EXHIBIT 10.1.2
CREDIT AGREEMENT
NOTICE TO BORROWER: THIS DOCUMENT CONTAINS PROVISIONS FOR A VARIABLE INTEREST
RATE.
This Credit Agreement (this "Agreement") dated September 13 , 1999 is
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entered into between FIRSTAMERICA AUTOMOTIVE, INC., a Delaware corporation
("FAA") and FAA Holding Corp., a California corporation (jointly, severally, and
collectively, "Borrower"), whose collective address is ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ("Borrower's Address") and FORD MOTOR CREDIT COMPANY, a
Delaware corporation ("Lender"), whose address is ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Lender's Address").
Borrower has requested Lender to extend a revolving line of credit to
Borrower in the principal amount not to exceed $138,500,000.00 (the "Loan") in
order to: (i) fund certain specific dealership acquisitions, (ii) retire
certain existing indebtedness of FAA, and (iii) provide used vehicle floor plan
financing to certain dealership subsidiaries of Borrower.
Lender is willing to make the Loan to Borrower provided that Borrower and
Guarantor grant to Lender a security interest in the Collateral (as defined
herein) and provide such other security as required by this Agreement and that
Borrower complies with the conditions precedent and other terms and conditions
of this Agreement and the Security Documents (as defined herein).
Now therefore, in consideration of the promises, covenants and undertakings
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties hereto, Lender and
Borrower hereby agree as follows:
ARTICLE I: DEFINITIONS
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1.1 All capitalized terms used in this Agreement have the meanings
attributed to them on Schedule A attached hereto, and made a part hereof, unless
otherwise defined herein. Any accounting terms used in this Agreement which are
not specifically defined herein have the meanings customarily given them in
accordance with generally accepted accounting principles in existence as of the
date hereof.
1.2 References. The existence throughout the Agreement of references
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to the Borrower's Subsidiaries is for a matter of convenience only. Any
references to Subsidiaries of the Borrower set forth herein will (i) with
respect to representations and warranties which deal with historical matters be
deemed to include each of the Subsidiaries existing on the date hereof; and (ii)
will not in any way be construed as consent by the Lender to the establishment,
maintenance or acquisition of any Subsidiary, except as may otherwise be
permitted hereunder.
1.3 Effectiveness of this Agreement. Upon the satisfaction of all of
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the conditions precedent set forth in Section 3.1 of this Agreement (the date
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upon which such conditions precedent are satisfied being hereinafter referred to
as the "Effective Date"), this Agreement will become effective.
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ARTICLE II: THE LOAN FACILITIES
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2.1 Advances. Upon the satisfaction of the conditions precedent set
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forth in Sections 3.1 and 3.2, from and including the date of this Agreement and
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prior to the Termination Date, the Lender will, on the terms and conditions set
forth in this Agreement, make Advances to the Borrower from time to time, in
dollars, in an amount not to exceed the Revolving Credit Availability at such
time; provided, however:
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(i) at no time may the Revolving Credit Obligations exceed the Commitment
at such time;
(ii) at no time may the aggregate outstanding amount of Advances made
for the purposes of the Permitted Acquisitions of the New
Subsidiaries exceed $107,000,000.00 ("Acquisition Advances");
(iii) at no time may Advances for used vehicle floor plan financing
exceed the lesser of $5,000,000.00 or 100% of Used Vehicle Value
("Used Advances" and together with Acquisition Advances, "Revolving
Advances");
(iv) the will be only one Advance hereunder for the purposes of retiring
existing indebtedness of First AmericaAutomotive, Inc., and that
Advance will be payable to General Electric Capital Corporation and
may be in an amount no greater than $26,500,000.00 (such Advance is
referred to herein as the "GECal Advance") (Lender will have no
obligation to make such advance unless the conditions set forth in
Section 3.4 of this Agreement have been satisified).
Subject to the terms of this Agreement, the Borrower may borrow, repay and
reborrow Revolving Advances at any time prior to the Termination Date. The
Borrower shall repay in full the outstanding principal balance on the
Termination Date.
2.2 Optional Payments; Mandatory Prepayments.
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(A) Optional Payments. The Borrower may from time to time repay or
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prepay, without penalty or premium all or any part of outstanding Advances;
provided, that the Borrower may not so prepay Advances unless it has provided at
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least one business day's written notice to the Lender of such prepayment.
(B) Mandatory Prepayments. If at any time and for any reason the
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Revolving Credit Obligations are greater than the Commitment then the Borrower
shall immediately make a mandatory prepayment of the Obligations in an amount
equal to such excess. Amounts equal to a Decision Reserve or net cash proceeds
of an Asset Sale in connection with or following restoration, rebuilding or
replacement of insured property will be mandatorily applied against the
Revolving Credit Obligations in the amounts and in the manner set forth in
Section 5.2(G) hereof. All of the mandatory prepayments made under this Section
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2.2(B) shall be applied first to Advances maturing on such date and then to
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subsequently maturing Advances in order of maturity.
2.3 Changes in the Commitment. Reduction of Commitment. The
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Borrower may permanently reduce the Commitment in whole, or in part, in an
aggregate minimum amount of
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$5,000,000.00 and integral multiples of $1,000,000.00 in excess of that amount
(unless the Commitment is reduced in whole), upon at least three (3) business
days' written notice to the Lender, which notice must specify the amount of
any such reduction; provided, however, that the amount of the Commitment may
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not be reduced below the aggregate principal amount of the outstanding
Revolving Credit Obligations.
2.4 Method of Borrowing. The Borrower shall give the Lender
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irrevocable notice in substantially the form of Exhibit B hereto (a "Borrowing
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Notice") not later than 10:00 a.m. (Eastern Standard Time) on the business day
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preceding the Borrowing Date of each Advance, specifying: (i) the Borrowing
Date (which must be a business day) of such Advance; (ii) the aggregate amount
of such Advance; (iii) the use of proceeds of such Advance; and (iv) the account
or accounts into which the Advances should be funded. Not later than 2:00 p.m.
(Eastern Standard Time) on each Borrowing Date, the Lender will make available
its Advance, in funds immediately available to the Borrower at such account or
accounts as will have been notified to the Lender. Each Advance will bear
interest from and including the date of the making of such Advance to (but not
including) the date of repayment thereof at the Applicable Commercial Paper
Rate, changing when and as the underlying Commercial Paper Rate changes, which
such interest shall be payable in accordance with Section 2.9(B) and the Note.
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2.5 Minimum Amount of Each Advance. Each Advance shall be in the
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minimum amount of $250,000.00 (and in multiples of $50,000.00 if in excess
thereof), provided, however, that any Advance may be in the amount of the unused
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Commitment.
2.6 Default Rate; Late Payment Fee. After the occurrence and during
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the continuance of an Event of Default, at the option of the Lender, the
interest rate(s) applicable to the Advances may be equal to the Applicable
Commercial Paper Rate plus three percent (3.0%) per annum. If any of the
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principal balance or interest on the Note or other sum due thereunder is not
paid within ten (10) days of when due, Borrower shall pay to Lender a late
charge payment equal to five percent (5%) of the amount of such installment or
the maximum rate permitted by law, whichever is less.
2.7 Method of Payment. All payments of principal, interest, and fees
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hereunder must be made, without setoff, deduction or counterclaim, in
immediately available funds to the Lender at the Lender's address specified
pursuant to Article X, or at any other address specified in writing by the
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Lender to the Borrower, by 2:00 p.m. (Eastern Standard Time) on the date when
due.
2.8 Advances, Telephonic Notices. The Lender is authorized to record
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the principal amount of each Advance and each repayment with respect to its
Advances on the schedule attached to the Note; provided, however, that the
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failure to so record will not affect the Borrower's obligations under the Note.
The Borrower authorizes the Lender to extend Advances and to transfer funds
based on telephonic notices made by any person or persons the Lender in good
faith believes to be acting on behalf of the Borrower. The Borrower agrees to
deliver promptly to the Lender a written confirmation, signed by an Authorized
Officer, if such confirmation is requested by the Lender, of each telephonic
notice. If the written confirmation differs in any material respect from the
action taken by the Lender, (i) the telephonic notice will govern absent
manifest error and (ii) the Lender shall promptly notify the Authorized Officer
who provided such confirmation of such difference.
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2.9 Promise to Pay; Interest and Commitment Fees; Interest Payment
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Dates; Interest and Fee Basis; Taxes.
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(A) Promise to Pay. The Borrower unconditionally promises to pay
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when due the principal amount of each Advance and all other Obligations incurred
by it, and to pay all unpaid interest accrued thereon, in accordance with the
terms of this Agreement and the Note.
(B) Interest Payment Date.
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(i) Interest Payable on Advances. Interest accrued on each Advance
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will be payable on each Payment Date, commencing with the first such date
to occur after the date hereof and at maturity (whether by acceleration
or otherwise). On each Payment Date, the Borrower must pay interest at
the rate equal to the Commercial Paper Rate plus two and seventy five
hundredths percent (2.75%) per annum (the "Collection Rate") on each
Advance outstanding on such date. On the Termination Date, the Borrower
shall pay, in addition to any unpaid principal amount of any Advance,
interest at the Collection Rate and an amount equal to the Scaled Assets
Adjustment Amount to the Lender.
(ii) Interest on other Obligations. Interest accrued on the principal
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balance of all other Obligations will be payable in arrears (i) on the last
day of each calendar month, commencing on the first such day following the
incurrence of such Obligation, (ii) upon repayment thereof in full or in
part, and (iii) if not theretofore paid in full, at the time such other
Obligation becomes due and payable (whether by acceleration or otherwise).
(C) Interest and Fee Basis. Interest and fees will be calculated for
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actual days elapsed on the basis of a 365, or when appropriate 366, day year.
Interest will be payable for the day an Obligation is incurred but not for the
day of any payment on the amount paid if payment is received prior to 2:00 p.m.
(Eastern Standard Time) at the place of payment. If any payment of principal of
or interest on an Advance or any payment of any other Obligations becomes due on
a day which is not a business day, such payment must be made on the next
succeeding business day and, in the case of a principal payment, such extension
of time will be included in computing interest in connection with such payment.
2.10 Termination Date. This Agreement will be effective until the
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Termination Date. Notwithstanding the termination of this Agreement on the
Termination Date, until all of the Obligations (other than contingent indemnity
obligations, but including all Floor Plan Indebtedness) have been fully and
indefeasibly paid and satisfied and all financing arrangements between the
Borrower and the Lender in connection with this Agreement have been terminated
(other than with respect to Hedging Obligations), all of the rights and remedies
under this Agreement and the other Loan Documents will survive and the Lender
will be entitled to retain its security interest in and to all existing and
future Collateral.
2.11 Taxes. (A) Any and all payments by the Borrower hereunder must
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be made free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings or any
liabilities with respect thereto including those arising after the date hereof
as a result of the adoption of or any change in any law, treaty, rule,
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regulation, guideline or determination of a governmental authority or any change
in the interpretation or application thereof by a governmental authority but
excluding such taxes (including income taxes, franchise taxes and branch profit
taxes) as are imposed on or measured by the Lender's income by the United States
of America or any governmental authority of the jurisdiction under the laws of
which the Lender is organized or having jurisdiction over the Lender by virtue
of the Lender's location(s) (other than solely as a result of the transaction
evidenced by this Agreement) (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings, and liabilities which the Lender determines
to be applicable to this Agreement, the other Loan Documents, the Commitment or
the Advances being hereinafter referred to as "Taxes"). If the Borrower is
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required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under the other Loan Documents to the Lender, (i) the sum payable
must be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.11(A)) the Lender receives an amount equal to the sum it would
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have received had no such deductions been made, (ii) the Borrower must make such
deductions, and (iii) the Borrower must pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.
(B) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges, or
similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement, the other Loan Documents, the Commitment or the Advances (hereinafter
referred to as "Other Taxes").
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(C) The Borrower indemnifies the Lender for the full amount of Taxes
and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed
by any governmental authority on amounts payable under this Section 2.11 paid by
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the Lender and any liability (including penalties, interest, and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. This indemnification must be made
within thirty (30) days after the date the Lender makes written demand therefor.
A certificate as to any additional amount payable to the Lender under this
Section 2.11 submitted to the Borrower by the Lender must show in reasonable
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detail the amount payable and the calculations used to determine such amount and
will, absent manifest error, be final, conclusive and binding upon each of the
parties hereto. With respect to such deduction or withholding for or on account
of any Taxes and to confirm that all such Taxes have been paid to the
appropriate governmental authorities, the Borrower will promptly (and in any
event not later than thirty (30) days after receipt) furnish to the Lender such
certificates, receipts and other documents as may be required (in the judgment
of the Lender) to establish any tax credit to which the Lender may be entitled.
(D) Within thirty (30) days after the date of any payment of Taxes or
Other Taxes by the Borrower, the Borrower shall furnish to the Lender the
original or a certified copy of a receipt evidencing payment thereof.
(E) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.11 will survive the payment in full of principal and interest
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hereunder and the termination of this Agreement.
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2.12 Loan Account. The Lender shall maintain in accordance with its
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usual practice an account or accounts (a "Loan Account") evidencing the
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Obligations of the Borrower to the Lender owing to the Lender from time to time,
including the amount of principal and interest payable and paid to the Lender
from time to time hereunder and under the Note. The entries made in the Loan
Account will be conclusive and binding for all purposes, absent manifest error,
unless the Borrower objects to information contained in the Loan Account within
thirty (30) days of the Borrower's receipt of such information.
ARTICLE III: CONDITIONS PRECEDENT
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3.1 Conditions of Effectiveness. The Effective Date of this
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Agreement will be on the date on which all of the following conditions have been
satisfied:
(A) no law, regulation, order, judgment or decree of any governmental
authority has, and the Lender had not received any notice that litigation
is pending or threatened which is likely to, (i) enjoin, prohibit or
restrain the making of an Advance hereunder or (ii) impose or result in the
imposition of a material adverse effect;
(B) all due diligence materials requested by the Lender from the Borrower
have been delivered to the Lender and such due diligence materials are in
form and substance satisfactory to the Lender;
(C) the Borrower has furnished to the Lender each of the following, all in
form and substance satisfactory to the Lender:
(i) this Agreement, duly executed by the Borrower;
(ii) the Note, duly executed by the Borrower in favor of the
Lender;
(iii) the Borrower's Guaranty, duly executed by the Borrower; a
Guaranty executed by each Guarantor which has not heretofore provided a
Guaranty to the Lender;
(iv) a Security Agreement executed by Borrower and each
Guarantor which has not heretofore provided a Security Agreement to the
Lender;
(v) to the extent Borrower or any Guarantor has any
Indebtedness other than Permitted Indebtedness, pay-out letters, releases
and UCC-3 Termination Statements, where applicable, from all third-party
creditors releasing all Liens securing any such Indebtedness;
(vi) certificates of good standing for the Borrower and each of
the Guarantors from its jurisdiction of incorporation and each other
jurisdiction where the nature of its business requires it to be qualified
as a foreign corporation;
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(vii) a Secretary's Certificate from the Borrower and each
Guarantor acquired by the Borrower on or prior to the date hereof, and an
Incumbency Certificate from Pledgor;
(viii) a certificate, in form and substance satisfactory to the
Lender, signed by the chief financial officer of the Borrower stating that
as of the Effective Date, no Event of Default or Unmatured Default has
occurred and is continuing and setting forth the calculation of the
FirstAmerica Group's Scaled Assets as of the Effective Date, and the
representations and warranties of the Borrower are true and correct with
full force and effect as if made on the Effective Date;
(ix) a written opinion of the Borrower's and Guarantors'
counsel, addressed to the Lender, in form and substance satisfactory to the
Lender;
(x) to the extent not included in the foregoing, the
documents, instruments and agreements set forth on the closing list
attached as Exhibit E hereto;
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(xi) such other documents as the Lender or its counsel may have
reasonably requested;
(xii) the Pledge Agreement, duly executed by Pledgor; and
(xiii) payment in full of the $500,000.00 loan origination fee.
3.2 Conditions Precedent to Each Advance. The Lender will not be
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required to make any Advance, unless on the applicable Borrowing Date:
(A) there exists no Event of Default or Unmatured Default; and
(B) the representations and warranties contained in Article IV
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are true and correct as of such Borrowing Date (unless such representation
and warranty expressly relates to an earlier date or is no longer true
solely as a result of transactions permitted by this Agreement).
Each Borrowing Notice with respect to each such Advance constitutes a
representation and warranty by the Borrower that the conditions contained in
Sections 3.2(A) and (B) have been satisfied. If the Lender has a reasonable
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basis for believing an Event of Default or Unmatured Default may have occurred
and is continuing or that the Borrower is not able to make one or more of the
representations and warranties set forth in Article IV, the Lender may require a
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duly completed officer's certificate in substantially the form of Exhibit F
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hereto as a condition to making an Advance.
3.3 Condition Precedent to Additional Advance. Notwithstanding
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anything to the contrary in this Agreement, the Lender is under no obligation to
make an Advance to the Borrower hereunder until and unless the following
requirements have been satisfied:
(A) there exist no Liens on the Collateral other than Permitted Existing
Liens and those Permitted Existing Liens appearing on Schedule 1.1.3 marked
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with an asterisk
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have been released and or terminated, and the Borrower has confirmed
delivery of such releases, UCC-3 termination statements or other
documentation reasonably requested by the Lender evidencing such release
or termination; and
(B) the loss payable endorsements referenced in Section 5.2(G) have been
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delivered to the Lender.
ARTICLE IV: REPRESENTATIONS AND WARRANTIES
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The Borrower represents and warrants as follows to the Lender as of
the date hereof and as of the Effective Date, giving effect to the
consummation of the transactions contemplated by the Transaction Documents on
the date hereof, and thereafter on each date as required by Section 4.2:
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4.1 Organization; Corporate Powers. The Borrower and each of its
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Subsidiaries (i) is a corporation, limited liability company or limited
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization, (ii) is duly qualified to do business
and is in good standing under the laws of each jurisdiction in which failure to
be so qualified and in good standing could not reasonably be expected to have a
material adverse effect and (iii) has all requisite corporate, company or
partnership power and authority to own, operate and encumber its property and to
conduct its business as presently conducted and as proposed to be conducted.
4.2 Authority.
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(A) The execution, delivery, performance and filing, as the case may
be, of each of the Transaction Documents which must be executed or filed by the
Borrower or any of its Subsidiaries in connection with the Public Offerings or
which have been executed or filed as required by this Agreement on or prior to
the Effective Date and to which the Borrower or any of its Subsidiaries is
party, and the consummation of the transactions contemplated thereby, have been
duly approved by the respective boards of directors or managers, or by the
partners, as applicable, and, if necessary, the shareholders, members or
partners, as applicable, of the Borrower and its Subsidiaries, and such
approvals have not been rescinded. No other corporate, company or partnership
action or proceedings on the part of the Borrower or its Subsidiaries are
necessary to consummate such transactions.
(B) Each of the Transaction Documents to which the Borrower or any of
its Subsidiaries is a party has been duly executed, delivered or filed, as the
case may be, by it and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, is in full force and effect
and no material term or condition thereof has been amended, modified or waived
without the prior written consent of the Lender, and the Borrower and its
Subsidiaries have, and, to the best of the Borrower's and its Subsidiaries'
knowledge, all other parties thereto have, performed and complied with all the
material terms, provisions, agreements and conditions set forth therein and
required to be performed or complied with by such parties on or before the date
hereof, and no unmatured default, default or breach of any material covenant by
any such party exists thereunder.
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4.3 No Conflict; Governmental Consents. The execution, delivery and
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performance of each of the Loan Documents and other Transaction Documents to
which the Borrower or any of its Subsidiaries is a party do not and will not (i)
conflict with the Charter Documents of the Borrower or any such Subsidiary, (ii)
constitute a tortious interference with any Contractual Obligation of any Person
or conflict with, result in a breach of or constitute (with or without notice or
lapse of time or both) a default under any requirement of law (including,
without limitation, any Environmental Property Transfer Act) or Contractual
Obligation of the Borrower or any such Subsidiary, or require termination of any
Contractual Obligation, (iii) result in or require the creation or imposition of
any Lien whatsoever upon any of the property or assets of the Borrower or any
such Subsidiary, other than Liens permitted by the Loan Documents, or (iv)
require any approval of the Borrower's or any such Subsidiary's shareholders
except such as have been obtained. The execution, delivery and performance of
each of the Transaction Documents to which the Borrower or any of its
Subsidiaries is a party do not and will not require any registration with,
consent or approval of, or notice to, or other action to, with or by any
governmental authority, including under any Environmental Property Transfer Act,
except (i) filings, consents or notices which have been made, obtained or given,
or which, if not made, obtained or given, individually or in the aggregate could
not reasonably be expected to have a material adverse effect and (ii) filings
necessary to create or perfect security interests in the Collateral.
4.4 Financial Statements.
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(A) The pro forma financial statements of the Borrower and its
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Subsidiaries contained in the Registration Statement, present on a pro forma
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basis the financial condition of the Borrower and such Subsidiaries as of the
dates contained therein, and reflect on a pro forma basis those liabilities
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reflected in the notes thereto and resulting from consummation of the Public
Offering and the other transactions contemplated by this Agreement, and the
payment or accrual of all Transaction Costs payable on the Effective Date with
respect to any of the foregoing.
(B) The historical financial statements (the "Statement") of the
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Borrower and each of the Subsidiaries included in the Registration Statement,
(i) were prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods covered thereby (except as otherwise
expressly noted therein), (ii) to the Borrower's knowledge, after diligent
inquiry, fairly present the financial condition of each of the Borrower and such
Subsidiaries as of the dates thereof and the results of operations for the
periods covered thereby; and (iii) show all material indebtedness and other
liabilities, direct or contingent, of each of the Borrower and such Subsidiaries
as of the dates thereof.
4.5 No Material Adverse Change. (A) Since December 31, 1998 up to
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the date hereof, there has occurred no event or circumstance which has had or
could reasonably be expected to have a material adverse change in the business,
condition (financial or otherwise), operations, performance, properties, or
prospects of the Borrower or any Guarantor from the pro forma financial
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statements and projections contained in the Registration Statement or in the
facts and information regarding such entities as represented to date. After
giving effect to the Acquisitions, none of the Borrower or Guarantor are or and
will be rendered insolvent by the indebtedness incurred in connection therewith,
will be left with unreasonably small capital with
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which to engage in its businesses or will have incurred debts beyond its
ability to pay such debts as they mature.
(B) Since the date hereof, there has occurred no event or
circumstance which has had or could reasonably be expected to have a material
adverse effect.
4.6 Taxes.
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(A) Tax Examinations. All deficiencies which have been asserted
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against the Borrower or any of the Borrower's Subsidiaries as a result of any
federal, state, local or foreign tax examination for each taxable year in
respect of which an examination has been conducted have been fully paid or
finally settled or are being contested in good faith, and as of the date hereof
no issue has been raised by any taxing authority in any such examination which,
by application of similar principles, reasonably can be expected to result in
assertion by such taxing authority of a material deficiency for any other year
not so examined which has not been reserved for in the Borrower's consolidated
financial statements to the extent, if any, required by Agreement Accounting
Principles.
(B) Payment of Taxes. All tax returns and reports of the Borrower
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and its Subsidiaries required to be filed have been timely filed, and all taxes,
assessments, fees and other governmental charges thereupon and upon their
respective property, assets, income and franchises which are shown in such
returns or reports to be due and payable have been paid. The Borrower has no
knowledge of any proposed tax assessment against the Borrower or any of its
Subsidiaries.
4.7 Litigation; Loss Contingencies and Violations. There is no
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action, suit, proceeding, arbitration or investigation before or by any
governmental authority or private arbitrator pending or, to the Borrower's
knowledge after diligent inquiry, threatened against the Borrower or any of its
Subsidiaries or any property of any of them (i) challenging the validity or the
enforceability of any material provision of the Transaction Documents or (ii)
which will have or could reasonably be expected to have a material adverse
effect. There is no material loss contingency within the meaning of Agreement
Accounting Principles which has not been reflected in the consolidated financial
statements of the Borrower and its Subsidiaries prepared and delivered pursuant
to Section 5.1(A) for the fiscal period during which such material loss
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contingency was incurred. Neither the Borrower nor any of its Subsidiaries is
(A) in violation of any applicable requirements of law which violation will have
or could reasonably be expected to have a material adverse effect, or (B)
subject to or in default with respect to any final judgment, writ, injunction,
restraining order or order of any nature, decree, rule or regulation of any
court or governmental authority which will have or could reasonably be expected
to have a material adverse effect.
4.8 Subsidiaries. Schedule 4.8 to this Agreement (i) contains a
------------ ------------
description as of the Effective Date (or as of the date of any supplement
thereto) of the corporate structure of, the Borrower and its Subsidiaries and
any other Person in which the Borrower or any of its Subsidiaries holds an
Equity Interest; and (ii) accurately sets forth as of the Effective Date (or as
of the date of any supplement thereto) (A) the correct legal name, the
jurisdiction of incorporation or formation and the jurisdictions in which each
of the Borrower and the Subsidiaries of the Borrower is qualified to transact
business as a foreign corporation or other
10
foreign entity and (B) a summary of the direct and indirect partnership, joint
venture, or other Equity Interests, if any, of the Borrower and each
Subsidiary of the Borrower in any Person that is not a corporation. After the
formation or acquisition of any New Subsidiary permitted under Section
-------
5.3(F)(ii), if requested by the Lender, the Borrower shall provide a supplement
----------
to Schedule 4.8 to this Agreement. None of the issued and outstanding Capital
------------
Stock of the Borrower or any of its Subsidiaries is subject to any redemption
or repurchase agreement. The outstanding Capital Stock of the Borrower and
each of the Borrower's Subsidiaries is duly authorized, validly issued, fully
paid and nonassessable and, is not Margin Stock. The Borrower has no
Subsidiaries other (i) the Subsidiaries set forth on Schedule 4.8 and (ii) any
------------
Subsidiaries acquired in connection with a Permitted Acquisition, in
connection with which the Borrower shall have provided all of the documents,
instruments and agreements as required by this Agreement.
4.9 ERISA. No Benefit Plan has incurred any material accumulated
-----
funding deficiency (as defined in Sections 302(a)(2) of ERISA and 412(a) of the
Code) whether or not waived. Neither the Borrower nor any member of the
Controlled Group has incurred any material liability to the PBGC which remains
outstanding other than the payment of premiums, and there are no premium
payments which have become due which are unpaid. Schedule B to the most recent
annual report filed with the IRS with respect to each Benefit Plan and, if so
requested, furnished to the Lender, is complete and accurate. Since the date of
each such Schedule B, there has been no material adverse change in the funding
status or financial condition of the Benefit Plan relating to such Schedule B.
Neither the Borrower nor any member of the Controlled Group has (i) failed to
make a required contribution or payment to a Multiemployer Plan or (ii) made a
complete or partial withdrawal under Sections 4203 or 4205 of ERISA from a
Multiemployer Plan, in either event which could result in any material
liability. Neither the Borrower nor any member of the Controlled Group has
failed to make a required installment or any other required payment under
Section 412 of the Code, in either case involving any material amount, on or
before the due date for such installment or other payment. Neither the Borrower
nor any member of the Controlled Group is required to provide security to a
Benefit Plan under Section 401(a)(29) of the Code due to a Plan amendment that
results in an increase in current liability for the plan year. Neither the
Borrower nor any of its Subsidiaries maintains or contributes to any employee
welfare benefit plan within the meaning of Section 3(1) of ERISA which provides
benefits to employees after termination of employment other than as required by
Section 601 of ERISA. Each Plan which is intended to be qualified under Section
401(a) of the Code as currently in effect is so qualified, and each trust
related to any such Plan is exempt from federal income tax under Section 501(a)
of the Code as currently in effect. The Borrower and all Subsidiaries are in
compliance in all material respects with the responsibilities, obligations and
duties imposed on them by ERISA and the Code with respect to all Plans. Neither
the Borrower nor any of its Subsidiaries nor any fiduciary of any Plan has
engaged in a nonexempt prohibited transaction described in Sections 406 of ERISA
or 4975 of the Code which could reasonably be expected to subject the Borrower
or any Guarantor to material liability. Neither the Borrower nor any member of
the Controlled Group has taken or failed to take any action which would
constitute or result in a Termination Event, which action or inaction could
reasonably be expected to subject the Borrower to material liability. Neither
the Borrower nor any Subsidiary is subject to any liability under Sections 4063,
4064, 4069, 4204 or 4212(c) of ERISA and no other member of the Controlled Group
is subject to any liability under Sections 4063, 4064, 4069, 4204 or 4212(c) of
ERISA which could reasonably be expected to subject the Borrower or any
Guarantor to liability. Neither the Borrower nor any of its Subsidiaries has,
by reason of the
11
transactions contemplated hereby, any obligation to make any payment to any
employee pursuant to any Plan or existing contract or arrangement. For
purposes of this Section 4.9 "material" means any noncompliance or basis for
-----------
liability which could reasonably be likely to subject the Borrower or any of
its Subsidiaries to liability individually or in the aggregate for all such
matters in excess of $250,000.00.
4.10 Accuracy of Information. The information, exhibits and reports
-----------------------
furnished by or on behalf of the Borrower and any of its Subsidiaries to the
Lender in connection with the negotiation of, or compliance with, the Loan
Documents, the representations and warranties of the Borrower and its
Subsidiaries contained in the Transaction Documents, and all certificates and
documents delivered to the Lender pursuant to the terms thereof, taken as a
whole, do not contain as of the date furnished any untrue statement of a fact or
omit to state a fact necessary in order to make the statements contained herein
or therein, taken as a whole, in light of the circumstances under which they
were made, not misleading.
4.11 Securities Activities. Neither the Borrower nor any of its
---------------------
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
4.12 Material Agreements. Neither the Borrower nor any of its
-------------------
Subsidiaries is a party to any Contractual Obligation or subject to any charter
or other corporate restriction which individually or in the aggregate will have
or could reasonably be expected to have a material adverse effect. Neither the
Borrower nor any of its Subsidiaries has received notice or has knowledge that
(i) it is in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Contractual Obligation
applicable to it, or (ii) any condition exists which, with the giving of notice
or the lapse of time or both, would constitute a default with respect to any
such Contractual Obligation, in each case, except where such default or
defaults, if any, individually or in the aggregate will not have or could not
reasonably be expected to have a material adverse effect.
4.13 Compliance with Laws; Compliance with Franchise Agreements. The
----------------------------------------------------------
Borrower and its Subsidiaries are in compliance with all requirements of law
applicable to them and their respective businesses. The execution, delivery and
performance by each Guarantor of any Loan Document to which it is a party does
not and will not conflict with the franchise agreement to which it is a party.
Each Guarantor (other than any Guarantor that functions only as a Subsidiary
holding company and is not an operating entity) is operating under a valid and
enforceable franchise agreement.
4.14 Assets and Properties. The Borrower and each of its
---------------------
Subsidiaries has good and marketable title to all of its assets and properties
(tangible and intangible, real or personal) owned by it or a valid leasehold
interest in all of its leased assets (except insofar as marketability may be
limited by any laws or regulations of any governmental authority affecting such
assets), and all such assets and property are free and clear of all Liens,
except Liens permitted under Section 5.3(C). Substantially all of the assets
--------------
and properties owned by, leased to or used by the Borrower and/or each such
Subsidiary of the Borrower are in adequate operating condition and repair,
ordinary wear and tear excepted. Neither this Agreement nor any other
Transaction Document, nor any transaction contemplated under any such agreement,
will affect any right, title or interest of the Borrower or such Subsidiary in
and to any of its assets in a manner that will have or could reasonably be
expected to have a material adverse effect.
12
4.15 Statutory Indebtedness Restrictions. Neither the Borrower nor
-----------------------------------
any of its Subsidiaries is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act,
or the Investment Company Act of 1940, or any other federal, state or local
statute, ordinance or regulation which limits its ability to incur indebtedness
or its ability to consummate the transactions contemplated hereby.
4.16 Insurance. The Borrower's and its Subsidiaries' insurance
---------
policies and programs reflect coverage that is reasonably consistent with
prudent industry practice.
4.17 Labor Matters. As of the date hereof, to the Borrower's and its
-------------
Subsidiaries' knowledge, there are no material labor disputes to which the
Borrower or any of its Subsidiaries may become a party, including, without
limitation, any strikes, lockouts or other disputes relating to such Persons'
plants and other facilities.
4.18 Environmental Matters. (A) The operations of the Borrower and
---------------------
its Subsidiaries comply in all material respects with Environmental, Health or
Safety Requirements of Law;
(B) the Borrower and its Subsidiaries have all material permits,
licenses or other authorizations required under Environmental, Health or
Safety Requirements of Law and are in material compliance with such
permits;
(C) neither the Borrower, any of its Subsidiaries nor any of
their respective present property or operations, or, to the best of, the
Borrower's or any of its Subsidiaries' knowledge, any of their respective
past property or operations, are subject to or the subject of, any
investigation known to the Borrower or any of its Subsidiaries, any
judicial or administrative proceeding, order, judgment, decree, settlement
or other agreement respecting: (i) any material violation of
Environmental, Health or Safety Requirements of Law; (ii) any material
remedial action; or (iii) any material claims or liabilities arising from
the Release or threatened Release of a Contaminant into the environment;
(D) there is not now, nor to the best of the Borrower's or any
of its Subsidiaries' knowledge has there ever been on or in the property of
the Borrower or any of its Subsidiaries any landfill, waste pile,
underground storage tanks, aboveground storage tanks, surface impoundment
or hazardous waste storage facility of any kind, any polychlorinated
biphenyls (PCBs) used in hydraulic oils, electric transformers or other
equipment, or any asbestos containing material that in the case of any of
the foregoing could be reasonably expected to result in any material claims
or liabilities; and
(E) neither the Borrower nor any of its Subsidiaries has any
material Contingent Obligation in connection with any Release or threatened
Release of a Contaminant into the environment.
4.19 Benefits. Each of the Borrower and its Subsidiaries will
--------
benefit from the financing arrangement established by this Agreement. The
Lender has stated and the Borrower acknowledges that, but for the agreement by
each of the Guarantors to execute and deliver its
13
respective Guaranty and Security Agreement, the Lender would not have made
available the credit facilities established hereby on the terms set forth
herein.
4.20 Acquisitions; Related Transactions. As of the Effective Date
----------------------------------
and as of the date of each Acquisition all material conditions precedent to, all
consents from applicable governmental authorities, and all other material
consents necessary to permit the Acquisitions pursuant to the Acquisition
Documents have been or will be satisfied or waived by the Borrower with the
prior written consent of the Lender.
ARTICLE V: COVENANTS
---------------------
The Borrower covenants and agrees that so long as any Commitment is
outstanding and thereafter until payment in full of all of the Obligations
(other than contingent indemnity obligations, but including Floor Plan
Indebtedness), unless the Lender otherwise gives its prior written consent:
5.1 Reporting. The Borrower shall:
---------
(A) Financial Reporting. Furnish to the Lender:
-------------------
(i) Quarterly Reports. As soon as practicable, and in any event
-----------------
within forty-five (45) days after the end of each fiscal quarter in each
fiscal quarter, the consolidated and consolidating balance sheet of the
Borrower and its Subsidiaries as at the end of such period and the related
consolidated and consolidating statements of income and consolidated
statements of cash flows of the Borrower and its Subsidiaries for such
fiscal quarter and for the period from the beginning of the then current
fiscal year to the end of such fiscal quarter, certified by the chief
financial officer of the Borrower on behalf of the Borrower as fairly
presenting the consolidated and consolidating financial position of the
Borrower and its Subsidiaries as at the dates indicated and the results of
their operations and cash flows for the periods indicated in accordance
with Agreement Accounting Principles, subject to normal year end
adjustments.
(ii) Annual Reports. As soon as practicable, and in any event
--------------
within ninety (90) days after the end of each fiscal year, (a) the
consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as at the end of such fiscal year and the related consolidated
and consolidating statements of income, stockholders' equity and cash flows
of the Borrower and its Subsidiaries for such fiscal year, and in
comparative form the corresponding figures for the previous fiscal year and
(b) an audit report on the items listed in clause (a) hereof (other than
----------
the consolidating statements) of independent certified public accountants
of recognized national standing, which audit report shall be unqualified
and shall state that such financial statements fairly present the
consolidated financial position of the Borrower and its Subsidiaries as at
the dates indicated and the results of their operations and cash flows for
the periods indicated in conformity with Agreement Accounting Principles
and that the examination by such accountants in connection with such
consolidated financial statements has been made in accordance with
generally accepted auditing standards. Within 30 days after the deliveries
made pursuant to this clause (ii), Borrower shall cause to be delivered to
-----------
Lender any management letter prepared by the above-referenced accountants.
14
(iii) Monthly Statements. As soon as practicable, and in any by
------------------
the seventh business day of each month, (i) certified copies of statements
prepared by Borrower fairly presenting the financial position of each of
Borrower's Subsidiaries individually, and by the twenty-fifth day of each
month, certified copies of statements prepared by Borrower fairly
presenting the consolidated and consolidating financial position of
Borrower and its Subsidiaries, and (ii) a certified used vehicle inventory
schedule, providing an inventory of all used vehicles owned by Borrower and
its Subsidiaries.
(iv) Officer's Certificate. Together with each delivery of any
---------------------
financial statement pursuant to clauses (i) and (ii) of this Section
----------- ---- -------
5.1(A), an Officer's Certificate of the Borrower, substantially in the form
of Exhibit F attached hereto and made a part hereof, stating that no Event
---------
of Default or Unmatured Default exists, or if any Event of Default or
Unmatured Default exists, stating the nature and status thereof and setting
forth (X) such financial statements and information as shall be reasonably
acceptable to the Lender and (Y) a valuation of the Collateral.
(B) Notice of Event of Default. Promptly upon any of the chief
--------------------------
executive officer, chief operating officer, chief financial officer, treasurer
or controller of the Borrower or any of its Subsidiaries obtaining knowledge (i)
of any condition or event which constitutes an Event of Default or Unmatured
Default, or (ii) that any Person has given any written notice to the Borrower or
any Subsidiary of the Borrower or taken any other action with respect to a
claimed default or event or condition of the type referred to in Section 6.1(E),
--------------
deliver to the Lender a notice specifying (a) the nature and period of existence
of any such claimed default, Event of Default, Unmatured Default, condition or
event, (b) the notice given or action taken by such Person in connection
therewith, and (c) what action the Borrower has taken, is taking and proposes to
take with respect thereto.
(C) Lawsuits. (i) Promptly upon the Borrower obtaining knowledge of
--------
the institution of, or written threat of, any action, suit, proceeding,
governmental investigation or arbitration against or affecting the Borrower or
any of its Subsidiaries or any property of the Borrower or any of its
Subsidiaries, which action, suit, proceeding, governmental investigation or
arbitration exposes, or in the case of multiple actions, suits, proceedings,
governmental investigations or arbitrations arising out of the same general
allegations or circumstances which expose, in the Borrower's reasonable
judgment, the Borrower or any of its Subsidiaries to liability in an amount
aggregating $500,000.00 or more, give written notice thereof to the Lender and
provide such other information as may be reasonably available to enable the
Lender and its counsel to evaluate such matters; and (ii) in addition to the
requirements set forth in clause (i) of this Section 5.1(C), upon request of the
---------- --------------
Lender, promptly give written notice of the status of any action, suit,
proceeding, governmental investigation or arbitration covered by a report
delivered pursuant to clause (i) above or disclosed in any filing with the
----------
Commission and provide such other information as may be reasonably available to
it that would not violate any attorney-client privilege by disclosure to the
Lender to enable the Lender and its counsel to evaluate such matters.
(D) ERISA Notices. Deliver or cause to be delivered to the Lender,
-------------
at the Borrower's expense, the following information and notices as soon as
reasonably possible, and in any event:
15
(i) (a) within ten (10) business days after the Borrower obtains
knowledge that a Termination Event has occurred, a written statement of the
chief financial officer of the Borrower describing such Termination Event
and the action, if any, which the Borrower has taken, is taking or proposes
to take with respect thereto, and when known, any action taken or
threatened by the IRS, DOL or PBGC with respect thereto and (b) within ten
(10) business days after any member of the Controlled Group obtains
knowledge that a Termination Event has occurred which could reasonably be
expected to subject the Borrower or any member of the Controlled Group to
liability individually or in the aggregate in excess of $250,000, a written
statement of the chief financial officer of the Borrower describing such
Termination Event and the action, if any, which the member of the
Controlled Group has taken, is taking or proposes to take with respect
thereto, and when known, any action taken or threatened by the IRS, DOL or
PBGC with respect thereto;
(ii) within ten (10) business days after the Borrower or any of
its Subsidiaries obtains knowledge that a prohibited transaction (defined
in Sections 406 of ERISA and Section 4975 of the Code) has occurred, a
statement of the chief financial officer of the Borrower describing such
transaction and the action which the Borrower or such Subsidiary has taken,
is taking or proposes to take with respect thereto;
(iii) within ten (10) business days after the Borrower or any of
its Subsidiaries receives notice of any unfavorable determination letter
from the IRS regarding the qualification of a Plan under Section 401(a) of
the Code, copies of each such letter;
(iv) within ten (10) business days after the filing thereof with
the IRS, a copy of each funding waiver request filed with respect to any
Benefit Plan and all communications received by the Borrower or a member of
the Controlled Group with respect to such request;
(v) within ten (10) business days after receipt by the Borrower
or any member of the Controlled Group of the PBGC's intention to terminate
a Benefit Plan or to have a trustee appointed to administer a Benefit Plan,
copies of each such notice;
(vi) within ten (10) business days after receipt by the Borrower
or any member of the Controlled Group of a notice from a Multi-employer
Plan regarding the imposition of withdrawal liability, copies of each such
notice;
(vii) within ten (10) business days after the Borrower or any
member of the Controlled Group fails to make a required installment or any
other required payment under Section 412 of the Code on or before the due
date for such installment or payment, a notification of such failure; and
(viii) within ten (10) business days after the Borrower or any
member of the Controlled Group knows or has reason to know that (a) a
Multi-employer Plan has been terminated, (b) the administrator or plan
sponsor of a Multi-employer Plan intends to terminate a Multi-employer
Plan, or (c) the PBGC has instituted or will institute proceedings under
Section 4042 of ERISA to terminate a Multi-employer Plan.
16
For purposes of this Section 5.1(D), the Borrower, any of its Subsidiaries and
--------------
any member of the Controlled Group shall be deemed to know all facts known by
the Administrator of any Plan of which the Borrower or any member of the
Controlled Group or such Subsidiary is the plan sponsor.
(E) Labor Matters. Notify the Lender in writing, promptly upon the
-------------
Borrower's learning thereof, of (i) any material labor dispute to which the
Borrower or any of its Subsidiaries may become a party, including, without
limitation, any strikes, lockouts or other disputes relating to such Persons'
plants and other facilities and (ii) any material liability incurred under the
Worker Adjustment and Retraining Notification Act with respect to the closing of
any plant or other facility of the Borrower or any of its Subsidiaries.
(F) Other Indebtedness. Deliver to the Lender (i) a copy of each
------------------
notice or communication regarding potential or actual defaults (including any
accompanying officer's certificate) delivered by or on behalf of the Borrower or
any of its Subsidiaries to the holders of funded Indebtedness pursuant to the
terms of the agreements governing such Indebtedness, such delivery to be made at
the same time and by the same means as such notice or other communication is
delivered to such holders, and (ii) a copy of each notice or other communication
regarding potential or actual defaults received by the Borrower or any of its
Subsidiaries from the holders of funded Indebtedness pursuant to the terms of
such Indebtedness, such delivery to be made promptly after such notice or other
communication is received by the Borrower or any such Subsidiary.
(G) Other Reports. Deliver or cause to be delivered to the Lender
-------------
copies of all financial statements, reports and notices, if any, sent or made
available generally by the Borrower to its securities holders or filed with the
Commission by the Borrower, all press releases made available generally by the
Borrower or any of the Borrower's Subsidiaries to the public concerning material
developments in the business of the Borrower or any such Subsidiary and all
notifications received from the Commission by the Borrower or its Subsidiaries
pursuant to the Securities Exchange Act of 1934 and the rules promulgated
thereunder (other than customary comment letters received in connection with
registration statements or other routine communications between the Commission
and the Borrower).
(H) Environmental Notices. Deliver or cause to be delivered to
---------------------
Lender, as soon as possible, and in any event within ten (10) days after receipt
by the Borrower or any of its Subsidiaries, a copy of (i) any notice or claim to
the effect that the Borrower or any of its Subsidiaries is or may be liable to
any Person as a result of the Release by the Borrower, any of its Subsidiaries,
or any other Person of any Contaminant into the environment, and (ii) any notice
alleging any violation of any Environmental, Health or Safety Requirements of
Law by the Borrower or any of its Subsidiaries.
(I) Other Information. Promptly upon receiving a request therefor
-----------------
from the Lender, prepare and deliver to the Lender such other information with
respect to the Borrower, any of its Subsidiaries, or the Collateral, including,
without limitation, schedules identifying and describing the Collateral and any
dispositions thereof, as from time to time may be reasonably requested by the
Lender.
17
5.2 Affirmative Covenants.
---------------------
(A) Existence, Etc. Except for mergers permitted pursuant to Section
--------------- -------
5.3(H), the Borrower shall, and shall cause each of its Subsidiaries to, at all
------
times maintain its corporate company or partnership existence, as applicable,
and preserve and keep, or cause to be preserved and kept, in full force and
effect its rights and franchises material to its businesses.
(B) Powers; Conduct of Business. The Borrower shall, and shall cause
---------------------------
each of its Subsidiaries to, qualify and remain qualified to do business in each
jurisdiction in which the nature of its business requires it to be so qualified
and where the failure to be so qualified will have or could reasonably be
expected to have a material adverse effect. The Borrower will, and will cause
each Subsidiary to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is presently
conducted.
(C) Compliance with Laws, Etc. The Borrower shall, and shall cause
--------------------------
its Subsidiaries to, (i) comply with all requirements of law and all restrictive
covenants affecting such Person or the business, properties, assets or
operations of such Person, and (ii) obtain as needed all permits necessary for
its operations and maintain such permits in good standing.
(D) Payment of Taxes and Claims; Tax Consolidation. The Borrower
----------------------------------------------
shall pay, and shall cause each of its Subsidiaries to pay, (i) all taxes,
assessments and other governmental charges imposed upon it or on any of its
properties or assets or in respect of any of its franchises, business, income or
property before any penalty or interest accrues thereon, and (ii) all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law have or
may become a Lien (other than a Lien permitted by Section 5.3(C)) upon any of
--------------
the Borrower's or such Subsidiary's property or assets, prior to the time when
any penalty or fine shall be incurred with respect thereto; provided, however,
-------- -------
that no such taxes, assessments and governmental charges referred to in clause
------
(i) above or claims referred to in clause (ii) above (and interest, penalties or
--- -----------
fines relating thereto) need be paid if being contested in good faith by
appropriate proceedings diligently instituted and conducted and if such reserve
or other appropriate provision, if any, as shall be required in conformity with
Agreement Accounting Principles shall have been made therefor. The Borrower
will not, nor will it permit any of its Subsidiaries to, file or consent to the
filing of any consolidated income tax return with any other Person other than
the consolidated return of the Borrower.
(E) Insurance. The Borrower shall maintain for itself and its
---------
Subsidiaries, or shall cause each of its Subsidiaries to maintain in full force
and effect, insurance policies and programs reflecting coverage that is
reasonably consistent with prudent industry practice.
(F) Inspection of Property; Books and Records; Discussions. The
------------------------------------------------------
Borrower shall permit and cause each of the Borrower's Subsidiaries to permit,
any authorized representative(s) designated by the Lender to visit and inspect
any of the properties of the Borrower or any of its Subsidiaries, to examine,
audit, check and make copies of their respective financial and accounting
records, books, journals, orders, receipts and any correspondence and other data
relating to their respective businesses or the transactions contemplated hereby
or by the Acquisitions (including, without limitation, in connection with
environmental compliance, hazard or liability), and to discuss their affairs,
finances and accounts with their officers and
18
independent certified public accountants, all upon reasonable notice and at
such reasonable times during normal business hours, as often as may be
reasonably requested; provided, that while no Event of Default exists, all of
--------
the foregoing shall be at the expense of the Lender. The Borrower shall keep
and maintain, and cause each of the Borrower's Subsidiaries to keep and
maintain, in all material respects, proper books of record and account in
which entries in conformity with Agreement Accounting Principles shall be made
of all dealings and transactions in relation to their respective businesses
and activities, including, without limitation, transactions and other dealings
with respect to the Collateral. If an Event of Default has occurred and is
continuing, the Borrower, upon the Lender's request, shall deliver to Lender
to Lender or its representatives copies of any such records (which such copies
must be certified, as to completeness and accuracy, by an Authorized Officer).
(G) Insurance and Condemnation Proceeds. The Borrower directs (and,
-----------------------------------
if applicable, shall cause its Subsidiaries to direct) all insurers under
policies of property damage, boiler and machinery and business interruption
insurance and payors of any condemnation claim or award relating to the property
to pay all proceeds payable under such policies or with respect to such claim or
award for any loss with respect to the Collateral directly to the Lender;
provided, however, in the event that such proceeds or award are less than
-------- -------
$250,000.00 ("Excluded Proceeds"), unless an Event of Default has occurred and
-----------------
is continuing, the Lender will remit such Excluded Proceeds to the Borrower or
Subsidiary, as applicable. Each such policy must contain a long-form loss-
payable endorsement naming the Lender as loss payee, which endorsement must be
in form and substance acceptable to the Lender. The Lender shall, upon receipt
of such proceeds (other than Excluded Proceeds) and at the Borrower's direction,
either apply the same to the principal amount of the Advances outstanding at the
time of such receipt and create a corresponding reserve against the Commitment
in an amount equal to such application (the "Decision Reserve") or hold them as
----------------
cash collateral for the Obligations in an interest bearing account. For up to
150 days from the date of any loss (the "Decision Period"), the Borrower may
---------------
notify the Lender that it intends to restore, rebuild or replace the property
subject to any insurance payment or condemnation award and shall, as soon as
practicable thereafter, provide the Lender detailed information, including a
construction schedule and cost estimates. Should an Event of Default occur at
any time during the Decision Period, should the Borrower notify the Lender that
it has decided not to rebuild or replace such property during the Decision
Period, or should the Borrower fail to notify the Lender of the Borrower's
decision during the Decision Period, then the amounts held as cash collateral
pursuant to this Section 5.2(G) or as the Decision Reserve must be applied as a
--------------
mandatory prepayment of the Advances pursuant to Section 2.2(B). Proceeds held
--------------
as cash collateral pursuant to this Section 5.2(G) or constituting the Decision
--------------
Reserve must be disbursed as payments for restoration, rebuilding or replacement
of such property become due; provided, however, should an Event of Default occur
-------- -------
after the Borrower has notified the Lender that it intends to rebuild or replace
the property, the Decision Reserve or amounts held as cash collateral will be
applied as a mandatory prepayment of the Advances pursuant to Section 2.2(B).
--------------
In the event the Decision Reserve is to be applied as a mandatory prepayment to
the Advances, the Borrower will be deemed to have requested Advances in an
amount equal to the Decision Reserve, and such Advances will be made regardless
of any failure of the Borrower to meet the conditions precedent set forth in
Article III. Upon completion of the restoration, rebuilding or replacement of
-----------
such property, the unused proceeds will constitute net cash proceeds of an Asset
Sale and will be applied as a mandatory prepayment of the Advances pursuant to
Section 2.2(B).
--------------
19
(H) ERISA Compliance. The Borrower shall, and shall cause each of
----------------
the Borrower's Subsidiaries to, establish, maintain and operate all Plans, if
any, to comply in all material respects with the provisions of ERISA, the Code,
all other applicable laws, and the regulations and interpretations thereunder
and the respective requirements of the governing documents for such Plans,
except where the failure to comply will not or could not reasonably be expected
to subject the Borrower and its Subsidiaries to liability individually or in the
aggregate in excess of $250,000.00.
(I) Maintenance of Property. The Borrower shall cause all property
-----------------------
used or useful in the conduct of its business or the business of any Subsidiary
to be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and shall cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Borrower may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section 5.2(H) shall prevent the
-------- ------- --------------
Borrower from discontinuing the operation or maintenance of any of such property
if such discontinuance is, in the judgment of the Borrower, desirable in the
conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Lender.
(J) Environmental Compliance. The Borrower and its Subsidiaries
------------------------
shall comply with all Environmental, Health or Safety Requirements of Law,
except where noncompliance could not reasonably be expected to subject the
Borrower and its Subsidiaries to liability individually or in the aggregate in
excess of $500,000.00. Neither the Borrower nor any of its Subsidiaries shall
be the subject of any proceeding or investigation pertaining to (i) the Release
by the Borrower or any of its Subsidiaries of any Contaminant into the
environment or (ii) the liability of the Borrower or any of its Subsidiaries
arising from the Release by any other Person of any Contaminant into the
environment, which, in either case, subjects or is reasonably likely to subject
the Borrower and its Subsidiaries individually or in the aggregate to liability
in excess of the amount set forth above.
(K) Use of Proceeds. The Borrower shall use the proceeds of the
---------------
Advances (i) to fund the Permitted Acquisitions of a New Subsidiary, (ii) to
payoff certain indebtedness owing by FirstAmerica Automotive, Inc. to General
Electric Acceptance Corporation in an amount not to exceed $26,500,000.00, and
(iii) to fund used automobile inventory, under the terms more specifically set
forth in Section 2.1 of this Agreement. The Borrower will not nor will it permit
any Subsidiary to, use any of the proceeds of the Loans to purchase or carry any
"Margin Stock" or to make any Acquisition, other than any Permitted Acquisition
pursuant to Section 5.3(F).
--------------
(L) Addition of Dealership Guarantors. The Borrower shall cause each
---------------------------------
Guarantor which has not heretofore provided a Guaranty to the Lender, to deliver
to the Lender a Guaranty, UCC-1 Financing Statements and an acknowledgment to be
bound by the Contribution Agreement, together with appropriate corporate
resolutions, opinions and other documentation in form and substance reasonably
satisfactory to the Lender. Each Guarantor shall provide such Guaranty and
Collateral Documents prior to or simultaneously with its Acquisition.
(M) Future Liens on Real Property. The Borrower shall, and shall
-----------------------------
cause each of its Subsidiaries that is required to guarantee the Obligations to,
execute and deliver to the Lender, immediately upon its acquisition or leasing
of any real property after the date hereof, a
20
mortgage, deed of trust, collateral assignment or other appropriate instrument
evidencing a Lien upon any such acquired property, lease or interest, to be in
form and substance reasonably acceptable to the Lender and subject only to
such Liens as otherwise permitted by this Agreement and the Borrower or the
applicable Subsidiary, as the case may be, shall have provided the Lender with
such opinions, landlord and mortgagee waivers or title insurance as the Lender
shall have reasonably requested in connection with such acquisition or leasing
of real property. The foregoing provision shall apply to the leasing of any
real property only if (i) the term of such lease (without regard to any
extension thereof at then current market rent) is more than five years or (ii)
such lease has a material value by reason of a purchase option, below-market
rent or otherwise.
(N) Additional Stock Pledge. In the event the Pledged Stock Value
-----------------------
decreases below $175,000,000.00, Borrower shall cause Pledgor to pledge
additional shares of stock in Speedway Motor Sports, Inc. to Lender. Pledgor
shall be required to pledge additional shares of stock in an amount sufficient
to decrease the Loan to Value to no greater than fifty-eight percent (58%),
which such additional pledge agreement and pledged shares must be delivered to
Lender within five (5) business days of the valuation described in the following
sentence. For purposes of this paragraph, the Pledged Stock Value will be
determined by Lender on the last trading day of each month during the term of
this Loan by multiplying (i) the number of shares of stock in Speedway Motor
Sports, Inc. pledged by Pledgor to Lender for such preceding month by (ii) the
closing price for Speedway Motor Sports, Inc. stock reported on the New York
Stock Exchange on the last day trading of such month. Any such Pledged Stock
Value will be in effect for the next calendar month, until the final business
day, upon which Lender will recalculate the Pledged Stock Value.
5.3 Negative Covenants.
------------------
(A) Indebtedness. Neither the Borrower nor any of its Subsidiaries
------------
may directly or indirectly create, incur, assume or otherwise become or remain
directly or indirectly liable with respect to any Indebtedness, except:
(i) the Obligations;
(ii) Permitted Existing Indebtedness and Permitted Refinancing
Indebtedness;
(iii) Indebtedness in respect of obligations secured by
Customary Permitted Liens;
(iv) Indebtedness constituting Contingent Obligations in
respect of Indebtedness otherwise permitted hereunder;
(v) Indebtedness arising from intercompany loans from the
Borrower to any Guarantor or from any Subsidiary to the Borrower or any
Guarantor; provided that in each case such Indebtedness is subordinated
--------
upon terms satisfactory to the Lender to the obligations of the Borrower
and its Subsidiaries with respect to the Obligations;
21
(vi) Guaranties by the Borrower of Indebtedness permitted to be
incurred by any Subsidiary;
(vii) Indebtedness with respect to surety, appeal and
performance bonds obtained by the Borrower or any of its Subsidiaries in
the ordinary course of business;
(viii) Indebtedness arising under the Borrower Guaranty or any
Guaranty;
(ix) Indebtedness not in excess of $250,000.00 in connection
with the Liens set forth in Section 5.3(C)(iv); and
(x) Indebtedness evidenced by Seller's Notes, provided that
Lender has approved the amount of any such Seller's Note prior to the
incurrence of the Indebtedness evidenced thereby.
(B) Sales of Assets. Neither the Borrower nor any of its
---------------
Subsidiaries may sell, assign, transfer, lease, convey or otherwise dispose of
any property (including the Capital Stock of any Subsidiary), whether now owned
or hereafter acquired, or any income or profits therefrom, or enter into any
agreement to do so, except:
(i) sales of inventory in the ordinary course of business;
(ii) the disposition in the ordinary course of business of
equipment that is obsolete, excess or no longer useful in the Borrower's or
its Subsidiaries' business;
(iii) sale (by sale of Capital Stock, sale of substantially all
assets of such Guarantor, or otherwise) of a Guarantor as a going concern
(provided that if Borrower incurred Indebtedness under the Note for the
purposes of the Permitted Acquisition of such Guarantor, simultaneous with
the sale of such Guarantor, Borrower makes a prepayment of the Indebtedness
under the Note in an amount equal to the net worth (calculated in
accordance with Agreement Accounting Principles) of such Guarantor);
(iv) sale of any real property acquired in connection with a
Permitted Acquisition, provided such sale is for not less than Fair Value;
and
(v) sales, assignments, transfers, leases, conveyances or other
dispositions of other assets (including sales of Capital Stock of a
Subsidiary) if such transaction (a) is for all cash consideration, (b) is
for not less than Fair Value, (c) when combined with all such other
transactions (each such transaction being valued at book value) (1) during
the immediately preceding twelve-month period, represents the disposition
of not greater than $250,000.00, and (2) during the period from the date
hereof to the date of such proposed transaction, represents the disposition
of not greater than $500,000.00 and (d) is a sale by the Borrower of
Capital Stock in any Subsidiary, except as provided in subclause (c) above,
the Borrower shall continue to own, of record and beneficially, with sole
voting and dispositive power, 100% (unless required by the Subsidiary's
franchise agreement to be less, in which event at least 80%) of the
outstanding shares of Capital Stock of any such Subsidiary.
22
(C) Liens. Neither the Borrower nor any of its Subsidiaries may
-----
directly or indirectly create, incur, assume or permit to exist any Lien on or
with respect to any of their respective property or assets, except:
(i) Permitted Existing Liens;
(ii) Customary Permitted Liens;
(iii) Liens securing the Obligations; and
(iv) Liens (other than on the stock of any Subsidiaries)
securing other obligations not exceeding $250,000.00 in the aggregate at
any time outstanding.
In addition, neither the Borrower nor any of its Subsidiaries may become a party
to any agreement, note, indenture or other instrument, or take any other action,
which would prohibit the creation of a Lien on any of its properties or other
assets in favor of the Lender, as collateral for the Obligations; provided that
--------
any agreement, note, indenture or other instrument in connection with Liens
permitted pursuant to clause (i) above may prohibit the creation of a Lien in
----------
favor of the Lender on the items of property subject to such Lien.
(D) Investments. Except to the extent permitted pursuant to
-----------
paragraph (G) below, neither the Borrower nor any of its Subsidiaries may
-------------
directly or indirectly make or own any Investment except:
(i) Investments in Cash Equivalents;
(ii) Permitted Existing Investments in an amount not greater
than the amount thereof on the date hereof;
(iii) Investments in trade receivables or received in connection
with the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with, customers
and suppliers arising in the ordinary course of business;
(iv) Investments consisting of intercompany loans from any
Subsidiary to the Borrower or any other Subsidiary permitted by Section
-------
5.3(A)(v);
---------
(v) Investments in any Guarantor;
(vi) Investments constituting Permitted Acquisitions; and
(vii) Investments in addition to those referred to elsewhere in
this Section 5.3(D) in an amount not to exceed $500,000.00 in the aggregate
--------------
at any time outstanding;
provided, however, that the Investments described in clause (vii) above are not
-------- ------- ------------
permitted if either an Event of Default or Unmatured Default shall have occurred
and be continuing on the date thereof or would result therefrom.
23
(E) Restricted Payments. Neither the Borrower nor any of its
-------------------
Subsidiaries may declare or make any Restricted Payment, except:
(i) where the consideration therefor consists solely of Equity
Interests (but excluding Disqualified Stock) of the Borrower or its
Subsidiaries provided no Change of Control would occur as a result thereof;
and
(ii) in connection with the payment of dividends by a Subsidiary
to the Borrower.
(F) Conduct of Business; Subsidiaries; Acquisitions. (i) Neither
-----------------------------------------------
the Borrower nor any of its Subsidiaries may engage in any business other than
the businesses engaged in by the Borrower and Guarantor on the date hereof and
any business or activities which are substantially similar, related or
incidental thereto.
(ii) The Borrower may create, acquire and/or capitalize any
entity listed on Exhibit G hereto (each referred to herein as a "New
---
Subsidiary") after the date hereof pursuant to any transaction that is
----------
permitted by or not otherwise prohibited by this Agreement; provided that upon
--------
the creation or acquisition of each New Subsidiary, the requirements set forth
in Section 5.2(L) hereof have been satisfied and all New Subsidiaries that are
--------------
Material Subsidiaries must be Controlled Subsidiaries.
(iii) The Borrower will not make any Acquisition of a New
Subsidiary unless such Acquisitions meets the following requirements, (each
such Acquisition constituting a "Permitted Acquisition"):
---------------------
(a) no Event of Default or Unmatured Default has occurred and is
continuing or would result from such Acquisition or the incurrence of any
Indebtedness in connection therewith;
(b) in the case of an Acquisition of Equity Interests of an
entity, such Acquisition must be of one hundred percent (100%) of the
Equity Interests of such entity except that in the case of a Majority
Acquisition, such Acquisition must be of at least eighty percent (80%) of
the Equity Interests of such entity, provided, that the provisions of
--------
Section 5.2(N) are complied with;
(c) the businesses being acquired must be substantially similar,
related or incidental to the businesses or activities engaged in by the
Borrower and its Subsidiaries on the date hereof;
(d) prior to each such Acquisition, the Borrower shall deliver
to the Lender a certificate from one of the Authorized Officers,
demonstrating to the reasonable satisfaction of the Lender that after
giving effect to such Acquisition, the incurrence of any Indebtedness
hereunder and in connection herewith, and the incurrence of the full amount
of any Seller's Notes, on a pro forma basis (both historically and on a
--- -----
projected basis), as if the Acquisition and such incurrence of Indebtedness
had occurred on the first day of the twelve-month period ending on the last
day of the Borrower's most recently completed fiscal quarter, the Borrower
would have been in compliance with all
24
of the covenants contained in this Agreement, including, without
limitation, the financial covenants set forth in Section 5.4;
-----------
(f) the purchase is consummated pursuant to a negotiated
acquisition agreement on a non-hostile basis;
(g) after giving effect to such Acquisition, the representations
and warranties set forth in Article IV hereof are true and correct in all
----------
material respects on and as of the date of such Acquisition with the same
effect as though made on and as of such date;
(h) the written consent of the Lender must have been obtained,
which such consent will not be unreasonably withheld, in connection with
any Acquisition if the acquisition price therefore (including the maximum
amount of any deferred portion thereof or contingency payments payable in
connection therewith) (computed with any non-cash portion of the
acquisition price being valued at the fair value thereof as of the date of
computation) exceeds $5,000,000.00 (such amount being net of new and used
vehicle inventory, if such inventory is financed with a floor plan lender)
for such Acquisition or series of related Acquisitions;
(i) the Borrower must have either (A) conducted (and must have
based the calculations set forth above on) its audit of the target, such
audit to have been performed in accordance with Borrower's established
procedures and Agreement Account Principles (if the Permitted Acquisition
is an Acquisition of Capital Stock (directly or indirectly), such audit
must be reviewed by independent certified public accountants, and a copy of
such review must be delivered to Lender), (B) obtained (and must have
based the calculations set forth above on) historical audited financial
statements for the target and/or reviewed unaudited financial statements
for the target for a period of not less than (1) two (2) years for
Acquisitions in excess of $20,000,000.00 and (2) one (1) year for any other
Acquisition, together with tax returns for the one year prior to such year,
in each case obtained from the seller or provided by independent certified
public accountants retained for the purposes of such Acquisition, broken
down by fiscal year in the Borrower's reasonable judgment, or (C) supplied
Lender with any other financial information Lender, in its discretion,
deems acceptable to Lender, in each case, copies of which shall be
provided to the Lender; and
(j) the Borrower must have obtained either (i) a new franchise
agreement between the Guarantor and the manufacturer on substantially the
same terms as the franchise agreement entered into between the manufacturer
and the entity to be acquired in such Permitted Acquisition or (ii) any
consent required from a manufacturer for the continued enforceability and
validity of such franchise agreement after the completion of a Permitted
Acquisition shall have been obtained.
(G) Transactions with Shareholders and Affiliates. Neither the
---------------------------------------------
Borrower nor any of its Subsidiaries may directly or indirectly enter into or
permit to exist any transaction (including, without limitation, the purchase,
sale, lease or exchange of any property or the rendering of any service) with
any holder or holders of any of the Equity Interests of the Borrower, or with
any Affiliate of the Borrower which is not a Guarantor, on terms that are less
favorable to the
25
Borrower or any of its Subsidiaries, as applicable, than those that might be
obtained in an arm's length transaction at the time from Persons who are not
such a holder or Affiliate.
(H) Restriction on Fundamental Changes. With the exception of the
----------------------------------
proposed merger between FAA and Sonic Automotive, Inc., neither the Borrower nor
any of its Subsidiaries may enter into any merger or consolidation, or
liquidate, wind-up or dissolve (or suffer any liquidation or dissolution), or
convey, lease, sell, transfer or otherwise dispose of, in one transaction or
series of transactions, all or substantially all of the Borrower's or any such
Subsidiary's business or property, whether now or hereafter acquired, except (i)
transactions permitted under Sections 5.3(B) or 5.3(G); (ii) the merger of a
--------------- ------
Subsidiary of the Borrower into a Person acquired or being acquired in
connection with a Permitted Acquisition; (iii) the merger of a wholly-owned
Subsidiary of the Borrower with and into the Borrower; and (iv) the merger of a
Subsidiary of the Borrower with another Subsidiary of the Borrower; provided,
--------
however, (i) with respect to any such permitted mergers involving any Guarantor,
-------
the surviving corporation in the merger shall also be or become a Guarantor; and
(ii) after the consummation of any such transaction, the Borrower shall be in
compliance with the provisions of Sections 5.2(K) and 5.3(E).
--------------- ------
(I) Sales and Leasebacks. Neither the Borrower nor any of its
--------------------
Subsidiaries may become liable, directly, by assumption or by Contingent
Obligation, with respect to any lease, whether an operating lease or a
Capitalized Lease, of any property (whether real or personal or mixed) (i) which
it or one of its Subsidiaries sold or transferred or is to sell or transfer to
any other Person, or (ii) which it or one of its Subsidiaries intends to use for
substantially the same purposes as any other property which has been or is to be
sold or transferred by it or one of its Subsidiaries to any other Person in
connection with such lease, provided, however, that transactions involving the
sale by Borrower and/or a Subsidiary of real property (which such sale is for
Fair Value and consummated pursuant to an arms length transaction), and the
subsequent leaseback by Borrower and/or a Subsidiary (which such leaseback is
for Fair Value and consummated pursuant to an arms length transaction), are
permitted.
(J) Margin Regulations. Neither the Borrower nor any of its
------------------
Subsidiaries, may use all or any portion of the proceeds of any credit extended
under this Agreement to purchase or carry Margin Stock.
(K) ERISA. The Borrower may not:
-----
(i) engage, or permit any of its Subsidiaries to engage, in
any prohibited transaction described in Sections 406 of ERISA or 4975 of
the Code for which a statutory or class exemption is not available or a
private exemption has not been previously obtained from the DOL;
(ii) permit to exist any accumulated funding deficiency (as
defined in Sections 302 of ERISA and 412 of the Code), with respect to any
Benefit Plan, whether or not waived;
(iii) fail, or permit any Controlled Group member to fail, to
pay timely required contributions or annual installments due with respect
to any waived funding deficiency to any Benefit Plan;
26
(iv) terminate, or permit any Controlled Group member to
terminate, any Benefit Plan which would result in any liability of the
Borrower or any Controlled Group member under Title IV of ERISA;
(v) fail to make any contribution or payment to any
Multiemployer Plan which the Borrower or any Controlled Group member may be
required to make under any agreement relating to such Multiemployer Plan,
or any law pertaining thereto;
(vi) fail, or permit any Controlled Group member to fail, to
pay any required installment or any other payment required under Section
412 of the Code on or before the due date for such installment or other
payment; or
(vii) amend, or permit any Controlled Group member to amend, a
Plan resulting in an increase in current liability for the plan year such
that the Borrower or any Controlled Group member is required to provide
security to such Plan under Section 401(a)(29) of the Code,
except where such transactions, events, circumstances, or failures will not have
or is not reasonably likely to subject the Borrower and its Subsidiaries to
liability individually or in the aggregate in excess of $250,000.00.
(L) Issuance of Equity Interests. The Borrower may not issue any
----------------------------
Equity Interests if as a result of such issuance a Change of Control occurs.
None of the Borrower's Subsidiaries may issue any Equity Interests other than to
(i) the Borrower, (ii) a Subsidiary holding company of the Borrower and (iii) a
Minority Holder (in connection with a Majority Acquisition).
(M) Corporate Documents; Franchise Agreements. Neither the Borrower
-----------------------------------------
nor any of its Subsidiaries may amend, modify or otherwise change any of the
terms or provisions in any of their respective constituent documents as in
effect on the date hereof in any manner adverse in any material respect to the
interests of the Lender without the prior written consent of the Lender. The
Borrower shall not permit any Guarantor to amend, modify or otherwise change any
of the terms or provisions of such Guarantor's franchise agreement in any manner
adverse in any material respect to the interests of the Lender without the prior
written consent of the Lender.
(N) Fiscal Year. Neither the Borrower nor any of its consolidated
-----------
Subsidiaries may change its fiscal year for accounting or tax purposes from a
period consisting of the 12-month period ending on December 31 of each calendar
year.
(O) Subsidiary Covenants. The Borrower will not, and will not permit
--------------------
any Subsidiary to, create or otherwise cause to become effective any consensual
encumbrance or restriction of any kind on the ability of any Subsidiary to pay
dividends or make any other distribution on its stock, or make any other
Restricted Payment, pay any Indebtedness or other Obligation owed to the
Borrower or any other Subsidiary, make loans or advances or other Investments in
the Borrower or any other Subsidiary, or sell, transfer or otherwise convey any
of its property to the Borrower or any other Subsidiary.
27
(P) Hedging Obligations. The Borrower shall not and shall not permit
-------------------
any of its Subsidiaries to enter into any interest rate, commodity or foreign
currency exchange, swap, collar, cap or similar agreements evidencing Hedging
Obligations, other than interest rate, foreign currency or commodity exchange,
swap, collar, cap or similar agreements entered into by the Borrower or a
Subsidiary pursuant to which the Borrower or such Subsidiary has hedged its
actual interest rate, foreign currency or commodity exposure.
ARTICLE VI: EVENT OF DEFAULTS
------------------------------
6.1 Event of Defaults. Each of the following occurrences constitute
-----------------
an Event of Default under this Agreement:
(A) Failure to Make Payments When Due. The Borrower fails to pay
---------------------------------
within ten (10) days after oral notice of the delinquency of any Obligations
under this Agreement or the other Loan Documents.
(B) Breach of Certain Covenants. The Borrower fails duly and
---------------------------
punctually to perform or observe any agreement, covenant or obligation binding
on the Borrower under Sections 5.2(F), 5.2(K), 5.3 or 5.4.
--------------- ------ --- ---
(C) Breach of Representation or Warranty. Any representation or
------------------------------------
warranty made or deemed made by the Borrower to the Lender herein or by the
Borrower or any of its Subsidiaries in any of the other Loan Documents or in any
written statement or certificate at any time given by any such Person pursuant
to any of the Loan Documents is false or misleading in any material respect on
the date as of which made (or deemed made).
(D) Other Defaults. The Borrower defaults in the performance of or
--------------
compliance with any term contained in this Agreement (other than as covered by
paragraphs (a), (b) or (c) of this Section 6.1), or the Borrower or any of its
-------------- --- --- -----------
Subsidiaries defaults in the performance of or compliance with any term
contained in any of the other Loan Documents, and such default continues for
twenty (20) days after written notice thereof.
(E) Default as to Other Indebtedness. The Borrower or any of its
--------------------------------
Subsidiaries fails to make any payment when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) with respect to any
Indebtedness (other than Indebtedness constituting the deferred portion of the
purchase price of an asset which is subject to a good faith dispute, which,
together with all such other outstanding disputed Indebtedness, is not in excess
of $500,000.00 and which is being contested by the Borrower, and provided that
the Borrower has set aside adequate reserves covering such disputed
Indebtedness) the outstanding principal amount of which Indebtedness is in
excess of $200,000.00; or any breach, default or event of default occurs, or any
other condition exists under any instrument, agreement or indenture pertaining
to any such Indebtedness, if the effect thereof is to cause an acceleration,
mandatory redemption, a requirement that the Borrower offer to purchase such
Indebtedness or other required repurchase of such Indebtedness, or permit the
holder(s) of such Indebtedness to accelerate the maturity of any such
Indebtedness or require a redemption or other repurchase of such Indebtedness;
or any such Indebtedness is otherwise declared to be due and payable (by
acceleration or otherwise) or required to be prepaid, redeemed or
28
otherwise repurchased by the Borrower or any of its Subsidiaries (other than
by a regularly scheduled required prepayment) prior to the stated maturity
thereof.
(F) Involuntary Bankruptcy; Appointment of Receiver, Etc.
-----------------------------------------------------
(i) An involuntary case is commenced against the Borrower or any
of the Borrower's Subsidiaries and the petition is not dismissed, stayed,
bonded or discharged within sixty (60) days after commencement of the case;
or a court having jurisdiction in the premises enters a decree or order for
relief in respect of the Borrower or any of the Borrower's Subsidiaries in
an involuntary case, under any applicable bankruptcy, insolvency or other
similar law now or hereinafter in effect; or any other similar relief is
granted under any applicable federal, state, local or foreign law.
(ii) A decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over the Borrower
or any of the Borrower's Subsidiaries or over all or a substantial part of
the property of the Borrower or any of the Borrower's Subsidiaries is
entered; or an interim receiver, trustee or other custodian of the Borrower
or any of the Borrower's Subsidiaries or of all or a substantial part of
the property of the Borrower or any of the Borrower's Subsidiaries is
appointed or a warrant of attachment, execution or similar process against
any substantial part of the property of the Borrower or any of the
Borrower's Subsidiaries is issued and any such event is not stayed,
dismissed, bonded or discharged within sixty (60) days after entry,
appointment or issuance.
(G) Voluntary Bankruptcy; Appointment of Receiver, Etc. The Borrower
---------------------------------------------------
or any of the Borrower's Subsidiaries (i) commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, (ii) consents to the entry of an order for relief in an involuntary
case, or to the conversion of an involuntary case to a voluntary case, under any
such law, (iii) consents to the appointment of or taking possession by a
receiver, trustee or other similar custodian for the benefit of creditors for
all or a substantial part of its property, (iv) makes any assignment for the
benefit of creditors or (v) takes any corporate action to authorize any of the
foregoing.
(H) Judgments and Attachments. Any money judgment(s) (other than a
-------------------------
money judgment covered by insurance as to which the insurance company has not
disclaimed coverage or if it has reserved the right to disclaim coverage, such
letter reserving the right to disclaim coverage is outstanding twelve months
after such money judgment was rendered), writ or warrant of attachment, or
similar process against the Borrower or any of its Subsidiaries or any of their
respective assets involving in any single case or in the aggregate an amount in
excess of $250,000.00 is or are entered and remain undischarged, unvacated,
unbonded or unstayed for a period of sixty (60) days or in any event later than
fifteen (15) days prior to the date of any proposed sale thereunder.
(I) Dissolution. Any order, judgment or decree is entered against
-----------
the Borrower or any of its Subsidiaries decreeing its involuntary dissolution or
split up and such order remains undischarged and unstayed for a period in excess
of sixty (60) days; or the Borrower or any of
29
its Subsidiaries otherwise dissolves or ceases to exist except as specifically
permitted by this Agreement.
(J) Loan Documents; Failure of Security. At any time, for any
-----------------------------------
reason, (i) any Loan Document as a whole that affects the ability of the Lender
to enforce the Obligations or enforce its rights against the Collateral ceases
to be in full force and effect or the Borrower or any of the Borrower's
Subsidiaries party thereto seeks to repudiate its obligations thereunder and the
Liens intended to be created thereby are, or the Borrower or any such Subsidiary
seeks to render such Liens, invalid or unperfected, or (ii) any Lien on
Collateral in favor of the Lender contemplated by the Loan Documents is, at any
time, for any reason, invalidated or otherwise ceases to be in full force and
effect or such Lien does not have the priority contemplated by this Agreement or
the Loan Documents and such failure continues for three (3) days after written
notice thereof.
(K) Termination Event. Any Termination Event occurs which is
-----------------
reasonably likely to subject the Borrower or any of its Subsidiaries to
liability individually or in the aggregate in excess of $250,000.00, and such
Termination Event continues for three (3) days after the occurrence thereof,
provided however, if such Termination Event is a Reportable Event, then prior to
-------- -------
such Termination Event causing an Event of Default under this Section 6.1(k),
--------------
such Termination Event continues for ten (10) days after the occurrence thereof.
(L) Waiver of Minimum Funding Standard. If the plan administrator of
----------------------------------
any Plan applies under Section 412(d) of the Code for a waiver of the minimum
funding standards of Section 412(a) of the Code and the Lender believes the
substantial business hardship upon which the application for the waiver is based
could reasonably be expected to subject either the Borrower or any Controlled
Group member to liability individually or in the aggregate in excess of
$250,000.00.
(M) Change of Control. A Change of Control occurs.
-----------------
(N) Hedging Agreements. Nonpayment by the Borrower or any Subsidiary
------------------
of any obligation under any contract with respect to Hedging Obligations entered
into by the Borrower or such Subsidiary with the Lender (or Affiliate thereof)
or the breach by the Borrower or Subsidiary of any other term, provision or
condition contained in any agreement and such nonpayment or breach continues for
ten (10) days after the occurrence thereof.
(O) Guarantor Default or Revocation. Except as may otherwise be
-------------------------------
specifically permitted under this Agreement, the Borrower Guaranty or any
Guaranty fails to remain in full force or effect or any action is taken by the
Borrower or any Guarantor to discontinue or to assert the invalidity or
unenforceability of the Borrower Guaranty or any Guaranty or the Borrower or any
Guarantor fails to comply with any of the terms or provisions of any Guaranty to
which it is a party, or the Borrower or any Guarantor denies that it has any
further liability under any Guaranty to which it is a party, or gives notice to
such effect.
(P) Environmental Matters. The Borrower or any of its Subsidiaries
---------------------
is the subject of any proceeding or investigation pertaining to (i) the Release
by the Borrower or any of its Subsidiaries of any Contaminant into the
environment, (ii) the liability of the Borrower or any of its Subsidiaries
arising from the Release by any other person of any Contaminant into the
30
environment, or (iii) any violation of any Environmental, Health or Safety
Requirements of Law by the Borrower or any of its Subsidiaries, which, in any
case, has subjected or is reasonably likely to subject the Borrower or any of
its Subsidiaries to liability individually or in the aggregate in excess of
$250,000.00.
(Q) Exercise of Purchase Option. O. ▇▇▇▇▇▇ ▇▇▇▇▇ chooses to
---------------------------
exercise his option to purchase any one or each New Subsidiary.
An Event of Default will be deemed "continuing" until cured or until
waived in writing in accordance with Section 7.3.
-----------
ARTICLE VII: ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
------------------------------------------------------------
7.1 Termination of Commitments; Acceleration. If any Event of
----------------------------------------
Default described in Section 6.1(F) or 6.1(G) occurs with respect to the
-------------- ------
Borrower, the obligation of the Lender to make Advances hereunder will
automatically terminate and the Obligations will immediately become due and
payable without any election or action on the part of the Lender. If any other
Event of Default occurs, the Lender may terminate or suspend its obligations to
make Advances hereunder, or declare the Obligations to be due and payable, or
both, whereupon, after written notice to the Borrower, the Obligations will
become immediately due and payable, without presentment, demand, protest or
other notice of any kind, all of which the Borrower expressly waives.
7.2 Amendments. No amendment, waiver or modification of any
----------
provision of this Agreement will be effective unless signed by each of the
parties hereto and then only to the extent in such writing specifically set
forth.
7.3 Preservation of Rights. No delay or omission of the Lender to
----------------------
exercise any right under the Loan Documents will impair such right or be
construed to be a waiver of any Event of Default or an acquiescence therein, and
the making of an Advance notwithstanding the existence of an Event of Default or
the inability of the Borrower to satisfy the conditions precedent to such
Advance will not constitute any waiver or acquiescence. Any single or partial
exercise of any such right will not preclude other or further exercise thereof
or the exercise of any other right, and no waiver, amendment or other variation
of the terms, conditions or provisions of the Loan Documents whatsoever will be
valid unless in writing signed by the Lender, and then only to the extent in
such writing specifically set forth. All remedies contained in the Loan
Documents or by law afforded will be cumulative and all will be available to the
Lender until the Obligations have been paid in full.
ARTICLE VIII: GENERAL PROVISIONS
---------------------------------
8.1 Survival of Representations. All representations and warranties
---------------------------
of the Borrower contained in this Agreement will survive delivery of the Note
and the making of the Advances herein contemplated.
31
8.2 Governmental Regulation. Anything contained in this Agreement to
-----------------------
the contrary notwithstanding, the Lender will not be obligated to extend credit
to the Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
8.3 Performance of Obligations. The Borrower agrees that the Lender
--------------------------
may, but has no obligation to (i) at any time, pay or discharge taxes, liens,
security interests or other encumbrances levied or placed on or threatened
against any Collateral, unless such claims are being contested in good faith by
the Borrower and the Borrower has set aside adequate reserves covering such tax,
lien, security interest or other encumbrance and no Event of Default has
occurred and is outstanding and (ii) after the occurrence and during the
continuance of an Event of Default to make any payment or perform any act
required of the Borrower under any Loan Document or take any other action which
the Lender in its reasonable discretion deems necessary or desirable to protect
or preserve the Collateral, including, without limitation, any action to (y)
effect any repairs or obtain any insurance called for by the terms of any of the
Loan Documents and to pay all or any part of the premiums therefor and the costs
thereof and (z) pay any rents payable by the Borrower which are more than 30
days past due, or as to which the landlord has given notice of termination,
under any lease. The Lender will use its reasonable efforts to give the
Borrower notice of any action taken under this Section 8.3 prior to the taking
-----------
of such action or promptly thereafter provided the failure to give such notice
will not affect the Borrower's obligations in respect thereof. The Borrower
agrees to pay the Lender, upon demand, the principal amount of all funds
advanced by the Lender under this Section 8.3, together with interest thereon at
-----------
the rate from time to time applicable to Advancesfrom the date of such advance
until the outstanding principal balance thereof is paid in full. All
outstanding principal of, and interest on, advances made under this Section 8.3
-----------
shall constitute Obligations for purposes hereof.
8.4 Headings. Section headings in the Loan Documents are for
--------
convenience of reference only, and do not govern the interpretation of any of
the provisions of the Loan Documents.
8.5 Entire Agreement. The Loan Documents embody the entire agreement
----------------
and understanding among the Borrower and the Lender and the Loan Documents
delivered on the Effective Date supersede all prior agreements and
understandings among the Borrower and the Lender relating to the subject matter
thereof.
8.6 Expenses; Indemnification.
-------------------------
(A) Expenses. The Borrower shall reimburse the Lender for any
--------
reasonable costs, internal charges and out-of-pocket expenses (including
reasonable attorneys' and paralegals' fees and time charges of attorneys and
paralegals for the Lender, which attorneys and paralegals may be employees of
the Lender) paid or incurred by the Lender in connection with the preparation,
negotiation, execution, delivery, review, amendment, modification, and
administration of the Loan Documents. The Borrower also agrees to reimburse the
Lender for any reasonable costs, internal charges and out-of-pocket expenses
(including attorneys' and paralegals' fees and time charges of attorneys and
paralegals for the Lender, which attorneys and paralegals may be employees of
the Lender) paid or incurred by the Lender in connection with the collection of
the Obligations and enforcement of the Loan Documents. In addition to expenses
set forth above, the Borrower agrees to reimburse the Lender, promptly after the
32
Lender's request therefor, for each audit or other business analysis performed
by it in connection with this Agreement or the other Loan Documents at a time
when an Event of Default exists in an amount equal to the Lender's then
reasonable and customary charges for each person employed to perform such audit
or analysis, plus all costs and expenses (including without limitation, travel
expenses) incurred by the Lender in the performance of such audit or analysis.
Lender shall provide the Borrower with a detailed statement of all
reimbursements requested under this Section 8.6(A).
--------------
(B) Indemnity. The Borrower further agrees to defend, protect,
---------
indemnify, and hold harmless the Lender and each of its Affiliates, and each of
the Lender's, or Affiliate's respective officers, directors, employees,
attorneys and agents (including, without limitation, those retained in
connection with the satisfaction or attempted satisfaction of any of the
conditions set forth in Article III) (collectively, the "Indemnitees") from and
----------- -----------
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses of any kind or nature
whatsoever (including, without limitation, the fees and disbursements of counsel
for such Indemnitees in connection with any investigative, administrative or
judicial proceeding, whether or not such Indemnitees shall be designated a party
thereto), imposed on, incurred by, or asserted against such Indemnitees in any
manner relating to or arising out of:
(i) this Agreement, the other Loan Documents or any of the
Transaction Documents, or any act, event or transaction related or
attendant thereto or to the making of the Advances, hereunder, the
management of such Advances, the use or intended use of the proceeds of the
Advances hereunder, or any of the other transactions contemplated by the
Transaction Documents; or
(ii) any liabilities, obligations, responsibilities, losses,
damages, personal injury, death, punitive damages, economic damages,
consequential damages, treble damages, intentional, willful or wanton
injury, damage or threat to the environment, natural resources or public
health or welfare, costs and expenses (including, without limitation,
attorney, expert and consulting fees and costs of investigation,
feasibility or remedial action studies), fines, penalties and monetary
sanctions, interest, direct or indirect, known or unknown, absolute or
contingent, past, present or future relating to violation of any
Environmental, Health or Safety Requirements of Law arising from or in
connection with the past, present or future operations of the Borrower, its
Subsidiaries or any of their respective predecessors in interest, or, the
past, present or future environmental, health or safety condition of any
respective property of the Borrower or its Subsidiaries, the presence of
asbestos-containing materials at any respective property of the Borrower or
its Subsidiaries or the Release or threatened Release of any Contaminant
into the environment (collectively, the "Indemnified Matters");
-------------------
provided, however, the Borrower has no obligation to an Indemnitee hereunder
-------- -------
with respect to Indemnified Matters caused by or resulting from the willful
misconduct or gross negligence of such Indemnitee as determined by the final
non-appealed judgment of a court of competent jurisdiction. If the undertaking
to indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, the Borrower
will contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all Indemnified Matters
incurred by the Indemnitees.
33
(C) Notwithstanding anything else in this Agreement to the contrary,
no party has any obligation to reimburse any person for attorneys' fees and
expenses unless such fees and expenses are (i) reasonable in amount, (ii)
determined without reference to any statutory presumption and (iii) calculated
using the actual time expended and the standard hourly rate for the attorneys
and paralegals performing the tasks in question and the actual out-of-pocket
expenses incurred.
(D) Waiver of Certain Claims; Settlement of Claims. The Borrower
----------------------------------------------
further agrees to assert no claim against any of the Indemnitees on any theory
of liability for consequential, special, indirect, exemplary or punitive
damages. No settlement will be entered into by the Borrower or any of its
Subsidiaries with respect to any claim, litigation, arbitration or other
proceeding relating to or arising out of the transactions evidenced by this
Agreement, the other Loan Documents or in connection with Related Transactions
(whether or not the Lender or any Indemnitee is a party thereto) unless such
settlement releases all Indemnitees from any and all liability with respect
thereto.
(E) Survival of Agreements. The obligations and agreements of the
----------------------
Borrower under this Section 8.6 will survive the termination of this Agreement.
-----------
8.7 Accounting. Except as provided to the contrary herein, all
----------
accounting terms used herein will be interpreted and all accounting
determinations hereunder will be made in accordance with Agreement Accounting
Principles.
8.8 Severability of Provisions. Any provision in any Loan Document
--------------------------
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
will, as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
8.9 Nonliability of Lender. The relationship between the Borrower
----------------------
and the Lender is solely that of borrower and lender. The Lender has no
fiduciary responsibilities to the Borrower and the Lender does not take any
responsibility to the Borrower to review or inform the Borrower of any matter in
connection with any phase of the Borrower's business or operations.
8.10 GOVERNING LAW. ANY DISPUTE BETWEEN THE BORROWER AND THE LENDER,
-------------
OR ANY INDEMNITEE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY,
OR OTHERWISE, WILL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT
REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF CALIFORNIA. ANY
ADVANCES MADE HEREUNDER WILL BE MADE PURSUANT TO THE CALIFORNIA FINANCE LENDER'S
LAW.
8.11 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
-------------------------------------------------------
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B),
---------------------- --------------
EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING
34
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, WILL
BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED IN CALIFORNIA, BUT
THE PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO
BE HEARD BY A COURT LOCATED OUTSIDE OF CALIFORNIA. EACH OF THE PARTIES HERETO
WAIVES IN ALL DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION (A) ANY OBJECTION
--------------
THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. THE BORROWER AGREES THAT THE LENDER OR ANY
-------------------
INDEMNITEE WILL HAVE THE RIGHT TO PROCEED AGAINST THE BORROWER OR ITS PROPERTY
IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL
JURISDICTION OVER THE BORROWER OR (2) REALIZE ON THE COLLATERAL OR ANY OTHER
SECURITY FOR THE OBLIGATIONS OR ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED
IN FAVOR OF SUCH PERSON. THE BORROWER AGREES THAT IT WILL NOT ASSERT ANY
PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON TO REALIZE ON
THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. THE BORROWER WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS
COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION (B).
--------------
(C) SERVICE OF PROCESS. THE BORROWER WAIVES PERSONAL SERVICE OF ANY
------------------
PROCESS UPON IT AND IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY WRITS,
PROCESS OR SUMMONSES IN ANY SUIT, ACTION OR PROCEEDING BY THE MAILING THEREOF BY
THE LENDER BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER
ADDRESSED AS PROVIDED HEREIN. NOTHING HEREIN WILL IN ANY WAY BE DEEMED TO LIMIT
THE ABILITY OF THE LENDER TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES IN ANY
OTHER MANNER PERMITTED BY APPLICABLE LAW THE BORROWER IRREVOCABLY WAIVES ANY
OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER
----- --- ----------
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH ABOVE.
(D) WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
--------------------
APPLICABLE LAW, EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION WILL BE DECIDED BY COURT TRIAL WITHOUT A JURY
AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL
35
COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY.
(E) WAIVER OF BOND. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE
--------------
LAW, THE BORROWER WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF ANY PARTY
HERETO IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE ANY JUDGMENT
OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PARTY, OR TO ENFORCE BY SPECIFIC
PERFORMANCE, TEMPORARY RESTRAINING ORDER, PRELIMINARY OR PERMANENT INJUNCTION,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
(F) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER
-----------------
PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE
PROVISIONS OF THIS SECTION 8.11, WITH ITS COUNSEL.
------------
8.12 No Strict Construction. The parties hereto have participated
----------------------
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement will be
construed as if drafted jointly by the parties hereto and no presumption or
burden of proof will arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
8.13 Subordination of Intercompany Indebtedness. The Borrower agrees
------------------------------------------
that any and all claims of the Borrower against any Guarantor, any endorser or
any other guarantor of all or any part of the Obligations, or against any of its
properties, including, without limitation, pursuant to the any intercompany
Indebtedness permitted under Section 5.3(A)(vi), will be subordinate and subject
------------------
in right of payment to the prior payment, in full and in cash, of all
Obligations. Notwithstanding any right of the Borrower to ask, demand, ▇▇▇ for,
take or receive any payment from any Guarantor, all rights, liens and security
interests of the Borrower, whether now or hereafter arising and howsoever
existing, in any assets of any Guarantor will be and are subordinated to the
rights, if any, of the Lender in those assets. The Borrower has no right to
possession of any such asset or to foreclose upon any such asset, whether by
judicial action or otherwise, unless and until all of the Obligations shall have
been paid in full in cash and satisfied and all financing arrangements under
this Agreement and the other Loan Documents between the Borrower and the Lender
have been terminated. If, during the continuance of an Event of Default, all or
any part of the assets of any Guarantor, or the proceeds thereof, are subject to
any distribution, division or application to the creditors of any Guarantor,
whether partial or complete, voluntary or involuntary, and whether by reason of
liquidation, bankruptcy, arrangement, receivership, assignment for the benefit
of creditors or any other action or proceeding, then, and in any such event, any
payment or distribution of any kind or character, either in cash, securities or
other property, which is payable or deliverable upon or with respect to any
indebtedness of any Guarantor to the Borrower, including, without limitation,
pursuant to the any intercompany Indebtedness permitted under Section 5.3(A)(vi)
------------------
("Intercompany Indebtedness") will be paid or delivered directly to the Lender
-------------------------
for application on any of the Obligations, due or to become due, until such
Obligations have first been paid in full in cash and satisfied; provided,
--------
however, ordinary course payments or distributions made by any Guarantor to the
-------
Borrower will be required to be paid or delivered to the Lender only upon
36
the Lender's request. The Borrower irrevocably authorizes and empowers the
Lender to demand, ▇▇▇ for, collect and receive every such payment or
distribution and give acquittance therefor and to make and present for and on
behalf of the Borrower such proofs of claim and take such other action, in the
Lender's own name or in the name of the Borrower or otherwise, as the Lender
may deem necessary or advisable for the enforcement of this Section 8.13. The
------------
Lender may vote such proofs of claim in any such proceeding, receive and
collect any and all dividends or other payments or disbursements made thereon
in whatever form the same may be paid or issued and apply the same on account
of any of the Obligations. Should any payment, distribution, security or
instrument or proceeds thereof be received by the Borrower upon or with
respect to the Intercompany Indebtedness during the continuance of an Event of
Default and prior to the satisfaction of all of the Obligations and the
termination of all financing arrangements under this Agreement and the other
Loan Documents between the Borrower and the Lender, the Borrower receive and
hold the same in trust, as trustee, for the benefit of the Lender and shall
forthwith deliver the same to the Lender, in precisely the form received
(except for the endorsement or assignment of the Borrower where necessary),
for application to any of the Obligations, due or not due, and, until so
delivered, the same will be held in trust by the Borrower as the property of
the Lender; provided, however, ordinary course payments or distributions made
-------- -------
to or by any Guarantor to the Borrower will be required to be paid or
delivered to the Lender only upon the Lender's request after the occurrence
and Continuance of an Event of Default. If the Borrower fails to make any such
endorsement or assignment to the Lender, the Lender or any of its officers or
employees are irrevocably authorized to make the same. The Borrower agrees
that until the Obligations have been paid in full in cash and satisfied and
all financing arrangements under this Agreement and the other Loan Documents
between the Borrower and the Lender have been terminated, the Borrower will
not assign or transfer to any Person (other than the Lender) any claim the
Borrower has or may have against any Guarantor.
8.14 Usury Not Intended. It is the intent of the Borrower and the
------------------
Lender in the execution and performance of this Agreement and the other Loan
Documents to contract in strict compliance with applicable usury laws, including
conflicts of law concepts, governing the Advances of the Lender including such
applicable laws of the State of California and the United States of America from
time-to-time in effect. In furtherance thereof, the Lender and the Borrower
stipulate and agree that none of the terms and provisions contained in this
Agreement or the other Loan Documents will ever be construed to create a
contract to pay, as consideration for the use, forbearance or detention of
money, interest at a rate in excess of the Maximum Rate and that for purposes
hereof "interest" includes the aggregate of all charges which constitute
interest under such laws that are contracted for, charged or received under this
Agreement; and in the event that, notwithstanding the foregoing, under any
circumstances the aggregate amounts taken, reserved, charged, received or paid
on the Advances, include amounts which by applicable law are deemed interest
which would exceed the Maximum Rate, then such excess will be deemed to be a
mistake and the Lender receiving same will credit the same on the principal of
its Note (or if the Note shall have been paid in full, refund said excess to the
Borrower). In the event that the maturity of the Note is accelerated by reason
of any election of the holder thereof resulting from any Event of Default under
this Agreement or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest may never include
more than the Maximum Rate and excess interest, if any, provided for in this
Agreement or otherwise will be canceled automatically as of the date of such
acceleration or prepayment and, if theretofore paid, will be credited on the
applicable Note
37
(or, if the Note has been paid in full, refunded to the Borrower of such
interest). In determining whether or not the interest paid or payable under
any specific contingencies exceeds the Maximum Rate, the Borrower and the
Lender will to the maximum extent permitted under applicable law amortize,
prorate, allocate and spread in equal parts during the period of the full
stated term of the Note all amounts considered to be interest under applicable
law at any time contracted for, charged, received or reserved in connection
with the Obligations. The provisions of this Section will control over all
other provisions of this Agreement or the other Loan Documents which may be in
apparent conflict herewith.
ARTICLE IX: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
--------------------------------------------------------------
9.1 Successors and Assigns. The terms and provisions of the Loan
----------------------
Documents will be binding upon and inure to the benefit of the Borrower and the
Lender and their respective successors and assigns, except that the Borrower
does not have the right to assign its rights or obligations under the Loan
Documents.
9.2 Participations.
--------------
(A) Permitted Participants; Effect. Subject to the terms set forth
------------------------------
in this Section 9.2, the Lender may, in the ordinary course of its business and
-----------
in accordance with applicable law, at any time sell to one or more banks or
other financial institutions ("Participants") participating interests in any
------------
Advance owing to the Lender, the Note, the Commitment or any other interest of
the Lender under the Loan Documents on a pro rata or non-pro rata basis. Notice
of such participation to the Borrower will be required prior to any
participation becoming effective. In the event of any such sale by the Lender
of participating interests to a Participant, the Lender's obligations under the
Loan Documents will remain unchanged, the Lender will remain solely responsible
to the other parties hereto for the performance of such obligations, the Lender
shall remain the holder of the Note for all purposes under the Loan Documents,
all amounts payable by the Borrower under this Agreement will be determined as
if the Lender had not sold such participating interests, and the Borrower shall
continue to deal solely and directly with the Lender in connection with the
Lender's rights and obligations under the Loan Documents.
(B) Voting Rights. The Lender will retain the sole right to approve,
-------------
without the consent of any Participant, any amendment, modification or waiver of
any provision of the Loan Documents other than any amendment, modification or
waiver with respect to any Advance or Commitment in which such Participant has
an interest.
9.3 Assignments. The Lender may, in the ordinary course of its
-----------
business and in accordance with applicable law, at any time assign to one or
more banks or other financial institutions approved by the Borrower within 10
days of notice to the Borrower by the Lender of such assignment (which such
approval may not be unreasonably withheld) all or a portion of its rights and
obligations under this Agreement (including, without limitation, its Commitment
and all Advances owing to it) pursuant to an assignment agreement in form and
substance satisfactory to the Lender. Notwithstanding the foregoing, the
Borrower will not have any right to approve an assignee under this Section 9.3,
-----------
after the occurrence and continuance of an Event of Default or to the extent
such assignee is an Affiliate of the Lender, provided, however, that to the
-------- -------
extent the Lender assigns its obligations hereunder, such Affiliate must be a
United
38
States Person and the Lender will have provided such financial statements as
the Borrower shall have reasonably requested.
9.4 Confidentiality. Subject to Section 9.5, the Lender will hold
--------------- -----------
all nonpublic information obtained pursuant to the requirements of this
Agreement and identified as such by the Borrower in accordance with the Lender's
customary procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure reasonably required by a prospective Transferee in connection with
the contemplated participation or as required or requested by any governmental
authority or representative thereof or pursuant to legal process and shall
require any such Transferee to agree (and require any of its Transferees to
agree) to comply with this Section 9.4. In no event shall the Lender be
-----------
obligated or required to return any materials furnished by the Borrower;
provided, however, each prospective Transferee will be required to agree that if
-------- -------
it does not become a participant it shall return all materials furnished to it
by or on behalf of the Borrower in connection with this Agreement.
9.5 Dissemination of Information. The Borrower authorizes the Lender
----------------------------
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
----------
prospective Transferee any and all information in the Lender's possession
concerning the Borrower and its Subsidiaries; provided that prior to any such
--------
disclosure, such prospective Transferee shall have agreed to preserve in
accordance with Section 9.4 the confidentiality of any confidential information
-----------
described therein.
ARTICLE X: NOTICES
-------------------
10.1 Giving Notice. Except as otherwise permitted by Section 2.8
------------- -----------
with respect to borrowing notices, all notices and other communications provided
to any party hereto under this Agreement or any other Loan Documents will be in
writing or by telex or by facsimile and addressed or delivered to such party at
its address set forth below its signature hereto or at such other address as may
be designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with postage prepaid, will be deemed given when
received; any notice, if transmitted by telex or facsimile, will be deemed given
when transmitted (answerback confirmed in the case of telexes).
10.2 Change of Address. The Borrower and the Lender may each change
-----------------
the address for service of notice upon it by a notice in writing to the other
parties hereto.
ARTICLE XI: COUNTERPARTS
-------------------------
11.1 This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one agreement, and any of the
parties hereto may execute this Agreement by signing any such counterpart. This
Agreement will be effective when it has been executed by the Borrower and the
Lender.
39
IN WITNESS WHEREOF, the Borrower and the Lender have executed this
Agreement as of the date first above written.
FIRSTAMERICA AUTOMOTIVE, INC.,
as the Borrower
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
Attest: /s/ W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------
W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Secretary
FAA HOLDING CORP., as the Borrower
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
Attest: /s/ W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------
W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Secretary
FORD MOTOR CREDIT COMPANY, as Lender
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
Title: National Account Manager
--------------------------
40
SCHEDULE A
"Acquisition" means any transaction, or any series of related
-----------
transactions, consummated on or after the date of this Agreement, by which the
Borrower or a Subsidiary holding company (i) acquires any going business or all
or substantially all of the assets of any Guarantor and/or related operations of
any Guarantor (e.g. body shop and service repair centers), whether through
purchase of assets, merger or otherwise or (ii) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of such
a Guarantor which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage of voting power) of the outstanding
equity interests of such Guarantor.
"Acquisition Documents" means all documents, instruments and
---------------------
agreements entered into in connection with any Acquisition.
"Advance" means any loan made by the Lender under Section 2.1 hereof.
------- -----------
"Affiliate" of any Person means any other Person directly or
---------
indirectly controlling, controlled by or under common control with such Person.
A Person shall be deemed to control another Person if the controlling Person is
the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934) of greater than five percent (5%) or more of any class of voting
securities (or other voting interests) of the controlled Person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management or policies of the controlled Person, whether through ownership of
Capital Stock, by contract or otherwise.
"Agreement Accounting Principles" means generally accepted accounting
-------------------------------
principles in effect from time to time, applied in a manner consistent with that
used in preparing the financial statements referred to in Section 5.1(A) hereof,
--------------
provided, however, all pro forma financial statements reflecting Acquisitions
-------- ------- --- -----
shall be prepared in accordance with the requirements established by the
Commission, for acquisition accounting for reporting acquisitions by public
companies (whether or not such Acquisitions are required to be publicly
reported).
"Applicable Commercial Paper Rate " means as of the Termination Date,
--------------------------------
(a) with respect to that portion of the Obligations the principal amount of
which is equal to or less than the sum of (i) the value of the FirstAmerica
Group's Scaled Assets (except that any of such assets on which Lender does not
have a first security interest are excluded therefrom) plus (ii) the Pledged
Stock Value (such sum is referred to herein as the "Collateral Value"), the
Commercial Paper Rate plus two and seventy-five hundredths percent (2.75%) per
----
annum, and (b) with respect to that portion of the Obligations the principal
amount of which equals or exceeds the Collateral Value, the Commercial Paper
Rate plus three and seventy-five hundredths percent (3.75%) per annum.
----
"Asset Sale" means, with respect to any Person, the sale, lease,
----------
conveyance, disposition or other transfer by such Person of any of its assets
(including by way of a sale-
41
leaseback transaction and including the sale or other transfer of any of the
Equity Interests of any Subsidiary of such Person).
"Authorized Officer" means any of the chief executive officer,
------------------
president, chief financial officer, treasurer or assistant treasurer of the
Borrower, acting singly.
"Average Scaled Assets" means, as of the Termination Date, the average
---------------------
of (i) the sum of (A) the FirstAmerica Group's Scaled Assets on the Effective
Date (any of such assets on which Lender does not have a first security interest
on the Effective Date will be excluded therefrom) and (B) the Pledged Stock
Value (which will be calculated as described in section 5.2 (O) of this
Agreement) and (ii) the sum of (A) the FirstAmerica Group's Scaled Assets on
the Termination Date (any of such assets on which Lender does not have a first
security interest on the Effective Date will be excluded therefrom) and (B) the
Pledged Stock Value (which will be calculated as described in section 5.2 (O)
of this Agreement).
"Benefit Plan" means a defined benefit plan as defined in Section
------------
3(35) of ERISA (other than a Multi-employer Plan) in respect of which the
Borrower or any other member of the Controlled Group is, or within the
immediately preceding six (6) years was, an "employer" as defined in Section
3(5) of ERISA.
"Borrower Guaranty" means that certain Guaranty, dated as of even date
-----------------
herewith, pursuant to which the Borrower guaranties all Guarantor obligations
arising under any Floor Plan Indebtedness, as such Guaranty may be increased,
amended, restated or otherwise modified and in effect from time to time.
"Capital Stock" means (i) in the case of a corporation, corporate
-------------
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited), (iv) in the case of a limited liability
company, any and all membership interests or other equivalents (however
designated) and (v) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Capitalized Lease" of a Person means any lease of property by such
-----------------
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
-----------------------------
obligations of such Person under Capitalized Leases which would be capitalized
on a balance sheet of such Person prepared in accordance with Agreement
Accounting Principles.
"Cash Equivalents" means (i) marketable direct obligations issued or
----------------
unconditionally guaranteed by the United States government and backed by the
full faith and credit of the United States government; (ii) domestic and
Eurodollar certificates of deposit and time deposits, bankers' acceptances and
floating rate certificates of deposit issued by any commercial bank organized
under the laws of the United States, any state thereof, the District of
Columbia, or its branches or agencies; (iii) shares of money market, mutual or
similar funds having assets in excess of $100,000,000 and the investments of
which are limited to investment grade securities
42
(i.e., securities rated at least Baa by ▇▇▇▇▇'▇ Investors Service, Inc. or at
least BBB by Standard & Poor's Corporation); (iv) commercial paper of United
States and foreign banks and bank holding companies and their subsidiaries and
United States and foreign finance, commercial industrial or utility companies
which, at the time of acquisition, are rated A-1 (or better) by Standard &
Poor's Ratings Group or P-1 (or better) by ▇▇▇▇▇'▇ Investors Services, Inc.;
(v) corporate bonds, mortgage-backed securities and municipal bonds in each
case of a domestic issuer rated at the date of acquisition not less than Aaa
by ▇▇▇▇▇'▇ Investor Services, Inc. or AAA by Standard & Poor's Corporation
with maturities of no more than two (2) years from the date of acquisition;
and (vi) money market funds with respect to which not less than 90% of such
funds are invested in the type of investments specified in clauses (i) through
(v) above; provided, unless the context otherwise requires, that the
--------
maturities of such Cash Equivalents shall not exceed 365 days.
"Change of Control" means an event or series of events by which:
-----------------
(i) the Principals and their Related Parties cease to own,
directly or indirectly, more than fifty percent (50%) of the combined
voting power of the Borrower's Capital Stock ordinarily having the right to
vote at an election of directors;
(ii) during any period of 24 consecutive calendar months,
individuals:
(a) who were directors of the Borrower on the first day
of such period, or
(b) whose election or nomination for election to the
board of directors of the Borrower was recommended or approved
by at least a majority of the directors then still in office
who were directors of the Borrower on the first day of such
period, or whose election or nomination for election was so
approved,
cease to constitute a majority of the board of directors of the Borrower;
(iii) the Borrower consolidates with or merges into another
corporation or conveys, transfers or leases all or substantially all of
its property to any Person, or any corporation consolidates with or
merges into the Borrower, in either event pursuant to a transaction in
which the outstanding Capital Stock of the Borrower is reclassified or
changed into or exchanged for (A) cash or Cash Equivalents or (B)
securities, and the holders of the Capital Stock in the Borrower
immediately prior to such transaction do not, as a result of such
transaction, own, directly or indirectly, more than fifty percent (50%)
of the combined voting power of the Borrower's Capital Stock or the
Capital Stock of its successor entity in such transaction;
(iv) Capital Stock in Borrower ceases to be publicly traded; or
(v) Borrower ceases to own (directly or indirectly) 80% of
Guarantor's Capital Stock.
"Charter Documents" means (i) in the case of a corporation, such entity's
-----------------
articles of incorporation and by-laws, (ii) in the case of a limited liability
company, such entity's articles of organization and operating agreement or
equivalent (however designated), (iii) in the case of a
43
partnership, such entity's partnership agreement or equivalent (however
designated) and (iv) in the case of an association or other business entity
not described above, such entity's founding documents (however designated).
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
----
otherwise modified from time to time, or any successor statute.
"Collateral" means all property and interests in property now owned or
----------
hereafter acquired by the Borrower or any Guarantor.
"Collateral Documents" means all agreements, instruments and documents
--------------------
executed in connection with this Agreement that are intended to create or
evidence Liens to secure the Obligations and all Floor Plan Indebtedness,
including, without limitation, the Security Agreement, the Escrow and Security
Agreement and all other security agreements, mortgages, deeds of trust, loan
agreements, notes, guaranties, subordination agreements, pledges, powers of
attorney, consents, assignments, contracts, fee letters, notices, leases,
financing statements and all other written matter whether heretofore, now, or
hereafter executed by or on behalf of the Borrower or any of its Subsidiaries
and delivered to the Lender, together with all agreements and documents referred
to therein or contemplated thereby.
"Commercial Paper Rate" means the interest rate for "Commercial Paper-
---------------------
Financial-1 Month" under the column entitled "Week Ending" for the Friday
preceding the last Monday of a calendar month as reported in the Federal Reserve
Statistical Release No. H.15 (519) issued by the Federal Reserve Board. In the
event such Release is discontinued or modified to eliminate the reporting of a
30-day commercial paper rate, then Lender will substitute, in its sole
discretion, a comparable report or release of the 30-day commercial paper rate
published by a comparable source.
"Commission" means the Securities and Exchange Commission and any Person
----------
succeeding to the functions thereof.
"Commitment" means $150,000,000.00 minus the amount of any Decision Reserve
---------- -----
in effect from time to time.
"Consolidated Net Worth" means, at a particular date, the amount by which
----------------------
the total consolidated assets of the Borrower and its consolidated Subsidiaries
exceeds the total consolidated liabilities of the Borrower and its consolidated
Subsidiaries.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
-----------
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos, polychlorinated biphenyls ("PCBs"), or any
constituent of any such substance or waste, and includes but is not limited to
these terms as defined in Environmental, Health or Safety Requirements of Law.
"Contingent Obligation", as applied to any Person, means any Contractual
---------------------
Obligation, contingent or otherwise, of that Person with respect to any
Indebtedness of another or other obligation or liability of another, including,
without limitation, any such Indebtedness, obligation or liability of another
directly or indirectly guaranteed, endorsed (otherwise than for collection or
44
deposit in the ordinary course of business), co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable, including Contractual Obligations (contingent or
otherwise) arising through any agreement to purchase, repurchase, or otherwise
acquire such Indebtedness, obligation or liability or any security therefor, or
to provide funds for the payment or discharge thereof (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or to
maintain solvency, assets, level of income, or other financial condition, or to
make payment other than for value received.
"Contractual Obligation", as applied to any Person, means any material
----------------------
provision of any equity or debt securities issued by that Person or any material
indenture, mortgage, deed of trust, security agreement, pledge agreement,
guaranty, contract, undertaking, agreement or instrument, in each case in
writing, to which that Person is a party or by which it or any of its properties
is bound, or to which it or any of its properties is subject.
"Contribution Agreement" means that certain Contribution Agreement, dated
----------------------
as of even date herewith, as it may be amended, restated or otherwise modified
and in effect from time to time.
"Controlled Group" means the group consisting of (i) any corporation which
----------------
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower; (ii) a partnership or other trade
or business (whether or not incorporated) which is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower; and (iii) a member
of the same affiliated service group (within the meaning of Section 414(m) of
the Code) as the Borrower, any corporation described in clause (i) above or any
----------
partnership or trade or business described in clause (ii) above.
-----------
"Controlled Subsidiary" of any Person means a Subsidiary of such Person (i)
---------------------
80% or more of the total Equity Interests or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more wholly-owned Subsidiaries of such Person and (ii) of
which such Person possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies, whether through the ownership
of voting securities, by agreement or otherwise.
"Customary Permitted Liens" means:
-------------------------
(i) Liens (other than Environmental Liens, Liens in favor of the IRS
and Liens in favor of the PBGC) with respect to the payment of taxes,
assessments or governmental charges in all cases which are not yet due or
(if foreclosure, distraint, sale or other similar proceedings shall not
have been commenced) which are being contested in good faith by appropriate
proceedings properly instituted and diligently conducted and with respect
to which adequate reserves or other appropriate provisions are being
maintained in accordance with Agreement Accounting Principles;
(ii) statutory Liens of landlords and Liens of suppliers, mechanics,
carriers, materialmen, warehousemen or workmen and other similar Liens
imposed by law created in the ordinary course of business for amounts not
yet due or which are being contested in good faith by appropriate
proceedings properly instituted and diligently
45
conducted and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with Agreement
Accounting Principles;
(iii) Liens (other than Environmental Liens, Liens in favor of the IRS
and Liens in favor of the PBGC) incurred or deposits made, in each case, in
the ordinary course of business in connection with worker's compensation,
unemployment insurance or other types of social security benefits or to
secure the performance of bids, tenders, sales, contracts (other than for
the repayment of borrowed money), surety, appeal and performance bonds;
provided that (A) all such Liens do not in the aggregate materially detract
--------
from the value of the Borrower's or such Subsidiary's assets or property
taken as a whole or materially impair the use thereof in the operation of
the businesses taken as a whole, and (B) with respect to Liens securing
bonds to stay judgments or in connection with appeals do not secure at any
time an aggregate amount exceeding $250,000.00;
(iv) Liens arising with respect to zoning restrictions, easements,
licenses, reservations, covenants, rights-of-way, utility easements,
building restrictions and other similar charges or encumbrances on the use
of real property which do not in any case materially detract from the value
of the property subject thereto or interfere with the ordinary conduct of
the business of the Borrower or any of its Subsidiaries;
(v) Liens of attachment or judgment with respect to judgments, writs
or warrants of attachment, or similar process against the Borrower or any
of its Subsidiaries which do not constitute an Event of Default under
Section 6.1(H) hereof; and
--------------
(vi) any interest or title of the lessor in the property subject to
any operating lease entered into by the Borrower or any of its Subsidiaries
in the ordinary course of business.
"Decision Period" is defined in Section 5.2(G) hereof.
--------------- --------------
"Decision Reserve" is defined in Section 5.2(G) hereof.
---------------- --------------
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
------------------
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the Termination Date.
"DOL" means the United States Department of Labor and any Person succeeding
---
to the functions thereof.
"Effective Date" is defined in Section 1.3 hereof.
-------------- -----------
"Environmental, Health or Safety Requirements of Law" means all
---------------------------------------------------
Requirements of Law derived from or relating to federal, state and local laws or
regulations relating to or addressing pollution or protection of the
environment, or protection of worker health or safety, including, but not
limited to, the Comprehensive Environmental Response, Compensation and
46
Liability Act, 42 U.S.C. (S) 9601 et seq., the Occupational Safety and Health
-- ---
Act of 1970, 29 U.S.C. (S) 651 et seq., and the Resource Conservation and
-- --
Recovery Act of 1976, 42 U.S.C. (S) 6901 et seq., in each case including any
-- ---
amendments thereto, any successor statutes, and any regulations or guidance
promulgated thereunder, and any state or local equivalent thereof.
"Environmental Property Transfer Act" means any applicable requirement of
-----------------------------------
law that conditions, restricts, prohibits or requires any notification or
disclosure triggered by the closure of any property or the transfer, sale or
lease of any property or deed or title for any property for environmental
reasons, including, but not limited to, any so-called "Industrial Site Recovery
Act" or "Responsible Property Transfer Act."
"Equipment" means all of the Borrower's and each Guarantor's present and
---------
future furniture, machinery, service vehicles, supplies and other equipment and
any and all accessions, parts and appurtenances attached to any of the foregoing
or used in connection therewith, and any substitutions therefor and
replacements, products and proceeds thereof.
"Equity Interests" means Capital Stock and all warrants, options or other
----------------
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time including (unless the context otherwise requires) any
rules or regulations promulgated thereunder.
"Event of Default" means an event described in Article VI hereof.
---------------- ----------
"Extension Notice" is defined in Section 2.10 hereof.
---------------- ------------
"Fair Value" means (a) with respect to the Capital Stock of the Borrower,
----------
the closing price for such Capital Stock on the trading date immediately
preceding the date of the applicable acquisition agreement; and (b) with respect
to other assets, the value of the relevant asset as of the date of acquisition
or sale determined in an arm's-length transaction conducted in good faith
between an informed and willing buyer and an informed and willing seller under
no compulsion to buy.
"FirstAmerica Group's Scaled Assets" means with respect to Borrower and its
----------------------------------
Subsidiaries, the sum of (A) an amount equal to 75% of the Receivables of
Borrower and its Subsidiaries which constitute factory receivables, (B) an
amount equal to 60% of the Receivables of Borrower and its Subsidiaries which
constitute current finance receivables, (C) an amount equal to 60% of the
Receivables of Borrower and its Subsidiaries which constitute receivables for
parts and services (after netting any amounts payable in connection with such
parts and services by Borrower or any of its Subsidiaries), (D) an amount equal
to 55% of the Inventory of Borrower and its Subsidiaries which constitutes parts
and accessories, (E) an amount equal to 80% of the difference between (i) that
portion of the Inventory of Borrower and its Subsidiaries which constitutes used
vehicles and (ii) the amount of any Floor Plan Indebtedness of Borrower and any
of its Subsidiaries incurred or available in connection with such used vehicles,
and (F) an amount equal to 45% of the difference between (i) the value of the
Equipment of Borrower and its Subsidiaries and (ii) the amount of Indebtedness
of Borrower
47
or any of its Subsidiaries incurred in connection with such Equipment. The
value of the FirstAmerica Group's Scaled Assets shall be calculated by the
Lender and shall be determined based on the financial statements and monthly
factory statements delivered to the Lender pursuant to Section 5.1(A). Scaled
--------------
Assets shall be measured as of the Effective Date and as of the end of each
Quarter.
"Floor Plan Indebtedness" means any and all loans, advances, debts,
-----------------------
liabilities and obligations owing by a Guarantor to the Lender of any kind or
nature, present or future, arising under a Wholesale Line or any other Loan
Document, whether or not evidenced by any note, guaranty or other instrument,
whether or not for the payment of money, whether arising by reason of an
extension of credit, loan, guaranty, indemnification, or in any other manner,
whether direct or indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising and however
acquired. The term includes, without limitation, all interest, charges,
expenses, fees, attorneys' fees and disbursements, paralegals' fees (in each
case whether or not allowed), and any other sum chargeable to the Borrower
and/or Guarantor under any wholesale line of credit.
"Guarantors" means, collectively, O ▇▇▇▇▇▇ ▇▇▇▇▇ and (i) any Subsidiary of
----------
Borrower operating a dealership and/or related body shop or service repair
center, and (ii) any Subsidiary of Borrower that owns Capital Stock in an entity
described in preceding section (i).
"Guaranty" means, collectively, all Guaranties in the form attached hereto
--------
as either Exhibit C-1 or Exhibit C-2, provided by a Guarantor to Lender, as
each may be amended, supplemented, or restated, and as in effect from time to
time, and the Contribution Agreement.
"Hedging Obligations" of a Person means any and all obligations of such
-------------------
Person, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or cross-
currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (ii) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.
"Indebtedness" of any Person means, without duplication, such Person's (a)
------------
obligations for borrowed money, (b) obligations representing the deferred
purchase price of property or services (other than accounts payable arising in
the ordinary course of such Person's business payable on terms customary in the
trade), (c) obligations, whether or not assumed, secured by Liens or payable out
of the proceeds or production from property or assets now or hereafter owned or
acquired by such Person, (d) obligations which are evidenced by notes,
acceptances or other instruments, (e) Capitalized Lease Obligations, (f)
reimbursement obligations with respect to letters of credit (other than
commercial letters of credit) issued for the account of such Person, (g) Hedging
Obligations, (h) Off Balance Sheet Liabilities and (i) Contingent Obligations in
respect of obligations of another Person of the type described in the foregoing
clauses (a) through (h). The amount of Indebtedness of any Person at any date
shall be without duplication (i) the outstanding balance at such date of all
unconditional obligations as
48
described above and the maximum liability of any such Contingent Obligations
at such date and (ii) in the case of Indebtedness of others secured by a Lien
to which the property or assets owned or held by such Person is subject, the
lesser of the fair market value at such date of any asset subject to a Lien
securing the Indebtedness of others and the amount of the Indebtedness
secured.
"Indemnified Matters" is defined in Section 8.6(B) hereof.
------------------- --------------
"Indemnitees" is defined in Section 8.6(B) hereof.
----------- --------------
"Inventory" shall mean any and all motor vehicles, tractors, trailers,
---------
service parts and accessories and other inventory of the Borrower and each
Guarantor.
"Investment" means, with respect to any Person, (i) any purchase or other
----------
acquisition by that Person of any Indebtedness, Equity Interests or other
securities, or of a beneficial interest in any Indebtedness, Equity Interests or
other securities, issued by any other Person, (ii) any purchase by that Person
of all or substantially all of the assets of a business conducted by another
Person, and (iii) any loan, advance (other than deposits with financial
institutions available for withdrawal on demand, prepaid expenses, accounts
receivable, advances to employees and similar items made or incurred in the
ordinary course of business) or capital contribution by that Person to any other
Person, including all Indebtedness to such Person arising from a sale of
property by such Person other than in the ordinary course of its business.
"IRS" means the Internal Revenue Service and any Person succeeding to the
---
functions thereof.
"Lien" means any lien (statutory or other), mortgage, pledge,
----
hypothecation, assignment, encumbrance or security agreement or preferential
arrangements of any kind or nature whatsoever (including, without limitation,
the interest of a vendor or lessor under any conditional sale, Capitalized Lease
or other title retention agreement).
"Loan Documents" means this Agreement, the Note, the Borrower Guaranty, the
--------------
Guaranty, the Collateral Documents and all other documents, instruments and
agreements executed in connection therewith or contemplated thereby, as the same
may be amended, restated or otherwise modified and in effect from time to time.
"Loan to Value" means the ratio of (i) the sum of all Advances outstanding
-------------
under the Loan to (ii) the sum of (A) the value of the FirstAmerica Group's
Scaled Assets (except that any of such assets on which Lender does not have a
first security interest will be excluded from such calculation), and (B) the
Pledged Stock Value (which will be calculated as described in section 5.2 (O)
of this Agreement).
"Margin Stock" shall have the meaning ascribed to such term in
------------
Regulation U.
"Material Subsidiary" means (a) any "Significant Subsidiary" as defined in
-------------------
Regulation S-X issued pursuant to the Securities Act and the Exchange Act and
(b) any other Subsidiary of the Borrower which at any time comprises five
percent (5%) or more of the Borrower's Tangible Base Capital.
49
"Maximum Rate" means the maximum nonusurious interest rate under applicable
------------
law.
"Minority Holder" means any holder of an Equity Interest in a Subsidiary
---------------
which such Equity Interest may not exceed 20% of the Capital Stock of such
Subsidiary.
"Multi-employer Plan" means a "Multi-employer Plan" as defined in Section
-------------------
4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years
was, contributed to by either the Borrower or any member of the Controlled
Group.
"New Subsidiary" is defined in Section 5.3(F)(ii).
-------------- ------------------
"Note" means that certain promissory note, in substantially the form of
----
Exhibit A hereto, duly executed by the Borrower and payable to the order of the
---------
Lender in the amount of $138,500,000.00, including any amendment, restatement,
modification, renewal, increase or replacement of such Note.
"Obligations" means all Advances, debts, liabilities, obligations,
-----------
covenants and duties owing by the Borrower or a Guarantor to the Lender or any
Indemnitee, of any kind or nature, present or future, arising under this
Agreement, the Note, the Collateral Documents or any other Loan Document,
whether or not evidenced by any note, guaranty or other instrument, whether or
not for the payment of money, whether arising by reason of an extension of
credit, loan, guaranty, indemnification, or in any other manner, whether direct
or indirect (including those acquired by assignment), absolute or contingent,
due or to become due, now existing or hereafter arising and however acquired.
The term includes, without limitation, all interest, charges, expenses, fees,
attorneys' fees and disbursements, paralegals' fees (in each case whether or not
allowed), and any other sum chargeable to the Borrower or a Guarantor or under
this Agreement or any other Loan Document.
"Off Balance Sheet Liabilities" of a Person means (a) any repurchase
-----------------------------
obligation or liability of such Person or any of its Subsidiaries with respect
to accounts or notes receivable sold by such Person or any of its Subsidiaries,
(b) any liability under any sale and leaseback transactions which do not create
a liability on the consolidated balance sheet of such Person, (c) any liability
under any financing lease or so-called "synthetic" lease transaction, or (d) any
obligations arising with respect to any other transaction which is the
functional equivalent of or takes the place of borrowing but which does not
constitute a liability on the consolidated balance sheets of such Person and its
Subsidiaries.
"Other Taxes" is defined in Section 2.11(B) hereof.
----------- ---------------
"Participants" is defined in Section 9.2(A) hereof.
------------ --------------
"Payment Date" means the thirtieth day of each calendar month, provided,
------------ --------
however if such day is not a business day, then the Payment Date shall be the
-------
next succeeding business day following such thirtieth day.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
----
thereto.
50
"Permitted Acquisition" is defined in Section 5.3(F)(iii) hereof.
--------------------- -------------------
"Permitted Existing Indebtedness" means the Indebtedness of the Borrower
-------------------------------
and its Subsidiaries identified as such on Schedule 1 to this Agreement.
----------
"Permitted Existing Investments" means the Investments of the Borrower and
------------------------------
its Subsidiaries identified as such on Schedule 2 to this Agreement.
----------
"Permitted Existing Liens" means the Liens on assets of the Borrower and
------------------------
its Subsidiaries identified as such on Schedule 3 to this Agreement.
----------
"Permitted Refinancing Indebtedness" means any replacement, renewal,
----------------------------------
refinancing or extension of any Indebtedness permitted by this Agreement that
(i) does not exceed the aggregate principal amount (plus associated fees and
expenses) of the Indebtedness being replaced, renewed, refinanced or extended,
(ii) does not rank at the time of such replacement, renewal, refinancing or
extension senior to the Indebtedness being replaced, renewed, refinanced or
extended, and (iii) does not contain terms (including, without limitation, terms
relating to security, amortization, interest rate, premiums, fees, covenants,
event of default and remedies) materially less favorable to the Borrower or to
the Lender than those applicable to the Indebtedness being replaced, renewed,
refinanced or extended.
"Person" means any individual, corporation, firm, enterprise, partnership,
------
trust, incorporated or unincorporated association, joint venture, joint stock
company, limited liability company or other entity of any kind, or any
government or political subdivision or any agency, department or instrumentality
thereof.
"Plan" means an employee benefit plan defined in Section 3(3) of ERISA in
----
respect of which the Borrower or any member of the Controlled Group is, or
within the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"Pledge Agreement" means the Pledge Agreement dated as of even date
----------------
herewith pursuant to which Pledgor pledged to Lender 5,000,000 shares of stock
in Speedway Motor Sports, Inc.
"Pledged Stock Value" means the closing price of Speedway Motor Sports,
-------------------
Inc. stock, as reported on the New York Stock Exchange.
"Pledgor" means Sonic Financial Corporation, a North Carolina corporation.
-------
"Principals" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇.
----------
"Quarter" means each three month period commencing January 1, April 1, July
-------
1 and October1 during the term of the Note.
"Receivable(s)" means and includes all of the Borrower's and each
-------------
Dealership Guarantor's presently existing and hereafter arising or acquired
accounts, contract rights, chattel paper, instruments, notes, letters of credit,
documents, documents of title, investment property, deposit accounts, other bank
accounts, general intangibles, tax refunds and other
51
obligations of third persons of any kind, now or hereafter existing, whether
arising out of or in connection with the sale or lease of goods, the rendering
of services or otherwise, and all rights now or hereafter existing in and to
all security agreements, leases, and other contracts securing or otherwise
relating to any such accounts, contract rights, chattel paper, instruments,
notes, letters of credit, documents, documents of title, investment property,
deposit accounts, other bank accounts, general intangibles, tax refunds or
obligations of third persons.
"Registration Statement" means the Registration Statement on Form S-1 filed
----------------------
by the Borrower with the Commission on April 7, 1999, with respect to the
initial public offerings of its Class A common stock, $.00001 par value, as
filed on such date, except that for purposes of Section 4.20, "Registration
------------
Statement" means such Registration Statement as amended from time to time prior
to the Effective Date.
"Regulation G" means Regulation G of the Board of Governors of the Federal
------------
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by nonbank, nonbroker lenders for the purpose of purchasing
or carrying margin stock (as defined therein).
"Regulation T" means Regulation T of the Board of Governors of the Federal
------------
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by and to brokers and dealers of securities for the purpose
of purchasing or carrying margin stock (as defined therein).
"Regulation U" means Regulation U of the Board of Governors of the Federal
------------
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying Margin
Stock applicable to member banks of the Federal Reserve System.
"Regulation X" means Regulation X of the Board of Governors of the Federal
------------
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by foreign lenders for the purpose of purchasing or carrying
margin stock (as defined therein).
"Related Party" with respect to any Principal means (i) any spouse or
-------------
immediate family member of such Principal or (ii) any trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding the outstanding Equity Interest of which consist
of such Principal and/or such other Persons referred to in the immediately
preceding clause (i).
"Release" means any release, spill, emission, leaking, pumping, injection,
-------
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment, including the movement of Contaminants through or in the
air, soil, surface water or groundwater.
"Reportable Event" means a reportable event as defined in Section 4043 of
----------------
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such
52
events as to which the PBGC by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days after such event occurs,
provided, however, that a failure to meet the minimum funding standards of
-------- -------
Section 412 of the Code and of Section 302 of ERISA shall be a Reportable
Event regardless of the issuance of any such waiver of the notice requirement
in accordance with either Section 4043(a) of ERISA or Section 412(d) of the
Code.
"Restricted Payment" means (i) any dividend or other distribution, direct
------------------
or indirect, on account of any Equity Interests of the Borrower now or hereafter
outstanding, except a dividend payable solely in the Borrower's Capital Stock
(other than Disqualified Stock) or in options, warrants or other rights to
purchase such Capital Stock, (ii) any redemption, retirement, purchase or other
acquisition for value, direct or indirect, of any Equity Interests of the
Borrower or any of its Subsidiaries now or hereafter outstanding, other than in
exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to a Subsidiary of the Borrower) of other Equity Interests of the
Borrower (other than Disqualified Stock), and (iii) any payment of a claim for
the rescission of the purchase or sale of, or for material damages arising from
the purchase or sale of any Equity Interests of the Borrower or any of the
Borrower's Subsidiaries, or of a claim for reimbursement, indemnification or
contribution arising out of or related to any such claim for damages or
rescission.
"Revolving Credit Availability" means, at any particular time, the amount
-----------------------------
by which the Commitment at such time exceeds the Revolving Credit Obligations at
such time.
"Revolving Credit Obligations" means, at any particular time, the sum of
----------------------------
the outstanding principal amount of all Advances at such time.
"Scaled Assets Adjustment Amount" means, as of the Termination Date the
-------------------------------
difference between:
(i) the amount of interest that Borrower should have paid, at the
Applicable Commercial Paper Rate, for the term of the Loan which such amount
will be determined by:
(A) calculating, for each day, during the term of the Loan, on which the
principal balance under the Note exceed the Average Scaled Assets, the
difference between the Average Scaled Assets and the principal balance
outstanding under the Note; and
(B) multiplying the amount determined pursuant to preceding subsection
by1.00% per annum, and
(ii) the amount of interest actually paid by Borrower at the Collection
Rate for the term of the Loan.
"Secretary's Certificate" with respect to Borrower and any Subsidiary,
-----------------------
means any certificate, delivered by a secretary, assistant secretary, managing
member, general partner or governor of such entity which certifies (i) the names
and true signatures of the incumbent officers or managers of such entity
authorized to sign each Transaction Document to which it is a party and the
other documents to be executed thereunder, (ii) a true and correct copy of such
entity's Certificate of Incorporation, or similar charter document and all
amendments thereto, (iii)
53
a true and correct copy of the by-laws or similar governing document of such
entity and all amendments thereto, and (iv) a true and correct copy of the
resolutions of such entity's board of directors or members approving and
authorizing the execution, delivery and performance by such entity of each
Transaction Document to which it is a party and the other documents to be
executed thereunder;
"Security Agreement" means, collectively, any Security Agreement from
------------------
Borrower or any Guarantor to Lender, pursuant to which any such entity grants
the Lender a security interest in all of its assets to secure the obligations
hereunder and the obligations of each Guarantor (other than itself) under any
documents evidencing any Floor Plan Indebtedness, as such Security Agreement may
be amended, modified, supplemented and/or restated, and as in effect from time
to time.
"Single Employer Plan" means a Plan maintained by the Borrower or any
--------------------
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"Seller's Note" means any promissory note payable by Borrower to the
-------------
seller of an entity acquired pursuant to a Permitted Acquisition, which such
note constitutes a deferred portion of the purchase price of the entity acquired
pursuant to such Permitted Acquisition.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
----------
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a
Subsidiary of the Borrower.
"Tangible Base Capital" means, at a particular date of calculation, the
---------------------
amount determined by the Lender to be equal to :
(i) Consolidated Net Worth
plus
----
(ii) the sum of
(A) Indebtedness of the Borrower or its Subsidiaries to officers of
the Borrower, which Indebtedness is subordinated in writing to
the Obligations on terms and conditions acceptable to the Lender;
(B) an amount equal to 64% of the LIFO reserve (as determined in
accordance with Agreement Accounting Principles) reflected on the
Borrower's balance sheet;
minus
-----
(iii) the sum of
54
(A) Receivables with respect to which the account debtor is a
director, officer, employee, Subsidiary or Affiliate of the
Borrower or other amounts (whether or not classified as
Receivables) from Affiliates of the Borrower or its Subsidiaries
(other than those payable within 30 days and incurred in the
ordinary course of business); and
(B) the value of leasehold improvements after deductions for
depreciation of the Borrower and its Subsidiaries on a
consolidated basis;
(C) that part of the Borrower's and its Subsidiaries (on a
consolidated basis) capitalization or reserves attributable to
any writing up of book values on any fixed assets after the date
of the most recently delivered financial statements of the
Borrower and its Subsidiaries;
(D) the aggregate amount of the Borrower's and its Subsidiaries
Investments in Affiliates (other than the Borrower's
Subsidiaries);
(E) organizational expenses related to start-up of operations with
respect to the Borrower and its Subsidiaries;
(F) goodwill and other intangible assets (as determined in
accordance with Agreement Accounting Principles);
(G) any amount paid to a third-party as consideration for no-
competition agreements;
(H) the value of daily rental franchise payments made by the
Borrower or its Subsidiaries under any franchise agreements (net
of any amounts owed by a franchisor to Borrower or its
Subsidiaries); and
(I) other assets (including, without limitation, airplanes, cattle,
etc.) not related to the operations of the Dealerships as
automobile dealerships.
"Taxes" is defined in Section 2.11(A) hereof.
----- ---------------
"Termination Date" means the day one hundred and eighty (180) days from the
----------------
Effective Date.
"Termination Event" means (i) a Reportable Event with respect to any
-----------------
Benefit Plan; (ii) the withdrawal of the Borrower or any member of the
Controlled Group from a Benefit Plan during a plan year in which the Borrower or
such Controlled Group member was a "substantial employer" as defined in Section
4001(a)(2) of ERISA or the cessation of operations which results in the
termination of employment of twenty percent (20%) of Benefit Plan participants
who are employees of the Borrower or any member of the Controlled Group; (iii)
the imposition of an obligation on the Borrower or any member of the Controlled
Group under Section 4041 of ERISA to provide affected parties written notice of
intent to terminate a Benefit Plan in a
55
distress termination described in Section 4041(c) of ERISA; (iv) the
institution by the PBGC of proceedings to terminate a Benefit Plan; (v) any
event or condition which might constitute grounds under Section 4042 of ERISA
for the Termination of, or the appointment of a trustee to administer, any
Benefit Plan; or (vi) the partial or complete withdrawal of the Borrower or
any member of the Controlled Group from a Multi-employer Plan.
"Transaction Costs" means the fees, costs and expenses payable by the
-----------------
Borrower in connection with the execution, delivery and performance of the
Transaction Documents.
"Transaction Documents" means the Loan Documents, the Public Offering
---------------------
Documents the Acquisition Documents.
"Total Adjusted Debt to Adjusted TBC Ratio" means the ratio of (i) Total
----- -----------------------------------
Adjusted Debt of Borrower and its Subsidiaries on a consolidated basis to (ii)
(A) Tangible Base Capital of Borrower and its Subsidiaries on a consolidated
basis plus (B) amounts Borrower has paid as good will in connection with the
Acquisition of any Guarantor.
"Unfunded Liabilities" means (i) in the case of Single Employer Plans, the
--------------------
amount (if any) by which the present value of all vested nonforfeitable benefits
under all Single Employer Plans exceeds the fair market value of all such Plan
assets allocable to such benefits, all determined as of the then most recent
valuation date for such Plans, and (ii) in the case of Multi-employer Plans, the
withdrawal liability that would be incurred by the Controlled Group if all
members of the Controlled Group completely withdrew from all Multi-employer
Plans.
"Unmatured Default" means an event which, but for the lapse of time or the
-----------------
giving of notice, or both, would constitute an Event of Default.
"Used Vehicle Value" means the collective value of the used vehicle
------------------
inventory of the Guarantors (except that vehicles more than five (5) years are
will be excluded therefrom), as reported in the financial statements described
in Section 5.1 (A) of this Agreement; such amount, however, may not exceed 100%
of the used vehicle current trade in value for such vehicles, as reported in
N.A.D.A.
56