AMENDMENT AGREEMENT NO. 2
to that certain
REVOLVING CREDIT AGREEMENT
This AMENDMENT AGREEMENT NO. 2 (the "Amendment"), dated as of
December 19, 1997, is among National Auto Finance Company, Inc. (the
"Borrower"), BankBoston, N.A. and the other lending institutions party thereto
(collectively the "Banks"), and BankBoston, N.A. as agent (the "Agent") for
itself and the other Banks.
WHEREAS, the Borrower, the Banks and the Agent are parties to that
certain Revolving Credit Agreement, dated as of September 29, 1997 (as amended
by Amendment No. 1, dated as of October 1, 1997, the "Credit Agreement"),
pursuant to which the Banks, upon certain terms and conditions, have made loans
to the Borrower; and
WHEREAS, the Borrower had requested that the Banks agree, and the Banks
have agreed, on the terms and subject to the conditions set forth herein, to
make certain changes to the Credit Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
SS.1. DEFINED TERMS. Capitalized terms which are used herein
--------------
without definition and which are defined in the Credit Agreement shall have the
same meanings herein as in the Credit Agreement.
SS.2. AMENDMENT OF CREDIT AGREEMENT. The Credit Agreement is
-----------------------------
hereby amended as follows:
(a) Section 1.1 of the Credit Agreement is amended and
restated in its entirety to read as follows:
(i) clause (c) of the definition of Borrowing Base
set forth in such ss.1.1 is amended by deleting the text "prior
to the Termination Date" and "and on and after the Termination
Date, 0% of the Residual Value" contained in such definition.
(ii) the definitions of Consolidated Total Interest
Expense and EBIT set forth in such ss.1.1 are amended and
restated in their entirety to read as follows:
Consolidated Total Interest Expense. For any period,
the aggregate amount of (a) interest required to be
paid or accrued by the Borrower and its Subsidiaries
during such period on all Indebtedness of the
Borrower and its Subsidiaries outstanding during all
or any part of such period, whether such interest was
2
or is required to be reflected as an item of expense
or capitalized, including payments consisting of
interest in respect of Capital Leases, and including
commitment fees, agency fees, facility fees, balance
deficiency fees and similar fees or expenses in
connection with the borrowing of money, plus (b) the
net amount payable (or minus the net amount
receivable) under Rate Hedging Agreements during such
period (whether or not actually paid or received
during such period) plus (c) dividends to be paid or
declared of the Borrower by the Borrower and its
Subsidiaries during such period on all shares of
preferred stock of the Borrower and its Subsidiaries
outstanding during all or any part of such period.
EBIT. With respect to any fiscal period, the sum of
(a) the Consolidated Net Income of the Borrower and
its Subsidiaries for such period (excluding
therefrom, to the extent included in determining
Consolidated Net Income, any items of extraordinary
gain (or loss), including net gains (or losses) on
sale of assets other than asset sales in the ordinary
course of business), (b) Consolidated Total Interest
Expense deducted from revenue in determining such
Consolidated Net Income and (c) Federal, state and
local income and franchise taxes deducted from
revenue in determining such Consolidated Net Income.
(iii) the definition of Reference Period set forth in
such ss.1.1 is amended by deleting each reference to the text
"calendar months" contained in such definition and
substituting, in each case, the text "fiscal quarters"
therefor.
(iv) the definition of Senior Subordinated Debt
Documents set forth in such ss.1.1 is amended by deleting the
reference to "Senior Subordinated Note Purchase Agreement"
contained in such definition and substituting "Securities
Purchase Agreement" therefor.
(v) the definition of Senior Subordinated Notes set
forth in such ss.1.1 is amended by deleting the amount of
"$12,000,000" contained in such definition and substituting
the amount "$40,000,000" therefor and by deleting the
reference to "Senior Subordinated Note Purchase Agreement"
contained in such definition and substituting "Securities
Purchase Agreement" therefor.
(vi) the definition of Subordination Agreements set
forth in such ss.1.1 is amended and restated in its entirety
to read as follows:
Subordination Agreements. Collectively, (a) Article
12 of the Securities Purchase Agreement and the
definitions and provisions applicable to such Article
12 contained therein and (b) the Junior Subordination
Agreement, dated as of December 22, 1997, among the
3
Agent, the holders of the Senior Subordinated Notes,
the holders of the Junior Subordinated Debt Documents
and the Borrower, each in form and substance
satisfactory to the Banks and the Agent.
(vii) Section 1.1 is further amended by adding the
following new definitions:
A. Consolidated Net Worth. As of the date of
determination, the stockholder's equity in the
Borrower (excluding any reductions resulting from
mergers accounted for as a pooling-of-interests in
accordance with generally accepted accounting
principles), determined in accordance with generally
accepted accounting principles.
B. Consolidated Tangible Net Worth. As of the date of
determination, the Consolidated Net Worth of the
Borrower plus the aggregate amount of Junior
Subordinated Debt plus such other Indebtedness that
(i) is expressly subordinated and made junior to the
Senior Subordinated Notes, (ii) is evidenced by a
written instrument, and (iii) is subject to a
subordination agreement among the holders of such
Indebtedness, the holders of the Senior Subordinated
Notes, the Borrower and the Agent, in each case, in
form and substance satisfactory to the Agent, minus
the total book value of all assets of the Borrower
and its Subsidiaries properly classified as
intangible assets under generally accepted accounting
principles.
C. Exchange Act. The Securities Exchange Act of 1934,
as amended, or any federal statute or code which is a
successor thereto.
D. Funded Debt. With respect to any Person and as at
any date of determination thereof, without
duplication, (a) all Indebtedness of such Person as
at such date for money borrowed, (b) the principal
component of all Capital Lease obligations, (c) all
Indebtedness for the deferred purchase price of
property or services represented by a note or other
security (other than in respect of any trade payable)
or other Indebtedness arising under any conditional
sale or other title retention agreement with respect
to property acquired by such Person (even though the
rights and remedies of the seller or lender under
such agreement in the event of default are limited to
repossession or sale of such property), and (d) all
Indebtedness of such Person secured by a purchase
money mortgage or other lien to secure all or part of
the purchase price of property subject to such
mortgage or lien.
4
E. Rate Hedging Agreements. Any written
agreements evidencing Rate Hedging Obligations.
F. Rate Hedging Obligations. Any and all obligations
of the Borrower or any of its Subsidiaries, whether
direct or indirect and whether absolute or
contingent, at any time created, arising, evidenced
or acquired (including all renewals, extensions,
modifications and amendments thereof and all
substitutions therefor), in respect of: (a) any and
all agreements, arrangements, devices and instruments
designed or intended to protect at least one of the
parties thereto from the fluctuations of interest
rates, exchange rates or forward rates applicable to
such party's assets, liabilities or exchange
transactions, including without limitation
dollar-denominated or cross currency interest rate
exchange agreements, forward rate currency or
interest rate options, puts and warrants and
so-called "rate swap" agreements; and (b) any and all
cancellations, buy-backs, reversals, terminations or
assignments of any of the foregoing.
G. Securities Purchase Agreement. The Securities
Purchase Agreement, dated as of December 22, 1997,
by and among the Borrower, The 1818 Mezzanine
Fund, L.P., PC Investment Company, Progressive
Investment Company, Inc. and Manufacturers Life
Insurance Company (U.S.A.).
H. Total Indebtedness. Funded Debt of the Borrower
and its Subsidiaries on a consolidated basis minus
Junior Subordinated Debt.
(viii) Section 1.1 is also amended by deleting the
definition of Termination Date set forth in such ss.1.1 in its
entirety.
(b) Section 3.4 of the Credit Agreement is hereby deleted in
its entirety.
(c) The first sentence of ss.6.17 of the Credit Agreement is
amended by (i) deleting the text "prior to the Termination Date,"
contained in such sentence and (ii) adding, immediately following the
text "working capital" contained in such sentence, the text "and
general corporate".
(d) Section 7.12 of the Credit Agreement is amended by (i)
deleting the text "prior to the Termination Date," contained in such
ss.7.12 and (ii) adding, immediately following the text "working
capital" contained in such ss.7.12, the text "and general corporate".
5
(e) Section 8.5.2 of the Credit Agreement is amended by
deleting all of the text immediately following the words "no Default or
Event of Default" contained in such ss.8.5.2 and substituting the
following therefor:
shall have occurred and be continuing or would occur after
giving effect thereto, (ii) the Borrower (or any of its
Subsidiaries, as the case may be) receives consideration at
the time of such disposition at least equal to the fair market
value of the assets sold or otherwise disposed of and, in the
case of a lease of assets, a lease providing for rent and
other conditions which are no less favorable than the then
prevailing market conditions, and (iii) the Borrower shall
apply, or cause a Subsidiary to apply, the net sale proceeds
from such disposition within 180 days of receipt thereof (A)
to make Investments in assets or properties that will be used
in the business of the Borrower and its Subsidiaries
consistent with ss.8.3 or (B) to repay any Indebtedness of the
Borrower subject to the provisions of Article 12 of the
Securities Purchase Agreement. Notwithstanding the foregoing
sentence, the Borrower may sell or transfer its assets or
properties in the ordinary course of business consistent with
past practice, including transfers made in a Permitted
Securitization Transaction and such transactions shall not be
subject to the conditions set forth in the previous sentence.
(f) Section 8.7 of the Credit Agreement is amended by adding
at the end of clause (b) contained in such ss.8.7 and immediately
before the semicolon the text 'other than the repayment in full of all
Indebtedness under the Senior Subordinated Note Purchase Agreement and
the "Senior Subordinated Notes" as defined therein on or prior to
December 22, 1997 solely with the proceeds of the subordinated debt
financing evidenced by the Securities Purchase Agreement'.
(g) Section 8.12 of the Credit Agreement is amended by
deleting (i) from within the parenthetical contained in such ss.8.12
the text "and the limitations contained in ss.5.9 of the Senior
Subordinated Note Purchase Agreement" and (ii) immediately following
the words "provided that", contained in such ss.8.12 the text "after
the Termination Date,".
(h) Section 9 of the Credit Agreement is amended by adding the
following new ss.9.9:
9.9 Leverage Ratio. In the event that the Borrower incurs
"Senior Indebtedness" (as defined in the Securities Purchase
Agreement) in excess of the Indebtedness permitted by clause
(iv) of Section 10.6(a) of the Securities Purchase Agreement
(the "Additional Senior Indebtedness") in addition to any
Indebtedness that is pari passu with the Indebtedness incurred
6
under the Senior Subordinated Notes, the Borrower will not
permit, immediately after giving effect to the Additional
Senior Indebtedness, the ratio of Total Indebtedness to
Consolidated Tangible Net Worth to exceed 4.5:1.0.
(i) Clause (i) of ss.12.1 of the Credit Agreement is amended
by adding at the end of such clause (i) and immediately prior to the
semicolon the text "or any action which is not quashed or remains
unstayed for a period in excess of fifteen days shall be legally taken
by a judgment creditor to levy upon assets or properties of the
Borrower or any of its Subsidiaries to enforce any such judgment".
(j) Section 12.1 of the Credit Agreement is further amended
by (i ) deleting the word "or" at the end of clause (u) in such ss.12.1
and (ii ) adding the following new clauses (w) and (x) to such ss.12.1:
(w) a "Blockage Notice" as defined in Section 12.3(b)
of the Securities Purchase Agreement shall be given
by a holder of Senior Indebtedness (as defined
therein) other than the Agent; or
(x) a Change of Control shall occur.
For the purposes of this clause (x),
"Change of Control" shall mean:
(i) Any Person or "group" (within the
meaning of Section 13(d)(3) of the Exchange Act)
other than National Auto Finance Company, L.P., Xxxx
X. Xxxxxxx, Xxxxx X. Xxxxx, First Union National Bank
of North Carolina (or any of its Affiliates) or the
Purchasers (as defined in the Securities Purchase
Agreement) (collectively the "Principal
Stockholders") is or becomes the beneficial owner,
directly or indirectly, of outstanding shares of
capital stock of the Borrower, entitling such Person
or Persons to exercise 50% or more of the total votes
entitled to be cast for the election of directors
under ordinary circumstances at a regular or special
meeting, or by action by written consent, of (i)
common stockholders of the Borrower if at least a
majority of the Borrower's Board of Directors are
elected by common stockholders, and (ii) voting
stockholders of the Borrower in all other
circumstances (the term "beneficial owner" shall be
determined in accordance with Rule 13d-3, promulgated
by the Commission under the Exchange Act);
(ii) A majority of the Board of Directors of
the Borrower shall consist of Persons other than
Continuing Directors. The term "Continuing Director"
shall mean any member of the Board of Directors of
7
the Borrower on the Closing Date and any other member
of the Board of Directors who shall be recommended or
elected to succeed or become a Continuing Director by
a majority of Continuing Directors who are then
members of the Board of Directors of the Borrower.
(iii) The stockholders of the Borrower shall
have approved a recapitalization, reorganization,
merger, consolidation, sale or other disposition of
all or substantially all the assets of the Borrower
(in one transaction or in a series of related
transactions) or similar transaction, in each case,
with respect to which all or substantially all the
Persons who were the respective beneficial owners of
the outstanding shares of capital stock of the
Borrower immediately prior to such recapitalization,
reorganization, merger or consolidation, beneficially
own, directly or indirectly, less than 10% of the
combined voting power of the then outstanding shares
of capital stock of the Borrower resulting from such
recapitalization, reorganization, merger,
consolidation or similar transaction or obtaining the
assets of the Borrower; or
(iv) Upon the consummation of any
transaction the result of which is that the common
stock of the Borrower is not required to be
registered under Section 12 of the Exchange Act and
that the holders of common stock of the Borrower do
not receive common stock of the Person surviving such
transaction which is required to be registered under
Section 12 of the Exchange Act.
SS.3. AFFIRMATION AND ACKNOWLEDGMENT OF THE BORROWER. The Borrower
----------------------------------------------
hereby ratifies and confirms all of its Obligations to the Banks, including,
without limitation the Loans, and the Borrower hereby affirms its absolute and
unconditional promise to pay to the Banks the Loans and all other amounts due
under the Credit Agreement as amended hereby. The Borrower hereby confirms that
the Obligations are and remain secured pursuant to the Security Documents and
pursuant to all other instruments and documents executed and delivered by the
Borrower as security for the Obligations.
SS.4. REPRESENTATIONS AND WARRANTIES. The Borrower hereby
--------------------------------
represents and warrants to the Banks as follows:
(a) The execution and delivery by the Borrower of this
Amendment and all other instruments and agreements required to be
executed and delivered by the Borrower in connection with the
transactions contemplated hereby or referred to herein (collectively,
the "Amendment Documents"), and the performance by the Borrower of its
obligations and agreements under the Amendment Documents and the Credit
Agreement as amended hereby, are within the corporate authority of the
Borrower, have been authorized by all necessary corporate proceedings
on behalf of the Borrower, and do not and will not contravene any
provision of law, statute, rule or regulation to which the Borrower or
8
any of its Subsidiaries is subject or any of the Borrower's charter,
other incorporation papers, by-laws or any stock provision or any
amendment thereof or of any indenture, agreement, instrument or
undertaking binding upon the Borrower.
(b) The Amendment Documents and the Credit Agreement as
amended hereby constitute legal, valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms, except
as limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting generally the enforcement of
creditors' rights.
(c) No approval or consent of, or filing with, any
governmental agency or authority is required to make valid and legally
binding the execution, delivery or performance by the Borrower of the
Amendment Documents or the Credit Agreement as amended hereby, or the
consummation by the Borrower of the transactions among the parties
contemplated hereby and thereby or referred to herein.
(d) The representations and warranties contained in ss.6 of
the Credit Agreement were correct at and as of the date made. Except to
the extent of changes resulting from transactions contemplated or
permitted by the Credit Agreement and changes occurring in the ordinary
course of business that singly or in the aggregate are not materially
adverse and to the extent such representations and warranties relate
expressly to an earlier date, such representations and warranties also
are correct at and as of the date hereof.
(e) The Borrower has performed and complied in all material
respects with all terms and conditions herein required to be performed
or complied with by it prior to or at the time hereof, and as of the
date hereof, after giving effect to the provisions hereof, there exists
no Event of Default or Default.
SS.5. EFFECTIVENESS. The effectiveness of this Amendment shall be
-------------
subject to the satisfaction of the following conditions:
(a) Delivery. Each of the Borrower and the Banks shall have
executed and delivered this Amendment.
(b) Senior Subordinated Debt Arrangements.
(i) The transactions contemplated by the Securities
Purchase Agreement shall have been consummated (which
Agreement shall be in form and substance satisfactory
to the Agent and the Banks);
(ii) All Indebtedness under the Senior Subordinated
Note Purchase Agreement shall simultaneously be paid
in full and the Senior Subordinated Note Purchase
Agreement and the "Senior Subordinated Notes" as
defined therein shall simultaneously be terminated
and cancelled.
9
(c) Proceedings and Documents. All proceedings in connection
with the transactions contemplated by this Amendment, the transactions
contemplated by the Securities Purchase Agreement and all documents
incident thereto shall be reasonably satisfactory in substance and form
to the Banks, the Agent and the Agents' Special Counsel, and the Banks,
the Agent and such counsel shall have received all information and such
counterpart originals or certified or other copies of such documents as
the Agent may reasonably request.
SS.6 ACKNOWLEDGMENT OF SUBORDINATED DEBT. The Banks hereby acknowledge
-----------------------------------
that the Indebtedness evidenced by the Securities Purchase Agreement and the
Senior Subordinated Notes as in effect on the date hereof shall be "Subordinated
Debt".
SS.7. MISCELLANEOUS PROVISIONS. (a) Except as otherwise expressly
------------------------
provided by this Amendment, all of the terms, conditions and provisions of the
Credit Agreement shall remain the same. It is declared and agreed by each of the
parties hereto that the Credit Agreement, as amended hereby, shall continue in
full force and effect, and that this Amendment and the Credit Agreement shall be
read and construed as one instrument.
(b) THIS AMENDMENT IS INTENDED TO TAKE EFFECT AS AN AGREEMENT UNDER
SEAL AND SHALL BE CONSTRUED ACCORDING TO AND GOVERNED BY THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS.
(c) This Amendment may be executed in any number of counterparts, but
all such counterparts shall together constitute but one instrument. In making
proof of this Amendment it shall not be necessary to produce or account for more
than one counterpart signed by each party hereto by and against which
enforcement hereof is sought.
(d) Pursuant to ss.15 of the Credit Agreement, the Borrower hereby
agrees to pay to the Agent, on demand by the Agent, all reasonable out-of-pocket
costs and expenses incurred or sustained by the Agent in connection with the
preparation of this Amendment (including reasonable legal fees).
10
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
NATIONAL AUTO FINANCE COMPANY,
INC.
By:____________________________________
Title:
BANKBOSTON, N.A.,
individually and as Agent
By:____________________________________
Title:
