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OMB APPROVAL
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OMB Number: 3235-0145
Expires: August 31, 1999
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND
AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)
(AMENDMENT 2)*
NATIONAL AUTO FINANCE COMPANY, INC.
(Name of Issuer)
SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
632528-10-5
(CUSIP Number)
RICHARD GOREVITZ JOSEPH P. DONLAN DAVID M. SCHNEIDER
THE PRUDENTIAL INSURANCE BROWN BROTHERS HARRIMAN & CO. THE PROGRESSIVE
COMPANY OF AMERICA 59 WALL STREET CORPORATION
ONE GATEWAY CENTER NEW YORK, NY 10005 6300 WILSON MILLS ROAD
11TH FLOOR (212) 493-7882 MAYFIELD VILLAGE, OH
NEWARK, NJ 07102-5311 44143
(973) 802-7003 (216) 461-5000
with a copy to:
DAVID C.L. FRAUMAN
CADWALADER, WICKERSHAM & TAFT
100 MAIDEN LANE
NEW YORK, NEW YORK 10038
(212) 504-6652
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
JULY 1, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box .
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See ss. 240.13d-7 for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Exchange Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
POTENTIAL PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM
DISPLAYS A CURRENTLY VALID OMB CONTROL NUMBER.
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 2 OF 19 PAGES
- ------------------------ ----------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Progressive Corporation, 34-0963169
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (A) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Ohio
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 8,372,235
OWNED BY ----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ----------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
4,142,235
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,142,235
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See
Instructions) [x]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.13%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
HC, CO
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 3 OF 19 PAGES
- ------------------------ ----------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Progressive Casualty Insurance Company, 34-6513736
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (A) [X]
(B) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Ohio
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 8,372,235
OWNED BY ----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ----------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
4,142,235
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,142,235
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See
Instructions) [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.13%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions) IC, CO, Subsidiary of The
Progressive Corporation
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 4 OF 19 PAGES
- ------------------------ ----------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PC Investment Company, 34-1576555
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (A) [X]
(B) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 8,372,235
OWNED BY ----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ----------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
4,142,235
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,142,235
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See
Instructions) [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.13%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions) CO, Subsidiary of Progressive
Casualty Insurance Company
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 5 OF 19 PAGES
- ------------------------ ----------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Progressive Investment Company, Inc., 34-1378861
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (A) [X}
(B) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 8,372,235
OWNED BY ----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ----------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
4,142,235
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,142,235
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See
Instructions) [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.13%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions) CO, Subsidiary of The
Progressive Corporation
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 6 OF 19 PAGES
- ------------------------ ----------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The 1818 Mezzanine Fund, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (A) [X]
(B) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 8,060,172
OWNED BY ----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ----------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
3,830,172
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,830,172
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See
Instructions) [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.28%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
PN
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 7 OF 19 PAGES
- ------------------------ ----------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Brown Brothers Harriman & Co.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (A) [X]
(B) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 8,060,172
OWNED BY ----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ----------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
3,830,172
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,830,172
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See
Instructions) [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.28%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
PN
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 8 OF 19 PAGES
- ------------------------ ----------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Joseph P. Donlan
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (A) [X]
(B) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION United States of America
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 8,060,172
OWNED BY ----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ----------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
3,830,172
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,830,172
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See
Instructions) [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.28%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
IN
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 9 OF 19 PAGES
- ------------------------ ----------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Robert R. Gould
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (A) [X]
(B) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION United States of America
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 8,060,172
OWNED BY ----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ----------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
3,830,172
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,830,172
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See
Instructions) [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.28%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
IN
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 10 OF 19 PAGES
- ------------------------ ----------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
T. Michael Long
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (A) [X]
(B) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION United States of America
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 8,060,172
OWNED BY ----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ----------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
3,830,172
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,830,172
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See
Instructions) [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.28%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
IN
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 11 OF 19 PAGES
- ------------------------ ----------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Lawrence C. Tucker
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (A) [X]
(B) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 8,060,172
OWNED BY ----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ----------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
3,830,172
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,830,172
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See
Instructions) [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
21.28%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
IN
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 12 OF 19 PAGES
- ------------------------ ----------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Structured Finance High Yield Fund, LLC
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (A) [X]
(B) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 7,550,259
OWNED BY ----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ----------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
3,320,259
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,320,259
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See
Instructions) [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.19%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
00
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 13 OF 19 PAGES
- ------------------------ ----------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Prudential Insurance Company of America, 22-121160
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (A) [X]
(B) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS (See Instructions)
OO
- --------------------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d)
or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New Jersey
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ----------------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 7,550,259
OWNED BY ----------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 0
PERSON ----------------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
3,320,259
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,320,259
- --------------------------------------------------------------------------------
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See
Instructions) [X]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
18.19%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON (See Instructions)
IC, IA
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 14 OF 19 PAGES
- ------------------------ ----------------------
ITEM 1. SECURITY AND ISSUER.
This Amendment No. 2 to the Schedule 13D filed on behalf of the
Progressive Entities (as defined below) on December 31, 1997, the Schedule 13D
filed on behalf of the BBH Entities (as defined below) on December 30, 1997, and
the Schedule 13G filed on behalf of the Prudential Entities (as defined below
and, together with the Progressive Entities and the BBH Entities, the "REPORTING
PERSONS") on April 26, 1999, as amended by Amendment No. 1 to the Schedule 13D
filed on May 6, 1999, is being filed in connection with changes in the Reporting
Persons' beneficial ownership of the shares of Common Stock, par value $0.01 per
share (the "COMMON STOCK"), of National Auto Finance Company, Inc., a Delaware
corporation (the "ISSUER").
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) On July 1, 1999, the Issuer issued to the Reporting Persons as
the holders of the Issuer's Senior Subordinated Notes due December 22, 2004 (as
amended, the "AMENDED NOTES"), in lieu of 50% of the interest accrued on those
Amended Notes, Convertible Senior Subordinated Promissory Notes due December 22,
2004 (the "CONVERTIBLE NOTES"), a copy of a form of which is filed as Exhibit
7.8 hereto and is incorporated herein by reference, in the total aggregate
principal amount of $692,709. The Convertible Notes are convertible, at the
option of the holder thereof, at a price of $0.75 per share, into shares of
Common Stock. The Convertible Notes are substantially similar to the Amended
Notes, except for the conversion feature and except that up to 100% of the
interest accrued on the Convertible Notes may be paid, at the option of the
Issuer, in additional Convertible Notes.
In connection with the issuance as described above of Convertible
Notes having an aggregate principal amount of $193,959, PC Investment Company, a
Delaware corporation ("PCI"), shall be deemed to have acquired beneficial
ownership of an additional 258,612 shares of Common Stock. Accordingly, each of
The Progressive Corporation, an Ohio corporation ("PROGRESSIVE"), Progressive
Casualty Insurance Company, an Ohio corporation ("PROGRESSIVE CASUALTY"), PCI
and Progressive Investment Company, Inc., a Delaware corporation ("PROGRESSIVE
INVESTMENT" and, together with Progressive, Progressive Casualty and PCI, the
"PROGRESSIVE ENTITIES"), may be deemed to beneficially own 8,372,235 shares of
Common Stock (the "PROGRESSIVE SHARES"), or 46.8% of the Issuer's Common Stock,
which percentage is calculated based upon (i) 17,280,762 shares of Common Stock
represented by the Issuer to be issued and outstanding on May 17, 1999, (ii)
363,623 shares of Common Stock issuable upon exercise of the Warrants held by
Progressive Investment, (iii) 258,612 shares of Common Stock issuable upon
conversion of the Convertible Notes held by PCI, and (iv) shared voting power
with respect to 4,230,000 shares of Common Stock owned by National Auto Finance
Company, L.P., a Delaware limited partnership, with respect to which the
Progressive Entities, the BBH Entities and the Prudential Entities have an
irrevocable proxy to vote (the "PARTNERSHIP SHARES"). The Progressive Entities
disclaim beneficial ownership of the Partnership Shares, the BBH Shares (as
defined below) and the Prudential Shares (as defined below).
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 15 OF 19 PAGES
- ------------------------ ----------------------
In connection with the issuance as described above of Convertible
Notes having an aggregate principal amount of $221,666, The 1818 Mezzanine Fund,
L.P., a Delaware limited partnership (the "FUND"), shall be deemed to have
acquired beneficial ownership of an additional 295,555 shares of Common Stock.
Accordingly, each of the Fund, Brown Brothers Harriman & Co., a New York limited
partnership ("BBH&CO."), Joseph P. Donlan, a United States citizen ("DONLAN"),
Robert R. Gould, a United States citizen ("GOULD"), T. Michael Long, a United
States citizen ("LONG"), and Lawrence C. Tucker, a United States citizen
("TUCKER" and, together with the Fund, BBH&Co., Donlan, Gould and Long, the "BBH
ENTITIES"), may be deemed to beneficially own 8,060,172 shares of Common Stock
(the "BBH SHARES"), or 44.8% of the Issuer's Common Stock, which percentage is
calculated based upon (i) 17,280,762 shares of Common Stock represented by the
Issuer to be issued and outstanding on May 17, 1999, (ii) 415,570 shares of
Common Stock issuable upon exercise of the Warrants held by the Fund, (iii)
295,555 shares of Common stock issuable upon conversion of the Convertible Notes
held by the Fund, and (iv) shared voting power with respect to the Partnership
Shares. The BBH Entities disclaim beneficial ownership of the Partnership
Shares, the Progressive Shares and the Prudential Shares (as defined below).
Donlan, Gould, Long and Tucker disclaim beneficial ownership of the BBH Shares.
In connection with the issuance as described above of Convertible
Notes having an aggregate principal amount of $277,084, The Structured Finance
High Yield Fund, LLC, a Delaware limited liability company ("SFHY"), shall be
deemed to have acquired beneficial ownership of an additional 369,445 shares of
Common Stock. Accordingly, each of SFHY and The Prudential Insurance Company of
America, a mutual insurance company organized under the laws of New Jersey
("PRUDENTIAL" and, together with SFHY, the "PRUDENTIAL ENTITIES"), may be deemed
to beneficially own 7,550,259 shares of Common Stock (the "PRUDENTIAL SHARES"),
or 41.4% of the Issuer's Common Stock, which percentage is calculated based upon
(i) 17,280,762 shares of Common Stock represented by the Issuer to be issued and
outstanding on May 17, 1999, (ii) 593,671 shares of Common Stock issuable upon
exercise of the Warrants held by SFHY, (iii) 369,445 shares of Common Stock
issuable upon conversion of the Convertible Notes held by SFHY, and (iv) shared
voting power with respect to the Partnership Shares. The Prudential Entities
disclaim beneficial ownership of the Partnership Shares, the Progressive Shares
and the BBH Shares.
(b) Number of Shares as to which each of the Progressive Entities has:
(i) Sole power to vote or direct the vote:
0 shares for each Progressive Entity;
(ii) Shared power to vote or direct the vote: 8,372,235
shares for each Progressive Entity;
(iii) Sole power to dispose or to direct the disposition: 0
shares for each Progressive Entity;
(iv) Shared power to dispose or to direct the disposition:
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 16 OF 19 PAGES
- ------------------------ ----------------------
4,142,235 shares for each Progressive Entity.
Number of Shares as to which each of the of the BBH Entities has:
(i) Sole power to vote or direct the vote:
0 shares for each BBH Entity;
(ii) Shared power to vote or direct the vote: 8,060,172
shares for each BBH Entity;
(iii) Sole power to dispose or to direct the disposition: 0
shares for each BBH Entity;
(iv) Shared power to dispose or to direct the disposition:
3,830,172 shares for each BBH Entity.
Number of Shares as to which each of the Prudential Entities has:
(i) Sole power to vote or direct the vote:
0 shares for each Prudential Entity;
(ii) Shared power to vote or direct the vote: 7,550,259
shares for each Prudential Entity;
(iii) Sole power to dispose or to direct the disposition: 0
shares for each Prudential Entity;
(iv) Shared power to dispose or to direct the disposition:
3,320,259 shares for each Prudential Entity.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 7.8. Form of the Convertible Note contemplated by the
Restructuring Agreement, dated as of April 12, 1999,
by and among National Auto Finance Company, Inc.,
National Auto Finance Company, L.P., National Auto
Finance Corporation, Gary L. Shapiro, Edgar A. Otto,
Stephen L. Gurba, The 1818 Mezzanine Fund, L.P., PC
Investment Company, Progressive Investment Company,
Inc., Manufacturers Life Insurance Company (U.S.A.).
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 17 OF 19 PAGES
- ------------------------ ----------------------
SIGNATURE.
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
THE PROGRESSIVE CORPORATION
PROGRESSIVE CASUALTY INSURANCE COMPANY
By: /S/ DAVID M. SCHNEIDER
----------------------------------------
Name: David M. Schneider
Title: Secretary
PC INVESTMENT COMPANY
PROGRESSIVE INVESTMENT COMPANY, INC.
By: /S/ DAVID M. SCHNEIDER
----------------------------------------
Name: David M. Schneider
Title: Secretary
Date: July 9, 1999
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 18 OF 19 PAGES
- ------------------------ ----------------------
SIGNATURE.
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
BROWN BROTHERS HARRIMAN & CO.
By: /S/ ROBERT R. GOULD
----------------------------------------
Name: Robert R. Gould
Title: Partner
THE 1818 MEZZANINE FUND, L.P.
By: Brown Brothers Harriman & Co.,
General Partner
By: /S/ ROBERT R. GOULD
----------------------------------------
Name: Robert R. Gould
Title: Partner
/S/ JOSEPH P. DONLAN
--------------------------------------------
Joseph P. Donlan
/S/ ROBERT R. GOULD
--------------------------------------------
Robert R. Gould
/S/ T. MICHAEL LONG
--------------------------------------------
T. Michael Long
/S/ LAWRENCE C. TUCKER
--------------------------------------------
Lawrence C. Tucker
Date: July 9, 1999
<PAGE>
SCHEDULE 13D
- ------------------------ ----------------------
CUSIP NO. 632528-10-5 PAGE 19 OF 19 PAGES
- ------------------------ ----------------------
SIGNATURE.
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
THE STRUCTURED FINANCE HIGH YIELD FUND, LLC
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /S/ MICHAEL J. BOZZO
----------------------------------------
Name: Michael J. Bozzo
Title: Vice President
Date: July 12, 1999
EXHIBIT 7.8
FORM
CONVERTIBLE SENIOR SUBORDINATED PROMISSORY NOTE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED,
QUALIFIED, APPROVED OR DISAPPROVED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. NEITHER THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER FEDERAL OR STATE REGULATORY
AUTHORITY HAS PASSED ON OR ENDORSED THE MERITS OF THESE SECURITIES.
NATIONAL AUTO FINANCE COMPANY, INC.
CONVERTIBLE SENIOR SUBORDINATED PROMISSORY NOTE
DUE DECEMBER 22, 2004
$___________ New York, New York
_________, 1999
<PAGE>
FOR VALUE RECEIVED, the undersigned, NATIONAL AUTO FINANCE COMPANY,
INC., a Delaware corporation (the "COMPANY"), promises to pay to the order of
[THE 1818 MEZZANINE FUND, L.P.] [PC INVESTMENT COMPANY] [GERLACH & CO., AS
NOMINEE FOR MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)] [THE STRUCTURED
FINANCE HIGH YIELD FUND, LLC] or permitted assigns the principal sum of
__________ Million dollars ($__________) on December 22, 2004, with interest
thereon from time to time as provided herein.
1. RESTRUCTURING AGREEMENT. This Convertible Senior Subordinated
Promissory Note (this "CONVERTIBLE NOTE") is issued pursuant to the Company's
Amended and Restated Senior Subordinated Promissory Note (the "AMENDED NOTES")
contemplated by, and attached as Exhibit A to, that certain Restructuring
Agreement, dated as of April 7, 1999 (the "RESTRUCTURING AGREEMENT"), by and
among the Company, National Auto Finance Company, L.P., a Delaware limited
partnership, National Auto Finance Corporation, a Delaware corporation, Nova
Financial Corporation, a Delaware corporation, Nova Corporation, a Delaware
corporation, Gary L. Shapiro, Edgar A. Otto, Stephen L. Gurba, 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").
2. PURCHASE AGREEMENT. The Restructuring Agreement, among other
things, restructured the terms of the Senior Subordinated Promissory Notes,
which were originally issued pursuant to the Securities Purchase Agreement,
dated as of December 22, 1997, by and among the Company, the Fund, PCI,
Progressive and ML (the "DECEMBER PURCHASE AGREEMENT") and the Securities
Purchase Agreement, dated as of March 27, 1998, by and among the Company and
SFHY (the "MARCH PURCHASE AGREEMENT," and together with the December Purchase
Agreement, the "PURCHASE AGREEMENTS"). This Convertible Note is issued pursuant
to the Company's election under (a) Section 2 of the Amended Notes to pay up to
50% of the interest due on the Amended Notes in the form of this Convertible
Note or (b) Section 3 of a Convertible Note to pay the interest due in
Convertible Notes in the form of additional Convertible Notes. A holder of this
Convertible Note is entitled to the benefits of this Convertible Note and the
Purchase Agreements (as amended by the Restructuring Agreement) and may enforce
the agreements contained herein and therein and exercise the remedies provided
for hereby and thereby or otherwise available in respect hereto and thereto.
The Purchase Agreements provide for the acceleration of the maturity
of the Amended Note upon the occurrence of certain events.
3. INTEREST. The Company promises to pay interest on the outstanding
principal amount of this Convertible Note (i) at the rate of 11.875% per annum
through December 22, 2000, (ii) at the rate of 12.875% per annum from and after
December 22, 2000 through December 22, 2001, (iii) at the rate of 13.875% per
annum from and after December 22, 2001 through December 22, 2002, and (iv) at
the rate of 14.875% per annum from and after December 22, 2002 through the date
of maturity of this Note (as applicable for each period, the "BASE INTEREST
RATE"). The Company shall pay interest ("ACCRUED INTEREST") on this Convertible
Note
-2-
<PAGE>
quarterly in arrears on each March 31, June 30, September 30 and December 31 of
each year or, if any such date shall not be a Business Day on the next
succeeding Business Day to occur after such date (each date upon which interest
shall be so payable, an "INTEREST PAYMENT DATE"), beginning on the March 31,
June 30, September 30 or December 31, as the case may be, next succeeding the
date of issuance hereof. For the period ending on the third anniversary of the
Restructuring Date (as defined in the Restructuring Agreement), the Company, at
its option, may elect to pay interest on this Convertible Note by issuing
additional Convertible Notes. Any additional Convertible Notes issued at the
Company's election in lieu of Accrued Interest shall be identical in form and
substance to, and shall entitle the holder thereof, to the benefits of this
Convertible Note. Interest on this Convertible Note shall accrue from the date
of issuance until repayment of the principal and payment of all accrued interest
in full. Interest shall be computed on the basis of a 360-day year of twelve
30-day months.
4. MANDATORY REDEMPTION AT THE OPTION OF THE HOLDER.
4.1 CHANGE OF CONTROL. If one or more events constituting a
Prepayment Event shall occur, the holder of this Convertible Note shall have the
right, on the date specified in Section 4.2 (the "MANDATORY REDEMPTION DATE"),
to require the Company to redeem (a "MANDATORY REDEMPTION") all (but not less
than all) of the Convertible Notes then held by such holder at a price (the
"MANDATORY REDEMPTION PRICE") equal to (i) the following percentage of the
outstanding principal amount of the Convertible Note to be prepaid plus (ii) an
amount equal to all accrued and unpaid interest thereon to the Mandatory
Redemption Date, in immediately available funds:
Percentage of Principal
If to be Prepaid During the Period: Amount
---------------------------------------- -----------------------
April 7, 1999 to December 22, 1999 107.5%
December 23, 1999 to December 22, 2000 105.0%
December 23, 2000 and thereafter 100.0%
Notwithstanding anything to the contrary contained herein, in the
event the holder of this Convertible Note requires a Mandatory Redemption
following a Change of Control that is a Sale Transaction, the percentage of the
Mandatory Redemption Price that exceeds the aggregate principal amount of and
accrued but unpaid interest on the Convertible Notes to be repaid shall be
waived or reduced to the extent that the "internal rate of return" of [the Fund]
[PCI] [ML] [SFHY] (which term shall include, except as otherwise provided below,
any subsequent holder of the Amended Notes, this Convertible Note or the
Warrants issued to [the Fund] [PCI] [ML] [SFHY] (collectively, its "SUBSEQUENT
HOLDER")) on the Amended Notes, the Convertible Notes and the Warrants issued
pursuant to the Purchase Agreements (taking into account the portion of the
Mandatory Redemption Price that exceeds the aggregate principal amount of and
accrued but unpaid interest on the Convertible Notes held by [the Fund] [PCI]
[ML] [SFHY] that have been or are to be prepaid pursuant to this Section 4 which
is not waived) exceeds 25.0%. For purposes of this Convertible Note, "internal
rate of return" means, as of the Mandatory Redemption Date, an internal rate of
return calculated by determining the discount
-3
<PAGE>
rate that equates the present value of all cash flows of the investment in the
Amended Notes and the Warrants to zero and which is derived by taking into
account (i) the amount invested in the Amended Notes and the Warrants of the
Company by [the Fund] [PCI] [ML] [SFHY] (as of the date invested) (excluding its
Subsequent Holder), (ii) the amount of any interest payments on the Convertible
Notes received by [the Fund] [PCI] [ML] [SFHY] (as of the date received), (iii)
the amount of any proceeds received by [the Fund] [PCI] [ML] [SFHY] upon the
sale or other disposition prior to the Mandatory Redemption Date of all or any
portion of the Amended Notes, the Convertible Notes and the Warrants or the
Common Stock issuable upon exercise of the Warrants (as of the date received),
(iv) the Market Price (as defined in the Warrants) of the Common Stock (assuming
exercise of any unexercised Warrants of the Company held by [the Fund] [PCI]
[ML] [SFHY] (as of the Mandatory Redemption Date) and (v) the facility fee
received by [the Fund] [PCI] [ML] [SFHY] pursuant to Section 2.2 of each of the
December Purchase Agreement and the March Purchase Agreement.
4.2 NOTICE. Notice of a Prepayment Event (the "PREPAYMENT
EVENT NOTICE") shall be mailed no more than 10 Business Days after the
occurrence of a Prepayment Event to each holder of Convertible Notes, at such
holder's address as it appears on the transfer books of the Company. The date
fixed for the Mandatory Redemption shall be fixed by the Company and shall be no
less than 20 days or more than 40 days after the date of the Prepayment Event
Notice. Notwithstanding the foregoing and Section 4.1 hereof, in the event of
the occurrence of a Prepayment Event of the types set forth in either of clauses
(iii) or (iv) of the definition of "Change of Control," the Prepayment Event
Notice shall be mailed to each holder of Convertible Notes no later than 10
Business Days prior to the consummation of the transaction contemplated by such
clause (iii) or (iv), as the case may be, and the Company shall not be required
to purchase any Convertible Notes unless such transaction shall be consummated,
in which case the Company shall be required to purchase such Convertible Notes
immediately prior to the consummation of such transaction.
4.3 PROVISIONS OF NOTICE. The right of the holders of
Convertible Notes to require the Company to effect a Mandatory Redemption shall
remain in effect from the time of the mailing of, until the redemption date set
forth in, the Prepayment Event Notice. The Prepayment Event Notice shall be
accompanied by a copy of the information most recently required to be supplied
under Sections 9.1(a) and 9.1(b) of the Purchase Agreement and the March
Purchase Agreement. The Prepayment Event Notice shall contain all instruments
and materials necessary to enable the holder of this Convertible Note to tender
this Convertible Note pursuant to this Section 3. The Prepayment Event Notice,
which shall govern the terms of the Mandatory Redemption, shall state:
(a) that a Prepayment Event has occurred, that each holder of
Convertible Notes has the right to require the Company to effect a
Mandatory Redemption pursuant to this Section 4 and that tendered
Convertible Notes will be redeemed;
(b) the Mandatory Redemption Price and the date for
redemption;
(c) that each holder of Convertible Notes may require the
Company to redeem all (but not less than all) Convertible Notes held
thereby;
-4-
<PAGE>
(d) that the Convertible Notes redeemed pursuant to the
Mandatory Redemption shall cease to accrue interest after the designated
date for purchase (unless the Company shall default in the payment of the
Mandatory Redemption Price, in which case the Convertible Notes shall not
cease to accrue interest after such date);
(e) such other information respecting the procedures for
effecting the Mandatory Redemption as the Company shall include and such
other information as may be required by law; and
(f) that (unless otherwise required by law) any holder of
Convertible Notes will be entitled to withdraw its election if the Company
receives, not later than the close of business on the third Business Day
next preceding the date scheduled for redemption, a facsimile transmission
or letter setting forth the name of such holder, the principal amount of
Convertible Notes such holder delivered for redemption and a statement
that such holder is withdrawing his or her election to have such
Convertible Notes redeemed.
4.4 REDEMPTION PROCEDURE. The holder of this Convertible Note
may elect to require the Company to redeem all (but not less than all) of the
Convertible Notes held by such holder pursuant to a Mandatory Redemption by
delivery of written notice thereof to the Company prior to the date fixed for
such Mandatory Redemption. If the holder of this Convertible Note so elects, on
the date fixed for any Mandatory Redemption, such holder shall surrender all of
the Convertible Notes held thereby to the Company at the place designated in the
Prepayment Event Notice. From and after the Mandatory Redemption Date (i) such
Convertible Notes shall no longer be deemed outstanding, (ii) the right to
receive interest thereon shall cease to accrue and (iii) all rights of the
holders of such Convertible Notes shall cease and terminate, excepting only the
right to receive the Mandatory Redemption Price therefor; PROVIDED, HOWEVER,
that if the Company shall default in the payment of the Mandatory Redemption
Price, the Convertible Notes shall thereafter be deemed to be outstanding and
the holders thereof shall have all of the rights of a holder of Convertible
Notes until such time as such default Shall no longer be continuing or shall
have been waived by holders of at least 66% of the then outstanding principal
amount of the Convertible Notes.
5. OPTIONAL REDEMPTION.
5.1 REDEMPTION BY COMPANY. Except as otherwise provided
herein, the Company shall not have any right to prepay or redeem this
Convertible Note. The Company shall have the right, at any time and from time to
time at its sole option and election, to redeem (the "OPTIONAL REDEMPTION") the
Convertible Notes, in whole but not in part, on not less than 30 days notice of
the date of redemption, which must be a Business Day (any such date an "OPTIONAL
REDEMPTION DATE") at a price (the "OPTIONAL REDEMPTION PRICE") equal to (i) the
following percentage of the outstanding principal amount of the Convertible
Notes to be redeemed plus (ii) an amount equal to all accrued and unpaid
interest thereon to the date fixed for prepayment, whether or not currently
payable, to the Optional Redemption Date, in cash or other immediately available
funds:
-5-
<PAGE>
PERCENTAGE OF PRINCIPAL
IF REDEEMED DURING THE PERIOD: AMOUNT
------------------------------ ------
April 7, 1999 to December 22, 1999 107.5%
December 23, 1999 to December 22, 2000 105.0%
December 23, 2000 and thereafter 100.0%
Notwithstanding anything to the contrary contained herein, in the
event of the occurrence of any Public Offering prior to December 23, 2001, the
Company shall have the right, at its sole option and election, to use the
proceeds from such Public Offering(s) to redeem, by delivery of a notice
pursuant to Section 5.2, concurrently with the consummation of such Public
Offering(s), up to an aggregate total amount (whether with the proceeds from one
or more than one Public Offering) of 33-1/3% of the principal amount of the
Convertible Notes outstanding on the Closing Date at a price equal to 100.0% of
the outstanding principal amount of the Convertible Notes to be prepaid plus an
amount equal to all accrued and unpaid interest thereon to the date fixed for
prepayment, whether or not currently payable, in cash or other immediately
available funds.
Upon the occurrence of an Event of Default under Section 11.1(viii)
of the Purchase Agreement, the Company shall be deemed to have elected to redeem
the Convertible Notes as provided in this Section 5.1 and shall so redeem the
Convertible Notes as provided in this Section 5 (without giving effect to the
immediately preceding paragraph).
5.2 NOTICE. Notice of the Optional Redemption (the "OPTIONAL
REDEMPTION NOTICE") shall be mailed at least 30 days, but not more than 60 days,
prior to the date fixed for redemption to each holder of the Convertible Notes,
at such holder's address as it appears on the transfer books of the Company. In
order to facilitate the redemption of the Convertible Notes, the Board of
Directors of the Company may fix a record date for the determination of the
Convertible Notes to be redeemed, or may cause the transfer books of the Company
for the Convertible Notes to be closed, not more than 60 days or less than 30
days prior to the date fixed for such redemption.
5.3 DEPOSIT OF FUNDS. On the Optional Redemption Date, the
Company shall, and at any time after the Optional Redemption Notice shall have
been mailed and before the date of Optional Redemption the Company may, deposit
for the benefit of the holders of the Convertible Notes the funds necessary for
the Optional Redemption with a bank or trust company in the Borough of
Manhattan, The City of New York, having a capital and surplus of at least
$150,000,000. Any moneys so deposited by the Company and unclaimed at the end of
two years from the date designated for the Optional Redemption shall revert to
the general funds of the Company or as otherwise required by law. After such
reversion, any such bank or trust company shall, upon demand, pay over to the
Company such unclaimed amounts and thereupon such bank or trust company shall be
relieved of all responsibility in respect thereof and any holder of Convertible
Notes shall look only to the Company for the payment of the Optional Redemption
Price. Any interest accrued on funds deposited pursuant to this Section 5.3
shall be paid from time to time to the Company for its own account.
-6-
<PAGE>
5.4 TERMINATION OF RIGHTS. The Optional Redemption Notice
having been given as aforesaid, upon the deposit of funds pursuant to Section
5.3 in respect of the Convertible Notes to be redeemed pursuant to Section 5.1,
notwithstanding that any such Convertible Notes themselves shall not have been
surrendered for cancellation, from and after the Optional Redemption Date (i)
the Convertible Notes shall no longer be deemed outstanding, (ii) the rights to
receive interest thereon shall cease to accrue and (iii) all rights of the
holders of the Convertible Notes receive interest thereon shall cease and
terminate, excepting only the right to receive the Optional Redemption Price
therefor; PROVIDED, HOWEVER, that if the Company shall default in the payment of
the Optional Redemption Price, the Convertible Notes shall thereafter be deemed
to be outstanding and the holders thereof shall have all of the rights of a
holder of Convertible Notes until such time as such default shall no longer be
continuing or shall have been waived by holders of at least 66% of the then
outstanding principal amount of the Convertible Notes.
6. CONVERSION RIGHTS.
6.1 CONVERSION BY THE HOLDER. The holder of this Convertible
Note has the right, exercisable at any time, to convert the principal amount
hereof (or any portion thereof that is an integral multiple of $50) and the
accrued but unpaid interest on the principal amount (or portion thereof) being
converted into that number of fully paid nonassessable shares of Common Stock
obtained by dividing the principal amount and the related accrued but unpaid
interest on the Convertible Note to be converted by $0.75 per share (the
"CONVERSION PRICE"). The Conversion Price is subject to adjustment as set forth
in Section 6.4 below.
6.2 CONVERSION PROCEDURE. To convert all or a portion of this
Convertible Note (or accrued but unpaid interest thereon), a holder must (a)
complete and sign an irrevocable notice of election to convert (the "CONVERSION
NOTICE"), substantially in the form of Exhibit A attached hereto, and deliver
such Conversion Notice to the Company, together with any payment required by the
fourth sentence of this paragraph, (b) furnish appropriate endorsements or
transfer documents if required by the Company and (c) pay an transfer or similar
tax, if required. Except as provided below, accrued but unpaid interest (to the
extent not converted) shall not be paid on Convertible Notes that are converted
by a holder into Common Stock. Holders of Convertible Notes at the close of
business on a record date set by the Board of Directors of the Company shall be
entitled to receive the interest payable on such Convertible Note (except (i) to
the extent a holder has elected to convert such interest, or (ii) that holders
of Convertible Notes called for redemption on a redemption date between such
record date and the Interest Payment Date shall not be entitled to receive such
interest on such Interest Payment Date) on the corresponding Interest Payment
Date notwithstanding the conversion of such Convertible Notes following such
record date and prior to such Interest Payment Date. However, Convertible Notes
surrendered for conversion during the period between the close of business on
any record date and the opening of business on the corresponding Interest
Payment Date (except Convertible Notes called for redemption on a redemption
date during such period) must be accompanied by payment of an amount equal to
the interest payable on such Convertible Notes on such Interest Payment Date. A
holder of Convertible Notes on a record date who (or whose transferee) tenders
any such Convertibles Notes for conversion into shares of Common Stock on such
Interest Payment Date shall receive the interest payable by the Company on such
Convertible Notes on such date, and the converting holder need not include
payment of the
-7-
<PAGE>
amount of such interest upon surrender of Convertible Notes for conversion. The
Company shall make no payment or allowance for dividends on the shares of Common
Stock issued upon conversion.
No fractional shares shall be issued upon conversion, but a
cash payment shall be made by the Company in lieu of fractional interests. The
outstanding principal amount of any Convertible Note shall be reduced by the
principal amount thereof converted into shares of Common Stock or other shares
of common stock of the Company.
6.3 SATISFACTION OF COMPANY'S OBLIGATION. The Company's
delivery upon conversion of the fixed number of shares of Common Stock or other
shares of common stock of the Company into which Convertible Notes are
convertible (together with cash in lieu of fractional shares) shall be deemed to
satisfy the Company's obligation to pay the principal amount at the maturity
date of the portion of Convertible Notes so converted and any unpaid interest
accrued on such Convertible Notes at the time of such conversion.
6.4 ANTI-DILUTION. The Conversion Price shall be adjusted in
the event of any change in the capital structure of the Company (whether by
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, split-up, split off, spin off, combination of shares, exchange of shares
or similar change) such that this Convertible Note shall thereafter be
convertible into such securities, cash and/or other property as would have been
received in respect of the shares of Common Stock subject to this Convertible
Note has this Convertible Note been converted in full immediately prior to such
change.
7. DEFINITIONS. Capitalized terms not otherwise defined in this
Convertible Note shall have the meanings ascribed to them in the Purchase
Agreement. As used in this Convertible Note, and unless the context requires a
different meaning, the following terms have the meanings indicated:
"BANKRUPTCY LAW" means Title 11, U.S. Code or any other federal,
state or foreign law, for the relief of debtors, as any such laws may be amended
from time to time.
"CHANGE OF CONTROL" of the Company shall mean such time as:
(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., Gary L. Shapiro, Keith B. Stein, First Union National Bank of North
Carolina, the Fund, PCI, Progressive, ML or SFHY (or any Affiliates of
First Union National Bank of North Carolina, the Fund, PCI, Progressive,
ML or SFHY) (collectively, the "PRINCIPAL Stockholder") is or becomes the
beneficial owner, directly or indirectly, of outstanding shares of Capital
Stock of the Company, 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 Company if at least
a majority of the Company's Board of Directors are elected by common
stockholders, and (ii) voting stockholders of the Company 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);
-8-
<PAGE>
(ii) A majority of the Board of Directors of the Company shall
consist of Persons other than Continuing Directors. The term "CONTINUING
DIRECTOR" shall mean (x) any member of the Board of Directors of the
Company on the Restructuring Date (as defined in the Restructuring
Agreement), (y) any person who is appointed or elected as a director
pursuant to Section 6 of the Restructuring Agreement, and (z) any other
person who shall be appointed or elected to become a director or succeed a
Continuing Director by a majority of Continuing Directors who are then
members of the Board of Directors of the Company;
(iii) The stockholders of the Company shall have approved a
recapitalization, reorganization, merger, consolidation, sale or other
disposition of all or substantially all the assets of the Company (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 Company immediately prior to such
recapitalization, reorganization, merger or consolidation, beneficially
own, directly or indirectly, less than 50% of the combined voting power of
the then outstanding shares of Capital Stock of the Company resulting from
such recapitalization, reorganization, merger, consolidation or similar
transaction or obtaining the assets of the Company; or
(iv) Upon the consummation of any transaction the result of
which is that the Common Stock is not required to be registered under
Section 12 of the Exchange Act and that the holders of Common Stock do not
receive common stock of the Person surviving such transaction which is
required to be registered under Section 12 of the Exchange Act.
"PREPAYMENT EVENT" means the occurrence of (i) a Change of Control
or (ii) a conveyance, transfer, lease or other disposition (whether in one
transaction or a series of transactions) of all or substantially all of the
assets (wherever acquired) of any division or Subsidiary of the Company (except
for sales in connection with Permitted Securitization Transactions) if such
assets accounted for at least 33% of the Company's Net Income deter-mined by
reference to the most recent audited financial statements of the Company;
PROVIDED, HOWEVER, that none of the events or transactions contemplated by the
Restructuring Documents (as defined in the Restructuring Agreement) shall be
deemed a Change of Control or other Prepayment Event or Sale Transaction.
"PUBLIC OFFERING" shall mean the sale in any offering by the Company
of its Capital Stock for its own account pursuant to a registration statement on
Form S-1 or otherwise under the Securities Act of 1933, as amended, and the
rules and regulations of the Securities and Exchange Commission thereunder.
"SALE TRANSACTION" shall mean a Change of Control pursuant to
subsection (iii) of the definition thereof, provided that the reference
contained therein to 50% shall instead be deemed to be 10%.
8. SUBORDINATION. This Convertible Note is, or in the future may be,
subordinated to certain Senior Indebtedness. To the extent provided in Article
12 of the
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Purchase Agreement, Senior Indebtedness must be paid before this Convertible
Note may be paid. The Company, and the holder of this Convertible Note by
accepting this Convertible Note, agree to the subordination provisions contained
in Article 12 of the Purchase Agreement.
9. EXCHANGE OF CONVERTIBLE NOTES. At the option of the holder of
this Convertible Note, this Convertible Note may be exchanged for other
Convertible Notes of like tenor and of a like aggregate principal amount, upon
surrender of this Convertible Note at the principal office of the Company;
PROVIDED, HOWEVER, that the minimum denomination of any Convertible Note to be
issued in exchange for this Convertible Note shall be at least $250,000 and in
at least $1,000 increments, unless the transferee of this Convertible Note (i)
shall have purchased this Convertible Note in a public offering or subsequent to
a public offering thereof, (ii) is a partner or member of the holder of this
Convertible Note and shall have received this Convertible Note upon the
dissolution or liquidation of the holder of this Convertible Note or in
connection with a distribution of assets by the holder of this Convertible Note,
or (iii) is a parent or subsidiary of the holder of this Convertible Note, which
in each case the minimum denomination of any note to be issued in exchange for
this Convertible Note shall be at least $1,000.
10. AMENDMENT. Amendments and modifications of this Convertible Note
may be made only in the manner provided in Section 14.5 of each of the December
Purchase Agreement and the March Purchase Agreement and in Section 11(e) of the
Restructuring Agreement.
11. GOVERNING LAW. This Convertible Note 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.
IN WITNESS WHEREOF, the Company has caused this installment to be
duly executed, as of the date written below.
NATIONAL AUTO FINANCE COMPANY, INC.
By:
----------------------------------------
Name: Keith B. Stein
Title: Chief Executive Officer
Date: ___________, 1999
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EXHIBIT A
To: National Auto Finance Company, Inc.
The undersigned holder of this Convertible Note hereby irrevocably
exercises the option to convert this Convertible Note, or the portion below
designated, and the accrued but unpaid interest thereon into Common Stock of
National Auto Finance Company, Inc. (the "COMPANY"), or any other class of
common stock of the Company, as permitted by the Articles of Incorporation of
the Company, in accordance with the terms of this Convertible Note, and directs
that the shares issuable and deliverable upon conversion, together with any
check in payment for fractional shares, be issued in the name of and delivered
to the undersigned, unless a different name has been indicated by assignment
below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned shall pay all transfer taxes payable with respect
thereto. However, Convertible Notes surrendered for conversion during the period
between the close of business on any record date and the opening of business on
the corresponding interest payment date (except Convertible Notes called for
redemption on a redemption date during such period) must be accompanied by
payment of an amount equal to the interest payable on such interest payment
date.
Date:
in whole in part accrued interest
Portion of principal
amount of the
Convertible Note
to be converted:
$
Signature (for conversion only)
Please print or typewrite Name and Address, including Zip Code, and Social
Security or Other Identifying Number.
