WAIVER AND AMENDMENT NO. 1 TO
THE SECURITIES PURCHASE AGREEMENT
Waiver and Amendment No. 1 (this "Waiver and Amendment"),
dated March 27, 1998, to the Securities Purchase Agreement (as defined below),
by and among National Auto Finance Company, Inc. (the "Company"), The 1818
Mezzanine Fund, L.P. (the "Fund"), PC Investment Company ("PCI"), Progressive
Investment Company, Inc. ("Progressive," and together with PCI, the "Progressive
Entities") and Manufacturers Life Insurance Company (U.S.A.) ("ML," and together
with the Fund and the Progressive Entities, the "Purchasers").
WHEREAS, the parties hereto have previously executed that
certain Securities Purchase Agreement, dated December 22, 1997 (the "Securities
Purchase Agreement"), by and among the Company and the Purchasers; and
WHEREAS, the Company has previously issued (i) that certain
warrant (warrant no. 1) to the Fund to initially purchase 415,570 shares of
Common Stock, par value $.01 per share (the "Common Stock"), of the Company at
an exercise price of $.01 per share; (ii) that certain warrant (warrant no. 4)
to Progressive to initially purchase 363,623 shares of Common Stock at an
exercise price of $.01 per share; and (iii) that certain warrant (warrant no. 3)
to ML to initially purchase 259,731 shares of Common Stock at an exercise price
of $.01 per share (collectively, the "Purchasers' Warrants"), and the
Purchasers' Warrants provide for adjustments in the number of shares of Common
Stock issuable upon exercise thereof under certain circumstances; and
WHEREAS, the Company proposes to issue and sell to The
Structured Finance High Yield Fund, LLC (the "High Yield Fund") (i) Senior
Subordinated Promissory Notes with a final maturity of December 22, 2004 in the
aggregate principal amount of $20,000,000.00 (the "March Notes") and (ii)
593,671 detachable warrants exercisable immediately to purchase initially
593,671 shares of the Company's Common at an exercise price of $.01 per share
(the "March Warrants"); and
WHEREAS, in connection with the transaction described in the
immediately preceding whereas clause above the Company desires to obtain certain
amendments to the Securities Purchase Agreement and a waiver of certain
anti-dilution provisions contained in the Warrants; and
WHEREAS, all capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to such terms in the Securities
Purchase Agreement.
In consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
A(1) Amendment to Section 1.1. (i) Section 1.1 of the
Securities Purchase Agreement shall be amended by including the following
additional definitions:
"March Holder" means the Purchaser (as defined in the
March Securities Purchase Agreement) and any subsequent transferee or
transferees of the March Notes, March Warrants or March Warrant Shares,
as reflected on the books and records of the Company, other than a
transferee who has acquired the March Notes, March Warrants or March
Warrant Shares that have been the subject of a distribution pursuant to
a registered public offering, or, in the case of March Notes, March
Warrants or March Warrant Shares, a transferee who has acquired such
March Notes, March Warrants or March Warrant Shares after such
securities have been sold pursuant to Rule 144 under the Securities Act
or otherwise distributed under circumstances not requiring a legend.
"March Notes" means the Senior Subordinated
Promissory Notes issued pursuant to the March Securities Purchase
Agreement and replacements thereof.
"March Securities Purchase Agreement" shall mean that
certain Securities Purchase Agreement, dated as of March 27, 1998, by
and between the Company and The Structured Finance High Yield Fund,
LLC, as the same may be amended, supplemented or modified from time to
time in accordance with its terms.
"March Warrants" means the Warrants issued pursuant
to the March Securities Purchase Agreement.
"March Warrant Shares" means the shares of Common
Stock issuable upon exercise of the March Warrants (subject to any
adjustments pursuant to the terms thereof).
(ii) The definition of "Restricted Payment" in Section 1.1 of
the Securities Purchase Agreement shall be amended and restated to read in its
entirety as follows:
"Restricted Payment" means (a) any dividend (or other
distribution of evidences of Indebtedness, assets or other property) on
any share of the Company's or any Subsidiary's Capital Stock (except
dividends payable solely in shares of their Capital Stock or dividends
paid to the Company or a wholly-owned Subsidiary of the Company by a
wholly-owned direct or indirect Subsidiary of the Company) or (b) any
payment by the Company or any of its Subsidiaries on account of the
direct or indirect purchase, redemption, retirement or other
acquisition of (i) any shares of the Company's or any such Subsidiary's
Capital Stock (except (x) the Warrants and the March Warrants and (y)
shares acquired upon the conversion, exchange or exercise thereof into
or for other shares of their Capital Stock), or (ii) any Indebtedness
of the Company or any such Subsidiary prior to any date set forth for
mandatory repayment or redemption of principal or interest thereon;
provided, however, that this clause (ii) shall not apply to (w)
Indebtedness incurred pursuant to the Notes, (x) Senior Indebtedness,
(y) Indebtedness that is pari passu in right of payment to the Notes,
to the extent that the Company offers to purchase, redeem or retire the
Notes pro rata with such pari passu Indebtedness or (z) Permitted
Refinancing Indebtedness in respect of Junior Subordinated Indebtedness
(other than Existing Junior Subordinated Indebtedness)).
(iii) The definition of "Junior Subordinated Indebtedness" in
Section 1.1 of the Securities Purchase Agreement shall be amended and restated
to read in its entirety as follows:
"Junior Subordinated Indebtedness" shall mean
Indebtedness that is expressly subordinated and made junior to the
payment and performance in full of the Notes, has a Stated Maturity
later than December 22, 2004, and is evidenced as such by a written
instrument containing subordination provisions in form and substance
approved by the holders of a majority in interest of the aggregate
principal amount of the Notes whose consent shall not be unreasonably
withheld; provided that any such subordination provisions shall be
deemed reasonable so long as the holder of the Junior Subordinated
Indebtedness agrees to be subordinated to the Notes at least to the
same extent as the Existing Junior Subordinated Indebtedness is
subordinated to the Notes pursuant to the Junior Subordination
Agreement (except that nothing contained in this proviso shall be
deemed to permit the Stated Maturity of any such Junior Subordinated
Indebtedness to be earlier than December 23, 2004). Notwithstanding
anything to the contrary contained in the foregoing, however, Junior
Subordinated Indebtedness shall be deemed to include the Existing
Junior Subordinated Indebtedness even though the Stated Maturity of
such Indebtedness is January 31, 2002. The fact that the Stated
Maturity of the Existing Junior Subordinated Indebtedness is January
31, 2002 shall not be deemed to be a violation of the terms of this
Agreement.
(2) Amendment to Section 10.6(a). Section 10.6(a) of the
Securities Purchase Agreement shall be amended and restated to read in its
entirety as follows:
(a) Neither the Company nor any of its
Subsidiaries shall, directly or indirectly, issue, assume or otherwise
incur any Indebtedness, other than: (i) Indebtedness under this
Agreement and the Notes, (ii) Indebtedness under the March Securities
Purchase Agreement and the March Notes, (iii) Junior Subordinated
Indebtedness, (iv) Intercompany Indebtedness, (v) Indebtedness under
the Credit Agreement or other similar facilities in an amount not
exceeding $100 million, which increases to an amount equal to the
product of the Consolidated Tangible Net Worth of the Company
multiplied by five multiplied by 0.6, and (vi) Senior Indebtedness (to
the extent not incurred under subsection (v) of this Section 10.6(a))
and Indebtedness that is pari passu with the Indebtedness incurred
under the Notes and the March Notes, but only to the extent that, in
the case of this clause (vi), immediately after giving effect thereto,
the ratio of Total Indebtedness to Consolidated Tangible Net Worth does
not exceed 5.0:1.0.
(3) Amendment to Section 14.5. Section 14.5 of the Securities
Purchase Agreement shall be amended and restated to read in its entirety as
follows:
(a) No failure or delay on the part of
any Holder, in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
(b) Any amendment, supplement or
modification of or to any provision of this Agreement or the Notes, any
waiver of any provision of this Agreement or the Notes, and any consent
to any departure by the Company from the terms of any provision of this
Agreement or the Notes, shall be effective (i) only if it is made or
given in writing and signed by the Company and the holders of 66% of
the aggregate principal amount of the Notes and March Notes
outstanding, and (ii) only in the specific instance and for the
specific purpose for which made or given. Notwithstanding the
foregoing, without the consent of each holder of a Note affected, an
amendment may not:
(1) reduce the rate of or extend the
time for payment of interest on any
Note;
(2) reduce the principal of or extend
the maturity of any Note;
(3) change the time at which any Note
shall or may be prepaid in
accordance with Sections 3 and 4 of
the Notes;
(4) make any Note payable in money other
than that stated in the Notes;
(5) make any change in Article 12 that
adversely affects the rights of any
holder of a Note under Article 12;
or
(6) make any change in the first or
second sentence of this Section
14.5(b).
(c) Any amendment, supplement or
modification of or to any of the terms provided in Article 8, Sections
9.1(c), 9.7, 9.9, 9.10, 9.11, 9.15, 10.4, 10.13 and 10.14 and Article
14, and any definitions in Article 1 relating to such provisions, and
any consent to any departure by the Company from such provisions, shall
be effective (i) only if it is made or given in writing and signed by
the Company and holders of at least 51% of the aggregate number of the
Purchaser Shares and March Warrant Shares held by Holders and March
Holders, and (ii) only in the specific instance and for the specific
purpose for which made or given.
(d) In addition to the foregoing, any
amendment, supplement or modification of or to any of the terms
provided in Sections 9.8, 9.11 or 9.14, and any consent to any
departure by the Company from any such provisions, shall be effective
(i) only if it is made or given in writing and signed by the Company
and holders of at least 51% of aggregate number of the Warrants (based
on the number of Warrant Shares issuable upon the exercise of
unexercised Warrants) and the March Warrants (based on the number of
March Warrant Shares issuable upon the exercise of unexercised March
Warrants) held by the Holders and the March Holders (as the case may
be), and (ii) only in the specific instance and for the specific
purpose for which made or given.
(e) Notwithstanding the foregoing, no
amendment, supplement or modification hereunder shall become effective
unless an equivalent amendment, modification or waiver under the March
Securities Purchase Agreement becomes effective simultaneously
therewith.
(f) Except where notice is specifically
required by this Agreement, no notice to or demand on the Company in
any case shall entitle the Company to any other or further notice or
demand in similar or other circumstances.
B Waiver of Anti-Dilution Adjustment. For purposes of Section
2(a)(ii) of the Purchasers' Warrants, each holder of the Purchasers' Warrants
hereby acknowledges that the Unit Issuance (as defined in the Purchasers'
Warrants) consisting of the March Notes and the March Warrants is fair, from a
financial point of view, to the stockholders of the Company. Accordingly, each
holder of Purchasers' Warrants hereby waives any obligation of the Company to
adjust the Number Issuable (as defined in the Purchasers' Warrants) pursuant to
Section 2(a)(ii) of the Purchasers' Warrants with respect to the issuance and
sale of the March Notes and March Warrants to the High Yield Fund as
contemplated in the March Securities Purchase Agreement.
C Representations and Warranties of the Company. (a) The
Company represents and warrants that this Waiver and Amendment has been duly
authorized, executed and delivered by, and constitutes a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability.
(b) The Company represents and warrants
that, after giving effect to the issuance of the March Notes, the ratio
of Total Indebtedness to Consolidated Tangible Net Worth does not
exceed 5.0:1.0.
D Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in accordance with Section
14.2 of the Securities Purchase Agreement.
E Counterparts. This Waiver and Amendment 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.
F Headings. The headings in this Waiver and Amendment are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
G Governing Law. This Waiver and Amendment 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.
H 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.
I Publicity. Except as may be required by applicable law or a
listing agreement with any securities exchange or Nasdaq, no party hereto shall
issue a publicity release or announcement or otherwise make any public
disclosure concerning this Waiver and Amendment or the transactions contemplated
hereby, without prior approval by the other parties hereto. If any announcement
is required by law to be made by a party hereto, prior to making such
announcement such party will deliver a draft of such announcement to the other
parties and shall give the other parties an opportunity to comment thereon.
J Expenses. The Company acknowledges and agrees that whether
or not the transactions contemplated hereby are consummated, the Company shall
reimburse the Purchasers for all out-of-pocket expenses, and all legal fees and
expenses of the Purchasers incurred in connection with the negotiation,
execution and delivery of this Waiver and Amendment and other related documents.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver
and Amendment to be executed and delivered by their respective officers or
partners hereunto duly authorized as of the date first above written.
NATIONAL AUTO FINANCE COMPANY, INC.
By:
Name:
Title:
THE 1818 MEZZANINE FUND, L.P.
By: ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co.,
its General Partner
By:
Name:
Title:
PROGRESSIVE INVESTMENT COMPANY, INC.
By:
Name:
Title:
PC INVESTMENT COMPANY
By:
Name:
Title:
MANUFACTURERS LIFE INSURANCE COMPANY
(U.S.A.)
By:
Name:
Title:
