RESTRUCTURING AGREEMENT
RESTRUCTURING AGREEMENT, dated as of April 7, 1999 (the
"Agreement"), by and among National Auto Finance Company, Inc., a Delaware
corporation (the "COMPANY"), National Auto Finance Company, L.P., a Delaware
limited partnership (the "PARTNERSHIP"), National Auto Finance Corporation, a
Delaware corporation (the "GENERAL PARTNER"), the Partners (as defined below),
The 1818 Mezzanine Fund, L.P., a Delaware limited partnership (the "FUND"), PC
Investment Company, a Delaware corporation ("PCI"), Progressive Investment
Company, Inc., a Delaware corporation ("PROGRESSIVE"), Manufacturers Life
Insurance Company (U.S.A.), a Michigan corporation ("ML"), and The Structured
Finance High Yield Fund, LLC, a Delaware limited liability company ("SFHY"). The
Fund, PCI, ML and SFHY are sometimes collectively referred to herein as the
"NOTEHOLDERS," and the Fund and Progressive are sometimes collectively referred
to herein as the "EQUITYHOLDERS."
PRELIMINARY STATEMENT
Pursuant to a Securities Purchase Agreement, dated as of December
22, 1997 (the "DECEMBER AGREEMENT"), (i) the Fund, PCI and ML purchased from the
Company $40,000,000 aggregate principal amount of the Company's Senior
Subordinated Notes due December 22, 2004 (the "NOTES"), and 1,038,924 detachable
warrants to purchase initially 1,038,924 shares of the Company's Common Stock,
par value $.01 per share (the "COMMON STOCK"), and (ii) the Fund and Progressive
purchased 1,904,762 shares of the Company's Common Stock.
SFHY purchased from the Company, pursuant to a Securities Purchase
Agreement, dated as of March 27, 1998 (the "MARCH AGREEMENT"; the December
Agreement and the March Agreement are sometimes collectively referred to herein
as the "AGREEMENTS"), $20,000,000 aggregate principal amount of the Company's
Notes and 593,671 detachable warrants to purchase initially 593,671 shares of
the Company's Common Stock.
The Partnership is the owner, directly and indirectly, of 4,230,000
shares of the Company's Common Stock (the "PARTNERSHIP SHARES"). In
consideration of, and as part of the transactions contemplated by, this
Agreement, the Partnership has agreed to grant the nominees of the Noteholders
and the Equityholders from time to time serving on the Company's Board of
Directors (the "BOARD") an irrevocable proxy to vote the Partnership Shares.
The Noteholders and the Equityholders have asserted potential claims
against the Partnership, National Auto Finance Corporation, a Delaware
corporation and the general partner of the Partnership (the "GENERAL Partner"),
Nova Financial Corporation, a Delaware corporation ("NOVA Financial"), Nova
Corporation, a Delaware corporation ("NOVA"), Xxxx X. Xxxxxxx ("XXXXXXX"), Xxxxx
X. Xxxx ("XXXX") and Xxxxxxx X. Xxxxx ("XXXXX"), each a limited partner of the
Partnership (collectively, the "PARTNERS"), which claims the parties desire to
settle. In consideration of, and as part of the transactions contemplated by,
this Agreement, the Noteholders and Equityholders have agreed to release the
Partnership, the General Partner and the Partners from certain liabilities and
have agreed not to bring certain causes of action against them.
The Company has issued its junior subordinated promissory notes in
the aggregate principal amount of $430,152, $961,714, $33,714, $27,246 and
$487,656, to Xxxxxxx, Xxxx, Xxxxx, Nova Financial and Nova, respectively (such
promissory notes as amended to the date hereof, the "JUNIOR NOTES"). The Company
is in default under the Junior Notes. In consideration of, and as part of the
transactions contemplated by, this Agreement, the holders of the Junior Notes
(the "JUNIOR NOTEHOLDERS") have agreed to restructure the terms of the Junior
Notes.
The Company has been unable to satisfy certain affirmative, negative
and financial covenants under the Agreements. The Company, the Noteholders and
the Equityholders now desire, on the terms and conditions set forth in this
Agreement, to restructure the terms of the Notes and the Junior Notes and to
waive breaches of certain of the covenants contained in, and defaults under, the
Agreements, the Notes and the Junior Notes and to provide for the issuance of
the Shares (as defined in Section 3 hereof) to the Noteholders and the
Equityholders (collectively, the "RESTRUCTURING").
Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Agreements.
In consideration of the mutual covenants and agreements set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Waivers and Amendments.
(a) In accordance with Section 14.5 of each of the Agreements, the
Noteholders and the Equityholders hereby waive the currently existing defaults
and breaches by the Company of (i) the representations and warranties contained
in each of the Agreements and the Notes, and (ii) the affirmative, negative and
financial covenants contained in Sections 9.1, 9.2, 9.4, 9.6, 10.1, 10.2, 10.4,
10.9, 11.1(iii), 11.1(iv), 11.1(v) and 11.1(vi) of each of the Agreements. The
Company hereby represents and warrants to the Noteholders and the Equityholders
that, to the knowledge of the Company after due inquiry, it is not in default or
breach of any covenant contained in either of the Agreements, other than
Sections 9.1, 9.2, 9.4, 9.6, 10.1, 10.2, 10.4, 10.9, 11.1(iii), 11.1(iv),
11.1(v) and 11.1(vi) of each thereof.
(b) The Company, the Noteholders and the Equityholders hereby amend
Section 10.1(a) of each of the Agreements so that, for the period commencing on
the date hereof (the "RESTRUCTURING DATE") and ending on March 31, 2001 (the
"WAIVER PERIOD"), the Company shall not be required to comply with the
Consolidated Net Worth covenant set forth in such Section 10.1(a). From and
after April 1, 2001, the Company's required Consolidated Net Worth shall
increase (from the Company's actual Consolidated Net Worth as of March 31, 2001)
through the term of the Amended Notes (as defined in Section 2 hereof) as set
forth in Section 10.1(b) (with respect to Net Income from and after April 1,
2001) and Section 10.1(c) (with respect to proceeds received after April 1,
2001) of each of the Agreements to the extent such sections are applicable to
the period from and after March 31, 2001. Schedule 1(b)(1) attached hereto sets
forth the Company's good faith estimates, based on consultation with its
independent accountants, of the charges that may arise as a result of the
Restructuring and the balance sheet effect thereof (it being acknowledged by all
parties hereto that the actual charges or the balance sheet effect thereof may
differ from such estimates). Schedule 1(b)(2) attached hereto sets forth the
Company's business plan for the twenty-four month period commencing April 1,
1999 and ending March 31, 2001 (the "BUSINESS PLAN"). The Business Plan has been
prepared by the Company in good faith and is based on assumptions the Company
believes to be reasonable as of the date hereof (it being acknowledged by all
parties hereto that actual results during the periods covered by the Business
Plan may differ from the results contained in the Business Plan).
(c) The Company, the Noteholders and the Equityholders hereby amend
Section 10.2 of each of the Agreements so that the covenant relating to the
Company's Adjusted Interest Expense set forth in each such Section 10.2 will be
waived for the Waiver Period. Such covenant shall become effective and the
Company shall be required to comply with such covenant upon the completion of
the first full fiscal quarter following the Waiver Period. Upon expiration of
the Waiver Period, the Adjusted Interest Expense covenant shall encompass only
those periods after the Waiver Period. Until the end of the fourth full fiscal
quarter following the Waiver Period, compliance by the Company with the Adjusted
Interest Expense covenant shall be determined by calculating the Company's EBIT
and Consolidated Total Interest Expense from the expiration of the Waiver Period
through the end of the quarterly period for which compliance is being determined
and then annualizing each such amount. From and after the end of the fourth full
fiscal quarter following the Waiver Period, the Company shall again comply with
the Adjusted Interest Rate covenant as set forth in Section 10.2 of each of the
Agreements.
(d) The Company, the Noteholders and the Equityholders hereby amend
Article 10 of each of the Agreements to add a new Section 10.15 to each of the
Agreements, which reads in its entirety as follows:
"10.15 RETURN ON ASSETS. The Company's required Return on
Assets (as defined below) for each of the quarterly periods
ending on the Measurement Dates indicated below (each such
quarterly period, a "MEASUREMENT PERIOD") shall not be less than the
corresponding amount set forth below:
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MEASUREMENT DATE RETURN ON ASSETS
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September 30, 1999 -1.00% (i.e.
negative 1.00%)
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December 31, 1999 0.01%
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March 31, 2000 0.01%
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June 30, 2000 1.00%
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September 30, 2000 2.00%
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December 31, 2000 2.25%
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March 31, 2001 and 2.50%
thereafter
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For purposes of the covenant set forth in this Section 10.15, the
following terms shall have the following meanings:
"RETURN ON ASSETS" shall mean the amount derived by subtracting (A) the
sum of (i) the Portfolio Loss Percentage for the applicable Measurement
Period, (ii) the Portfolio Cost of Funds Percentage for the applicable
Measurement Period, and (iii) the Direct Operating Expense Percentage for
the applicable Measurement Period, from (B) the sum of (x) the Weighted
Average Coupon, (y) the Weighted Average Dealer Discount, and (z) the
Third Party Servicing Revenue Percentage. The Company's Return on Assets
will be measured for each Measurement Period, with results to be submitted
to the Noteholders and the Equityholders no later than the forty-fifth day
after the closing of each Measurement Period. Attached hereto as Schedule
1(d) is a sample calculation of the Company's Return on Assets. The
Company shall calculate its Return on Assets consistent with the sample
calculation set forth on Schedule 1(d).
"AVERAGE NAFI PORTFOLIO SIZE" shall mean the aggregate principal amount of
all loans in the NAFI Portfolio at the end of each day in the Measurement
Period, divided by the number of days in the applicable Measurement
Period.
"AVERAGE TOTAL PORTFOLIO SIZE" shall mean the aggregate principal amount
of all loans in the Total Portfolio at the end of each day in the
Measurement Period, divided by the number of days in the applicable
Measurement Period.
"DIRECT OPERATING EXPENSE PERCENTAGE" shall mean all expenses (on an
annualized basis) of the Company for the applicable Measurement Period
that are properly classified in accordance with GAAP as operating expenses
(but excluding depreciation and interest expenses), divided by the Average
Total Portfolio Size during the applicable Measurement Period.
"NAFI PORTFOLIO" shall mean all loans originated by the Company or
acquired by the Company through its Portfolio Acquisition Program.
"PORTFOLIO COST OF FUNDS PERCENTAGE" shall mean the actual weighted
average composite cost of funds for the applicable Measurement Period,
including the capital costs of the Company's securitization tranches A and
B, the capital costs of the Company's overcollateralization credit
enhancement of any such securitization and the capital costs of all cash
maintained in any spread account of any such securitization.
"PORTFOLIO LOSS PERCENTAGE" shall mean the actual net principal
liquidations (on an annualized basis) as reported by the Company's loan
servicing system for the applicable Measurement Period, divided by the
Average NAFI Portfolio Size during the applicable Measurement Period.
"THIRD PARTY SERVICING REVENUE PERCENTAGE" shall mean all third party
servicing revenue (on an annualized basis) for the applicable Measurement
Period as reported by the Company in accordance with GAAP, divided by the
Average Total Portfolio Size during the applicable Measurement Period.
"TOTAL PORTFOLIO" shall mean the NAFI Portfolio and all loans serviced by
the Company for or on behalf of a third party.
"WEIGHTED AVERAGE COUPON" shall mean the weighted average coupon of all
loans in the NAFI Portfolio as of the last day of the applicable
Measurement Period, as derived from the Company's loan servicing system.
"WEIGHTED AVERAGE DEALER DISCOUNT" shall mean the weighted average dealer
discount of the NAFI Portfolio as of the last day of the applicable
Measurement Period, as derived from the Company's loan servicing system,
divided by the Weighted Average Life of the NAFI Portfolio.
"WEIGHTED AVERAGE LIFE" shall mean the weighted average life of all loans
in the NAFI Portfolio as of the last day of the applicable Measurement
Period, as derived from the Company's loan servicing system.
Any other terms used but not defined in this Section 10.15 shall have the
meaning ascribed to such terms in Section 1.1 of each of the Agreements."
(e) The Company, the Noteholders and the Equityholders hereby amend
Section 11.1(vi) of each of the Agreements by adding the following at the end of
each thereof: "provided, however, that for purposes of determining whether an
"Amortization Event" under Section 9.01(f) or (g) of that certain Pooling and
Administration Agreement, dated as of December 8, 1994, as amended (as so
amended, the "POOLING AGREEMENT"), by and among National Financial Auto Funding
Trust II, the Company and Bankers Trust Company, has occurred and constitutes an
Event of Default under the Agreements, the Company's "Net Loss Ratio" (as
defined in the Pooling Agreement) shall be calculated and determined as provided
in the Pooling Agreement as in effect on the Restructuring Date, without giving
effect to any amendments or waivers, if any, after the Restructuring Date.
(f) Except to the extent each is expressly amended or waived by the
terms of this Agreement, all terms and conditions of each of the Agreements and
all other instruments and agreements executed thereunder shall remain in full
force and effect in accordance with their respective terms. Following the
Restructuring Date, except as specifically set forth or provided for herein, the
Company again shall comply with all Affirmative Covenants and Negative and
Financial Covenants contained in each of the Agreements.
2. RESTRUCTURING NOTES. Effective on the Restructuring Date, the
Notes held by the Noteholders shall be amended and restated, in the form of
Exhibit A attached hereto (the "AMENDED NOTES"), to allow the Company, at its
option, for a two-year period ending on the date that is two years from the
Restructuring Date, to pay an amount equal to up to 50% of the scheduled cash
interest payments on the Amended Notes through the issuance of convertible
senior subordinated notes (the "CONVERTIBLE NOTES"), in the form of Exhibit B
attached hereto. Upon presentation of the originally issued Notes from the
Noteholders to the Company, the Company shall xxxx "Canceled" on the originally
issued Notes and deliver to the Noteholders in exchange therefor Amended Notes
having an aggregate principal amount equal to the aggregate principal amount of
the canceled Notes.
3. RESTRUCTURING SHARES. Simultaneously with the execution and
delivery of this Agreement, the Company shall issue, or cause to be issued, to
(i) the Noteholders, on a pro-rata basis (in relation to the aggregate principal
amount of Notes held by them), an aggregate of 7,071,429 shares of the Company's
Common Stock, and (ii) the Equityholders, on a pro-rata basis (in relation to
the number of shares of the Company's Common Stock purchased by each of them
pursuant to the December Agreement), an aggregate of 1,178,571 shares of the
Company's Common Stock (collectively, the "SHARES").
4. RELEASES. (a) Simultaneously with the execution and delivery of
this Agreement, the Noteholders and the Equityholders shall execute and deliver
the Release in the form of Exhibit C attached hereto. (b) Simultaneously with
the execution and delivery of this Agreement, the Partnership, the General
Partner and the Partners shall execute and deliver the Release and Covenant Not
to Xxx in the form of Exhibit D attached hereto. (c) Simultaneously with the
execution and delivery of this Agreement, the Company, the Noteholders and the
Equityholders shall execute and deliver the Release in the form of Exhibit E
attached hereto. (d) Anything to the contrary notwithstanding, the releases
contemplated by and provided for in Sections 4(b) and 4(c) shall not release any
of the released parties from any claims brought by holders of the Company's
securities not signing the releases (such as from shareholder derivative or
class action claims).
5. VOTING PROXY AND TRANSFER LIMITATIONS. (a) Simultaneously with
the execution and delivery of this Agreement, the Partnership shall execute and
deliver to the Noteholders and the Equityholders a proxy with respect to the
Partnership Shares, in the form attached hereto as Exhibit F (the "PROXY"). The
Partnership shall deliver to the Company or its transfer agent the
certificate(s) representing the Partnership Shares for the purpose of imprinting
thereon the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
IRREVOCABLE PROXY AND CERTAIN LIMITATIONS ON TRANSFER AS
CONTEMPLATED BY AND SET FORTH IN THAT CERTAIN RESTRUCTURING
AGREEMENT, DATED AS OF APRIL 7, 1999, BY AND AMONG THE COMPANY AND
NATIONAL AUTO FINANCE COMPANY, L.P., NATIONAL AUTO FINANCE
CORPORATION, THE PARTNERS (AS DEFINED THEREIN), THE 1818 MEZZANINE
FUND, L.P., PC INVESTMENT COMPANY, PROGRESSIVE INVESTMENT COMPANY,
INC., MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) AND THE
STRUCTURED FINANCE HIGH YIELD FUND, LLC.
(b) The Partnership agrees not to sell, assign, transfer, pledge,
encumber or otherwise dispose of the Partnership Shares, except (i) in an arm's
length transaction to a party who is not an affiliate (as defined in Rule 405
under the Securities Act of 1933, as amended) of the Partnership or its
partners, or (ii) if to an affiliate (as defined in Rule 405 under the
Securities Act of 1933, as amended) of the Partnership or its partners, subject
to the Proxy (in which case the buyer, assignee, transferee or pledgee, as the
case may be, shall agree in writing to be bound by the terms of this Agreement,
including, without limitation, the Proxy and the transfer limitations set forth
in this Section 5(b)). The foregoing notwithstanding, the Partnership may
distribute the Partnership Shares to the partners of the Partnership, provided
each such partner shall execute and deliver to the Noteholders and the
Equityholders an instrument agreeing to be bound by the terms of this Agreement,
including, without limitation, the Proxy and the transfer limitations set forth
in this Section 5(b).
6. BOARD REPRESENTATION. The Company and the Noteholders hereby
amend Section 9.10(d) of each of the Agreements so that, upon completion of the
Restructuring and (subject to the other provisions of Section 9.10 of each of
the Agreements) from time to time thereafter, each of the Fund, PCI and SFHY
shall have the right to designate a total of two directors to the Board. The
Company shall take all action within its power to cause the appointment or
election of such separate and individual designees of each of the Fund, PCI and
SFHY.
7. AFFILIATED TRANSACTIONS. The Company, the Noteholders and the
Equityholders hereby amend Section 10.4 of each of the Agreements so that from
and after the Restructuring Date, anything to the contrary in Section 10.9 of
each of the Agreements notwithstanding, the Company shall not, and shall not
permit any of its Subsidiaries to, enter into any transaction with any Affiliate
of the Company, including payments on the Company's Preferred Stock (other than
payments on Preferred Stock issued to Noteholders, if any), unless such
transaction is approved by the Board, including the affirmative vote of a
majority of the representatives of the Noteholders; provided that no such
approval shall be required in connection with the Company's ongoing transactions
with BNI, Inc. or any ordinary course transaction between the Company and the
Noteholders or the Equityholders (or any of their respective affiliates).
8. REPRESENTATIONS. (a) Each of the Noteholders, the Equityholders,
the Company, the Partnership, the General Partner, Nova and Nova Financial
severally and not jointly, as to itself only, represents and warrants to the
other parties hereto as follows:
(i) it is a corporation, limited liability company or limited
partnership, as the case may be, duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, with
full corporate, limited liability company or partnership power and
authority, as the case may be, to execute and deliver the Restructuring
Documents (as defined in Section 11(n)) and to consummate the transactions
contemplated thereby;
(ii) the Restructuring Documents have been duly authorized, executed
and delivered by it and constitute legal, valid and binding obligations of
it, enforceable against it in accordance with their respective terms
(except as such enforceability may be limited by bankruptcy, insolvency or
similar laws of general application from time to time affecting the rights
of creditors generally and subject to general principles of equity); and
(iii) the execution and delivery of the Restructuring Documents and
the performance by it of its obligations thereunder will not constitute a
violation, breach or default (with or without the passage of time or the
giving of notice, or both) on its part under its organizational documents,
under any federal, state, local or foreign law, rule or regulation, under
any order or judgment that is binding on it or any of its properties, or
under any agreement, instrument or document to which it is a party or by
which it or any of its properties are bound.
(b) In addition to the representations and warranties contained in
Section 8(a) above, the Company represents and warrants to the Noteholders and
the Equityholders as follows: (i) the Shares and the shares of Common Stock
issuable upon conversion of the Convertible Notes (the "CONVERSION SHARES") are
duly authorized and, upon issuance as provided herein or in the Convertible
Notes, as the case may be, will be validly issued, fully paid and nonassessable;
and (ii) upon issuance as provided herein or in the Convertible Notes, as the
case may be, the Shares and the Conversion Shares will be free and clear of any
mortgage, pledge, security interest, encumbrance, charge or other lien.
The foregoing notwithstanding, the Noteholders and the Equityholders
acknowledge that the Company will be required to amend its certificate of
incorporation to increase the number of authorized shares of Common Stock to
permit the issuance of the Conversion Shares. The Company hereby covenants and
agrees to take all action within its power (including seeking the requisite
stockholder approval) to amend its certificate of incorporation as soon as
practicable following the Restructuring Date (but no later than June 30, 1999)
to increase the number of authorized shares of Common Stock to permit the
issuance of the Conversion Shares.
(c) In addition to the representations and warranties contained in
Section 8(a) above, the Partnership represents and warrants to the Noteholders
and the Equityholders as follows:
(i) the Partnership Shares are owned, beneficially and of record, by
the Partnership, free and clear of any liens, claims, security interests,
pledges, charges, encumbrances, mortgages or other defects or restrictions
of any kind whatsoever; and
(ii) the Partnership owns no shares of the Company's Common Stock,
other than the Partnership Shares.
(d) Each of the Partners (other than Nova and Nova Financial),
severally and not jointly, as to himself only, represents and warrants to the
other parties hereto as follows:
(i) he has full power and authority to execute and deliver the
Restructuring Documents and to consummate the transactions contemplated
thereby;
(ii) the Restructuring Documents have been duly executed and
delivered by him and constitute his legal, valid and binding obligations,
enforceable against him in accordance with their respective terms (except
as such enforceability may be limited by bankruptcy, insolvency or similar
laws of general application from time to time affecting the rights of
creditors generally and subject to general principles of equity); and
(iii) the execution and delivery of the Restructuring Documents and
the performance by him of his obligations thereunder will not constitute a
violation, breach or default (with or without the passage of time or the
giving of notice, or both) on his part under any federal, state, local or
foreign law, rule or regulation, or under any order or judgment that is
binding on him or any of his properties, or under any agreement, instrument
or document to which he is a party or by which he or any of his properties
are bound.
9. CONDITIONS TO THE RESTRUCTURING.
(a) Simultaneously with the execution and delivery of this
Agreement, the Company and First Union National Bank shall execute and deliver
(i) the Amended and Restated Pooling and Administration Agreement, (ii) the
Revolving Credit, Term Loan and Security Agreement, and (iii) the Commitment
Letter and the agreements, instruments and documents contemplated thereby, in
the forms attached hereto as Exhibit G-1, G-2 and G-3, respectively.
(b) Simultaneously with the execution and delivery of this
Agreement, the Company, the Partnership and the Junior Noteholders shall execute
and deliver the Note Exchange Agreement and the agreements, instruments and
documents contemplated thereby, in the forms attached hereto as Exhibit H (the
"JUNIOR RESTRUCTURING DOCUMENTS").
(c) Simultaneously with the execution and delivery of this
Agreement, the Partnership shall execute and deliver to the Company the
Certificate Sale Agreement and the Assignment contemplated thereby, and attached
thereto as Exhibit A, in the forms attached hereto as Exhibit I.
(d) Simultaneously with the execution and delivery of this
Agreement, the Board shall receive an opinion from Rothschild Inc. with respect
to the fairness to the Company and its equityholders (other than the
Equityholders and the Partnership), from a financial point of view, of the
transactions contemplated by the Restructuring Documents.
The parties hereto (other than the Company) consent to the Company's
execution and delivery of the foregoing agreements, instruments and documents
and acknowledge and agree that such execution and delivery, and the consummation
of the transactions contemplated thereby, do not violate or constitute a default
under either of the Agreements, the Notes or the Junior Notes.
10. INDEMNIFICATION. (a) In addition to all sums due or to be due
under the Amended Notes and Convertible Notes, the Company agrees to indemnify
and hold harmless the Noteholders and the Equityholders, their respective
Affiliates and each of their respective officers, directors, agents, employees,
members and partners (each, an "INDEMNIFIED PARTY") to the fullest extent
permitted by law from and against all losses, claims, damages, expenses
(including reasonable fees and disbursements of counsel as provided for in
Section 11(o) hereof) or other liabilities ("LOSSES") resulting from any breach
of any agreement, covenant or undertaking of the Company contained in the
Restructuring Documents or any legal, administrative or other actions (including
actions brought by any equityholders of the Company or derivative actions
brought by a Person claiming through the Company or in the Company's name),
proceedings or investigations (whether formal or informal), or written threats
thereof, based upon, relating to or arising out of the Restructuring Documents
or the transactions contemplated thereby or any Indemnified Party's role in the
Restructuring transactions; provided, however, that the Company shall not be
liable under this Section 10: (a) for any amount paid in settlement of claims
without the Company's consent (which consent shall not be unreasonably
withheld), (b) with respect to Losses arising solely out of actions brought by
the partners or shareholders of the Fund, PCI, Progressive, ML or SFHY against
an Indemnified Party or by one Indemnified Party against another, or (c) to the
extent that it is finally judicially determined that such Losses resulted
primarily from the willful misconduct, bad faith or gross negligence of such
Indemnified Party or a breach of the Indemnified Party's agreements herein;
provided, further, that if and to the extent that such indemnification is
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of such indemnified Losses which shall be
permissible under applicable laws. In connection with the obligation of the
Company to indemnify for Losses as set forth above, the Company further agrees
to reimburse each Indemnified Party for all such documented Losses (including
reasonable fees and disbursements of counsel) as they are incurred by such
indemnified party; provided, however, that if an Indemnified Party is reimbursed
hereunder for any Losses, such reimbursement of Losses shall be refunded to the
extent it is finally judicially determined that the Losses in question resulted
primarily from the willful misconduct, bad faith or gross negligence of such
Indemnified Party.
(b) In addition to all sums due or to be due under the New Junior
Notes (as defined in the Note Exchange Agreement that is part of the Junior
Restructuring Documents) and the Junior Convertible Interest Notes (as defined
in the New Junior Notes), the Company agrees to indemnify and hold harmless the
Partnership, Xxxxxxx, Xxxx and Xxxxx (each, a "PARTNERSHIP INDEMNITEE") to the
fullest extent permitted by law from and against all losses, claims, damages,
expenses (including reasonable fees and disbursements of counsel) or other
liabilities ("PARTNERSHIP LOSSES") resulting from any legal actions (including
actions brought by any equityholders of the Company or derivative actions
brought by a Person claiming through the Company or in the Company's name)
brought against any Partnership Indemnitee as a result of such Partnership
Indemnitee's role in the transactions contemplated by the Restructuring
Documents to which it is a party; provided, however, that the Company shall not
be liable under this Section 10(b): (i) for any amount paid in settlement of
claims without the Company's consent (which consent shall not be unreasonably
withheld), (ii) with respect to Partnership Losses arising solely out of actions
brought by the partners of the Partnership against a Partnership Indemnitee or
by one Partnership Indemnitee against another, or (iii) to the extent that it is
finally judicially determined that such Partnership Losses resulted primarily
from the willful misconduct, bad faith or gross negligence of a Partnership
Indemnitee or a breach of a Partnership Indemnitee's agreements in the
Restructuring Documents; provided, further, that if and to the extent that such
indemnification is unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of such indemnified
Partnership Losses which shall be permissible under applicable laws.
11. MISCELLANEOUS.
(A) SURVIVAL OF PROVISIONS. All representations, warranties,
covenants and other agreements made herein shall survive the execution and
delivery of the Restructuring Documents.
(B) NOTICES. All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
services or personal delivery to the following addresses, or to such other
addresses as shall be designated from time to time by a party in accordance with
this Section 11(b).
if to the Fund: with a copy to:
The 1818 Mezzanine Fund, X.X. Xxxxxxxxxx, Xxxxxxxxxx & Xxxx
c/x Xxxxx Brothers Xxxxxxxx & Co. 000 Xxxxxx Xxxx
00 Xxxx Xxxxxx Xxx Xxxx, Xxx Xxxx 00000
Xxx Xxxx, Xxx Xxxx 00000 Attention: Xxxxx X. X. Xxxxxxx,
Attention: Xxxxxx X. Xxxxxx Esq.
Telecopier No.: (000) 000-0000 Telecopier No.: (000) 000-0000
if to PCI or Progressive: with a copy to:
0 Xxxxxxxxx Xxxxx, 0xx Xxxxx Xxxxxxxxxx, Xxxxxxxxxx & Xxxx
Xxxxxx, Xxxxxxxxxxx 00000 000 Xxxxxx Xxxx
Attention: Xxxxxx Xxx Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000 Attention: Xxxxx X. X. Xxxxxxx,
Esq.
Telecopier No.: (000) 000-0000
if to ML: with a copy to:
c/o MF Private Capital, Inc. Manufacturers Life Insurance
00 Xxxx Xxxxxx, Xxxxx 000 Company
Boston, Massachusetts 02109-5105 Corporate Law Department
Attention: Xxxxxxx X. Xxxxx, Xx. 000 Xxxxx Xxxxxx Xxxx
Telecopier No.: (000) 000-0000 Toronto, Ontario M4W 1ES, Canada
Attention: Xxxxxxx Xxxxxx, Esq.
Telecopier No: (000) 000-0000
if to SFHY: with a copy to:
The Structured Finance High Yield Fund, Cadwalader, Xxxxxxxxxx & Xxxx
LLC 000 Xxxxxx Xxxx
c/o Prudential Investments--Structured Xxx Xxxx, Xxx Xxxx 00000
Finance Group Attention: Xxxxx X. X. Xxxxxxx,
Xxx Xxxxxxx Xxxxxx, 00xx Xxxxx Xxx.
Xxxxxx, Xxx Xxxxxx 00000-0000 Telecopier No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
Telecopier No.: (000) 000-0000
if to the Company: with a copy to:
National Auto Finance Company, Inc. Weil, Gotshal & Xxxxxx LLP
00000 Xxxxxxxx Xxxx Xxxx., Xxxxx 000 000 Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000 Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxx Attention: Xxxxxx Xxxxxxxxxx,
Telecopier No.: (000) 000-0000 Esq.
Telecopier No.: (000) 000-0000
if to the Partnership: with a copy to:
National Auto Finance Company, X.X. X'Xxxxxxxx, Graev & Karabell, LLP
Xxx Xxxxxx Xxxxxxxxx Xxxxx 00 Xxxxxxxxxx Xxxxx
000 Xxxxx Xxxxxxx Xxxxxxx, Xxxxx 000 Xxx Xxxx, Xxx Xxxx 00000
Xxxx Xxxxx, Xxxxxxx 00000 Attention: Xxxxxxx X. Xxxxxxx,
Attention: Xxxx X. Xxxxxxx Esq.
Telecopier No.: (000) 000-0000 Telecopier No.: (000) 000-0000
if to Xxxx X. Xxxxxxx: with a copy to:
National Financial Companies, LLC X'Xxxxxxxx, Graev & Karabell, LLP
Xxx Xxxxxx Xxxxxxxxx Xxxxx, Xxx. 000 30 Rockefeller Plaza
000 Xxxxx Xxxxxxx Xxxxxxx Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000 Attention: Xxxxxxx X. Xxxxxxx,
Esq.
Telecopier No.: (000) 000-0000
if to Xxxxx X. Xxxx: with a copy to:
Congress Point Financial Corp. X'Xxxxxxxx, Graev & Karabell, LLP
0000 Xxxxxxxx Xxxxxx, Xxxxx 0000 00 Xxxxxxxxxxx Xxxxx
Xxxx Xxxxx, Xxxxxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
Main Facsimile: (000) 000-0000 Attention: Xxxxxxx X. Xxxxxxx,
Esq.
Telecopier No.: (000) 000-0000
if to Xxxxxxx X. Xxxxx: with a copy to:
Bulova Technologies X'Xxxxxxxx, Graev & Karabell, LLP
000 Xxxxx Xxxxx Xxxxxx 30 Rockefeller Plaza
P. O. Box 4787 New York, New York 10112
Xxxxxxxxx, Xxxxxxxxxxxx 00000-0000 Attention: Xxxxxxx X. Xxxxxxx,
Fax: (000) 000-0000 Esq.
Telecopier No.: (000) 000-0000
All such notices and communications shall be deemed to have been
duly given: if delivered by hand, when personally delivered; if delivered by
courier, when delivered to the recipient by commercial overnight courier
service; if mailed, five Business Days after being deposited in the mail,
postage prepaid; and if telecopied, upon confirmation of receipt.
(C) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns and
permitted transferees of the parties hereto.
(D) ASSIGNMENTS.
The Company may not assign any of its rights or obligations under
this Agreement (other than in connection with a transaction permitted pursuant
to Section 10.3 of the Agreements) without the written consent of the holders of
a majority (i) in aggregate principal amount of the Amended Notes held by the
Noteholders, and (ii) of the aggregate number of shares of Common Stock held by
the Equityholders.
Subject to the other limitations contained in the Amended Notes, the
Convertible Notes and this Agreement, the Noteholders and Equityholders and any
subsequent Holder of Amended Notes, Convertible Notes or Common Stock may, at
any time, or from time to time, sell, agree to sell or assign to one or more
other Persons who agree to be bound by all of the terms of this Agreement, all
or any portion of the Amended Notes, Convertible Notes or Common Stock. Subject
to the other limitations contained in the Amended Notes, the Convertible Notes
and this Agreement, in the event of any such sale or assignment of an Amended
Note or Convertible Note, upon surrender for exchange of any Amended Note or
Convertible Note at the office of the Company designated for notices in
accordance with Section 11(b), the Company shall execute and deliver in exchange
therefor, without expense to the Holder (provided the Company shall not be
responsible for any transfer taxes in connection with any such sale or
assignment), one or more new Amended Notes or Convertible Notes, as the case may
be, in the same aggregate principal amount as the then unpaid principal amount
of the Amended Note or Convertible Note so surrendered as such Holder shall
specify, dated as of the date to which interest has been paid on the Amended
Note or Convertible Note so surrendered (or, if no interest has been paid, the
date of such surrendered Amended Note or Convertible Note), in the name of such
Person or Persons as may be designated by such Holder in writing, and otherwise
of the same form and tenor as the Amended Note or Convertible Note so
surrendered for exchange.
Subject to the limitations contained in certificates representing
the Shares or the Partnership Shares and this Agreement, in the event of any
sale or assignment of any certificate representing any of the Shares or the
Partnership Shares at the office of the Company designated for notices in
accordance with Section 11(b), the Company shall execute and deliver in exchange
therefor, without expenses to the holder (provided the Company shall not be
responsible for any transfer taxes in connection with any such sale or
assignment), one or more certificates representing shares of Common Stock in the
same amount as surrendered as such holder shall specify in the name of such
Person or Persons as may be designated by such holder in writing, and otherwise
of the same form. Every Amended Note, Convertible Note or certificate
representing any Shares or the Partnership Shares surrendered for transfer shall
be duly endorsed, or accompanied by a written instrument of transfer duly
executed by the holder of such Amended Note, Convertible Note or certificate
representing any Shares or the Partnership Shares or its attorney duly
authorized in writing.
(e) Amendment and Waiver.
(i) No failure or delay on the part of any party hereto in
exercising any right, power or remedy under any of the Restructuring
Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or
remedy.
(ii) Any amendment, supplement or modification of or to any
provision of this Agreement, the Amended Notes or the Convertible Notes,
any waiver of any provision of this Agreement, the Amended Notes or the
Convertible Notes, and any consent to any departure by the Company from the
terms of any provision of this Agreement, the Amended Notes or the
Convertible Notes, shall be effective (i) only if it is made or given in
writing and signed by the Company and (x) if such amendment, supplement or
modification affects the holders of the Amended Notes, the holders of 66%
of the aggregate principal amount of the Amended Notes outstanding, (y) if
such amendment, supplement or modification affects the holders of the
Convertible Notes, the holders of 66% of the aggregate principal amount of
the Convertible Notes outstanding or (z) if such amendment, supplement or
modification affects both the holders of the Amended Notes and the
Convertible Notes, the holders of 66% of the aggregate principal amount of
both the Amended Notes and the Convertible Notes, and (ii) only in the
specific instance and for the specific purpose for which made or given.
Notwithstanding the foregoing, without the consent of each holder of an
Amended Note or Convertible Note affected, an amendment may not:
(1) reduce the rate of or extend the time for payment of
interest on any Amended Note or Convertible Note;
(2) reduce the principal of or extend the maturity of any
Amended Note or Convertible Note;
(3) change the time at which any Amended Note or Convertible
Note shall or may be prepaid in accordance with Sections
3 and 4 of the Amended Notes and Sections 4 and 5 of the
Convertible Notes;
(4) make any Amended Note or Convertible Note payable in
money or securities other than as stated in the Amended
Notes or Convertible Notes; or
(5) make any change in the first or second sentence of this
Section 11(e)(i) or (ii).
(F) COUNTERPARTS. This Agreement and any of the other Restructuring
Documents may be executed in any number of counterparts and by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement.
(G) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(H) DETERMINATIONS. All elections or determinations to be made by
the Company, any Noteholder, any Equityholder or the Board hereunder in its
opinion or judgment or with its approval or otherwise shall be made by it in its
sole discretion, unless otherwise specified herein.
(I) GOVERNING LAW. This Agreement has been negotiated, executed and
delivered in the State of New York and shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
(J) JURISDICTION. Each party to this Agreement hereby irrevocably
agrees that any legal action or proceeding arising out of or relating to the
Restructuring Document or transactions contemplated thereby may be brought in
the courts of the State of New York located in New York City or of the United
States of America for the Southern District of New York and hereby expressly
submits to the personal jurisdiction and venue of such courts for the purposes
thereof and expressly waives any claim of improper venue and any claim that such
courts are an inconvenient forum. Each party hereby irrevocably consents to the
service of process of any of the aforementioned courts pursuant to a contractual
provision in any such suit, action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to the address set
forth in Section 11(b), such service to become effective 10 days after such
mailing. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED,
EACH PARTY HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF
OR BASED UPON THE RESTRUCTURING DOCUMENTS OR THE SUBJECT MATTER THEREOF, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR
OTHERWISE. (K) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions hereof.
(L) RULES OF CONSTRUCTION. Unless the context otherwise requires,
"or" is not exclusive, and references to sections or subsections refer to
sections or subsections of this Agreement.
(M) REMEDIES. If a breach of this Agreement, the Amended Notes or
the Convertible Notes by the Company occurs and is continuing, the Noteholders
or any subsequent holder of Amended Notes or Convertible Notes may pursue any
available remedy by proceeding at law or in equity to enforce the performance
(including, without limitation, the specific performance) of any provision of
the Amended Notes, the Convertible Notes or this Agreement. The Noteholders or
any holder of Amended Notes or Convertible Notes may maintain a proceeding even
if it does not possess any of the Amended Notes or Convertible Notes or does not
produce any of them in the proceeding. No remedy is exclusive of any other
remedy. All available remedies are cumulative.
(N) ENTIRE AGREEMENT. This Agreement and the exhibits and schedules
hereto, the Amended Notes and the Convertible Notes, the Proxy, the Junior
Restructuring Documents and the releases described herein (collectively, the
"RESTRUCTURING DOCUMENTS"), are intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein; provided, however, that notwithstanding the
foregoing, except as expressly amended or otherwise modified by any of the
provisions of any of the Restructuring Documents, the provisions of the
Agreements shall remain in full force and effect and unaffected by the
provisions of or the Restructuring Documents. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein or therein. The Restructuring Documents supersede all prior agreements
and understandings among the parties with respect to such subject matter. This
Agreement shall not be effective unless and until this Agreement and each of the
other Restructuring Documents has been signed by each of the parties whose
signature is provided for herein and therein.
(O) NOTEHOLDERS AND EQUITYHOLDERS' ATTORNEYS' FEES. All reasonable
attorney's fees, charges and disbursements and all reasonable out-of-pocket
expenses incurred by the Noteholders and the Equityholders in connection with
the negotiation, execution and delivery of this Agreement and the other
Restructuring Documents and the transactions contemplated hereby and thereby
shall be paid by the Company. In any action or proceeding brought to enforce any
provision of this Agreement or any of the other Restructuring Documents or any
other document or instrument contemplated hereby or thereby, or where any
provision hereof or thereof is validly asserted as a defense, the successful
party shall be entitled to recover reasonable attorneys' fees, charges and
disbursements in addition to any other available remedy.
(P) PARTNERSHIP COUNSEL FEES. Simultaneously with the execution and
delivery of this Agreement, the Company shall pay to the Partnership, by wire
transfer in immediately available funds, $15,000 in contribution to the counsel
fees incurred by the Partnership in connection with the transactions
contemplated hereby.
(Q) PUBLICITY. Except as may be required by applicable law or a
listing agreement with any securities exchange or The Nasdaq Stock Market, Inc.,
the Company, the Noteholders and the Equityholders severally agree that none of
them shall issue a publicity release or announcement or otherwise make any
public disclosure concerning this Agreement or the transactions contemplated
hereby, without prior approval of the others of them. If any announcement is
required by law to be made by any party referred to in this Section 11(q), prior
to making such announcement such party, to the greatest extent practicable (i)
will deliver a draft of such announcement to such other parties referred to in
this Section 11(q), and (ii) shall give such other parties an opportunity to
comment thereon.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective officers or partners hereunto duly
authorized as of the date first above written.
NATIONAL AUTO FINANCE COMPANY, INC.
By:____________________________________
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
NATIONAL AUTO FINANCE COMPANY, L.P.
By:_________________________________
National Auto Finance Corporation,
its general partner
By:____________________________________
Name: Xxxx X. Xxxxxxx
Title: President
NATIONAL AUTO FINANCE CORPORATION
By:____________________________________
Name: Xxxx X. Xxxxxxx
Title: President
NOVA FINANCIAL CORPORATION
By:____________________________________
Name:
Title:
NOVA CORPORATION
By:____________________________________
Name:
Title:
XXXX X. XXXXXXX
_________________________________________
XXXXX X. XXXX
_________________________________________
XXXXXXX X. XXXXX
_________________________________________
THE 1818 MEZZANINE FUND, L.P.
By: Xxxxx Brothers Xxxxxxxx & Co.,
its General Partner
By:____________________________________
Name: Xxxxxx X. Xxxxxx
Title: Senior Manager
THE PROGRESSIVE INVESTMENT COMPANY,
INC.
By:____________________________________
Name: Xxxxxx Xxx
Title: Portfolio Manager
PC INVESTMENT COMPANY
By:____________________________________
Name: Xxxxxx Xxx
Title: Portfolio Manager
MANUFACTURERS LIFE INSURANCE COMPANY
(U.S.A.)
By:____________________________________
Name: Xxxxxxx X. Xxxxx
Title: Senior Managing Director
THE STRUCTURED FINANCE HIGH YIELD
FUND, LLC.
By:____________________________________
Name:
Title: Vice President
SCHEDULE 1(b)(1)
GOOD FAITH ESTIMATE OF RESTRUCTURING CHARGES
SCHEDULE 1(b)(2)
BUSINESS PLAN
SCHEDULE 1(d)
SAMPLE RETURN ON ASSETS CALCULATION
EXHIBIT A
AMENDED AND RESTATED SENIOR SUBORDINATED NOTE
EXHIBIT B
CONVERTIBLE NOTE
EXHIBIT C
RELEASE OF THE COMPANY BY THE NOTEHOLDERS AND THE EQUITYHOLDERS
EXHIBIT D
RELEASE OF THE COMPANY, THE NOTEHOLDERS AND THE EQUITYHOLDERS BY THE
PARTNERSHIP
EXHIBIT E
RELEASE OF THE PARTNERSHIP BY THE COMPANY, THE NOTEHOLDERS AND THE
EQUITYHOLDERS
EXHIBIT F
PROXY
EXHIBIT G
AGREEMENTS BETWEEN THE COMPANY AND FIRST UNION
EXHIBIT H
JUNIOR RESTRUCTURING DOCUMENTS
EXHIBIT I
CERTIFICATE SALE AGREEMENT
