Schedule 13D Amendment No. 1

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LNOfVlLWuE1Jz5GNXYMbMKr6trCljErfe9Aci6W+RH9zNGaSGE15tcb+snPHGZ/c tKNrH021kYG6dXnZGNYkQQ== 0001193125-04-203233.txt : 20041124 0001193125-04-203233.hdr.sgml : 20041124 20041124134040 ACCESSION NUMBER: 0001193125-04-203233 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20041124 DATE AS OF CHANGE: 20041124 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HOWARD ROBERT E II CENTRAL INDEX KEY: 0001049607 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: BUSINESS PHONE: 4059368888 MAIL ADDRESS: STREET 1: 13300 N BROADWAY EXTENSION CITY: OKLAHOMA CITY STATE: OK ZIP: 73114 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GROUP 1 AUTOMOTIVE INC CENTRAL INDEX KEY: 0001031203 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO DEALERS & GASOLINE STATIONS [5500] IRS NUMBER: 760506313 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-51911 FILM NUMBER: 041166400 BUSINESS ADDRESS: STREET 1: 950 ECHO LANE STREET 2: STE 100 CITY: HOUSTON STATE: TX ZIP: 77024 BUSINESS PHONE: 7134676268 MAIL ADDRESS: STREET 1: 950 ECHO LANE STREET 2: STE 100 CITY: HOUSTON STATE: TX ZIP: 77024 SC 13D/A 1 dsc13da.htm SCHEDULE 13D AMENDMENT NO. 1 Schedule 13D Amendment No. 1

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No. 1 )

Group 1 Automotive, Inc.

(Name of Issuer)

Common Stock, par value $.01 per share

(Title of Class of Securities)

398905109

(CUSIP Number)

Robert A. Curry, Esq.

Mark D. Berman, Esq.

Conner & Winters

3700 First Place Tower

15 East Fifth Street

Tulsa, Oklahoma 74103

918-586-5711

(Name, Address and Telephone Number of Person Authorized to

Receive Notices and Communication)

May 15, 2001

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ¨

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provision of the Act (however, see the Notes.)


CUSIP NO. 398905109		13D		Page 2 of 6 pages


1	NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Robert E. Howard, II.
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF GROUP (a) ¨ (b) ¨
3	SEC USE ONLY
4	SOURCE OF FUNDS PF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)	¨
6	CITIZENSHIP OR PLACE OF ORGANIZATION United States of America

NUMBER OF

BENEFICIALLY

OWNED BY

EACH

REPORTING

PERSON

WITH

7 SOLE VOTING POWER

2,048,800

8 SHARED VOTING POWER

9 SOLE DISPOSITIVE POWER

1,268,800

10 SHARED DISPOSITIVE POWER

780,000

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

2,048,800

CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES


CUSIP NO. 398905109		13D		Page 3 of 6 pages

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

8.9%

TYPE OF REPORTING PERSON

ITEM 1. SECURITY AND ISSUER

This Amendment No. 1 amends the Schedule 13D filed on November 13, 1997, by the reporting person and relates to the common stock, par value $.01 per share (the “Common Stock”) of Group 1 Automotive, Inc., a Delaware corporation (the “Issuer”). The address of the principal executive offices of the Issuer is 950 Echo Lane, Suite 100, Houston, Texas 77024.

ITEM 2. IDENTITY AND BACKGROUND

This statement is filed by Robert E. Howard, II, who is a natural person and a citizen of the United States of America. Mr. Howard is a member of the board of directors of the Issuer. Mr. Howard is also a director and the President of Mercedes Benz of Oklahoma. His business address is 1225 North Broadway Avenue, Oklahoma City, OK 73102.

During the past five years, Mr. Howard has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). Mr. Howard is not currently, and during the last five years has not been, party to a civil proceeding of a judicial or administrative body of competent jurisdiction, resulting in a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violations with respect to such law.

ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION

Mr. Howard acquired beneficial ownership of 54,917 of the shares of Common Stock reported on this Amendment 1 to Schedule 13D with personal funds.

ITEM 4. PURPOSE OF TRANSACTION

Mr. Howard purchased the shares of the Common Stock, as described above, for investment purposes.

Except as set forth in this Item 4, Mr. Howard does not have any plans or proposals that relate to or would result in any of the actions specified in clauses (a) through (j) of Item 4 to Schedule 13D.

ITEM 5. INTEREST IN SECURITIES OF THE ISSUER

(a) Mr. Howard is now the beneficial owner of 2,048,800 shares of Common Stock. The Issuer’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2004, reports that there were 23,112,100 shares of Common Stock outstanding as of October 29, 2004. Mr. Howard is therefore currently the beneficial owner of 8.9% of the total issued and outstanding shares of Common Stock.

(b) The responses of Mr. Howard to Items 7-11 of the cover page of this Schedule 13D/A are incorporated herein by reference.


CUSIP NO. 398905109		13D		Page 4 of 6 pages

(c) No transactions in the Common Stock have been effected during the past sixty days. Mr. Howard filed Schedule 13D on November 13, 1997, wherein he reported the acquisition of beneficial ownership of 2,982,405 shares, or 20.3%, of the Issuer’s then outstanding Common Stock. Due to factors such as the price of the Common Stock, general stock market and economic conditions, tax considerations and other factors deemed relevant, Mr. Howard decided to dispose of Common Stock of the Issuer on various dates and in various amounts beginning in April 2001. Unless otherwise indicated, all transactions were effected on the open market. Such transactions are reported herein as follows:


DATE OF ACQUISITION	SHARES ACQUIRED	HOW ACQUIRED / PRICE PER SHARE
12-24-1997	16,400 shares	$8.50
12-1-1998	33,334 shares	Exercise of a right/option for nominal consideration pursuant to pre-existing agreement¹
08-06-1999	600 shares	$20.44
08-22-2002	1,250	Exercise of a right/option for nominal consideration pursuant to pre-existing agreement²
05-16-2003	3,333	Exercise of an option for nominal consideration pursuant to pre-existing agreement³
03-11-2004	1,500 shares	By inheritance

DATE OF DISPOSITION	SHARES DISPOSED BY SALE or GIFT	PRICE PER SHARE (UNLESS DISPOSITION BY GIFT OR OTHER)
04-30-2001	10,000 shares	$18.52
05-01-2001	8,100 shares	$18.50
05-02-2001	3,200 shares	$18.50
05-03-2001	9,700 shares	$18.50
05-07-2001	33,400 shares	$18.50
05-09-2001	44,900 shares	$20.00
05-15-2001	90,700 shares	$19.90
12-18-2001	1,000 shares	Gift
02-14-2002	50,000 shares	$32.29
02-15-2002	50,000 shares	$32.05
02-26-2002	100,000 shares	$34.60
03-04-2002	54,500 shares	$40.05
03-05-2002	45,500 shares	$39.20
04-23-2002	1,000 shares	Gift
04-25-2002	30,000 shares	$44.06
05-03-2002	20,000 shares	$48.21
05-20-2002	50,000 shares	$48.90
07-10-2002	16,667	Share grant to employee⁴
07-10-2002	3,951	Gift
07-15-2002	1,000 shares	Gift
08-06-2003	164,954 shares	$34.32
08-11-2003	4,000 shares	Gift
08-19-2003	1,000 shares	Gift
09-04-2003	17,000 shares	$39.00
09-18-2003	15,000 shares	$39.12
09-19-2003	10,450 shares	$39.42

¹	Employee Stock Purchase Agreement dated June 16, 1997, by and between Mr. Howard and Steve Albright.

²	Employee Stock Purchase Agreement dated June 16, 1997, by and between Mr. Howard and Scott Smith.

³	Stock Restriction and Option Agreement dated December 1, 1998 (“Option Agreement”) by and between Mr. Howard and Joe Heitz.

⁴	Pursuant to Option Agreement described in Footnote 3.


CUSIP NO. 398905109		13D		Page 5 of 6 pages


02-27-2004	50,000 shares	$36.43
03-23-2004	50,000 shares	$34.73
03-25-2004	50,000 shares	$34.66
03-30-2004	3,000 shares	Gift
04-06-2004	1,000 shares	Gift

(d) Mr. Howard shares dispositive power with respect to 780,000 shares of the Common Stock pursuant to the pledge of those shares to a financial institution.

(e) Not applicable.

ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER

Mr. Howard entered into a registration agreement dated December 19, 2001, with the Issuer (the “Agreement”) under which the Issuer agreed to file a registration statement covering the offering for resale by Mr. Howard of up to 700,000 shares of Common Stock. Under the Agreement, Mr. Howard agreed not to sell any shares of Common Stock owned by him, other than pursuant to the registration statement, until the earlier of (i) the first business day immediately following the consummation of the sale of all his shares of Common Stock covered by the registration statement or (ii) the first business day immediately following the termination of the Agreement by Mr. Howard or the Issuer. The Agreement also allowed the Issuer to defer the sale by Mr. Howard of any shares of Common Stock covered by the registration statement under certain circumstances.

Mr. Howard entered into a lock-up agreement dated October 25, 2001, with Goldman, Sachs & Co. in which he agreed, subject to certain exceptions, not to sell or otherwise dispose of any shares beneficially owned by Mr. Howard for 60 days following the date of the final prospectus supplement covering the public offering referred to therein.

Mr. Howard entered into Employee Stock Purchase Agreements dated June 16, 1997 (“Stock Purchase Agreements”), with employees Steve Albright and Scott Smith. Pursuant to the Stock Purchase Agreements, Mr. Howard had the right to acquire the employees’ unvested shares of the Common Stock within 90 days of the cessation of their employment.

Mr. Howard entered into a Stock Restriction and Option Agreement dated December 1, 1998, with employee Joe Heitz under which Mr. Howard was granted the option to acquire a percentage of Mr. Heitz’ shares of the Common Stock.

Mr. Howard entered into a Stock Pledge Agreement dated January 31, 2003, with the Bank of Oklahoma pursuant to which he pledged 1,000,000 shares of the Common Stock as collateral in connection with a loan agreement. Absent an event of default under the loan agreement, Bank of Oklahoma does not have power to sell the shares of Common Stock. Mr. Howard retains voting power with respect to the shares of Common Stock.

Howard Investments, L.L.C. (“Howard Investments”), which is controlled by Mr. Howard, entered into a Loan and Collateral Account Agreement dated August 15, 2003 (the “Loan Agreement”), with Merrill Lynch Private Finance Inc. (“Merrill Private Finance”) which provides for a credit facility that is secured by a pledge of assets into a securities account. The pledged assets include 780,000 shares of the Common Stock. The Loan Agreement provides that Merrill Private Finance may instruct the disposition of the pledged securities at any time, including but not limited to a reduction in the value of the collateral below agreed maintenance requirements or the occurrence of a “remedy event” under the agreement. Mr. Howard retains voting power with respect to the shares of Common Stock.


CUSIP NO. 398905109		13D		Page 6 of 6 pages

ITEM 7. MATERIAL TO BE FILED AS EXHIBITS



Exhibit 1.		Registration Agreement dated December 19, 2001, between Mr. Howard and the Issuer.

Exhibit 2.		Lock-up Agreement dated October 25, 2001, between Mr. Howard and Goldman Sachs & Co.

Exhibit 3.		Employee Stock Purchase Agreement dated June 16, 1997, between Mr. Howard and Steve Albright.

Exhibit 4.		Employee Stock Purchase Agreement dated June 16, 1997, between Mr. Howard and Scott Smith.

Exhibit 5.		Stock Restriction and Option Agreement dated December 1, 1998, between Mr. Howard and Joe Heitz.

Exhibit 6.		Stock Pledge Agreement dated January 31, 2003, between Mr. Howard and Bank of Oklahoma.

Exhibit 7.		Loan and Collateral Account Agreement dated August 15, 2003, between Howard Investments and Merrill Lynch Private Finance Inc.

Signature

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

November 24, 2004

Date

/s/ Robert E. Howard, II

Signature

Name / Title

EX-99.1 2 dex991.htm REGISTRATION AGREEMENT Registration Agreement

EXHIBIT 1

REGISTRATION AGREEMENT

THIS REGISTRATION AGREEMENT (this “Agreement”) is entered into on, and effective as of, December 19, 2001, between Group 1 Automotive, Inc., a Delaware corporation (the “Company”) and Robert E. Howard II (the “Stockholder”)

WHEREAS, the Stockholder desires that the Company register with the Securities and Exchange Commission (the “SEC”) the offer and sale by the Stockholder of 700,000 shares (the “Shares”) of common stock, par value $.01 per share, of the Company (the “Common Stock”) held by the Stockholder (the “Registration”).

WHEREAS, the Company desires that the Stockholder refrain from disposing of any of his shares of Common Stock during the pendency of the Registration, except as expressly contemplated herein;

NOW, THEREFORE, for and in consideration of the above premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows.

1. The Company shall, as promptly as reasonably practicable, file with the SEC a registration statement (“Registration Statement”) with respect to the Shares and use commercially reasonable efforts to cause such registration statement to become and remain effective; provided, however, that the Company shall have no obligation to maintain the effectiveness of the Registration Statement. At the Company’s sole discretion, the Registration Statement may include shares of Common Stock to be offered on behalf of the Company and/or on behalf of one or more other stockholders of the Company. Unless otherwise agreed by the parties in writing, any underwriter (each, an “Underwriter”) participating in any offering of the Shares pursuant to the Registration Statement shall be selected by the Company. The Company shall use its commercially reasonable efforts to cooperate with any reasonable requests made by the Underwriter, as the case may be, in connection with any offering of the Shares pursuant to the Registration Statement. Subject to the limitations contained below, the Stockholder shall have sole discretion to determine: (i) whether any of the Shares will be sold, (ii) when the Shares will be sold and (iii) at what price the Shares will be sold.

2. Except as otherwise agreed by the parties, the Stockholder must provide the Company with written notice of the Stockholder’s intent to sell any or all of the Shares no less than five and no more than 10 business days before the date of such sale (the “Notice of Sale”). Upon receipt of the Notice of Sale, the Company may elect to defer any sale of Shares by the Stockholder pursuant to the Registration Statement and the Stockholder shall not sell any such Shares during such deferral period if (i) the Company notifies the Stockholder prior to the contemplated date of such sale that the Company is in good faith contemplating offering shares of Common Stock pursuant to an underwritten offering within 60 days of its receipt of the Notice of Sale or (ii) the Company notifies the Selling Stockholder prior to the contemplated date of such sale that the Company’s Board of Directors has determined that the requested offering

would require disclosure of pending matters or information the disclosure of which would likely be detrimental to the Company or materially interfere with its business or a financing, acquisition, corporate reorganization or other material transaction involving the Company or that appropriate financial statements are not available. A deferral of such proposed sale pursuant to this paragraph shall be lifted, and the sale may be forthwith made, if (a) in the case of clause (i) of the immediately preceding sentence, such offering is consummated or terminated or (b) in the case of clause (ii) of the immediately preceding sentence, such matters or information is disclosed or the transaction giving rise to such required disclosure is terminated. Upon the receipt of a Notice of Sale, the Company may notify the Stockholder that the prospectus contained in the Registration Statement, as amended and supplemented, contains an untrue statement of a material fact or omits to state any material fact necessary to make the statements therein not misleading or that any transaction in which the Company is engaged or proposes to engage, or any event that has occurred or is expected to occur, would require an amendment to such Registration Statement or a supplement to such prospectus (including any such amendment or supplement made through incorporation by reference). The Stockholder agrees that, upon receipt of any notice from the Company pursuant to the immediately preceding sentence, the Stockholder will not sell any Shares until the Stockholder receives copies of a properly supplemented or amended prospectus, and, if so directed by the Company the Stockholder will deliver to the Company all copies then in the Stockholder’s possession of the most recent prospectus covering such Shares at the time of receipt of such notice.

3. The Stockholder hereby acknowledges that whether or not the issuance and sale of the Shares pursuant to the Registration Statement actually occurs depends on a number of factors, including market conditions. The Stockholder further acknowledges that this Agreement in no way limits the ability of the Company to issue and sell shares of Common Stock during the pendency of the Registration, whether though an underwritten offering or otherwise and regardless of the impact of any such issuance and sale on the ability of the Stockholder to sell the Shares pursuant to the Registration Statement.

4. The Company shall indemnify the Stockholder and each Underwriter with respect to the offering of any of the Shares pursuant to the Registration Statement to the extent set forth in Appendix A attached hereto.

5. Except for Shares sold pursuant to the Registration Statement, the Stockholder will not, directly or indirectly, sell, lend, offer, contract to sell, transfer the economic risk of ownership in, make any short sale, pledge or otherwise dispose of or transfer any shares of Common Stock or any securities convertible into or exchangeable or exercisable for or any other rights to purchase or acquire Common Stock without the prior written consent of the Company for a period from the date hereof until the earlier of (i) first business day immediately following the consummation of the sale of all of the Shares pursuant to the Registration Statement or (ii) the first business day immediately following the termination of this Agreement pursuant to Paragraph 7 below. The Stockholder understands that the agreements of the Stockholder are irrevocable and shall be binding upon the Stockholder’s heirs, legal representatives, successors and assigns. The Stockholder agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent against the transfer of Common Stock or other securities of the Company held by the Stockholder except in compliance with this Agreement.

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6. All expenses incurred by the Company in connection with the Registration Statement that relate to shares of Common Stock offered by the Company, including, without limitation, all registration and qualification fees, printing and accounting fees, and fees and disbursements of counsel for the Company, shall be borne by the Company. All expenses incurred by the Company in connection with the Registration Statement that are directly attributable to the inclusion of the Shares in the Registration Statement, including, without limitation, all registration and qualification fees, printing and accounting fees, and fees and disbursements of counsel for the Company, shall be borne by the Stockholder. In addition, the Stockholder shall pay the Underwriters’ discounts and commissions applicable to the Shares. The Stockholder shall also pay his own costs for experts or professionals (including counsel) employed by the Stockholder or on his behalf in connection with the registration of the Shares under this Agreement.

7. This agreement may be terminated at any time by the Stockholder or the Company by delivering written notice to the other party of such termination. Upon any such termination, except for the obligations of the parties under Section 4 and 7 and as provided in the immediately following sentence, this Agreement shall forthwith become void, there shall be no liability on either party hereunder and all rights and obligations of any party hereto shall cease. If this Agreement is terminated by the Company prior to the sale of any of the Shares pursuant to the Registration Statement, the Company shall reimburse the Stockholder for all of his reasonable out-of-pocket costs incurred pursuant to Section 6 above.

[signature page follows]

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth above.


GROUP 1 AUTOMOTIVE, INC.

By:		/s/ SCOTT L. THOMPSON
Name:		Scott L. Thompson
Title:		Senior Vice President

STOCKHOLDER

/s/ ROBERT E. HOWARD II
Robert E. Howard II

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APPENDIX A

INDEMNIFICATION

(a) The Company will, if the Shares are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Stockholder, each of its officers and directors, and each person controlling the Stockholder, with respect to which registration, qualification or compliance has been effected pursuant to this Agreement, and each Underwriters, if any, and each person who controls any Underwriter, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements not misleading, or any violation by the Company of any rule or regulation promulgated under the Securities Act of 1933, as amended (the “Act”), or of any other federal, state or common law applicable to the Company and relating to any action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse the Stockholder, each such Underwriter and each person who controls any such Underwriter, for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by an instrument duly executed by the Stockholder (in his capacity as Stockholder) or Underwriter and stated to be specifically for use therein. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such party and shall survive the subsequent transfer of shares of Common Stock by the seller thereof and the transfer of any shares of Common Stock which were the subject of such registration, qualification or listing.

(b) The Stockholder will, if the Shares are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers, each legal counsel and independent accountant of the Company, each Underwriter, if any, each person who controls the Company or such Underwriter within the meaning of the Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company, Underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by an instrument duly executed by the Stockholder and stated to be specifically for use therein; provided, however, that (i) the obligations of the Stockholder hereunder (including legal and other defense cost) shall be limited to an amount

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equal to the proceeds to the Stockholder of Shares sold as contemplated herein and (ii) the indemnity for untrue statements or omissions described above shall not apply if the Stockholder provides the Company with such additional written information prior to the effectiveness of the registration as is required to make the previously supplied written information true and complete, together with a description in reasonable detail of the information previously supplied which was untrue or incomplete.

(c) Each party entitled to indemnification hereunder (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party’s expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement. After notice from the Indemnifying Party to the Indemnified Party of its election to assume the defense of such claim or litigation, the Indemnifying Party will not be liable to such Indemnified Party for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof other than reasonable costs of investigation, unless the Indemnifying Party abandons the defense of such claim or litigation. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. No Indemnified Party shall consent to the entry of any judgment or enter into any settlement without the prior written consent of the Indemnifying Party.

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EX-99.2 3 dex992.htm LOCK-UP AGREEMENT Lock-up Agreement

EXHIBIT 2

Group 1 Automotive, Inc.

Lock-Up Agreement

October 25, 2001

Goldman, Sachs & Co.

85 Broad Street

New York, NY 10004

Re: Group 1 Automotive, Inc. – Lock-up Agreement

Ladies and Gentlemen:

The undersigned understands that you, as underwriter (the “Underwriter”) propose to enter into an Underwriting Agreement and a Pricing Agreement, with Group 1 Automotive, Inc., a Delaware corporation (the “Company”), providing for a public offering of the Common Stock of the Company (the “Shares”) pursuant to a Registration Statement or Registration Statements on Form S-3 to be filed with the Securities and Exchange Commission (the “SEC”).

In consideration of the agreement by the Underwriter to offer and sell the Shares, and of other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the undersigned agrees that, during the period beginning from the date of the final Prospectus Supplement covering the public offering of the Shares and continuing to and including the date 60 days after the date of such final Prospectus Supplement, the undersigned will not offer, sell, contract to sell, grant any option to purchase, make any short sale or otherwise dispose of any shares of Common Stock of the Company, or any options or warrants to purchase any shares of Common Stock of the Company, or any securities convertible into, exchangeable for or that represent the right to receive shares of Common Stock of the Company, whether now owned or hereinafter acquired, owned directly by the undersigned (including holding as a custodian) or with respect to which the undersigned has beneficial ownership within the rules and regulations of the SEC (collectively the “Undersigned’s Shares”).

The foregoing restriction is expressly agreed to preclude the undersigned from engaging in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of the Undersigned’s Shares even if such Shares would be disposed of by someone other than the undersigned. Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to any of the Undersigned’s Shares or with respect to any security that includes, relates to, or derives any significant part of its value from such Shares.

Notwithstanding the foregoing, the undersigned may transfer the Undersigned’s Shares (i) as a bona fide gift or gifts, provided that the donee or donees thereof agree to be bound in writing

by the restrictions set forth herein, (ii) to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, provided that the trustee of the trust agrees to be bound in writing by the restrictions set forth herein, and provided further that any such transfer shall not involve a disposition for value, or (iii) with the prior written consent of Goldman, Sachs & Co. on behalf of the Underwriter. For purposes of this Lock-Up Agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin. In addition, notwithstanding the foregoing, if the undersigned is a corporation, the corporation may transfer the capital stock of the Company to any wholly owned subsidiary of such corporation; provided, however, that in any such case, it shall be a condition to the transfer that the transferee execute an agreement stating that the transferee is receiving and holding such capital stock subject to the provisions of this Agreement and there shall be no further transfer of such capital stock except in accordance with this Agreement, and provided further that any such transfer shall not involve a disposition for value. The undersigned now has, and, except as contemplated by clause (i), (ii), or (iii) above, for the duration of this Lock-Up Agreement will have, good and marketable title to the Undersigned’s Shares. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the Undersigned’s Shares except in compliance with the foregoing restrictions.

The undersigned understands that the Company and the Underwriter are relying upon this Lock-Up Agreement in proceeding toward consummation of the offering. The undersigned further understands that this Lock-Up Agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors, and assigns,

This Lock-Up Agreement is entered into with the following understanding:

The undersigned currently holds Shares that are pledged as collateral with a financial institution.

Prior to the date of this Agreement, the Undersigned has reached a verbal agreement to pledge additional shares as collateral in a financial agreement. The pledge of the Undersigned’s Shares is scheduled to take place during the Lock-Up period.

Very truly yours,

Robert E. Howard II

Exact Name of Shareholder

/s/ ROBERT E. HOWARD II

Authorized Signature

Director, Shareholder

Title

EX-99.3 4 dex993.htm EMPLOYEE STOCK PURCHASE AGREEMENT Employee Stock Purchase Agreement

EXHIBIT 3

EMPLOYEE STOCK PURCHASE AGREEMENT

This Agreement is made as of the 16th day of June, 1997, by and among Robert E. Howard II, an individual (“Howard”), STEVE ALBRIGHT, an individual (the “Purchaser”).

I. PURCHASE OF SHARES

1.1 Purchase. The Purchaser hereby purchases, and Howard hereby sells to the Purchaser, Four Hundred (400) shares (the “Corporation Shares”) of the common stock of Bob Howard Motors, Inc., an Oklahoma corporation (the “Corporation”) at a purchase price of Five and No/100 Dollar ($5.00) (the “Purchase Price”).

1.2 Payment. Concurrently with the execution of this Agreement, the Purchaser shall pay the Purchase Price for the Corporation Shares either in cash or cash equivalent. Purchaser shall also deliver to Howard a duly executed blank Assignment Separate from Certificate (in the form attached hereto as Exhibit A) and whatever additional documents may be required by Howard as a condition for the purchase.

1.3 Delivery of Certificates. The certificates representing the Corporation Shares subject to Howard’s Repurchase Right under Article V hereof shall be held in escrow by the Secretary of the Corporation as provided in Article VII hereof.

II. ACQUISITION BY GROUP 1 AUTOMOTIVE, INC.

2.1 Acquisition in General. Group 1 Automotive, Inc., a Delaware corporation (“Group 1 “) has made an offer to acquire all of the capital stock of the Corporation (the “Acquisition”), pursuant to a Stock Purchase Agreement (the “Stock Purchase Agreement”) to be executed by Group 1, the Corporation and the stockholders of the Corporation. Pursuant to the Stock Purchase Agreement, Purchaser will sell to Group 1 all of the Corporation Shares and will purchase from Group 1 an as yet undetermined number of shares of common stock of Group 1 (the “Group 1 Shares”). The Corporation Shares and the Group 1 Shares are referred to herein collectively as the “Shares.”

2.2 Effects of the Acquisition.

(a) Should the closing date of the Acquisition (the “Acquisition Closing Date”) occur on or prior to December 31, 1997:

(i) as provided in Article VII hereof, the Corporation shall release the escrowed certificates representing the Corporation Shares, so that Purchaser may endorse and deliver such certificates to Group 1 pursuant to the Stock Purchase Agreement;

(ii) the Group 1 shares shall be substituted for the Corporation Shares for the purposes of this Agreement, and certificates representing the Group 1 Shares shall be delivered by Group 1 to the Corporation, to be held in escrow as provided in Article VII hereof;

(iii) this Agreement shall have no further application or effect upon the Corporation Shares, and Group 1 shall own the Corporation Shares free and clear of all claims and encumbrances, including, without limitation, all rights granted to Howard hereunder; and

(iv) the Group 1 Shares shall be subject to the terms and provisions of this Agreement, including, without limitation, Howard’s Repurchase Right under Article V hereof, Howard’s First Refusal Right under Article VI hereof and the escrow provisions of Article VII hereof, and the Purchase Price for Group 1 Shares under Articles V and VI hereof shall be the Purchase Price originally paid by the Purchaser for the Corporation Shares.

(b) Should the Acquisition Closing Date not occur on or prior to December 31, 1997:

(i) Howard shall have the right to repurchase the Purchased Corporation Shares from Purchaser for the Purchase Price, notwithstanding Purchaser’s status as a Service Provider to the Corporation at the time of Howard’s repurchase hereunder, such repurchase to be conducted in accordance with Section 5.2 hereof; and

(ii) upon the completion of such repurchase, this Agreement shall terminate in all respects and shall have no further effect upon the parties hereto.

III. SPECIAL PROVISIONS

3.1 Stockholder Rights. Until such time as Howard actually exercises his repurchase rights under this Agreement, Purchaser (or any successor in interest) shall have all the rights of a stockholder (including voting and dividend rights) with respect to the Shares owned by Purchaser (or any successor in interest). Such stockholder rights shall apply to any Shares held in escrow under Article VII, subject, however, to the transfer restrictions of Article IV.

3.2 Section 83(b) Election. Purchaser understands that under Section 83 of the Internal Revenue Code of 1986, as amended (the “Code”), the difference between the Purchase Price paid for the Corporation Shares and their fair market value on the date any forfeiture restrictions applicable to such shares lapse will be reportable as ordinary income at that time. For this purpose, the term “forfeiture restrictions” includes Howard’s right to repurchase the Corporation Shares pursuant to his Repurchase Right under Article V of this Agreement. Purchaser understands that he may elect to be taxed at the time the Corporation Shares are acquired hereunder to the extent the fair market value of the Corporation Shares differs from the Purchase Price rather than when and as such Corporation Shares cease to be subject to such

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forfeiture restrictions, by filing an election under Section 83(b) of the Code with the I.R.S. within thirty (30) days after the date of purchase hereunder. If the fair market value of the Corporation Shares at the date of purchase equals the Purchase Price paid (and thus no tax is payable), the election must be made to avoid adverse tax consequences in the future. The form for making this election is attached as Exhibit B hereto. Purchaser understands that failure to make this filing within the thirty (30) day period will result in the recognition of ordinary income by the Purchaser (in the event the fair market value of the Corporation Shares increases after the date of purchase) as the forfeiture restrictions lapse. PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER’S SOLE RESPONSIBILITY, AND NOT HOWARD’S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b), EVEN IF PURCHASER REQUESTS HOWARD OR HIS REPRESENTATIVES TO MAKE THIS FILING ON HIS/HER BEHALF. PURCHASER IS RELYING SOLELY ON HIS OR HER ADVISORS WITH RESPECT TO THE DECISION AS TO WHETHER OR NOT TO FILE AN 83(b) ELECTION.

IV. TRANSFER RESTRICTIONS

Purchaser shall not transfer, assign, encumber, or otherwise dispose of any of the Corporation Shares, except as provided in the Stock Purchase Agreement. The Unvested Group 1 Shares (as defined herein) shall not be transferred, assigned, encumbered, or otherwise made the subject of disposition, except that such shares may be transferred subject to Howard’s First Refusal Right under Article VI. No transfer restrictions shall apply to Group 1 Shares that have vested in Purchaser in accordance with Section 5.3 herein.

V. REPURCHASE RIGHT

5.1 Grant. Howard is hereby granted the right (the “Repurchase Right”), exercisable at any time during the ninety (90) day period following the date the Purchaser ceases for any reason to be a Service Provider to the Corporation to repurchase at the Purchase Price all or (at the discretion of Howard and with the consent of the Purchaser) any portion of (i) the Corporation Shares owned by the Purchaser prior to the Acquisition, or (ii) the Group 1 Shares owned by Purchaser subsequent to the Acquisition in which the Purchaser has not acquired a vested interest in accordance with the vesting provisions of Section 5.3 (such shares to be hereinafter called the “Unvested Group 1 Shares”). For purposes of this Agreement, the Purchaser shall be deemed to be a Service Provider to the Corporation for so long as the Purchaser is a full time employee of the Corporation, Group 1, or any affiliate of subsidiary of Group 1.

5.2 Exercise of the Repurchase Right. The Repurchase Right shall be exercisable by written notice delivered to the Purchaser prior to the expiration of the applicable ninety (90) day period specified in Section 5.1. The notice shall indicate the number of Corporation Shares or Unvested Group 1 Shares to be repurchased and the date on which the repurchase is to be effected, such date to be not more than thirty (30) days after the date of notice. To the extent one or more certificates representing the Corporation Shares or Unvested Group 1 Shares may have been previously delivered out of escrow to the Purchaser, then Purchaser shall, prior to the close of business on the date specified for the repurchase, deliver to Howard the certificates representing the Corporation Shares or Unvested Shares Group 1 to be repurchased, each

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certificate to be properly endorsed for transfer. Howard shall, concurrently with his receipt of such stock certificates (either from escrow in accordance with Section 7.3 or from Purchaser as herein provided), pay to Purchaser in cash, an amount equal to the Purchase Price previously paid for the Corporation Shares or Unvested Group 1 Shares that are to be repurchased.

5.3 Termination of the Repurchase Right.

(a) Prior to the Acquisition, the Repurchase Right shall apply at all times to one hundred percent (100%) of the Corporation Shares. Following the Acquisition, the vesting schedule described hereunder shall apply to the Group 1 Shares, and as provided in Section 2.2(a) hereof the Repurchase Right shall no longer apply to the Corporation Shares. The Repurchase Right shall terminate with respect to any Unvested Group 1 Shares for which it is not timely exercised under Section 5.2. In addition, the Repurchase Right shall terminate, and cease to be exercisable, with respect to any and all Group 1 Shares in which the Purchaser vests in accordance with the schedule below. Accordingly, provided the Purchaser continues to be a Service Provider to the Corporation, the Purchaser shall acquire a vested interest in, and the Repurchase Right shall lapse with respect to, the Group 1 Shares in accordance with the following provisions:

(i) The Purchaser shall not acquire any vested interest in, nor shall the Repurchase Right lapse with respect to, any Group 1 Shares during the initial twelve (12) month period measured from the Acquisition Closing Date.

(ii) Upon the expiration of the initial twelve (12) month period measured from the Acquisition Closing Date, the Purchaser shall acquire a vested interest in, and the Repurchase Right shall lapse with respect to, that number of Group 1 Shares equal to twenty percent (20%) of the Group 1 Shares.

(iii) From and after the expiration of the initial twelve (12) month period measured from the Acquisition Closing Date, the Purchaser shall acquire a vested interest in, and the Repurchase Right shall lapse with respect to, the remaining Group 1 Shares in a series of successive annual installments each equal to twenty percent (20%) of the Group 1 Shares.

5.4 Fractional Shares. No fractional shares shall be repurchased by Howard. Accordingly, should the Repurchase Right extend to a fractional share (in accordance with the vesting computation provisions of Section 5.3) at the time the Purchaser ceases to be a Service Provider, then such fractional share shall be added to any fractional share in which the Purchaser is at such time vested in order to make one whole vested share no longer subject to the Repurchase Right.

5.5 Additional Shares or Substituted Securities. In the event of any stock dividend, stock split, recapitalization or other change affecting (i) prior to the Acquisition, the Corporation’s outstanding common stock, or (ii) subsequent to the Acquisition, Group 1’s outstanding common stock, as a class effected without receipt of consideration, then any new, substituted or additional securities or other property (including money paid other than as a

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regular cash dividend) which is by reason of any such transaction distributed with respect to the Corporation Shares or the Group 1 Shares then owned by Purchaser shall be immediately subject to the Repurchase Right, but only to the extent the Corporation Shares or Group 1 Shares then owned by Purchaser are at the time covered by such right. Appropriate adjustments to reflect the distribution of such securities or property shall be made to the number of Corporation Shares or Group 1 Shares hereunder and to the price per share to be paid upon the exercise of the Repurchase Right in order to reflect the effect of any such transaction upon the Corporation’s capital structure; provided, however, that the aggregate Purchase Price shall remain the same.

5.6 Legend. All certificates representing Shares subject to Howard’s Right of Repurchase shall be endorsed with the following legend:

“THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN ROBERT E. HOWARD II AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS CERTAIN REPURCHASE RIGHTS TO ROBERT E. HOWARD II UPON TERMINATION OF SERVICE WITH THE COMPANY. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.”

VI. RIGHT OF FIRST REFUSAL

6.1 Grant. Howard is hereby granted the right of first refusal (the “First Refusal Right”), exercisable in connection with any proposed sale or other transfer of the Unvested Group 1 Shares. For purposes of this Article VI, the term “transfer” shall include any assignment, pledge, encumbrance or other disposition for value of the Unvested Group 1 Shares intended to be made by the Purchaser.

6.2 Notice of Intended Disposition. In the event the Purchaser desires to accept a bona fide third party offer for any or all of the Unvested Group 1 Shares (the shares subject to such offer to be hereinafter called, solely for the purposes of this Article VI, the “Target Shares”), Purchaser shall promptly deliver to Howard written notice (the “Disposition Notice”) of the offer and the basic terms and conditions thereof, including the proposed purchase price.

6.3 Exercise of Right. Howard shall, for a period of thirty (30) days following receipt of the Disposition Notice, have the right to repurchase any or all of the Target Shares specified in the Disposition Notice for that portion of the Purchase Price allocable to such Target Shares. Such right shall be exercisable by written notice (the “Exercise Notice”) delivered to Purchaser prior to the expiration of the thirty (30) day exercise period. If such right is exercised with respect to all the Target Shares specified in the Disposition Notice, then Howard shall effect the repurchase of the Target Shares, including payment of the purchase price therefor, not more than five (5) business days after delivery of the Exercise Notice; and at such time Purchaser shall deliver to Howard the certificates representing the Target Shares to be repurchased, each

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certificate to be properly endorsed for transfer. To the extent any of the Target Shares are at the time held in escrow under Article VII, the certificates for such shares shall automatically be released from escrow and delivered to Howard.

6.4 Non Exercise of Right. In the event the Exercise Notice is not given to Purchaser within thirty (30) days following the date of Howard’s receipt of the Disposition Notice, Purchaser shall have a period of thirty (30) days thereafter, in which to sell or otherwise dispose of the Target Shares upon terms and conditions (including the purchase price) no more favorable to the third party purchaser than those specified in the Disposition Notice. To the extent any of the Target Shares are at the time held in escrow under Article VII, the certificates for such shares shall automatically be released from escrow and surrendered to the Purchaser. The third-party purchaser shall acquire the Target Shares free and clear of all the terms and provisions of this Agreement (including Howard’s Repurchase Right under Article V and Howard’s First Refusal Right hereunder). In the event Purchaser does not sell or otherwise dispose of the Target Shares within the specified thirty (30) day period, Howard’s First Refusal Right shall continue to be applicable to any subsequent disposition of the Target Shares by Purchaser.

6.5 Partial Exercise of Right. In the event Howard makes a timely exercise of the First Refusal Right with respect to a portion, but not all, of the Target Shares specified in the Disposition Notice, Purchaser shall have the option, exercisable by written notice to Howard delivered within thirty (30) days after the date of the Disposition Notice, to effect the sale of the Target Shares pursuant to one of the following alternatives:

(a) sale or other disposition of all the Target Shares to a third-party purchaser in compliance with the requirements of Section 6.4, as if Howard did not exercise the First Refusal Right hereunder; or

(b) sale to Howard of the portion of the Target Shares which Howard has elected to purchase, such sale to be effected in substantial conformity with the provisions of Section 6.3.

Failure of Purchaser to deliver timely notification to Howard under this Section 6.5 shall be deemed to be an election by Purchaser to sell the Target Shares pursuant to alternative (b) above.

6.6 Recapitalization.

In the event of any stock dividend, stock split, recapitalization or other transaction affecting Group 1’s outstanding Common Stock as a class effected without receipt of consideration, then any new, substituted or additional securities or other property which is by reason of such transaction distributed with respect to the Unvested Group 1 Shares shall be immediately subject to Howard’s First Refusal Right hereunder.

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6.7 Legend. All certificates representing Unvested Group 1 Shares subject to the Right of First Refusal shall be endorsed with the following legend:

“THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN ROBERT E. HOWARD II AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS TO ROBERT E. HOWARD II CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE”

VI1. ESCROW

7.1 Deposit. Upon execution of this Agreement, the certificates for the Corporation Shares shall be deposited in escrow with the Secretary of the Corporation to be held in accordance with the provisions of this Article VII. Each deposited certificate shall be accompanied by a duly executed Assignment Separate from Certificate in the form of Exhibit A. The deposited certificates, together with any other assets or securities from time to time deposited with the Corporation pursuant to the requirements of this Agreement, shall remain in escrow until such time or times as the certificates (or other assets and securities) are to be released or otherwise surrendered for cancellation in accordance with Section 7.2. Upon delivery of the certificates (or other assets and securities) to Howard, the Purchaser shall be issued an instrument of deposit acknowledging the number of Corporation Shares (or other assets and securities) delivered in escrow to the Secretary of the Corporation.

7.2 Release/Surrender. The Corporation Shares or Group 1 Shares, together with any other assets or securities held in escrow hereunder, shall be subject to the following terms and conditions relating to their release from escrow or their surrender to Howard for repurchase:

(a) On the Acquisition Closing Date, the Corporation shall release the escrowed certificates representing the Corporation Shares to Purchaser so that Purchaser may endorse and deliver such certificates to Group 1 pursuant to the Stock Purchase Agreement, and the Group 1 Shares purchased by Purchaser pursuant to the Stock Purchase Agreement shall be delivered by Group 1 to the Corporation to be held in escrow according to the provisions of this Article VII, delivery of such Group 1 Shares to be conducted in a manner consistent with the provisions of Section 7.1 hereof, including the delivery of an Assignment Separate from Certificate duly executed by Purchaser covering the escrowed Group 1 Shares.

(b) Should Howard elect to exercise his Repurchase Right under Article V with respect to any Corporation Shares or Unvested Group 1 Shares, then the escrowed certificates for such Corporation Shares or Unvested Group 1 Shares (together with any other assets or securities issued with respect thereto) shall be delivered to Howard, concurrently with the payment to the Purchaser, in cash or cash equivalent (including the cancellation of any purchase money indebtedness), of an amount equal to the aggregate Purchase Price for such Corporation Shares or Unvested Group 1 Shares, and the Purchaser shall cease to have any further rights or claims with respect to such Corporation Shares or Unvested Group 1 Shares (or other assets or securities).

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(c) Should Howard elect to exercise his First Refusal Right under Article VI with respect to any Target Shares held at the time in escrow hereunder, then the escrowed certificates for such Target Shares (together with any other assets or securities issued with respect thereto) shall, concurrently with the payment of the Section 6.3 purchase price for such Target Shares to the Purchaser, be delivered to Howard, and the Purchaser shall cease to have any further rights or claims with respect to such Target Shares (or other assets or securities).

(d) Should Howard elect not to exercise his First Refusal Right under Article VI with respect to any Target Shares held at the time in escrow hereunder, then the escrowed certificates for such Target Shares (together with any other assets or securities issued with respect thereto) shall be surrendered to the Purchaser for disposition according to the provisions of Section 6.4.

(e) As the interest of the Purchaser in the Group 1 Shares (or any other assets or securities issued with respect thereto) vests in accordance with the provisions of Article V, the certificates for such vested shares (as well as all other vested assets and securities) shall be released from escrow and delivered to the Purchaser in accordance with the following schedule:

(i) The initial release of vested shares (or other vested assets and securities) from escrow shall be effected within thirty (30) days following the expiration of the initial twelve (12) month period measured from the Acquisition Closing Date.

(ii) Subsequent releases of vested shares (or other vested assets and securities) from escrow shall be effected at annual intervals thereafter, with the first such annual release to occur twenty four (24) months after the Acquisition Closing Date.

(iii) Upon the Purchaser’s cessation of Service Provider status, any escrowed Group 1 Shares (or other assets or securities) in which the Purchaser is at the time vested shall be promptly released from escrow.

7.3 Recapitalization. All regular cash dividends on the Corporation Shares or Group 1 Shares held in escrow pursuant to this Article VII (or other securities at the time held in escrow) shall be paid directly to the Purchaser and shall not be held in escrow. However, in the event of any stock dividend, stock split, recapitalization or other change affecting (i) prior to the Acquisition, the Corporation’s outstanding Common Stock or (ii) subsequent to the Acquisition, Group 1’s outstanding Common Stock, as a class effected without receipt of consideration, any new, substituted or additional securities or other property which is by reason of such transaction distributed with respect to such Corporation Shares or Group 1 Shares shall be immediately delivered to the Secretary of the Corporation to be held in escrow under this Article VII, but only to the extent such Corporation Shares or Group 1 Shares are at the time subject to the escrow requirements of Section 7.1.

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VIII.

GENERAL PROVISIONS

8.1 Assignment. Howard may not assign his Repurchase Rights under Article V and/or his First Refusal Right under Article VI.

8.2 Definitions. For purposes of this Agreement, the following provisions shall be applicable in determining the parent and subsidiary corporations of the Corporation:

(a) Any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation shall be considered to be a parent corporation of the Corporation, provided each such corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

(b) Each corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation shall be considered to be a subsidiary of Corporation, provided each such corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50 %) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

8.3 No Employment or Service Contract. Nothing in this Agreement shall confer upon the Purchaser any right to continue in the service of the Corporation (or any parent or subsidiary corporation of the Corporation employing or retaining Purchaser) for any period of time or interfere with or restrict in any way the rights of the Corporation (or any parent or subsidiary corporation of the Corporation employing or retaining Purchaser) or the Purchaser, which rights are hereby expressly reserved by each, to terminate the Service Provider status of Purchaser at any time for any reason whatsoever, with or without cause.

8.4 Notices. Any notice required in connection with (i) the Repurchase Right or the First Refusal Right or (ii) the disposition of any Shares covered thereby shall be given in writing and shall be deemed effective upon personal delivery or upon deposit in the United States mail, registered or certified, postage prepaid and addressed to the party entitled to such notice at the address indicated below such party’s signature line on this Agreement or at such other address as such party may designate by ten (10) days’ advance written notice under this Section 8.4 to all other parties to this Agreement.

8.5 No Waiver. The failure of Howard in any instance to exercise the Repurchase Rights granted under Article V, or the failure of Howard in any instance to exercise the First Refusal Right granted under Article VI, shall not constitute a waiver of any other repurchase rights and/or rights of first refusal that may subsequently arise under the provisions of this Agreement or any other agreement between Howard and the Purchaser. No waiver of any breach or condition of this Agreement shall be deemed to be a waiver of any other or subsequent breach or condition, whether of like or different nature.

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8.6 Cancellation of Shares. If Howard shall make available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Shares to be repurchased in accordance with the provisions of this Agreement, then from and after such time, the person from whom such shares are to be repurchased shall no longer have any rights as a holder of such shares (other than the right to receive payment of such consideration in accordance with this Agreement), and such shares shall be deemed purchased in accordance with the applicable provisions hereof and Howard shall be deemed the Purchaser and holder of such shares, whether or not the certificates therefor have been delivered as required by this Agreement.

IX. MISCELLANEOUS PROVISIONS.

9.1 Purchaser Undertaking. Purchaser hereby agrees to take whatever additional action and execute whatever additional documents Howard may in his judgment deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on either the Purchaser, the Corporation Shares or the Group 1 Shares pursuant to the express provisions of this Agreement.

9.2 Agreement is Entire Contract. This Agreement constitutes the entire contract between the parties hereto with regard to the subject matter hereof.

9.3 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Oklahoma, as such laws are applied to contracts entered into and performed in such State.

9.4 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

9.5 Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and be binding upon, Howard and his successors and assigns and the Purchaser and the Purchaser’s legal representatives, heirs, legatees, distributees, assigns and transferees by operation of law, whether or not any such person shall have become a party to this Agreement and have agreed in writing to join herein and be bound by the terms and conditions hereof.

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the day and year first indicated above.

“Howard”

ROBERT E. HOWARD II

“PURCHASER”¹

STEVE ALBRIGHT

Address:

2108 Reynolds Court

Norman, OK 73069

I have received, completed, executed and retained the I.R.C. Section 83(b) election that was attached hereto as Exhibit B. As set forth in Section 3.2, I understand that I, and not Robert E. Howard II, will be responsible for completing the form and filing the election with the appropriate office of the federal and state tax authorities and that if such filing is not completed within thirty (30) days after the date of this Agreement, I will forfeit the significant tax benefits of Section 83(b). I understand further that such filing should be made by registered or certified mail, return receipt requested, and that I must retain two (2) copies of the completed form for filing with my state and federal tax returns for the current tax year and an additional copy for my records.

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EXHIBIT A

Assignment Separate From Certificate

FOR VALUE RECEIVED hereby sells, assigns and transfers unto ROBERT E. HOWARD II, an individual, ( ) shares of the Capital Stock of Bob Howard Inc., an Oklahoma corporation (the “Corporation”), standing in name on the books of said Corporation represented by Certificate No. herewith and do hereby irrevocably constitute and appoint Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.

Dated:


Signature:

Signature:

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EXHIBIT B

Repurchase Rights

This statement is being made under Section 83(b) of the Internal Revenue Code, pursuant to Treas. Reg. Section 1.83 2.

(1) The person who performed the services is:

Name:

Address:

Taxpayer Ident. No.:

Taxable Year: Calendar Year 19

(2) The property with respect to which the election is being made is shares of the common stock of .

(3) The property was issued on , 19 .

(4) The property is subject to a repurchase right pursuant to which Robert E. Howard II has the right to acquire the property at the original purchase price if for any reason stockholder’s employment with Robert E. Howard II is terminated. Robert E. Howard II’s repurchase right lapses on , 19 .

(5) The fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is $ per share.

(6) The amount paid for such property is $ per share.

(7) A copy of this statement was furnished to , for whom Employee rendered the service underlying the transfer of property.

(8) This statement is executed as of: .



Spouse (if any)				Employee

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EX-99.4 5 dex994.htm EMPLOYEE STOCK PURCHASE AGREEMENT Employee Stock Purchase Agreement

EXHIBIT 4

EMPLOYEE STOCK PURCHASE AGREEMENT

This Agreement is made as of the 16th day of June, 1997, by and among Robert E. Howard II, an individual (“Howard”), SCOTT SMITH, an individual (the “Purchaser”).

I. PURCHASE OF SHARES

1.1 Purchase. The Purchaser hereby purchases, and Howard hereby sells to the Purchaser, Two Hundred (200) shares (the “Corporation Shares”) of the common stock of Howard Pontiac-GMC, Inc., an Oklahoma corporation (the “Corporation”) at a purchase price of Five and No/100 Dollar ($5.00) (the “Purchase Price”).

II. ACQUISITION BY GROUP 1 AUTOMOTIVE, INC.

2.2 Effects of the Acquisition.

(a) Should the closing date of the Acquisition (the “Acquisition Closing Date”) occur on or prior to December 31, 1997:

(b) Should the Acquisition Closing Date not occur on or prior to December 31, 1997:

(ii) upon the completion of such repurchase, this Agreement shall terminate in all respects and shall have no further effect upon the parties hereto.

III. SPECIAL PROVISIONS

IV. TRANSFER RESTRICTIONS

V. REPURCHASE RIGHT

5.3 Termination of the Repurchase Right.

(a) Prior to the Acquisition, the Repurchase Right shall apply at all times to one hundred percent (100 %) of the Corporation Shares. Following the Acquisition, the vesting schedule described hereunder shall apply to the Group 1 Shares, and as provided in Section 2.2(a) hereof the Repurchase Right shall no longer apply to the Corporation Shares. The Repurchase Right shall terminate with respect to any Unvested Group 1 Shares for which it is not timely exercised under Section 5.2. In addition, the Repurchase Right shall terminate, and cease to be exercisable, with respect to any and all Group 1 Shares in which the Purchaser vests in accordance with the schedule below. Accordingly, provided the Purchaser continues to be a Service Provider to the Corporation, the Purchaser shall acquire a vested interest in, and the Repurchase Right shall lapse with respect to, the Group 1 Shares in accordance with the following provisions:

Corporation Shares or the Group 1 Shares then owned by Purchaser shall be immediately subject to the Repurchase Right, but only to the extent the Corporation Shares or Group 1 Shares then owned by Purchaser are at the time covered by such right. Appropriate adjustments to reflect the distribution of such securities or property shall be made to the number of Corporation Shares or Group 1 Shares hereunder and to the price per share to be paid upon the exercise of the Repurchase Right in order to reflect the effect of any such transaction upon the Corporation’s capital structure; provided, however, that the aggregate Purchase Price shall remain the same.

5.6 Legend. All certificates representing Shares subject to Howard’s Right of Repurchase shall be endorsed with the following legend:

VI.	RIGHT OF FIRST REFUSAL

6.4 Non-Exercise of Right. In the event the Exercise Notice is not given to Purchaser within thirty (30) days following the date of Howard’s receipt of the Disposition Notice, Purchaser shall have a period of thirty (30) days thereafter, in which to sell or otherwise dispose of the Target Shares upon terms and conditions (including the purchase price) no more favorable to the third party purchaser than those specified in the Disposition Notice. To the extent any of the Target Shares are at the time held in escrow under Article VII, the certificates for such shares shall automatically be released from escrow and surrendered to the Purchaser. The third party purchaser shall acquire the Target Shares free and clear of all the terms and provisions of this Agreement (including Howard’s Repurchase Right under Article V and Howard’s First Refusal Right hereunder). In the event Purchaser does not sell or otherwise dispose of the Target Shares within the specified thirty (30) day period, Howard’s First Refusal Right shall continue to be applicable to any subsequent disposition of the Target Shares by Purchaser.

(b) sale to Howard of the portion of the Target Shares which Howard has elected to purchase, such sale to be effected in substantial conformity with the provisions of Section 6.3.

Failure of Purchaser to deliver timely notification to Howard under this Section 6.5 shall be deemed to be an election by Purchaser to sell the Target Shares pursuant to alternative (b) above.

6.6 Recapitalization.

6.7 Legend. All certificates representing Unvested Group 1 Shares subject to the Right of First Refusal shall be endorsed with the following legend:

“THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN ROBERT E. HOWARD II AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS TO ROBERT E. HOWARD II CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE.”

VII. ESCROW

VIII. GENERAL PROVISIONS

8.1 Assignment. Howard may not assign his Repurchase Rights under Article V and/or his First Refusal Right under Article VI.

8.2 Definitions. For purposes of this Agreement, the following provisions shall be applicable in determining the parent and subsidiary corporations of the Corporation:

(b) Each corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation shall be considered to be a subsidiary of Corporation, provided each such corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

the person from whom such shares are to be repurchased shall no longer have any rights as a holder of such shares (other than the right to receive payment of such consideration in accordance with this Agreement), and such shares shall be deemed purchased in accordance with the applicable provisions hereof and Howard shall be deemed the Purchaser and holder of such shares, whether or not the certificates therefor have been delivered as required by this Agreement.

IX. MISCELLANEOUS PROVISIONS.

9.2 Agreement is Entire Contract. This Agreement constitutes the entire contract between the parties hereto with regard to the subject matter hereof.

9.4 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Parties have executed this Agreement on the day and year first indicated above.

“Howard”

/s/ ROBERT E. HOWARD II

ROBERT E. HOWARD II

“PURCHASER”¹

/s/ SCOTT SMITH

SCOTT SMITH

Address:

1412 Pinehurst

Edmond, OK 73034

EXHIBIT A

Assignment Separate From Certificate

Dated:


Signature:

Signature:

EXHIBIT B

Repurchase Rights

This statement is being made under Section 83(b) of the Internal Revenue Code, pursuant to Treas. Reg. Section 1.83 2.

(1) The person who performed the services is:

Name:

Address:

Taxpayer Ident. No.:

Taxable Year: Calendar Year 19

(2) The property with respect to which the election is being made is shares of the common stock of .

(3) The property was issued on , 19 .

(5) The fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is $ per share.

(6) The amount paid for such property is $ per share.

(7) A copy of this statement was furnished to , for whom Employee rendered the service underlying the transfer of property.

(8) This statement is executed as of: .

Spouse (if any)

Guaranteed:

Employee

EX-99.5 6 dex995.htm STOCK RESTRICTION AND OPTION AGREEMENT Stock Restriction and Option Agreement

EXHIBIT 5

STOCK RESTRICTION AND OPTION AGREEMENT

This Stock Restriction and Option Agreement (“Agreement”) is entered effective this is 1^st day of December, 1998, by and between ROBERT E. HOWARD II, an individual (“Howard”), and JOE HEITZ, an individual (“General Manager”).

EXPLANATORY STATEMENT:

WHEREAS, Howard and General Manager wish to grant Howard the option to purchase certain Group 1 Automotive, Inc. shares of General Manager;

WHEREAS, Howard and General Manager wish to make provision to phase out and terminate the option granted to Howard; and

WHEREAS, the parties desire to grant to Howard an option to acquire General Manager’s shares of Group 1 upon the terms and conditions stated herein.

NOW, THEREFORE, in consideration of the foregoing and of the mutual agreements and understandings of the parties hereto, the parties hereby agree as follows:

ARTICLE I.

DEFINITIONS

The following words are intended to have the following meanings when used in this Agreement:

1.1 Agreement shall mean this Agreement as in effect on the date hereof and as hereafter from time to time amended, modified or supplemented in accordance with the terms hereof.

1.2 Anniversary Dates:

(a)

First Anniversary Date means November 30, 1999.

(b)

Second Anniversary Date means November 30, 2000.

(c)

Third Anniversary Date means November 30, 2001.

(d)

Fourth Anniversary Date means November 30, 2002.

(e)

Fifth Anniversary Date means November 30, 2003.

1.3 Effective Date shall mean the effective date of this Agreement as set forth in the preamble of this Agreement.

1.4 Escrow Agent shall mean Randall K. Calvert, who shall hold and deposit funds and certificates representing shares of Group 1 to effect a purchase or sale pursuant to this Agreement.

1.5 Encumber or Encumbrance. “To Encumber” includes to pledge, hypothecate, or otherwise secure any type of debt or obligation with shares of the Stock, whether incurred voluntarily or involuntarily, and in any manner whatsoever. An “Encumbrance” is any type of security or surety interest created by such Encumbering.

1.6 Exercise Date means the date of the exercise of the Option pursuant to the provisions of Section 3.1.

1.7 Group 1 shall mean Group 1 Automotive, Inc., a Delaware corporation.

1.8 Option Date shall mean December 1, 1998.

1.9 Option Price is the purchase price for the Option Shares, as calculated pursuant to the provisions of Section 3.3.

1.10 Option Shares means the shares of Group 1 stock owned by General Manager, subject to this Agreement, as specified in Section

1.11 Person shall mean any individual, entity, corporation, association, trust, partnership, joint venture, limited liability company or any government agency or political subdivision thereof.

1.12 Termination Date means the last date upon which Howard may exercise the Option, which is the Fifth Anniversary Date.

1.13 Transfer is any sale, assignment, pledge, Encumbrance, gift, bequest, or other transfer of Option Shares, whether or not for value and whether or not made on account of a court order or otherwise by operation of law, including any Transfer incident to any divorce or marital property settlement or any Transfer pursuant to applicable community property, quasi-community property or similar state law.

ARTICLE II.

RESTRICTIONS ON STOCK TRANSFERS

2.1 Restriction on Transfer or Encumbrance of Shares. General Manager agrees that he will not Transfer or Encumber any of the Option Shares, nor will he permit any such Transfer or Encumbrance to be effected by operation of law, by judicial process, or otherwise, other than in accordance with this Agreement.

2.2 Unauthorized Transfer or Encumbrance of the Option Shares. If General Manager Transfers or Encumbers any of the Option Shares otherwise than in strict accordance

with the terms and conditions of this Agreement, such Transfer. or Encumbrance shall be of no force, effect or validity, and shall be null and void ab initio. No attempted Encumbrance or Transfer of any Option Shares not in accordance with the terms of this Agreement shall be reflected on Group 1’s books.

2.3 Endorsement on Stock Certificates. All certificates issued to represent the Option Shares shall, in addition to any other legend required or permitted by the Certificate of Incorporation or By-laws, bear the following legend:

This security is the subject of restrictions pursuant to a Stock Restriction and Option Agreement effective the 1^st day of December, 1998, a copy of which is on file with the Secretary of Group 1 Automotive, Inc., and may not be transferred, exchanged. sold, assigned, encumbered or otherwise disposed of except in strict accordance with the express terms of such agreement. By acceptance of this certificate the holder hereof agrees to be bound by the terms of such agreement.

General Manager may return his certificates representing shares of Group 1 which are no longer subject to the terms of this Agreement to the Secretary of Group 1, who will issue new certificates, without the restrictive endorsement required by this Agreement.

ARTICLE III.

OPTION TO PURCHASE

3.1 Howard’s Option to Purchase Shares. For the periods indicated below, General Manager hereby grants to Howard an option (the “Option”) to purchase the number of Group 1 shares indicated with respect to each period stated below. Option shares subject to the Option shall be reduced by twenty percent (20%) after each Anniversary Date as indicated below. The number of Option Shares for each indicated period shall be as set forth below:


During the Period:		Option Shares Subject to the Option:
Option Date to First Anniversary Date		100% of the Option Shares

First Anniversary Date to Second Anniversary Date		80% of the Option Shares

Second Anniversary Date to Third Anniversary Date		60% of the Option Shares

Third Anniversary Date to Fourth Anniversary Date		40% of the Option Shares

Fourth Anniversary Date to Fifth Anniversary Date		20% of the Option Shares

The number of Option Shares and the Option Price shall be adjusted for any change in the capitalization of Group 1, as provided in Section 4 below. As Twenty percent (20%) of the Option Shares are released from the Option after each Anniversary Date as indicated by the

above schedule, the legend printed on such released Option Shares pursuant to Section 2.2 shall be removed from such released Option Shares within a reasonable period of time after the expiration of the Option on such released Option Shares, and if such released Option Shares are in the possession of an Escrow Agent, they shall be promptly delivered to General Manager.

3.2 Exercise of Option. This Option must be exercised by Howard on or before the Termination Date, by notice in writing pursuant to the provisions of Section 4.10, to General Manager. Notice shall be deemed given and the Option exercised on the date on which the notice is mailed (“Exercise Date”). If Howard fails to exercise the Option prior to the Termination date. this Agreement shall terminate and have no effect.

3.3 Option Price. The price for the purchase of the Option Shares (“Option Price”) shall be ten dollars ($10). The number of Option Shares during each period is a follows:


During the Period:		Option Shares:
Option Date to First Anniversary Date		16,667 Shares

First Anniversary Date to Second Anniversary Date		13,334 Shares

Second Anniversary Date to Third Anniversary Date		10,000 Shares

Third Anniversary Date to Fourth Anniversary Date		6,668 Shares

Fourth Anniversary Date to Fifth Anniversary Date		3,333 Shares

3.4 Payment of Option Price. Payment shall be made for the Option Shares in cash at the time of Closing, as defined below. General Manager will receive the benefits of ownership of the Option Shares from the Exercise Date to the date of Option Closing.

3.5 Option Closing. The purchase of the Option Shares pursuant to this Agreement will take place at a closing (“Option Closing”), held at 1:00 P.M. on the thirtieth (30th) day after the Exercise Date, at 13300 Broadway Extension. Oklahoma City, Oklahoma in Howard’s office at said location, or at any other place and time to which the parties agree.

3.5.1 At the Option Closing, Howard will pay for the Option Shares and General Manager will deliver certificates representing all of the Option Shares, duly endorsed, free and clear of all Encumbrances.

3.5.2 If General Manager does not deliver the certificates at the Option Closing, then (1) Howard shall deposit the Option Price with the Escrow Agent; (2) the Escrow Agent shall deposit such funds with any bank with which Group 1 has a bank account on the date of the Option Closing, to be paid to General Manager as soon as is reasonably practicable; and (3) Group 1 will adjust its transfer books to reflect that the Option Shares have been Transferred.

3.6 Power of Attorney. General Manager appoints Group 1, through its Secretary or such other officer as its Board of Directors may designate, as his agent and attorney in fact to execute and deliver all documents needed to convey his Option Shares, if General Manager is not present at the Closing. This power of attorney is coupled with an interest and is executed under the provisions of Okla. Stat. tit. 58, §§ 1071-1077 (1997). This power of attorney shall become effective immediately, and shall not be affected by General Manager’s subsequent disability or incapacity, or by lapse of time, and shall continue for so long as this Agreement is in effect.

ARTICLE IX.

MISCELLANEOUS PROVISIONS

4.1 Recapitalization, Exchanges, Etc. Affecting the Securities. The provisions of this Agreement shall apply to the full extent set forth herein with respect to the Option Shares, and to any and all equity or debt securities of Group 1 or any successors or assigns of Group 1 (whether by merger, consolidation, sale of assets, or otherwise) which may be issued in respect of, in exchange for, or in substitution of, such equity of debt securities and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, reclassification, recapitalization. reorganization and the like occurring after the date hereof.

4.2 Term. The term of this Agreement shall expire on the Termination Date. Upon the expiration of the term of this Agreement, (i) the parties shall have no continuing rights or obligations, and (ii) the Shares of General Manager shall be free of all burdens and restrictions, under this Agreement. This Agreement shall terminate in all respects upon occurrence of any of the following events: (i) dissolution of Group l; or (ii) the Termination Date.

4.3 No Option to General Manager. General Manager acknowledges that this Agreement does not grant General Manager, now or at any time in the future, the option or right to acquire any shares of Group 1.

4.4 Additional Assurances. The provisions of this Agreement shall be self-operative and shall not require further agreement by the parties except as may be herein specifically provided to the contrary; provided, however, that at the request of Howard or Group 1, General Manager shall execute such additional instruments and documents as Howard or Group 1 may deem reasonably necessary to effectuate this Agreement.

4.5 Reliance. The parties to this Agreement represent and warrant that, in making the decision to enter into this Agreement, they have not relied in any manner upon attorneys of any of the other parties, other than the information or representations set forth herein. The parties to this Agreement also represent and warrant that each of them has had the benefit of counsel of their own choice and has been afforded an opportunity to review this Agreement with their chosen counsel. The parties to this Agreement further represent that they have read this Agreement, that they understand it, and that they have executed it voluntarily and with full knowledge of its contents. General Manager acknowledges that Howard’s counsel, Randall K. Calvert, prepared this Agreement in the course of his representation of Howard, and that:

(1)

GENERAL MANAGER HAS BEEN ADVISED BY MR. CALVERT THAT A CONFLICT EXISTS AMONG THEIR INDIVIDUAL INTERESTS;

(2)

GENERAL MANAGER HAS BEEN ADVISED BY MR. CALVERT TO SEEK THE ADVICE OF INDEPENDENT COUNSEL;

(3)

GENERAL MANAGER HAS HAD THE OPPORTUNTTY TO SEEK THE ADVICE OF INDEPENDENT COUNSEL;

(4)

GENERAL MANAGER HAS RECEIVED NO REPRESENTATIONS FROM MR. CALVERT ABOUT THE TAX CONSEQUENCES OF THIS AGREEMENT;

(5)

GENERAL MANAGER HAS BEEN ADVISED BY MR. CALVERT THAT THIS AGREEMENT MAY HAVE TAX CONSEQUENCES;

(6)

GENERAL MANAGER HAS BEEN ADVISED BY MR. CALVERT TO SEEK THE ADVICE OF INDEPENDENT TAX COUNSEL; AND .

(7)

GENERAL MANAGER HAS HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT TAX COUNSEL.

4.6 Legal Fees and Costs. In the event that either party elects to incur legal expenses to enforce or interpret any provision of this Agreement, the prevailing party will be entitled to recover its legal expenses, including, without limitation, reasonable attorneys’ fees, costs, and disbursements, in addition to any other relief to which such party may be entitled.

4.7 Choice of Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (without giving effect to the choice of law principles of such State).

4.8 Benefit/Assignment. Subject to any provisions herein to the contrary, this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective legal representatives, successors, and assigns. Neither Howard nor General Manager may assign any of their rights hereunder to any Person.

4.9 Waiver of Breach. Any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

4.10 Notices. Any notice, demand, or communication required, permitted, or desired to be given hereunder shall be deemed effectively given when personally delivered or mailed by prepaid, certified mail, return receipt requested, addressed as follows:


If to Howard:		Robert E. Howard II
		c/o Bob Howard Automall
		P.O. Box 14508
		Oklahoma City, Oklahoma 73113

with a copy to:		Randall K. Calvert, Esq.
		6520 N. Western, Suite 100
		Oklahoma City, OK 73116

If to General Manager:		Joe Heitz
		3600 W. Maine, Suite 150
		Norman, OK 73072

or to such other address, and to the attention of such other person or officer, as either party may designate, with copies thereof to the respective counsel thereof, all at the addresses that a party may designate by like written notice

4.11 Severability. This Agreement is intended to be performed in accordance with, and only to the extent permitted by, all applicable laws, ordinances, rules and regulations. If any provision of this Agreement or the application thereof to any persons or circumstances shall, for any reason and to any extent, be invalid or unenforceable, but the extent of such invalidity or unenforceability does not destroy the basis of the bargain among the parties as expressed herein, the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected thereby, but rather shall be enforced to the greatest extent permitted by law.

4.12 Gender and Number. Whenever the context of this Agreement requires, the gender of all words herein shall include the masculine, feminine, and neuter, and the number of all words herein shall include the singular and plural.

4.13 Divisions and Headings. The divisions of this Agreement into sections and the use of captions and headings in connection therewith are solely for convenience and shall have no legal effect in construing the provisions of this Agreement.

4.14 Entire Agreement; Amendment. This Agreement and the other writings referred to herein or delivered pursuant hereto which form a part hereof contain the entire agreement among the parties hereto with respect to the subject transactions contemplated hereby and supersede all prior oral and written agreements and memoranda and undertakings among the panics hereto with regard to this subject matter. This Agreement may be amended only by a written instrument duly executed by Howard and General Manager.

4.15 Conflict. In the event of any conflict between the provision of this Agreement and the provisions of another agreement, the provisions of this Agreement shall govern and prevail.

4.16 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.


GENERAL MANAGER:


Joe Heitz, an individual

HOWARD:

/s/ ROBERT E. HOWARD II
ROBERT E. HOWARD II, an individual

GROUP 1:

GROUP 1 AUTOMOTIVE, INC.

By:		/s/ JOHN T. TURNER
		John T. Turner,
		Executive Vice President

EX-99.6 7 dex996.htm STOCK PLEDGE AGREEMENT Stock Pledge Agreement

EXHIBIT 6

STOCK PLEDGE AGREEMENT

This STOCK PLEDGE AGREEMENT (“Agreement”) is executed this 31st day of January, 2003, by and between Robert S. Howard, II, an individual resident of the State of Oklahoma (“Pledgor”) and Bank Of Oklahoma, N.A. (the “Bank”) under that certain Loan Agreement (the “Loan Agreement’”) by and between Robert E. Howard, II, individually (the “Borrower”), and Bank, dated as of the date hereof.

W I T N E S S E T H

A. Contemporaneous with the execution of this Agreement, Borrower executed and delivered to Bank the Loan Agreement;

B. Pursuant to the terms of the Loan Agreement, the Borrower executed and delivered to Bank the Note (as defined below);

C. Pledgor and the Bank have agreed that as a condition precedent, among other conditions precedent, and in order to induce the Bank to advance the funds described in the Loan Agreement and evidenced by the Note (the “Loan”), Pledgor should execute this Agreement in the form hereof in order to pledge 1,000,000 shares of Pledgor’s ownership of the common stock of Group 1 Automotive, Inc.

D. Pledgor and Bank have previously executed that certain Security Agreement dated as of November 1, 2001 (the “Former Agreement”) wherein Pledgor granted Bank a security interest in the stocked pledged hereunder.

E. Pledgor and Bank agree that this Agreement amends and restates in its entirety the former Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:

A. CERTAIN DEFINITIONS: As used in this Pledge Agreement, capitalized terms shall have the following meanings:

1. “Code” shall mean the Uniform Commercial Code adopted in the State of Oklahoma as in effect on the date of this Agreement.

2. “Company” shall mean Group 1 Automotive, Inc., an Oklahoma corporation.

3. “Loan Documents” shall mean the Loan Agreement, the Note, this Agreement, and any and all other instruments and documents executed and delivered in connection with, or to secure Borrower’s obligations under the Loan Agreement, as the same may be amended from time to time.

4. “Note” shall mean that certain promissory note dated as of the date hereof in the face amount of $9,125,237.00, as more particularly described in the Loan Agreement, and all renewals, replacements, and extensions thereof made by Borrower payable to the order of Bank.

5. “Pledged Interest” shall mean 1,000,000 shares of issued and outstanding common stock of the Company registered in the name of Pledgor as more particularly described on Exhibit “A” attached hereto, together with any additional shares required to be pledged hereunder or under the Loan Agreement.

6. “Secured Indebtedness” shall mean (i) Borrower’s obligations under the Note, the Loan Agreement and all other Loan Documents, (ii) all fees, expenses, and charges (including but not limited to indemnification and reimbursement obligations and attorneys’ fees) payable under the Loan Documents, and (iii) all other obligations of any kind or nature of Borrower to Bank including that certain promissory note dated as of January 17, 2002 in the face amount of $5,010,000 and that certain promissory note dated as of November 1, 2001 in the amount of $13,090,000, and any renewals or extensions for any of the above.

Capitalized terms used herein shall, unless otherwise defined herein, have the same meanings as those assigned thereto in the Loan Agreement. Capitalized terms used herein shall, unless otherwise defined herein or in the Loan Agreement, have the same meanings as those assigned thereto in the Code.

B. PLEDGE. In order to induce Bank to make the loan referenced in the Loan Agreement and as security for the due and punctual payment of the Secured Indebtedness together with any and all reasonable expenses (including reasonable attorney fees) which may be incurred by the Bank in collecting any or all of the Secured Indebtedness or in enforcing any rights hereunder (all such expenses being hereinafter referred to as the “Expenses”), and for other good and valuable consideration, Pledgor hereby pledges, hypothecates, assigns, transfers, sets over and delivers unto Bank the Pledged Interest. Pledgor shall execute and deliver any and all financing statements as well as any other documentation required by the Bank in order to register the pledge of the Pledged Interest on the books and records of the Company.

C. DELIVERY OF SHARES. All certificates or instruments representing or evidencing the Pledged Interest shall be delivered to and held by the Bank and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Bank. Upon the occurrence of an Event of Default, the Bank shall have the right, subject to obtaining approval of applicable regulatory authorities, to transfer to or register in the name of the Bank or any of its nominees any or all of the Pledged Interest. In addition, the Bank shall have the right at any time to exchange certificates or instruments representing or evidencing the Pledged interest for certificates or instruments of smaller or larger denominations.

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TO HAVE AND TO HOLD the Pledged Interest together with all rights, title, interest, powers, privileges and preferences appertaining or incidental thereto, unto Bank, its successors and assigns, forever as security for the Secured Indebtedness and Expenses, subject, however, to the terms, covenants and conditions hereinafter set forth.

C. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants as follows:

(1) The Pledged Interest has been duly and validly authorized, executed and issued, and Pledgor owns the same beneficially free and clear of any liens, charges or encumbrances thereon or affecting the title thereto.

(2) Pledgor has good right and lawful authority to pledge and deposit the Pledged Interest as provided herein and warrants and will preserve and defend all right, title and interest in and to the Pledged interest delivered to Bank hereunder against the claims of all persons, and will maintain and preserve the lien hereof as long as this Pledge Agreement shall remain in full force and effect.

D. DELIVERY OF ADDITIONAL SHARES. In the event that the Company shall issue, whether by way of stock dividend, stock split or otherwise, any additional common or preferred stock or other securities as a result of or attributable to the registered ownership of the Pledged Interest, such common or preferred stock, or other securities shall constitute part of the Pledged Interest as additional security for the secured indebtedness and, if the same are received by Pledgor, they will immediately upon receipt thereof deposit, sell, assign, pledge and deliver the same duly endorsed in blank or with stock powers attached to Bank.

E. TRANSFER TO NAME OF NOMINEE. Subject to obtaining approval of applicable regulatory authorities, Bank shall have the right to hold the Pledged Interest in the name of Pledgor endorsed or assigned in blank or in favor of Bank, or may have the Pledged Interest registered in the name of any nominee or nominees of Bank or exchange the certificates representing the Pledged Interest for certificates of smaller or larger denominations for any purpose consistent with the terms of this Agreement.

F. VOTING RIGHTS, DISTRIBUTIONS, ETC. So long as no Event of Default (as such term is defined in the Loan Agreement) has occurred, Pledgor shall have the right to vote its interest in the Company and to collect and receive for its own use all distributions and to give waivers and consents with respect to the Pledged Interest and, from time to time, in case any of the Pledged Interest has been transferred into the name of Bank or its nominee or nominees, Bank may execute and deliver or cause to be executed and delivered appropriate powers of attorney or proxies to vote such interest or to execute such waivers or consents, except that any such proxy or power of attorney shall not include any power to vote for or do any act or thing inconsistent with the terms of this Agreement. Upon the occurrence of an Event of Default and the expiration of any applicable periods within which to cure such Default, the Bank shall have the right to vote the interest in the Company represented by the Pledged Interest and to collect and receive for its own use all distributions and to give waivers and consents with respect to the Pledged Interest shall terminate. Upon the occurrence and continuance of an Event of Default,

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the Bank shall notify the Pledgor in writing if Bank desires to exercise its rights herein with respect to the Pledged Interest, and shall notify Pledgor if the Bank elects that the Pledgor is no longer entitled to exercise any rights with respect to the Pledged Interest.

G. CASH DIVIDENDS: NON-CASH DIVIDENDS. Pledgor’s right to receive dividends are subject to those conditions and covenants, if any, set forth in the Loan Agreement, as same may be amended from time to time. Upon the occurrence and during the continuance of an Event of Default all cash dividends and all other cash paid or exchangeable with respect to the Collateral shall be paid directly to Bank. Upon the occurrence and during the continuance of an Event of Default, any rights of Pledgor to have non-cash dividends registered. in its name and delivered to it pursuant to the terms hereof shall cease and all such non-cash dividends shall be registered by the issuer in the name of Bank and shall be delivered by the issuer directly to the Bank.

H. REMEDIES UPON DEFAULT. If any Event of Default (as such term is defined in the Loan Agreement) shall have occurred and be continuing, Bank, without being required to give any notice to Pledgor, except as hereinafter provided, may sell the Pledged Interest or any part thereof at public or private sale and Bank may be the purchaser of any or all of the Pledged Interest so sold. Each such purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of, and Pledgor hereby waives (to the extent permitted by law) all rights of redemption, stay or appraisal which it has or may have under rule of law or statute now existing or hereafter adopted. Bank shall give ten days’ written notice of its intention to make any such public or private sale. Such notice in case of public sale shall be held at such time or times within ordinary business hours and at such place or places as Bank may fix in the notice of such sale. At any such sale, the Pledged interest or any portion thereof to be sold may be sold in one lot as an entirety or in separate parcels as Bank may determine. At any such sale, Bank shall comply with applicable, if any, federal and state securities laws. Bank shall not be obligated to make any sale of the Pledged Interest if it shall determine not to do so, regardless of the fact that notice of sale of the Pledged Interest may have been given. Bank may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In case sale of all or any part of the Pledged Interest is made on credit, the Pledged Interest so sold may be retained by Bank until the sale price is paid by the purchaser or purchasers thereof, but Bank shall not incur any liability in case any such purchaser or purchasers shall fail to take up and pay for the Pledged Interest so sold and, in case of any such failure, such Pledged Interest may be sold again upon like notice. As an alternative to exercising the power of sale herein conferred upon it, Bank may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Pledged Interest or any portion thereof, pursuant to a judgment or decree of a court or courts of competent jurisdiction.

I. APPLICATION OF PROCEEDS OF SALE. The proceeds of the Pledged Interest shall be applied by Bank as follows:

First: to the payment of any and all Bank’s expenses, including reasonable compensation to its agents and attorneys employed in connection, therewith;

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Second: to the payment of the Secured Indebtedness and all other obligations; and

Third: the balance, if any, of such proceeds shall be paid to Pledgor, its successors and assigns, or as a court of competent jurisdiction may direct.

J. BANK APPOINTED ATTORNEY-IN-FACT. Bank is hereby appointed Pledgor’s attorney-in-fact for the purpose of carrying out the provisions off this Pledge Agreement and taking any action and executing any instrument which Bank may deem necessary or advisable to accomplish the purpose hereof, which appointment is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, so long as an Event of Default under any Note shall be continuing, Bank shall have the right and power to receive, endorse and collect all checks and other orders for the payment of money made payable to Pledgor representing any distribution in respect of the Pledged Interest or any part thereof and to give full discharge for the same.

K. NO WAIVER. No failure on the part of Bank to exercise and no delay in exercising any right, power or remedy hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any such right, power or remedy by Bank preclude any other or future exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.

L. TERMINATION. Upon the payment in full of the Secured Indebtedness (other than contingent indemnification obligations to the extent no claims giving rise thereto have been asserted), this Pledge Agreement shall terminate and Bank shall forthwith assign, transfer and deliver to Pledgor such of the Pledged Interest and such cash, if any, as shall not have been sold or otherwise applied by Bank pursuant to the terms hereof and are still held by it hereunder.

M. FURTHER ASSURANCES. Pledgor agrees that at any time and from time to time, at the expense of Pledgor, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary desirable, or that the Bank may request, in order to perfect and protect the security granted or purported to be granted hereby or to enable the Bank to exercise and enforce its rights and remedies hereunder with respect to any Shares.

N. BINDING AGREEMENT. This Agreement and the terms, covenants and conditions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns, except that Bank shall not be permitted to assign this Agreement or any of its rights herein or in the Pledged Interest or other cash or property held by Bank as collateral under this Agreement.

O. SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party, and all covenants and agreements in this Agreement contained by or on behalf of the parties hereto shall bind and inure to the benefit of the respective executors, administrators, heirs, successors and assigns of the parties hereto.

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P. CONSTRUCTION. This Agreement shall be construed in accordance with and be governed by the laws of the State of Oklahoma. This Agreement may not be changed orally but only by an agreement in writing signed by the person against whom enforcement of any waiver, change, modification or discharge shall be sought.

Q. EVENT OF DEFAULT. The occurrence of any “Event of Default” under the Loan Agreement shall constitute an Event of Default hereunder.

R. CONFLICT. In the event of a conflict between the provisions of this Agreement and those of the Loan Agreement, the provisions of the Loan Agreement shall control.

IN WITNESS WHEREOF, the parties hereto have caused this Stock Pledge Agreement to be duly executed on the day and year first above written.


/s/ Robert E. Howard, II
ROBERT E. HOWARD, II

BANK OF OKLAHOMA, N.A.

By:		/s/ Mark A. Fish
		Mark A. Fish, Senior Vice President

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EX-99.7 8 dex997.htm LOAN AND COLLATERAL ACCOUNT AGREEMENT Loan and Collateral Account Agreement

EXHIBIT 7

LOAN AND COLLATERAL ACCOUNT AGREEMENT

DEMAND LOAN

THIS LOAN AND COLLATERAL ACCOUNT AGREEMENT, as modified or supplemented, from time to time (this “Agreement”), and dated as of the date of the Lender’s acceptance set forth in the signature area below, among Merrill Lynch Private Finance Inc., a Delaware corporation (the “Lender”), the Borrower or Borrowers identified in the signature area below and any Guarantor or Guarantors and Pledgor or Pledgors identified in the signature area below, establishes the terms and conditions that will govern the uncommitted demand loan facility to be made available to the Borrower by the Lender. The Facility is secured by a pledge of assets held in a securities account established and maintained with Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), in accordance with this Agreement and MLPF&S is a party to this Agreement only to the extent, and for the purposes, set forth in this Agreement.

1. DEFINITIONS

For the purposes of this Agreement, the following terms shall have the meanings indicated:

“Advance” means an advance made by the Lender to the Borrower under this Agreement or, as the case may be, the outstanding principal balance of any such advance.

“Advance Requirement” means, on any date, the percentage of the Value of the Collateral, expressed as a Dollar amount and determined by the Lender, from time to time, in its discretion, denoting the maximum amount of Advances that may be outstanding on that date, after giving effect to any Advances then requested by the Borrower. The Lender reserves the right to modify in its discretion from time to time the percentage of Value of the Collateral to be used in determining the Advance Requirement and/or the type of Collateral that may be included in determining the Advance Requirement.

“Alternate Rate” means the floating rate of interest advised by the Lender based on the United States federal funds rate, as determined by the Lender, in its discretion, plus an additional percentage rate deemed adequate by the Lender to compensate it for funding the relevant Advance or other amount and for the Lender’s profit. The Alternate Rate shall change when and as the federal funds rate changes. A written statement by the Lender of the Alternate Rate shall be conclusive evidence of such rate.

“Borrower” means, individually and collectively, the one or more Persons signing below as Borrower.

“Business Day” means a day on which commercial banks are not authorized or required to close in New York City and on which the Lender is open for business.

“Collateral” has the meaning given to that term in Section 3.2.

“Dollar(s)” means the lawful currency of the United States of America.

“Facility” has the meaning given to that term in Section 2.1(a).

“Facility Fee” has the meaning given to that term in Section 2.8.

“Facility Fee Percentage” means the percentage designated in the signature area below as the Facility Fee Percentage.

“Guarantor” means, individually and collectively, the one or more Persons, if any, signing below as Guarantor (or signing any other document identifying the Person(s) as Guarantor and delivering that document to the Lender) and guaranteeing the Obligations.

“Interest Period” means a period by reference to which interest is calculated on an Advance.

“Interest Rate” means a per annum rate equal to LIBOR, plus the Spread. In no event shall the Interest Rate be in excess of the maximum interest rate permitted by New York law.

“LIBOR” means, with regard to a particular Advance and Interest Period, the rate per annum equal to the rate (as determined by the Lender on the date of that Advance) at which deposits in Dollars are offered by MLIB to leading banks in the London Interbank Market in an amount comparable to that Advance and for that Interest Period, it being understood and agreed that a written statement by the Lender of LIBOR shall be conclusive evidence of such rate.

“LIBOR Business Day” means a day on which deposits in Dollars and any other relevant currency may be dealt in on the London Interbank Market and on which most commercial banks in London, England, and the Lender are open for business.

“Lien” has the meaning given to that term in Section 4.1.

“Loan Party” means any Borrower, Pledgor or Guarantor under this Agreement.

“Maintenance Requirement” means, on any date, the percentage of the Value of the Collateral, expressed as a dollar amount and determined by the Lender, from time to time, in its discretion, denoting the maximum amount of the Advances that may be outstanding on that date. The Lender reserves the right to modify the Maintenance Requirement, from time to time, in its discretion, including but not limited to modifying the percentage of the Value of the Collateral to be used in determining the Maintenance Requirement and/or the type of Collateral that may be included in determining the Maintenance Requirement. Among other things, the Lender may, in its discretion, adjust the Maintenance Requirement as a result of a reduction in the trading volume or per share price of the Collateral.

“Maximum Amount” means the amount designated in the signature area below as the Maximum Amount available under the Facility.

“Merrill Lynch Group” means, collectively, Merrill Lynch & Co., Inc. (“MLC”), together with any legal Person (whether now existing or hereafter formed) of which MLC is or becomes a Subsidiary and all other legal Persons (whether now existing or hereafter formed or acquired) including, but not limited to, MLPF&S, which are directly or indirectly owned or controlled by MLC and/or any such parent of MLC and/or one or more of their Subsidiaries.

“Minimum Advance Amount” means the amount designated in the signature area below as the Minimum Advance Amount.

“MLIB” means Merrill Lynch International Bank Limited, a bank organized under the laws of England.

“MLPF&S” has the meaning given to that term in the introductory paragraph of this Agreement.

“Obligations” means, collectively, all of the indebtedness, liabilities and obligations of the Borrower to the Lender, whether now existing or hereafter arising and whether or not currently contemplated, including, without limitation, the indebtedness, liabilities, and obligations arising under this Agreement and any other agreement, instrument or document executed in connection herewith (in each case, as amended, modified and renewed from time to time) and the transactions contemplated hereby. The Obligations shall include, without limitation, any Advances, interest, Facility Fees, and other fees, costs and expenses now or hereafter payable by the Borrower to the Lender.

“Person” means, any individual, corporation, limited liability company, partnership, limited partnership, limited liability partnership, firm, joint venture, association, organization, trust, state or agency of a state (in each case, whether or not having separate legal personality).

“Pledgor” means individually and collectively, the one or more Persons, if any, signing below as Pledgor (or signing any other document identifying the Person[s] as Pledgor).

“Remedy Event” has the meaning given to that term in Section 8.1.

“Securities” has the meaning given to that term in Section 3.2.

“Securities Account” means, individually and collectively, the one or more securities accounts established pursuant to Section 3.1.

“Security Interest” has the meaning given to that term in Section 3.2.

“Spread” means the percentage amount indicated in the signature page area below.

“Subsidiary” means, at any time, in relation to a legal Person, any other legal Person that is directly or indirectly controlled, or more than 50% of whose issued or outstanding shares or equity interests having general voting power in ordinary circumstances is beneficially owned, directly or indirectly, by that first legal Person.

“Value” means the value assigned to the Collateral by the Lender, from time to time, in the Lender’s discretion.

2. THE FACILITY

2.1. Advances.

(a) The Lender agrees, upon the terms and subject to the conditions set forth in this Agreement, to make available to the Borrower an uncommitted facility (the “Facility”) in an amount up to the Maximum Amount. The Borrower acknowledges that the Lender has no obligation to make any Advances to the Borrower. All Advances that the Lender, in its discretion, agrees to make to the Borrower shall be in an amount not less than the Minimum Amount and in integral multiples of $100,000.00 in excess thereof. Any Advances that the Lender makes to the Borrower and which the Borrower repays may be reborrowed up to the Maximum Amount, subject to the Lender’s discretion. The Borrower agrees to provide prior written notice to the Lender if the purpose of any Advance differs from that previously disclosed in writing to the Lender.

(b) The Borrower shall request an Advance from the Lender in the manner provided in Section 10.15, which request must be received not later than 11:00 a.m. (New York City time), three LIBOR Business Days prior to the date of such Advance and shall specify: (i) the date of such Advance; (ii) the amount of such Advance; and (iii) the duration of the Interest Period to be applicable to such Advance. All requests made under this Section 2.1(b) shall be irrevocable.

2.2. Interest.

(a) Interest shall be calculated and payable on each Advance by reference to successive Interest Periods. In the case of each Advance, its first Interest Period shall begin on the proposed date of that Advance and each subsequent Interest Period shall begin on the last day of the previous Interest Period. The Borrower may select an Interest Period of 1, 3, 6 or 12 months duration (or such other period as the Lender may agree to) in the notice provided by the Borrower to the Lender pursuant to Section 2.1(b) or Section 2.2(b); provided, however, that the Borrower may select an Interest Period of 12 months or longer only if the Lender (in its discretion) agrees.

(b) Subject to the Lender’s discretion, the Borrower may elect, from time to time, to renew the Interest Period for all or part of an outstanding Advance by requesting such renewal from the Lender, as provided in Section 10.15, which request must be received not later than 11:00 a.m. (New York City time), three LIBOR Business Days prior to the last day of the

Interest Period for such Advance and shall specify: (i) the renewal date for such Advance (which shall be the last day of the Interest Period for such Advance); (ii) the amount of the Advance to be renewed (which shall not be less than the Minimum Amount and integral multiples of $100,000.00 in excess thereof); and (iii) the duration of the Interest Period to be applicable thereto. All requests made under this Section 2.2(b) shall be irrevocable. If the Borrower fails to request the renewal of any Interest Period for any Advance by the required time, the Interest Period for such Advance shall be renewed after the last day of the Interest Period for such Advance for successive 30-day Interest Periods or such other Interest Periods as the Lender deems appropriate, subject to the Lender’s right to demand payment at any time, and interest shall accrue and be payable on such Advance at the Interest Rate determined by the Lender for such Interest Periods, subject to the provisions of this Agreement.

(c) Interest shall be due and payable on the last day of each Interest Period in an amount equal to the unpaid interest accrued during that Interest Period on the Advance to which it relates at the Interest Rate applicable for that Interest Period. In the case of an Interest Period of 12 months or more, interest shall be due and payable every six months from the date of the relevant Advance. If the Alternate Rate shall be applicable to any Advance at any time, interest accrued thereon shall be due and payable on the last Business Day of each month. In addition, accrued interest shall be due and payable in full at any time upon demand.

(d) If the Lender determines that for any reason deposits in Dollars are not offered by MLIB to leading banks in the London Interbank Market in an amount comparable to a proposed Advance or an unpaid Advance for which renewal of the Interest Period has been requested and for a period equal to the requested Interest Period for such Advance, or that LIBOR applicable for any requested Interest Period, with respect to a proposed Advance, does not adequately and fairly reflect the cost to the Lender of funding such Advance, the Lender shall so notify the Borrower and the requested Advance shall not be made or renewed, as the case may be. Upon receipt of such notice, the Borrower may: (i) revoke any notice given to the Lender pursuant to Section 2.1(b) with respect to a new Advance; or (ii) revoke any notice given to the Lender pursuant to Section 2.2(b) with respect to an unpaid Advance, which Advance shall remain outstanding after the last day of the Interest Period for such Advance, subject to the Lender’s right to demand payment at any time, and interest shall accrue and be payable on such Advance at the Alternate Rate, subject to the provisions of this Agreement. If, after receipt of such notice from the Lender, the Borrower does not revoke any notice given to the Lender pursuant to Section 2.1(b) with respect to a new Advance or pursuant to Section 2.2(b) with respect to an unpaid Advance, the Advance shall not be made or shall remain outstanding after the last day of the Interest Period for such Advance, as the case may be. Any Advance so remaining outstanding shall be subject to the Lender’s right to demand payment at any time, and interest shall accrue and be payable on such Advance at the Alternate Rate, subject to the provisions of this Agreement.

(e) If the Lender (in its discretion) so determines, any due but unpaid interest may be added to the amount of the Advance to which it relates (or, at the Lender’s option, may be treated as a separate Advance), and interest calculated as provided for above shall thereafter be paid thereon.

(f) Interest shall be calculated on the basis of actual days elapsed during a year of 360 days. Interest shall accrue on the principal of each Advance from and including the date of the Advance to, but excluding the date of, the principal’s payment.

2.3. Payments; Prepayments.

(a) For value received, the Borrower hereby promises to pay to the Lender or to the Lender’s order, upon demand, an amount equal to the aggregate unpaid principal amount of all Advances made by the Lender to the Borrower, together with interest calculated pursuant to Section 2.2 and all other Obligations outstanding under this Agreement.

(b) Upon at least three LIBOR Business Days’ prior written notice to the Lender, the Borrower shall have the right, from time to time, on the last day of any Interest Period for a particular Advance, to pay the outstanding principal amount of that Advance, in whole or in part, in an amount of not less than $100,000.00 plus the amount of any then accrued but unpaid interest on the principal amount paid. Each notice of payment shall specify the payment date and the principal amount of the Advance to be paid, shall be irrevocable and shall commit the Borrower to pay the Advance in the amount and on the date stated therein.

(c) Upon at least three LIBOR Business Days’ prior written notice to the Lender and subject to the indemnification provisions of Section 2.3(d), the Borrower shall have the right, from time to time, on any LIBOR Business Day, other than the last day of any Interest Period for a particular Advance, to pay the outstanding principal amount of that Advance, in whole or in part, in an amount of not less than $100,000.00 plus the amount of any accrued but unpaid interest to the date of such payment on the principal amount so paid. Each such notice of payment shall specify the payment date, the principal amount of the Advance to be paid, be irrevocable and commit the Borrower to pay the Advance in the amount and on the date stated therein.

(d) The Borrower shall pay to the Lender, upon the request of the Lender, such amount as the Lender reasonably determines will compensate it for any loss (including loss of profit), cost or expense incurred by the Lender as a result of the payment of any Advance, in whole or in part, on a date other than the last day of the Interest Period for such Advance, whether such payment is made by the Borrower pursuant to Section 2.3(c) or is effected by the Lender liquidating all or a portion of Securities Account upon the occurrence of a Remedy Event. Notice by the Lender to the Borrower of the amount of any such compensation to be paid by the Borrower shall be conclusive.

(e) For purposes of determining the last day of an Interest Period, each Interest Period that would otherwise end on a day that is not a LIBOR Business Day shall end on the next succeeding LIBOR Business Day, except that, if the next succeeding LIBOR Business Day falls in the next succeeding calendar month, the Interest Period shall end on the next preceding LIBOR Business Day.

2.4. Default Interest. In the event the Borrower does not make any payment of principal or interest to the Lender, when due, the Interest Rate payable, with respect to all

Advances (both before and after judgment), will increase, effective, as of the date when such payment was due, by two percent (2.00%) until all payments due hereunder (including any late payments and any amounts accelerated) are paid to the Lender in full. Any default interest payable hereunder that is not paid when due may be added to the overdue sum and itself bear interest accordingly.

2.5. Manner of Payment. All payments due from the Borrower hereunder may be debited by the Lender at its discretion from the Securities Account, or from any other account maintained by the Borrower or any Guarantor with MLPF&S or any other member of the Merrill Lynch Group. The Borrower and each Guarantor hereby authorize the Lender and each other member of the Merrill Lynch Group to initiate debit entries and, if necessary, credit entries to any such account. All members of the Merrill Lynch Group shall be fully protected in relying on this authorization. In the event the Borrower or any Guarantor fails to maintain sufficient funds or credit availability in any such account, the Borrower shall make such payments on the date when due without offset or counterclaim in Dollars in federal or other immediately available funds to the account of the Lender in accordance with the wire transfer instructions provided by the Lender from time to time. Any such payment received after 11:00 a.m., New York City time, on a particular day, shall be deemed received on the following Business Day.

2.6. Taxes. All payments by the Borrower and any Guarantor under this Agreement shall be made free and clear of any restrictions or conditions, without set off or counterclaim, and (except as hereinafter provided) without any deduction or withholding for or on account of tax or otherwise. If any such deduction or withholding is required by law to be made from any sum paid or payable to the Lender, the Borrower or such Guarantor shall pay in the same manner and at the same time such additional amounts as will result in the Lender’s receiving and retaining (free from any liability other than tax on its overall net income) such net amount as would have been received by it had no such deduction or withholding been required to be made.

2.7. Purpose. The Borrower shall use the proceeds of any Advance made hereunder to finance the purchase of securities or for such other lawful purposes as have been disclosed to the Lender in writing.

2.8. Facility Fee. The Borrower shall pay an arrangement fee (the “Facility Fee”):

(a) prior to each Advance, in an amount equal to the product determined by multiplying (i) the Facility Fee Percentage, by (ii) the amount of such Advance and by (iii) a fraction equal to the quotient determined by dividing the number of days between the date of such Advance and the next annual anniversary date of this Agreement by 365; and

(b) on the annual anniversary date of this Agreement during each year this Agreement is in effect, in an amount equal to the product determined by multiplying (i) the Facility Fee Percentage, by (ii) the aggregate unpaid principal amount of all Advances outstanding on such anniversary date.

Notwithstanding the foregoing, the total amount of all Facility Fees payable during any 12-month period after the date of this Agreement shall not exceed an amount equal to the product determined by multiplying (a) the Facility Fee Percentage by (b) the Maximum Amount.

3. ESTABLISHMENT OF SECURITIES ACCOUNT; PLEDGE OF COLLATERAL; BORROWING OF SECURITIES

3.1. Establishment of the Securities Account. Each Loan Party hereby directs MLPF&S, and MLPF&S hereby agrees, to establish the Securities Account, which shall be known as the “Merrill Lynch Private Finance Inc. ( ) Pledged Collateral Account” or such other title (including abbreviations) acceptable to the Lender to reflect the Lender’s interest therein, and shall bear the account number . Each of the Loan Parties, as a condition to the Lender’s considering making any Advances, agrees to place the Collateral in the Securities Account. Each Borrower and each Guarantor, jointly and severally, agree at all times to maintain Collateral in the Securities Account, with an aggregate Value sufficient to satisfy the Maintenance Requirement, until all the Obligations have been indefeasibly paid and performed in full and this Agreement has been terminated. Each of the Loan Parties acknowledges that in establishing and maintaining the Securities Account, MLPF&S is acting on behalf of the Lender as the Lender’s agent for purposes of perfecting the Security Interest.

3.2. Grant of Security Interest.

(a) As security for the full payment and performance of the Obligations, and the obligations, whether now existing or hereafter arising, of each Guarantor pursuant to Section 9, each Loan Party hereby assigns, pledges, grants and conveys to the Lender, and grants to the Lender a continuing first-priority lien and security interest (the “Security Interest”) on and in the following (collectively, the “Collateral”):

(i) the Securities Account and all stocks, bonds, securities entitlements, financial assets and other securities, contracts, options, including put and call option contracts, and investment property now or hereafter in or credited to the Securities Account (the “Securities”);

(ii) all credit balances, accounts, contract rights, general intangibles, instruments, documents, monies, certificates of deposit and other property of whatever kind or description now or hereafter held in the Securities Account;

(iii) all securities, securities entitlements, financial assets, instruments, investment property, contract rights, cash deposits or other general intangibles now or hereafter described in confirmations, statements and other reports delivered, from time to time, by MLPF&S to any Loan Party or the Lender in connection with the Securities Account, all of which are deemed to be Securities in the Securities Account for purposes of this Agreement;

(iv) all monies, debts, claims, securities and other property now or hereafter deposited with or owed or owing by the Lender and/or any other member of the Merrill Lynch Group to such Loan Party; and

(v) all dividends, interest and proceeds of any of the property described in clauses (i), (ii), (iii), or (iv) above, including without limitation, proceeds of proceeds.

Each Loan Party and MLPF&S expressly agree for the benefit of the Lender that all of the property described in clauses (i), (ii), (iii) and (iv) is to be treated as a financial asset for purposes of Article 8 of the Uniform Commercial Code.

(b) Each Loan Party shall take all action that the Lender requests or is reasonably necessary to ensure that the Lender has a continuing perfected first priority Security Interest in the Collateral while this Agreement is in effect. Upon the Lender’s request, each Loan Party shall execute and deliver to the Lender a financing statement conforming to the Uniform Commercial Code in effect in any state or jurisdiction deemed appropriate by the Lender, and such other documents as may be required in the Lender’s judgment, in order to perfect or maintain the perfection of the Security Interest, all in a form the Lender considers acceptable. Upon the Lender’s request, each Loan Party shall also execute and deliver a continuation statement conforming to the Uniform Commercial Code in effect in any state or jurisdiction deemed appropriate by the Lender and in a form the Lender deems to be acceptable. If any Loan Party fails to deliver to the Lender financing statements, continuation statements or other documents the Lender requests, the Lender may, to the extent permitted by law and without limiting its other rights under this Agreement, execute and file in such Loan Party’s name, as such Loan Party’s attorney in fact, such documents. Upon the Lender’s request, each Loan Party shall execute and deliver to the Lender such documents and shall take such other action as the Lender may request in order to continue or maintain the perfection and priority of the Security Interest under any amendments to the Uniform Commercial Code in effect in any state or jurisdiction deemed appropriate by the Lender, from time to time, after the date of this Agreement.

(c) Set forth in the signature area below is the location of each Loan Party’s principal residence, if such Loan Party is an individual (natural person), or, if such Loan Party is not an individual (natural person), the jurisdiction of such Loan Party’s organization or formation, as well as such Loan Party’s chief executive office and, if different, the location of such Loan Party’s principal place of business. Each Loan Party agrees to provide the Lender with not less than 30 days’ prior written notice of any change of any such location.

3.3. Certain Lender Rights in the Securities Account. The Lender may give instructions of any kind or character to MLPF&S with respect to the Securities Account, either oral or written. The Lender’s instructions may include instructions to liquidate Collateral and other property in the Securities Account, to pay credit balances from the Securities Account to the Lender or its designees, or to move the Collateral from the Securities Account to the Lender or into an account in the Lender’s name or the name of its designees. MLPF&S shall comply with the Lender’s entitlement orders and other instructions in regard to the Securities Account without further consent by any Loan Party. In following the Lender’s instructions, MLPF&S is under no duty to any Loan Party to determine whether a Remedy Event has occurred or is continuing. MLPF&S shall neither accept nor comply with any instructions from any Loan Party with respect to the Securities Account. The Lender is entitled to receive directly from MLPF&S,

and the Borrower and each other Loan Party each irrevocably authorizes MLPF&S to provide to the Lender, duplicates of any and all notices, confirmations and statements of account that the Borrower or such other Loan Party is entitled to receive with respect to the Securities Account. MLPF&S is authorized to provide the Lender with any and all information in its possession or control relating to the Securities Account, and to provide the Lender with online access to MLPF&S systems relating to the Securities Account.

3.4. Transactions in the Securities Account.

(a) A Loan Party may ask the Lender to request MLPF&S to release Collateral from the Securities Account if (but only if) the Lender so consents (in its discretion) and the Value of the Collateral remaining in the Securities Account after such withdrawal would continue to satisfy the Maintenance Requirement. Each Loan Party understands that a release of Collateral from the Securities Account will not be considered by the Lender if, following such release, the Value of the Collateral in the Securities Account would not satisfy the Maintenance Requirement and further understands that any transactions made in the Securities Account may be reversed by the Lender if the transaction would result in a breach of this Agreement.

(b) In addition, each Loan Party may ask the Lender to consent (in its discretion) to, and to request that MLPF&S arrange for, the sale of call options with respect to Securities in the Securities Account and the purchase of call options in order to close out short call option positions in the Securities Account. Each Loan Party agrees that all such call option contracts will be purchased or sold over the counter or on or through an exchange or clearing house and will be executed pursuant to the terms of MLPF&S’s Standard Option Agreement(s). Each Loan Party acknowledges that all such call option contracts are considered “securities” for purposes of the definition of “Collateral” contained in this Agreement, and each Loan Party and MLPF&S agree that all such call options are to be treated as financial assets for purposes of Article 8 of the Uniform Commercial Code. In the event of the exercise of any call option in the Securities Account (or any other event resulting in “cash” proceeds being paid into the Securities Account), each Loan Party acknowledges and agrees that the “cash” proceeds paid with respect to such call option (or otherwise paid into the Securities Account) will be applied by the Lender against the Obligations on the fifteenth Business Day following such exercise (or, if earlier, the receipt of the “cash” proceeds in the Securities Account), unless prior to such fifteenth Business Day such Loan Party has replaced such proceeds in the Securities Account with Securities acceptable to the Lender (in the Lender’s discretion).

(c) Without limiting any other right or remedy available to the Lender under this Agreement or at law or in equity, including, without limitation, the rights and remedies contemplated by Section 8.2, the Lender may (i) buy or sell any or all Securities or other property that may be short in the Securities Account; (ii) cancel any open orders; and (iii) exercise or refrain from exercising, terminating, liquidating or closing, modifying, extending, obtaining or reestablishing, any or all outstanding contracts or options and any or all hedges, related or associated positions, securities or transactions.

(d) Each Loan Party acknowledges and agrees that, notwithstanding any other provision of this Agreement or any agreement between any Loan Party and MLPF&S, only the

Lender will be entitled to give entitlement orders, instructions or directions to MLPF&S with respect to the Securities Account and no Loan Party will be entitled to give entitlement orders, instructions or directions to MLPF&S with respect to the Securities Account at any time.

3.5. Other Account Provisions. Each Loan Party acknowledges that no trading, VISA^® card, funds transfer services or wire transfer, check-writing or margin capabilities exist or will be permitted with respect to the Securities Account. This Agreement does not create any obligations or duties on MLPF&S to any Loan Party greater than or in addition to the customary and usual obligations and duties that MLPF&S has as a stockbroker and custodian of securities, except to the extent expressly provided in this Agreement. All transactions in the Securities Account are subject to the constitution, rules, regulations, customs and usages of the exchange or market and its clearing house, if any, on which MLPF&S or its agents (including MLPF&S’s subsidiaries and affiliates) execute such transactions. Each Loan Party agrees to pay customary brokerage fees in connection with any transactions in a Securities Account made in accordance with this Agreement.

3.6. Borrowing of Securities. Each Loan Party hereby authorizes the Lender, from time to time, to lend to itself, as principal or otherwise, or to others, any securities in the Securities Account irrespective of the Obligations outstanding at the relevant time. Each Loan Party agrees to execute and deliver to the Lender such agreements and other documents as the Lender may reasonably request in order to give effect to this Section 3.6.

3.7. Authorization. Each Loan Party authorizes MLPF&S and/or the Lender, as appropriate, to (a) deduct from and transfer to the Lender any free credit balance in the Securities Account (which amount is due to such Loan Party) in order to make payment of any obligation and (b) liquidate any Securities in the Securities Account in order to make payment of any Obligation. Furthermore, each Loan Party hereby waives any obligations the Lender or MLPF&S may have Section 9-207 of the Uniform Commercial Code.

3.8. Power of Attorney to Lender. Each Loan Party hereby irrevocably appoints the Lender as such Loan Party’s attorney-in-fact, with full power of substitution and with full authority in the place and stead of such Loan Party and in the name of such Loan Party or otherwise, from time to time in the Lender’s discretion, at the expense of the Borrower and after the occurrence of a Remedy Event: (a) to take any action and to execute any instrument that the Lender may deem necessary or advisable to protect, collect, realize upon and preserve the Collateral, (b) to enforce the Lender’s rights in the Collateral, (c) to file any claims or take any action or institute any proceedings that the Lender may deem necessary or desirable for the collection of the Collateral, (d) to transfer into the name of the Lender or its designee any or all of the Collateral, and (e) to sell or otherwise dispose of any or all of the Collateral.

3.9. The Lender’s Duties. The powers conferred on the Lender in this Agreement are solely to protect its interest in the Collateral and shall not impose any duty upon the Lender to exercise any such powers. Except for the safe custody of any Collateral in its possession or the possession of a member of the Merrill Lynch Group and the accounting for monies actually received by it or a member of the Merrill Lynch Group hereunder, the Lender shall have no duty as to the Collateral or as to the taking of any necessary steps to preserve rights against other parties or any other rights pertaining to any of the Collateral.

4. REPRESENTATIONS AND WARRANTIES

On a continuing basis, each Loan Party, jointly and severally, represents, warrants and covenants to the Lender that:

4.1. Collateral. Except for the Lender’s rights established under this Agreement and the security interest of MLPF&S in any call option contract contemplated by Section 3.4(b), such Loan Party, to the extent of its rights in the Collateral, owns the Collateral free of any security interest, lien or other encumbrance, including, but not limited to, any contract or agreement limiting, restricting or impeding the transfer of the Collateral (each, a “Lien”) in favor of any Person (other than any subordinated interest that MLPF&S may have in the Securities Account). The Security Interest is and shall remain a perfected and valid first-priority lien on and security interest in the Collateral.

4.2. Due Organization. If such Loan Party is a legal Person, it is duly organized and validly existing under the jurisdiction of its organization or formation and has the power and authority to own its assets and to conduct the business that it conducts; such Loan Party is in good standing under the laws of the jurisdiction of its organization or formation and is duly qualified to do business in all jurisdictions in which the nature of its activities requires such qualification. If such Loan Party is a trust, such trust was created under a valid will duly admitted to probate by a court of competent jurisdiction or a trust instrument executed with the proper formalities of the jurisdiction whose law governs the trust; the trustees of such trust have been revoked or have duly accepted the trust according to the formalities required by the trust instrument and are continuing to conduct the activities in which it engages; and such trust is currently in existence and has not been revoked.

4.3. Power and Authority; Binding Agreements. Such Loan Party has the full right, power and authority to make, execute, deliver and perform its obligations under this Agreement and the execution, delivery and performance of the documents contemplated by this Agreement and consummation of the transactions contemplated by this Agreement have been duly authorized by all necessary action on its part. This Agreement constitutes the legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms.

4.4. No Violation. The execution, delivery or performance by such Loan Party of this Agreement and the related documents, the consummation of the transactions contemplated by this Agreement, and compliance with the provisions of this Agreement will not (a) violate any law, regulation, order, judgment or decree binding on such Loan Party, (b) if such Loan Party is a legal Person, violate or conflict with any of its organizational agreements or charter documents, or (c) conflict with, cause a breach of, constitute a default under, be cause for the acceleration of the maturity of, or create or result in the creation or imposition of any Lien, charge or encumbrance (other than in favor of the Lender) on any of its property under any agreement, notice, indenture, instrument or other undertaking to which it is a party.

4.5. No Consents. No order, consent, license, authorization, recording or registration is required to authorize or is required in connection with the execution, delivery and performance or the legality, validity, binding effect or enforceability of this Agreement, any documents executed in connection with this Agreement or any transactions contemplated by this Agreement.

4.6. No Litigation. There are no actions, suits, litigations, arbitrations, administrative proceedings or investigations pending or threatened against such Loan Party or any of the Collateral in which such Loan Party has rights that could (a) have a material adverse effect on the business or affairs, condition (financial or otherwise), obligations, operations, performance, properties or prospects of such Loan Party or (b) affect its ability to enter into and perform its obligations under this Agreement or any of the transactions contemplated by this Agreement.

4.7. Compliance with Laws. The activities and operations of such Loan Party are and have been in compliance in all respects with all applicable federal, state, local and foreign laws and regulations, including, without limitation, tax, environmental and health and safety laws and regulations.

4.8. No Material Adverse Change. Since the date of such Loan Party’s most recent financial statements or representations delivered to the Lender, there has been no material adverse change in the business, condition (financial or otherwise), obligations, operations, performance, properties or prospects of such Loan Party.

4.9. Solvency. After giving effect to each Advance made, from time to time, and such Loan Party’s obligations (including contingent obligations) under this Agreement, (a) the present fair value of its assets exceeds the total amount of its liabilities (including, without limitation, contingent liabilities), (b) it has capital and assets sufficient to carry on its business, (c) it is not engaged and is not about to engage in a business or a transaction for which its remaining assets are unreasonably small in relation to such business or transaction and (d) it does not intend to incur, or believe that it will incur, debts beyond its ability to pay as they become due. Such Loan Party will not be rendered insolvent by the execution, delivery and performance of the documents relating to this Agreement or by the consummation of the transactions contemplated under this Agreement.

4.10. Place of Business. The location of such Loan Party’s principal residence, if such Loan Party is a natural person, or, if such Loan Party is not a natural person, such Loan Party’s jurisdiction of organization or formation, its chief executive office and, if different, the location of its principal place of business, are accurately set forth in the signature area below.

4.11. No Default. Such Loan Party is not in default under any agreement to which it is a party or by which it or its assets may be bound, which default is material in the context of this Agreement.

4.12. Full Disclosure. All information disclosed to the Lender in connection with this Agreement and the making of each Advance hereunder is true, complete and accurate in all respects and does not omit any material facts or circumstances, which could make any of such information misleading in any respect.

Each of the representations and warranties in this Agreement shall be correct and complied with at all times and in all respects during the continuance of this Agreement, and until all Obligations have been indefeasibly paid and performed in full, as if repeated, then, by reference to the then existing circumstances.

5. AFFIRMATIVE COVENANTS

Until this Agreement has terminated and all Obligations have been indefeasibly paid and performed in full, each Loan Party (except as otherwise provided with respect to a Pledgor) shall:

5.1. Maintenance of Existence. Preserve and maintain its existence, rights and franchises, if it is a legal Person.

5.2. Compliance with Laws. Comply in all material respects with all applicable laws, statutes, codes, ordinances, regulations, rules, orders, awards, judgments, decrees, injunctions, approvals and permits applicable to it.

5.3. Payment of Taxes. Pay all taxes, assessments and governmental charges imposed upon it or upon its property and all claims (including, without limitation, claims for labor, materials, supplies or services), which might, if unpaid, become a Lien upon its property, unless, in each case, the validity or amount thereof is being contested in good faith by appropriate proceedings and such Loan Party has maintained adequate reserves with respect thereto.

5.4. Books and Records. Keep proper books of record and account, containing complete and accurate entries of all financial and business transactions.

5.5. Audit Rights. Permit any representative of the Lender to examine its books and records and to make copies and take extracts therefrom, and to discuss its affairs, finances and accounts with its officers, partners and employees and its independent accountants, all at such places in the United States and at such reasonable times and as often as the Lender may reasonably request, provided that such actions do not unreasonably interfere with its day-to-day business and operations.

5.6. Maintenance of Collateral. Maintain the Collateral in the Securities Account as the Lender may require, from time to time, in accordance with the Maintenance Requirement. Each Loan Party shall, upon demand, pay all calls, subscription monies and/or other monies payable on or with respect to any of the Securities included in the Collateral provided by it or, if the Lender pays the same (which it shall not be obliged to do), indemnify the Lender against such payment. If at any time the Value of the Collateral is less than the Maintenance Requirement and no Loan Party has, promptly upon demand, reduced the outstanding principal balance of the Obligations or deposited in the Securities Account additional funds and/or securities acceptable to the Lender to be held as Collateral with a Value sufficient to increase the Value of the Collateral to at least 105% of the Maintenance Requirement, the Lender may, at its option, from time to time, and without any obligation on its part, give notice to (a) instruct

MLPF&S to cancel any open orders and close any or all outstanding contracts, liquidate any or all Collateral, withdraw and/or sell any or all Collateral and reduce in whole or in part the Obligations and (b) take any other actions to which it is entitled, whether pursuant to Section 8.2 or otherwise. Notwithstanding the provisions of this Section 5.6, the Lender may, at any time pursuant to Section 8.3, demand payment of the aggregate unpaid principal amount of the Advances and all other Obligations.

5.7. Bankruptcy. Notify the Lender, in writing, before filing any petition seeking the protection of any bankruptcy, insolvency or any similar statutes. In addition, no Loan Party shall take any action that may cause (or fail to take any necessary action that would prevent) a petition in bankruptcy, insolvency or any similar law or procedure to be filed against such Loan Party.

5.8. Financial and Credit Information.

(a) Notify the Lender immediately, in writing, of any change in its financial condition or prospects that would adversely affect its ability to repay or perform any obligation(s) to the Lender according to the terms of this Agreement.

(b) Supply to the Lender such current financial information or other information as the Lender may reasonably request, from time to time.

(c) Permit the Lender and MLPF&S to share with one another and any affiliated companies, or any Person authorized by any of them, for legitimate business purposes, any information about it that each may currently possess or obtain in the future, unless such Loan Party has notified the Lender at the time of application for the Facility that such Loan Party objects to the sharing of such information.

(d) Permit the Lender, or anyone authorized by it, to obtain third-party credit or investigative reports with respect to such Loan Party, and to answer any questions about its credit experience with such Loan Party.

(e) Comply with any requests from the Lender for additional documentation required to be filed or executed by such Loan Party, from time to time, by applicable law or the policies and procedures of MLPF&S or the Lender.

5.9. Protection of Collateral and Legal Proceedings. At its own expense, take any and all actions necessary to preserve, protect and defend the Security Interest in the Collateral and the perfection and priority thereof against all adverse claims, including appearing in and defending any and all actions and proceedings that purport to affect any of the foregoing. Each Loan Party shall promptly reimburse the Lender for all sums, including costs, expenses and actual attorneys’ fees that the Lender may pay or incur in defending, protecting or enforcing the Security Interest in the Collateral or the perfection or priority thereof, or in discharging any prior or subsequent Lien or adverse claim against the Collateral or any part thereof, or by reason of becoming or being made a party to or intervening in any action or proceeding affecting the Collateral or the rights of the Lender therein, all of which actions each Loan Party hereby agrees that the Lender shall have the right to take in its discretion.

6. NEGATIVE COVENANTS

Until this Agreement has terminated and all Obligations have been indefeasibly paid and performed in full, no Loan Party will, without the prior consent of the Lender (which may be withheld in the Lender’s discretion), (a) create, incur, assume or suffer to exist any Lien on the Collateral, other than Liens created in favor of the Lender, including, but not limited to entering into, continuing or extending any contract or agreement in any way limiting, restricting or impeding the pledge or transfer of any of the Collateral, or (b) sell, assign, transfer, exchange, lease, lend or dispose of (directly or indirectly, voluntarily, by operation of law or otherwise) or grant any option with respect to, any of the Collateral.

7. CONDITIONS PRECEDENT

7.1. Conditions Precedent to the Initial Advance. It shall be a condition precedent to the Lender’s considering making the initial Advance that the Lender shall have received:

(a) evidence that the Securities Account has been established and that the Value of the Collateral meets the Advance Requirement; and

(b) such other documents, opinions, certificates and other items as the Lender may reasonably request.

7.2. Conditions Precedent to All Advances. It shall be a condition precedent to the Lender’s considering making any Advance or renewing any Interest Period that on the date of each such Advance or the renewal of such Interest Period, as the case may be, the Lender shall have received evidence that the Value of the Collateral meets the Advance Requirement and the following statements shall be true (and each request for an Advance shall constitute a representation and warranty by the Loan Parties that on the date of making or renewing such Advance such statements are true):

(a) The Borrower has paid the Facility Fee payable in connection with this Agreement;

(b) The representations and warranties contained in Section 4 are true and correct on and as of the date of such Advance;

(c) No event has occurred or is continuing or would result from the making of such Advance that would constitute a Remedy Event or an event, act or condition which, with the passage of time or notice, or both, would constitute a Remedy Event;

(d) The Lender: (i) is satisfied that none of the Collateral is subject to any restriction on transfer applicable to the Lender or any transferee of the Lender, whether imposed by law or by agreement, or (ii) has given its prior written consent to any such restriction (without being obligated to do so) and has received any agreements, documents and other items relating to any such restriction as the Lender has requested (in its discretion); and

(e) The Borrower has made a request in accordance with, and has otherwise complied with other provisions of, Section 2.1(b) or 2.2(b), as the case may be.

8. REMEDY EVENTS; REMEDIES

8.1. Remedy Events. If any of the following events (each, a “Remedy Event”) occurs, the Lender, in its discretion, may take any or all of the actions outlined in Section 8.2.:

(a) the Borrower fails to make any payment when it is due as required by this Agreement;

(b) a Loan Party breaches any provision of this Agreement;

(c) the Value of the Collateral in the Securities Account falls below the applicable Maintenance Requirement, and no Loan Party deposits additional Collateral or reduces the outstanding principal balance of the Obligations as required under Section 5.6;

(d) a Loan Party makes, or the Lender discovers that a Loan Party has made, a material misrepresentation in connection with this Agreement or any Advance;

(e) any step is taken or legal proceeding started by any Person in the bankruptcy of any Loan Party or for the appointment of a receiver, administrator, trustee or similar officer of any Loan Party or of any or all of the revenues and assets of any Loan Party or the winding up, administration, dissolution or reorganization of any Loan Party;

(f) any Loan Party is insolvent, is unable to pay its debts as they fall due, stops, suspends or threatens to stop or suspend payment of all or a material part of its debts, begins negotiations or takes any proceeding or other step with a view to readjustment, rescheduling or deferral of all of its indebtedness or any part of its indebtedness, which it would or might otherwise be unable to pay when due, or proposes or makes a general assignment or an arrangement or composition with or for the benefit of its creditors;

(g) an attachment or garnishment writ, or the like, is levied against all or any portion of the Securities Account or the Collateral;

(h) any indebtedness of a Loan Party to any member of the Merrill Lynch Group or any other Person(s) in respect of monies borrowed or raised (i) is not paid when due nor within any applicable grace period in any agreement relating to such indebtedness, or (ii) becomes due and payable before its normal maturity by reason of a default or event of default, however described;

(i) judgment for the payment of money is rendered against any Loan Party and within thirty (30) days from the entry of judgment has not been discharged or stayed pending appeal or, if any such judgment is affirmed on appeal, has not been discharged within thirty (30) days from the entry of the final order of affirmance on appeal;

(j) if a Loan Party is acting in the capacity of trustee of a trust for the purposes hereof, it or they cease to be appropriately authorized or such trust comes or is brought to an end;

(k) if a Loan Party is a natural Person, such Loan Party, (i) dies, (ii) becomes or is declared (by appropriate authority) incompetent or of unsound mind, or (iii) is indicted or convicted of any crime.

(1) the Lender otherwise deems itself or the Security Interest in any of the Collateral insecure or the Lender believes in good faith that the prospect of payment or other performance by any Loan Party is impaired.

8.2. Remedies.

(a) Upon the occurrence of a Remedy Event, the Lender may, at its option: (i) declare the Obligations to be immediately due and payable in full, whereupon the Obligations shall immediately become due and payable in full and the Facility shall be terminated; provided, however, that in the event of the occurrence of a Remedy Event described in Section 8.1(e), the Obligations shall become immediately due and payable in full and the Facility shall terminate without any action or declaration on the part of the Lender; (ii) instruct MLPF&S to cancel any open orders and close any and all outstanding contracts; (iii) liquidate any or all of the Collateral; (iv) withdraw and/or sell any or all of the Collateral; (v) apply any or all of the Collateral as well as the proceeds of any such Collateral to the Obligations; and (vi) exercise any and all other rights and remedies under this Agreement or applicable law. Each Loan Party shall be responsible for any decrease in the Value of the Collateral occurring prior to or during liquidation. Upon the occurrence of a Remedy Event, the Lender may also set off any or all of the Obligations against any securities, cash or other property of any Borrower or Guarantor in the possession of the Lender (directly or through MLPF&S as the Lender’s agent), or any other member of the Merrill Lynch Group and against any obligations owed to the Borrower or any Guarantor by the Lender or any other member of the Merrill Lynch Group.

(b) The Lender may exercise any or all of its rights under this Section without further demand for additional Collateral, or notice of sale or purchase, or other notice or advertisement. Any sales or purchases made pursuant to this Section may be made at the Lender’s discretion on any exchange or other market where such business is usually transacted, or at public auction or private sale, and the Lender, or its agent, may be the purchaser for the Lender’s or its agent’s own account. It is understood that the giving of any prior demand or call or prior notice of the time and place of such sale or purchase by the Lender, or its agent, will not be considered a waiver of the Lender’s right to sell or buy without any such demand, call or notice as provided in this Agreement.

(c) In addition to the Lender’s rights and remedies described in this Agreement, the Lender has the right to exercise any one or more of the rights and remedies of a secured creditor under the Uniform Commercial Code as now or hereafter in effect in the State of New York. All the rights and remedies that are available to the Lender under this Agreement are

cumulative and are in addition to any and all other rights and remedies that are otherwise available to the Lender either at law, equity or otherwise. The Lender may exercise any one or more of such rights and remedies simultaneously or successively.

8.3. Demand. Each of the Loan Parties hereby acknowledges that the principal amount of the Advances and all other Obligations are payable on the Lender’s demand by the Lender and that the Lender may make demand on the Borrower and/or any Guarantor regardless of whether or not a Remedy Event has occurred. In the event the Lender makes such demand and the Obligations are not paid in full, the Lender shall have the right, at its option, to exercise any or all of the remedies described in Section 8.2.

9. ADDITIONAL GUARANTOR/PLEDGOR COVENANTS

9.1. Guarantor Covenants. Each Guarantor hereby unconditionally and irrevocably agrees with the Lender (for itself and as trustee of the benefit of these agreements for each other member of the Merrill Lynch Group) as follows:

(a) Each Guarantor hereby irrevocably, unconditionally and absolutely guarantees, to the Lender the full and punctual payment and performance of the Obligations in accordance with this Agreement. The foregoing guaranty is a guaranty of payment and not of collection, and is the primary obligation of such Guarantor.

(b) As between such Guarantor and the Lender, but without affecting the Borrower’s obligations, such Guarantor shall be liable under (a) above as if it were the sole principal debtor and not merely a guarantor. Accordingly, it shall not be discharged, nor shall its liability be affected, by reason of:

(i) any time, indulgence, waiver or consent at any time given to any Loan Party or any other Person;

(ii) any amendment to any other provision of this Agreement or to any security or other agreement, guaranty or indemnity;

(iii) the making or absence of, or delay in, any demand on any Loan Party or any other Person for payment;

(iv) the enforcement or the absence of, or delay in, enforcement of this Agreement or of any security or other agreement, guaranty or indemnity or any failure to perfect the Security Interest in any Collateral;

(v) the release of any agreement, security, guaranty or indemnity;

(vi) the death, incapacity, bankruptcy, insolvency, winding up, liquidation, dissolution, merger, reorganization or similar event of or with respect to any Loan Party or any other Person;

(vii) the illegality, invalidity or unenforceability of or any defect in any provision of this Agreement or any other agreement or any of the Obligations or of any other obligations of any Loan Party to the Lender or any other circumstance that might otherwise constitute a legal or equitable discharge of or defense to it; or

(viii) the disallowance of all or a portion of the Lender’s claim for repayment of any obligation of the Borrower or any Guarantor hereunder under any provision of the United States Bankruptcy Code, any successor statute, or any other law, rule or regulation.

(c) The obligations of each Guarantor under (a) above are, and shall remain, in full force and effect by way of continuing security until this Agreement has terminated and the Obligations have been indefeasibly paid and performed in full. Furthermore, such obligations are additional to, and not instead of, any security or other agreement, guaranty or indemnity at anytime existing in favor of the Lender, whether from the Borrower, another Loan Party or otherwise. Each Guarantor irrevocably waives all notices and demands whatsoever.

9.2. Additional Provisions.

(a) Each Guarantor unconditionally and irrevocably further agrees as follows:

(i) any sum expressed to be payable by the Borrower under this Agreement, which is, for any reason (whether or not now existing and whether or not now known or becoming known to any party to this Agreement), not recoverable from the Borrower, shall nevertheless be recoverable from such Guarantor as if it were the sole principal debtor and shall be paid by it to the Lender on demand (such Guarantor’s liability under this Agreement being liability for payment, and not collection); and

(ii) each Guarantor shall, as a primary obligation, indemnify the Lender against any loss suffered by the Lender as a result of any Obligation not being paid by the time and on the date specified in this Agreement and otherwise in the manner specified in this Agreement or any Obligation being or becoming void, voidable or unenforceable for any reason (whether or not now existing and whether or not now known becoming not now existing and whether or not now known or becoming known to any party to this Agreement), the amount of that loss being the amount of the Obligation not paid.

(b) Each Guarantor acknowledges that the Lender is entering into this Agreement, and that all transactions by the Lender under this Agreement are done, in reliance on the guaranty, indemnities and other undertakings on the part of such Guarantor in this Agreement, and that the Lender would not, in the absence of such guaranty, indemnities and other undertakings on the part of such Guarantor in this Agreement, enter into this Agreement with the Borrower or do any transactions with or for the Borrower under this Agreement.

(i) that by becoming party to this Agreement as a Guarantor, and in particular by giving the guaranty and indemnities in this Section 9 and/or by providing Collateral, such Guarantor may become liable instead of or as well as the Borrower;

(ii) that such Guarantor’s obligations, and in particular its obligations under such guaranty and indemnities and in respect of such Collateral, will be unlimited as to amount; and

(iii) that such Guarantor should in its own interests seek independent legal advice before signing this Agreement as a Guarantor.

9.3. Pledgor. Each Pledgor hereby unconditionally and irrevocably agrees that:

(a) its assignment of, and its grant of a security interest in, the Collateral shall not be affected by reason of:

(i) any time, indulgence, waiver or consent at any time given to any Loan Party or any other Person;

(ii) any amendment to any other provision of this Agreement or any security or other agreement, guaranty or indemnity;

(iii) the making or absence of, or delay in, any demand on any Loan Party or any other Person for payment;

(v) the release of any agreement, security, guaranty or indemnity;

(vi) the death, incapacity, bankruptcy, insolvency, winding up, liquidation, dissolution, merger, reorganization or other similar event of or with respect to any Loan Party or any other Person;

(vii) the illegality, invalidity or unenforceability of or any defect in any provision of this Agreement or any other agreement or any of the Obligations or any other obligation of any Loan Party or any other circumstance that might otherwise constitute a legal or equitable discharge of or defense to any Person; or

(viii) the disallowance of all or a portion of the Lender’s claim for repayment of any Obligation of the Borrower or any obligation of any Guarantor hereunder under any provision of the United States Bankruptcy Code, any successor statute, or any other law, rule or regulation.

(b) The Security Interest in the Collateral is and shall remain in full force and effect by way of continuing security until this Agreement has terminated and the Obligations have been indefeasibly paid and performed in full. Furthermore, the Obligations are in addition to, and not instead of, any security or other agreement, guaranty or indemnity at any time existing in favor of the Lender, whether from the Borrower, any other Loan Party or otherwise. Each Pledgor irrevocably waives all notices and demands whatsoever.

(c) Each Pledgor acknowledges that the Lender is entering into this Agreement, and that all transactions by the Lender under this Agreement are done, in reliance on the agreements of such Pledgor in this Agreement, and that the Lender would not, in the absence of such agreements, enter into this Agreement with the Borrower or do any transactions with or for the Borrower under this Agreement.

(d) The Lender hereby gives notice to each Pledgor:

(i) that the Obligations under this Agreement are unlimited and, accordingly, an unlimited amount of the Collateral may be applied in respect of such Obligations; and

(ii) that such Pledgor should in its own interest seek independent legal advice before signing this Agreement as a Pledgor.

10. MISCELLANEOUS

10.1. Costs of Collection. If the Borrower or any Guarantor fails to make any payment under this Agreement, as and when required, the Borrower and each Guarantor must pay, jointly and severally and to the extent permitted by applicable law, the Lender’s court and collection costs, including reasonable legal fees and legal expenses (at all levels and in any bankruptcy proceeding), any cost incurred in the disposition of the Collateral, including reasonable legal fees and legal expenses, and, if the Obligations are referred for collection to any attorney who is not an employee of the Lender or one of its affiliates, the Lender’s reasonable legal fees and legal expenses (at all levels and in any bankruptcy proceeding).

10.2. Delay in Enforcement; No Waiver. The Lender may choose to delay or not to enforce any of its rights under this Agreement without losing such rights. If the Lender chooses not to exercise or enforce any of its rights, each Loan Party agrees that the Lender is not waiving the right to enforce such rights at a later time or any of its other rights. Any waiver of the Lender’s rights under this Agreement must be in writing.

10.3. Waivers. To the extent permitted by applicable law, each Loan Party waives its rights to require the Lender (a) to demand payments of amounts due (known as “presentment”); (b) to give notice that amounts due have not been paid (known as “notice of dishonor”); and (c) to obtain an official certification of nonpayment (known as “protest”).

10.4. Miscellaneous Indemnities. The Borrower and each Guarantor shall, on demand jointly and severally, indemnify the Lender against:

(a) any cost or increased cost in maintaining the Facility, the Securities Account, the Obligations, all or any part of any Advance, or any other amount outstanding under this Agreement or any reduction in the effective return to the Lender under this Agreement or in the rate of overall return on its capital below that which it would have been able to achieve but for its entering into or giving effect to this Agreement, in each case, which, in the Lender’s determination, is sustained or incurred directly or indirectly as a consequence of, or of compliance with, any present or future law or regulation or any directive or the like (whether or not having the force of law) of any governmental or other regulatory body or authority including any law, regulation, directive or the like relating to reserve assets, liquidity or monetary control or affecting the manner in which the Lender allocates capital resources to its obligations under this Agreement;

(b) any funding and any other cost, expense or liability (including loss of profit, reasonable legal fees [at all levels and in any bankruptcy proceeding] and taxes) sustained or incurred by the Lender (i) to render this Agreement (including the Security Interest) enforceable and admissible in evidence in any enforcement proceedings commenced by the Lender in connection with this Agreement, (ii) in connection with the administration of, or in protecting or enforcing the Lender’s rights under this Agreement and/or any amendment thereto, including any bankruptcy proceeding, (iii) as a result of the occurrence or continuance of any Remedy Event (whether in connection with any act or thing done as set out in Section 8 or otherwise), or (iv) as a result of the receipt or recovery by the Lender of all or any part of an Advance (other than interest on an Advance, which is calculated by referring to the Alternate Rate) or an overdue sum otherwise than on the last day of an Interest Period applicable to an Advance or, as the case may be, a period selected by the Lender and applicable to that overdue sum; and

(c) any stamp, documentary, registration or similar tax payable in connection with this Agreement, any Advance or the entry into, registration, performance, enforcement or admissibility in evidence of this Agreement and/or any such amendment, supplement or waiver, promptly and in any event before any interest or penalty becomes payable, together with any liability with respect to or resulting from any delay in paying or omission to pay any such tax.

10.5. Interpretation, Etc. Whenever it appears herein, the phrase “in the Lender’s discretion” or “in its discretion” shall be read as “in the Lender’s sole and absolute discretion.” Whenever the context may require, the terms used in this agreement shall include the singular or the plural and the feminine, masculine or neuter gender shall include each other gender. References in this Agreement to “Sections” shall be to Sections of this Agreement, unless otherwise specifically provided.

10.6. Successors and Assigns.

(a) This Agreement shall be binding upon and inure to the benefit of the heirs, successors and assigns of all the parties to this Agreement. The Lender may assign at its sole

option all or any part of its rights, obligations and remedies under this Agreement. Any assignee of the Lender’s rights and obligations shall be entitled to the full benefit of this Agreement to the same extent as if it were an original party in respect of the rights or obligations assigned or transferred to it. No Loan Party may assign its rights or obligations under this Agreement.

(b) The Lender may at any time change the office through which it is acting for the purpose of this Agreement and may at any time act for this purpose through more than one office.

(c) The Lender may disclose to a potential assignee or transferee or any other Person who has entered or proposes to enter into contractual arrangements with the Lender in relation to or concerning this Agreement such information about any Loan Party and this Agreement, as it may deem appropriate.

10.7. Amendments. No amendment or waiver of any provision of this Agreement shall be effective unless the same shall be in writing and signed by the Lender and the Borrower; provided, however, any amendment to the provisions of Section 9 of this Agreement requires the signature of the Guarantors or the Pledgors, as the case may be. Any waiver shall be effective only in the specific instance and for the specific purpose for which given.

10.8. Headlines. The heading of each provision of this Agreement is for descriptive purposes only and shall not be deemed to modify or qualify any of the rights or obligations described in each such provision.

10.9. Joint and Several Liability. If the Borrower consists of more than one Person (each a “Co-Borrower”), references herein to “the Borrower” shall be read as “each Co-Borrower,” “all Co-Borrowers,” or “any or all Co-Borrowers,” jointly and severally, whichever reading maximizes the Lender’s rights and the Co-Borrowers’ obligations under this Agreement. All Co-Borrowers’ and, if more than one, all Guarantors’ Obligations hereunder shall be joint and several.

10.10. Severability. If any provision of this Agreement is held to be invalid, illegal, void or unenforceable by reason of any law, rule, administrative order or judicial or arbitral decision, such determination shall not affect the validity of the remaining provisions of this Agreement.

10.11. Entire Agreement. This Agreement constitutes the entire agreement among the Loan Parties, the Lender and MLPF&S regarding the matters contemplated by this Agreement, and supersedes any and all prior agreements (whether written or oral).

10.12. Acknowledgment Regarding Perfection. MLPF&S, by its signature below, acknowledges the Security Interest of the Lender in the Securities Account and agrees to take any action required to maintain the Security Interest and the perfection thereof.

10.13. Returned Payment. To the extent the Lender or MLPF&S receives any payment with respect to the Obligations, the Facility or this Agreement, and all or any part of such payment is subsequently invalidated, declared to be fraudulent or preferential, set aside or

required to be repaid by the Lender or MLPF&S or paid over to a trustee, receiver or any other entity, whether under any bankruptcy law or otherwise (any such payment being hereinafter referred to as a “Returned Payment”), this Agreement shall continue to be effective or shall be reinstated, as the case may be, to the extent of such payment or repayment by the Lender or MLPF&S, and the indebtedness or part thereof intended to be satisfied by such Returned Payment shall be revised and continued in full force and effect as if such Returned Payment had not been made.

10.14. Effectiveness Upon Acceptance by Lender and MLPF&S. This Agreement will become effective only after each Loan Party has signed this Agreement in the space provided below and the Lender and MLPF&S have signed this Agreement in the spaces provided below.

10.15. Notices. Except as otherwise provided in this Section 10.15, all communications hereunder shall be in writing and delivered or mailed by registered or certified mail or overnight carrier or by telecopy. Statements, notices and all other communications to the Borrower or any other Loan Party will be sent to the address set forth on the signature page below or to such other address as may be designated in a written notice delivered in the manner provided herein. Each Loan Party agrees to send correspondence to the Lender at such address as is provided by the Lender, from time to time. Unless the Lender shall require requests under Section 2.1(b) or 2.2(b) to be in writing, such requests may be given by the Borrower to the Lender verbally. The Lender shall send to the Borrower written confirmation of any such notice. If the Lender has not received written notice from the Borrower of any exception or objection to any such confirmation within fifteen (15) days of the Borrower’s receipt of such confirmation, the Borrower shall be deemed to have approved such confirmation and such confirmation shall be presumed conclusively to be correct with respect to all matters set forth therein.

10.16. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

10.17. Arbitration with MLPF&S.

EACH LOAN PARTY UNDERSTANDS AND EACH LOAN PARTY AND MLPF&S AGREE THAT:

(a) ARBITRATION IS FINAL AND BINDING ON THE PARTIES.

(b) EACH LOAN PARTY, EACH PLEDGOR AND MLPF&S ARE WAIVING THEIR RIGHT TO SEEK REMEDIES IN COURT, INCLUDING THE RIGHT TO JURY TRIAL.

(c) PRE-ARBITRATION DISCOVERY IS GENERALLY MORE LIMITED THAN AND DIFFERENT FROM COURT PROCEEDINGS.

(d) THE ARBITRATOR’S AWARD IS NOT REQUIRED TO INCLUDE FACTUAL FINDINGS OR LEGAL REASONING AND ANY PARTY’S RIGHT TO APPEAL OR TO SEEK MODIFICATION OF RULINGS BY THE ARBITRATORS IS STRICTLY LIMITED.

(e) THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.

EACH LOAN PARTY HEREBY AGREES TO HOLD HARMLESS MLPF&S, ITS AFFILIATES (EXCLUDING THE LENDER), AND ITS EMPLOYEES FROM ANY AND ALL CLAIMS, LIABILITIES, AND/OR DAMAGES, IN ANY WAY RELATED TO, OR ARISING OUT OF, OR IN CONNECTION WITH, EACH LOAN PARTY’S GRANTING OF THE SECURITY INTEREST OR THE LENDER’S EXERCISE OF RIGHTS UNDER THIS AGREEMENT, INCLUDING ANY ACTION OR INACTION BY MLPF&S IN FOLLOWING THE LENDER’S INSTRUCTIONS REGARDING THE SECURITIES ACCOUNT IN ACCORDANCE WITH THIS AGREEMENT.

EACH LOAN PARTY AGREES THAT ALL CONTROVERSIES, WHICH MAY ARISE BETWEEN MLPF&S AND SUCH LOAN PARTY CONCERNING THE SECURITIES ACCOUNT, INCLUDING BUT NOT LIMITED TO THOSE INVOLVING ANY TRANSACTION OR THE CONSTRUCTION, PERFORMANCE OR BREACH OF THIS AGREEMENT OR ANY OTHER AGREEMENT BETWEEN MLPF&S AND SUCH LOAN PARTY WHETHER ENTERED INTO PRIOR TO, ON OR SUBSEQUENT TO THE DATE HEREOF, SHALL BE DETERMINED BY ARBITRATION. ANY ARBITRATION UNDER THIS AGREEMENT SHALL BE CONDUCTED ONLY BEFORE THE NEW YORK STOCK EXCHANGE INC., THE AMERICAN STOCK EXCHANGE, INC., OR AN ARBITRATION FACILITY PROVIDED BY ANY OTHER EXCHANGE, THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC., OR THE MUNICIPAL SECURITIES RULEMAKING BOARD, AND IN ACCORDANCE WITH ITS ARBITRATION RULES THEN IN FORCE. EACH LOAN PARTY MAY ELECT IN THE FIRST INSTANCE WHETHER ARBITRATION SHALL BE CONDUCTED BEFORE THE NEW YORK STOCK EXCHANGE, INC., THE AMERICAN STOCK EXCHANGE, INC., OTHER EXCHANGES, THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC., OR THE MUNICIPAL SECURITIES RULEMAKING BOARD, BUT IF SUCH LOAN PARTY FAILS TO MAKE SUCH ELECTION, BY REGISTERED LETTER OR TELEGRAM ADDRESSED TO MLPF&S IN CARE OF THE LENDER, BEFORE THE EXPIRATION OF FIVE DAYS AFTER RECEIPT OF A WRITTEN REQUEST FROM MLPF&S TO MAKE SUCH ELECTION, MLPF&S MAY MAKE SUCH ELECTION. JUDGEMENT UPON THE AWARD OF THE ARBITRATORS MAY BE ENTERED IN ANY COURT, STATE OR FEDERAL, HAVING JURISDICTION.

NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED CLASS ACTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY PREDISPUTE

ARBITRATION AGREEMENT AGAINST ANY PERSON WHO HAS INITIATED IN COURT A PUTATIVE CLASS ACTION; OR WHO IS A MEMBER OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED BY THE PUTATIVE CLASS ACTION UNTIL:

(i) THE CLASS CERTIFICATION IS DENIED;

(ii) THE CLASS IS DECERTIFIED; OR

(iii) THE CUSTOMER IS EXCLUDED FROM THE CLASS BY THE COURT.

SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN.

EACH LOAN PARTY HEREBY ACKNOWLEDGES THAT THIS SECTION 10.17 APPLIES SOLELY TO TRANSACTIONS BETWEEN MLPF&S AND THE LOAN PARTIES IN CONNECTION WITH THE SECURITIES ACCOUNT AND THAT THIS SECTION 10.17 DOES NOT OTHERWISE PERTAIN TO THE FACILITY, THE LOAN OR THE ADVANCES MADE HEREUNDER.

10.18. GOVERNING LAW. THIS AGREEMENT IN ALL RESPECTS SHALL BE GOVERNED BY AND INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE WITHOUT REGARD TO ANY CONFLICT OF LAW PROVISION THEREOF THAT MIGHT PREVENT THE OPERATION OF THIS SECTION 10.18.

10.19. WAIVER OF JURY TRIAL. EXCEPT TO THE EXTENT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH LOAN PARTY HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE, WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. EACH LOAN PARTY ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE LENDER THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH THE LENDER HAS RELIED, IS RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT AND ANY DOCUMENT RELATED THERETO. THE LENDER MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF ANY LOAN PARTY, AS THE CASE MAY BE, TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.

10.20. SUBMISSION TO JURISDICTION. EACH LOAN PARTY (EACH, A “SUBMITTING PARTY”) HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF BROUGHT BY THE LENDER OR ITS SUCCESSORS OR ASSIGNS. EACH SUBMITTING PARTY, TO THE EXTENT PERMITTED BY APPLICABLE LAW, (A) HEREBY WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS AGREEMENT OR THE SUBJECT MATTER HEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT, AND (B) HEREBY WAIVES THE RIGHT TO ASSERT IN ANY SUCH SUIT, ACTION OR PROCEEDING ANY OFFSET OR COUNTERCLAIM, EXCEPT COUNTERCLAIMS THAT ARE COMPULSORY. EACH SUBMITTING PARTY HEREBY CONSENTS TO THE SERVICE OF PROCESS BY MAIL AT THE ADDRESS OF SUCH PARTY SET FORTH IN THE SIGNATURE AREA BELOW CONTEMPLATED BY THIS AGREEMENT. EACH SUBMITTING PARTY AGREES THAT ITS SUBMISSION TO JURISDICTION AND CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE LENDER. FINAL JUDGMENT AGAINST A SUBMITTING PARTY IN ANY SUCH SUIT, ACTION OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (X) BY SUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF THE INDEBTEDNESS OR LIABILITY OF SUCH SUBMITTING PARTY OR (Y) IN ANY OTHER MANNER PROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHER JURISDICTION; PROVIDED, HOWEVER, THAT THE LENDER MAY AT ITS OPTION BRING SUIT OR INSTITUTE OTHER JUDICIAL PROCEEDINGS AGAINST A SUBMITTING PARTY OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE UNITED STATES OR OF ANY COUNTRY OR PLACE WHERE SUCH SUBMITTING PARTY OR SUCH ASSETS MAY BE FOUND.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first written above.

This Agreement contains a pre-dispute arbitration provision regarding disputes with MLPF&S in Section 10.17.


MAXIMUM AMOUNT:	$	6,500,000
MINIMUM ADVANCE AMOUNT:	$	100,000
SPREAD:		0.50	%
FACILITY FEE PERCENTAGE		0.0	%

[Remainder of page intentionally left blank.]

BORROWER:

a.	Name (if entity, please provide legal name as it appears in organizational documents; e.g., certificate of incorporation, partnership agreement): Howard Investments LLC

b.	Trade name (if different):

c.	Print address of principal residence (if individual), or principal place of business and, if different, chief executive offices (if entity):

P.O. Box 61250

Oklahoma City, OK 73146

d.	Jurisdiction of organization or formation (if entity):

e.	Signature:


		Howard Investments LLC

		By:		/s/ ROBERT E. HOWARD II
				Howard Investments LLC

		Date:		7-16-03

		Witness:		/s/ MICKEY L. CLAGG
		Print Name:		Mickey L. Clagg
		Date:		7-16-03


MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED

By:		/s/ (illegible)

Date:		8/4/03

Title:		Resident Vice President

Address:		1221 McKinney #3900
		Houston, TX 77010


MERRILL LYNCH PRIVATE FINANCE INC.

By:		/s/ (illegible)

Date:		8/15/03

Title:		Director

Address:

“Merrill Lynch Private Finance – California Department of Corporations Finance Lenders License”.

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