSION TO JURISDICTION. THE COMPANY HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK, WITH RESPECT TO ALL ACTIONS OR PROCEEDINGS RELATING TO
THIS AGREEMENT AND THE NOTES, AND THE COMPANY WAIVES ANY OBJECTION WHICH IT MAY
HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY
PROCEEDING IN ANY SUCH COURT AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MAIL OR
MESSENGER DIRECTED TO IT AT THE ADDRESS OF THE COMPANY SET FORTH IN SECTION 12.8
ABOVE, AND THAT SERVICE SO MADE, SHALL BE DEEMED TO BE COMPLETED UPON THE
EARLIER OF ACTUAL RECEIPT AND FIVE BUSINESS DAYS AFTER THE SAME SHALL HAVE BEEN
POSTED TO THE COMPANY'S ADDRESS, AS THE CASE MAY BE, IN ACCORDANCE HEREWITH. THE
COMPANY AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER
74
JURISDICTIONS BY SUIT ON THE JUDGMENT (IF SUCH A PROCEDURE IS AVAILABLE UNDER
APPLICABLE LAW) OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING CONTAINED IN
THIS SECTION SHALL AFFECT THE RIGHT OF ANY HOLDER OF NOTES TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING ANY ACTION OR
PROCEEDING IN THE COURTS OF ANY JURISDICTION AGAINST THE COMPANY OR TO ENFORCE A
JUDGMENT OBTAINED IN THE COURTS OF ANY OTHER JURISDICTION.
12.14 Captions. The descriptive headings of the various Sections or parts
of this Agreement are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
12.15 Indemnification Provisions. The Company hereby agrees to indemnify
each of the holders of the Notes or Registrable Securities and their respective
directors, officers, agents and employees from and hold each of them harmless
against any and all losses, liabilities, claims, damages or expenses actually
incurred by any of them, including attorneys' fees, arising out of or by reason
of (i) any action, suit, investigation, litigation, settlement, or other
administrative or judicial proceeding related to any use made or proposed to be
made by the Company of the proceeds of the Notes or the Company's issuance
thereof; (ii) any breach of a representation or warranty of the Company to the
Purchasers contained herein or in any certificate delivered pursuant to the
provisions hereof; (iii) the failure of the Company or its Subsidiaries to
perform any agreement set forth herein; (iv) any action, suit, investigation,
litigation, settlement, or other administrative or judicial proceeding related
to: (a) any environmental cleanup, assessment, containment, removal, testing,
monitoring or audit, (b) non-compliance with any Environmental Laws, or (c)
other matters relating to the protection of the Environment, in each case
arising from or alleged to arise from acts or omissions of, or circumstances or
conditions related to, the Company or any of its Subsidiaries; or (v) an actual
or alleged Environmental Condition involving the Company or any Subsidiary
thereof, regardless of whether caused by, or within the control of, the Company
or such Subsidiary (but excluding any such losses, liabilities, claims, damages
or expenses incurred by reason of the gross negligence or willful misconduct of
the Person to be indemnified). If and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Company hereby agrees to
make the maximum contribution to the payment and satisfaction of each of such
losses, liabilities, claims, damages, expenses, fees and disbursements which is
permissible under applicable Laws.
12.16 WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE PURCHASERS WAIVES
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT, AND AGREES THAT ANY SUCH
75
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
12.17 Time of the Essence. Time is of the essence in interpreting and
performing this Agreement and each Note issued pursuant to this Agreement.
12.18 FINAL AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF.
76
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO
THE SUBJECT MATTER HEREOF.
The execution hereof by you shall constitute a contract between us for the
uses and purposes hereinbefore set forth, and this Agreement may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together constituting a single agreement.
NATIONAL AUTO FINANCE COMPANY L.P.
By: National Auto Finance Corporation
Its: General Partner
By: _________________________
Name:
Title:
Accepted as of August 9, 1996
▇▇▇▇▇▇ GUARANTY TRUST COMPANY OF NEW YORK,
as Trustee of the Commingled Pension Trust Fund (Multi-Market
Special Investment Fund II) of ▇▇▇▇▇▇ Guaranty Trust Company
of New York
By:________________________
Name:
Title:
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO
THE SUBJECT MATTER HEREOF.
The execution hereof by you shall constitute a contract between us for the
uses and purposes hereinbefore set forth, and this Agreement may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together constituting a single agreement.
NATIONAL AUTO FINANCE COMPANY L.P.
By: National Auto Finance Corporation
Its: General Partner
By: _________________________
Name:
Title:
Accepted as of August 9, 1996
▇▇▇▇▇▇ GUARANTY TRUST COMPANY OF NEW YORK,
as Trustee of the Multi-Market Special Investment Trust Fund
of ▇▇▇▇▇▇ Guaranty Trust Company of New York
By:____________________________
Name:
Title:
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO
THE SUBJECT MATTER HEREOF.
The execution hereof by you shall constitute a contract between us for the
uses and purposes hereinbefore set forth, and this Agreement may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together constituting a single agreement.
NATIONAL AUTO FINANCE COMPANY L.P.
By: National Auto Finance Corporation
Its: General Partner
By: _________________________
Name:
Title:
Accepted as of August 9, 1996
▇▇▇▇▇▇ GUARANTY TRUST COMPANY OF NEW YORK,
as Investment Manager and Agent for The ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Foundation
(Multi-Market Account)
By:_______________________________
Name:
Title:
