UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2007
OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
Commission file number: 1-13461
Group 1 Automotive, Inc.
(Exact name of registrant as specified in its charter)
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DELAWARE
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76-0506313
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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950 Echo Lane, Suite 100
Houston, Texas 77024
(Address of principal executive offices) (Zip Code)
(713) 647-5700
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
þ
Accelerated filer
o
Non-accelerated filer
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes
o
No
þ
As
of April 30, 2007, the Company had 24,279,442 shares of common stock, par value $.01,
outstanding.
Part I. Financial Information
Item 1. Financial Statements
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
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March 31,
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December 31,
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2007
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2006
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(unaudited)
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ASSETS
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CURRENT ASSETS:
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Cash and cash equivalents
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$
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37,023
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|
|
$
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39,313
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Contracts-in-transit and vehicle receivables, net
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182,161
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189,004
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Accounts and notes receivable, net
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79,860
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76,793
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Inventories
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851,190
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|
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|
830,628
|
|
Deferred income taxes
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|
|
19,173
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|
17,176
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|
Prepaid expenses and other current assets
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20,922
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|
|
|
25,098
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|
|
|
|
|
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Total current assets
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1,190,329
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1,178,012
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PROPERTY AND EQUIPMENT, net
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293,443
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230,385
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GOODWILL
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445,181
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426,439
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INTANGIBLE FRANCHISE RIGHTS
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260,889
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249,886
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OTHER ASSETS
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30,544
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29,233
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Total assets
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$
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2,220,386
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$
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2,113,955
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LIABILITIES AND STOCKHOLDERS EQUITY
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CURRENT LIABILITIES:
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Floorplan notes payable credit facility
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$
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587,600
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$
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437,288
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Floorplan notes payable manufacturer affiliates
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134,781
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287,978
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Current maturities of long-term debt
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8,501
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854
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Accounts payable
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135,012
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117,536
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Accrued expenses
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99,903
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97,302
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Total current liabilities
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965,797
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940,958
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LONG-TERM DEBT, net of current maturities
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490,083
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428,639
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DEFERRED INCOME TAXES
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10,750
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2,787
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OTHER LIABILITIES
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28,293
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27,826
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Total liabilities before deferred revenues
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1,494,923
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1,400,210
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DEFERRED REVENUES
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19,595
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20,905
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STOCKHOLDERS EQUITY:
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Preferred stock, $.01 par value, 1,000 shares
authorized; none issued or outstanding
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|
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Common stock, $.01 par value, 50,000 shares
authorized; 25,239 and 25,165 issued, respectively
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252
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252
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Additional paid-in capital
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293,582
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292,278
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Retained earnings
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462,164
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448,115
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Accumulated other comprehensive income (loss)
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(131
|
)
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591
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Treasury stock, at cost; 944 and 904 shares, respectively
|
|
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(49,999
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)
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(48,396
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)
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Total stockholders equity
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705,868
|
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692,840
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Total liabilities and stockholders equity
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$
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2,220,386
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$
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2,113,955
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The accompanying notes are an integral part of these consolidated financial statements.
3
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
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Three Months Ended March 31,
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2007
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2006
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REVENUES:
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New vehicle retail sales
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$
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932,094
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$
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860,128
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Used vehicle retail sales
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289,714
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265,920
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Used vehicle wholesale sales
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74,644
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80,693
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Parts and service sales
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175,839
|
|
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162,867
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Finance, insurance and other, net
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50,447
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|
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47,958
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Total revenues
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1,522,738
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1,417,566
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COST OF SALES:
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New vehicle retail sales
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867,614
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795,614
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Used vehicle retail sales
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|
252,941
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|
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|
230,880
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|
Used vehicle wholesale sales
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73,475
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|
|
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79,714
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Parts and service sales
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|
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81,551
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|
|
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74,533
|
|
|
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|
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Total cost of sales
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1,275,581
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1,180,741
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GROSS PROFIT
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247,157
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236,825
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
|
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198,163
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180,477
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DEPRECIATION AND AMORTIZATION EXPENSE
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4,848
|
|
|
|
4,563
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|
|
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INCOME FROM OPERATIONS
|
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44,146
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|
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|
51,785
|
|
|
|
|
|
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OTHER INCOME AND (EXPENSES):
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Floorplan interest expense
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|
|
(12,238
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)
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|
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(11,846
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)
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Other interest expense, net
|
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|
(5,207
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)
|
|
|
(3,989
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)
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Other income, net
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|
95
|
|
|
|
26
|
|
|
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INCOME BEFORE INCOME TAXES
|
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26,796
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|
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|
35,976
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PROVISION FOR INCOME TAXES
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9,349
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|
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13,665
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|
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NET INCOME
|
|
$
|
17,447
|
|
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$
|
22,311
|
|
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|
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|
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EARNINGS PER SHARE:
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Basic
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$
|
0.73
|
|
|
$
|
0.93
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Diluted
|
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$
|
0.72
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|
$
|
0.91
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CASH DIVIDENDS PER COMMON SHARE
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|
$
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0.14
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$
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0.13
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|
|
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WEIGHTED AVERAGE SHARES OUTSTANDING:
|
|
|
|
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|
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Basic
|
|
|
23,895
|
|
|
|
24,040
|
|
Diluted
|
|
|
24,081
|
|
|
|
24,453
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|
The accompanying notes are an integral part of these consolidated financial statements.
4
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
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|
|
|
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|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2007
|
|
|
2006
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
17,447
|
|
|
$
|
22,311
|
|
Adjustments to reconcile net income to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
4,848
|
|
|
|
4,563
|
|
Other
|
|
|
8,303
|
|
|
|
5,215
|
|
Changes in operating assets and liabilities, net of effects
of acquisitions and dispositions:
|
|
|
|
|
|
|
|
|
Contracts-in-transit and vehicle receivables
|
|
|
6,843
|
|
|
|
30,185
|
|
Accounts and notes receivable
|
|
|
(593
|
)
|
|
|
7,363
|
|
Inventories
|
|
|
17,572
|
|
|
|
(82,806
|
)
|
Prepaid expenses and other assets
|
|
|
1,902
|
|
|
|
2,103
|
|
Floorplan notes payable manufacturer affiliates
|
|
|
(150,688
|
)
|
|
|
18,503
|
|
Accounts payable and accrued expenses
|
|
|
8,805
|
|
|
|
(20,777
|
)
|
Deferred revenues
|
|
|
(1,310
|
)
|
|
|
(1,467
|
)
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(86,871
|
)
|
|
|
(14,807
|
)
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(22,882
|
)
|
|
|
(15,318
|
)
|
Cash paid in
acquisitions, net of cash received (see Note 9)
|
|
|
(107,839
|
)
|
|
|
(40,642
|
)
|
Proceeds from sales of franchises, property and equipment
|
|
|
6,693
|
|
|
|
10,643
|
|
Other
|
|
|
2,452
|
|
|
|
(2,072
|
)
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(121,576
|
)
|
|
|
(47,389
|
)
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Borrowings on credit facility Floorplan Line
|
|
|
1,336,124
|
|
|
|
887,501
|
|
Repayments on credit facility Floorplan Line
|
|
|
(1,185,823
|
)
|
|
|
(840,709
|
)
|
Borrowings on credit facility Acquisition Line
|
|
|
|
|
|
|
15,000
|
|
Repayments on credit facility Acquisition Line
|
|
|
|
|
|
|
(15,000
|
)
|
Repayments on other facilities for divestitures
|
|
|
(2,498
|
)
|
|
|
|
|
Principal payments of long-term debt
|
|
|
(212
|
)
|
|
|
(191
|
)
|
Borrowings of long-term debt
|
|
|
63,650
|
|
|
|
|
|
Debt issue costs
|
|
|
(319
|
)
|
|
|
|
|
Proceeds from issuance of common stock to benefit plans
|
|
|
1,549
|
|
|
|
14,406
|
|
Excess tax benefits from stock-based compensation
|
|
|
87
|
|
|
|
2,628
|
|
Repurchases of common stock, amounts based on settlement date
|
|
|
(3,003
|
)
|
|
|
(711
|
)
|
Dividends paid
|
|
|
(3,398
|
)
|
|
|
(3,191
|
)
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
206,157
|
|
|
|
59,733
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(2,290
|
)
|
|
|
(2,463
|
)
|
CASH AND CASH EQUIVALENTS, beginning of period
|
|
|
39,313
|
|
|
|
37,695
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, end of period
|
|
$
|
37,023
|
|
|
$
|
35,232
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
22,151
|
|
|
$
|
17,748
|
|
Income taxes, net of refunds received
|
|
$
|
|
|
|
$
|
8,365
|
|
The accompanying notes are an integral part of these consolidated financial statements.
5
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
Gains (Losses)
|
|
|
Gains(Losses)
|
|
|
Gains on
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
on Interest
|
|
|
on Marketable
|
|
|
Currency
|
|
|
Treasury
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Rate Swaps
|
|
|
Securities
|
|
|
Translation
|
|
|
Stock
|
|
|
Total
|
|
BALANCE, December 31, 2006
|
|
|
25,165
|
|
|
$
|
252
|
|
|
$
|
292,278
|
|
|
$
|
448,115
|
|
|
$
|
797
|
|
|
$
|
(206
|
)
|
|
$
|
|
|
|
$
|
(48,396
|
)
|
|
$
|
692,840
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,447
|
|
Interest rate swap adjustment,
net of tax benefit of $464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(773
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(773
|
)
|
Gain on investments, net of
taxes of $27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
44
|
|
Unrealized Gain on Currency Translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,725
|
|
Purchases of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,003
|
)
|
|
|
(3,003
|
)
|
Issuance of
common & treasury shares to
employee benefit plans
|
|
|
17
|
|
|
|
|
|
|
|
149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,400
|
|
|
|
1,549
|
|
Issuance of restricted stock
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeiture of restricted stock
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
996
|
|
Tax benefit from options exercised and
the vesting of restricted shares
|
|
|
|
|
|
|
|
|
|
|
159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
159
|
|
Cash dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,398
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,398
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, March 31, 2007
|
|
|
25,239
|
|
|
$
|
252
|
|
|
$
|
293,582
|
|
|
$
|
462,164
|
|
|
$
|
24
|
|
|
$
|
(162
|
)
|
|
$
|
7
|
|
|
$
|
(49,999
|
)
|
|
$
|
705,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
6
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
Group 1 Automotive, Inc., a Delaware corporation, through its subsidiaries, is a leading
operator in the automotive retailing industry with operations in the states of Alabama, California,
Florida, Georgia, Kansas, Louisiana, Massachusetts, Mississippi, New Hampshire, New Jersey, New
Mexico, New York, Oklahoma and Texas in the United States of America and in the towns of Brighton,
Hailsham and Worthing in the United Kingdom. Through their dealerships, these subsidiaries sell
new and used cars and light trucks; arrange related financing, vehicle service and insurance
contracts; provide maintenance and repair services; and sell replacement parts. Group 1
Automotive, Inc. and its subsidiaries are herein collectively referred to as the Company or
Group 1.
As of March 31, 2007, the Companys retail network consisted of the following four regions
(with the number of dealerships they comprised): (i) the Northeast (23 dealerships in
Massachusetts, New Hampshire, New Jersey and New York), (ii) the Southeast (17 dealerships in
Alabama, Florida, Georgia, Louisiana and Mississippi), (iii) the Central (51 dealerships in Kansas,
New Mexico, Oklahoma and Texas), and (iv) the West (12 dealerships in California). Each region is
managed by a regional vice president reporting directly to the Companys Chief Executive Officer
and a regional chief financial officer reporting directly to the Companys Chief Financial Officer.
In addition, our international operations consists of three dealerships in the United Kingdom also
managed locally with direct reporting responsibilities to the Companys corporate management team.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
All acquisitions of dealerships completed during the periods presented have been accounted for
using the purchase method of accounting and their results of operations are included from the
effective dates of the closings of the acquisitions. The allocations of purchase price to the
assets acquired and liabilities assumed are assigned and recorded based on estimates of fair value.
All intercompany balances and transactions have been eliminated in consolidation.
Interim Financial Information
The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by accounting principles
generally accepted in the United States for complete financial statements. In the opinion of
management, all adjustments of a normal and recurring nature considered necessary for a fair
presentation have been included. Due to seasonality and other factors, the results of operations
for the interim period are not necessarily indicative of the results that will be realized for the
entire fiscal year. For further information, refer to the consolidated financial statements and
footnotes thereto included in the Companys Annual Report on Form 10-K for the year ended December
31, 2006.
Statements of Cash Flows
With respect to all new vehicle floorplan borrowings, the manufacturers of the vehicles draft
the Companys credit facilities directly with no cash flow to or from the Company. With respect to
borrowings for used vehicle financing, the Company chooses which vehicles to finance and the funds
flow directly to the Company from the lender. All borrowings from, and repayments to, lenders
affiliated with the vehicle manufacturers (excluding the cash flows from or to affiliated lenders
participating in our syndicated lending group) are presented within cash flows from operating
activities on the Consolidated Statements of Cash Flows and all borrowings from, and repayments to,
the syndicated lending group under the revolving credit facility (including the cash flows from or
to affiliated lenders participating in the facility) are presented within cash flows from financing
activities.
Income Taxes
Currently, the Company operates in 14 different states in the U.S. and one country
internationally, each of which has unique tax rates and payment calculations. As the amount of
income generated in each jurisdiction varies from period to period, the Companys estimated
effective tax rate can vary based on the proportion of taxable income generated in each
jurisdiction.
The effective income tax rate of 34.9% and 38.0% of pretax income for the three months ended
March 31, 2007 and 2006, respectively, differed from the federal statutory rate of 35% due
primarily to increases attributable to the adoption of Statement of Financial Accounting Standards
(SFAS) No. 123(R), Share-Based Payment, and the impact of a change in the mix of the Companys
pretax income from taxable state jurisdictions, offset in 2007 primarily by the benefit received
from tax-deductible goodwill related to a dealership disposition.
The Companys option grants include options that qualify as incentive stock options for income
tax purposes. The treatment
of the potential tax deduction, if any, related to incentive stock options may cause
variability in the Companys effective tax rate in future periods. In the period the compensation
cost related to incentive stock options is recorded in accordance with SFAS 123(R), a corresponding
tax benefit is not recorded, as based on the design of these incentive stock options, the Company
is
7
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
not expected to receive a tax deduction related to such incentive stock options when exercised.
However, if upon exercise such incentive stock options fail to continue to meet the qualifications
for treatment as incentive stock options, the Company may be eligible for certain tax deductions in
subsequent periods. In such cases, the Company would record a tax benefit for the lower of the
actual income tax deduction or the amount of the corresponding cumulative stock compensation cost
recorded in the financial statements for the particular options multiplied by the statutory tax
rate.
Effective January 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement 109 (FIN 48). This statement
clarifies the criteria that an individual tax position must satisfy for some or all of the benefits
of that position to be recognized in a companys financial statements. FIN 48 prescribes a
recognition threshold of more-likelythan-not, and a measurement attribute for all tax positions
taken or expected to be taken on a tax return, in order to be recognized in the financial
statements (See Note 5 for additional information).
Recent Accounting Pronouncements
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial LiabilitiesIncluding an Amendment of FASB Statement No. 115 (SFAS 159). SFAS 159
expands the use of fair value accounting but does not affect existing standards which require
assets or liabilities to be carried at fair value. Under SFAS 159, a company may elect to use fair
value to measure accounts and loans receivable, available-for-sale and held-to-maturity securities,
equity method investments, accounts payable, guarantees and issued debt. Other eligible items
include firm commitments for financial instruments that otherwise would not be recognized at
inception and non-cash warranty obligations where a warrantor is permitted to pay a third party to
provide the warranty goods or services. If the use of fair value is elected, any upfront costs and
fees related to the item must be recognized in earnings and cannot be deferred, e.g., debt issue
costs. The fair value election is irrevocable and generally made on an instrument-by-instrument
basis, even if a company has similar instruments that it elects not to measure based on fair value.
At the adoption date, unrealized gains and losses on existing items for which fair value has been
elected are reported as a cumulative adjustment to beginning retained earnings. Subsequent to the
adoption of SFAS 159, changes in fair value are recognized in earnings. SFAS 159 is effective for
fiscal years beginning after November 15, 2007. The Company is currently determining whether fair
value accounting is appropriate for any of its eligible items and cannot estimate the impact, if
any, which SFAS 159 will have on its consolidated results of operations and financial condition.
3. STOCK BASED COMPENSATION
The Company provides compensation benefits to employees and non-employee directors pursuant to
its 1996 Stock Option Plan, as amended, and 1998 Employee Stock Purchase Plan, as amended.
1996 Stock Option Plan
The Companys 1996 Stock Option Plan, as amended, reserved 5.5 million shares of common stock
for grants of options (including options qualified as incentive stock options under the Internal
Revenue Code of 1986 and options which are non-qualified), stock appreciation rights and restricted
stock awards to directors, officers and other employees of the Company and its subsidiaries at the
market price at the date of grant. As of March 31, 2007, there were 1,122,421 shares available
under the 1996 Stock Option Plan for future grants of options, stock appreciation rights and
restricted stock awards. On March 8, 2007, the Companys Board of Directors adopted an amendment
and restatement of the 1996 Stock Option Plan to, among other things, rename the plan as Group 1
Automotive, Inc. 2007 Long-Term Incentive Plan, increase the number of shares of common stock
available for issuance under the plan from 5.5 million to 6.5 million shares and extend the
duration of the plan from March 9, 2014, to March 8, 2017. The proposed amendment and restatement
of the 1996 Stock Option Plan is contingent upon receiving the affirmative vote of the holders of a
majority of the Companys common stock cast with respect to the proposal at the Companys annual
stockholders meeting on May 17, 2007.
Stock Option Awards
The fair value of each stock option award is estimated as of the date of grant using the
Black-Scholes option-pricing model. The Company has not issued stock option awards since November
2005. The following summary presents information regarding outstanding options as of March 31,
2007, and the changes during the three months then ended:
8
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
Shares Under
|
|
|
Exercise Price
|
|
|
|
Option
|
|
|
Per Share
|
|
Outstanding December 31, 2006
|
|
|
271,170
|
|
|
$
|
28.10
|
|
Grants
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(17,075
|
)
|
|
|
21.50
|
|
Canceled
|
|
|
(5,771
|
)
|
|
|
34.13
|
|
|
|
|
|
|
|
|
Outstanding March 31, 2007
|
|
|
248,324
|
|
|
$
|
28.41
|
|
|
|
|
|
|
|
|
Vested or expected to vest at March 31, 2007
|
|
|
222,330
|
|
|
$
|
28.28
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2007
|
|
|
158,304
|
|
|
$
|
27.70
|
|
|
|
|
|
|
|
|
Restricted Stock Awards
Beginning in 2005, the Company began granting directors and certain employees, at no cost to
the recipient, restricted stock awards or, at their election, phantom stock awards, pursuant to the
Companys 1996 Stock Incentive Plan, as amended. Restricted stock awards are considered
outstanding at the date of grant, but are restricted from disposition for periods ranging from six
months to five years. The phantom stock awards will settle in shares of common stock upon the
termination of the grantees employment or directorship and have vesting periods also ranging from
six months to five years. In the event the employee or director terminates his or her employment
or directorship with the Company prior to the lapse of the restrictions, the shares, in most cases,
will be forfeited to the Company.
A summary of these awards as of March 31, 2007, and the changes during the three months then
ended is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Awards
|
|
|
Fair Value
|
|
Nonvested at December 31, 2006
|
|
|
380,000
|
|
|
$
|
43.28
|
|
Granted
|
|
|
68,552
|
|
|
|
43.37
|
|
Vested
|
|
|
(2,920
|
)
|
|
|
27.83
|
|
Forfeited
|
|
|
(1,500
|
)
|
|
|
57.63
|
|
|
|
|
|
|
|
|
Nonvested at March 31, 2007
|
|
|
444,132
|
|
|
|
43.34
|
|
|
|
|
|
|
|
|
Employee Stock Purchase Plan
In September 1997, the Company adopted the Group 1 Automotive, Inc. 1998 Employee Stock
Purchase Plan, as amended (the Purchase Plan). The Purchase Plan authorizes the issuance of up
to 2.5 million shares of common stock and provides that no options to purchase shares may be
granted under the Purchase Plan after March 6, 2016. As of March 31, 2007, there were 603,076
shares remaining in reserve for future issuance under the Purchase Plan. During the three months
ended March 31, 2007 and 2006, the Company issued 34,976 and 42,557 shares, respectively, of common
stock to employees participating in the Purchase Plan.
All Stock-Based Payment Arrangements
Total stock-based compensation cost was $1.0 million and $1.3 million for the three months
ended March 31, 2007 and 2006, respectively. Total income tax benefit recognized for stock-based
compensation arrangements was $0.1 million and $0.2 million for the three months ended March 31,
2007 and 2006, respectively.
Cash received from option exercises and Purchase Plan purchases was $1.5 million and $14.4
million for the three months ended March 31, 2007 and 2006, respectively. The actual tax benefit
realized for the tax deductions from option exercises and Purchase Plan purchases totaled $159
thousand and $5.4 million for the three months ended March 31, 2007 and 2006,
respectively.
9
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. EARNINGS (LOSS) PER SHARE:
Basic earnings per share is computed based on weighted average shares outstanding and excludes
dilutive securities. Diluted earnings per share is computed including the impact of all
potentially dilutive securities. The following table sets forth the calculation of earnings per
share for the three months ended March 31, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands, except per share amounts)
|
|
Net income
|
|
$
|
17,447
|
|
|
$
|
22,311
|
|
Weighted average basic shares outstanding
|
|
|
23,895
|
|
|
|
24,040
|
|
Dilutive effect of stock-based awards, net of assumed
repurchase of treasury stock
|
|
|
186
|
|
|
|
413
|
|
|
|
|
|
|
|
|
Weighted average diluted shares outstanding
|
|
|
24,081
|
|
|
|
24,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.73
|
|
|
$
|
0.93
|
|
Diluted
|
|
$
|
0.72
|
|
|
$
|
0.91
|
|
Any options with an exercise price in excess of the average market price of the Companys
common stock, during the periods presented, are not considered when calculating the dilutive effect
of stock options for diluted earnings per share calculations. The weighted average number of
stock-based awards not included in the calculation of the dilutive effect of stock based awards was
0.2 million for 2007 and 0.3 million for 2006.
The Company will be required to include the dilutive effect, if applicable, of the net shares
issuable under its 2.25% Convertible Notes and the warrants sold in connection with the Convertible
Notes. Since the average price of the Companys common stock for the three months ended March 31,
2007, was less than $59.43, no net shares were issuable under the Convertible Notes or the
warrants.
5. INCOME TAXES:
As discussed in Note 2, the Company adopted FIN 48 on January 1, 2007. No cumulative
adjustment was required to effect the adoption of FIN 48. As of March 31, 2007, approximately $0.6
million of unrecognized tax benefits, including $0.1 million of interest, remained unrecognized.
All of the unrecognized tax benefits could potentially be recognized in the next 12 months based
upon resolution of these with the relevant tax authorities.
The Company is subject to U.S. federal income tax as well as income tax in multiple state
jurisdictions. In addition, the Company is subject to income tax in the United Kingdom as result of
its dealership acquisitions in March 2007. Taxable years 2002-2006 remain open for examination by
the Companys major taxing jurisdictions.
Consistent with prior practices, the Company recognizes interest and penalties related to
uncertain tax positions in income tax expense.
6. CREDIT FACILITIES:
Revolving Credit Facility
Effective March 19, 2007, the Company entered into an amended and restated five-year revolving
syndicated credit arrangement with 22 financial institutions, including three
manufacturer-affiliated finance companies (the Revolving Credit Facility). The facility matures
in March 2012 and provides a total of $1.35 billion of financing. The Company can expand the
facility to its maximum commitment of $1.85 billion, subject to participating lender approval. This
facility consists of two tranches: $1.0 billion for vehicle inventory floorplan financing, which we
refer to as the Floorplan Line, and $350.0 million for
working capital, including acquisitions, which we refer to as the Acquisition Line. Up to half
of the Acquisition Line can be borrowed in either Euros or Pounds Sterling. The Acquisition Line
bears interest at LIBOR plus a margin that ranges from 150 to 225 basis points, depending on the
Companys leverage ratio. The Floorplan Line bears interest at rates equal to LIBOR plus 87.5 basis
points for new vehicle inventory and LIBOR plus 97.5 basis points for used vehicle inventory. In
conjunction with the amendment to the Revolving Credit Facility, the
Company capitalized $2.7 million of related costs that will be amortized over the term of the facility.
10
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
All of the Companys dealership-owning subsidiaries are co-borrowers under the Revolving
Credit Facility. The Revolving Credit Facility contains a number of significant covenants that,
among other things, restrict the Companys ability to make disbursements outside of the ordinary
course of business, dispose of assets, incur additional indebtedness, create liens on assets, make
investments and engage in mergers or consolidations. The Company is also required to comply with
specified financial tests and ratios defined in the Revolving Credit
Facility such as
fixed-charge coverage, current ratio, leverage, and a minimum net worth requirement, among others.
Additionally, under the terms of the Revolving Credit Facility, the
Company is limited in its ability to make cash dividend payments to
its stockholders and to repurchase shares of its outstanding stock,
based primarily on the quarterly net income of the Company.
The Companys obligations under the Revolving Credit Facility are secured by essentially all
of the Companys personal property (other than equity interests in dealership-owning subsidiaries)
including all motor vehicle inventory and proceeds from the disposition of dealership-owning
subsidiaries.
On February 28, 2007, the Companys floorplan facility with DaimlerChrysler matured and was
not renewed. The facility provided for up to $300.0 million of financing for Chrysler, Dodge, Jeep
and Mercedes-Benz new vehicle inventory. The Company used available funds from our Revolving
Credit Facility to pay off the outstanding balance on the maturity date. Consistent with its
accounting policies, the Company has presented the payment of the
$112.1 million of outstanding floorplan
borrowings with DaimlerChrysler as of February 28, 2007, as an operating cash outflow and the
corresponding borrowing from the Revolving Credit Facility as a financing cash inflow in the
accompanying consolidated statement of cash flows.
The Company will continue to use the Revolving Credit Facility to finance our Chrysler, Dodge,
Jeep and Mercedes-Benz new vehicle inventory. The Companys Ford and Lincoln-Mercury dealerships
will continue to obtain new vehicle floorplan financing from Ford Motor Credit Company under its
$300 million floorplan credit facility.
As of March 31, 2007, borrowings outstanding under the Floorplan Line and the Acquisition Line
totaled $587.6 million and $18.0 million, respectively.
The $18.0 million of borrowings outstanding under the
Acquisition Line represents letters of credit issued & outstanding.
Borrowings available under the Floorplan
Line and the Acquisition Line totaled $412.4 million and 332.0 million, respectively, for an
aggregate available under the Revolving Credit Facility of
$744.4 million. Included in the $412.4 million available
balance under the Floorplan Line is $116.1 million of
immediately available funds, resulting from payments made on our
floorplan Notes Payable with excess cash.
Real Estate Credit Facility
On March 30, 2007, the Company entered into a five-year term real estate credit facility with
Bank of America, N.A. (the Mortgage Facility), initially
providing $75 million of financing for real estate expansions. The proceeds of the Mortgage Facility will be used
primarily for acquisitions of real property and vehicle dealerships. The facility matures in March
2012. At the Companys
option, any loan under the Mortgage Facility will bear interest at a rate equal to (i) one month
LIBOR plus 1.05% or (ii) the Base Rate plus 0.50%. Quarterly principal payments are required of
each loan outstanding under the facility at an amount equal to one eightieth of the original
principal amount. The Company can expand the facility to its maximum commitment of $175 million,
provided that certain agreed upon terms and conditions are complied with. Initial borrowings under
the facility totaled $63.7 million, with $3.2 million
recorded as a current payable. The Company capitalized $0.3 million of related debt financing
costs that will be amortized over the term of the facility.
The Mortgage Facility is guaranteed by the Company and essentially all of the existing and
future direct and indirect domestic subsidiaries of the Company which guarantee or are required to
guarantee the Companys Revolving Credit Facility. So long as no default exists, the Company is
entitled to sell any property subject to the facility on fair and reasonable terms in an arms
length transaction, remove it from the facility, repay in full the entire outstanding balance of
the loan relating to such sold property, and then increase the available borrowings under the
Mortgage Facility by the amount of such loan repayment. Each loan is secured by real property (and
improvements related thereto) specified by the Company and located at or near a vehicle dealership
operated by a subsidiary of the Company or otherwise used or to be used by a vehicle dealership
operated by a subsidiary of the Company. As of March 31, 2007, available borrowings from the
Mortgage Facility totaled $11.3 million.
The Mortgage Facility contains certain covenants, including financial ratios that must be
complied with: fixed charge coverage ratio; senior secured leverage ratio; dispositions of financed
properties; ownership of equity interests in a lessor subsidiary; and occupancy or sublease of any
financed property.
On April 27, 2007, the Company amended the Mortgage Facility expanding its maximum commitment
to $235.0 million and syndicating the facility with nine financial institutions.
11
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. PROPERTY AND EQUIPMENT:
The Companys property and equipment consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
Useful Lives
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
in Years
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
(In thousands)
|
|
Land
|
|
|
|
|
|
$
|
83,216
|
|
|
$
|
66,383
|
|
Buildings
|
|
|
30 to 40
|
|
|
|
79,067
|
|
|
|
51,056
|
|
Leasehold improvements
|
|
|
7 to 15
|
|
|
|
58,900
|
|
|
|
57,526
|
|
Machinery and equipment
|
|
|
7 to 20
|
|
|
|
53,634
|
|
|
|
43,798
|
|
Furniture and fixtures
|
|
|
3 to 10
|
|
|
|
59,502
|
|
|
|
56,099
|
|
Company vehicles
|
|
|
3 to 5
|
|
|
|
10,347
|
|
|
|
9,980
|
|
Construction in progress
|
|
|
|
|
|
|
44,734
|
|
|
|
30,163
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
389,400
|
|
|
|
315,005
|
|
Less accumulated depreciation and amortization
|
|
|
|
|
|
|
95,957
|
|
|
|
84,620
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
$
|
293,443
|
|
|
$
|
230,385
|
|
|
|
|
|
|
|
|
|
|
|
|
During the three months ended March 31, 2007, the Company acquired $45.7 million of fixed
assets associated with dealership acquisitions, including $11.9 million for land and $28.0 million
for buildings. In addition to these acquisitions, the Company
incurred $22.9 million of capital expenditures, including
$4.9 million for land, and $14.1 million for construction of new or
expanded facilities, of which $11.7 million can be drawn against
our Mortgage Facility based upon the applicable Loan to Value Ratio.
8. COMMITMENTS AND CONTINGENCIES:
Legal Proceedings
From time to time, our dealerships are named in claims involving the manufacture of
automobiles, contractual disputes and other matters arising in the ordinary course of business.
Due to the nature of the automotive retailing business, the Company may be involved in legal
proceedings or suffer losses that could have a material adverse effect on the Companys business.
In the normal course of business, the Company is required to respond to customer, employee and
other third-party complaints. In addition, the manufacturers of the vehicles the Company sells and
services have audit rights allowing them to review the validity of amounts claimed for incentive,
rebate or warranty-related items and charge back the Company for amounts determined to be invalid
rewards under the manufacturers programs, subject to the Companys right to appeal any such
decision. In August 2006, a manufacturer notified the Company of the results of a recently
completed incentive and rebate-related audit at one of the Companys dealerships. The manufacturer
initially assessed a $3.1 million claim against the dealership for chargeback of alleged
non-qualifying incentive and rebate awards. The dealership contested the alleged audit chargeback,
and provided formal written notice to the manufacturer of the facts and circumstances surrounding
such incentive and rebate programs. On April 5, 2007, the manufacturer rejected the dealerships
response to the allegations and notified the dealership in writing of its findings and the
dealerships contractual rights to appeal the results of such audit. While the dealership intends
to assert its meritorious defenses to substantially reduce or eliminate such chargeback, it has
entered into settlement negotiations with the manufacturer and, as of March 31, 2007, has accrued
an estimate of the probable costs for the resolution of this claim.
Other than the foregoing, there are currently no legal or other proceedings pending against or
involving the Company that, in managements opinion, based on current known facts and
circumstances, are expected to have a material adverse effect on the Companys financial position,
results of operations or cash flows. As required, the Company has accrued its estimate of the
probable costs for the resolution of such claims.
Vehicle Service Contract Obligations
While the Company is not an obligor under the vehicle service contracts it currently sells, it
is an obligor under vehicle service contracts previously sold in two states. The contracts were
sold to retail vehicle customers with terms, typically, ranging from two to seven years. The
purchase price paid by the customer, net of the fee the Company received, was remitted to an
administrator. The administrator set the pricing at a level adequate to fund expected future
claims and their profit. Additionally, the administrator purchased insurance to further secure its
ability to pay the claims under the contracts. The Company can become liable if the administrator
and the insurance company are unable to fund future claims. Though the Company has never
12
GROUP 1 AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
had to
fund any claims related to these contracts, and reviews the credit worthiness of the administrator
and the insurance company, it is unable to estimate the maximum potential claim exposure, but
believes there will not be any future obligation to fund claims on the contracts. The Companys
revenues related to these contracts were deferred at the time of sale and are being recognized over
the life of the contracts. The amounts deferred are presented on the face of the balance sheets as
deferred revenues.
Other Matters
The Company, acting through its subsidiaries, is the lessee under many real estate leases that
provide for the use by the Companys subsidiaries of their respective dealership premises.
Pursuant to these leases, the Companys subsidiaries generally agree to indemnify the lessor and
other parties from certain liabilities arising as a result of the use of the leased premises,
including environmental liabilities, or a breach of the lease by the lessee. Additionally, from
time to time, the Company enters into agreements in connection with the sale of assets or
businesses in which it agrees to indemnify the purchaser, or other parties, from certain
liabilities or costs arising in connection with the assets or business. Also, in the ordinary
course of business in connection with purchases or sales of goods and services, the Company enters
into agreements that may contain indemnification provisions. In the event that an indemnification
claim is asserted, liability would be limited by the terms of the applicable agreement.
From time to time, primarily in connection with dealership dispositions, the Companys
subsidiaries assign or sublease to the dealership purchaser the subsidiaries interests in any real
property leases associated with such stores. In general, the Companys subsidiaries retain
responsibility for the performance of certain obligations under such leases to the extent that the
assignee or sublessee does not perform, whether such performance is required prior to or following
the assignment or subletting of the lease. Additionally, the Company and its subsidiaries
generally remain subject to the terms of any guarantees made by the Company and its subsidiaries in
connection with such leases. Although the Company generally has indemnification rights against the
assignee or sublessee in the event of non-performance under these leases, as well as certain
defenses, and the Company presently has no reason to believe that it or its subsidiaries will be
called on to perform under any such assigned leases or subleases, the Company estimates that lessee
rental payment obligations during the remaining terms of these leases are approximately $26.4
million at March 31, 2007. The Company and its subsidiaries also may be called on to perform other
obligations under these leases, such as environmental remediation of the leased premises or repair
of the leased premises upon termination of the lease, although the Company presently has no reason
to believe that it or its subsidiaries will be called on to so perform and such obligations cannot
be quantified at this time. The Companys exposure under these leases is difficult to estimate and
there can be no assurance that any performance of the Company or its subsidiaries required under
these leases would not have a material adverse effect on the Companys business, financial
condition and cash flows.
9. ACQUISITIONS AND DISPOSITIONS:
During the three months ended March 31, 2007, the Company acquired three automobile dealership
franchises located in Kansas and six franchises located in the United Kingdom. Total consideration
paid of $107.8 million consisted of $75.2 million to the sellers and $32.6 million to the sellers financing sources to
pay off outstanding floorplan borrowings, which we replaced with
borrowings from our Revolving Credit Facility. Of the $75.2 million paid to the sellers,
$39.9 million was for land and buildings. The accompanying consolidated balance sheet as of March
31, 2007, includes preliminary allocations of the purchase price for all of the acquired assets and
liabilities assumed based on their estimated fair market values at the dates of acquisition and,
are subject to final adjustment. Also during the three months ended March 31, 2007, the Company
disposed of two automobile dealership franchises for total consideration of $6.3 million. In January 2007, the Company sold its Maxwell
Chrysler store in Austin, Texas. In February 2007, the Company sold its Sandy Springs Ford store in Atlanta,
Georgia and terminated the related facilities and dealer management system software leases with the respective lessors resulting in a $3.3 million
charge.
13
Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
This Managements Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those discussed in the forward-looking statements because of
various factors. See Cautionary Statement about Forward Looking Statements.
Overview
We are a leading operator in the $1.0 trillion automotive retailing industry. We own and
operate 103 automotive dealerships, 142 franchises, and 28 collision service centers in the United
States and three dealerships, six franchises and two collision centers in the United Kingdom as of
March 31, 2007. We market and sell an extensive range of automotive products and services
including new and used vehicles and related financing, vehicle maintenance and repair services,
replacement parts, and warranty, insurance and extended service contracts. Our operations are
primarily located in major metropolitan areas in the states of Alabama, California, Florida,
Georgia, Kansas, Louisiana, Massachusetts, Mississippi, New Hampshire, New Jersey, New Mexico, New
York, Oklahoma and Texas in the United States of America and in the towns of Brighton, Hailsham
and Worthing in the United Kingdom.
As of March 31, 2007, the Companys retail network consisted of the following four regions
(with the number of dealerships they comprised): (i) the Northeast (23 dealerships in
Massachusetts, New Hampshire, New Jersey and New York), (ii) the Southeast (17 dealerships in
Alabama, Florida, Georgia, Louisiana and Mississippi), (iii) the Central (51 dealerships in Kansas,
New Mexico, Oklahoma and Texas), and (iv) the West (12 dealerships in California). Each region is
managed by a regional vice president reporting directly to the Companys Chief Executive Officer
and a regional chief financial officer reporting directly to the Companys Chief Financial Officer.
In addition, our international operations consists of three dealerships in the United Kingdom also
managed locally with direct reporting responsibilities to the Companys corporate management team.
Our operating results reflect the combined performance of each of our interrelated business
activities, which include the sale of new vehicles, used vehicles, finance and insurance products,
and parts, service and collision repair services. Historically, each of these activities has been
directly or indirectly impacted by a variety of supply/demand factors, including vehicle
inventories, consumer confidence, discretionary spending, availability and affordability of
consumer credit, manufacturer incentives, weather patterns, fuel prices and interest rates. For
example, during periods of sustained economic downturn or significant supply/demand imbalances, new
vehicle sales may be negatively impacted as consumers tend to shift their purchases to used
vehicles. Some consumers may even delay their purchasing decisions altogether, electing instead to
repair their existing vehicles. In such cases, however, we believe the impact on our overall
business is mitigated by our ability to offer other products and services, such as used vehicles
and parts, service and collision repair services.
Our operations are also subject to seasonal variations as demand for automobiles is generally
lower during the winter months than in other seasons. A greater amount of vehicle sales generally
occurs in the second and third quarters of each year due in part to weather-related factors,
consumer buying patterns, the historical timing of major manufacturer incentive programs, and the
introduction of new vehicle models. Accordingly, we expect our operating results to be higher in
the second and third quarters as compared to the first and fourth quarters.
For the three months ended March 31, 2007, we reported net income of $17.4 million and diluted
earnings per share of $0.72, compared to net income of $22.3 million and a diluted earnings per
share of $0.91 during the first three months of 2006. Our 2007 results were negatively impacted by a $2.5 million after-tax charge
for payments made during the quarter in conjunction with the sale & lease termination of one of
our domestic brand stores, as well as a charge for the estimated cost to buy out the lease of another domestic brand store.
14
Key Performance Indicators
The following table highlights certain of the key performance indicators we use to manage our
business:
Consolidated Statistical Data
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
|
Months Ended March 31,
|
|
|
|
2007
|
|
|
2006
|
|
Unit Sales
|
|
|
|
|
|
|
|
|
Retail Sales
|
|
|
|
|
|
|
|
|
New Vehicle
|
|
|
31,236
|
|
|
|
28,969
|
|
Used Vehicle
|
|
|
17,541
|
|
|
|
16,263
|
|
|
|
|
|
|
|
|
Total Retail Sales
|
|
|
48,777
|
|
|
|
45,232
|
|
Wholesale Sales
|
|
|
10,772
|
|
|
|
10,655
|
|
|
|
|
|
|
|
|
Total Vehicle Sales
|
|
|
59,549
|
|
|
|
55,887
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
|
|
|
|
|
|
New Vehicle Retail
|
|
|
6.9
|
%
|
|
|
7.5
|
%
|
Used Vehicle
|
|
|
10.4
|
%
|
|
|
10.4
|
%
|
Parts and Service
|
|
|
53.6
|
%
|
|
|
54.2
|
%
|
Total Gross Margin
|
|
|
16.2
|
%
|
|
|
16.7
|
%
|
SG&A
(1)
as a % of Gross Profit
|
|
|
80.2
|
%
|
|
|
76.2
|
%
|
Operating Margin
|
|
|
2.9
|
%
|
|
|
3.7
|
%
|
Pretax Margin
|
|
|
1.8
|
%
|
|
|
2.5
|
%
|
Finance and Insurance
|
|
|
|
|
|
|
|
|
Revenues per Retail Unit Sold
|
|
$
|
1,034
|
|
|
$
|
1,060
|
|
|
|
|
(1)
|
|
Selling, general and administrative expenses.
|
Our
overall retail unit sales increased, primarily impacted by recent
acquisitions. We believe our results are generally consistent with the
national retail performance of the brands we represent and the overall
markets in which we operate, specifically, reflecting strong performance from our Houston market
area and weaker performance in our New Orleans market following the
post-Hurricane Katrina recovery efforts that bolstered our 2006 results.
Our new vehicle gross margin decreased from 7.5% for the three months ended March 31, 2006, to
6.9% for 2007, resulting in our consolidated gross profit per new vehicle unit sold decreasing from
$2,227 per unit in 2006, to $2,064 per unit in 2007. Contributing to our new vehicle gross margin decline, we continued to experience pressure on margins of all brands in our West Region. In addition,
we saw further reductions in our Ford F-Series sales, which carry better than average margins. And, our margins within
the Chrysler Brands declined as the mix of manufacturer-offered incentives contained a lower lever of dealer cash as compared to prior year.
With respect to used vehicles, our used retail units sales & revenues increased 7.9% & 8.9%,
respectively, in 2007, but our gross profit per retail unit declined 2.7%. Our used wholesale revenues declined 7.5% on slightly more units, while our profit per wholesale unit improved
18.5%. As a result of this shift in used vehicle revenue mix to more retail business & the decline in retail profit per unit, total used vehicle gross margins remained flat at 10.4% for the three months
ended March 31, 2007, compared with the same period a year ago.
Our
consolidated parts and service gross margin decreased slightly between the first quarter
of 2006 and 2007, as our lower margin wholesale businesses grew more quickly than our higher margin
retail businesses. The component (parts, service and collision) margins stayed relatively
constant between the periods on an 8.0% increase in revenues.
Our consolidated finance and insurance revenues decreased from $1,060 per retail unit sold in
the first quarter of 2006 to $1,034 in 2007, primarily due to a decrease in vehicle service
contract penetration, income per finance and vehicle service contract, as well as a decrease in
fleet volume, which is recognized as finance and insurance business.
Our consolidated selling, general and administrative expenses (SG&A), as a percentage of gross
profit, increased from 76.2% during the first three months of 2006, to 80.2% in 2007. This
increase from 2006 to 2007 is primarily the combination of the decreases in gross margin noted above, as well as
costs incurred associated with lease terminations in 2007, accrued expenses associated with the standardization of our employee
vacation policies as of January 1, 2007 and the gain on the sale of a franchise
in 2006.
Our floorplan interest expense increased primarily as a result of rising interest rates, partially
offset by a reduction in inventory levels. The combination of all of these factors contributed to a
net decrease in our operating margin from 3.7% to 2.9% in the first quarter of 2007, and in our
pretax margin from 2.5% to 1.8%.
15
We address these items, and other variances between the periods presented, in the results of
operations section below.
Critical Accounting Policies and Accounting Estimates
Our consolidated financial statements are impacted by the accounting policies we use and the
estimates and assumptions we make during their preparation. We disclosed our critical accounting
policies and estimates in our 2006 Annual Report on Form 10-K. No significant changes have
occurred since that time.
Results of Operations
The following tables present comparative financial and non-financial data for the three months
ended March 31, 2007 and 2006, of (a) our Same Store locations, (b) those locations acquired or
disposed of (Transactions) during the three months ended March 31, 2007, and (c) the total
company. Same Store amounts include the results of dealerships for the identical months in each
period presented in the comparison, commencing with the first month in which we owned the
dealership and, in the case
of dispositions, ending with the last month it was owned. Same Store results also include the
activities of the corporate office.
The following table summarizes our combined Same Store results for the three months ended
March 31, 2007, as compared to 2006.
Total Same Store Data
(dollars in thousands, except per unit amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2007
|
|
|
% Change
|
|
|
2006
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
New vehicle retail
|
|
$
|
820,017
|
|
|
|
(2.3
|
)%
|
|
$
|
838,950
|
|
Used vehicle retail
|
|
|
256,545
|
|
|
|
0.9
|
%
|
|
|
254,159
|
|
Used vehicle wholesale
|
|
|
63,861
|
|
|
|
(17.8
|
)%
|
|
|
77,650
|
|
Parts and Service
|
|
|
159,293
|
|
|
|
2.6
|
%
|
|
|
155,197
|
|
Finance, insurance and other
|
|
|
46,439
|
|
|
|
0.2
|
%
|
|
|
46,344
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
1,346,155
|
|
|
|
(1.9
|
)%
|
|
|
1,372,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
New vehicle retail
|
|
|
763,518
|
|
|
|
(1.6
|
)%
|
|
|
775,984
|
|
Used vehicle retail
|
|
|
222,944
|
|
|
|
1.0
|
%
|
|
|
220,810
|
|
Used vehicle wholesale
|
|
|
63,100
|
|
|
|
(17.6
|
)%
|
|
|
76,582
|
|
Parts and Service
|
|
|
74,244
|
|
|
|
5.3
|
%
|
|
|
70,523
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of sales
|
|
|
1,123,806
|
|
|
|
(1.8
|
)%
|
|
|
1,143,899
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
222,349
|
|
|
|
(2.6
|
)%
|
|
$
|
228,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
expenses
|
|
$
|
176,471
|
|
|
|
2.7
|
%
|
|
$
|
171,798
|
|
Depreciation and amortization
expenses
|
|
$
|
4,383
|
|
|
|
(0.3
|
)%
|
|
$
|
4,395
|
|
Floorplan interest expense
|
|
$
|
10,871
|
|
|
|
(3.8
|
)%
|
|
$
|
11,299
|
|
Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
New Vehicle Retail
|
|
|
6.9
|
%
|
|
|
|
|
|
|
7.5
|
%
|
Used Vehicle
|
|
|
10.7
|
%
|
|
|
|
|
|
|
10.4
|
%
|
Parts and Service
|
|
|
53.4
|
%
|
|
|
|
|
|
|
54.6
|
%
|
Total Gross Margin
|
|
|
16.5
|
%
|
|
|
|
|
|
|
16.6
|
%
|
SG&A as a % of Gross Profit
|
|
|
79.4
|
%
|
|
|
|
|
|
|
75.2
|
%
|
Operating Margin
|
|
|
3.1
|
%
|
|
|
|
|
|
|
3.8
|
%
|
Finance and Insurance
Revenues per Retail Unit Sold
|
|
$
|
1,085
|
|
|
|
2.4
|
%
|
|
$
|
1,060
|
|
The discussion that follows provides explanation for the variances noted above. Each table
presents by primary income statement line item, comparative financial and non-financial data for our
Same Store locations, Transactions and the consolidated company for the three months ended March
31, 2007 and 2006.
16
New Vehicle Retail Data
(dollars in thousands, except per unit amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2007
|
|
|
% Change
|
|
|
2006
|
|
Retail Unit Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
|
27,280
|
|
|
|
(3.3
|
)%
|
|
|
28,200
|
|
Transactions
|
|
|
3,956
|
|
|
|
|
|
|
|
769
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
31,236
|
|
|
|
7.8
|
%
|
|
|
28,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Sales Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
820,017
|
|
|
|
(2.3
|
)%
|
|
$
|
838,950
|
|
Transactions
|
|
|
112,077
|
|
|
|
|
|
|
|
21,178
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
932,094
|
|
|
|
8.4
|
%
|
|
$
|
860,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
56,499
|
|
|
|
(10.3
|
)%
|
|
$
|
62,966
|
|
Transactions
|
|
|
7,981
|
|
|
|
|
|
|
|
1,548
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
64,480
|
|
|
|
(0.1
|
)%
|
|
$
|
64,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit per Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
2,071
|
|
|
|
(7.3
|
)%
|
|
$
|
2,233
|
|
Transactions
|
|
$
|
2,017
|
|
|
|
|
|
|
$
|
2,013
|
|
Total
|
|
$
|
2,064
|
|
|
|
(7.3
|
)%
|
|
$
|
2,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
|
6.9
|
%
|
|
|
|
|
|
|
7.5
|
%
|
Transactions
|
|
|
7.1
|
%
|
|
|
|
|
|
|
7.3
|
%
|
Total
|
|
|
6.9
|
%
|
|
|
|
|
|
|
7.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory Days Supply
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
|
58
|
|
|
|
(4.9
|
)%
|
|
|
61
|
|
Transactions
|
|
|
51
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
57
|
|
|
|
(8.1
|
)%
|
|
|
62
|
|
|
|
|
(1)
|
|
Inventory days supply equals units in inventory at the end of the period, divided by unit sales for the month then ended, multiplied by 30 days.
|
New vehicle unit sales and revenue increased 7.8% and 8.4%, respectively, as a result of
acquisitions, partially offset by a decrease in Same Store results. On a Same Store basis, our new
vehicle units, revenues and gross profit decreased 3.3%, 2.3% and
10.3%, respectively,
driven by lower volumes and gross profits in the New Orleans market as post-Hurricane Katrina recovery efforts bolstered our 2006 results.
With respect to same store new vehicle unit sales, we experienced
a 12.9% decrease in our domestic nameplates, partially offset by a 3.0% and 0.9% increase in luxury
and import unit sales, respectively. On a Same Store basis, excluding our New Orleans stores, our new vehicle revenues and gross profit decreased 0.4%
and 8.1%, respectively. Excluding these New Orleans stores, domestic brand sales were down 10.1%,
while our import and luxury brand sales were up 1.8% and 7.1%, respectively. The 8.1% decline in
Same Store gross profit, excluding the New Orleans results, is primarily related to the lower sales
volume discussed above, as well as lower profits realized per retail
unit sold. We believe our results are generally consistent with the
national retail performance of the brands we represent and the
overall markets in which we operate. Contributing to our
new vehicle gross profit decline, we continued to experience margin pressure on all of our brands
in the West Region. In addition, we saw further reductions in our Ford F-Series sales, which carry
better than average margins, as well as declines in our profits within the Chrysler brands as the mix of manufacturer-offered
incentives contained a lower level of dealer cash as compared to prior year.
17
The following table sets forth our top ten Same Store brands, based on retail unit sales
volume:
Same Store New Vehicle Unit Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2007
|
|
|
% Change
|
|
|
2006
|
|
Toyota/Scion
|
|
|
8,157
|
|
|
|
0.1
|
%
|
|
|
8,146
|
|
Ford
|
|
|
3,358
|
|
|
|
(18.4
|
)
|
|
|
4,115
|
|
Nissan
|
|
|
2,736
|
|
|
|
1.7
|
|
|
|
2,689
|
|
Honda
|
|
|
2,357
|
|
|
|
2.2
|
|
|
|
2,306
|
|
Lexus
|
|
|
1,554
|
|
|
|
10.0
|
|
|
|
1,413
|
|
Chevrolet
|
|
|
1,546
|
|
|
|
5.5
|
|
|
|
1,465
|
|
Dodge
|
|
|
1,297
|
|
|
|
(14.5
|
)
|
|
|
1,517
|
|
BMW
|
|
|
1,070
|
|
|
|
(7.4
|
)
|
|
|
1,155
|
|
Mercedes-Benz
|
|
|
989
|
|
|
|
8.2
|
|
|
|
914
|
|
Jeep
|
|
|
657
|
|
|
|
(1.2
|
)
|
|
|
665
|
|
Other
|
|
|
3,559
|
|
|
|
(6.7
|
)
|
|
|
3,815
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
27,280
|
|
|
|
(3.3
|
)
|
|
|
28,200
|
|
|
|
|
|
|
|
|
|
|
|
|
Although certain of our Same Store brand sales experienced year-over-year declines, others
exceeded prior year sales highlighting the cyclical nature of our business and the need to have a
well-balanced portfolio of new vehicle brands of which we sell. We anticipate that total industrywide
sales of new vehicles throughout 2007 will be lower than 2006 and remain highly competitive.
The level of retail sales, as well as our own ability to retain or grow market share, during future
periods is difficult to predict.
Most manufacturers offer interest assistance to offset floorplan interest charges incurred in
connection with inventory purchases. This assistance varies by manufacturer, but generally
provides for a defined amount regardless of our actual floorplan interest rate or the length of
time for which the inventory is financed. The amount of interest assistance we recognize in a
given period is primarily a function of the specific terms of the respective manufacturers
interest assistance programs and wholesale interest rates, the average wholesale price of inventory
sold, and our rate of inventory turn. For these reasons, this assistance has ranged from
approximately 71.5% to 139.5% of our total floorplan interest expense over the past three years,
with the current quarters assistance totaling 74.3%. We record these incentives as a reduction of
new vehicle cost of sales as the vehicles are sold, which therefore impact the gross profit and
gross margin detailed above. The total assistance recognized in cost of goods sold during the
three months ended March 31, 2007 and 2006, was $9.1 million and $8.5 million, respectively.
Finally, our days supply of new vehicle inventory decreased from 62 days supply at March 31,
2006, and 63 days supply at December 31, 2006, to 57 days supply at March 31, 2007, primarily reflecting
planned reductions in domestic nameplates. Our domestic inventory was reduced to 69 days supply at March 31, 2007, while our import and luxury brands
were at 58 days and 40 days supply, respectively.
The following table sets forth the inventory days supply for our top ten brands, based on
retail unit sales volume:
Inventory Days Supply
|
|
|
|
|
|
|
|
|
March 31, 2007
|
|
December 31, 2006
|
|
March 31, 2006
|
Lexus
|
|
18
|
|
14
|
|
31
|
BMW
|
|
21
|
|
31
|
|
25
|
Mercedes-Benz
|
|
46
|
|
39
|
|
44
|
Honda
|
|
50
|
|
55
|
|
40
|
Toyota
|
|
54
|
|
47
|
|
45
|
Jeep
|
|
54
|
|
71
|
|
69
|
Dodge
|
|
63
|
|
74
|
|
100
|
Nissan
|
|
65
|
|
68
|
|
67
|
Ford
|
|
69
|
|
114
|
|
86
|
Chevrolet
|
|
75
|
|
89
|
|
95
|
Total
|
|
57
|
|
63
|
|
62
|
|
|
|
|
|
|
|
Import
|
|
58
|
|
57
|
|
50
|
Domestic
|
|
69
|
|
99
|
|
91
|
Luxury
|
|
40
|
|
37
|
|
40
|
18
Used Vehicle Retail Data
(dollars in thousands, except per unit amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2007
|
|
|
% Change
|
|
|
2006
|
|
Retail Unit Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
|
15,508
|
|
|
|
0.0
|
%
|
|
|
15,506
|
|
Transactions
|
|
|
2,033
|
|
|
|
|
|
|
|
757
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
17,541
|
|
|
|
7.9
|
%
|
|
|
16,263
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Sales Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
256,545
|
|
|
|
0.9
|
%
|
|
$
|
254,159
|
|
Transactions
|
|
|
33,169
|
|
|
|
|
|
|
|
11,761
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
289,714
|
|
|
|
8.9
|
%
|
|
$
|
265,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
33,601
|
|
|
|
0.8
|
%
|
|
$
|
33,349
|
|
Transactions
|
|
|
3,172
|
|
|
|
|
|
|
|
1,691
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
36,773
|
|
|
|
4.9
|
%
|
|
$
|
35,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit per Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
2,167
|
|
|
|
0.7
|
%
|
|
$
|
2,151
|
|
Transactions
|
|
$
|
1,560
|
|
|
|
|
|
|
$
|
2,234
|
|
Total
|
|
$
|
2,096
|
|
|
|
(2.7
|
)%
|
|
$
|
2,155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
|
13.1
|
%
|
|
|
|
|
|
|
13.1
|
%
|
Transactions
|
|
|
9.6
|
%
|
|
|
|
|
|
|
14.4
|
%
|
Total
|
|
|
12.7
|
%
|
|
|
|
|
|
|
13.2
|
%
|
Used Vehicle Wholesale Data
(dollars in thousands, except per unit amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2007
|
|
|
% Change
|
|
|
2006
|
|
Wholesale Unit Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
|
9,440
|
|
|
|
(7.7
|
)%
|
|
|
10,223
|
|
Transactions
|
|
|
1,332
|
|
|
|
|
|
|
|
432
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10,772
|
|
|
|
1.1
|
%
|
|
|
10,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale Sales Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
63,861
|
|
|
|
(17.8
|
)%
|
|
$
|
77,650
|
|
Transactions
|
|
|
10,783
|
|
|
|
|
|
|
|
3,043
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
74,644
|
|
|
|
(7.5
|
)%
|
|
$
|
80,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
761
|
|
|
|
(28.7
|
)%
|
|
$
|
1,068
|
|
Transactions
|
|
|
408
|
|
|
|
|
|
|
|
(89
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,169
|
|
|
|
19.4
|
%
|
|
$
|
979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale Profit (Loss) per
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale Unit Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
81
|
|
|
|
(22.1
|
)%
|
|
$
|
104
|
|
Transactions
|
|
$
|
306
|
|
|
|
|
|
|
$
|
(206
|
)
|
Total
|
|
$
|
109
|
|
|
|
18.5
|
%
|
|
$
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
|
1.2
|
%
|
|
|
|
|
|
|
1.4
|
%
|
Transactions
|
|
|
3.8
|
%
|
|
|
|
|
|
|
(2.9
|
)%
|
Total
|
|
|
1.6
|
%
|
|
|
|
|
|
|
1.2
|
%
|
19
Total Used Vehicle Data
(dollars in thousands, except per unit amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2007
|
|
|
% Change
|
|
|
2006
|
|
Used Vehicle Unit Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
|
24,948
|
|
|
|
(3.0
|
)%
|
|
|
25,729
|
|
Transactions
|
|
|
3,365
|
|
|
|
|
|
|
|
1,189
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
28,313
|
|
|
|
5.2
|
%
|
|
|
26,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
320,406
|
|
|
|
(3.4
|
)%
|
|
$
|
331,809
|
|
Transactions
|
|
|
43,952
|
|
|
|
|
|
|
|
14,804
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
364,358
|
|
|
|
5.1
|
%
|
|
$
|
346,613
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
34,362
|
|
|
|
(0.2
|
)%
|
|
$
|
34,417
|
|
Transactions
|
|
|
3,580
|
|
|
|
|
|
|
|
1,602
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
37,942
|
|
|
|
5.3
|
%
|
|
$
|
36,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit per Used Vehicle
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
1,377
|
|
|
|
2.9
|
%
|
|
$
|
1,338
|
|
Transactions
|
|
$
|
1,064
|
|
|
|
|
|
|
$
|
1,347
|
|
Total
|
|
$
|
1,340
|
|
|
|
0.1
|
%
|
|
$
|
1,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
|
10.7
|
%
|
|
|
|
|
|
|
10.4
|
%
|
Transactions
|
|
|
8.1
|
%
|
|
|
|
|
|
|
10.8
|
%
|
Total
|
|
|
10.4
|
%
|
|
|
|
|
|
|
10.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory Days Supply
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
|
28
|
|
|
|
3.7
|
%
|
|
|
27
|
|
Transactions
|
|
|
26
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
28
|
|
|
|
0.0
|
%
|
|
|
28
|
|
|
|
|
(1)
|
|
Inventory days supply equals units in inventory at the end of
the period, divided by unit sales for the month then ended,
multiplied by 30 days.
|
Our used vehicle results are affected by the number and quality of trade-ins and lease turn-ins, the availability of consumer
credit and our efforts to effectively manage the level and quality of our overall used vehicle
inventory. Overall, our used vehicle unit sales and revenues increased 5.2% and 5.1%,
respectively, reflecting the strong performance in our recent acquisitions, offset by volume and
revenue declines of 3.0% and 3.4%, respectively, in our Same Store results. Our used vehicle gross
profit increased 5.3% overall, while our Same Store results were relatively flat. Conversely, our
total used vehicle gross profit per unit sold and gross margin remained consistent between periods,
while our Same Store results improved 2.9% and 30 basis points, respectively.
As
we continue to implement our strategy of identifying used retail
inventory, using our software as an enabler, and improving our
overall used vehicle business, our same store used vehicle mix
shifted toward retail, and our used retail revenues increased
$2.4 million, or 0.9%, while wholesale sales decreased
$13.8 million, or 17.8%. Our used retail gross profit improved
0.8% on flat unit volume, while wholesale profits declined
$0.3 million, or 28.7%. As discussed in our new vehicle
results, our New Orleans market experienced unusually strong activity in the first quarter of 2006
as a result of post-hurricane recovery efforts. Excluding our New Orleans stores, our Same Store
used vehicle retail revenues and gross profit increased 2.5% and 2.1%, respectively.
Our days supply of used vehicle inventory was at 28 days at March 31, 2007, slightly down
from our 31 days supply on hand at December 31, 2006, but consistent with the 28 days supply at
March 31, 2006. Although we continuously work to optimize our used vehicle inventory levels, the
28 days supply at March 31, 2007, remains unusually low and, in all likelihood, will need to be
increased in the coming months to provide adequate supply and selection for the spring and summer
selling seasons. We currently target a 37 days supply for maximum operating efficiency.
20
Parts and Service Data
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2007
|
|
|
% Change
|
|
|
2006
|
|
Parts and Service Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
159,293
|
|
|
|
2.6
|
%
|
|
$
|
155,197
|
|
Transactions
|
|
|
16,546
|
|
|
|
|
|
|
|
7,670
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
175,839
|
|
|
|
8.0
|
%
|
|
$
|
162,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
85,049
|
|
|
|
0.4
|
%
|
|
$
|
84,674
|
|
Transactions
|
|
|
9,239
|
|
|
|
|
|
|
|
3,660
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
94,288
|
|
|
|
6.7
|
%
|
|
$
|
88,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
|
53.4
|
%
|
|
|
|
|
|
|
54.6
|
%
|
Transactions
|
|
|
55.8
|
%
|
|
|
|
|
|
|
47.7
|
%
|
Total
|
|
|
53.6
|
%
|
|
|
|
|
|
|
54.2
|
%
|
Our Same Store parts and service revenues increased 2.6% during the three months ended March
31, 2007, as compared to 2006, primarily because of increases in our parts business, as well as in
our customer pay (non-warranty) service businesses. These increases were partially offset by
decreases in our warranty-related service sales and our collision business. Overall, our gross
profit improved 6.7%, but our gross margin declined 60 basis points.
Our Same Store parts sales increased $4.9 million, or 5.3%, for the three months ended March
31, 2007, as compared to 2006. These increases were driven by a $3.3 million, or 10.1%, increase
in our lower margin wholesale sales and a $1.9 million, or 4.7%, increase in our customer pay
(non-warranty) parts sales. Despite an increase in Same Store parts gross profit during the
period, this disproportionate increase in our lower margin wholesale parts business led to a
decline in our overall parts gross margin.
Our Same Store overall service (including collision) revenue decreased $0.8 million during
2007, as compared to 2006, as a 0.6% increase in customer pay (non-warranty) service sales was
offset by a decrease of 5.0% in warranty-related service revenue and an overall 2.0% decline in
collision service revenues. The decline in warranty service revenue was due to the benefit
received in 2006 from some specific manufacturer quality issues, primarily Mercedes-Benz, Nissan
and Ford, that were remedied during 2006. The decline in collision service revenues was primarily
attributable to the closing of one collision center during early 2007.
21
Finance and Insurance Data
(dollars in thousands, except per unit amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
2007
|
|
|
% Change
|
|
|
2006
|
|
Retail New and Used
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
|
42,788
|
|
|
|
(2.1
|
)%
|
|
|
43,706
|
|
Transactions
|
|
|
5,989
|
|
|
|
|
|
|
|
1,526
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
48,777
|
|
|
|
7.8
|
%
|
|
|
45,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Finance Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
18,075
|
|
|
|
10.5
|
%
|
|
$
|
16,354
|
|
Transactions
|
|
|
1,728
|
|
|
|
|
|
|
|
673
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,803
|
|
|
|
16.3
|
%
|
|
$
|
17,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vehicle Service Contract Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
17,837
|
|
|
|
(5.7
|
)%
|
|
$
|
18,918
|
|
Transactions
|
|
|
1,275
|
|
|
|
|
|
|
|
592
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
19,112
|
|
|
|
(2.0
|
)%
|
|
$
|
19,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance and Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
10,527
|
|
|
|
(4.9
|
)%
|
|
$
|
11,072
|
|
Transactions
|
|
|
1,005
|
|
|
|
|
|
|
|
349
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,532
|
|
|
|
1.0
|
%
|
|
$
|
11,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
46,439
|
|
|
|
0.2
|
%
|
|
$
|
46,344
|
|
Transactions
|
|
|
4,008
|
|
|
|
|
|
|
|
1,614
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
50,447
|
|
|
|
5.2
|
%
|
|
$
|
47,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance and Insurance
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues per Unit Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
1,085
|
|
|
|
2.4
|
%
|
|
$
|
1,060
|
|
Transactions
|
|
$
|
669
|
|
|
|
|
|
|
$
|
1,058
|
|
Total
|
|
$
|
1,034
|
|
|
|
(2.5
|
)%
|
|
$
|
1,060
|
|
Overall, our finance and insurance revenues improved 5.2% between 2006 and 2007 on lower
revenues per unit sold and a 7.8% increase in retail new and used unit sales.
Our finance and insurance revenues per retail unit sold decreased 2.5% during the first three
months of 2007, as compared to 2006. Same Store increases of 2.4% were offset by the impact from
recent acquisitions, which generally had lower penetration of finance and insurance products on
sales of new and used vehicles than our existing stores.
Although we saw a decrease in our Same Store retail unit sales of 2.1%, our 2007 Same Store
retail finance fee income increased 10.5%, as compared to 2006, due primarily to a 10.2% increase
in revenue per contract and a $0.3 million decrease in chargeback expense. The decrease in
chargeback expense was due to a decrease in customer refinancing activity, in which a customer
obtains a new, lower rate loan from a third-party source in order to replace the original loan
chosen by the customer to obtain upfront manufacturer incentives. In addition, with the decline in
manufacturer provided financing incentives, we were able to present a greater range of financing
sources to our customers, thereby yielding an overall increase in finance fee income.
Our 2007 Same Store vehicle service contract fees decreased 5.7%, as compared to 2006,
primarily because of a decrease of 120 basis points in our penetration rates and lower retail unit
sales.
Our 2007 Same Store insurance and other sales revenue decreased 4.9%, as compared to 2006,
primarily because of decreases in retail unit sales and lower fleet volumes, which is recognized as
finance and insurance business.
22
Selling, General and Administrative Data
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2007
|
|
|
% Change
|
|
|
2006
|
|
Personnel
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
106,104
|
|
|
|
1.9
|
%
|
|
$
|
104,132
|
|
Transactions
|
|
|
11,416
|
|
|
|
|
|
|
|
4,446
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
117,520
|
|
|
|
8.2
|
%
|
|
$
|
108,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
13,491
|
|
|
|
(5.3
|
)%
|
|
$
|
14,253
|
|
Transactions
|
|
|
1,845
|
|
|
|
|
|
|
|
1,122
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
15,336
|
|
|
|
(0.3
|
)%
|
|
$
|
15,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rent and Facility Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
23,280
|
|
|
|
1.6
|
%
|
|
$
|
22,913
|
|
Transactions
|
|
|
1,179
|
|
|
|
|
|
|
|
1,695
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
24,459
|
|
|
|
(0.6
|
)%
|
|
$
|
24,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other SG&A
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
33,596
|
|
|
|
10.2
|
%
|
|
$
|
30,500
|
|
Transactions
|
|
|
7,252
|
|
|
|
|
|
|
|
1,416
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
40,848
|
|
|
|
28.0
|
%
|
|
$
|
31,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total SG&A
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
176,471
|
|
|
|
2.7
|
%
|
|
$
|
171,798
|
|
Transactions
|
|
|
21,692
|
|
|
|
|
|
|
|
8,679
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
198,163
|
|
|
|
9.8
|
%
|
|
$
|
180,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
$
|
222,349
|
|
|
|
(2.6
|
)%
|
|
$
|
228,401
|
|
Transactions
|
|
|
24,808
|
|
|
|
|
|
|
|
8,424
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
247,157
|
|
|
|
4.4
|
%
|
|
$
|
236,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A as % of Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Stores
|
|
|
79.4
|
%
|
|
|
|
|
|
|
75.2
|
%
|
Transactions
|
|
|
87.4
|
%
|
|
|
|
|
|
|
103.0
|
%
|
Total
|
|
|
80.2
|
%
|
|
|
|
|
|
|
76.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate Number of
Employees at March 31,
|
|
|
8,800
|
|
|
|
|
|
|
|
8,400
|
|
Our selling, general and administrative (SG&A) expenses consist primarily of salaries,
commissions and incentive-based compensation, as well as rent, advertising, insurance, benefits,
utilities and other fixed expenses. We believe that our personnel and advertising expenses are
variable and can be adjusted in response to changing business conditions. In such a case, however,
it may take us several months to adjust our cost structure, or we may elect not to fully adjust a
variable component, such as advertising expenses.
SG&A expenses increased as a percentage of gross profit from 76.2% during the first three
months of 2006 to 80.2% in 2007. This increase resulted from the combination of a decrease in
overall gross margin, a pretax charge of $3.8 million related to the lease termination costs at
two of our dealership facilities, a $2.3 million pretax accrual related to the standardization
of our employee vacation policies as of January 1, 2007, and a
$1.3 million pretax gain on the disposal of a franchise during
the first quarter of 2006, partially offset by reductions in advertising
expenditures. Although we expect our overall cost structure to remain lower than prior periods,
our SG&A as a percentage of gross profit ratio is strongly influenced by the level of gross profit
we realize.
Other SG&A consists primarily of insurance, freight, supplies, professional fees, loaner car
expenses, vehicle delivery expenses, software licenses and other data processing costs, and
miscellaneous other operating costs not related to personnel,
advertising or facilities. During the first quarter of 2007, as compared to the same period
of 2006, these Same Store expenses increased $3.1 million primarily as a result of a $0.5 million
charge related to a lease termination in 2007 and a $1.3 million gain recognized on the sale of one
of our franchises during the first quarter of 2006. The 2007 balance of $7.3 million in
Transactions includes $3.3 million related to lease terminations associated with the sale of a
dealership in the Southeast region.
23
Depreciation and Amortization Expense
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2007
|
|
|
% Change
|
|
|
2006
|
|
Same Stores
|
|
$
|
4,383
|
|
|
|
(0.3
|
)%
|
|
$
|
4,395
|
|
Transactions
|
|
|
465
|
|
|
|
|
|
|
|
168
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,848
|
|
|
|
6.2
|
%
|
|
$
|
4,563
|
|
|
|
|
|
|
|
|
|
|
|
|
Our Same Store depreciation and amortization expense remained relatively consistent between
periods.
Floorplan Interest Expense
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2007
|
|
|
% Change
|
|
|
2006
|
|
Same Stores
|
|
$
|
10,871
|
|
|
|
(3.8
|
)%
|
|
$
|
11,299
|
|
Transactions
|
|
|
1,367
|
|
|
|
|
|
|
|
547
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12,238
|
|
|
|
3.3
|
%
|
|
$
|
11,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Memo:
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturers assistance
|
|
$
|
9,088
|
|
|
|
7.3
|
%
|
|
$
|
8,471
|
|
Our floorplan interest expense fluctuates based on changes in borrowings outstanding and
interest rates, which are based on LIBOR (or Prime in some cases) plus a spread. Our Same Store
floorplan interest expense decreased during the three months ended March 31, 2007, compared to
2006, primarily as a result of an approximate $74.0 million decrease in weighted average floorplan
borrowings outstanding between the periods partially offset by a 72 basis-point increase in
weighted average interest rates.
Other Interest Expense, net
Other net interest expense, which consists of interest charges on our long-term debt and our
acquisition line partially offset by interest income, increased $1.2 million, or 30.5%, to $5.2
million for the three months ended March 31, 2007, from $4.0 million for the three months ended
March 31, 2006. This increase was due to a $271.2 million increase in weighted average borrowings
outstanding between the periods, due to the Convertible Notes issued during the second quarter of
2006, partially offset by a 442 basis-point decrease in weighted average interest rates, also
primarily related to the lower interest bearing Convertible Notes.
Provision for Income Taxes
Our provision for income taxes decreased $4.3 million to $9.3 million for the three months
ended March 31, 2007, from $13.7 million for the three months ended March 31, 2006. For the three
months ended March 31, 2007, our effective tax rate decreased to 34.9%, from 38.0% for the three
months ended March 31, 2006, due primarily to the benefit received from tax-deductible goodwill
related to a dealership disposition.
Liquidity and Capital Resources
Our liquidity and capital resources are primarily derived from cash on hand, cash from
operations, borrowings under our credit facilities, which provide floorplan, real estate, working
capital and acquisition financing, and proceeds from debt and equity offerings. Based on current facts and circumstances we believe we have adequate cash flow,
coupled with available borrowing capacity, to fund our current operations, capital expenditures and
acquisition program for 2007. If our capital expenditures or acquisition plans for 2007 change, we
may need to access the private or public capital markets to obtain additional funding.
24
Sources of Liquidity and Capital Resources
Cash on Hand.
As of March 31, 2007, our total cash on hand was $37.0 million.
Cash Flows.
The following table sets forth selected information from our statements of cash
flow:
|
|
|
|
|
|
|
|
|
|
|
For the Three
|
|
|
|
Months Ended March 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(In thousands)
|
|
Net cash used in operating activities
|
|
$
|
(86,871
|
)
|
|
$
|
(14,807
|
)
|
Net cash used in investing activities
|
|
|
(121,576
|
)
|
|
|
(47,389
|
)
|
Net cash provided by financing activities
|
|
|
206,157
|
|
|
|
59,733
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
$
|
(2,290
|
)
|
|
$
|
(2,463
|
)
|
|
|
|
|
|
|
|
Operating
activities.
For the three months ended March 31, 2007, we
used $84.1 million in net
cash, primarily driven by a $150.7 million decrease in floorplan notes payable associated with
manufacturer affiliates. This was driven by our decision not to renew
the DaimlerChrysler Facility during
the period, whereas $112.1 million was paid to close the facility with borrowings from our
revolving credit facility. The cash used to pay down our floorplan notes payable was partially
offset by an increase in cash provided by net income, after adding back depreciation and
amortization and other non-cash charges, and other working capital
changes, including a $17.6 million reduction in inventories
(excluding investing activities).
For the three months ended March 31, 2006, we used $14.8 million in net cash from operating
activities, primarily driven by an $82.8 million increase in inventories, a portion of which were
not financed by floorplan notes payable with manufacturer affiliates.
The cash used to increase
inventories was partially offset by an increase in cash provided by net income, after adding back
depreciation and amortization and other non-cash charges, and other working capital changes.
Investing activities.
During the first three months of 2007, we used approximately $121.6
million in investing activities. We used $107.8 million for acquisitions, net of cash received,
and $22.9 million for capital expenditures. Of the
$107.8 million used for acquisitions, $75.2 million was
paid to the sellers, including $39.9 million for land and
buildings, and $32.6 million was used to pay off the
sellers floorplan borrowings. Approximately $4.9 million
of the capital expenditures was for the purchase of land and
$14.1 million was for construction of new or expanded facilities
(see Note 7 to the consolidated financial statements). Partially offsetting these uses was approximately $6.7 million in proceeds from sales
of franchises and other property and equipment.
During the first three months of 2006, we used approximately $47.4 million in investing
activities. We used $40.6 million for acquisitions, net of cash received, and $15.3 million for
capital expenditures. Of the $40.6 million used for
acquisitions, $29.3 million was paid to the sellers and
$11.3 million was used to pay off the sellers floorplan
borrowings. Approximately $11.5 million of the capital
expenditures was for the purchase of land and construction of new or expanded facilities. Partially
offsetting these uses was approximately $10.6 million in proceeds from sales of franchises and
other property and equipment.
Financing
activities.
We obtained approximately $203.4 million in financing activities during
the three months ended March 31, 2007, primarily from floorplan borrowings under our revolving
credit facility. As discussed above, $112.1 million was borrowed to pay off our DaimlerChrysler
Facility. We also obtained $63.7 million from a new mortgage facility.
We obtained approximately $59.7 million in financing activities during the three months ended
March 31, 2006, primarily from floorplan borrowings under our revolving credit facility and
proceeds from the issuance of common stock related to exercises of stock options and employee stock
purchase plan purchases.
Working
Capital.
At March 31, 2007, we had $224.5 million
of working capital. Changes in our
working capital are driven primarily by changes in floorplan notes payable outstanding. Borrowings
on our new vehicle floorplan notes payable, subject to agreed upon pay-off terms, are equal to 100%
of the factory invoice of the vehicles. Borrowings on our used vehicle floorplan notes payable,
also subject to agreed upon pay-off terms, are limited to 70% of the aggregate book value of our
used vehicle inventory. At times, we have made payments on our floorplan notes payable using
excess cash flow from operations and the proceeds of debt and equity offerings. As needed, we
reborrow the amounts later, up to the limits on the floorplan notes payable discussed below, for
working capital, acquisitions, capital expenditures and/or general
corporate purposes. At March 31, 2007, we had
$116.1 million of immediately available funds as a result of
payments made on our floorplan notes payable with excess cash.
Credit Facilities.
Our various credit facilities are used to finance the purchase of
inventory and real estate, provide acquisition funding and provide working capital for general
corporate purposes. As of March 31, 2007, we had three facilities
providing us $1.3 billion of borrowing capacity for inventory floorplan financing, $75.0
million for real estate purchases, and an additional $350.0 million for acquisitions, capital
expenditures and/or other general corporate purposes.
25
Revolving Credit Facility.
In March 2007, we amended our revolving credit facility, expanding
it by $400.0 million to a total of $1.35 billion. This facility, which is now comprised of 19
major financial institutions and three manufacturer captive finance companies, matures in March
2012. We can expand the Revolving Credit Facility to its maximum commitment of $1.85 billion, subject to
participating lender approval. This facility consists of two tranches: $1.0 billion for floorplan
financing, which we refer to as the Floorplan Line, and $350.0 million for acquisitions, capital
expenditures and general corporate purposes, including the issuance of letters of credit. We refer
to this tranche as the Acquisition Line. The Floorplan Line bears interest at rates equal to LIBOR
plus 87.5 basis points for new vehicle inventory and LIBOR plus 97.5 basis points for used vehicle
inventory. The Acquisition Line bears interest at LIBOR plus a margin that ranges from 150.0 to
225.0 basis points, depending on our leverage ratio.
Our Revolving Credit Facility contains various covenants including financial ratios, such as
fixed-charge coverage and leverage and current ratios, and a minimum equity requirement, among
others, as well as additional maintenance requirements. We were in compliance with these covenants
at March 31, 2007. Additionally, under the terms of our
Revolving Credit Facility, the Company is limited in its ability to
make cash dividend payments to its stockholders and to repurchase
shares of its outstanding stock, based primarily on the quarterly net
income of the Company.
Ford Motor Credit Facility.
The Ford Motor Credit Company Facility, which we refer to as the
FMCC Facility, provides financing for our entire Ford, Lincoln and Mercury new vehicle inventory.
The FMCC Facility, which matures in December 2007, provides for up to $300.0 million of financing
for inventory at an interest rate equal to Prime plus 100 basis points minus certain incentives.
We expect the net cost of our borrowings under the FMCC facility, after all incentives, to
approximate the cost of borrowing under the Floorplan Line of our revolving credit facility.
Real Estate Credit Facility.
In March 2007, we completed an initial $75.0 million, five-year
real estate credit facility with Bank of America, N.A. We refer to this facility as the Mortgage
Facility. The facility will be used for general working capital, capital expenditures, and
acquisitions of real estate and dealerships. Borrowings under the Mortgage Facility consist of
individual term loans, each in a minimum amount of $0.5 million, secured by a parcel of property.
Our initial borrowing under the facility totaled $63.7 million. On April 27, 2007, we amended the
Mortgage Facility, expanding its maximum commitment to
$235.0 million and syndicating the facility
with nine financial institutions. The Mortgage Facility matures in March 2012 and bears interest
at a rate equal to LIBOR plus 105.0 basis points.
DaimlerChrysler Facility.
On February 28, 2007, the DaimlerChrysler Facility matured and we
chose not to renew this facility past its maturity date. The facility provided for up to $300.0
million of financing for our entire Chrysler, Dodge, Jeep and Mercedes-Benz new vehicle inventory.
We used available funds from our Floorplan Line to pay off the outstanding balance on the maturity
date and will continue to use the Floorplan Line to finance our Chrysler, Dodge, Jeep and
Mercedes-Benz new vehicle inventory.
The following table summarizes the current position of our credit facilities as of March 31,
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
Credit Facility
|
|
Commitment
|
|
|
Outstanding
|
|
|
Available
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
Floorplan Line
(1)
|
|
$
|
1,000,000
|
|
|
$
|
587,600
|
|
|
$
|
412,400
|
|
Acquisition Line
(2)
|
|
|
350,000
|
|
|
|
18,000
|
|
|
|
332,000
|
|
|
|
|
|
|
|
|
|
|
|
Total Revolving Credit Facility
|
|
|
1,350,000
|
|
|
|
605,600
|
|
|
|
744,400
|
|
FMCC Facility
|
|
|
300,000
|
|
|
|
106,107
|
|
|
|
193,893
|
|
Mortgage Facility
|
|
|
75,000
|
|
|
|
63,650
|
|
|
|
11,350
|
|
|
|
|
|
|
|
|
|
|
|
Total Credit Facilities
(3)
|
|
$
|
1,725,000
|
|
|
$
|
775,357
|
|
|
$
|
949,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The available balance at March 31, 2007, includes $116.1 million of immediately available funds.
|
|
(2)
|
|
The outstanding balance at March 31, 2007, includes $18.0 million of letters of credit.
|
|
(3)
|
|
Outstanding balance excludes $28.7 million of borrowings with manufacturer-affiliates for rental vehicle financing not associated with any of the Companys credit facilities.
|
Uses of Liquidity and Capital Resources
Capital Expenditures.
Our capital expenditures include expenditures to extend the useful
lives of current facilities and expenditures to start or expand operations. Historically, our
annual capital expenditures, exclusive of new or expanded operations, have approximately equaled
our annual depreciation charge. In general, expenditures relating to the construction or expansion
of dealership facilities are driven by dealership acquisition
activity significant growth in sales at an existing facility,
manufacturer imaging programs or new franchises being granted to us
by a manufacturer. During
2007, we plan to invest approximately $80.0 million, primarily
26
to expand or relocate existing
facilities, including the purchase of land and related equipment, and to perform manufacturer
required imaging projects at some locations.
Acquisitions.
Our acquisition target for 2007 is to complete strategic acquisitions that have
approximately $600.0 million in expected annual revenues. We expect the cash needed to complete
our acquisitions will come from excess working capital, operating cash flows of our dealerships,
and borrowings under our floorplan facilities, our Mortgage Facility and our Acquisition Line.
Depending on the market value of our common stock, we may issue common stock to fund a portion of
the purchase price of acquisitions. We purchase businesses based on expected return on investment.
Generally, the purchase price is approximately 20% to 25% of the annual revenue. Thus, our
acquisition target of $600.0 million in revenues is expected to cost us between $120.0 and $150.0
million, excluding the amount incurred to finance vehicle inventories. Since January 1, 2007, we
have completed the acquisition of nine franchises with expected annual revenues of approximately
$303.0 million.
Stock Repurchases.
In March 2006, the Companys Board of Directors authorized the repurchase
of a number of shares equivalent to the shares issued pursuant to the Companys employee stock
purchase plan. The Company currently expects these approved repurchases to
total approximately 130,000 shares during 2007. Pursuant to this authorization, a total of 75,000
shares were repurchased in March 2007, at a cost of approximately $3.0 million. Approximately $1.2
million of the funds for such repurchases came from employee contributions during the period.
Further, on April 24, 2007, the Companys Board of Directors authorized the repurchase of up to
$30.0 million of its common shares.
Dividends
.
In February 2007, our Board of Directors declared a dividend of $0.14 per common
share for the fourth quarter of 2006. These dividend payments on our outstanding common stock and
common stock equivalents totaled approximately $3.4 million in the first quarter of 2007. The
payment of any future dividend is subject to the discretion of our Board of Directors after
considering our results of operations, financial condition, cash flows, capital requirements,
outlook for our business, general business conditions and other factors.
Provisions of our credit facilities and our senior subordinated notes require us to maintain
certain financial ratios and limit the amount of disbursements we may make outside the ordinary
course of business. These include limitations on the payment of cash dividends and on stock
repurchases, which are limited to a percentage of cumulative net income. This amount will increase or
decrease in future periods by adding to the current limitation the sum of 50% of our consolidated
net income, if positive, and 100% of equity issuances, less actual dividends or stock repurchases
completed in each quarterly period. Our revolving credit facility matures in 2012 and our senior
subordinated notes mature in 2013.
27
Cautionary Statement about Forward-Looking Statements
This quarterly report includes certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These statements include statements regarding our plans, goals, or current expectations with
respect to, among other things:
|
|
|
our future operating performance;
|
|
|
|
|
our ability to improve our margins;
|
|
|
|
|
operating cash flows and availability of capital;
|
|
|
|
|
the completion of future acquisitions;
|
|
|
|
|
the future revenues of acquired dealerships;
|
|
|
|
|
future stock repurchases and dividends;
|
|
|
|
|
capital expenditures;
|
|
|
|
|
changes in sales volumes in the new and used vehicle and parts and service markets;
|
|
|
|
|
business trends in the retail automotive industry, including the level of manufacturer
incentives, new and used vehicle retail sales volume, customer demand, interest rates and
changes in industrywide inventory levels; and
|
|
|
|
|
availability of financing for inventory and working capital.
|
Any such forward-looking statements are not assurances of future performance and involve risks
and uncertainties. Actual results may differ materially from anticipated results in the
forward-looking statements for a number of reasons, including:
|
|
|
the future economic environment, including consumer confidence, interest rates, the
price of gasoline, the level of manufacturer incentives and the availability of consumer
credit may affect the demand for new and used vehicles, replacement parts, maintenance and
repair services and finance and insurance products;
|
|
|
|
|
adverse international developments such as war, terrorism, political conflicts or other
hostilities may adversely affect the demand for our products and services;
|
|
|
|
|
the future regulatory environment, unexpected litigation or adverse legislation,
including changes in state franchise laws, may impose additional costs on us or otherwise
adversely affect us;
|
|
|
|
|
our principal automobile manufacturers, especially Toyota/Lexus, Ford, DaimlerChrysler,
Nissan/Infiniti, Honda/Acura, General Motors & BMW, because of financial distress or other
reasons, may not continue to produce or make available to us vehicles that are in high
demand by our customers or provide financing, advertising or other assistance to us;
|
|
|
|
|
requirements imposed on us by our manufacturers may limit our acquisitions and require
us to increase the level of capital expenditures related to our dealership facilities;
|
|
|
|
|
our dealership operations may not perform at expected levels or achieve expected improvements;
|
|
|
|
|
our failure to achieve expected future cost savings or future costs being higher than we expect;
|
|
|
|
|
available capital resources and various debt agreements may limit our ability to
complete acquisitions, complete construction of new or expanded facilities, repurchase
shares or pay dividends;
|
|
|
|
|
our cost of financing could increase significantly;
|
|
|
|
|
foreign exchange controls and currency fluctuations;
|
|
|
|
|
new accounting standards could materially impact our reported earnings per share;
|
|
|
|
|
our inability to complete additional acquisitions or changes in the pace of acquisitions;
|
|
|
|
|
the inability to adjust our cost structure to offset any reduction in the demand for our products and services;
|
|
|
|
|
our loss of key personnel;
|
|
|
|
|
competition in our industry may impact our operations or our ability to complete acquisitions;
|
|
|
|
|
the failure to achieve expected sales volumes from our new franchises;
|
|
|
|
|
insurance costs could increase significantly and all of our losses may not be covered by insurance; and
|
|
|
|
|
our inability to obtain inventory of new and used vehicles and parts, including imported
inventory, at the cost, or in the volume, we expect.
|
These factors, as well as additional factors that could affect our operating results and
performance are described in our Form 10-K under the headings Business Risk Factors and
Managements Discussion and Analysis of Financial Condition and Results of Operations. We urge
you to carefully consider those factors.
All forward-looking statements attributable to us are qualified in their entirety by this
cautionary statement. We undertake no responsibility to update our forward-looking statements.
28
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Information about our market sensitive financial instruments updates was provided as of
December 31, 2006, in our Annual Report on Form 10-K. There have been no significant changes in
our market risk from those disclosed at that time during the three months ended March 31, 2007.
Item 4. Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our
management, including our principal executive officer and principal financial officer, of the
effectiveness of our disclosure controls and procedures as of the end of the period covered by this
quarterly report. Based upon that evaluation, our principal executive officer and principal
financial officer concluded that our disclosure controls and procedures were effective as of March
31, 2007, to ensure that information was accumulated, and communicated to our management, including
our principal executive officer and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure.
During the three months ended March 31, 2007, we have made no change in our internal controls
over financial reporting that has materially affected, or is reasonably likely to materially
affect, our internal controls over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings
From time to time, our dealerships are named in claims involving the manufacture of
automobiles, contractual disputes and other matters arising in the ordinary course of business.
Due to the nature of the automotive retailing business, the Company may be involved in legal
proceedings or suffer losses that could have a material adverse effect on the Companys business.
In the normal course of business, the Company is required to respond to customer, employee and
other third-party complaints. In addition, the manufacturers of the vehicles we sell and service
have audit rights allowing them to review the validity of amounts claimed for incentive, rebate or
warranty-related items and charge back the Company for amounts determined to be invalid rewards
under the manufacturers programs, subject to the Companys right to appeal any such decision. In
August 2006, a manufacturer notified the Company of the results of a recently completed incentive
and rebate-related audit at one of the Companys dealerships. The manufacturer initially assessed
a $3.1 million claim against the dealership for chargeback of alleged non-qualifying incentive and
rebate awards. The dealership contested the alleged audit chargeback, and provided formal written
notice to the manufacturer of the facts and circumstances surrounding such incentive and rebate
programs. On April 5, 2007, the manufacturer rejected the dealerships response to the allegations
and notified the dealership in writing of its findings and the dealerships contractual rights to
appeal the results of such audit. While the dealership intends to assert its meritorious defenses
to substantially reduce or eliminate such chargeback, it has entered into settlement negotiations
with the manufacturer and, as of March 31, 2007, has accrued an estimate of the probable costs for
the resolution of this claim.
Other than the foregoing, there are currently no legal or other proceedings pending against or
involving the Company that, in managements opinion, based on current known facts and
circumstances, are expected to have a material adverse effect on the Companys financial position
or results of operations.
Item 1A. Risk Factors
There have been no material changes in our risk factors as previously disclosed in Part 1 of
the Companys Annual Report on Form 10-K for the year ended December 31, 2006.
29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
From time to time, our Board of Directors authorizes us to repurchase shares of the Companys
common stock, subject to the restrictions of various debt agreements and our judgment. In March
2006, the Companys Board of Directors authorized the repurchase of a number of shares equivalent
to the shares issued pursuant to the Companys employee stock purchase plan on a quarterly basis.
There is no minimum or maximum quantity or valuation of shares associated with this authorization.
The following table summarizes the share repurchases associated with the Companys employee stock
purchase plan, which occurred during the most recently completed quarter.
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Average Price
|
Period
|
|
Repurchased
|
|
Paid per Share
|
January 1 - 31, 2007
|
|
|
|
|
|
$
|
|
|
February 1 - 28, 2007
|
|
|
|
|
|
$
|
|
|
March 1 - 31, 2007
|
|
|
75,000
|
|
|
$
|
40.04
|
|
|
|
|
|
|
|
|
|
|
Total shares repurchased
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits
|
3.1
|
|
Restated Certificate of Incorporation (Incorporated by
reference to Exhibit 3.1 of Group 1 Automotive, Inc.s
Registration Statement on Form S-1 Registration
No. 333-29893).
|
|
|
3.2
|
|
Certificate of Designation of Series A Junior Participating
Preferred Stock.
|
|
|
3.3
|
|
Bylaws of Group 1 Automotive, Inc. (Incorporated by
reference to Exhibit 3.3 of Group 1 Automotive, Inc.s
Registration Statement on Form S-1 Registration
No. 333-29893).
|
|
|
10.1
|
|
Seventh Amended and Restated Revolving Credit Agreement,
effective as of March 19, 2007 (Incorporated by reference to
Exhibit 10.1 of the Companys Current Report on
Form 8-K (File No. 001-13461) dated March 21, 2007).
|
|
|
10.2
|
|
Credit Agreement dated as of March 29, 2007 among
Group 1 Realty, Inc., Group 1 Automotive, Bank of America,
N.A., and the other Lenders Party Hereto (Confidential Treatment has
been requested for portions of this document).
|
|
|
10.3
|
|
Amendment No. 1 to Credit Agreement and Joinder
Agreement dated as of April 27, 2007 by and among Group 1
Realty, Inc., Group 1 Automotive, Inc., Bank of America, N.A.
and the Joining Lenders.
|
|
|
11.1
|
|
Statement re: computation of earnings per share is included under Note 3 to the financial statements.
|
|
|
31.1
|
|
Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2
|
|
Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1
|
|
Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.2
|
|
Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
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30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Group 1 Automotive, Inc.
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May 7, 2007
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By:
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/s/ John C. Rickel
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Date
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John C. Rickel
Chief Financial Officer
(Principal Financial and Accounting Officer)
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31
EXHIBIT INDEX
Item 6. Exhibits
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3.1
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Restated Certificate of Incorporation (Incorporated by
reference to Exhibit 3.1 of Group 1 Automotive, Inc.s
Registration Statement on Form S-1 Registration
No. 333-29893).
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3.2
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Certificate of Designation of Series A Junior Participating
Preferred Stock.
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3.3
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Bylaws of Group 1 Automotive, Inc. (Incorporated by
reference to Exhibit 3.3 of Group 1 Automotive, Inc.s
Registration Statement on Form S-1 Registration
No. 333-29893).
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10.1
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Seventh Amended and Restated Revolving Credit Agreement,
effective as of March 19, 2007 (Incorporated by reference to
Exhibit 10.1 of the Companys Current Report on
Form 8-K (File No. 001-13461) dated March 21, 2007).
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10.2
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Credit Agreement dated as of March 29, 2007 among
Group 1 Realty, Inc., Group 1 Automotive, Bank of America,
N.A., and the other Lenders Party Hereto (Confidential Treatment has
been requested for portions of this document).
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10.3
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Amendment No. 1 to Credit Agreement and Joinder
Agreement dated as of April 27, 2007 by and among Group 1
Realty, Inc., Group 1 Automotive, Inc., Bank of America, N.A.
and the Joining Lenders.
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11.1
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Statement re: computation of earnings per share is included under Note 3 to the financial statements.
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31.1
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Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2
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Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
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32.1
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Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
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32.2
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Certification of Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
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32
EXHIBIT 10.2
EXHIBIT A
SPECIFIC TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT FOR THOSE
TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO ASTERISKS
(**).
Published CUSIP Number:
CREDIT AGREEMENT
Dated as of March 29, 2007
among
GROUP 1 REALTY, INC.,
as the Borrower,
GROUP 1 AUTOMOTIVE, INC.,
BANK OF AMERICA, N.A.,
as Administrative Agent,
and
The Other Lenders Party Hereto
BANC OF AMERICA SECURITIES LLC,
as
Sole Lead Arranger and Sole Book Manager
TABLE OF CONTENTS
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Section
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Page
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ARTICLE I.
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DEFINITIONS AND ACCOUNTING TERMS
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1.01
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Defined Terms
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1
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1.02
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Other Interpretive Provisions
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21
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1.03
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Accounting Terms
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22
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1.04
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Rounding
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22
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1.05
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Times of Day
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23
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ARTICLE II.
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THE COMMITMENTS AND BORROWINGS
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2.01
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Loans
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23
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2.02
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Borrowings, Conversions and Continuations of Loans
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23
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2.03
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Prepayments
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24
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2.04
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Termination or Reduction of Commitments
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25
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2.05
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Repayment of Loans
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25
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2.06
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Interest
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25
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2.07
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Fees
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26
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2.08
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Computation of Interest and Fees
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26
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2.09
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Evidence of Debt
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27
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2.10
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Payments Generally; Administrative Agents Clawback
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27
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2.11
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Sharing of Payments by Lenders
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29
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2.12
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Extension of Maturity Date
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29
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2.13
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Increase in Commitments
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31
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ARTICLE III.
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TAXES, YIELD PROTECTION AND ILLEGALITY
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3.01
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Taxes
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32
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3.02
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Illegality
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35
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3.03
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Inability to Determine Rates
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35
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3.04
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Increased Costs; Reserves on Eurodollar Rate Loans
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36
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3.05
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Mitigation Obligations; Replacement of Lenders
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37
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3.06
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Survival
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38
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ARTICLE IV.
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CONDITIONS PRECEDENT TO BORROWINGS
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4.01
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Conditions of Closing Date
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38
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4.02
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Conditions to all Borrowings
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39
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i
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Section
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Page
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ARTICLE V.
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REPRESENTATIONS AND WARRANTIES
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5.01
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Organization; Corporate Powers
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43
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5.02
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Authorization
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43
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5.03
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Governmental Approval
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43
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5.04
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Enforceability
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44
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5.05
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Financial Statements
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44
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5.06
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No Material Adverse Change
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44
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5.07
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Title to Properties
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44
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5.08
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Litigation; Compliance with Laws; Etc
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44
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5.09
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Agreements; No Default
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45
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5.10
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Federal Reserve Regulations
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45
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5.11
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Taxes
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45
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5.12
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Pension and Welfare Plans
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45
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5.13
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No Material Misstatements
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46
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5.14
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Investment Company Act
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46
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5.15
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Maintenance of Insurance
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46
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5.16
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Existing Liens
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46
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5.17
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Environmental Matters
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47
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5.18
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Subsidiaries
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47
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5.19
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Engaged in Motor Vehicle Sales
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48
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5.20
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Dealer Franchise Agreements and Manufacturer Framework Agreements
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48
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5.21
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Use of Proceeds
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48
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5.22
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Collateral
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48
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5.23
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Location of Borrower
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49
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5.24
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Leases
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49
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5.25
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Security Interest
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49
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5.26
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Solvency
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49
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ARTICLE VI.
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AFFIRMATIVE COVENANTS
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6.01
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Existence
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49
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6.02
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Repair
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50
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6.03
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Insurance
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50
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6.04
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Obligations and Taxes
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53
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6.05
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Financial Statements; Reports
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53
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6.06
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Litigation and Other Notices
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54
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6.07
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|
ERISA
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55
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6.08
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Books, Records and Access
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55
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6.09
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Use of Proceeds
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56
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6.10
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Nature of Business
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56
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6.11
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Compliance
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56
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6.12
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Intentionally omitted
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|
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56
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6.13
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Intentionally omitted
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56
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ii
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Section
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Page
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6.14
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Intentionally omitted.
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56
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6.15
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Further Assurances
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56
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6.16
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Permitted Acquisitions; Subsidiary Guarantors
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56
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6.17
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Ford Borrower and GM Borrower Dividends
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57
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6.18
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Leases
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57
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6.19
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Unimproved Real Property
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58
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ARTICLE VII.
|
NEGATIVE COVENANTS
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7.01
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Indebtedness
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|
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58
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7.02
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Liens
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|
|
60
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7.03
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|
Consolidations and Mergers
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|
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60
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7.04
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Disposition of Assets
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|
61
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7.05
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Investments
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62
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7.06
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Transactions with Affiliates
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|
|
63
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7.07
|
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Other Agreements
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|
|
63
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|
7.08
|
|
Fiscal Year; Accounting
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|
|
63
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|
7.09
|
|
Credit Standards
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|
|
63
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|
7.10
|
|
Pension Plans
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|
|
63
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|
7.11
|
|
Restricted Payments
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|
|
64
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|
7.12
|
|
Fixed Charge Coverage Ratio
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|
|
64
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|
7.13
|
|
Senior Secured Leverage Ratio
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|
|
64
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|
7.14
|
|
Disposition of Financed Properties
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|
|
64
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|
7.15
|
|
Lessor Subsidiaries
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|
|
65
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|
7.16
|
|
Collateral
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|
|
65
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|
7.17
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|
Leases
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65
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|
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|
ARTICLE VIII.
|
EVENTS OF DEFAULT AND REMEDIES
|
8.01
|
|
Events of Default
|
|
|
65
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|
8.02
|
|
Remedies Upon Event of Default
|
|
|
67
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|
8.03
|
|
Application of Funds
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|
|
68
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|
|
|
|
|
|
|
|
ARTICLE IX.
|
ADMINISTRATIVE AGENT
|
9.01
|
|
Appointment and Authority
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|
|
69
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|
9.02
|
|
Rights as a Lender
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|
|
69
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|
9.03
|
|
Exculpatory Provisions
|
|
|
69
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|
9.04
|
|
Reliance by Administrative Agent
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|
|
70
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|
9.05
|
|
Delegation of Duties
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|
|
70
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|
9.06
|
|
Resignation of Administrative Agent
|
|
|
70
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|
9.07
|
|
Non-Reliance on Administrative Agent and Other Lenders
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|
|
71
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|
9.08
|
|
No Other Duties, Etc
|
|
|
71
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|
iii
|
|
|
|
|
|
|
|
|
Section
|
|
Page
|
|
9.09
|
|
Administrative Agent May File Proofs of Claim
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|
|
71
|
|
9.10
|
|
Collateral and Guaranty Matters
|
|
|
72
|
|
|
|
|
|
|
|
|
ARTICLE X.
|
MISCELLANEOUS
|
10.01
|
|
Amendments, Etc
|
|
|
73
|
|
10.02
|
|
Notices; Effectiveness; Electronic Communication
|
|
|
74
|
|
10.03
|
|
No Waiver; Cumulative Remedies
|
|
|
76
|
|
10.04
|
|
Expenses; Indemnity; Damage Waiver
|
|
|
76
|
|
10.05
|
|
Payments Set Aside
|
|
|
78
|
|
10.06
|
|
Successors and Assigns
|
|
|
78
|
|
10.07
|
|
Treatment of Certain Information; Confidentiality
|
|
|
81
|
|
10.08
|
|
Right of Setoff
|
|
|
82
|
|
10.09
|
|
Interest Rate Limitation
|
|
|
83
|
|
10.10
|
|
Counterparts; Effectiveness
|
|
|
83
|
|
10.11
|
|
Survival of Representations and Warranties
|
|
|
84
|
|
10.12
|
|
Severability
|
|
|
84
|
|
10.13
|
|
Replacement of Lenders
|
|
|
84
|
|
10.14
|
|
Governing Law; Jurisdiction; Etc
|
|
|
85
|
|
10.15
|
|
Waiver of Jury Trial
|
|
|
86
|
|
10.16
|
|
California Judicial Reference
|
|
|
86
|
|
10.17
|
|
No Advisory or Fiduciary Responsibility
|
|
|
86
|
|
10.18
|
|
USA PATRIOT Act Notice
|
|
|
87
|
|
10.19
|
|
Time of the Essence
|
|
|
87
|
|
10.20
|
|
ENTIRE AGREEMENT
|
|
|
87
|
|
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|
|
|
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|
|
SIGNATURES
|
|
|
S-1
|
|
iv
SCHEDULES
|
|
|
1.01A
|
|
Leases
|
2.01
|
|
Commitments and Applicable Percentages
|
4.01(a)(iv)
|
|
Entities in Good Standing
|
5.08(a)
|
|
Litigation
|
5.12
|
|
ERISA Disclosures
|
5.16(g)
|
|
Existing Liens
|
5.18
|
|
Subsidiaries
|
5.20
|
|
Dealer Franchise Agreements and Manufacturer Framework Agreements
|
5.23
|
|
Borrower Information
|
7.01(b)
|
|
Existing Indebtedness
|
10.02
|
|
Administrative Agents Office; Certain Addresses for Notices
|
EXHIBITS
|
|
|
|
|
Form of
|
A
|
|
Loan Notice
|
B
|
|
Note
|
C
|
|
Compliance Certificate
|
D
|
|
Assignment and Assumption
|
E
|
|
Company Guaranty Agreement
|
F
|
|
Subsidiary Guaranty Agreement
|
G
|
|
Lessee Estoppel, Subordination and Attornment Agreement
|
H
|
|
Letter of Undertaking
|
I
|
|
Opinion Matters
|
v
CREDIT AGREEMENT
This CREDIT AGREEMENT (
Agreement
) is entered into as of March 29, 2007, among GROUP
1 REALTY, INC., a Delaware corporation, as borrower (the
Borrower
), GROUP 1 AUTOMOTIVE,
INC., a Delaware corporation (the
Company
), each lender from time to time party hereto
(collectively, the
Lenders
and individually, a
Lender
), and BANK OF AMERICA,
N.A., as Administrative Agent.
The Borrower has requested that the Lenders provide a credit facility, and the Lenders are
willing to do so on the terms and conditions set forth herein.
In consideration of the mutual covenants and agreements herein contained, the parties hereto
covenant and agree as follows:
ARTICLE I.
DEFINITIONS AND ACCOUNTING TERMS
1.01 Defined Terms
. As used in this Agreement, the following terms shall have the meanings
set forth below:
Account
means any account as such term is defined in the UCC, now or hereafter
owned by the Company, the Borrower or any of their respective Restricted Subsidiaries, including
rights to payment for goods and services sold or leased, whether now in existence or arising in the
future.
Acquisition
means the acquisition by the Company or any of its Wholly Owned
Subsidiaries of (i) not less than one hundred percent (100%) of the capital stock or other evidence
of equity ownership (but excluding director qualifying shares) of an Auto Dealer, or (ii) all or
substantially all of the assets of an Auto Dealer.
Adjusted Senior Indebtedness
means, for any date of determination, for the Company
and its Restricted Subsidiaries on a consolidated basis, Adjusted Total Indebtedness minus
Subordinated Indebtedness.
Adjusted Total Indebtedness
means, as of any date of determination, for the Company
and its Restricted Subsidiaries, on a consolidated basis, the difference between (a) Indebtedness
and (b) the sum of (i) floor plan loans in respect of inventory of the Company and its Restricted
Subsidiaries, (ii) Excluded Capital Leases, and (iii) Retail Loan Guarantees not in excess of ten
percent (10%) of Stockholders Equity.
Administrative Agent
means Bank of America in its capacity as administrative agent
under any of the Loan Documents, or any successor administrative agent appointed in accordance with
Section 9.06
.
Administrative Agents Office
means the Administrative Agents address and, as
appropriate, account as set forth on
Schedule 10.02
, or such other address or account as
the Administrative Agent may from time to time notify to the Borrower and the Lenders.
1
Administrative Questionnaire
means an Administrative Questionnaire in a form
supplied by the Administrative Agent.
Affiliate
of any Person means any other Person who directly or indirectly
beneficially owns or controls five percent (5%) or more of the total voting power of shares of
capital stock or other equity interests of such Person having the right to vote for directors under
ordinary circumstances, any Person controlling, controlled by or under common control with any such
Person (within the meaning of Rule 405 under the Securities Act of 1933), and any director or
executive officer of such Person.
Aggregate Commitments
means the Commitments of all the Lenders.
Agreement
means this Credit Agreement.
Applicable Percentage
means with respect to any Lender at any time, the percentage
(carried out to the ninth decimal place) of the Aggregate Commitments represented by such Lenders
Commitment at such time. If the Commitment of each Lender to make Loans has been terminated
pursuant to
Section 8.02
or if the Aggregate Commitments have expired, then the Applicable
Percentage of each Lender shall be determined based on the Applicable Percentage of such Lender
most recently in effect, giving effect to any subsequent assignments. The initial Applicable
Percentage of each Lender is set forth opposite the name of such Lender on
Schedule 2.01
or
in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as
applicable.
Applicable Rate
means a per annum rate equal to:
|
(a)
|
|
with respect to Base Rate Loans, 0.00%;
|
|
|
(b)
|
|
with respect to Eurodollar Rate Loans, 1.05%; and
|
|
|
(c)
|
|
with respect to the Commitment Fee, 0.10%.
|
Approved Fund
means any Fund that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a
Lender.
Arranger
means Banc of America Securities LLC, in its capacity as sole lead arranger
and sole book manager.
Assignment and Assumption
means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required by
Section
10.06(b)
), and accepted by the Administrative Agent, in substantially the form of
Exhibit
D
or any other form approved by the Administrative Agent.
Audited Financial Statements
means the audited consolidated balance sheet of the
Company and its Subsidiaries for the fiscal year ended December 31, 2006, and the related
consolidated statements of income or operations, shareholders equity and cash flows for such
fiscal year of the Company and its Subsidiaries, including the notes thereto.
2
Auto Dealer
has the meaning specified in the Closing Date Revolving Credit
Agreement.
Availability Period
means the period from and including the Closing Date to the
earliest of (a) the Maturity Date, (b) the date of termination of the Aggregate Commitments
pursuant to
Section 2.04
, and (c) the date of termination of the Commitment of each Lender
to make Loans pursuant to
Section 8.02
.
Bank of America
means Bank of America, N.A. and its successors.
Baron Development
means Baron Development Company L.L.C., a Kansas limited liability
company.
Base Rate
means for any day a fluctuating rate per annum equal to the higher of (a)
the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as
publicly announced from time to time by Bank of America as its prime rate. The prime rate is a
rate set by Bank of America based upon various factors including Bank of Americas costs and
desired return, general economic conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such announced rate. Any change in
such rate announced by Bank of America shall take effect at the opening of business on the day
specified in the public announcement of such change.
Base Rate Loan
means a Loan that bears interest based on the Base Rate.
Board
means the Board of Governors of the Federal Reserve System of the United
States.
Borrower
has the meaning specified in the introductory paragraph hereto.
Borrower Materials
has the meaning specified in
Section 6.05
.
Borrowing
means a borrowing consisting of simultaneous Loans of the same Type made
by each of the Lenders pursuant to
Section 2.01
.
Buildings
, as to any Financed Property, means the Buildings as defined in the
Mortgage related to such Financed Property.
Business Day
means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact closed in, the state
where the Administrative Agents Office is located and Houston, Texas, and, if such day relates to
any Eurodollar Rate Loan, means any such day on which dealings in Dollar deposits are conducted by
and between banks in the London interbank eurodollar market.
Capital Lease
means any lease required to be accounted for as a capital lease under
GAAP.
Change in Law
means the occurrence, after the Closing Date, of any of the following:
(a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any
law,
3
rule, regulation or treaty or in the administration, interpretation or application thereof by
any Governmental Authority or (c) the making or issuance of any request, guideline or directive
(whether or not having the force of law) by any Governmental Authority.
Change of Control
will be deemed to have occurred if either (a) the shares of the
Company cease to be publicly traded or (b) at any time after the Closing Date, individuals who were
either directors of the Company on the Closing Date or directors approved (by recommendation,
nomination, election or otherwise) by a majority of the directors cease to constitute a majority of
the members of the board of directors of the Company.
Closing Date
means the first date all the conditions precedent in
Section
4.01
are satisfied or waived in accordance with
Section 10.01
.
Closing Date Revolving Credit Agreement
means the Revolving Credit Agreement as in
effect on the Closing Date and (notwithstanding Section 1.02(a)(i) hereof) without giving effect to
any amendment, supplement or modification after the date hereof.
Code
means the Internal Revenue Code of 1986.
Collateral
means, collectively, the fee interests in real property and related real
property interests, including real property leases, rental and lease payments and other rights in
respect of such leases, fixtures, leasehold improvements, condemnation awards or insurance proceeds
relating to the foregoing and related items owned by the Borrower or a Subsidiary Lessor, in which
a Lien is granted or purported to be granted pursuant to the Security Instruments.
Collateral Substitution
means the removal of a Financed Property from the Property
Pool at the time of a Permitted Financed Property Disposition with respect to such Financed
Property (and the release of any Liens granted to the Administrative Agent in connection therewith)
substantially simultaneously with, and in any event on the same day as, the admission of a
different Financed Property into the Property Pool, provided that, (i) there shall exist no Default
or Event of Default at the time of any such Collateral Substitution, (ii) any such Collateral
Substitution shall be subject to terms and conditions reasonably satisfactory to the Administrative
Agent (including without limitation, those requirements set forth in
Section 4.02
) and be
subject to a Mortgage and Real Estate Support Documents, and (iii) the Borrower shall have paid all
fees set forth in the Fee Letter related to any such Collateral Substitution.
Commitment
means, as to each Lender, its obligation to make Loans to the Borrower
pursuant to
Section 2.01
, in an aggregate principal amount at any one time outstanding not
to exceed the amount set forth opposite such Lenders name on
Schedule 2.01
or in any
Assignment and Assumption pursuant to which such Lender is a party, as applicable, as such amount
may be adjusted from time to time in accordance with this Agreement.
Commitment Fee
has the meaning specified in
Section 2.07(a)
.
Company
has the meaning specified in the introduction to this Agreement.
4
Company Guaranty Agreement
means the Guaranty Agreement between the Company and the
Administrative Agent, substantially in the form of
Exhibit E
.
Compliance Certificate
means a certificate substantially in the form of
Exhibit
C
.
Consolidated EBITDA
means, for any period for which the amount thereof is to be
determined, Consolidated Net Income for such period, plus, to the extent deducted in the
determination of Consolidated Net Income and without duplication with items included in the
adjustments to Net Income under GAAP in the determination of Consolidated Net Income, (a)
provisions for income taxes, (b) Interest Expense, (c) depreciation and amortization expense, and
(d) other non-cash income or charges.
Consolidated Net Income
means the Net Income (or net losses) of the Company and its
Restricted Subsidiaries on a consolidated basis.
Consolidated Pro Forma EBITDA
means the Pro Forma EBITDA of the Company and its
Restricted Subsidiaries, determined on a consolidated basis.
Dealer/Manufacturer Agreement
has the meaning specified in
Section 5.20
.
Dealership
means any physical site or group of related physical sites at which any
Restricted Subsidiary of the Company operates Motor Vehicle dealerships. Such sites may include
showrooms, storage lots and repair and/or service facilities.
Debtor Relief Laws
means the Bankruptcy Code of the United States, and all other
liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium,
rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the
United States or other applicable jurisdictions from time to time in effect and affecting the
rights of creditors generally.
Default
means any event or condition that constitutes an Event of Default or that,
with the giving of any notice, the passage of time, or both, would be an Event of Default.
Default Rate
means when used with respect to Obligations, an interest rate equal to
(i) the Base Rate
plus
(ii) the Applicable Rate, if any, applicable to Base Rate Loans
plus
(iii) 2% per annum;
provided
,
however
, that with respect to a
Eurodollar Rate Loan, the Default Rate shall be an interest rate equal to the interest rate
(including any Applicable Rate) otherwise applicable to such Loan plus 2% per annum.
Defaulting Lender
means any Lender that (a) has failed to fund any portion of the
Loans required to be funded by it hereunder within one Business Day of the date required to be
funded by it hereunder unless such failure has been cured, (b) has otherwise failed to pay over to
the Administrative Agent or any other Lender any other amount required to be paid by it hereunder
within one Business Day of the date when due, unless the subject of a good faith dispute or unless
such failure has been cured, or (c) has been deemed insolvent or become the subject of a
receivorship, insolvency reorganization, bankruptcy or other similar insolvency proceeding.
5
Disposition
means the sale, lease, conveyance or other disposition of property.
Disposition Closing Costs
means, as to any Financed Property, customary and
reasonable costs paid to third parties which are not Affiliates of the Borrower or any Lessor
Subsidiary in connection with the sale of such Financed Property.
Dollar
and
$
mean lawful money of the United States.
Earnings Available for Fixed Charges
means, for any period of determination, an
amount equal to (a) Consolidated EBITDA plus (b) lease expenses minus (c) cash income taxes in each
case for the Company and its Restricted Subsidiaries, determined on a consolidated basis as
reported in the annual audited and the quarterly unaudited financial statements of the Company
provided in accordance with
Section 6.05(a) and 6.05(b)
.
EBITDA
means, for any Person, for any period, Net Income for such period, plus, to
the extent deducted in the determination of Net Income and without duplication with items included
in the adjustments under GAAP to Net Income in the determination of net income, (a) provisions for
income taxes, (b) Interest Expense, (c) depreciation and amortization expense and (d) other non
cash income or charges.
Eligible Assignee
means any Person that meets the requirements to be an assignee
under
Section 10.06(b)(iii)
,
(v)
and
(vi)
(subject to such consents, if
any, as may be required under
Section 10.06(b)(iii)
).
Environmental Laws
means any and all Federal, state, local, and foreign statutes,
laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or governmental restrictions relating to pollution and the
protection of the environment or the release of any materials into the environment, including those
related to Hazardous Materials, air emissions and discharges to waste or public systems.
Environmental Liability
means any liability, contingent or otherwise (including any
liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the
Company, the Borrower, any other Loan Party or any of their respective Subsidiaries directly or
indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation,
use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c)
exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous
Materials into the environment or (e) any contract, agreement or other consensual arrangement
between any Loan Party and any Person other than the Administrative Agent, any Lender and/or any of
their Related Parties pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
ERISA
means the Employee Retirement Income Security Act of 1974.
ERISA Affiliate
means any corporation, trade or business that is, along with the
Company or the Borrower, a member of a controlled group of corporations or a controlled group of
trades or businesses, as described in Sections 414(b) and 414(c), respectively, of the Code or
Section 4001(a)(14) of ERISA.
6
Eurodollar Rate
means, for any Interest Period with respect to a Eurodollar Rate
Loan, the rate per annum equal to the British Bankers Association LIBOR Rate (
BBA LIBOR
),
as published by Reuters (or other commercially available source providing quotations of BBA LIBOR
as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for
delivery on the first day of such Interest Period) with a term equivalent to such Interest Period.
If such rate is not available at such time for any reason, then the Eurodollar Rate for such
Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate
at which deposits in Dollars for delivery on the first day of such Interest Period in same day
funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by
Bank of America and with a term equivalent to such Interest Period would be offered by Bank of
Americas London Branch to major banks in the London interbank eurodollar market at their request
at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such
Interest Period. A Loan bearing interest at the Eurodollar Rate may be (a) borrowed on a day other
than the first day of the applicable Interest Period and (b) repaid or converted to a different
Type of Loan on a day other than the last day of an Interest Period without giving rise to any
additional payment for break funding costs.
Eurodollar Rate Loan
means a Loan that bears interest at a rate based on the
Eurodollar Rate.
Event of Default
has the meaning specified in
Section 8.01
.
Excluded Capital Lease
means any lease originally recorded as an operating lease and
subsequently reclassified as a Capital Lease.
Excluded Taxes
means, with respect to the Administrative Agent, any Lender or any
other recipient of any payment to be made by or on account of any obligation of the Company or the
Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however
denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction
(or any political subdivision thereof) under the laws of which such recipient is organized or in
which its principal office is located or, in the case of any Lender, in which its applicable
Lending Office is located, (b) any branch profits taxes imposed by the United States or any similar
tax imposed by any other jurisdiction in which the Company or the Borrower is located and (c) in
the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under
Section 10.13
), any withholding tax that is imposed on amounts payable to such Foreign
Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office)
or is attributable to such Foreign Lenders failure or inability (other than as a result of a
Change in Law) to comply with
Section 3.01(e)
, except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office
(or assignment), to receive additional amounts from the Company or the Borrower with respect to
such withholding tax pursuant to
Section 3.01(a)
.
Facility Termination Date
means the date as of which all of the following shall have
occurred: (a) the Borrower shall have permanently terminated the credit facilities under the Loan
Documents by final payment in full of all Outstanding Amounts, together with all accrued and
7
unpaid interest and fees thereon, (b) all Commitments shall have terminated or expired; (c)
the obligations and liabilities of the Borrower and each other Loan Party under all Related Swap
Contracts shall have been fully, finally and irrevocably paid and satisfied in full and the Related
Swap Contracts shall have expired or been terminated, or other arrangements satisfactory to the
applicable Related Swap Contract Providers shall have been made with respect thereto; and (d) the
Borrower and each other Loan Party shall have fully, finally and irrevocably paid and satisfied in
full all of their respective obligations and liabilities arising under the Loan Documents,
including with respect to the Borrower and the Obligations (except for future obligations
consisting of continuing indemnities and other contingent Obligations of the Borrower or any Loan
Party that may be owing to any of its Related Parties or any Lender pursuant to the Loan Documents
and expressly survive termination of the Credit Agreement or any other Loan Document).
Federal Funds Rate
means, for any day, the rate per annum equal to the weighted
average of the rates on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of
New York on the Business Day next succeeding such day;
provided
that (a) if such day is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such
rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day
shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%)
charged to Bank of America on such day on such transactions as determined by the Administrative
Agent.
Fee Letter
means the letter agreement, dated January 22, 2007, among the Company,
the Borrower and Bank of America, as amended, supplemented or otherwise modified from time to time.
Financed Property
means a real property parcel (and improvements related thereto)
which (a) is owned in fee by the Borrower or a Lessor Subsidiary and located at or near a
Dealership or otherwise used or to be used by a Dealership in its business, (b) is located in any
state of the United States of America or the District of Columbia and (c) has been identified as a
Financed Property with respect to any Loans on the applicable Loan Notice.
FIRREA Appraisal
means an appraisal of a Financed Property that is commissioned by
the Administrative Agent and satisfies the requirement of the Federal Institutions Reform, Recovery
and Enforcement Act or is otherwise acceptable to the Administrative Agent in its sole
discretion.
FIRREA Appraisal Value
means, with respect to a Financed Property, the value set
forth for such Financed Property in the FIRREA Appraisal.
Fixed Charge Coverage Ratio
means the ratio of (a) Earnings Available for Fixed
Charges to (b) Fixed Charges.
Fixed Charges
means, for any period of determination, without duplication, the sum
of (a) Interest Expense, (b) lease expense, (c) scheduled principal payments, (d) cash dividends
and
8
(e) Maintenance Capital Expenditures, in each case, for the Company and its Restricted
Subsidiaries, determined on a consolidated basis.
Floor Plan Indebtedness
means all secured Indebtedness of the Revolving Facility
Borrowers incurred to finance Motor Vehicles.
Floor Plan Interest Expense
means that component of the Companys aggregate Interest
Expense, determined on a consolidated basis, attributable to Floor Plan Indebtedness.
FMV
has the meaning specified in the definition of Permitted Financed Property
Disposition.
Ford Borrower
has the meaning specified in the Closing Date Revolving Credit
Agreement.
Foreign Lender
means with respect to the Company or the Borrower, any Lender that is
organized under the laws of a jurisdiction other than that in which the Company or the Borrower is
resident for tax purposes. For purposes of this definition, the United States, each State thereof
and the District of Columbia shall be deemed to constitute a single jurisdiction.
Foreign Subsidiary
means any Subsidiary that is not organized under the laws of any
political subdivision of the United States.
Fund
means any Person (other than a natural person) that is (or will be) engaged in
making, purchasing, holding or otherwise investing in commercial loans and similar extensions of
credit in the ordinary course of its activities.
GAAP
means generally accepted accounting principles as in effect, as of the
applicable date of determination thereof, from time to time as set forth in the opinions,
statements and pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and the Financial Accounting Standards Board applied on a consistent
basis.
GM Borrowers
has the meaning specified in the Closing Date Revolving Credit
Agreement.
Governmental Authority
means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to
government (including any supra-national bodies such as the European Union or the European Central
Bank).
Guarantee
by any Person means all obligations (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or collection) of such Person
guaranteeing, or in effect guaranteeing, any Indebtedness, dividend or other obligation of any
other Person (the
Primary Obligor
) in any manner, whether directly or indirectly,
including all obligations incurred through an agreement, contingent or otherwise, by such Person:
9
(a) to purchase such Indebtedness or obligation or any property or assets constituting
security therefor,
(b) (i) to advance or supply funds for the purchase or payment of such Indebtedness or
obligation or (ii) to maintain working capital or other balance sheet condition or otherwise
to maintain funds for the purchase or payment of such Indebtedness or obligation,
(c) to lease property under a Capital Lease or any other lease, the lessee under which
is a Person other than the Company or a Wholly Owned Subsidiary or to purchase securities or
other property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the Primary Obligor to make payment of such
Indebtedness or perform such obligation, or
(d) otherwise to assure the owner of such Indebtedness or such obligation of the
Primary Obligor against loss in respect thereof.
Guarantors
means, collectively, the Company and each Subsidiary Guarantor.
Guaranty Joinder Agreement
means each Guaranty Joinder Agreement, substantially in
the form attached to the Subsidiary Guaranty Agreement, executed and delivered by a Restricted
Subsidiary or any other Person to the Administrative Agent, for the benefit of the Secured Parties,
pursuant to
Section 6.16(b)
.
Hazardous Materials
means all explosive or radioactive substances or wastes and all
hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to
any Environmental Law.
Highest Lawful Rate
means, as to any Lender, the maximum non-usurious rate of
interest, if any, that at any time or from time to time may be contracted for, taken, reserved,
charged or received on the aggregate principal amount of all Loans under the laws of the United
States of America and/or the laws of the State of Texas as may be applicable thereto and as applied
in accordance with
Section 10.09
and that are presently in effect or, to the extent allowed
under such applicable law, which may hereafter be in effect and which allow a higher maximum
non-usurious interest rate than applicable law now allows.
Improved Real Property
shall mean (a) those properties which contain permanent
building structures with electrical, water and sewage hook-ups and which are usable (without
material modification) for Dealerships and related facilities, and (b) so long as a property
containing the building structure referenced in clause (a) above is financed hereunder, those
parking facilities and other property areas sharing a common boundary line and otherwise contiguous
with such property containing such building structure referenced in clause (a) above.
Indebtedness
of any Person means, without duplication:
10
(a) any obligation of such Person for borrowed money, including any obligation of such
Person evidenced by bonds, debentures, notes, letter of credit reimbursement agreements or
other similar debt instruments,
(b) all obligations of such Person under conditional sale or other title retention
agreements relating to property purchased by such Person, regardless of whether any personal
liability exists in respect thereof,
(c) any obligation of such Person for the deferred purchase price of any property or
services, regardless of whether any personal liability exists in respect thereof, except
accounts payable from time to time incurred in the ordinary course of such Persons business
and which are not in excess of ninety (90) days past invoice or billing date,
(d) obligations in respect of Capital Leases of such Person,
(e) all Guarantees by such Person; provided, however, that a Guarantee will not be
considered Indebtedness if the underlying obligation secured by such Guarantee would not
constitute Indebtedness under this Agreement,
(f) any Indebtedness of another Person secured by a Lien on any asset of such first
Person, whether or not such Indebtedness is assumed by such first Person,
(g) any Indebtedness consisting of preferred stock of a Person having a mandatory
redemption date prior to the Maturity Date, and
(h) amounts owed by such Person under any Related Swap Contract, provided that (except
for such amounts owed that are Indebtedness pursuant to clauses (a) through (g) above) such
amounts owed will not be considered Indebtedness for purposes of determining the financial
covenants set forth in
Sections 7.12
and
7.13
.
Indemnified Taxes
means Taxes other than Excluded Taxes.
Indemnitees
has the meaning specified in
Section 10.04(b)
.
Information
has the meaning specified in
Section 10.07
.
Interest Expense
means, for any Person, determined on a consolidated basis, the sum
of all interest on Indebtedness paid or payable (including the portion of rents payable under
Capital Leases allocable to interest, but excluding interest allowances from Manufacturers) plus
all original issue discount and other interest expense associated with Indebtedness amortized or
required to be amortized in accordance with GAAP.
Interest Payment Date
means the first Business Day of each calendar month.
Interest Period
means a period of approximately one month commencing on the first
Business Day of each month and ending on the first Business Day of the following month.
11
Investment
means, as to any Person, any investment so classified under GAAP.
Laws
means, collectively, all international, foreign, Federal, state and local
statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or
judicial precedents or authorities, including the interpretation or administration thereof by any
Governmental Authority charged with the enforcement, interpretation or administration thereof, and
all applicable administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authority, in each case whether or not having the
force of law.
Lease
means each operating lease or Capital Lease of all or any portion of a
Financed Property, including but not limited to those leases set forth on
Schedule 1.01A
.
Lender
has the meaning specified in the introductory paragraph hereto.
Lending Office
means, as to any Lender, the office or offices of such Lender
described as such in such Lenders Administrative Questionnaire, or such other office or offices as
a Lender may from time to time notify the Borrower and the Administrative Agent.
Lessee Subsidiary
means, with respect to a Financed Property, the Restricted
Subsidiary party as a lessee to the Lease associated with such Financed Property.
Lessor Subsidiary
means any Subsidiary Guarantor which is a Restricted Subsidiary
and a Wholly Owned Subsidiary and owns a Financed Property, including without limitation, Baron
Development.
Lien
means any mortgage, pledge, hypothecation, judgment lien or similar legal
process, conditional sale, title retention or other security interest, or any lease in the nature
thereof.
Loan
has the meaning specified in
Section 2.01
.
Loan Documents
means this Agreement, each Note, the Fee Letter, the Company Guaranty
Agreement, the Subsidiary Guaranty Agreement, each Guaranty Joinder Agreement and each Security
Instrument.
Loan Notice
means a notice of (a) a Borrowing or (b) a conversion of Loans from one
Type to the other, pursuant to
Section 2.02(a)
, which, if in writing, shall be
substantially in the form of
Exhibit A
.
Loan Parties
means, collectively, the Company, the Borrower, each Guarantor and each
Person (other than the Administrative Agent or any Secured Party) executing a Security Instrument.
Maintenance Capital Expenditures
means an amount equal to $(**) per year per
Dealership.
12
Manufacturer
means the manufacturer, or a manufacturer-appointed, wholesale
distributor of a Motor Vehicle.
Margin Stock
has the meaning specified in Regulation U.
Material Adverse Effect
means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, liabilities (actual or contingent),
condition (financial or otherwise) or prospects of the Company and its Restricted Subsidiaries
taken as a whole; (b) a material impairment of the ability of the Company, the Borrower, or the
Subsidiary Guarantors taken as a whole, to perform its or their obligations under any Loan Document
to which any of them is a party; or (c) a material adverse effect upon the legality, validity,
binding effect or enforceability against any Loan Party of any Loan Document to which it is a
party.
Maturity Date
means the later of (a) March 29, 2012 and (b) if maturity is extended
pursuant to
Section 2.12
, such extended maturity date as determined pursuant to such
Section;
provided
,
however
, that, in each case, if such date is not a Business Day,
the Maturity Date shall be the preceding Business Day.
Maximum Loan to Value Ratio Amount
means, subject to the last sentence of this
definition, as of the date a Loan is made with respect to a Financed Property (i) in the case of a
Financed Property constituting Improved Real Property, (**) ((**)%) of the FIRREA Appraisal Value
of such Financed Property, and (ii) in the case of Financed Property constituting Unimproved Real
Property, (**) ((**)%) of the FIRREA Appraisal Value of such Financed Property. For purposes of
calculating the Maximum Loan to Value Ratio Amount, no value otherwise included in any FIRREA
Appraisal shall be attributed to any non-fixture equipment or other personal property or any future
construction or improvements, provided that (x) the value of Post-Construction and appreciation may
be included when determining the total Maximum Loan to Value Ratio Amount applicable to any
Financed Property if the FIRREA Appraisal Value of the respective Financed Property (as reflected
in a FIRREA Appraisal prepared after Post-Construction) is more than $(**) higher than the initial
FIRREA Appraisal Value of the respective Financed Property and (y) in the event Post-Construction
is so included pursuant to clause (x) above, the (**) ((**)%) Maximum Loan to Value Ratio Amount
shall then apply to any such Financed Property which has become Improved Real Property as a result
of such Post-Construction.
Moodys
means Moodys Investors Service, Inc. and any successor thereto.
Mortgage Permitted Liens
means, with respect to any Financed Property, the
Permitted Liens as defined in the Mortgage for such Financed Property.
Mortgages
means, collectively, the mortgages, deeds of trust or security deeds now
or hereafter encumbering any of the Borrowers or any Lessor Subsidiarys (or after giving effect
to a merger or sale permitted by
Section 7.03 (a)
or
(b)
, the Companys) interests
in the Financed Properties and other property as described therein in favor of, or for the benefit
of, the Administrative Agent.
Mortgaged Property
, as to any Financed Property, means the Mortgaged Property as
defined in the Mortgage related to such Financed Property.
13
Motor Vehicle
means any motorized vehicle approved for highway use by any State of
the United States.
Multiemployer Plan
means a multiemployer plan as defined in Section 4001(a)(3) of
ERISA.
Net Income
means for any Person, for any period of determination, the net income (or
net losses) of such Person and its Subsidiaries on a consolidated basis as determined in accordance
with GAAP after deducting, to the extent included in computing said net income and without
duplication, (i) the income (or deficit) of any Person (other than a Wholly Owned Subsidiary of
such Person), in which such Person or any of its Subsidiaries has any ownership interest, except to
the extent that any such income has been actually received by such Person or such Subsidiary in the
form of cash dividends or similar cash distribution, (ii) any income (or deficit) of any other
Person accrued prior to the date it becomes a Subsidiary of such Person or merges into or
consolidates with such entity, (iii) the gain or loss (net of any tax effect) resulting from the
sale of any capital assets, (iv) any gains or losses or other income which are non-recurring or
extraordinary, and (v) any portion of the net income of any Subsidiaries which is not available for
distribution.
New Motor Vehicle
has the meaning specified in the Closing Date Revolving Credit
Agreement.
Non-Extending Lender
has the meaning specified in
Section 2.12(b)
.
Note
means a promissory note made by the Borrower in favor of a Lender evidencing
Loans made by such Lender, substantially in the form of
Exhibit B
.
Obligations
means all advances to, and debts, liabilities, obligations, covenants
and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan
or any Related Swap Contract, whether direct or indirect (including those acquired by assumption),
absolute or contingent, due or to become due, now existing or hereafter arising and including
interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate
thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such
proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.
Organization Documents
means, (a) with respect to any corporation, the certificate
or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents
with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the
certificate or articles of formation or organization and operating agreement; and (c) with respect
to any partnership, joint venture, trust or other form of business entity, the partnership, joint
venture or other applicable agreement of formation or organization and any agreement, instrument,
filing or notice with respect thereto filed in connection with its formation or organization with
the applicable Governmental Authority in the jurisdiction of its formation or organization and, if
applicable, any certificate or articles of formation or organization of such entity.
14
Other Taxes
means all present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies arising from any payment made hereunder or
under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with
respect to, this Agreement or any other Loan Document.
Outstanding Amount
means, on any date, the aggregate outstanding principal amount of
Loans after giving effect to any borrowings and prepayments or repayments of Loans occurring on
such date.
Participant
has the meaning specified in
Section 10.06(d)
.
PBGC
means the Pension Benefit Guaranty Corporation.
Permitted Acquisition
has the meaning specified in
Section 6.16(a)
.
Permitted Financed Property Disposition
means a sale of a Financed Property in its
entirety by the Borrower or the applicable Lessor Subsidiary, provided that,
(a) if such Financed Property is sold at a time when no Default resulting from non-payment of
any amount due under the Loan Documents (a
Payment Default
) exists and no Event of
Default exists, (i) such sale shall be on fair and reasonable terms substantially as favorable to
the Borrower or such Lessor Subsidiary as would be obtainable by the Borrower or such Lessor
Subsidiary at the time in an arms-length commercial transaction, and (ii) substantially
simultaneously with such sale, the Borrower shall repay in full the entire outstanding principal
balance of the Loan associated with such Financed Property and all accrued and unpaid interest and
any fees associated therewith; and
(b) subject to
Section 7.14
, if such Financed Property is sold at a time when a
Payment Default or an Event of Default exists (provided that no such sale shall be permitted
hereunder during an Event of Default described in
Section 8.01(f)
, at any time during any
proceeding described in
Section 8.01(g)(i), (ii) or (iii)
, or following a foreclosure by
the Administrative Agent or deed in lieu of foreclosure of such Financed Property), (i) such sale
shall (x) be an arms-length commercial transaction to an unrelated third party on fair and
reasonable terms (
FMV
) and (y) occur concurrently with the sale of the Auto Dealer
associated with such Financed Property to such third party (or to the tenant of such third party
with respect to such Financed Property, which tenant shall not be an Affiliate of the Loan
Parties), and (ii) substantially simultaneously with such sale, the Borrower shall pay to the
Administrative Agent, on behalf of the Lenders, the greater of (x) the entire outstanding principal
balance of any Loan with respect to such Financed Property and all accrued and unpaid interest and
any fees associated therewith and (y) the cash proceeds resulting from such sale which are
attributable to such Financed Property after deducting Disposition Closing Costs.
Permitted Liens
means those Liens permitted under
Section 7.02
hereof.
Permitted Real Estate Debt
means Indebtedness of a Subsidiary (i) existing as of the
Closing Date or incurred in connection with a Permitted Acquisition, provided that such
Indebtedness is secured solely by real estate, improvements, fixtures, leases, rents and related
real property rights of such Subsidiary used in the day-to-day operations of its business, and (ii)
15
Indebtedness and related interest rate swap agreements of a Subsidiary, provided that such
Indebtedness is secured solely by real estate, improvements, fixtures, leases, rents and related
real property rights of such Subsidiary and further provided that the amount of such indebtedness
does not exceed (**)% of the fair market value of the real estate collateral securing such
Indebtedness.
Person
means any natural person, corporation, limited liability company, trust,
joint venture, association, company, partnership, Governmental Authority or other entity.
Plan
means a pension plan, as such term is defined in Section 3(2)(A) of ERISA
(other than a Multiemployer Plan), established or maintained by the Company, the Borrower or any of
their respective Subsidiaries or any ERISA Affiliate or as to which the Company, the Borrower or
any of their respective Subsidiaries or any ERISA Affiliate contributes or is a member or otherwise
may have any liability.
Platform
has the meaning specified in
Section 6.05
.
Post-Construction
means, with respect to a Financed Property, construction or
improvements completed after such Financed Property entered the Property Pool.
Principal Amortization Payment Date
means, in respect of each Loan, the first
Business Day of each April, July, October and January which is more than 90 days after the date on
which such Loan was made, provided that if such day is not a Business Day, the respective Principal
Amortization Payment Date shall be the next succeeding Business Day.
Pro Forma EBITDA
means, for any Person, for any period of determination, EBITDA of
such Person for the immediately preceding four fiscal quarters plus (or minus), without
duplication, the EBITDA for such four quarter period of any Person acquired during such period as
if such acquisition had occurred on the first day of such four quarter period, provided, if a
calculation of Pro Forma EBITDA results in an increase in the Companys Consolidated EBITDA by 10%
or more from the most recent date of determination, no such increase above 10% shall be considered
a part of any computation hereunder unless the applicable calculations of Pro Forma EBITDA are
based on supporting calculations and such other information as the Administrative Agent may
reasonably request to determine the accuracy of such calculation.
Pro Forma Floor Plan Interest Expense
means, for any Person, as of any period of
determination, Floor Plan Interest Expense of such Person for the immediately preceding four fiscal
quarters plus, without duplication, the Floor Plan Interest Expense for such period of any Person
acquired during such period, as if acquired on the first day of such period.
Property Pool
means, collectively, as of any date, the Financed Properties
constituting Collateral as of such date.
Public Lender
has the meaning specified in
Section 6.05
.
Qualified Sale/Leaseback Transaction
means a sale by the Company or any Restricted
Subsidiary of real property and related fixtures and accessories used in the ordinary course of
business, which property is, in a concurrent transaction, leased by such Person from the
16
purchaser thereof under a lease agreement, the terms of which, as of the date of such
transaction, based upon the immediately preceding four fiscal quarters of the Company, would not
cause the Company or the Borrower to be in Default under any of the provisions of this Agreement.
Real Estate Support Documents
means, for each Financed Property, (a) mortgagee title
insurance policies (in amounts and with endorsements reasonably acceptable to the Administrative
Agent and insuring over, and without exception for, any then existing or future mechanics,
materialmen or similar Liens), and such surveys (certified to the Administrative Agent and
applicable title insurance company), zoning letters, appraisals (including FIRREA Appraisals),
environmental reports (including Phase I and if requested, Phase II environmental assessments) and
other mortgage-related documents, as the Administrative Agent may reasonably request, (b) a lessee
estoppel, subordination and attornment agreement in substantially the form attached hereto as
Exhibit G
, or such other form as the Administrative Agent may accept in its sole
discretion, (c) third party consents, flood hazard certifications, and evidence of flood insurance
(if required), as the Administrative Agent may reasonably request; and (d) such lessees affidavits
and opinions of local counsel with respect to the Mortgages as the Administrative Agent may
reasonably request.
Register
has the meaning specified in
Section 10.06(c)
.
Regulation T
means Regulation T of the Board, as the same is from time to time in
effect, and all official rulings and interpretations thereunder or thereof.
Regulation U
means Regulation U of the Board, as the same is from time to time in
effect, and all official rulings and interpretations thereunder or thereof.
Regulation X
means Regulation X of the Board, as the same is from time to time in
effect, and all official rulings and interpretations thereunder or thereof.
Related Parties
means, with respect to any Person, such Persons Affiliates and the
partners, directors, officers, employees, agents and advisors of such Person and of such Persons
Affiliates.
Related Swap Contract
means each interest rate Swap Contract the notional amounts
under which relate solely to the Obligations arising with respect to any Loan, which Swap Contract
is entered into or maintained by or for the benefit of any Loan Party with a Related Swap Contract
Provider and is not prohibited by the express terms of the Loan Documents.
Related Swap Contract Provider
means any Person that, at the time it enters into a
Related Swap Contract, is (a) a Lender or (b) an Affiliate of a Lender that has executed and
delivered a letter of undertaking in the form of
Exhibit H
hereto to the Administrative
Agent,
provided
that, at any time such Person ceases to be a Lender or an Affiliate of a
Lender hereunder, such Person shall no longer be considered a Related Swap Contract Provider.
Reportable Event
means a Reportable Event as referenced in Section 4043(b)(3) of
ERISA, other than an event for which the 30 day notice requirement under ERISA has been waived in
regulations issued by the PBGC.
17
Required Lenders
means, as of any date of determination, Lenders having more than
50% of the Aggregate Commitments or, if the commitment of each Lender to make Loans has been
terminated pursuant to
Section 8.02
, Lenders holding in the aggregate more than 50% of the
Total Outstandings;
provided
that the Commitment of, and the portion of the Total
Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making
a determination of Required Lenders.
Requirement of Law
means, as to any Person, any law (statutory or common), treaty,
rule or regulation or determination of any arbitrator or of a Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to which such Person or any of
its property is subject.
Responsible Officer
means the chief executive officer, president, chief financial
officer, treasurer, assistant treasurer, vice president or controller of a Loan Party and, solely
for purposes of notices given pursuant to
Article II
, any other officer of the applicable
Loan Party so designated by any of the foregoing officers in a notice to the Administrative Agent.
Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be
conclusively presumed to have been authorized by all necessary corporate, partnership and/or other
action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed
to have acted on behalf of such Loan Party.
Restricted Payment
means, as to any Person, any dividend or other distribution of
assets, properties, cash, rights, obligations or securities made by such Person or any Subsidiary
of such Person on account of shares of such Persons capital stock, or any partnership interest or
similar ownership interest in such Person, or any purchase, retirement, redemption or other
acquisition made by such Person or any Subsidiary of such Person of any of such Persons capital
stock, partnership interest or similar ownership interest or warrants, rights or options evidencing
a right to acquire such shares or interests.
Restricted Subsidiary
means any direct or indirect Subsidiary of the Company that is
organized under the laws of the United States or any state, territory or other political
subdivision thereof and is directly owned by the Company or another Restricted Subsidiary.
Retail Loan Guarantees
means any Guarantee by the Company or any of its Restricted
Subsidiaries in favor of any Person of retail installment contracts or other retail payment
obligations in respect of Motor Vehicles sold to a customer.
Revolving Credit Agreement
means that certain Seventh Amended and Restated Credit
Agreement effective as of March 19, 2007 among the Company, the Subsidiaries of the Company listed
therein, the lenders party thereto from time to time, JPMorgan Chase Bank, N.A., as administrative
agent, Comerica Bank, as floor plan agent, and Bank of America as syndication agent, as such
agreement may, from time to time, be amended, supplemented or otherwise modified.
Revolving Facility Borrowers
means the Borrowers as defined in the Revolving
Credit Agreement.
18
S&P
means Standard & Poors Ratings Services, a division of The McGraw-Hill
Companies, Inc. and any successor thereto.
Secured Parties
means, collectively, with respect to each of the Security
Instruments, the Administrative Agent, the Lenders, and each Person that is a Related Swap Contract
Provider.
Security Instruments
means, collectively or individually as the context may
indicate, the Mortgages and all other agreements, instruments and other documents, whether now
existing or hereafter in effect, pursuant to which the Company, the Borrower, any other Loan Party
or any other Person shall grant or convey to the Administrative Agent for the benefit of the
Secured Parties a Lien on, or any other Person shall acknowledge any such Lien on, property as
security for all or any portion of the Obligations, any other obligation under any Loan Document
and any obligation or liability arising under any Related Swap Contract.
Senior Secured Leverage Ratio
means as of any date of determination, for the
Company, the ratio of (a) Adjusted Senior Indebtedness that is secured by any assets of the Company
or any of its direct or indirect Restricted Subsidiaries or is Guaranteed by the Company or any
direct or indirect Restricted Subsidiary as of such date to (b) (y) Consolidated Pro Forma EBITDA
as of such date, minus (z) Pro Forma Floor Plan Interest Expense of the Company and its Restricted
Subsidiaries, determined on a consolidated basis and after having given effect to any proposed
Acquisition, as of such date.
Solvent
means, when used with respect to any Person, that at the time of
determination, (a) the fair value of its assets (both at fair valuation and at present fair
saleable value on an orderly basis) is in excess of the total amount of its liabilities, including
contingent obligations; and (b) it is then able and expects to be able to pay its debts as they
mature; and (c) it has capital sufficient to carry on its business as conducted and as proposed to
be conducted.
Stockholders Equity
means, as of any date of determination, the consolidated
stockholders equity of the Company and its Restricted Subsidiaries determined in accordance with
GAAP, after eliminating all intercompany items and after deducting from stockholders equity such
portion thereof as is properly attributable to minority interests in Subsidiaries as reflected in
the financial statements most recently delivered.
Subordinated Indebtedness
means (i) Indebtedness of any Restricted Subsidiary having
maturities and terms, and which is subordinated to payment of the Obligations, and approved (with
respect to the maturity and subordination terms only, but approval of the Administrative Agent
shall not be required for the incurrence of such Indebtedness generally) in writing by the
Administrative Agent and which, in the aggregate, is less than ten percent (10%) of Stockholders
Equity and (ii) unsecured subordinated Indebtedness of the Company (which may be Guaranteed by the
Restricted Subsidiaries of the Company on an unsecured basis) provided that such Indebtedness (x)
is subordinated to payment of the Obligations as approved in writing by the Administrative Agent,
(which approval of subordination terms (including any description of senior debt) shall be
required for any such Indebtedness, including, without limitation, any Indebtedness issued pursuant
to supplemental indentures entered into under the Subordinated Indenture dated August 13, 2003
among the Company, the subsidiary guarantors named therein
19
and Wells Fargo Bank, N.A. as Trustee) (y) does not have a maturity before August 15, 2013,
and (z) has terms that are no more restrictive than the terms of the Loan Documents (taken as a
whole in each case) and further provided that, after giving effect to the issuance of such
Indebtedness, no Default or Event of Default shall have occurred or be continuing or would occur as
a result thereof.
Subsidiary
means any Person of which or in which any other Person (the Parent) or
any other Subsidiary of the Parent owns directly or indirectly fifty percent (50%) or more of: (a)
the combined voting power of all classes of stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such Person, if it is a corporation;
(b) the capital interest or profits interest of such Person, if it is a partnership, joint venture,
limited liability company or similar entity; or (c) the beneficial interest of such Person, if it
is a trust, association or other unincorporated organization. Unless otherwise specified, all
references herein to a Subsidiary or to Subsidiaries shall refer to a Subsidiary or
Subsidiaries of the Company.
Subsidiary Guarantors
means, collectively, all Restricted Subsidiaries executing a
Subsidiary Guaranty Agreement on the Closing Date and all other Restricted Subsidiaries that enter
into a Subsidiary Guaranty Agreement or Guaranty Joinder Agreement.
Subsidiary Guaranty Agreement
means the Subsidiary Guaranty Agreement made by the
Subsidiary Guarantors in favor of the Administrative Agent and the Lenders, substantially in the
form of
Exhibit F
.
Swap Contract
means (a) any and all rate swap transactions, basis swaps, credit
derivative transactions, forward rate transactions, commodity swaps, commodity options, forward
commodity contracts, equity or equity index swaps or options, bond or bond price or bond index
swaps or options or forward bond or forward bond price or forward bond index transactions, interest
rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap transactions, currency options,
spot contracts, or any other similar transactions or any combination of any of the foregoing
(including any options to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions of any kind, and
the related confirmations, which are subject to the terms and conditions of, or governed by, any
form of master agreement published by the International Swaps and Derivatives Association, Inc.,
any International Foreign Exchange Master Agreement, or any other master agreement or any schedules
to any such agreement.
Taxes
means all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental Authority, including
any interest, additions to tax or penalties applicable thereto.
Total Outstandings
means the aggregate Outstanding Amount of all Loans.
Type
means, with respect to a Loan, its character as a Base Rate Loan or a
Eurodollar Rate Loan.
20
UCC
means the Uniform Commercial Code as adopted and in effect in the State of Texas
from time to time.
Unimproved Real Property
means any Financed Property other than Improved Real
Property. Without limiting the generality of the foregoing, (i) Unimproved Real Property shall
include (A) those properties which do not contain building structures with electrical, water and/or
sewage hook-ups or which are not usable (without material modification) for Dealerships and/or
related facilities, and (B) (except as otherwise set forth in clause (b) of the definition of
Improved Real Property) those properties which consist of parking facilities (even if such
parking facilities contain curbs, asphalt and lighting improvements) and (ii) for purposes of
determining the calculation set forth in
Section 4.02(d)(v)
and the requirements of Loans
associated with Post-Construction, until the applicable construction is completed on a Financed
Property so that such property meets the definition of Improved Real Property, such Financed
Property shall be considered Unimproved Real Property.
United States
and
U.S.
mean the United States of America.
Unrestricted Subsidiary
means any direct or indirect Subsidiary of the Company that
is not a Restricted Subsidiary and any Subsidiary of an Unrestricted Subsidiary.
Wholly Owned Subsidiary
means any Person of which the Company or its other Wholly
Owned Subsidiaries own directly or indirectly one hundred percent (100%) of:
(a) the issued and outstanding shares of stock (except shares required as directors
qualifying shares and shares constituting less than two percent (2%) of the issued and
outstanding shares);
(b) the capital interest or profits interest of such Person, if it is a partnership,
joint venture, limited liability company or similar entity; or
(c) the beneficial interest of such Person, if it is a trust, association or other
unincorporated organization.
(d) any Foreign Subsidiary that is required by the applicable laws and regulations of
such foreign jurisdiction to be partially owned by the government of such foreign
jurisdiction or individual or corporate citizens of such foreign jurisdiction, provided that
the Company, directly or indirectly, owns the remaining equity interests in such Subsidiary
and, by contract or otherwise, controls the management and business of such Subsidiary and
derives economic benefits of ownership of such Subsidiary to substantially the same extent
as if such Subsidiary were a Wholly Owned Subsidiary.
1.02 Other Interpretive Provisions
. With reference to this Agreement and each other Loan
Document, unless otherwise specified herein or in such other Loan Document:
(a) The definitions of terms herein shall apply equally to the singular and plural forms of
the terms defined. Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words
include
,
includes
and
including
shall be deemed to be followed by the phrase without limitation. The word
will
21
shall be construed to have the same meaning and effect as the word
shall
. Unless
the context requires otherwise, (i) any definition of or reference to any agreement, instrument or
other document (including any Organization Document) shall be construed as referring to such
agreement, instrument or other document as from time to time amended, supplemented or otherwise
modified (subject to any restrictions on such amendments, supplements or modifications set forth
herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed
to include such Persons successors and assigns, (iii) the words
herein
,
hereof
and
hereunder
, and words of similar import when used in any Loan Document, shall be
construed to refer to such Loan Document in its entirety and not to any particular provision
thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall
be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document
in which such references appear, and (v) any reference to any Law shall include all statutory and
regulatory provisions consolidating, amending, replacing or interpreting such law and any reference
to any Law or regulation shall, unless otherwise specified, refer to such Law or regulation as
amended, modified or supplemented from time to time.
(b) In the computation of periods of time from a specified date to a later specified date, the
word
from
means
from and including
; the words
to
and
until
each mean
to but excluding
; and the word
through
means
to and
including
.
(c) Section headings herein and in the other Loan Documents are included for convenience of
reference only and shall not affect the interpretation of this Agreement or any other Loan
Document.
1.03 Accounting Terms
. (a)
Generally
. All accounting terms not specifically or
completely defined herein shall be construed in conformity with, and all financial data (including
financial ratios and other financial calculations) required to be submitted pursuant to this
Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect
from time to time, applied in a manner consistent with that used in preparing the Audited Financial
Statements,
except
as otherwise specifically prescribed herein.
(b)
Changes in GAAP
. If at any time any change in GAAP would affect the computation
of any financial ratio or requirement set forth in any Loan Document, and either the Company, the
Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders, the
Company and the Borrower shall negotiate in good faith to amend such ratio or requirement to
preserve the original intent thereof in light of such change in GAAP (subject to the approval of
the Required Lenders);
provided
that
, until so amended, (i) such ratio or
requirement shall continue to be computed in accordance with GAAP prior to such change therein and
(ii) the Company and the Borrower shall provide to the Administrative Agent and the Lenders
financial statements and other documents required under this Agreement or as reasonably requested
hereunder setting forth a reconciliation between calculations of such ratio or requirement made
before and after giving effect to such change in GAAP.
1.04 Rounding
. Any financial ratios required to be maintained by the Company or the Borrower
pursuant to this Agreement shall be calculated by dividing the appropriate component by the other
component, carrying the result to one place more than the number of places by
22
which such ratio is expressed herein and rounding the result up or down to the nearest number
(with a rounding-up if there is no nearest number).
1.05 Times of Day
. Unless otherwise specified, all references herein to times of day shall be
references to Central time (daylight or standard, as applicable).
ARTICLE II.
THE COMMITMENTS AND BORROWINGS
2.01 Loans
. Subject to the terms and conditions set forth herein, each Lender severally
agrees to make term loans (each such loan, a
Loan
) to the Borrower in an aggregate amount
not to exceed at any time outstanding the amount of such Lenders Commitment;
provided
however
, that, (a) each Loan shall be made with respect to a single Financed Property
identified in the Loan Notice for such Loan, (b) each Loan shall be made only on a Business Day
during the Availability Period (i) at the time the respective Financed Property initially enters
the Property Pool (including pursuant to a Collateral Substitution) or (ii) with respect to a
Financed Property already in the Property Pool in accordance with the terms hereof and subject to
the terms set forth in the definition of Maximum Loan to Value Ratio Amount, on or after the date
of completion of Post-Construction with respect to such property, (c) the aggregate amount of Loans
advanced with respect to any Financed Property shall be no greater than the Maximum Loan to Value
Ratio Amount for such property, (d) after giving effect to any Borrowing, (i) the Total
Outstandings shall not exceed the Aggregate Commitments, and (ii) the aggregate Outstanding Amount
of the Loans of any Lender, shall not exceed such Lenders Commitment and (e) if the respective
Financed Property is owned by a Subsidiary Lessor, the Loan associated with such Financed Property
shall be made to the Borrower and simultaneously contributed to such Lessor Subsidiary, and the
Borrower and the Lessor Subsidiary shall direct the Administrative Agent to disburse such Loan in
accordance with
Section 2.02(b)
. Within the limits of each Lenders Commitment, and
subject to the other terms and conditions hereof, the Borrower may borrow under this
Section
2.01
, prepay under
Section 2.03
, and reborrow under this
Section 2.01
. Loans
may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein.
2.02 Borrowings, Conversions and Continuations of Loans
.
(a) Each Borrowing and each conversion of Loans from one Type to the other, shall be made upon
the Borrowers irrevocable notice to the Administrative Agent, which may be given by telephone.
Each such notice must be received by the Administrative Agent not later than 10:00 a.m. (i) one
Business Day prior to the requested date of any Borrowing of Eurodollar Rate Loans, of any
conversion of Eurodollar Rate Loans to Base Rate Loans or of any conversion of Base Rate Loans to
Eurodollar Rate Loans, and (ii) one Business Day prior to the requested date of any Borrowing of
Base Rate Loans. Each telephonic notice by the Borrower pursuant to this
Section 2.02(a)
must be confirmed promptly by delivery to the Administrative Agent of a written Loan Notice,
appropriately completed and signed by a Responsible Officer of the Borrower. Each Borrowing of,
conversion to or continuation of Loans shall be in a principal amount of $500,000 or more. Each
Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a
Borrowing or a conversion of Loans from one Type to the
23
other, (ii) the requested date of the Borrowing or conversion, as the case may be (which shall
be a Business Day), (iii) the principal amount of Loans to be borrowed or converted, and (iv) the
Type of Loans to be borrowed or to which existing Loans are to be converted. If the Borrower fails
to provide a timely Loan Notice requesting a conversion of Eurodollar Rate Loans to Base Rate
Loans, such Loans shall, subject to Article III, continue as Eurodollar Rate Loans. If the
Borrower fails to specify a Type of Loan in a Loan Notice, then the applicable Loans shall, subject
to Article III, be made as, or converted to, Eurodollar Rate Loans.
(b) Following receipt of a Loan Notice, the Administrative Agent shall promptly notify each
Lender of the amount of its Applicable Percentage of the applicable Loans. Each Lender shall make
the amount of its Loan available to the Administrative Agent in immediately available funds at the
Administrative Agents Office not later than 12:00 noon on the Business Day specified in the
applicable Loan Notice. Upon satisfaction of the applicable conditions set forth in
Section
4.02
(and, if such Borrowing is the initial Borrowing,
Section 4.01
), the
Administrative Agent shall make all funds so received available to the Borrower (or in the event
the Financed Property which is the subject of such Loan Notice is owned by a Lessor Subsidiary, to
such Lessor Subsidiary) in like funds as received by the Administrative Agent either by (i)
crediting the account of the Borrower (or the Lessor Subsidiary, if applicable) on the books of
Bank of America with the amount of such funds or (ii) crediting the account of the Borrower (or the
Lessor Subsidiary, if applicable) on the books of another bank with the amount of such funds, in
each case in accordance with instructions provided to (and reasonably acceptable to) the
Administrative Agent by the Borrower. The Borrower acknowledges and agrees that any funds so
delivered to a Lessor Subsidiary shall constitute a Loan to the Borrower and simultaneous
contribution of the proceeds of such Loan by the Borrower to the capital of such Lessor Subsidiary.
(c) The Administrative Agent shall promptly notify the Borrower and the Lenders of the
interest rate applicable to any Eurodollar Rate Loans upon determination of such interest rate. At
any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower
and the Lenders of any change in Bank of Americas prime rate used in determining the Base Rate
promptly following the public announcement of such change.
2.03 Prepayments
.
(a) The Borrower may, upon notice to the Administrative Agent, at any time or from time to
time voluntarily prepay Loans in whole or in part without premium or penalty;
provided
that
(i) such notice must be received by the Administrative Agent not later than 10:00 a.m. on the date
of prepayment of such Loans; (ii) any prepayment of Loans shall be in a principal amount of
$500,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entire
principal amount thereof then outstanding. Each such notice shall specify the date and amount of
such prepayment and the Type(s) of Loans to be prepaid. The Administrative Agent will promptly
notify each Lender of its receipt of each such notice, and of the amount of such Lenders
Applicable Percentage of such prepayment. If such notice is given by the Borrower, the Borrower
shall make such prepayment and the payment amount specified in such notice shall be due and payable
on the date specified therein. Each such prepayment shall be applied to the remaining installments
of principal of the Loans of the Lenders in accordance with their respective Applicable Percentages
in the inverse order of maturity.
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(b) If for any reason the Total Outstandings at any time exceed the Aggregate Commitments then
in effect, the Borrower shall immediately prepay Loans in an aggregate amount equal to such excess.
2.04 Termination or Reduction of Commitments
. The Borrower may, upon notice to the
Administrative Agent, terminate the Aggregate Commitments, or from time to time permanently reduce
the Aggregate Commitments;
provided
that (i) any such notice shall be received by the
Administrative Agent not later than 10:00 a.m. 10 days prior to the date of termination or
reduction, (ii) any such partial reduction shall be in an aggregate amount of $5,000,000 or any
whole multiple of $1,000,000 in excess thereof, and (iii) the Borrower shall not terminate or
reduce the Aggregate Commitments if, after giving effect thereto and to any concurrent prepayments
hereunder, the Total Outstandings would exceed the Aggregate Commitments. The Administrative Agent
will promptly notify the Lenders of any such notice of termination or reduction of the Aggregate
Commitments. Any reduction of the Aggregate Commitments shall be applied to the Commitment of each
Lender according to its Applicable Percentage. All fees accrued until the effective date of any
termination of the Aggregate Commitments shall be paid on the effective date of such termination.
2.05 Repayment of Loans
.
(a) The Borrower shall make quarterly amortization payments with respect to each Loan on each
Principal Amortization Payment Date (beginning on the first such date to occur after the making of
such Loan) in each case equal to 1.25% of the initial principal amount of such Loan.
(b) The Borrower shall repay to the Lenders on the date of any Permitted Financed Property
Disposition any amounts required to be paid as set forth in the definition of Permitted Financed
Property Disposition.
(c) The Borrower shall repay to any Non-Extending Lenders any amounts required to be paid to
such Lenders pursuant to
Section 2.12(e)
.
(d) The Borrower shall repay to the Lenders on the Maturity Date the aggregate principal
amount of Loans outstanding on such date.
2.06 Interest
.
(a) Subject to the provisions of subsection (b) below and
Section 10.09
below, (i)
each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof from the
applicable borrowing date at a rate per annum equal to the Eurodollar Rate
plus
the
Applicable Rate, but in no event to exceed the Highest Lawful Rate; and (ii) each Base Rate Loan
shall bear interest on the outstanding principal amount thereof from the applicable borrowing date
at a rate per annum equal to the Base Rate
plus
the Applicable Rate, but in no event to
exceed the Highest Lawful Rate.
(b) (i) If any amount payable by the Borrower under any Loan Document is not paid when due
(without regard to any applicable grace periods), whether at stated maturity, by
acceleration or otherwise, then until such amount is paid in full, such amount
25
(and the principal amount of all outstanding Obligations) shall thereafter bear interest at
a fluctuating interest rate per annum at all times equal to the Default Rate, but in no
event to exceed the Highest Lawful Rate, to the fullest extent permitted by applicable Laws.
(ii) Without limiting the generality of clause (i) above, upon the request of the
Required Lenders, while any Event of Default exists, the Borrower shall pay interest on the
principal amount of all outstanding Obligations hereunder at a fluctuating interest rate per
annum at all times equal to the Default Rate, but in no event to exceed the Highest Lawful
Rate, to the fullest extent permitted by applicable Laws.
(iii) Accrued and unpaid interest on past due amounts (including interest on past due
interest) shall be due and payable upon demand.
(c) Interest on each Loan shall be due and payable in arrears on each Interest Payment Date
applicable thereto and at such other times as may be specified herein. Interest hereunder shall be
due and payable in accordance with the terms hereof before and after judgment, and before and after
the commencement of any proceeding under any Debtor Relief Law.
2.07 Fees
.
(a)
Commitment Fee
. The Borrower shall pay to the Administrative Agent for the
account of each Lender in accordance with its Applicable Percentage a non-refundable commitment fee
in advance (i) on the Closing Date, in an amount equal to the Applicable Rate
times
the
Aggregate Commitments in effect on the Closing Date, (ii) on each anniversary date of the Closing
Date, in an amount equal to the Applicable Rate
times
the Aggregate Commitments in effect
on such date and (iii) on each effectiveness date of an increase in Commitments pursuant to
Section 2.13
or otherwise, in an amount equal to the Applicable Rate
times
the
amount of the increase in the Aggregate Commitments as of such date multiplied (in the case of this
clause (iii)) by a fraction equal to (A) the number of days from such effectiveness date to and
including the next date that is an anniversary of the Closing Date divided by (B) 365 (such fees
described herein collectively referred to as the
Commitment Fee
).
(b)
Other Fees
. (i) The Company and the Borrower, jointly and severally, shall pay
to the Administrative Agent for its own account fees in the amounts and at the times
specified in the Fee Letter. Such fees shall be fully earned when paid and shall not be
refundable for any reason whatsoever.
(ii) The Borrower shall pay to the Lenders such fees as shall have been separately
agreed upon in writing in the amounts and at the times so specified. Such fees shall be
fully earned when paid and shall not be refundable for any reason whatsoever.
2.08 Computation of Interest and Fees
. All computations of interest for Base Rate Loans when
the Base Rate is determined by Bank of Americas prime rate shall be made on the basis of a year
of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees
and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in
more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year);
provided that if such calculation results in a rate per annum in excess of
26
the Highest Lawful Rate, then such amount shall be calculated on the basis of a year of the
smallest number of days, not to exceed 365 or 366, as applicable, which does not exceed the Highest
Lawful Rate. Interest shall accrue on each Loan for the day on which the Loan is made, and shall
not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is
paid,
provided
that any Loan that is repaid on the same day on which it is made shall,
subject to
Section 2.10(a)
, bear interest for one day. Each determination by the
Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all
purposes, absent manifest error.
2.09 Evidence of Debt
. The Borrowings made by each Lender shall be evidenced by one or more
accounts or records maintained by such Lender and by the Administrative Agent in the ordinary
course of business. The accounts or records maintained by the Administrative Agent and each Lender
shall be conclusive absent manifest error of the amount of the Borrowings made by the Lenders to
the Borrower and the interest and payments thereon. Any failure to so record or any error in doing
so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay
any amount owing with respect to the Obligations. In the event of any conflict between the
accounts and records maintained by any Lender and the accounts and records of the Administrative
Agent in respect of such matters, the accounts and records of the Administrative Agent shall
control in the absence of manifest error. Upon the request of any Lender made through the
Administrative Agent, the Borrower shall execute and deliver to such Lender (through the
Administrative Agent) a Note, which shall evidence such Lenders Loans in addition to such accounts
or records. Each Lender may attach schedules to its Note and endorse thereon the date, Type (if
applicable), amount and maturity of its Loans and payments with respect thereto.
2.10 Payments Generally; Administrative Agents Clawback
.
(a)
General
. All payments to be made by the Borrower shall be made without condition
or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly
provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent,
for the account of the respective Lenders to which such payment is owed, at the Administrative
Agents Office in Dollars and in immediately available funds not later than 1:00 p.m. on the date
specified herein. The Administrative Agent will promptly distribute to each Lender its Applicable
Percentage (or other applicable share as provided herein) of such payment in like funds as received
by wire transfer to such Lenders Lending Office. All payments received by the Administrative
Agent after 1:00 p.m. shall be deemed received on the next succeeding Business Day and any
applicable interest or fee shall continue to accrue. If any payment to be made by the Borrower
shall come due on a day other than a Business Day, payment shall be made on the next following
Business Day, and such extension of time shall be reflected in computing interest or fees, as the
case may be.
(b) (i)
Funding by Lenders; Presumption by Administrative Agent
. Unless the
Administrative Agent shall have received notice from a Lender prior to 11:00 a.m. on the
date of any Borrowing that such Lender will not make available to the Administrative Agent
such Lenders share of such Borrowing, the Administrative Agent may assume that such Lender
has made such share available on such date in accordance with
Section 2.02
and may,
in reliance upon such assumption, make available to the Borrower a
27
corresponding amount. In such event, if a Lender has not in fact made its share of the
applicable Borrowing available to the Administrative Agent, then the applicable Lender and
the Borrower severally agree to pay to the Administrative Agent forthwith on demand such
corresponding amount in immediately available funds with interest thereon, for each day from
and including the date such amount is made available to the Borrower to but excluding the
date of payment to the Administrative Agent, at (A) in the case of a payment to be made by
such Lender, the greater of the Federal Funds Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank compensation,
plus any administrative processing or similar fees customarily charged by the Administrative
Agent in connection with the foregoing, and (B) in the case of a payment to be made by the
Borrower, the interest rate applicable to Base Rate Loans. If the Borrower and such Lender
shall pay such interest to the Administrative Agent for the same or an overlapping period,
the Administrative Agent shall promptly remit to the Borrower the amount of such interest
paid by the Borrower for such period. If such Lender pays its share of the applicable
Borrowing to the Administrative Agent, then the amount so paid shall constitute such
Lenders Loan included in such Borrowing. Any payment by the Borrower shall be without
prejudice to any claim the Borrower may have against a Lender that shall have failed to make
such payment to the Administrative Agent.
(ii)
Payments by Borrower; Presumptions by Administrative Agent
. Unless the
Administrative Agent shall have received notice from the Borrower prior to the date on which
any payment is due to the Administrative Agent for the account of the Lenders that the
Borrower will not make such payment, the Administrative Agent may assume that the Borrower
has made such payment on such date in accordance herewith and may, in reliance upon such
assumption, distribute to the Lenders the amount due. In such event, if the Borrower has
not in fact made such payment, then each of the Lenders severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such Lender, in
immediately available funds with interest thereon, for each day from and including the date
such amount is distributed to it to but excluding the date of payment to the Administrative
Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation.
A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount
owing under this subsection (b) shall be conclusive, absent manifest error.
(c)
Failure to Satisfy Conditions Precedent
. If any Lender makes available to the
Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing
provisions of this
Article II
, and such funds are not made available to the Borrower by the
Administrative Agent because the conditions to the applicable Borrowing set forth in
Article
IV
are not satisfied or waived in accordance with the terms hereof, the Administrative Agent
shall return such funds (in like funds as received from such Lender) to such Lender, without
interest.
(d)
Obligations of Lenders Several
. The obligations of the Lenders hereunder to make
Loans and to make payments pursuant to
Section 10.04(c)
are several and not joint. The
28
failure of any Lender to make any Loan or to make any payment under
Section 10.04(c)
on any date required hereunder shall not relieve any other Lender of its corresponding obligation
to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so
make its Loan or to make its payment under
Section 10.04(c)
.
(e)
Funding Source
. Nothing herein shall be deemed to obligate any Lender to obtain
the funds for any Loan in any particular place or manner or to constitute a representation by any
Lender that it has obtained or will obtain the funds for any Loan in any particular place or
manner.
2.11 Sharing of Payments by Lenders
. If any Lender shall, by exercising any right of setoff
or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of
the Loans made by it resulting in such Lenders receiving payment of a proportion of the aggregate
amount of such Loans and accrued interest thereon greater than its
pro
rata
share
thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the
Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the
Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the
benefit of all such payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective Loans and other amounts
owing them,
provided
that:
(i) if any such participations are purchased and all or any portion of the payment
giving rise thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest; and
(ii) the provisions of this Section shall not be construed to apply to (x) any payment
made by the Borrower pursuant to and in accordance with the express terms of this Agreement
or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Loans to any assignee or participant, other than to the Borrower
or any Subsidiary thereof (as to which the provisions of this Section shall apply).
Each of the Borrower and the Company consents to the foregoing and agrees, to the extent it
may effectively do so under applicable Laws, that any Lender acquiring a participation pursuant to
the foregoing arrangements may exercise against the Borrower or the Company, as applicable rights
of setoff and counterclaim with respect to such participation as fully as if such Lender were a
direct creditor of the Borrower or the Company, as applicable, in the amount of such participation.
2.12 Extension of Maturity Date
.
(a)
Requests for Extension
. The Borrower may, by notice to the Administrative Agent
(who shall promptly notify the Lenders) not earlier than 75 days and not later than 60 days prior
to the date one year prior to the Maturity Date then in effect hereunder (the
Existing
Maturity Date
), request that each Lender extend such Lenders Maturity Date for an additional
364 days from the Existing Maturity Date; provided that, in no event shall the Maturity Date be
extended beyond March 29, 2014.
29
(b)
Lender Elections to Extend
. Each Lender, acting in its sole and individual
discretion, shall, by notice to the Administrative Agent given not later than the date (the
Notice Date
) that is 30 days prior to the date one year prior to the Existing Maturity
Date, advise the Administrative Agent whether or not such Lender agrees to such extension. Each
Lender that advises the Administrative Agent on or before the Notice Date that such Lender does not
agree to extend its Maturity Date, and each Lender that does not advise the Administrative Agent on
or before the Notice Date that such Lender agrees to such extension, shall be a
Non-Extending
Lender
. The election of any Lender to agree to such extension shall not obligate any other
Lender to so agree.
(c)
Notification by Administrative Agent
. The Administrative Agent shall notify the
Borrower of each Lenders determination under this Section no later than the date 25 days prior to
the date one year prior to the Existing Maturity Date (or, if such date is not a Business Day, on
the next preceding Business Day).
(d)
Additional Commitment Lenders
. The Borrower shall have the right to replace each
Non-Extending Lender with, and add as Lenders under this Agreement in place thereof, one or more
Eligible Assignees (each, an
Additional Commitment Lender
) as provided in
Section
10.13
,
provided
that, each of such Additional Commitment Lenders shall enter into an
Assignment and Assumption pursuant to which such Additional Commitment Lender shall, effective as
of the date one year prior to the Existing Maturity Date, undertake a Commitment (and, if any such
Additional Commitment Lender is already a Lender, its Commitment shall be in addition to such
Lenders Commitment hereunder on such date).
(e)
Conditions to Effectiveness of Extensions
. As a condition precedent to such
extension, the Borrower shall deliver to the Administrative Agent a certificate of each Loan Party
dated as of the Existing Maturity Date (in sufficient copies for each Extending Lender and each
Additional Commitment Lender) signed by a Responsible Officer of such Loan Party (i) certifying and
attaching the resolutions adopted by such Loan Party approving or consenting to such extension and
(ii) in the case of the Borrower, certifying that, before and after giving effect to such extension
(A) the representations and warranties contained in
Article V
and the other Loan Documents
are true and correct on and as of the Existing Maturity Date, except to the extent that such
representations and warranties specifically refer to an earlier date, in which case they are true
and correct as of such earlier date, and that solely for purposes of this
Section 2.12
, the
representations and warranties contained in subsection
(a)
of
Section 5.05
shall be
deemed to refer to the most recent statements furnished pursuant to subsection (a) of
Section
6.05
, and (B) no Default exists. In addition, on the Maturity Date of each Non-Extending
Lender, (i) the Borrower shall repay to such Non-Extending Lender, an amount equal to the
outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder and under the other Loan Documents and (ii) the Loans shall be reallocated
in accordance with the revised Commitments and the Lenders shall make cash settlement with each
other directly or through the Administrative Agent (as the Administrative Agent shall direct and
approve), such that after giving effect to such reallocations each extending Lenders Applicable
Percentage of the Aggregate Commitments equals its Applicable Percentage of the then Outstanding
Amount of all the Loans and the requisite assignments shall be deemed to be made in such amounts
among the Lenders and from each Lender to each other Lender with the same
30
force and effect as if such assignments were evidenced by applicable Assignment Agreements,
but without payment of any related assignment fees.
(f)
Conflicting Provisions
. This Section shall supersede any provisions in
Section 2.11
or
10.01
to the contrary.
2.13 Increase in Commitments
.
(a)
Request for Increase
. Provided there exists no Default and subject to the
conditions set forth in this
Section 2.13
(including obtaining agreement by the respective
Lenders or Eligible Assignees to increase their Commitments), upon notice to the Administrative
Agent (which shall promptly notify the Lenders), the Borrower may from time to time, increase the
Aggregate Commitments by an amount (for all such increases) not exceeding $100,000,000;
provided
that (i) any such increase shall be in a minimum amount of $15,000,000, and (ii)
the Borrower may make a maximum of three such increases. At the time of sending such notice, the
Borrower (in consultation with the Administrative Agent) shall specify the time period within which
each Lender is requested to elect to participate in such increase (which shall in no event be less
than ten Business Days from the date of delivery of such notice to the Lenders).
(b)
Lender Elections to Increase
. Each Lender shall notify the Administrative Agent
within such time period whether or not it agrees to increase its Commitment and, if so, whether by
an amount equal to, greater than, or less than its Applicable Percentage of such proposed increase.
Any Lender not responding within such time period shall be deemed to have declined to increase its
Commitment.
(c)
Notification by Administrative Agent; Additional Lenders; Relation to Extension of
Maturity Date
. The Administrative Agent shall notify the Borrower and each Lender of the
Lenders responses to each request made hereunder. To achieve the full amount of a requested
increase, the Borrower may also invite additional Eligible Assignees to become Lenders pursuant to
a joinder agreement in form and substance satisfactory to the Administrative Agent and its counsel.
If the Borrower has requested or obtained an extension of the Maturity Date pursuant to
Section 2.12
at any time prior to the Increase Effective Date, then any Lender or Eligible
Assignee agreeing to increase its Commitment or incur a new Commitment pursuant to this
Section
2.12
must also agree to such extension of its Maturity Date (unless such extension does not
become effective as to any Lender).
(d)
Effective Date and Allocations
. If the Aggregate Commitments are increased in
accordance with this Section, the Administrative Agent and the Borrower shall determine the
effective date (the
Increase Effective Date
) and the final allocation of such increase.
The Administrative Agent shall promptly notify the Borrower and the Lenders of the final allocation
of such increase and the Increase Effective Date.
(e)
Conditions to Effectiveness of Increase
. As a condition precedent to such
increase, the Borrower shall deliver to the Administrative Agent a certificate of each Loan Party
dated as of the Increase Effective Date (in sufficient copies for each Lender) signed by a
Responsible Officer of such Loan Party (i) certifying and attaching the resolutions adopted by such
Loan Party approving or consenting to such increase, and (ii) in the case of the Borrower,
31
certifying that, before and after giving effect to such increase, (A) the representations and
warranties contained in
Article V
and the other Loan Documents are true and correct on and
as of the Increase Effective Date, except to the extent that such representations and warranties
specifically refer to an earlier date, in which case they are true and correct as of such earlier
date, and that solely for purposes of this
Section 2.13
, the representations and warranties
contained in subsection (a) of
Section 5.05
shall be deemed to refer to the most recent
statements furnished pursuant to subsection (a) of
Section 6.05
, and (B) no Default exists.
The Borrower shall prepay any Loans outstanding on the Increase Effective Date to the extent
necessary to keep the outstanding Loans ratable with any revised Applicable Percentages arising
from any nonratable increase in the Commitments under this Section.
(f)
Conflicting Provisions
. This Section shall supersede any provisions in
Section 2.11
or
10.01
to the contrary.
ARTICLE III.
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes
.
(a)
Payments Free of Taxes
. Subject to
Section 3.01(e)
, any and all payments
by or on account of any obligation of the Company or the Borrower hereunder or under any other Loan
Document shall be made free and clear of and without reduction or withholding for any Indemnified
Taxes or Other Taxes,
provided
that if the Company or the Borrower shall be required by
applicable Law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then
(i) the sum payable shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section) the Administrative
Agent or Lender, as the case may be, receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Company or the Borrower, as applicable, shall make such
deductions and (iii) the Company or the Borrower, as applicable, shall timely pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable Law.
(b)
Payment of Other Taxes by the Company and the Borrower
. Subject to
Section
3.01(e)
, without limiting the provisions of subsection (a) above, to the extent permitted by
applicable Laws, the Company and the Borrower shall timely pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable Law.
(c)
Indemnification by the Company and the Borrower
. Subject to
Section
3.01(e)
, the Company and the Borrower (jointly and severally) shall indemnify the
Administrative Agent and each Lender, within 10 days after demand therefor, for the full amount of
any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent
or such Lender, as the case may be, and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as
to the amount of such payment or liability delivered to the Company or the Borrower by a Lender
(with
32
a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on
behalf of a Lender, shall be conclusive absent manifest error.
(d)
Evidence of Payments
. As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Company or the Borrower to a Governmental Authority, the Company or the
Borrower, as applicable, shall deliver to the Administrative Agent the original or a certified copy
of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory to the
Administrative Agent.
(e)
Status of Lenders
. Each Foreign Lender shall deliver to the Borrower (with a copy
to the Administrative Agent), at the time or times prescribed by applicable law or reasonably
requested by the Borrower or the Administrative Agent, such properly completed and executed
documentation prescribed by applicable law as will permit such payments to be made without
withholding under the law of the jurisdiction in which the Borrower is resident for tax purposes,
or any treaty to which such jurisdiction is a party, with respect to any payments hereunder or
under any other Loan Document. In addition, any Lender, if requested by the Borrower or the
Administrative Agent, shall deliver such other documentation prescribed by applicable law or
reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the
Administrative Agent to determine whether or not such Lender is subject to backup withholding or
information reporting requirements.
Without limiting the generality of the foregoing, each Foreign Lender shall deliver to the
Borrower and the Administrative Agent (in such number of copies as shall be requested by the
recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this
Agreement (and from time to time thereafter upon the request of the Borrower or the Administrative
Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is
applicable:
(i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility
for benefits of an income tax treaty to which the United States is a party,
(ii) duly completed copies of Internal Revenue Service Form W-8ECI,
(iii) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that
such Foreign Lender is not (A) a bank within the meaning of section 881(c)(3)(A) of the
Code, (B) a 10 percent shareholder of the Borrower within the meaning of section
881(c)(3)(B) of the Code, or (C) a controlled foreign corporation described in section
881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form
W-8BEN, or
(iv) any other form prescribed by applicable Law as a basis for claiming exemption from
United States Federal withholding tax duly completed together with such supplementary
documentation as may be prescribed by applicable Law to permit the Borrower to determine the
withholding or deduction required to be made.
33
Without limiting the obligations of the Foreign Lenders set forth above regarding delivery of
certain forms and documents to establish each Foreign Lenders status for U.S. withholding tax
purposes, each Foreign Lender agrees promptly to deliver to the Administrative Agent and the
Borrower, as the Administrative Agent or the Borrower shall reasonably request, on or prior to the
Closing Date, and in a timely fashion thereafter, such other documents and forms required by any
relevant taxing authorities under the Laws of any other jurisdiction, duly executed and completed
by such Foreign Lender, as are required under such Laws to confirm such Foreign Lenders
entitlement to any available exemption from applicable withholding taxes in respect of all payments
to be made to such Foreign Lender outside of the U.S. by the Borrower or the Company pursuant to
this Agreement or otherwise to establish such Foreign Lenders status for withholding tax purposes
in such other jurisdiction. Each Foreign Lender shall promptly (i) notify the Administrative Agent
of any change in circumstances which would modify or render invalid any such claimed exemption or
reduction, and (ii) take such steps as shall not be materially disadvantageous to it, in the
reasonable judgment of such Foreign Lender, and as may be reasonably necessary (including the
re-designation of its Lending Office) to avoid any requirement of applicable Laws of any such
jurisdiction that the Borrower or the Company make any deduction or withholding for taxes from
amounts payable to such Foreign Lender. Additionally, the Borrower shall promptly deliver to the
Administrative Agent or any Foreign Lender, as the Administrative Agent or such Foreign Lender
shall reasonably request, on or prior to the Closing Date, and in a timely fashion thereafter, such
documents and forms required by any relevant taxing authorities under the Laws of any jurisdiction,
duly executed and completed by the Borrower or the Company, as applicable, as are required to be
furnished by such Foreign Lender or the Administrative Agent, under such Laws in connection with
any payment by the Administrative Agent or any Foreign Lender of Taxes or Other Taxes, or otherwise
in connection with the Loan Documents, with respect to such jurisdiction.
Notwithstanding anything to the contrary herein, the Borrower and the Company shall not be
required to pay any additional amounts in respect of U.S. income tax pursuant hereto to any Lender
for the account of any Lending Office of such Lender:
(i) if the obligation to pay such additional amounts would not have arisen but for a
failure by such Lender to comply with its obligations in
Section 3.05(a)
in respect
of such Lending Office; or
(ii) if a Lender shall have delivered to the Borrower the forms referred to above in
this
Section 3.01(e)
, and such Lender shall not at any time be entitled to complete
exemption from deduction or withholding of U.S. income tax with respect of payments by the
Borrower or the Company hereunder for the account of the Lending Office of such Lender for
any reason other than a change in U.S. Law or regulations after the date of delivery of such
forms.
(f)
Treatment of Certain Refunds
. If the Administrative Agent or any Lender
determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to
which it has been indemnified by the Company or the Borrower or with respect to which the Company
or the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Company
or the Borrower, as applicable, an amount equal to such refund (but only to the extent of indemnity
payments made, or additional amounts paid, by the Company or the
34
Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such
refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender, as the case
may be, and without interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund),
provided
that the Company and the Borrower, upon the request
of the Administrative Agent or such Lender, agree, jointly and severally, to repay the amount paid
over to the Company or the Borrower (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to the Administrative Agent or such Lender in the event the
Administrative Agent or such Lender is required to repay such refund to such Governmental
Authority. This subsection shall not be construed to require the Administrative Agent or any
Lender to make available its tax returns (or any other information relating to its taxes that it
deems confidential) to the Company, the Borrower or any other Person.
(g)
Assertion of Claims
. Each Lender shall have 180 days from the date it determines
that the Company or the Borrower is required to pay an additional amount to such Lender, or to any
Governmental Authority for the account of such Lender, pursuant to this
Section 3.01
to
assert such claim under this
Section 3.01
.
3.02 Illegality
. If any Lender determines that any Law has made it unlawful, or that any
Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending
Office to make, maintain or fund Eurodollar Rate Loans, or to determine or charge interest rates
based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on
the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London
interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative
Agent, any obligation of such Lender to make or continue Eurodollar Rate Loans or to convert Base
Rate Loans to Eurodollar Rate Loans shall be suspended until such Lender notifies the
Administrative Agent and the Borrower that the circumstances giving rise to such determination no
longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with
a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of
such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such
Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if
such Lender may not lawfully continue to maintain such Eurodollar Rate Loans. If any Lender
determines that any Law has made it unlawful, or that any Governmental Authority has asserted that
it is unlawful, for such Lender or its applicable Lending Office to participate in outstanding
Eurodollar Rate Loans, then, on notice thereof by such Lender to the Borrower through the
Administrative Agent, the Borrower shall prepay such Eurodollar Rate Loans of such Lender or
convert all such Eurodollar Rate Loans of such Lender to Base Rate Loans immediately. Upon any
such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so
prepaid or converted.
3.03 Inability to Determine Rates
. If the Required Lenders determine that for any reason in
connection with any request for a Eurodollar Rate Loan or a conversion thereto that (a) adequate
and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest
Period with respect to a proposed Eurodollar Rate Loan, or (b) the Eurodollar Rate for any
requested Interest Period with respect to a proposed Eurodollar Rate Loan does not adequately and
fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will
promptly so notify the Borrower and each Lender. Thereafter, the obligation of the Lenders to make
or maintain Eurodollar Rate Loans shall be suspended until the Administrative
35
Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of
such notice, the Borrower may revoke any pending request for a Borrowing of or conversion to of
Eurodollar Rate Loans or, failing that, will be deemed to have converted such request into a
request for a Borrowing of Base Rate Loans in the amount specified therein.
3.04 Increased Costs; Reserves on Eurodollar Rate Loans.
(a)
Increased Costs Generally
. If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan,
insurance charge or similar requirement against assets of, deposits with or for the account
of, or credit extended or participated in by, any Lender (except any reserve requirement
contemplated by
Section 3.04(e)
);
(ii) subject any Lender to any tax of any kind whatsoever with respect to this
Agreement, any Eurodollar Rate Loan made by it, or change the basis of taxation of payments
to such Lender in respect thereof (except for Indemnified Taxes or Other Taxes covered by
Section 3.01
and the imposition of, or any change in the rate of, any Excluded Tax
payable by such Lender); or
(iii) impose on any Lender or the London interbank market any other condition, cost or
expense affecting this Agreement or Eurodollar Rate Loans made by such Lender;
and the result of any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any Eurodollar Rate Loan (or of maintaining its obligation to make any such Loan), or
to reduce the amount of any sum received or receivable by such Lender hereunder (whether of
principal, interest or any other amount) then, upon request of such Lender, the Borrower will pay
to such Lender such additional amount or amounts as will compensate such Lender for such additional
costs incurred or reduction suffered.
(b)
Capital Requirements
. If any Lender determines that any Change in Law affecting
such Lender or any Lending Office of such Lender or such Lenders holding company, if any,
regarding capital requirements has or would have the effect of reducing the rate of return on such
Lenders capital or on the capital of such Lenders holding company, if any, as a consequence of
this Agreement, the Commitments of such Lender or the Loans made by such Lender, to a level below
that which such Lender or such Lenders holding company could have achieved but for such Change in
Law (taking into consideration such Lenders policies and the policies of such Lenders holding
company with respect to capital adequacy), then from time to time the Borrower will pay to such
Lender such additional amount or amounts as will compensate such Lender or such Lenders holding
company for any such reduction suffered.
(c)
Certificates for Reimbursement
. A certificate of a Lender setting forth the
amount or amounts necessary to compensate such Lender or its holding company as specified in
subsection (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.
36
(d)
Delay in Requests
. Failure or delay on the part of any Lender to demand
compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of
such Lenders right to demand such compensation,
provided
that the Borrower shall not be
required to compensate a Lender pursuant to the foregoing provisions of this Section for any
increased costs incurred or reductions suffered more than 180 days prior to the date that such
Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions
and of such Lenders intention to claim compensation therefor (except that, if the Change in Law
giving rise to such increased costs or reductions is retroactive, then the nine-month period
referred to above shall be extended to include the period of retroactive effect thereof).
(e)
Reserves on Eurodollar Rate Loans
. The Borrower shall pay to each Lender, as long
as such Lender shall be required to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency funds or deposits (currently known as Eurocurrency
liabilities), additional interest on the unpaid principal amount of each Eurodollar Rate Loan
equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by
such Lender in good faith, which determination shall be conclusive), which shall be due and payable
on each date on which interest is payable on such Loan,
provided
the Borrower shall have
received at least 10 days prior notice (with a copy to the Administrative Agent) of such
additional interest from such Lender. If a Lender fails to give notice 10 days prior to the
relevant Interest Payment Date, such additional interest shall be due and payable 10 days from
receipt of such notice.
3.05 Mitigation Obligations; Replacement of Lenders
.
(a)
Designation of a Different Lending Office
. If any Lender requests compensation
under
Section 3.04
, or the Company or the Borrower is required to pay any additional amount
to any Lender or any Governmental Authority for the account of any Lender pursuant to
Section
3.01
, or if any Lender gives a notice pursuant to
Section 3.02
, then such Lender shall
use reasonable efforts to designate a different Lending Office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its offices, branches or
affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to
Section 3.01
or
3.04
, as the case may be, in
the future, or eliminate the need for the notice pursuant to
Section 3.02
, as applicable,
and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would
not otherwise be disadvantageous to such Lender. The Company and the Borrower (jointly and
severally) hereby agree to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(b)
Replacement of Lenders
. If any Lender requests compensation under
Section
3.04
, or if the Company or the Borrower is required to pay any additional amount to any Lender
or any Governmental Authority for the account of any Lender pursuant to
Section 3.01
, or if
any Lender asserts any illegality under
Section 3.02
, the Borrower may replace such Lender
in accordance with
Section 10.13
.
37
3.06 Survival
. Subject to
Section 3.04(d)
, all of the Companys and the Borrowers
obligations under this
Article III
shall survive termination of the Aggregate Commitments
and repayment of all other Obligations hereunder.
ARTICLE IV.
CONDITIONS PRECEDENT TO BORROWINGS
4.01 Conditions of Closing Date
. This Agreement shall be effective subject to satisfaction of
the following conditions precedent:
(a) The Administrative Agents receipt of the following, each of which shall be originals or
telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a
Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of
certificates of governmental officials, a recent date before the Closing Date) and each in form and
substance reasonably satisfactory to the Administrative Agent and each of the Lenders:
(i) executed counterparts of this Agreement, the Company Guaranty Agreement and the
Subsidiary Guaranty Agreement, sufficient in number for distribution to the Administrative
Agent, each Lender and the Borrower;
(ii) a Note executed by the Borrower in favor of each Lender requesting a Note;
(iii) such certificates of resolutions or other action, incumbency certificates and/or
other certificates of Responsible Officers of each Loan Party as the Administrative Agent
may require evidencing the identity, authority and capacity of each Responsible Officer
thereof authorized to act as a Responsible Officer in connection with this Agreement and the
other Loan Documents to which such Loan Party is a party;
(iv) such documents and certifications as the Administrative Agent may reasonably
require (x) to evidence that each Loan Party is duly organized or formed, and (y) to
evidence that the Company, the Borrower and each other Loan Party listed on
Schedule
4.01(a)(iv)
is validly existing, in good standing and qualified to engage in business in
each jurisdiction where its ownership, lease or operation of properties or the conduct of
its business requires such qualification, except to the extent that failure to do so could
not reasonably be expected to have a Material Adverse Effect;
(v) a favorable opinion of Vinson & Elkins LLP, counsel to the Loan Parties, addressed
to the Administrative Agent and each Lender, as to the matters set forth in
Exhibit
I
and such other matters concerning the Loan Parties and the Loan Documents as the
Administrative Agent may reasonably request;
(vi) a certificate of a Responsible Officer of each Loan Party either (A) attaching
copies of all consents, licenses and approvals required in connection with the execution,
delivery and performance by such Loan Party and the validity against such
38
Loan Party of the Loan Documents to which it is a party, and such consents, licenses
and approvals shall be in full force and effect, or (B) stating that no such consents,
licenses or approvals are so required;
(vii) a certificate signed by a Responsible Officer of the Company and the Borrower
certifying that there has been no event, circumstance since the date of the Audited
Financial Statements that has had or could be reasonably expected to have, either
individually or in the aggregate, a Material Adverse Effect;
(viii) a certificate signed by a Responsible Officer of each Loan Party certifying that
each Loan Party is Solvent after giving effect to this Agreement and the other Loan
Documents and the Indebtedness pursuant hereto;
(ix) such other assurances, certificates, documents, consents or opinions as the
Administrative Agent or the Required Lenders reasonably may require.
(b) Any fees required to be paid on or before the Closing Date shall have been paid.
(c) Unless waived by the Administrative Agent, the Company and the Borrower shall have paid
all reasonable fees, charges and disbursements of counsel to the Administrative Agent (directly to
such counsel if requested by the Administrative Agent) to the extent invoiced prior to or on the
Closing Date, plus such additional amounts of such fees, charges and disbursements as shall
constitute its reasonable estimate of such reasonable fees, charges and disbursements incurred or
to be incurred by it through the closing proceedings (provided that such estimate shall not
thereafter preclude a final settling of accounts between the Company, the Borrower and the
Administrative Agent).
(d) The Closing Date shall have occurred on or before April 16, 2007.
Without limiting the generality of the provisions of the last paragraph of
Section
9.03
, for purposes of determining compliance with the conditions specified in this
Section
4.01
, each Lender that has signed this Agreement shall be deemed to have consented to, approved
or accepted or to be satisfied with, each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative
Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its
objection thereto.
4.02 Conditions to all Borrowings
. The obligation of each Lender to honor any Loan Notice
(other than a Loan Notice requesting only a conversion of Loans to the other Type) is subject to
the following conditions precedent:
(a) The representations and warranties of the Company, the Borrower and each other Loan Party
contained in
Article V
or any other Loan Document, or which are contained in any document
furnished at any time under or in connection herewith or therewith, shall be true and correct on
and as of the date of such Borrowing, except to the extent that such representations and warranties
specifically refer to an earlier date, in which case they shall be true and correct as of such
earlier date, and except that for purposes of this
Section 4.02
, the representations and
39
warranties contained in subsection (a) of
Section 5.05
shall be deemed to refer to the
most recent statements furnished pursuant to clause (a) of
Section 6.05
.
(b) No Default shall exist, or would result from such proposed Borrowing or from the
application of the proceeds thereof.
(c) The Administrative Agent shall have received a Loan Notice in accordance with the
requirements hereof.
(d) With respect to the Financed Property which is to be financed in whole or in part by such
Loan, the Administrative Agent shall have received each of the following, each of which shall be
originals or telecopies (followed promptly by originals) unless otherwise specified, each properly
executed by a Responsible Officer of the signing Loan Party, each dated the date of such Loan (or a
recent date before the date of such Loan) and each in form and substance reasonably satisfactory to
the Administrative Agent:
(i) a satisfactory FIRREA Appraisal;
(ii) (x) a Mortgage and evidence of the proper recordation of such Mortgage (or, except
in the case of a Financed Property located in Kansas, the delivery of such Mortgage to the
applicable title insurance company for recordation, on or immediately after the date of the
applicable Borrowing) in the appropriate filing office, and (y) the Real Estate Support
Documents with respect to such Financed Property (including Phase I and if reasonably
requested, Phase II environmental assessments and any other reasonably applicable
environmental reports);
(iii) a copy of the Lease of such Financed Property to the applicable Lessee Subsidiary
and any sublease or Memorandum of Lease associated therewith, if any;
(iv) a favorable opinion of local counsel to the Borrower or the applicable Lessor
Subsidiary in the state where such Financed Property is located, addressed to the
Administrative Agent and each Lender, as to such matters concerning the Borrower and the
Loan Documents as the Administrative Agent may reasonably request;
(v) a certificate of a Responsible Officer of the Borrower in form and detail
reasonably satisfactory to the Administrative Agent (which may be contained in the
applicable Loan Notice) demonstrating (A) that the aggregate amount of the requested Loan
(together with any other Loan with respect to such Financed Property) is no greater than the
Maximum Loan to Value Ratio Amount applicable to such Financed Property and (B) in the case
of a Financed Property constituting Unimproved Real Property, the amount of such Loan, when
aggregated with all other Loans advanced with respect to Financed Properties then
constituting Unimproved Real Property, is no greater than fifteen percent (15%) of the then
Aggregate Commitments;
(vi) Uniform Commercial Code search results showing no Liens on the Financed Property
other than Mortgage Permitted Liens;
40
(vii) delivery of Uniform Commercial Code financing statements and fixture filings
suitable in form and substance for filing in all places required by applicable Law to
perfect the Liens of the Administrative Agent under the Mortgage and other Security
Instruments related to such Financed Property as a first priority Lien (subject only to
Permitted Liens) as to items of Collateral in which a security interest may be perfected by
the filing of financing statements or fixture filings, and such other documents and/or
evidence of other actions as may be necessary under applicable Law to perfect the Liens of
the Administrative Agent under the Mortgage and other Security Instruments related to such
Financed Property as a first priority Lien in and to such other Collateral as the
Administrative Agent may require;
(viii) evidence that all insurance required to be maintained pursuant to the Loan
Documents with respect to such Financed Property has been obtained and is in effect; and
endorsements naming the Administrative Agent (on behalf of the Lenders and the other Secured
Parties) as an additional insured and loss payee, as the case may be, on all such insurance
policies maintained with respect to such Financed Property; and
(ix) with respect to the applicable Lessor Subsidiary associated with such Financed
Property (to the extent not previously delivered):
(A) such certificates of resolutions or other action, incumbency certificates
and/or other certificates of Responsible Officers of such Lessor Subsidiary as the
Administrative Agent may require evidencing the identity, authority and capacity of
each Responsible Officer thereof authorized to act as a Responsible Officer in
connection with the Loan Documents to which such Lessor Subsidiary is a party;
(B) such documents and certifications as the Administrative Agent may
reasonably require (x) to evidence that each Loan Party is duly organized or formed,
and (y) to evidence that such Lessor Subsidiary is validly existing, in good
standing and qualified to engage in business in each jurisdiction where its
ownership, lease or operation of properties or the conduct of its business requires
such qualification, except to the extent that failure to do so could not reasonably
be expected to have a Material Adverse Effect;
(C) a certificate of a Responsible Officer of such Lessor Subsidiary either (A)
attaching copies of all consents, licenses and approvals required in connection with
the execution, delivery and performance by such Lessor Subsidiary and the validity
against such Lessor Subsidiary of the Loan Documents to which it is a party, and
such consents, licenses and approvals shall be in full force and effect, or (B)
stating that no such consents, licenses or approvals are so required; and
(D) a certificate signed by a Responsible Officer of the Company and such
Lessor Subsidiary certifying that such Lessor Subsidiary is Solvent after giving
effect to this Agreement, the Mortgage of such Lessor Subsidiary, and the other Loan
Documents and the Indebtedness pursuant hereto.
41
(e) In addition to the items set forth in clause (d) above, in the case of a Loan associated
with Post-Construction for a Financed Property, the Administrative Agent shall have received each
of the following, each of which shall be originals or telecopies (followed promptly by originals)
unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan
Party, each dated the date of such Loan (or a recent date before the date of such Loan) and each in
form and substance reasonably satisfactory to the Administrative Agent:
(i) a satisfactory FIRREA Appraisal;
(ii) (x) a modification of the respective Mortgage and evidence of the proper
recordation of such modification (or the delivery of such modification to the applicable
title insurance company for recordation, on or immediately after the date of the applicable
Borrowing) in the appropriate filing office, and (y) applicable Real Estate Support
Documents with respect to such Financed Property (including, if reasonably requested by the
Administrative Agent, an additional Phase I and if reasonably requested in connection with
the results of such additional Phase I, Phase II environmental assessments and any other
reasonably applicable environmental reports) and endorsements to the title insurance policy
with respect to such Financed Property, reflecting such modification and increased property
value but otherwise showing no change in coverage;
(iii) if reasonably requested by the Administrative Agent, a favorable opinion of local
counsel to the Borrower or the applicable Lessor Subsidiary in the state where such Financed
Property is located, addressed to the Administrative Agent and each Lender with respect to
the modification of the respective Mortgage;
(iv) a certificate of a Responsible Officer of the Borrower in form and detail
reasonably satisfactory to the Administrative Agent (which may be contained in the
applicable Loan Notice) demonstrating that the aggregate amount of the requested Loan
(together with any other Loan with respect to such Financed Property) is no greater than the
Maximum Loan to Value Ratio Amount applicable to such Financed Property; and
(v) evidence that all insurance required to be maintained pursuant to the Loan
Documents with respect to such Financed Property has been obtained and is in effect; and
endorsements naming the Administrative Agent (on behalf of the Lenders and the other Secured
Parties) as an additional insured and loss payee, as the case may be, on all such insurance
policies maintained with respect to such Financed Property.
(f) The Required Lenders shall not have declined the particular Financed Property in
accordance with such Lenders policies and practices generally applicable to its customers in
connection with loan transactions.
(g) Any fees required to be paid on or before the date of the applicable Borrowing shall have
been paid.
(h) Unless waived by the Administrative Agent, the Company and the Borrower shall have paid
all fees, charges and disbursements of counsel to the Administrative Agent (directly to such
counsel if requested by the Administrative Agent) to the extent invoiced prior to or on the date of
the applicable Borrowing.
42
Each Loan Notice (other than a Loan Notice requesting only a conversion of Loans to the other
Type) submitted by the Borrower shall be deemed to be a representation and warranty that the
conditions specified in
Sections 4.02(a)
and
(b)
have been satisfied on and as of
the date of the applicable Borrowing.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants, with respect to itself and its Subsidiaries, and the
Borrower represents and warrants, with respect to itself and its Subsidiaries and each of the Loan
Parties, to the Administrative Agent and the Lenders that:
5.01 Organization; Corporate Powers
. The Company, the Borrower, each other Loan Party and
each of their respective Subsidiaries is duly organized only under the laws of the state (or in the
case of any Unrestricted Subsidiaries, the country) of its respective incorporation or organization
and each Loan Party and each Restricted Subsidiary is validly existing and in good standing under
the laws of the state of its respective incorporation or organization, has the requisite power and
authority, governmental licenses, consents and approvals to own its property and assets and to
carry on its business as now conducted and is qualified to do business in every jurisdiction where
such qualification is required and is in compliance with all Requirements of Law except where the
failure to so qualify or comply could not reasonably be expected to have a Material Adverse Effect.
The Borrower has the corporate power to execute, deliver and perform its Obligations under this
Agreement and the other Loan Documents to which it is a party, to borrow hereunder and to execute
and deliver the Notes. The Company and each other Loan Party has the corporate power to execute,
deliver and perform its Obligations under this Agreement and the other Loan Documents to which it
is a party.
5.02 Authorization
. The execution, delivery and performance of this Agreement and the Loan
Documents by the Loan Parties, the Borrowings hereunder, the execution and delivery of the Notes by
the Borrower and the use of the proceeds of the Borrowings (a) have been duly authorized by all
requisite corporate (or other organizational) and, if required, stockholder (or other equity
holder) action on the part of the Company, the Borrower and each other Loan Party and (b) will not
(i) violate (A) any provision of Law or the Organizational Documents of the Company, the Borrower
or any other Loan Party, (B) any order of any court, or any rule, regulation or order of any other
agency of government binding upon the Company, the Borrower or any other Loan Party or (C) any
provisions of any indenture, agreement or other instrument to which the Company, the Borrower or
any other Loan Party is a party, or by which the Company, the Borrower or any other Loan Party or
any of their respective properties or assets are or may be bound which violation could reasonably
be expected to have a Material Adverse Effect, (ii) be in conflict with, result in a breach of or
constitute (alone or with notice or lapse of time or both) a default under any indenture, agreement
or other instrument referred to in (b)(i)(C) above which violation could reasonably be expected to
have a Material Adverse Effect or (iii) result in the creation or imposition of any Lien whatsoever
upon any property or assets of the Company, the Borrower or any other Loan Party other than under
the Loan Documents.
43
5.03 Governmental Approval
. No registration with, or consent or approval of, or other action
by, any federal, state or other Governmental Authority or any other Person is or will be required
in connection with the execution, delivery and performance of this Agreement, any other Loan
Document, the execution and delivery of the Notes or repayment of the Borrowings hereunder.
5.04 Enforceability
. This Agreement and each of the Loan Documents have been duly executed
and delivered by each of the Company, the Borrower and each of the other Loan Parties and
constitute legal, valid and binding obligations of such Persons party thereto; and the Notes, when
duly executed and delivered by the Borrower, will constitute legal, valid and binding Obligations
of the Borrower, in each case enforceable in accordance with their respective terms (subject, as to
the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting creditors rights generally and general principles of equity).
5.05 Financial Statements
.
(a) The Audited Financial Statements, a copy of which has been furnished to the Lenders, has
been prepared in conformity with GAAP applied on a basis consistent with that of the preceding
fiscal year, and present fairly in all material respects the financial condition of the Company
and its Subsidiaries, as at such date, and the consolidated results of the operations of the
Company and its Subsidiaries for the period then ended.
(b) The Form 10-K of the Company for the fiscal year ended December 31, 2006, a copy of which
has been furnished to the Lenders, has been prepared in accordance with all applicable rules,
regulations and guidelines of the Securities and Exchange Commission and presents fairly in all
material respects the financial condition of the Company and its Subsidiaries, as at such date, and
the results of their operations for the periods then ended.
5.06 No Material Adverse Change
. There has been no material adverse change in the businesses,
assets, operations, prospects or condition, financial or otherwise, as determined on a consolidated
basis, of the Company or any of its Subsidiaries, since the date of the Audited Financial
Statements.
5.07 Title to Properties
. Each Loan Party has good and marketable title to, or valid
leasehold interests in, all its properties and assets except for (i) such properties as are no
longer used or useful in the conduct of its business or as have been disposed of in the ordinary
course of business, (ii) Permitted Liens on property and assets other than Financed Properties,
(iii) minor defects in title on property and assets other than Financed Properties, which defects
do not interfere with the ability of such Loan Party to conduct its business as now conducted, and
(iv) Mortgage Permitted Liens on any Financed Property.
5.08 Litigation; Compliance with Laws; Etc
.
(a) There are no actions, suits or proceedings, except as specified in
Schedule
5.08(a)
, at law or in equity or by or before any Governmental Authority now pending or, to the
knowledge of any of the Loan Parties, threatened against or affecting any of the Loan Parties or
the business, assets or rights of any of the Loan Parties as to which there is a reasonable
44
possibility of an adverse determination and which, if adversely determined, could,
individually or in the aggregate, reasonably to be expected to have a Material Adverse Effect.
(b) (i) None of the Loan Parties is in violation of any law, the breach or consequence of
which could reasonably be expected to have a Material Adverse Effect, (ii) to the best knowledge of
the Loan Parties after due investigation, the Loan Parties are in material compliance with all
statutes and governmental rules and regulations applicable to them, and (iii) none of the Loan
Parties is in default under any material order, writ, injunction, award or decree of any
Governmental Authority binding upon it or its assets or any material indenture, mortgage, contract,
agreement or other undertaking or instrument to which it is a party or by which any of its
properties may be bound, which default could reasonably be expected to have a Material Adverse
Effect. Nothing has occurred which would materially and adversely affect the ability of any Loan
Party to carry on its business as now conducted or perform its obligations under any such order,
writ, injunction, award or decree or any such material indenture, mortgage, contract, agreement or
other undertaking or instrument.
5.09 Agreements; No Default
.
(a) None of the Loan Parties is a party to any agreement or instrument or subject to any
corporate restriction reasonably to be expected to have a Material Adverse Effect.
(b) No Default has occurred and is continuing.
5.10 Federal Reserve Regulations
.
(a) Neither the Company, the Borrower nor any of their respective Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying Margin Stock.
(b) No part of the proceeds of the Loans will be used, whether directly or indirectly, and
whether immediately, incidentally or ultimately (i) to purchase or carry Margin Stock or to extend
credit to others for the purpose of purchasing or carrying Margin Stock or to refund Indebtedness
originally incurred for such purpose or (ii) for any purpose which entails a violation of, or which
is inconsistent with, the provisions of the Regulations of the Board, including Regulations T, U or
X; provided, however, the Company may acquire Margin Stock if, upon the acquisition of such Margin
Stock, twenty-five percent (25%) or less of the Companys total assets subject to the restrictions
set forth in
Section 7.01
would then be composed of Margin Stock, and the Company shall
furnish to the Administrative Agent upon its request, a statement in conformity with the
requirements of Federal Reserve Form U-1 referred to in Regulation U.
5.11 Taxes
. The Company, the Borrower and each of their respective Subsidiaries has filed all
tax returns which are required to have been filed and has paid, or made adequate provisions for the
payment of, all of its taxes which are due and payable, except such taxes, if any, as are being
contested in good faith and by appropriate proceedings and as to which such reserves or other
appropriate provisions as may be required by GAAP have been maintained. Neither the Company, the
Borrower nor any of their respective Subsidiaries is aware of any proposed assessment against it
for additional taxes (or any basis for any such assessment) which could reasonably be expected to
have a Material Adverse Effect.
45
5.12 Pension and Welfare Plans
. Except for matters that could not reasonably be expected to
have a Material Adverse Effect: (a) each Plan complies in all respects with all applicable statutes
and governmental rules and regulations; (b) no Reportable Event has occurred and is continuing with
respect to any Plan; (c) since December 31, 2006, neither the Company, the Borrower nor any ERISA
Affiliate has withdrawn from any Plan or instituted steps to do so, except as listed on
Schedule 5.12
; and (d) since December 31, 2006, no steps have been instituted to terminate
any Plan, except as listed on
Schedule 5.12
. No condition exists or event or transaction
has occurred in connection with any Plan which could result in the incurrence by the Company, the
Borrower or any ERISA Affiliate of any liability, fine or penalty which could reasonably be
expected to have a Material Adverse Effect. Except for circumstances that could not reasonably be
expected to have a Material Adverse Effect, neither the Company, the Borrower nor any ERISA
Affiliate is a member of, or contributes to, any multiple employer Plan as described in Section
4064 of ERISA. None of the Loan Parties has any contingent liability with respect to any
post-retirement welfare benefit plans, as such term is defined in ERISA which could reasonably be
expected to have a Material Adverse Effect. Except for matters that could not reasonably be
expected to have a Material Adverse Effect, neither the Company, the Borrower nor any ERISA
Affiliate has any liability under Section 4201 or 4243 of ERISA for any withdrawal, partial
withdrawal, reorganization or other event under any Multiemployer Plan.
5.13 No Material Misstatements
. As of the date hereof, neither this Agreement, the other Loan
Documents nor any other document delivered by or on behalf of the Company, the Borrower, any other
Loan Party or any of their respective Subsidiaries in connection with any Loan Document or included
therein contained or contains any material misstatement of fact or omitted or omits to state any
material fact necessary to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
5.14 Investment Company Act
. Neither the Company, the Borrower nor any of their respective
Subsidiaries is an investment company or company controlled by an investment company as defined
in, or subject to regulation under, the Investment Company Act of 1940.
5.15 Maintenance of Insurance
. The Company, the Borrower and each of their respective
Subsidiaries maintains insurance to such extent and against such hazards and liabilities as is
commonly maintained by companies similarly situated.
5.16 Existing Liens
. None of the assets of the Company, the Borrower or any other Loan Party
is subject to any Lien, except:
(a) Liens for current taxes not delinquent or taxes being contested in good faith and by
appropriate proceedings and as to which such reserves or other appropriate provisions as may be
required by GAAP are being maintained;
(b) carriers, warehousemens, mechanics, materialmens, landlords and other like statutory
or contractual Liens arising in the ordinary course of business securing obligations which are not
overdue for a period of more than ninety (90) days or which are being contested in good faith and
by appropriate proceedings and as to which such reserves or other appropriate provisions as may be
required by GAAP are being maintained;
46
(c) pledges or deposits in connection with workers compensation, unemployment insurance and
other social security legislation and to secure performance of tenders, statutory obligations,
surety and appeal bonds and similar obligations;
(d) deposits to secure the performance of bids, trade contracts, statutory obligations, lease
obligations, and other obligations of a like nature incurred in the ordinary course of business,
and Liens securing reimbursement obligations created by open letters of credit for the purchase of
inventory;
(e) Liens granted by a Subsidiary of the Company to secure such Subsidiarys Indebtedness to
the Company or to any other Subsidiary of the Company;
(f) Liens, if any, disclosed in the financial statements referred to in
Section 5.05
;
(g) Liens listed on
Schedule 5.16(g)
and Liens permitted by
Section 7.02
; and
(h) Liens arising by virtue of statutory, common law or contractual provisions relating to
bankers liens, rights of set-off or similar rights and remedies and burdening only deposit,
brokerage and similar accounts (or funds, securities or other assets maintained therein) with a
creditor depository or similar institution.
5.17 Environmental Matters
. With respect to any real property owned or occupied by any Loan
Party other than the Financed Properties:
(a) each Loan Party has complied in all respects with all applicable federal, state, local and
other statutes, ordinances, orders, judgments, rulings and regulations relating to environmental
pollution or to environmental regulation or control except where the failure to comply could not
reasonably be expected to have a Material Adverse Effect;
(b) neither the Company, the Borrower, any of their respective Restricted Subsidiaries has
received notice of any failure so to comply which alone or together with any other such failure
could reasonably be expected to have a Material Adverse Effect; and
(c) neither the Company, the Borrower or any of their respective Restricted Subsidiaries nor
any of its facilities manages any hazardous wastes, hazardous substances, hazardous materials,
toxic substances or toxic pollutants, as those terms are used in the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response Compensation and Liability Act, the
Hazardous Materials Transportation Act, the Toxic Substance Control Act, the Clean Air Act or the
Clean Water Act, in violation of any regulations promulgated pursuant thereto or in any other
applicable law where such violation could reasonably be expected to have, individually or together
with other violations, a Material Adverse Effect.
5.18 Subsidiaries
. As of the Closing Date, (i) neither the Company nor the Borrower has any
Subsidiaries, and no Subsidiary has a Subsidiary other than those specifically disclosed (and
identified as Restricted or Unrestricted) in part (a) of
Schedule 5.18
, (ii) neither the
Company, the Borrower nor any of their respective Subsidiaries has any equity investments in any
other Person other than those specifically disclosed in part (b) of
Schedule 5.18
and (iii)
all of the Restricted Subsidiaries of the Company (other than the Borrower, the Ford Borrowers and
47
those listed in the first sentence of
Section 6.16.(b)
) are parties to the Subsidiary
Guaranty Agreement and are fully liable thereunder to the extent set forth therein. The state of
incorporation or formation and the address, principal place of business for each Subsidiary is
specified in part (a) of
Schedule 5.18
. Each of the Company, the Borrower and/or each of
their respective Restricted Subsidiaries is the owner, directly or indirectly, free and clear of
all Liens (except for Liens in favor of the Revolving Facility Administrative Agent and transfer
restrictions contained in the Dealer/Manufacturer Agreements), of all of the issued and outstanding
voting stock of each Subsidiary disclosed on
Schedule 5.18
(except where ownership of less
than one hundred percent (100%) is indicated on
Schedule 5.18
).
5.19 Engaged in Motor Vehicle Sales
. The Lessee Subsidiaries are engaged in the business of
selling Motor Vehicles.
5.20 Dealer Franchise Agreements and Manufacturer Framework Agreements
. As of the Closing
Date, none of the Loan Parties is a party to any dealer franchise agreements, manufacturer
framework agreements, or any other similar agreements, including any master agreements between the
Loan Parties and any Manufacturer (
Dealer/Manufacturer Agreements
) other than those
specifically disclosed in
Schedule 5.20
, which schedule shows the Manufacturer and the Loan
Party which is a party to each such agreement, the date such agreement was entered into and the
expiration date (if any) of each such agreement
.
Each of the Dealer/Manufacturer Agreements
applicable to the Company, the Borrower or any Lessee Subsidiary is currently in full force and
effect as of the date hereof, and no such agreement has been terminated by a final non-appealable
decision by a court of competent jurisdiction. Each of the Dealer/Manufacturer Agreements
applicable to any Restricted Subsidiary (other than the Company, the Borrower or any Lessee
Subsidiary) is currently in full force and effect as of the date hereof and no such agreement has
been terminated by a final non-appealable decision by a court of competent jurisdiction except
where such termination could not reasonably be expected to have a Material Adverse Effect. There
exists no actual or threatened termination, cancellation, or limitation of, or any modification or
change in, the business relationship between any Loan Party and any customer or any group of
customers whose purchases individually or in the aggregate are material to the business of such
Loan Party, or with any material Manufacturer, and there exists no present condition or state of
facts or circumstances which could reasonably be expected to have a Material Adverse Effect.
5.21 Use of Proceeds
. The proceeds of the Loans shall be used (a) for general working
capital, capital expenditures and other lawful purposes of the Borrower, (b) to make distributions
to the Company and (c) for acquisitions of real property and vehicle dealerships. Neither the
Administrative Agent nor any Lender shall have any responsibility as to the use of any proceeds of
the Loans. The Borrower represents and warrants to the Lenders and the Administrative Agent that
all Loans will be for business, commercial, investment or other similar purpose and not primarily
for personal, family, household or agricultural use, as such terms are used in the Texas Finance
Code.
5.22 Collateral
. All of the Collateral is owned by the grantor of the security interest
therein in favor of the Administrative Agent, or such grantor has sufficient rights therein to
grant such security interest, free of any title defects or any Liens or interests of others, except
for (a) the Liens and security interests of the Administrative Agent and (b) Mortgage Permitted
Liens.
48
Upon completion of the recordings contemplated by
Section 4.02
, the Administrative
Agent will have a perfected security interest in, or Lien on, all of the Collateral.
5.23 Location of Borrower
. As of the Closing Date, the Companys, the Borrowers and each
Lessor Subsidiarys correct legal name, type of organization, jurisdiction of organization, state
organization number and federal employers identification number are set forth on
Schedule
5.23
. As of the Closing Date, the Companys, the Borrowers and each Lessor Subsidiarys chief
executive office is located at the address set forth in
Schedule 5.23
. Each of the Company
and the Borrower shall, and shall cause each Lessor Subsidiary to, promptly (but in any event
within five (5) Business Days) immediately report to the Administrative Agent any change in such
Persons name, type of organization, state organization number, jurisdiction of organization or
federal employers identification number or the address of such Persons chief executive office.
5.24 Leases
. There is a Lease in force for each Financed Property, each Lease is in full
force and effect without amendment or modification from the form or copy delivered to the
Administrative Agent except for amendments permitted hereunder; no default by any party exists
under any such Lease that could result in termination of such Lease, nor has any event occurred
which, with the passage of time or the giving of notice, or both, would constitute such a default.
Schedule 1.01A
is a complete and correct listing of all Leases as of the Closing Date.
5.25 Security Interest
. The Liens granted to the Administrative Agent (for the benefit of the
Secured Parties) are valid first priority Liens in the Collateral (subject only to Mortgage
Permitted Liens), and upon completion of the recordings contemplated by
Section 4.02
will
be perfected in accordance with the requirements of all states in which the Borrower or the
applicable Lessor Subsidiary is organized or any item of the Collateral is located to the extent
that the filing of Uniform Commercial Code financing statements or fixture filings or the recording
of the Mortgages is sufficient to perfect such Lien.
5.26 Solvency
. Both before and after giving effect to the Loans hereunder, each Loan Party is
Solvent. On the Closing Date, both before and after giving effect to the Loans hereunder, each
Loan Party is Solvent.
ARTICLE VI.
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan or other amount due
hereunder shall remain unpaid or unsatisfied, the Borrower, and the Company as to itself and its
Subsidiaries, covenant and agree that:
6.01 Existence
. Each of the Company and the Borrower will maintain and preserve, and except
as permitted by
Section 7.03
, will cause each other Loan Party to maintain and preserve,
its respective existence and good standing under the laws of its state of jurisdiction, as a
corporation or other form of business organization, as the case may be, and all rights, privileges,
licenses, permits, patents, patent rights, copyrights, trademarks, trade names,
49
franchises and other authority to the extent material and necessary for the conduct of their
respective businesses in the ordinary course as conducted from time to time.
6.02 Repair
. Each of the Company and the Borrower will maintain, preserve and keep, and will
cause each other Loan Party to maintain, preserve and keep, all of its properties in good repair,
working order and condition (ordinary wear and tear excepted). Each of the Company and the
Borrower will make, and will cause each other Loan Party to make, all necessary and proper repairs,
renewals, replacements, additions, betterments and improvements thereto so that at all times the
efficiency thereof shall be fully preserved and maintained; the Company and the Borrower will at
all times do or cause to be done all things necessary to preserve, renew and keep in full force and
effect, and will cause each other Loan Party to do or cause to be done all things necessary to
preserve, renew and keep in full force and effect, the rights, licenses, permits, franchises,
patents, copyrights, trademarks and trade names material to the conduct of its businesses; the
Company, the Borrower, each other Loan Party will maintain and operate such businesses in
substantially the manner in which they are presently conducted and operated (subject to changes in
the ordinary course of business); the Company, the Borrower, each other Loan Party will comply with
all laws and regulations applicable to the operation of such businesses whether now in effect or
hereafter enacted and with all other applicable laws and regulations except where the failure to
comply could not reasonably be expected to have a Material Adverse Effect; and the Company, the
Borrower, each other Loan Party will take all action which may be required to obtain, preserve,
renew and extend all licenses, permits and other authorizations which may be material to the
operation of such businesses.
6.03 Insurance
.
(a) The Company will maintain, on a consolidated basis, insurance to such extent and against
such hazards and liabilities as is commonly maintained by companies similarly situated (and in any
event the Borrower will maintain such insurance). In addition to the insurance referred to above,
with respect to each Mortgaged Property, the Borrower will (and the Company and the Borrower shall
cause each Lessor Subsidiary to) maintain the following policies:
(i) Prior to construction of any improvements on any Mortgaged Property, an all-risk,
completed value, non-reporting builders risk insurance policy or policies that provide
coverage similar to the foregoing must be submitted to the Administrative Agent. This
policy must be from a company and in an amount satisfactory to the Administrative Agent,
must have a vandalism and malicious mischief endorsement and must be sufficient to avoid the
application of any co-insurance provisions, must include provisions for a minimum 30-day
advance written notice of any intended policy cancellation or non-renewal, and must
designate the Administrative Agent as mortgagee and loss payee in a standard mortgagee
endorsement with the following address:
Bank of America, N.A., as Administrative Agent
2001 Clayton Road
Building B
Mailcode: CA4-702-02-25
Concord, CA 94520
50
Attn: Monitoring and Compliance
(ii) The Borrower covenants to (and the Company and the Borrower shall cause each
Lessor Subsidiary to) maintain or cause to be maintained, by the Borrower (or the Lessor
Subsidiary, as applicable) and, during the construction of any improvements on any Mortgaged
Property, the general contractor, general accident and public liability insurance against
all claims for bodily injury, death or property damage occurring upon, in or about any part
of such Mortgaged Property. The policies must be from companies and in amounts satisfactory
to the Administrative Agent. The contractors policy must include workers compensation
coverage in an amount sufficient to satisfy statutory requirements;
(iii) An all-risk property insurance policy must be in effect, and an original
certificate from the issuing insurance company evidencing that the policy is in full force
and effect must be submitted to the Administrative Agent; provided that such insurance shall
include coverage for earthquakes and against wind damage on such terms as the Administrative
Agent may reasonably require. The policy must be from a company satisfactory to the
Administrative Agent, must be in an amount satisfactory to the Administrative Agent, must
eliminate all co-insurance provisions, must include a Replacement Cost and Agreed
Amount/Stipulated Value Endorsement, must include a Sinkhole Endorsement, if appropriate,
must include provisions for a minimum 30-day advance written notice to the Administrative
Agent of any intended policy cancellation or non-renewal, and must designate the
Administrative Agent as mortgagee and loss payee in a standard mortgagee endorsement, as its
interest may appear;
(iv) If, and to the extent that, any Mortgaged Property is located within an area that
has been or is hereafter designated or identified as an area having special flood hazards as
defined in the Federal Flood Disaster Protection Act of 1973, as such act may from time to
time be amended and in effect, or pursuant to any other national or state program of flood
insurance, the Borrower shall (and the Company and the Borrower shall cause each Lessor
Subsidiary to) carry flood insurance with respect to such Mortgaged Property in an amount
not less than the maximum amount available under the Flood Disaster Protection Act of 1973
and the regulations issued pursuant thereto, as amended from time to time, in form complying
with the insurance purchase requirement of that Act;
(v) Each such liability insurance policy shall name the Administrative Agent as an
additional insured party with respect to such Mortgaged Property, and each such casualty
insurance policy shall name the Administrative Agent as a loss payee, and shall provide by
way of endorsements, riders or otherwise that (i) proceeds will be payable to the
Administrative Agent as its interest may appear; (ii) such insurance policy shall be
renewed, if renewal is available, and shall not be canceled and further, shall not be
endorsed, altered or reissued to effect a change in coverage in any manner materially
adverse to the Administrative Agent, for any reason and to any extent whatsoever unless such
insurer shall have first given the Administrative Agent thirty (30) days prior written
notice thereof; (iii) such insurance policy shall not be impaired by any act or neglect of
the Borrower (or any Lessor Subsidiary) or any use of such Mortgaged Property for
51
purposes more hazardous than are permitted by such policy; and (iv) the Administrative
Agent may, but shall not be obliged to, make premium payments to prevent any nonrenewal,
cancellation, endorsement, alteration or reissuance and such payments shall be accepted by
the insurer to prevent same;
(vi) The Administrative Agent shall be furnished with the original of each such initial
policy or a certificate with a duplicate of such original policy coincident with the
execution of the Mortgage related to such Mortgaged Property and satisfactory evidence of
renewal thereof not less than thirty (30) days prior to the expiration of the initial or
each preceding renewal policy together with receipts or other evidence that the premiums
thereon have been paid, with the original of each renewal policy or a certificate with a
duplicate of such renewal policy to follow as soon as available or, in any such case, an
appropriate brokers certificate in respect thereto. Upon request by Administrative Agent,
the Borrower shall (and the Company and the Borrower shall cause each Lessor Subsidiary to)
furnish to the Administrative Agent a statement certified by the Borrower (or the Lessor
Subsidiary, as applicable) or a duly authorized officer of the Borrower (or the Lessor
Subsidiary, as applicable) of the amounts of insurance maintained in compliance with this
Section 6.03
, a general description of the risks covered by such insurance and of
the insurance company or companies which carry such insurance. In addition, the Borrower
will (and the Company and the Borrower shall cause each Lessor Subsidiary to) promptly
comply with any and all requirements of any insurer of any portion of any Mortgaged Property
and any and all rules and regulations of any insurance commission or board of fire
underwriters having jurisdiction over such Mortgaged Property; and
(vii) Without limiting any of the other provisions of this
Section 6.03
, all
losses under, and the proceeds payable under, any policies of insurance that the Borrower
(or the Lessor Subsidiary, as applicable) may elect to obtain, whether or not required
hereunder, which insure, cover or relate to any Mortgaged Property, or any portion thereof,
shall be applied in the same manner and to the same extent as provided herein with respect
to any insurance required to be carried by the Borrower (or the Lessor Subsidiary, as
applicable).
(b) Unless the Company or the Borrower provides the Administrative Agent with evidence of the
insurance coverage as required by this Agreement or any other Loan Document, the Administrative
Agent (at its discretion) may purchase insurance at the Companys and the Borrowers expense to
protect the Secured Parties interest. This insurance may, but need not, also protect the
Companys and the Borrowers interest. If the Collateral becomes damaged, the coverage the
Administrative Agent purchases may not pay any claim the Company, the Borrower or any of their
Subsidiaries makes or any claim made against the Company, the Borrower or any of their
Subsidiaries. The Company or the Borrower, as applicable, may later cancel this coverage by
providing evidence that the Company or the Borrower, as applicable, has obtained property coverage
elsewhere.
(c) The Company and the Borrower (jointly and severally) are responsible for the cost of any
insurance purchased by the Administrative Agent. The cost of this insurance may be added to the
Obligations. If the cost is added to the Obligations, the interest rate provided in
52
Section 2.06(b)(i)
shall apply to such added amount. The effective date of coverage
may be the date the Companys prior coverage lapsed or the date the Company or the Borrower failed
to provide proof of coverage.
(d) Each of the Company and the Borrower acknowledges that the coverage the Administrative
Agent purchases may be considerably more expensive than insurance the Company or the Borrower can
obtain on its own and may not satisfy any need for property damage coverage or any mandatory
liability insurance requirements imposed by applicable law.
6.04 Obligations and Taxes
. Subject to any additional requirements in any Mortgage, each of
the Company and the Borrower will pay and discharge and will cause each other Loan Party to pay and
discharge, when due, all taxes, assessments and governmental charges or levies imposed upon the
Company, the Borrower or such Loan Party, as the case may be, as well as all lawful claims for
labor, materials and supplies or otherwise unless and only to the extent that the Company, the
Borrower or such Loan Party, as the case may be, is contesting such taxes, assessments and
governmental charges, levies or claims in good faith and by appropriate proceedings and the
Company, the Borrower or such Loan Party has set aside on its books such reserves or other
appropriate provisions therefor as may be required by GAAP.
6.05 Financial Statements; Reports
. The Company will furnish to the Administrative Agent and
each Lender:
(a)
Annual Audit Reports
. Within one hundred twenty (120) days after the end of each
fiscal year of the Company, to the extent not filed with the Securities and Exchange Commission, a
copy of the annual audit report of the Company and its Subsidiaries prepared on a consolidated
basis in conformity with GAAP and certified by an independent certified public accountant of
recognized national standing, to the extent any Unrestricted Subsidiaries exist, consolidating
financial statements for each of said Unrestricted Subsidiaries, and upon request by the
Administrative Agent or any Lender, unaudited annual financial statements with respect to the
Borrower;
(b)
Quarterly Financial Statements
. Within sixty (60) days after the end of each
quarter (except the last quarter) of each fiscal year of the Company, to the extent not filed with
the Securities and Exchange Commission, a copy of the Form 10 Q of the Company for such quarter,
prepared in accordance with the rules, regulations and guidelines of the Securities and Exchange
Commission and including therein the consolidated financial statements of the Company and its
Subsidiaries, to the extent any Unrestricted Subsidiaries exist, consolidating financial statements
for each of said Unrestricted Subsidiaries, and upon request by the Administrative Agent or any
Lender, unaudited quarterly financial statements with respect to the Borrower, in each case subject
to normal year end audit adjustments in each case;
(c)
Officers Certificate
. Together with the financial statements furnished by the
Company under
Section 6.05(a)
and
Section 6.05(b)
, a Compliance Certificate
executed by the Companys Chief Financial Officer or Treasurer dated the date of such annual audit
report or such quarterly financial statement, as the case may be, and including therewith the
calculations (and supporting documentation and/or backup information for such calculations) for all
financial
53
covenants set forth in
ARTICLE VII
hereof, and notices of all Swap Contracts to which
it is a party as of the date of such certificate;
(d)
SEC and Other Reports
. Copies of each filing and report made by the Company, the
Borrower or any of their respective Subsidiaries with or to any securities exchange or the
Securities and Exchange Commission and each communication from the Company, the Borrower or any of
their respective Subsidiaries to shareholders generally, promptly upon the making thereof, to the
extent such filings and reports are not available on the Companys website;
(e)
Intentionally omitted
.
(f)
Intentionally omitted
.
(g)
Intentionally omitted
.
(h)
Requested Information
. Promptly, from time to time, such other reports or
information as the Administrative Agent or any Lender may reasonably request.
Each of the Company and the Borrower hereby acknowledges that (a) the Administrative Agent
and/or the Arranger may make available to the Lenders materials and/or information provided by or
on behalf of the Company and the Borrower hereunder (collectively,
Borrower Materials
) by
posting the Borrower Materials on IntraLinks or another similar electronic system (the
Platform
) and (b) certain of the Lenders (each, a
Public Lender
) may have
personnel who do not wish to receive material non-public information with respect to the Company or
the Borrower, their Affiliates or their respective securities of any of the foregoing and who may
be engaged in investment and other market-related activities with respect to such Persons
securities. Each of the Company and the Borrower hereby agrees that (w) all Borrower Materials
that are to be made available to Public Lenders shall be clearly and conspicuously marked PUBLIC
which, at a minimum, shall mean that the word PUBLIC shall appear prominently on the first page
thereof; (x) by marking Borrower Materials PUBLIC, the Borrower shall be deemed to have
authorized the Administrative Agent, the Arranger, and the Lenders to treat such Borrower Materials
as not containing any material non-public information with respect to the Company or the Borrower
or their securities for purposes of United States Federal and state securities laws
(
provided
,
however
, that to the extent such Borrower Materials constitute
Information, they shall be treated as set forth in
Section 10.07
); (y) all Borrower
Materials marked PUBLIC are permitted to be made available through a portion of the Platform
designated Public Investor; and (z) the Administrative Agent and the Arranger shall be entitled
to treat any Borrower Materials that are not marked PUBLIC as being suitable only for posting on
a portion of the Platform not designated Public Investor.
6.06 Litigation and Other Notices
. The Company will notify the Administrative Agent and the
Lenders in writing of any of the following immediately upon learning of the occurrence thereof,
describing the same and, if applicable, the steps being taken by the Person(s) affected with
respect thereto:
(a)
Judgment
. The entry of any judgment or decree against the Company, the Borrower
and/or any of their respective Subsidiaries if the aggregate amount of such judgment or decree
exceeds Five Million Dollars ($5,000,000) (after deducting the amount with respect to
54
which the Company, the Borrower or such Subsidiary is insured and with respect to which the
insurer has assumed responsibility in writing);
(b)
Suits and Proceedings
. The filing or commencement of any action, suit,
investigation or proceeding, whether at law or in equity or by or before any court or any
Governmental Authority as to which there is a reasonable possibility of an adverse determination
and which, if adversely determined, could reasonably be expected to have a Material Adverse Effect;
(c)
Default
. The occurrence of any Event of Default or Default, together with a
written explanation of the facts and circumstances associated therewith;
(d)
Material Adverse Change
. The occurrence of any event which could reasonably be
expected to have a Material Adverse Effect;
(e)
Pension and Welfare Plans
. The occurrence of a Reportable Event with respect to
any Plan; the institution of any steps by the Company, the Borrower or any of their respective
Subsidiaries or any ERISA Affiliate, the PBGC or any other Person to terminate any Plan if such
termination could reasonably be expected to result in a Material Adverse Effect; the institution of
any steps by the Company, the Borrower or any of their respective Subsidiaries or any ERISA
Affiliate to withdraw from any Plan if such withdrawal could reasonably be expected to result in a
Material Adverse Effect; the incurrence of any material increase in the contingent liability of the
Company, the Borrower or any of their respective Subsidiaries with respect to any post-retirement
welfare benefits that could reasonably be expected to have a Material Adverse Effect; or the
incurrence by the Company or any ERISA Affiliate of any liability under Section 4201 or 4243 of
ERISA for any withdrawal, partial withdrawal, reorganization or other event under any Multiemployer
Plan that could reasonably be expected to have a Material Adverse Effect;
(f)
Leases
. (i) The entering into by the Borrower of any Lease after the Closing Date
or any amendment or other modification to any Lease (and a copy of any such Lease, amendment or
modification), (ii) the termination or expiration of any Lease, or (iii) any material adverse
change in the relationship between the Borrower and any lessee;
(g) The occurrence of any material change in accounting policies or financial reporting
practices by the Company, the Borrower or any of their respective Subsidiaries;
(h)
Hazardous Materials
. Any report, study, inspection or test that indicates the
presence of any Hazardous Materials on or about any Mortgaged Property or any adverse condition
relating to any Mortgaged Property, any Buildings or any such materials which presence or adverse
condition could reasonably be expected to have a Material Adverse Effect; and
(i)
Other Events
. The occurrence of such other events as the Administrative Agent or
the Required Lenders may reasonably specify from time to time.
6.07 ERISA
. Each Loan Party will comply with the applicable provisions of ERISA except where
the failure to comply could not reasonably be expected to have a Material Adverse Effect.
55
6.08 Books, Records and Access
. Each Loan Party will maintain complete and accurate books and
records in which full and correct entries in conformity with GAAP shall be made of all dealings and
transactions in relation to the business and activities of such Loan Party. Each Loan Party will
permit reasonable access by the Administrative Agent and each Lender, upon reasonable request, to
the books and records relating to such Loan Party during normal business hours, to permit or cause
to be permitted, the Administrative Agent and each Lender to make extracts from such books and
records, including, to the extent permissible without the relevant Loan Party being in breach
thereof, Master Franchise Agreements. Each Loan Party will also permit, or cause to be permitted,
upon reasonable request, any authorized representative designated by any Lender to discuss the
affairs, finances and condition of such Loan Party with such Persons principal financial officers
and principal accounting officers and such other officers as such Loan Party shall deem
appropriate.
6.09 Use of Proceeds
. The Borrower shall use the proceeds of the Loans for only the purposes
described in
Section 5.21
. No Loans shall be used for any purpose which would be in
contravention of any Requirement of Law.
6.10 Nature of Business
. The Loan Parties will engage in substantially the same field of
business as they are engaged in on the date hereof, and except as permitted in
Section
7.5(h)
, will refrain from engaging in, establishing or becoming in any way involved as a lender
in the business of automobile financing, sub-prime automobile financing or any other credit
transactions related to automobiles other than Retail Loan Guarantees.
6.11 Compliance
. The Loan Parties will comply with all statutes and governmental rules and
regulations applicable to them including all such statutes and government rules and regulations
relating to environmental pollution or to environmental regulation and control except where the
failure to comply could not reasonably be expected to have a Material Adverse Effect.
6.12 Intentionally omitted
.
6.13 Intentionally omitted
.
6.14 Intentionally omitted
.
6.15 Further Assurances
. Each of the Company and the Borrower shall, and shall cause each of
the Loan Parties to, to the extent applicable, execute, acknowledge, deliver, and record or file
such further instruments, including, without limitation, further security agreements, financing
statements, and continuation statements, and do such further acts as may be reasonably necessary,
desirable, or proper to carry out more effectively the purposes of this Agreement, and to protect
the Liens granted in this Agreement or the Loan Documents to which any of them respectively is a
party and against the rights or interests of third persons, and the Company and the Borrower
(jointly and severally) will pay all reasonable costs connected with any of the foregoing.
6.16 Permitted Acquisitions; Subsidiary Guarantors
.
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(a) Subject to the remaining provisions of this
Section 6.16
applicable thereto, the
Company may, from time to time after the Closing Date, make Acquisitions, as long as with respect
thereto each of the following conditions are satisfied (a Permitted Acquisition):
(i) no Default or Event of Default is in existence at the time of the consummation of
such proposed Acquisition or would exist after giving effect thereto, and no other
agreement, contract or instrument to which any Loan Party is a party restricts such proposed
Acquisition; and
(ii) for each acquisition involving the acquisition or creation of a direct or indirect
Restricted Subsidiary of the Company, (1) such Subsidiary shall be a Wholly Owned
Subsidiary, and (2) the Acquisition will not have the effect of causing or requiring any
direct or indirect Subsidiary of the Company to be engaged in the sale of New Motor Vehicles
of a different Manufacturer than the Manufacturer whose New Motor Vehicles such Subsidiary
was authorized to sell prior to the Acquisition.
(b) The Company shall cause each Restricted Subsidiary (other than the Ford Borrowers, GPI
Associates Holdings, LLC, Group 1 Automotive Reinsurance Two, Ltd and Group 1 Reinsurance Ltd., any
other Subsidiary formed for purposes of reinsurance, and any dormant Subsidiaries having retained
equity of less than $50,000) that is created or is otherwise acquired to execute and deliver a
Guaranty Joinder Agreement and updated Schedules of the Agreement, if applicable, and the other
applicable Loan Documents, with the documentation to be in form and substance reasonably
satisfactory to the Administrative Agent. GPI Associates Holdings, LLC shall be excluded from the
requirements contained herein only so long as it does not acquire any assets or incur any
Indebtedness other than those assets (including additional interests in existing or similar assets)
and Indebtedness in place on the date hereof. Any Restricted Subsidiary and any Subsidiary formed
for the sole purpose of transacting specific asset securitizations shall be excluded from the
requirements contained herein unless such Subsidiary is a guarantor of obligations under the
Revolving Credit Facility. Notwithstanding the foregoing, in the event the Dealer/Manufacturer
Agreement or other written agreements with Manufacturers to which any Subsidiary is subject shall
prohibit or restrict any Subsidiary of the Company from entering into the Guaranty Joinder
Agreement, such affected Subsidiary shall not be required to be a party thereto.
6.17 Ford Borrower and GM Borrower Dividends
. On or before the last Business Day of each
fiscal quarter of the Company, the Company shall cause all GM Borrowers and Ford Borrowers to make
cash transfers to the Company or to their respective parent with a view toward making an ultimate
and concurrent cash transfers to the Company of all pre-tax profits in excess of working capital
reasonably required in the day to day operations of such GM Borrower or Ford Borrower, as
applicable or such amounts as may be required pursuant to a Dealer/Manufacturer Agreement or other
agreements with Manufacturers to which such GM Borrower or Ford Borrower, as applicable, is a
party.
6.18 Leases
. At all times, comply in all material respects with the terms and provisions of
the Leases of the Financed Properties, and cause such Leases to be kept in full force and effect
without termination, amendment or modification, except for (i) any modification or amendment of a
Lease made in the ordinary course of business consistent with past practices
57
of the Loan Parties, and which amendment or modification is not materially adverse to the Loan
Parties, the Administrative Agent or the Lenders or (ii) renewals or extensions (A) on either
substantially the same terms as the existing Lease of a Financed Property, or (B) as otherwise
approved by the Administrative Agent in writing.
6.19 Unimproved Real Property
. With respect to each Financed Property constituting Unimproved
Real Property, the Borrower or the applicable Lessor Subsidiary shall commence construction on each
such Financed Property within (**) months of the date the applicable Financed Property enters the
Property Pool.
ARTICLE VII.
NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan or other amount due
hereunder shall remain unpaid or unsatisfied, the Borrower, and the Company as to itself and as to
each of its Subsidiaries, covenants and agrees that:
7.01 Indebtedness
. Neither the Company nor any Subsidiary will incur, create, assume or
suffer to exist any Indebtedness, except:
(a) the Notes and the Indebtedness and Obligations under this Agreement and the other Loan
Documents;
(b) Indebtedness of any Loan Party existing at the Closing Date which is reflected in
Schedule 7.01(b)
hereto (and does not fall within any other category in this
Section
7.01
) and all renewals and extensions thereof on substantially the same terms;
(c) Indebtedness created under leases which, in accordance with GAAP, have been recorded
and/or should have been recorded on the books of the applicable Subsidiary as Capital Leases;
(d) Indebtedness in connection with the purchase of personal property other than Motor
Vehicles;
(e) Subordinated Indebtedness;
(f) accounts payable (for the deferred purchase price of property or services) which are from
time to time incurred in the ordinary course of business and which are not in excess of ninety (90)
days past the invoice or billing date;
(g) (A) Permitted Real Estate Debt, (B) any Guarantees by the Company of such Indebtedness and
(C) any Guarantees by any Subsidiary of such Indebtedness incurred by any Restricted Subsidiary;
(h) Indebtedness of any Subsidiary of the Company in existence (but not incurred or created in
connection with a Permitted Acquisition) on the date on which such Subsidiary is acquired by the
Company, provided (i) neither the Company nor any of its other Subsidiaries has
58
any obligation with respect to such Indebtedness, (ii) none of the properties of the Company
or any of its other Subsidiaries is bound with respect to such Indebtedness, (iii) the aggregate
amount of all such Subsidiary Indebtedness does not exceed 10% of Stockholders Equity, and (iv)
such Indebtedness may be prepaid only upon the payment of prepayment penalties or premiums in
excess of 5% of the principal amount of such Indebtedness;
(i) Indebtedness secured by Liens upon any property hereafter acquired by the Company or any
of its Subsidiaries to secure Indebtedness in existence on the date of a Permitted Acquisition (but
not incurred or created in connection with such Permitted Acquisition), which Indebtedness is
assumed by such Person simultaneously with such Permitted Acquisition, which Liens extend only to
such property so acquired (and not to any after-acquired property) and with respect to which
Indebtedness neither the Company nor any of its Subsidiaries (other than the acquiring Person) has
any obligation;
(j) Indebtedness owed by the Company or any of its Subsidiaries to the Company or to any other
Subsidiary;
(k) any Retail Loan Guarantees; provided that the sum of (i) the aggregate principal amount of
all Retail Loan Guarantees plus (ii) Investments in seller financed notes in connection with Motor
Vehicles shall not exceed ten percent (10%) of Stockholders Equity;
(l) contingent obligations (including Guarantees) by the Company of any Indebtedness of the
Restricted Subsidiaries permitted hereunder unless otherwise provided herein;
(m) Indebtedness arising under any Service Agreement as such term is defined in
Section
6.14
;
(n) Indebtedness of Unrestricted Subsidiaries to non-Affiliated Persons not secured by Liens
on any property of, and not Guaranteed by, the Company or any Restricted Subsidiary;
(o) Indebtedness that constitutes a renewal, refinancing, replacement or extension of
Indebtedness of Loan Parties otherwise permitted hereunder; provided that the principal amount of
any such Indebtedness renewed, refinanced, replaced or extended shall not materially exceed the
amount outstanding immediately prior to such renewal, refinancing replacement or extension, and,
further provided, in the case of Subordinated Indebtedness, no such renewal, refinancing,
replacement or extension may shorten the maturity to a date that is earlier than six (6) months
after the Maturity Date or change any of the subordination provisions in a manner adverse to the
Lenders without the consent of Required Lenders;
(p) Unsecured debt of the Company in an aggregate amount not to exceed Six Hundred Million and
No/100 Dollars ($600,000,000) outstanding at any time to the extent permitted under the Closing
Date Revolving Credit Agreement;
(q) Indebtedness of the Company or any Restricted Subsidiary (other than the Borrower)
consisting of floor plan financing for Motor Vehicles, provided that such Indebtedness is not
secured by any of the Collateral;
59
(r) Indebtedness of any Restricted Subsidiary (other than the Borrower) created under a
qualified service loaner program with the financial affiliate of the Manufacturer of the Motor
Vehicles to be provided to such Loan Party (other than the Borrower) under such service loaner
program;
(s) obligations (contingent or otherwise) of the Company, the Borrower or any Restricted
Subsidiary existing or arising under any Related Swap Contract; and
(t) Indebtedness under the Revolving Credit Agreement in an amount not to exceed
$1,850,000,000 outstanding at any time.
7.02 Liens
. Neither the Company nor any Restricted Subsidiary will incur, create, assume or
permit to exist any Lien on any of its property or assets, whether owned at the date hereof or
hereafter acquired, or assign or convey any rights to or security interests in any future revenues,
except:
(a) Liens pursuant to any Loan Document;
(b) Liens securing Indebtedness permitted by
Section 7.01(c)
,
Section 7.01(d)
(which Liens extend only to property so purchased),
Section 7.01(h)
,
Section
7.01(i)
,
Section 7.01(n)
,
Section 7.01(q)
,
Section 7.01(r)
(which Liens
extend only to property under such qualified service loaner program) or
Section 7.01(t)
(which Liens shall not extend to any of the Collateral);
(c) Liens referred to in
Section 5.16
and Mortgage Permitted Liens;
(d) Liens securing Permitted Real Estate Debt and permitted guarantees thereof;
(e) extensions, renewals and replacements of Liens referred to in
Section 7.02(a)
,
(b)
,
(c)
,
(d)
and
(f)
provided, that any such extension, renewal or
replacement Lien shall be limited to the property or assets covered by the Lien being extended,
renewed or replaced and that the Indebtedness secured by any such extension, renewal or replacement
lien shall be in an amount not greater than the amount of the Indebtedness secured by the original
Lien extended, renewed or replaced;
(f) Certain rights of set-off in favor of a Manufacturer on amounts owing in connection with
Motor Vehicles purchased from such Manufacturer and in favor of suppliers and retail finance
institutions consistent with the Companys existing business practices and in the ordinary course
of business; and
(g) Liens existing under Qualified Sale/Leaseback Transactions, but only on the Property
subject of such transaction.
7.03 Consolidations and Mergers
. No Loan Party shall merge, consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to
or in favor of any Person, except
60
(a) (i) any Loan Party may merge with the Company, provided that the Company shall be the
continuing or surviving Person, (ii) any Loan Party may merge with the Borrower provided that the
Borrower shall be the continuing or surviving Person (unless the Borrower is merging with the
Company), (iii) any Lessor Subsidiary may merge with the Company or the Borrower, provided that the
Company or the Borrower shall be the continuing or surviving Person, (iv) any Lessee Subsidiary may
merge with any Restricted Subsidiary, or (v) (subject to the provisions in clauses (i) and (ii)
above) any Loan Party may merge with any one or more such Loan Parties, provided that (A) if any
such Person merges with a Lessor Subsidiary, the Lessor Subsidiary shall be the continuing or
surviving Person, (B) if any such transaction shall be between a Loan Party which is a Wholly Owned
Subsidiary and a Loan Party which is not a Wholly Owned Subsidiary, the Wholly Owned Subsidiary
shall be the continuing or surviving Person and (C) nothing contained in this clause (v) shall be
deemed to permit Lessor Subsidiary to merge with any Person other than the Company or the Borrower;
(b) (i) any Loan Party (other than the Borrower) may sell all or substantially all of its
assets (upon voluntary liquidation or otherwise) to the Company, the Borrower or a Wholly Owned
Subsidiary that is a party to the Guaranty Agreement; (ii) the Borrower or any Lessor Subsidiary
may sell all or substantially all of its assets (upon voluntary liquidation or otherwise) to the
Company; and (iii) the Borrower or any Lessor Subsidiary may sell all or substantially all of its
assets (upon voluntary liquidation or otherwise) other than assets comprising any Collateral to a
Loan Party; and
(c) any Loan Party (other than the Borrower) may merge or consolidate with another Person
(that is not the Company or any of its Subsidiaries) if (x) the Loan Party involved in the merger
or the consolidation is the surviving Person or the Person who is the survivor becomes a Wholly
Owned Subsidiary as a result thereof, (y) if the Company or any Lessor Subsidiary is involved in
the merger or consolidation, the Company or such Lessor Subsidiary shall be the surviving Person
and (z) immediately prior to and after giving effect to such merger or consolidation, there exists
no Default or Event of Default;
provided
,
further
, that if (w) the Borrower or any Lessor Subsidiary merges into
the Company pursuant to
clause (a)(i)
above, (x) any Lessor Subsidiary merges into the
Company or the Borrower pursuant to
clause (a)(iii)
above, (y) the Borrower or any Lessor
Subsidiary sells all or substantially all of its assets to the Company pursuant to
clause
(b)(ii)
above or (z) any Lessor Subsidiary sells all or substantially all of its assets to
another Loan Party pursuant to
clause (b)(i)
above, the Borrower, the Lessor Subsidiary,
the Company or such other Loan Party, as applicable, shall execute and/or deliver to the
Administrative Agent all such documents and opinions, deliver such endorsements of applicable title
policies, and take such other actions as may be required or as the Administrative Agent may
reasonably request in order to ensure the continued perfection and priority of the Administrative
Agents Lien on any property owned by the Borrower, the Lessor Subsidiary or the Company, as
applicable, immediately prior to such merger or sale, continued title insurance coverage with
respect to any applicable Financed Properties after giving effect to such merger or sale, and the
assumption by the purchasing or surviving Person of obligations under any applicable Mortgage;
provided
further
, that if any Lessee Subsidiary merges with any other Person
pursuant to clause (a) or (c) above, or sells all or substantially all of its assets to any other
Person pursuant to clause (b) above, then the Person who is the survivor of such merger or the
purchaser of such assets, as applicable, shall execute
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and/or deliver to the Administrative Agent a subordination and attornment agreement in
substantially the form of
Exhibit G
.
7.04 Disposition of Assets
. Neither the Company nor the Borrower will, or permit any Loan
Party to permit any Disposition (whether in one or a series of transactions) of any property or
assets (including Accounts, notes receivable, and/or chattel paper, with or without recourse) or
enter into any agreement so to do, except:
(a) Dispositions of Motor Vehicles and other inventory in the ordinary course of business;
(b) Dispositions of assets, properties or businesses by the Company or any of its Subsidiaries
to any other Subsidiary or to the Company provided, however, (i) other than Dispositions to newly
created Subsidiaries which become Revolving Facility Borrowers for purposes of complying with
Dealer/Manufacturer Agreements, any such Disposition made to a Ford Borrower or a GM Borrower shall
be made on an arms-length basis for fair market value for cash and only in the ordinary course of
business;
(c) Dispositions of equipment and other property which is obsolete, worn out or no longer used
in or useful to such Persons business, all in the ordinary course of business;
(d) Dispositions occurring as the result of a casualty event, condemnation or expropriation;
(e) Dispositions pursuant to Qualified Sale/Leaseback Transactions, provided that if any such
property so Disposed is in the Property Pool, the Borrower shall have made all necessary payments
contemplated by
Section 7.14
;
(f) Dispositions of chattel paper to third parties pursuant to arms length transactions for
fair value in the ordinary course of business;
(g) Dispositions as permitted in
Section 7.03
;
(h) Dispositions in any year of other property, assets (including capital stock of its
Subsidiaries and Affiliates) or businesses of the Company not otherwise permitted by clauses (a)
through (g) of this
Section 7.04
; provided, that the proceeds realized from such
Disposition in any applicable year in excess of ten percent (10%) of the tangible assets of the
Company as of the beginning of such year are either reinvested within one (1) year in similar
assets or used to repay the Obligations; and
(i) Dispositions of Financed Properties permitted by
Section 7.14
.
7.05 Investments
. Neither the Company nor any Restricted Subsidiary will make or permit to
exist any Investment in any Person, except for:
(a) Permitted Acquisitions;
62
(b) extensions of credit in the nature of Accounts or notes receivable and/or chattel paper
arising from the sale of goods and services in the ordinary course of business;
(c) shares of stock, obligations or other securities received in settlement of claims arising
in the ordinary course of business;
(d) Investments in securities maturing within two (2) years and issued or fully guaranteed or
insured by the United States of America or any state or agency thereof;
(e) Investments in commercial paper maturing two hundred seventy (270) days or less from the
date of acquisition thereof and having, at such date of acquisition, a credit rating of at least
A-1 from S&P and P-1 from Moodys;
(f) Investments in certificates of deposit, bankers acceptances and time deposits maturing
within two (2) years from the date of acquisition thereof issued or guaranteed by or placed with,
and money market deposit accounts issued or offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or any State thereof that has a combined
capital and surplus and undivided profits of not less than $100,000,000 and whose credit rating is
at least A-1 from S&P and P-1 from Moodys, or any Lender;
(g) Investments in negotiable instruments held by Comercia Securities, Inc. that are permitted
by the Revolving Credit Agreement;
(h) Investments in seller financed notes in connection with Motor Vehicles; provided that the
sum of (i) the aggregate amount of all seller financed notes of the Loan Parties in connection with
Motor Vehicles plus (ii) the aggregate amount of all Retail Loan Guarantees shall not exceed ten
percent (10%) of Stockholders Equity;
(i) Investments in Wholly Owned Subsidiaries of the Company;
(j) Investments in less than Wholly Owned Subsidiaries in an aggregate amount of up to ten
percent (10%) of Stockholders Equity; and
(k) Investments in joint ventures in an aggregate amount of up to five percent (5%) of
Stockholders Equity.
7.06 Transactions with Affiliates
. No Loan Party will enter into any transaction with any
Affiliate except upon terms no less favorable than the applicable Loan Party could obtain in an
arms-length transaction with a Person which was not an Affiliate.
7.07 Other Agreements
. No Loan Party will enter into any agreement containing any provision
which would be violated or breached by such Loan Partys performance of its Obligations hereunder
or under any instrument or document delivered or to be delivered by the Loan Parties hereunder or
in connection herewith if the effect of such violation or breach could reasonably be expected to
have a Material Adverse Effect.
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7.08 Fiscal Year; Accounting
. No Loan Party will change its fiscal year without prior
notification to the Administrative Agent or change its method of accounting (other than immaterial
changes and methods and changes authorized or required by GAAP).
7.09 Credit Standards
. No Loan Party will modify in any material way and which is
inconsistent with normal industry practice, the credit standards and procedures, the collection
policies or the loss recognition procedures with respect to the creation or collection of Accounts,
notes received and/or chattel paper.
7.10 Pension Plans
. No Loan Party will engage in, or permit to exist or occur any other
condition, event or transaction with respect to any Plan which could reasonably be expected to have
a Material Adverse Effect. No Loan Party will take any action or fail to take any action the
result of which could be a past due liability to a Multiemployer Plan that could reasonably be
expected to have a Material Adverse Effect.
7.11 Restricted Payments
. Neither the Company nor any Restricted Subsidiary will declare or
make any Restricted Payment, if, in each case, immediately after giving effect thereto any Default
or Event of Default has occurred or would be created thereby.
7.12 Fixed Charge Coverage Ratio
. The Company will not permit (as of the end of any fiscal
quarter) its Fixed Charge Coverage Ratio to be less than 1.25 to 1.0, such ratio to be calculated
as of the end of each fiscal quarter of the Company based upon the four fiscal quarters immediately
preceding such date of determination.
7.13 Senior Secured Leverage Ratio
. The Company shall not, at any time, permit its Senior
Secured Leverage Ratio to be greater than 2.0 to 1.0.
7.14 Disposition of Financed Properties
. The Borrower and each Loan Party agree that it shall
not, and shall not permit any Lessor Subsidiary to, permit any Disposition (whether in one or a
series of transactions) of any Financed Property or any portion of any Financed Property, or enter
into any agreement so to do, except Permitted Financed Property Dispositions;
provided
that, if (i) a payment default or Event of Default exists and (ii) the Administrative Agent is not
in agreement with the Borrowers determination of the FMV or Disposition Closing Costs attributable
to such Financed Property, then (x) upon the request of the Administrative Agent (which such
request shall be in the Administrative Agents sole discretion), the Borrower shall place into
escrow (in a manner satisfactory to the Administrative Agent, the escrow account) an amount equal
to the difference between (1) 125% of the value of such Financed Property reflected in the original
FIRREA Appraisal with respect to such Financed Property (or if a subsequent FIRREA Appraisal has
been commissioned with respect to such Financed Property, 125% of the value reflected in such later
FIRREA Appraisal) (in either case, the Baseline Appraisal) and (2) the amount of the payment made
by the Borrower as required under clause (b)(ii) of the definition of Permitted Financed Property
Disposition; (y) the Administrative Agent shall commission a FIRREA Appraisal at the Borrowers
expense with respect to such Financed Property (which such FIRREA Appraisal shall be acceptable to
the Administrative Agent in its sole discretion) (the Commissioned Appraisal) to determine any
amount required to be paid pursuant to clause (b) of the definition of Permitted Financed Property
Disposition and may make demand under or debit the escrow account in the amount of
64
the difference between (1) the value reflected in the Commissioned Appraisal less Disposition
Closing Costs and (2) the amount of the payment made by the Borrower as required under clause
(b)(ii) of the definition of Permitted Financed Property Disposition. The Borrower acknowledges
that if the value of the applicable Financed Property reflected in any Commissioned Appraisal is
greater than 125% of the value reflected in the Baseline Appraisal, the Borrower shall pay to the
Administrative Agent an additional amount equal to the difference between (1) the value reflected
in the Commissioned Appraisal less Disposition Closing Costs and (2) the sum of (A) the amount
debited from the escrow account in accordance with this paragraph and (B) the amount of the payment
made by the Borrower as required under
clause (b)(ii)
of the definition of Permitted
Financed Property Disposition. The Administrative Agent will promptly return to the Borrower any
amounts remaining in the escrow account with respect to such Financed Property after determination
and debiting, if any, of the account in connection herewith. In the event of any Permitted
Financed Property Disposition in accordance with the terms hereof, such Financed Property shall be
removed from the Property Pool (and the Liens granted to the Administrative Agent in connection
therewith shall be released) and availability under the facility described in
Section 2.01
hereof shall increase in the amount of such repayment (but in no event greater than the Aggregate
Commitments then in effect).
7.15 Lessor Subsidiaries
. No Loan Party shall permit any Person other than the Borrower, or a
Wholly Owned Subsidiary of the Company which is a Restricted Subsidiary, to own any equity interest
in any Lessor Subsidiary.
7.16 Collateral
. No Loan Party shall permit to exist any Lien or security interest on the
Collateral other than (i) the Liens and security interests of the Administrative Agent and (b)
Mortgage Permitted Liens.
7.17 Leases
. No Loan Party shall permit (i) any Person to occupy any Financed Property except
for the Lessee Subsidiary party to the Lease with respect to such Financed Property, which such
Lessor Subsidiary has executed and delivered to the Administrative Agent a subordination and
attornment agreement in substantially the form of
Exhibit G
or (ii) any sublease on any
Financed Property to exist other than a sublease to a Restricted Subsidiary which is a Wholly Owned
Subsidiary and has entered into a subordination and attornment agreement substantially in the form
of
Exhibit G
.
ARTICLE VIII.
EVENTS OF DEFAULT AND REMEDIES
8.01 Events of Default
. Any of the following shall constitute an Event of Default:
(a) any representation or warranty made or deemed made in or in connection with this
Agreement, the Notes, any of the Loan Documents or any of the Borrowings hereunder or in any
report, certificate, financial statement or other instrument furnished in connection with this
Agreement or the execution and delivery of the Notes or any of the Loan Documents or the making of
any of the Borrowings hereunder shall prove to have been false or misleading in any material
respect when made or deemed made;
65
(b) default shall be made in the payment of any principal of any Loan when and as the same
shall become due and payable pursuant to the terms of this Agreement, whether at the due date
thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan or any Commitment Fees or
any other amount due under this Agreement other than principal of any Loan when and as the same
shall become due and payable which shall remain unremedied for a period of five (5) days from the
date due;
(d) default shall be made in the due observance or performance of any covenant, condition or
agreement contained in
Section 6.01
,
Section 6.06
,
Section 6.09
,
Section 6.10
or in
ARTICLE VII
;
(e) except as provided in
Section 8.01(a)
through
Section 8.01(d)
, inclusive,
default shall be made in the due observance or performance of any other covenant, condition or
agreement to be observed or performed pursuant to this Agreement or any of the other Loan Documents
and such default shall continue unremedied for thirty (30) days after the earlier to occur of (i)
any Loan Party obtaining knowledge thereof and (ii) written notice thereof having been given to the
Company or the Borrower;
(f) the Company or any Restricted Subsidiary shall (i) voluntarily commence any proceeding or
file any petition seeking relief under any Debtor Relief Law, (ii) consent to the institution of,
or fail to contravene in a timely and appropriate manner to any such proceeding or the filing of
any such petition, (iii) apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator or similar official for such Person or for a substantial part of such Persons
property or assets, (iv) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (v) make a general assignment for the benefit of creditors, or
(vi) become unable, admit in writing its inability or fail generally to pay its debts as they
become due or (vii) take any corporate or other action for the purpose of effecting any of the
foregoing;
(g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in
a court of competent jurisdiction seeking (i) relief in respect of the Company or any Restricted
Subsidiary, or of a substantial part of the property or assets of such Person, under any Debtor
Relief Law, (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar
official for the Company or any Restricted Subsidiary or any of its Subsidiaries or for a
substantial part of the property of any such Person or (iii) the winding-up or liquidation of the
Company or any Restricted Subsidiary; and such proceeding or petition shall continue undismissed
for sixty (60) days or an order or decree approving or ordering any of the foregoing shall continue
unstayed and in effect for sixty (60) days;
(h) default (other than a default in the payment of principal or interest) shall occur with
respect to any Indebtedness of the Company or any Restricted Subsidiary, if the total amount of
such Indebtedness in default exceeds in the aggregate, an amount equal to Ten Million Dollars
($10,000,000) and if the effect of any such default shall be to accelerate, or to permit the holder
or obligee of any such Indebtedness (or any trustee on behalf of such holder or obligee) to
accelerate (with or without notice or lapse of time or both), the maturity of any such
66
Indebtedness; or any payment of principal or interest, regardless of amount, on any
Indebtedness of the Company or any Restricted Subsidiary, which Indebtedness exceeds in the
aggregate an amount equal to Ten Million Dollars ($10,000,000), shall not be paid when due, whether
at maturity, by acceleration or otherwise (after giving effect to any period of grace as specified
in the instrument evidencing or governing such Indebtedness);
(i) a Reportable Event or Reportable Events shall have occurred with respect to any Plan or
Plans that reasonably could be expected to result in a Material Adverse Effect or the incurrence by
the Company, the Borrower or any ERISA Affiliate of any liability under Section 4201 or 4243 of
ERISA for any withdrawal, partial withdrawal, reorganization or other event under any Multiemployer
Plan that could reasonably be expected to have a Material Adverse Effect;
(j) there shall be entered against the Company or any Restricted Subsidiary one or more
judgments or decrees in excess of Ten Million Dollars ($10,000,000) in the aggregate at any one
time outstanding for the Company and all Restricted Subsidiaries and all such judgments or decrees
in the amount of such excess shall not have been vacated, discharged, stayed or bonded pending
appeal within sixty (60) days from the entry thereof, excluding those judgments or decrees for and
to the extent which the Company, any such Restricted Subsidiary is insured and with respect to
which the insurer has assumed responsibility in writing (subject to usual deductibles) or for and
to the extent which the Company or any such Loan Party is otherwise indemnified if the terms of
such indemnification are satisfactory to the Required Lenders;
(k) there shall occur any material loss of or change to any Dealer/Manufacturer Agreement
between any Loan Party and a Manufacturer, which could reasonably be expected to result in a
Material Adverse Effect;
(l) any of the Loan Documents shall cease to be legal, valid and binding agreements
enforceable against any Person other than the Administrative Agent or any Lender executing the same
in accordance with the respective terms thereof except as permitted by the terms hereof or thereof
or shall in any way be terminated or become or be declared ineffective or inoperative or shall in
any way whatsoever cease to give or provide the respective Liens, security interests, rights,
titles, interests, remedies, powers or privileges intended to be created thereby;
(m) a Change of Control; or
(n) there shall occur (i) any default under any Lease and such default is material (or, if
such default is not material, the Borrower (or the applicable Lessor Subsidiary) has made a claim
of default or has objected, either orally or in writing, to the conduct giving rise to such
default), and such default continues for 30 days, or (ii) an amendment or other modification to a
Lease which is materially adverse to the Borrower (or a Lessor Subsidiary, as applicable), the
Administrative Agent or the Lenders.
8.02 Remedies Upon Event of Default
. If any Event of Default occurs and is continuing, the
Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders,
take any or all of the following actions:
67
(a) declare the commitment of each Lender to make Loans to be terminated, whereupon such
commitments shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and
unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document
to be immediately due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by each of the Company and the Borrower;
(c) exercise on behalf of itself, the Lenders all rights and remedies available to it or the
Lenders under the Loan Documents;
provided
,
however
, that upon the occurrence of an actual or deemed entry of an
order for relief with respect to the Borrower or the Company under the Bankruptcy Code of the
United States, the obligation of each Lender to make Loans shall automatically terminate, the
unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid
shall automatically become due and payable, without further act of the Administrative Agent or any
Lender.
8.03 Application of Funds.
After the exercise of remedies provided for in
Section
8.02
(or after the Loans have automatically become immediately due and payable as set forth in
the proviso to
Section 8.02
), any amounts received on account of the Obligations shall be
applied by the Administrative Agent in the following order:
First
, to payment of that portion of the Obligations constituting fees, indemnities,
expenses and other amounts (including fees, charges and disbursements of counsel to the
Administrative Agent and amounts payable under
Article III
, but excluding amounts payable
under Related Swap Contracts) payable to the Administrative Agent in its capacity as such;
Second
, to payment of that portion of the Obligations constituting fees, indemnities
and other amounts (other than principal, interest and amounts payable in respect of Related Swap
Contracts) payable to the Lenders (including fees, charges and disbursements of counsel to the
respective Lenders and amounts payable under
Article III
), ratably among them in proportion
to the respective amounts described in this clause
Second
payable to them;
Third
, to payment of that portion of the Obligations constituting accrued and unpaid
interest on the Loans and other Obligations (other than in respect of Related Swap Contracts),
ratably among the Lenders in proportion to the respective amounts described in this clause
Third
payable to them;
Fourth
, to payment of that portion of the Obligations constituting unpaid principal of
the Loans, ratably among the Lenders in proportion to the respective amounts described in this
clause
Fourth
held by them;
Fifth
, to payment of amounts owing under Related Swap Contracts, in each case to the
extent owing to any Related Swap Contract Provider arising under Related Swap Contracts that shall
have been terminated and as to which the Administrative Agent shall have received notice
68
of such termination and the amount owing under the applicable Related Swap Contracts from the
applicable Related Swap Contract Provider;
Sixth
, to the payment of all other Obligations of the Loan Parties owing under or in
respect of the Loan Documents that are due and payable to the Administrative Agent and the other
Secured Parties, or any of them, on such date, ratably based on the respective aggregate amounts of
all such Obligations owing to the Administrative Agent and the other Secured Parties on such date;
and
Last
, the balance, if any, after all of the Obligations have been indefeasibly paid in
full, to the Borrower or as otherwise required by Law.
ARTICLE IX.
ADMINISTRATIVE AGENT
9.01 Appointment and Authority
. Each of the Lenders hereby irrevocably appoints Bank of
America to act on its behalf as the Administrative Agent hereunder and under the other Loan
Documents and authorizes the Administrative Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof,
together with such actions and powers as are reasonably incidental thereto. The provisions of this
Article are solely for the benefit of the Administrative Agent and the Lenders, and neither the
Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such
provisions.
9.02 Rights as a Lender
. The Person serving as the Administrative Agent hereunder shall have
the same rights and powers in its capacity as a Lender as any other Lender and may exercise the
same as though it were not the Administrative Agent and the term Lender or Lenders shall,
unless otherwise expressly indicated or unless the context otherwise requires, include the Person
serving as the Administrative Agent hereunder in its individual capacity. Such Person and its
Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other
advisory capacity for and generally engage in any kind of business with the Company, the Borrower
or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent
hereunder and without any duty to account therefor to the Lenders.
9.03 Exculpatory Provisions
. The Administrative Agent shall not have any duties or
obligations except those expressly set forth herein and in the other Loan Documents. Without
limiting the generality of the foregoing, the Administrative Agent:
(a) shall not be subject to any fiduciary or other implied duties, regardless of whether a
Default has occurred and is continuing;
(b) shall not have any duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan
Documents that the Administrative Agent is required to exercise as directed in writing by the
Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided
for herein or in the other Loan Documents),
provided
that the Administrative
69
Agent shall not be required to take any action that, in its opinion or the opinion of its
counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document
or applicable law; and
(c) shall not, except as expressly set forth herein and in the other Loan Documents, have any
duty to disclose, and shall not be liable for the failure to disclose, any information relating to
the Company, the Borrower or any of their respective Affiliates that is communicated to or obtained
by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.
The Administrative Agent shall not be liable for any action taken or not taken by it (i) with
the consent or at the request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be
necessary, under the circumstances as provided in
Sections 10.01
and
8.02
) or (ii)
in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall
be deemed not to have knowledge of any Default unless and until notice describing such Default is
given to the Administrative Agent by the Borrower or a Lender.
The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with this Agreement or
any other Loan Document, (ii) the contents of any certificate, report or other document delivered
hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance
of any of the covenants, agreements or other terms or conditions set forth herein or therein or the
occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this
Agreement, any other Loan Document or any other agreement, instrument or document or (v) the
satisfaction of any condition set forth in
Article IV
or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to the Administrative Agent.
9.04 Reliance by Administrative Agent
. The Administrative Agent shall be entitled to rely
upon, and shall not incur any liability for relying upon, any notice, request, certificate,
consent, statement, instrument, document or other writing (including any electronic message,
Internet or intranet website posting or other distribution) believed by it to be genuine and to
have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed by it to have been
made by the proper Person, and shall not incur any liability for relying thereon. In determining
compliance with any condition hereunder to the making of a Loan, that by its terms must be
fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition
is satisfactory to such Lender unless the Administrative Agent shall have received notice to the
contrary from such Lender prior to the making of such Loan. The Administrative Agent may consult
with legal counsel (who may be counsel for the Company or the Borrower), independent accountants
and other experts selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.
9.05 Delegation of Duties
. The Administrative Agent may perform any and all of its duties and
exercise its rights and powers hereunder or under any other Loan Document by or
70
through any one or more sub-agents appointed by the Administrative Agent. The Administrative
Agent and any such sub-agent may perform any and all of its duties and exercise its rights and
powers by or through their respective Related Parties. The exculpatory provisions of this Article
shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any
such sub-agent, and shall apply to their respective activities in connection with the syndication
of the credit facilities provided for herein as well as activities as Administrative Agent.
9.06 Resignation of Administrative Agent
. The Administrative Agent may at any time give
notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of
resignation, the Required Lenders shall have the right, in consultation with the Borrower, to
appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of
any such bank with an office in the United States. If no such successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent gives notice of its resignation, then the retiring Administrative
Agent may on behalf of the Lenders, appoint a successor Administrative Agent meeting the
qualifications set forth above;
provided
that if the Administrative Agent shall notify the
Borrower and the Lenders that no qualifying Person has accepted such appointment, then such
resignation shall nonetheless become effective in accordance with such notice and (1) the retiring
Administrative Agent shall be discharged from its duties and obligations hereunder and under the
other Loan Documents (except that in the case of any collateral security held by the Administrative
Agent on behalf of the Lenders under any of the Loan Documents, the retiring Administrative Agent
shall continue to hold such collateral security until such time as a successor Administrative Agent
is appointed) and (2) all payments, communications and determinations provided to be made by, to or
through the Administrative Agent shall instead be made by or to each Lender directly, until such
time as the Required Lenders appoint a successor Administrative Agent as provided for above in this
Section. Upon the acceptance of a successors appointment as Administrative Agent hereunder, such
successor shall succeed to and become vested with all of the rights, powers, privileges and duties
of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be
discharged from all of its duties and obligations hereunder or under the other Loan Documents (if
not already discharged therefrom as provided above in this Section). The fees payable by the
Company and the Borrower to a successor Administrative Agent shall be the same as those payable to
its predecessor unless otherwise agreed between the Company and the Borrower and such successor.
After the retiring Administrative Agents resignation hereunder and under the other Loan Documents,
the provisions of this Article and
Section 10.04
shall continue in effect for the benefit
of such retiring Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while the retiring
Administrative Agent was acting as Administrative Agent.
9.07 Non-Reliance on Administrative Agent and Other Lenders
. Each Lender acknowledges that it
has, independently and without reliance upon the Administrative Agent or any other Lender or any of
their Related Parties and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Administrative Agent or any
other Lender or any of their Related Parties and based on such documents and information as it
shall from time to time deem appropriate, continue to make
71
its own decisions in taking or not taking action under or based upon this Agreement, any other
Loan Document or any related agreement or any document furnished hereunder or thereunder.
9.08 No Other Duties, Etc
. Anything herein to the contrary notwithstanding, neither the Book
Manager nor the Lead Arranger listed on the cover page hereof shall have any powers, duties or
responsibilities under this Agreement or any of the other Loan Documents, except in its capacity,
as applicable, as the Administrative Agent or a Lender hereunder.
9.09 Administrative Agent May File Proofs of Claim
. In case of the pendency of any proceeding
under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the
Administrative Agent (irrespective of whether the principal of any Loan shall then be due and
payable as herein expressed or by declaration or otherwise and irrespective of whether the
Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered,
by intervention in such proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal and interest owing and
unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such
other documents as may be necessary or advisable in order to have the claims of the Lenders and the
Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements
and advances of the Lenders and the Administrative Agent and their respective agents and counsel
and all other amounts due the Lenders and the Administrative Agent under
Sections 2.07
and
10.04
) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such
claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender to make such payments to the
Administrative Agent and, in the event that the Administrative Agent shall consent to the making of
such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the
reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its
agents and counsel, and any other amounts due the Administrative Agent under
Sections 2.07
and
10.04
.
Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or
consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement,
adjustment or composition affecting the Obligations or the rights of any Lender to authorize the
Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
9.10 Collateral and Guaranty Matters
. The Lenders irrevocably authorize the Administrative
Agent, at its option and in its discretion,
(a) to release any Lien on any property granted to or held by the Administrative Agent under
any Loan Document (i) upon termination of the Aggregate Commitments and payment in full of all
Obligations (other than contingent indemnification obligations), (ii) that is sold or to be sold as
part of or in connection with any sale permitted hereunder or under any other Loan Document
(including in connection with Permitted Financed Property Dispositions),
72
or (iii) subject to
Section 10.01
, if approved, authorized or ratified in writing by
the Required Lenders;
(b) to subordinate any Lien on any property granted to or held by the Administrative Agent
under any Loan Document to the holder of any Lien on such property that is permitted by
Section
7.02(b)
; and
(c) to release any Subsidiary Guarantor from its obligations under the Subsidiary Guaranty
Agreement (and to release any Lien or any property of such Subsidiary Guarantor) if such Person
ceases to be a Restricted Subsidiary as a result of a transaction permitted hereunder.
Upon request by the Administrative Agent at any time, the Required Lenders will confirm in
writing the Administrative Agents authority to release or subordinate its interest in particular
types or items of property, or to release any Subsidiary Guarantor from its obligations under the
Subsidiary Guaranty Agreement pursuant to this
Section 9.10
.
ARTICLE X.
MISCELLANEOUS
10.01 Amendments, Etc
. No amendment or waiver of any provision of this Agreement or any other
Loan Document, and no consent to any departure by the Company, the Borrower or any other Loan Party
therefrom, shall be effective unless in writing signed by the Required Lenders and the Company, the
Borrower or the applicable Loan Party, as the case may be, and notice and an executed copy thereof
given to the Administrative Agent, and each such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given;
provided
,
however
,
that no such amendment, waiver or consent shall:
(a) waive any condition set forth in
Section 4.01(a)
without the written consent of
each Lender;
(b) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated
pursuant to
Section 8.02
) without the written consent of such Lender;
(c) postpone any date fixed by this Agreement or any other Loan Document for any payment or
mandatory prepayment of principal, interest, fees or other amounts due to the Lenders (or any of
them) hereunder or under any other Loan Document without the written consent of each Lender
directly affected thereby;
(d) reduce the principal of, or the rate of interest specified herein on, any Loan, or
(subject to clause (ii) of the second proviso to this
Section 10.01
) any fees or other
amounts payable hereunder or under any other Loan Document without the written consent of each
Lender directly affected thereby;
provided
,
however
, that only the consent of the
Required Lenders shall be necessary to amend the definition of Default Rate or to waive any
obligation of the Borrower to pay interest at the Default Rate;
73
(e) change
Section 8.03
in a manner that would alter the pro rata sharing of payments
required thereby without the written consent of each Lender;
(f) change any provision of this Section or the definition of Required Lenders or any other
provision hereof specifying the number or percentage of Lenders required to amend, waive or
otherwise modify any rights hereunder or make any determination or grant any consent hereunder,
without the written consent of each Lender; or
(g) release all or substantially all of the Collateral in any transaction or series of related
transactions or all or substantially all of the value of the Subsidiary Guaranty Agreement without
the written consent of each Lender, except to the extent the release of any Subsidiary Guarantor is
permitted pursuant to
Section 9.10
or the release of Collateral is permitted pursuant to
Permitted Financed Property Dispositions (in which in either case such release may be made by the
Administrative Agent acting alone);
and,
provided
further
, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Administrative Agent in addition to the Lenders required above, affect
the rights or duties of the Administrative Agent under this Agreement or any other Loan Document;
and (ii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing
executed only by the parties thereto. Notwithstanding anything to the contrary herein, no
Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent
hereunder, except that the Commitment of such Lender may not be increased or extended without the
consent of such Lender.
10.02 Notices; Effectiveness; Electronic Communication
.
(a)
Notices Generally
. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in subsection (b) below), all
notices and other communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as
follows, and all notices and other communications expressly permitted hereunder to be given by
telephone shall be made to the applicable telephone number, as follows:
(i) if to the Company, the Borrower or the Administrative Agent to the address,
telecopier number, electronic mail address or telephone number specified for such Person on
Schedule 10.02
; and
(ii) if to any other Lender, to the address, telecopier number, electronic mail address
or telephone number specified in its Administrative Questionnaire.
Notices sent by hand or overnight courier service, or mailed by certified or registered mail,
shall be deemed to have been given when received; notices sent by telecopier shall be deemed to
have been given when sent (except that, if not given during normal business hours for the
recipient, shall be deemed to have been given at the opening of business on the next business day
for the recipient). Notices delivered through electronic communications to the extent provided in
subsection (b) below, shall be effective as provided in such subsection (b).
74
(b)
Electronic Communications
. Notices and other communications to the Lenders
hereunder may be delivered or furnished by electronic communication (including e-mail and Internet
or intranet websites) pursuant to procedures approved by the Administrative Agent,
provided
that the foregoing shall not apply to notices to any Lender pursuant to
Article II
if such
Lender has notified the Administrative Agent that it is incapable of receiving notices under such
Article by electronic communication. The Administrative Agent, the Company or the Borrower may, in
its discretion, agree to accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it,
provided
that approval of such
procedures may be limited to particular notices or communications.
Unless the Administrative Agent otherwise prescribes, (i) notices and other communications
sent to an e-mail address shall be deemed received upon the senders receipt of an acknowledgement
from the intended recipient (such as by the return receipt requested function, as available,
return e-mail or other written acknowledgement),
provided
that if such notice or other
communication is not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on the next business day
for the recipient, and (ii) notices or communications posted to an Internet or intranet website
shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as
described in the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.
(c)
The Platform
. THE PLATFORM IS PROVIDED AS IS AND AS AVAILABLE. THE AGENT
PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR
THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE
BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR
FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE
BORROWER MATERIALS OR THE PLATFORM. In no event shall the Administrative Agent or any of its
Related Parties (collectively, the
Agent Parties
) have any liability to the Company, the
Borrower, any Lender or any other Person for losses, claims, damages, liabilities or expenses of
any kind (whether in tort, contract or otherwise) arising out of the Companys, the Borrowers or
the Administrative Agents transmission of Borrower Materials through the Internet, except to the
extent that such losses, claims, damages, liabilities or expenses are determined by a court of
competent jurisdiction by a final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Agent Party;
provided
,
however
, that in no
event shall any Agent Party have any liability to the Company, the Borrower, any Lender or any
other Person for indirect, special, incidental, consequential or punitive damages (as opposed to
direct or actual damages).
(d)
Change of Address, Etc
. Each of the Company, the Borrower and the Administrative
Agent may change its address, telecopier or telephone number for notices and other communications
hereunder by notice to the other parties hereto. Each other Lender may change its address,
telecopier or telephone number for notices and other communications hereunder by notice to the
Company, the Borrower and the Administrative Agent. In addition,
75
each Lender agrees to notify the Administrative Agent from time to time to ensure that the
Administrative Agent has on record (i) an effective address, contact name, telephone number,
telecopier number and electronic mail address to which notices and other communications may be sent
and (ii) accurate wire instructions for such Lender. Furthermore, each Public Lender agrees to
cause at least one individual at or on behalf of such Public Lender to at all times have selected
the Private Side Information or similar designation on the content declaration screen of the
Platform in order to enable such Public Lender or its delegate, in accordance with such Public
Lenders compliance procedures and applicable Law, including United States Federal and state
securities Laws, to make reference to Borrower Materials that are not made available through the
Public Side Information portion of the Platform and that may contain material non-public
information with respect to the Company, the Borrower or their respective securities for purposes
of United States Federal or state securities laws.
(e)
Reliance by Administrative Agent and Lenders
. The Administrative Agent and the
Lenders shall be entitled to rely and act upon any notices (including telephonic Loan Notices)
purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a
manner specified herein, were incomplete or were not preceded or followed by any other form of
notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any
confirmation thereof. The Company and the Borrower (jointly and severally) shall indemnify the
Administrative Agent, each Lender and the Related Parties of each of them from all losses, costs,
expenses and liabilities resulting from the reliance by such Person on each notice purportedly
given by or on behalf of the Company or the Borrower. All telephonic notices to and other
telephonic communications with the Administrative Agent may be recorded by the Administrative
Agent, and each of the parties hereto hereby consents to such recording.
10.03 No Waiver; Cumulative Remedies
. No failure by any Lender or the Administrative Agent to
exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided
by law.
10.04 Expenses; Indemnity; Damage Waiver
.
(a)
Costs and Expenses
. The Company and the Borrower (jointly and severally) shall
pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its
Affiliates (including the reasonable fees, charges and disbursements of counsel for the
Administrative Agent) and internally allocated costs incurred by the Administrative Agent and its
Affiliates for the review of environmental reports, in each case in connection with the syndication
of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and
administration of this Agreement and the other Loan Documents or any amendments, modifications or
waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), and (ii) all out-of-pocket expenses incurred by the Administrative
Agent or any Lender (including the fees, charges and disbursements of any counsel for the
Administrative Agent or any Lender, in connection with the enforcement or protection of its rights
(A) in connection with this Agreement and the other Loan
76
Documents, including its rights under this Section, or (B) in connection with the Loans made
hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans.
(b)
Indemnification by the Company and the Borrower
. The Company and the Borrower
(jointly and severally) shall indemnify the Administrative Agent (and any sub-agent thereof) and
each Lender and each Related Party of any of the foregoing Persons (each such Person being called
an
Indemnitee
) against, and hold each Indemnitee harmless from, any and all losses,
claims, damages, liabilities and related expenses (including the fees, charges and disbursements of
any counsel for any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by
any third party or by the Company, the Borrower or any other Loan Party arising out of, in
connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan
Document or any agreement or instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations hereunder or thereunder, the consummation of the
transactions contemplated hereby or thereby or, in the case of the Administrative agent (and any
sub-agent thereof) and its Related Parties only, the administration of this Agreement and the other
Loan Documents, (ii) any Loan or the use or proposed use of the proceeds therefrom, (iii) any
actual or alleged presence or release of Hazardous Materials on or from any property owned or
operated by the Company, the Borrower or any of their respective Subsidiaries (other than
Environmental Liability relating to a Financed Property, which indemnity shall be as set forth in
the Mortgage for such Financed Property), or any Environmental Liability related in any way to the
Company, the Borrower or any of their respective Subsidiaries (other than Financed Property, which
indemnity shall be as set forth in the Mortgage for such Financed Property), or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory, whether brought by a third party or by the
Company, the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party
thereto, IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF THE
COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF THE INDEMNITEE;
provided
that such
indemnity shall not, as to any Indemnitee, be available to the extent that (x) such losses, claims,
damages, liabilities or related expenses (1) are determined by a court of competent jurisdiction by
final and nonappealable judgment to have resulted from the gross negligence or willful misconduct
of such Indemnitee or (2) result from a claim brought by the Company, the Borrower or any other
Loan Party against an Indemnitee for breach in bad faith of such Indemnitees obligations hereunder
or under any other Loan Document, if the Company, the Borrower or such Loan Party has obtained a
final and nonappealable judgment in its favor on such claim as determined by a court of competent
jurisdiction or (y) to the extent that such losses, claims, damages, liabilities or related
expenses arising under clause (iii) result from any action or inaction of the Lenders following a
transfer of title by foreclosure or deed in lieu of foreclosure of the respective Financed Property
associated with such losses, claims, damages, liabilities or related expenses (unless such losses,
claims, damages, liabilities or related expenses are found in a final, nonappealable judgment by a
court of competent jurisdiction to have resulted from the Borrowers, the Companys or any
Subsidiarys gross negligence or willful misconduct).
(c)
Reimbursement by Lenders
. To the extent that the Company or the Borrower for any
reason fails to indefeasibly pay any amount required under subsection (a) or (b) of this
77
Section to be paid by it to the Administrative Agent (or any sub-agent thereof) or any Related
Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or
any such sub-agent) or such Related Party, as the case may be, such Lenders Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or indemnity payment is sought)
of such unpaid amount,
provided
that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or asserted against the
Administrative Agent (or any such sub-agent) in its capacity as such, or against any Related Party
of any of the foregoing acting for the Administrative Agent (or any such sub-agent) in connection
with such capacity. The obligations of the Lenders under this subsection (c) are subject to the
provisions of
Section 2.10(d)
.
(d)
Waiver of Consequential Damages, Etc.
To the fullest extent permitted by
applicable Law, neither the Company nor the Borrower shall assert, and hereby waives, any claim
against any Indemnitee, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as
a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated
hereby, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds
thereof. No Indemnitee referred to in subsection (b) above shall be liable for any damages arising
from the use by unintended recipients of any information or other materials distributed to such
unintended recipients by such Indemnitee through telecommunications, electronic or other
information transmission systems in connection with this Agreement or the other Loan Documents or
the transactions contemplated hereby or thereby other than for direct or actual damages resulting
from the gross negligence of willful misconduct of such Indemnitee as determined by a final and
nonappealable judgment of a court of competent jurisdiction.
(e)
Payments
. All amounts due under this Section shall be payable not later than ten
Business Days after demand therefor.
(f)
Survival
. The agreements in this Section shall survive the resignation of the
Administrative Agent, the replacement of any Lender, the termination of the Aggregate Commitments
and the repayment, satisfaction or discharge of all the other Obligations.
10.05 Payments Set Aside.
To the extent that any payment by or on behalf of the Company or
the Borrower is made to the Administrative Agent or any Lender, or the Administrative Agent or any
Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part
thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or
required (including pursuant to any settlement entered into by the Administrative Agent or such
Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection
with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or such setoff had not
occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its
applicable share (without duplication) of any amount so recovered from or repaid by the
Administrative Agent, plus interest thereon from the date of such demand to the date such payment
is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The
obligations of the Lenders under clause (b) of the preceding sentence shall survive the payment in
full of the Obligations and the termination of this Agreement.
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10.06 Successors and Assigns
.
(a)
Successors and Assigns Generally
. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that neither the Company, the Borrower nor any other Loan Party
may assign or otherwise transfer any of its rights or obligations hereunder without the prior
written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise
transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with
the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with
the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a
security interest subject to the restrictions of subsection (f) of this Section (and any other
attempted assignment or transfer by any party hereto shall be null and void). Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person (other than the
parties hereto, their respective successors and assigns permitted hereby, Participants to the
extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.
(b)
Assignments by Lenders
. Any Lender may at any time assign to one or more
assignees all or a portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it);
provided
that any such
assignment shall be subject to the following conditions:
(i)
Minimum Amounts
.
(A) in the case of an assignment of the entire remaining amount of the
assigning Lenders Commitment and the Loans at the time owing to it or in the case
of an assignment to a Lender, an affiliate of a Lender or an Approved Fund, no
minimum amount need be assigned; and
(B) in any case not described in subsection (b)(i)(A) of this Section, the
aggregate amount of the Commitment (which for this purpose includes Loans
outstanding thereunder) or, if the Commitment is not then in effect, the principal
outstanding balance of the Loans of the assigning Lender subject to each such
assignment, determined as of the date the Assignment and Assumption with respect to
such assignment is delivered to the Administrative Agent or, if Trade Date is
specified in the Assignment and Assumption, as of the Trade Date, shall not be less
than $5,000,000 unless each of the Administrative Agent and, so long as no Event of
Default has occurred and is continuing, the Borrower otherwise consents (each such
consent not to be unreasonably withheld or delayed).
(ii)
Proportionate Amounts
. Each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lenders rights and obligations
under this Agreement with respect to the Loans or the Commitment assigned.
(iii)
Required Consents
. No consent shall be required for any assignment
except to the extent required by subsection (b)(i)(B) of this Section and, in addition:
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(A) the consent of the Borrower (such consent not to be unreasonably withheld
or delayed) shall be required unless (1) an Event of Default has occurred and is
continuing at the time of such assignment or (2) such assignment is to a Lender, an
Affiliate of a Lender or an Approved Fund; and
(B) the consent of the Administrative Agent (such consent not to be
unreasonably withheld or delayed) shall be required if such assignment is to be a
Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with
respect to such Lender.
(iv)
Assignment and Assumption
. The parties to each assignment shall execute
and deliver to the Administrative Agent an Assignment and Assumption, together with a
processing and recordation fee in the amount of $3,500;
provided
,
however
,
that the Administrative Agent may, in its sole discretion, elect to waive such processing
and recordation fee in the case of any assignment. The assignee, if it is not a Lender,
shall deliver to the Administrative Agent an Administrative Questionnaire.
(v)
No Assignment to Borrower
. No such assignment shall be made to the
Company, the Borrower or any of their respective Affiliates or Subsidiaries.
(vi)
No Assignment to Natural Persons
. No such assignment shall be made to a
natural person.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection
(c) of this Section, from and after the effective date specified in each Assignment and Assumption,
the assignee thereunder shall be a party to this Agreement and, to the extent of the interest
assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lenders rights and obligations
under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be
entitled to the benefits of
Sections 3.01
,
3.04
,
3.05
, and
10.04
with respect to facts and circumstances occurring prior to the effective date of such assignment.
Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee
Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that
does not comply with this subsection shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance with subsection (d) of
this Section.
(c)
Register
. The Administrative Agent, acting solely for this purpose as an agent of
the Borrower, shall maintain at the Administrative Agents Office a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and addresses of the
Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant
to the terms hereof from time to time (the
Register
). The entries in the Register shall
be conclusive, and the Company, the Borrower, the Administrative Agent and the Lenders may treat
each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.
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The Register shall be available for inspection by the Borrower and any Lender, at any
reasonable time and from time to time upon reasonable prior notice.
(d)
Participations
. Any Lender may at any time, without the consent of, or notice to,
the Company, the Borrower or the Administrative Agent, sell participations to any Person (other
than a natural person or the Company, the Borrower or any of the Companys or the Borrowers
respective Affiliates or Subsidiaries) (each, a
Participant
) in all or a portion of such
Lenders rights and/or obligations under this Agreement (including all or a portion of its
Commitment and/or the Loans owing to it);
provided
that (i) such Lenders obligations under
this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations and (iii) the Company, the Borrower,
the Administrative Agent and the Lenders shall continue to deal solely and directly with such
Lender in connection with such Lenders rights and obligations under this Agreement.
Any agreement or instrument pursuant to which a Lender sells such a participation shall
provide that such Lender shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement;
provided
that such
agreement or instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, waiver or other modification described in the first proviso to
Section 10.01
that affects such Participant. Subject to subsection (e) of this Section,
each of the Company and the Borrower agrees that each Participant shall be entitled to the benefits
of
Sections 3.01
and
3.04
to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 10.08
as though it were a Lender,
provided
such Participant agrees to be subject to
Section
2.11
as though it were a Lender.
(e)
Limitations upon Participant Rights
. A Participant shall not be entitled to
receive any greater payment under
Section 3.01
or
3.04
than the applicable Lender
would have been entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the Borrowers prior written
consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to
the benefits of
Section 3.01
unless the Borrower is notified of the participation sold to
such Participant and such Participant agrees, for the benefit of the Borrower, to comply with
Section 3.01(e)
as though it were a Lender.
(f)
Certain Pledges
. Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement (including under its Note, if any) to
secure obligations of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank;
provided
that no such pledge or assignment shall release such Lender
from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as
a party hereto.
(g)
Electronic Execution of Assignments
. The words execution, signed,
signature, and words of like import in any Assignment and Assumption shall be deemed to include
electronic signatures or the keeping of records in electronic form, each of which shall be of the
same legal effect, validity or enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, as the case may be, to the extent and as provided for in any
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applicable law, including the Federal Electronic Signatures in Global and National Commerce
Act, the New York State Electronic Signatures and Records Act, or any other similar state laws
based on the Uniform Electronic Transactions Act.
10.07 Treatment of Certain Information; Confidentiality
. Each of the Administrative Agent and
the Lenders agrees to maintain the confidentiality of the Information (as defined below), except
that Information may be disclosed (a) to its Affiliates and to its and its Affiliates respective
partners, directors, officers, employees, agents, advisors and representatives (it being understood
that the Persons to whom such disclosure is made will be informed of the confidential nature of
such Information and instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory
authority, such as the National Association of Insurance Commissioners), (c) to the extent required
by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other
party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan
Document or any action or proceeding relating to this Agreement or any other Loan Document or the
enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions
substantially the same as those of this Section, to (i) any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations under this Agreement or
any Eligible Assignee invited to be a Lender pursuant to
Section 2.13(c)
or (ii) any actual
or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the
Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such
Information (x) becomes publicly available other than as a result of a breach of this Section or
(y) becomes available to the Administrative Agent, any Lender or any of their respective Affiliates
on a nonconfidential basis from a source other than the Company or the Borrower.
For purposes of this Section,
Information
means all information received from the
Company, the Borrower or any of their respective Subsidiaries relating to the Company, the Borrower
or any such Subsidiary or any of their respective businesses, other than any such information that
is available to the Administrative Agent or any Lender on a nonconfidential basis prior to
disclosure by the Company, the Borrower or any such Subsidiary,
provided
that, in the case
of information received from the Company, the Borrower or any such Subsidiary after the date
hereof, such information is clearly identified at the time of delivery as confidential. Any Person
required to maintain the confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has exercised the same
degree of care to maintain the confidentiality of such Information as such Person would accord to
its own confidential information.
Each of the Administrative Agent and the Lenders acknowledges that (a) the Information may
include material non-public information concerning the Company, the Borrower or a Subsidiary, as
the case may be, (b) it has developed compliance procedures regarding the use of material
non-public information and (c) it will handle such material non-public information in accordance
with applicable Law, including United States Federal and state securities Laws.
10.08 Right of Setoff.
If an Event of Default shall have occurred and be continuing, each
Lender and each of their respective Affiliates is hereby authorized at any time and from time to
time, after obtaining the prior written consent of the Administrative Agent, to the fullest
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extent permitted by applicable Law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final, in whatever currency) at any time held and other
obligations (in whatever currency) at any time owing by such Lender or any such Affiliate to or for
the credit or the account of the Company, the Borrower or any other Loan Party against any and all
of the obligations of the Company, the Borrower or such Loan Party now or hereafter existing under
this Agreement or any other Loan Document to such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement or any other Loan Document and although such
obligations of the Company, the Borrower or such Loan Party may be contingent or unmatured or are
owed to a branch or office of such Lender different from the branch or office holding such deposit
or obligated on such indebtedness. The rights of each Lender and their respective Affiliates under
this Section are in addition to other rights and remedies (including other rights of setoff) that
such Lender or their respective Affiliates may have. Each Lender agrees to notify the Company, the
Borrower and the Administrative Agent promptly after any such setoff and application,
provided
that the failure to give such notice shall not affect the validity of such setoff
and application.
10.09 Interest Rate Limitation.
Each provision in this Agreement and each other Loan Document
is expressly limited so that in no event whatsoever shall the amount contracted for, charged, paid,
or otherwise agreed to be paid, or received to the Administrative Agent or any Lender for the use,
forbearance or detention of the money to be loaned under this Agreement or any Loan Document or
otherwise (including any sums paid as required by any covenant or obligation contained herein or in
any other Loan Document which is for the use, forbearance or detention of such money), exceed that
amount of money which would cause the effective rate of interest to exceed the Highest Lawful Rate,
and all amounts owed under this Agreement and each other Loan Document shall be held to be subject
to reduction to the effect that such amounts so paid or agreed to be paid which are for the use,
forbearance or detention of money under this Agreement or such Loan Document shall in no event
exceed that amount of money which would cause the effective rate of interest to exceed the Highest
Lawful Rate. Anything in this Agreement, any Note or any other Loan Document to the contrary
notwithstanding, none of the Loan Parties shall ever be required to pay unearned interest on any
Note and shall never be required to pay interest on such Note at a rate in excess of the Highest
Lawful Rate, and if the effective rate of interest which would otherwise be payable under this
Agreement, such Note and the other Loan Documents would exceed the Highest Lawful Rate, or if the
holder of such Note shall receive any unearned interest or shall receive monies that are deemed to
constitute interest which would increase the effective rate of interest payable by the Loan Parties
under this Agreement, such Note or Loan Document to a rate in excess of the Highest Lawful Rate,
then (a) the amount of interest which would otherwise be payable by the Loan Parties under this
Agreement, such Note or any Loan Document shall be reduced to the amount allowed under applicable
law, and (b) any unearned interest paid by the Loan Parties or any interest paid by the Loan
Parties in excess of the Highest Lawful Rate shall be credited on the principal of such Note (or,
if the principal amount of such Note shall have been paid in full, refunded to the Loan Parties).
It is further agreed that, without limitation of the foregoing, all calculations of the rate of
interest contracted for, charged or received by any Lender under the Notes held by it, or under
this Agreement, are made for the purpose of determining whether such rate exceeds the Highest
Lawful Rate applicable to such Lender (such Highest Lawful Rate being such Lenders
Maximum
Permissible Rate
), and shall be made, to the extent permitted by usury laws applicable to such
Lender (now or hereafter enacted), by amortizing, prorating and spreading
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during the period of the full stated term of the Loans evidenced by said Notes all interest at
any time contracted for, charged or received by such Lender in connection therewith. If at any
time and from time to time (i) the amount of interest payable to any Lender on any date shall be
computed at such Lenders Maximum Permissible Rate pursuant to this Section and (ii) in respect of
any subsequent interest computation period the amount of interest otherwise payable to such Lender
would be less than the amount of interest payable to such Lender computed at such Lenders Maximum
Permissible Rate, then the amount of interest payable to such Lender in respect of such subsequent
interest computation period shall continue to be computed at such Lenders Maximum Permissible Rate
until the total amount of interest payable to such Lender shall equal the total amount of interest
which would have been payable to such Lender if the total amount of interest had been computed
without giving effect to this Section.
10.10 Counterparts; Effectiveness.
This Agreement and the other Loan Documents may be
executed in counterparts (and by different parties hereto in different counterparts), each of which
shall constitute an original, but all of which when taken together shall constitute a single
contract. Except as provided in
Section 4.01
, this Agreement and the other Loan Documents
shall become effective when they shall have been executed by the Administrative Agent and when the
Administrative Agent shall have received counterparts hereof that, when taken together, bear the
signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature
page of this Agreement and any other Loan Document by telecopy shall be effective as delivery of a
manually executed counterpart of this Agreement and the other Loan Documents.
10.11 Survival of Representations and Warranties.
All representations and warranties made
hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or
in connection herewith or therewith shall survive the execution and delivery hereof and thereof.
Such representations and warranties have been or will be relied upon by the Administrative Agent
and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or
on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice
or knowledge of any Default at the time of any Borrowing, and shall continue in full force and
effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied.
10.12 Severability.
If any provision of this Agreement or the other Loan Documents is held to
be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the
remaining provisions of this Agreement and the other Loan Documents shall not be affected or
impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the
illegal, invalid or unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the illegal, invalid or unenforceable provisions. The
invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.
10.13 Replacement of Lenders.
If any Lender requests compensation under
Section 3.04
,
or if the Company or the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to
Section 3.01
, or if any
Lender gives a notice under
Section 3.02
, or if any Lender is a Defaulting Lender or if any
other circumstance exists hereunder that gives the Company or the Borrower the right to replace a
84
Lender as a party hereto, then the Borrower may, at its sole expense and effort, upon notice
to such Lender and the Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in, and consents required
by,
Section 10.06
), all of its interests, rights and obligations under this Agreement and
the related Loan Documents to an assignee that shall assume such obligations (which assignee may be
another Lender, if a Lender accepts such assignment),
provided
that:
(a) the Borrower or the assignee Lender shall have paid to the Administrative Agent the
assignment fee specified in
Section 10.06(b)
;
(b) such Lender shall have received payment of an amount equal to the outstanding principal of
its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and
under the other Loan Documents from the assignee (to the extent of such outstanding principal and
accrued interest and fees), the Borrower (in the case of all other amounts);
(c) in the case of any such assignment resulting from a claim for compensation under
Section 3.04
or payments required to be made pursuant to
Section 3.01
, such
assignment will result in a reduction in such compensation or payments thereafter; and
(d) such assignment does not conflict with applicable Laws.
A Lender shall not be required to make any such assignment or delegation if, prior thereto, as
a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to
require such assignment and delegation cease to apply.
10.14 Governing Law; Jurisdiction; Etc
.
(a)
GOVERNING LAW
. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF TEXAS.
(b)
SUBMISSION TO JURISDICTION
. EACH OF THE COMPANY AND THE BORROWER IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF TEXAS SITTING IN HARRIS COUNTY AND OF THE UNITED STATES DISTRICT COURT OF
THE SOUTHERN DISTRICT, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES
THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
TEXAS STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.
EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY
RIGHT THAT THE ADMINISTRATIVE AGENT OR
85
ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT AGAINST THE COMPANY OR THE BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY
JURISDICTION.
(c)
WAIVER OF VENUE
. EACH OF THE COMPANY AND THE BORROWER IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF
THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION
OR PROCEEDING IN ANY SUCH COURT.
(d)
SERVICE OF PROCESS
. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS
IN THE MANNER PROVIDED FOR NOTICES IN
SECTION 10.02
. NOTHING IN THIS AGREEMENT WILL AFFECT
THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
10.15 Waiver of Jury Trial
. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY
OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE
OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
10.16 California Judicial Reference
. If any action or proceeding is filed in a court of the
State of California by or against any party thereto in connection with any of the transactions
contemplated by this Agreement or any other Loan Document, (a) the court shall, and is hereby
directed to, make a general reference pursuant to California Code of Civil Procedure Section 638 to
a referee (who shall be a single active or retired judge) to hear and determine all of the issues
in such action or proceeding (whether of fact or of law) and to report a statement of decision
provided that at the option of any party to such proceeding, any such issues pertaining to a
provisional remedy as defined in California Code of Civil Procedure Section 1281.8 shall be heard
and determined by the court, and (b) without limiting the generality of
Section 10.04
, the
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Company and the Borrower (jointly and severally) shall be solely responsible to pay all fees
and expenses of any referee appointed in such action or proceeding.
10.17 No Advisory or Fiduciary Responsibility
. In connection with all aspects of each
transaction contemplated hereby (including in connection with any amendment, waiver or other
modification hereof or of any other Loan Document), each of the Company and the Borrower
acknowledges and agrees, and acknowledges its Affiliates understanding, that: (i) (A) the
arranging and other services regarding this Agreement provided by the Administrative Agent and the
Arranger, are arms-length commercial transactions between the Company, the Borrower and their
respective Affiliates, on the one hand, and the Administrative Agent and the Arranger, on the other
hand, (B) each of the Company and the Borrower has consulted its own legal, accounting, regulatory
and tax advisors to the extent it has deemed appropriate, and (C) each of the Company and the
Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of
the transactions contemplated hereby and by the other Loan Documents; (ii) (A) the Administrative
Agent and the Arranger each is and has been acting solely as a principal and, except as expressly
agreed in writing by the relevant parties, has not been, is not, and will not be acting as an
advisor, agent or fiduciary for the Company, the Borrower or any of their respective Affiliates or
any other Person and (B) neither the Administrative Agent nor the Arranger has any obligation to
the Company, the Borrower or any of their respective Affiliates with respect to the transactions
contemplated hereby except those obligations expressly set forth herein and in the other Loan
Documents and (iii) the Administrative Agent and the Arranger and their respective Affiliates may
be engaged in a board range of transactions that involve interests that differ from those of the
Company, the Borrower and their respective Affiliates, and neither the Administrative Agent nor the
Arranger has any obligation to disclose any of such interests to the Company and the Borrower or
any of their respective Affiliates. To the fullest extent permitted by Law, each of the Company
and the Borrower hereby waives and releases any claims that it may have against the Administrative
Agent and the Arranger with respect to any breach or alleged breach of agency or fiduciary duty in
connection with any aspect of any transaction contemplated hereby.
10.18 USA PATRIOT Act Notice
. Each Lender that is subject to the Act (as hereinafter defined)
and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the
Company and the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001)) (the Act), it is required to obtain, verify
and record information that identifies the Company and the Borrower, which information includes the
name and address of the Company and the Borrower and other information that will allow such Lender
or the Administrative Agent, as applicable, to identify the Company and the Borrower in accordance
with the Act.
10.19 Time of the Essence
. Time is of the essence of the Loan Documents.
10.20 ENTIRE AGREEMENT
. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
87
IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be duly executed as of
the date first above written.
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GROUP 1 REALTY, INC.
, as the Borrower
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By:
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/s/ John C. Rickel
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Name:
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John C. Rickel
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Title:
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President
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GROUP 1 AUTOMOTIVE, INC.
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By:
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/s/ John C. Rickel
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Name:
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John C. Rickel
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Title:
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Senior Vice President & CFO
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CREDIT AGREEMENT
Signature Page
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BANK OF AMERICA, N.A.,
as
Administrative Agent
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By:
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/s/ Ronaldo Naval
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Name:
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Ronaldo Naval
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Title:
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Vice President
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CREDIT AGREEMENT
Signature Page
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BANK OF AMERICA, N.A.,
as a Lender
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By:
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/s/ M. Patricia Kay
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Name:
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M. Patricia Kay
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Title:
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Senior Vice President
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CREDIT AGREEMENT
Signature Page