UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
____________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 2, 2014
LITHIA MOTORS, INC.
(Exact name of registrant as specified in its charter)
State of Oregon |
001-14733 |
93-0572810 |
(State or other jurisdiction of |
(Commission |
(I.R.S. Employer |
incorporation) |
File Number) |
Identification No.) |
150 N. Bartlett St |
Medford, OR 97501 |
(Address of principal executive offices) |
(541) 776-6401
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 |
Entry into a Material Definitive Agreement. |
Effective October 1, 2014, Lithia Motors, Inc. (the “Company”) entered into the Amended and Restated Loan Agreement (the “Amended Loan Agreement”) with U.S. Bank National Association as agent for the lenders, and U.S. Bank National Association; JPMorgan Chase Bank, N.A.; Toyota Motor Credit Corporation; American Honda Finance Corporation; Mercedes-Benz Financial Services USA LLC; TD Bank, N.A.; BMW Financial Services NA, LLC; Bank of America, N.A.; Capital One, N.A.; Bank of the West; KeyBank National Association; Ally Bank; Santander Bank, N.A.; VW Credit, Inc.; Nissan Motor Acceptance Corporation and Hyundai Capital America, as lenders. The prior Loan Agreement, dated effective April 17, 2012, as amended by the Second Amendment to the Loan Agreement dated effective December 16, 2013, provided for a total financing commitment of $1.0 billion, which would have expired in December 2018. The Amended Loan Agreement increased the total financing commitment to $1.7 billion (which can be expanded to $1.85 billion) and extended the expiration date of the credit facilities to October 2019. Under the Amended Loan Agreement, the initial allocation of the financing commitment is for (i) up to $150 million in used vehicle inventory floor plan financing (which could increase to a maximum of $250 million, an increase from a prior maximum of $200 million), (ii) a maximum of $300 million in revolving financing for the Company’s general corporate purposes, including acquisitions and working capital (an increase from a prior maximum of $200 million), and (iii) an aggregate of up to $1.25 billion in new vehicle inventory floor plan financing (an increase from a prior commitment of $700 million). The Amended Loan Agreement permits certain reallocations of the financing commitments provided that the used vehicle inventory floor plan commitment does not exceed $250 million, the revolving financing commitment does not exceed $300 million, and the sum of those commitments plus the new vehicle inventory floor plan financing commitment does not exceed the total aggregate financing commitment. The interest rate on the credit facility varies based on the type of debt, with the rate of one-month LIBOR plus 1.25% for new vehicle floor plan financing, one-month LIBOR plus 1.50% for used vehicle floor plan financing; and a variable interest rate on the revolving financing ranging from the one-month LIBOR plus 1.25% to 2.50%, depending on the Company’s leverage ratio.
A copy of the Amended Loan Agreement is attached as Exhibit 10.1 and incorporated herein by reference.
Item 2.01 |
Completion of Acquisition or Disposition of Assets. |
On October 1, 2014, Lithia Motors, Inc., an Oregon corporation (“Lithia”), completed the purchase of all of the issued and outstanding shares of the capital stock of DCH Auto Group (USA) Inc., a Delaware corporation (“DCH”), from DCH Auto Group (USA) Limited, a British Virgin Islands corporation (“Seller”), pursuant to the Stock Purchase Agreement (as amended, the “Agreement”) dated June 14, 2014 between Lithia and Seller. DCH owns and operates 27 stores located in California, New York and New Jersey.
Lithia purchased DCH for an initial purchase price of $669.5 million, comprised of $364 million in cash, the issuance of 268,770 shares of Lithia class A common stock, incurring $230 million of vehicle floorplan debt financing, and the assumption of non-floorplan debt of $53 million. The number of shares that Lithia issued was determined in accordance with the Agreement, which called for dividing $22.5 million by the volume-weighted average trading price of the shares in the 30 trading days ended September 30, 2014. The initial purchase price is subject to adjustment under the terms of the Agreement. A press release announcing the closing of the transaction is filed as Exhibit 99.1.
Lithia filed a copy of the Agreement as Exhibit 2.1 to its Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (the “SEC”) on August 8, 2014 (the “10-Q”). Portions of Exhibit 2.1 to the 10-Q were redacted pursuant to Lithia’s request for confidential treatment that the SEC granted by order dated August 29, 2014. An un-redacted version of Exhibit 2.1 to the 10-Q is filed as Exhibit 2.1.
Item 3.02 |
Unregistered Sales of Equity Securities. |
In connection with the purchase of DCH, on October 1, 2014 Lithia issued 268,770 shares of its Class A Common Stock to Seller. The number of shares issues was calculated by dividing $22.5 million by the volume-weighted average trading price of the shares in the 30 trading days ended September 30, 2014. The shares were issued to Seller, an accredited investor, in a transaction exempt from Section 4(a)(2) of the Securities Act of 1933. All of the shares will be held in an indemnity escrow, along with additional cash, to satisfy any indemnity claims by Lithia against Seller; the shares may not be transferred, except to Lithia to settle indemnity claims, for six months.
Item 9.01 |
Financial Statements and Exhibits. |
(a) Financial statements of businesses acquired.
The historical financial statements required by this Item 9.01(a) will be filed by amendment to this Current Report on Form 8-K not later than 71 calendar days after the date on which this Current Report on Form 8-K is filed.
(b) Pro forma financial information.
The pro forma financial statements required by this Item 9.01(b) will be filed by amendment to this Current Report on Form 8-K not later than 71 calendar days after the date on which this Current Report on Form 8-K is filed.
(d) Exhibits.
Exhibit No. | Description |
2.1 |
Stock Purchase Agreement dated June 14, 2014 between Lithia Motors, Inc. and DCH Auto Group (USA) Limited |
10.1 |
Amended and Restated Loan Agreement dated effective as of October 1, 2014 |
99.1 |
Press Release dated October 1, 2014 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
LITHIA MOTORS, INC. |
| |
|
|
|
|
Dated: October 2, 2014 |
|
|
|
|
By: |
/s/ Christopher S. Holzshu |
|
|
|
Christopher S. Holzshu |
|
|
|
SVP, CFO and Secretary |
|
Exhibit Index |
Exhibit No. | Description |
2.1 |
Stock Purchase Agreement dated June 14, 2014 between Lithia Motors, Inc. and DCH Auto Group (USA) Limited |
10.1 |
Amended and Restated Loan Agreement dated effective as of October 1, 2014 |
99.1 |
Press Release dated October 1, 2014 |
Exhibit 2.1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
between
Lithia Motors, Inc.
and
DCH Auto Group (USA) Limited,
dated as of
June 14, 2014
TABLE OF CONTENTS
Page
SECTION 1 |
PURCHASE AND SALE |
2 | |
1.01 |
Purchase and Sale |
2 | |
1.02 |
Purchase Price |
2 | |
1.03 |
Closing |
5 | |
SECTION 2 |
REPRESENTATIONS AND WARRANTIES OF SELLER |
5 | |
2.01 |
Organization and Authority of Seller |
6 | |
2.02 |
Organization, Authority and Qualification of the Company |
6 | |
2.03 |
Capitalization |
6 | |
2.04 |
Subsidiaries |
7 | |
2.05 |
No Conflicts; Consents |
8 | |
2.06 |
Financial Statements |
8 | |
2.07 |
Undisclosed Liabilities |
9 | |
2.08 |
Absence of Certain Changes, Events and Conditions |
10 | |
2.09 |
Material Contracts |
11 | |
2.10 |
Title to Assets; Real Property |
13 | |
2.11 |
Intellectual Property |
15 | |
2.12 |
Inventory |
16 | |
2.13 |
Accounts Receivable |
16 | |
2.14 |
Customers, Manufacturers and Suppliers |
17 | |
2.15 |
Insurance |
18 | |
2.16 |
Legal Proceedings; Governmental Orders |
19 | |
2.17 |
Compliance with Laws; Permits |
19 | |
2.18 |
Environmental Matters |
20 | |
2.19 |
Employee Benefit Matters |
21 | |
2.20 |
Employment Matters |
25 | |
2.21 |
Taxes |
26 | |
2.22 |
Books and Records |
29 | |
2.23 |
Brokers |
29 | |
2.24 |
Product Warranties and Service and Maintenance Programs |
29 | |
2.25 |
Rights of First Refusal |
30 | |
2.26 |
No Other Representations and Warranties |
30 | |
SECTION 3 |
REPRESENTATIONS AND WARRANTIES OF BUYER |
30 | |
3.01 |
Organization and Authority of Buyer |
30 | |
3.02 |
Buyer Shares |
31 | |
3.03 |
No Conflicts; Consents |
31 | |
3.04 |
Buyer SEC Reports; Financial Statements |
32 |
TABLE OF CONTENTS
(continued)
Page
3.05 |
Absence of Certain Changes, Events and Conditions |
32 | |
3.06 |
Investment Purpose |
32 | |
3.07 |
Brokers |
32 | |
3.08 |
Financing |
33 | |
3.09 |
Legal Proceedings |
33 | |
3.10 |
No Other Representations and Warranties |
33 | |
SECTION 4 |
COVENANTS OF SELLER |
33 | |
4.01 |
Conduct of Business Prior to the Closing |
33 | |
4.02 |
Access to Information |
37 | |
4.03 |
No Solicitation of Other Bids |
37 | |
4.04 |
Notice of Certain Events |
38 | |
4.05 |
Resignations |
39 | |
4.06 |
Confidentiality |
39 | |
4.07 |
Non-Competition; Non-Solicitation |
39 | |
4.08 |
Governmental Approvals and Consents |
41 | |
4.09 |
[Reserved] |
43 | |
4.10 |
Books and Records |
43 | |
4.11 |
Closing Conditions |
43 | |
4.12 |
Public Announcements |
43 | |
4.13 |
Cooperation with Financing |
44 | |
4.14 |
Real Property Spreadsheet |
44 | |
4.15 |
Further Assurances |
44 | |
4.16 |
Other Matters |
44 | |
SECTION 5 |
COVENANTS OF BUYER |
44 | |
5.01 |
Financing |
44 | |
5.02 |
Governmental Approvals and Consents |
45 | |
5.03 |
Closing Conditions |
46 | |
5.04 |
Public Announcements |
47 | |
5.05 |
Manufacturer Consent |
47 | |
5.06 |
Books and Records |
47 | |
5.07 |
Further Assurances |
48 | |
SECTION 6 |
CONDITIONS TO CLOSING |
48 | |
6.01 |
Conditions to Obligations of Buyer |
48 | |
6.02 |
Conditions to Obligations of Seller |
51 |
TABLE OF CONTENTS
(continued)
Page
SECTION 7 |
TAX MATTERS |
53 | |
7.01 |
Tax Covenants |
53 | |
7.02 |
Termination of Existing Tax Sharing Agreements |
53 | |
7.03 |
Tax Indemnification |
54 | |
7.04 |
Straddle Period |
54 | |
7.05 |
Contests |
54 | |
7.06 |
Cooperation and Exchange of Information |
55 | |
7.07 |
Tax Treatment of Indemnification Payments |
55 | |
7.08 |
Survival |
55 | |
7.09 |
Overlap |
55 | |
SECTION 8 |
INDEMNIFICATION AND ESCROW |
55 | |
8.01 |
Survival |
55 | |
8.02 |
Indemnification by Seller |
56 | |
8.03 |
Indemnification by Buyer |
57 | |
8.04 |
Certain Limitations |
57 | |
8.05 |
Indemnification Procedures |
58 | |
8.06 |
Payments |
60 | |
8.07 |
Tax Treatment of Indemnification Payments |
61 | |
8.08 |
Duty to Mitigate |
61 | |
8.09 |
Exclusive Remedies |
61 | |
SECTION 9 |
TERMINATION |
62 | |
9.01 |
Termination |
62 | |
9.02 |
Effect of Termination |
63 | |
SECTION 10 |
MISCELLANEOUS |
63 | |
10.01 |
Expenses |
63 | |
10.02 |
Notices |
63 | |
10.03 |
Interpretation |
64 | |
10.04 |
Headings |
64 | |
10.05 |
Severability |
64 | |
10.06 |
Entire Agreement |
65 | |
10.07 |
Successors and Assigns |
65 | |
10.08 |
No Third-Party Beneficiaries |
65 | |
10.09 |
Amendment and Modification; Waiver |
65 | |
10.10 |
Governing Law; Submission to Jurisdiction; Waiver of Jury Trial |
65 |
TABLE OF CONTENTS
(continued)
Page
10.11 |
Specific Performance |
66 | |
10.12 |
Liquidated Damages |
66 | |
10.13 |
Disclosure Schedules |
67 | |
10.14 |
Resolution of Disputes Regarding Initial Acquisition Balance Sheet or Closing Statement (Including Final Acquisition Balance Sheet) |
67 | |
10.15 |
Withholding Tax |
68 | |
10.16 |
Tax Treatment of Payments and Adjustments |
68 | |
10.17 |
Counterparts |
68 |
STOCK PURCHASE AGREEMENT
Dated: |
June 14, 2014 |
|
|
|
|
Between: |
Lithia Motors, Inc., an Oregon corporation 150 N. Bartlett Medford, Oregon 97501 Facsimile: 541.770.7172 Attn: Bryan B. DeBoer |
“Buyer” |
|
|
|
And: |
DCH Auto Group (USA) Limited, a British Virgin Islands corporation Omar Hodge Building, 2nd Floor Wickham’s Cay, Road Town, Tortola, British Virgin Islands Facsimile: 732-727-8373 Attn: Mr. Shau-wai Lam |
“Seller” |
Terms used in this Stock Purchase Agreement (“Agreement”) are defined where they are first used or in Appendix I.
A. DCH Auto Group (USA) Inc., a Delaware corporation (the “Company”), and its Subsidiaries own car dealerships that own and sell New Cars, Used Cars and Parts and provide maintenance and repair and other services in New York, New Jersey and California.
B. The authorized capital stock of the Company consists of 2,500,000 shares of common stock, par value $0.0001 per share (“Common Stock”), of which, as of the date of this Agreement, 2,432,612 shares are issued and outstanding (the “Company Shares”).
C. As of the date of this Agreement, the ESOP Trustee holds 132,622.44 Company Shares (of which 7639.53 remain unallocated)(the “ESOP Shares”), and the Company intends to redeem from the ESOP Trustee the ESOP Shares for a price to be agreed to between the Company and the ESOP Trustee (the “ESOP Payment”).
D. Mr. Shau-wai Lam owns 58,800 Company Shares (the “Lam Shares”), and the Company intends to redeem from Mr. Lam, and Mr. Lam intends to sell to the Company, the Lam shares pursuant to a Stock Redemption Agreement to be entered into between Mr. Lam and the Company on or after the date hereof (the “Lam Stock Redemption Agreement”) for an aggregate price of $10,151,820.00 (the “Lam Stock Price”).
E. Seller owns 2,241,200 Company Shares (the “Shares”) and Seller wishes to sell to Buyer, and Buyer wishes to purchase from Seller, the Shares, subject to the terms and conditions set forth herein.
In consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.
SECTION 1
PURCHASE AND SALE
1.01 Purchase and Sale. Subject to the terms and conditions set forth herein, at the Closing, Seller shall sell to Buyer, and Buyer shall purchase from Seller, the Shares, free and clear of all Encumbrances, for the consideration specified in Section 1.02.
1.02 Purchase Price. The purchase price for the Shares (the “Purchase Price”) shall be Goodwill plus Tangible Net Worth minus (if not already included in Tangible Net Worth) the Lam Stock Price minus (if not already included in Tangible Net Worth) the ESOP Stock Redemption Amount using the methodologies set forth below:
● “Goodwill” means the goodwill and intangible assets of the Company and its Subsidiaries, and shall be valued at $205,000,000.
● “Tangible Net Worth” means all tangible assets (i.e., all assets excluding goodwill and intangible assets) minus all liabilities of the Company and its Subsidiaries, with the following additional adjustments as of the Closing Date in the case of the finally determined Tangible Net Worth:
o |
A LIFO adjustment to increase the Tangible Net Worth by multiplying the LIFO reserve as shown on the Initial Acquisition Balance Sheet and the Final Acquisition Balance Sheet by the product of 1 minus the combined statutory federal and state tax rates for the Company and its Subsidiaries in effect on December 31, 2013, estimated to be 0.42, for a result of 0.58. This shall be done to gross up the inventory value to FIFO while offsetting the tax liability associated with the conversion to FIFO. |
o |
Adjustments to reflect the fair value of Real Property as set forth on Schedule 1.02 and based on the information with respect to the Real Property set forth on the spreadsheet delivered by Seller to Buyer dated as of the date of this Agreement (the “Real Property Spreadsheet”); provided that the aggregate amount of such adjustments shall not increase Tangible Net Worth by less than $23,000,000 nor increase Tangible Net Worth by more than $29,000,000. |
o |
An adjustment to reflect acquisitions between the date of this Agreement and the Closing Date determined in good faith by Buyer and Seller, provided such acquisitions were not made in violation of Section 4.01(b)(ix). |
o |
To the extent not already reflected in Tangible Net Worth (including as a reserve), an adjustment to decrease Tangible Net Worth by (x) the expenses of the Company or any Subsidiary incurred in connection with the preparation of this Agreement and the completion of the transactions contemplated by this Agreement, whether payable before, on or after the Closing Date; and (y) any bonus or retention payments made by the Company or any Subsidiary in connection with or as a result of the transactions contemplated by this Agreement, including all applicable employer Taxes payable with respect thereto, whether payable before, on or after the Closing Date, provided, however, that any post-Closing retention payments guarantees reflected in Tangible Net Worth shall be added back to Tangible Net Worth. |
● “ESOP Stock Redemption Amount” means an amount equal to (x) if the ESOP Shares are redeemed on or before the Closing Date, the aggregate redemption price or (y) if the ESOP Shares are not redeemed on or before the Closing Date, an aggregate amount equal to (A) Goodwill plus Tangible Net Worth minus the Lam Stock Price, multiplied by (B) a fraction, the numerator of which is the number of ESOP Shares outstanding at the Closing Date and the denominator of which is the number ESOP Shares outstanding at the Closing Date plus the Shares.
The Initial Acquisition Balance Sheet and the Final Acquisition Balance Sheet, except as set forth above, will be prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) applied using the same accounting methods, practices, principles, policies and procedures, with consistent classifications, judgments and valuation and estimation methodologies that were used in the preparation of the Audited Financial Statements for the Company’s most recent fiscal year.
(a) Initial Purchase Price. The initial Purchase Price for the Shares shall be calculated based on the initial determination of Tangible Net Worth as of August 31, 2014 (the “Initial Purchase Price”). Working together from the date of execution of this Agreement, Buyer and Seller shall jointly prepare an initial acquisition balance sheet of the Company and its Subsidiaries dated as of August 31, 2014 to determine Tangible Net Worth as of such date (the “Initial Acquisition Balance Sheet”). A template of the calculation to determine the Initial Purchase Price is attached as Schedule 1.02(a).
(b) Initial Purchase Price Payment. The Initial Purchase Price will be paid as follows: (x) issuance to Seller of a number shares of Class A Common Stock of Buyer, ticker symbol LAD on the New York Stock Exchange (“Lithia Shares”), determined by dividing $22,500,000 by the volume-weighted average trading price of Lithia Shares in the 30 trading days ending on the day immediately preceding the Closing Date (“Stock Consideration”) and (y) an amount in cash equal to the Initial Purchase Price minus $22,500,000 (the “Cash Consideration”). At the Closing, Buyer shall pay the Initial Purchase Price as follows:
(i) with respect to the Cash Consideration, Buyer shall (x) withhold an amount equal to 8% of the Initial Purchase Price, if the ESOP Shares are not redeemed at the time of Closing, or 3% of the Initial Purchase Price, if the ESOP Shares are redeemed at the time of Closing (the “Holdback Amount”) to secure the payment to Buyer of any Post-Closing Adjustment pursuant to Section 1.02(e) and (y) pay the remainder of the Cash Consideration by wire transfer of immediately available funds, as follows:
(A) |
Buyer shall deposit an amount equal to the difference of 10% of the Initial Purchase Price minus $22,500,000 into an interest-bearing account (the “Indemnity Escrow”) to be held and released pursuant to the terms of the Indemnity Escrow Agreement in the form attached as Exhibit A to this Agreement (the “Indemnity Escrow Agreement”); and |
(B) |
Buyer shall pay an amount equal to the remaining Cash Consideration as designated in writing by Seller to Buyer no later than five Business Days before the Closing Date; and |
(ii) with respect to the Stock Consideration, Buyer shall deposit the Lithia Shares into the Indemnity Escrow to be held and released pursuant to the terms of the Indemnity Escrow Agreement.
(c) Calculation of the Final Purchase Price. Within 45 days after the Closing, Seller shall prepare, and may engage Seller’s Accountants to assist it in preparing, financial statements of the Company and its Subsidiaries consisting of an audited balance sheet dated as September 30, 2014 (the “Final Acquisition Balance Sheet”) and unaudited statements of income and retained earnings, stockholders’ equity and cash flow for the nine-month period then ended (in each case, without giving effect to the transactions contemplated herein). Seller shall prepare a statement setting forth the final determination of Tangible Net Worth as of the Closing Date, which shall be based on the Final Acquisition Balance Sheet, and the final Purchase Price (which, together with the Final Acquisition Balance Sheet, shall be the “Closing Statement”). The Closing Statement (including the Final Acquisition Balance Sheet) shall not be final unless and until approved by Buyer in writing, which approval or rejection must be made by Buyer in writing within 30 days of its receipt thereof or such failure to notify Seller shall be deemed an approval of the Closing Statement. The final Purchase Price (the “Final Purchase Price”) shall be calculated in the same manner as the Initial Purchase Price.
(d) Resolution of Balance Sheet Disagreements. If Buyer and Seller are unable to agree on either the Initial Acquisition Balance Sheet by September 20, 2014 or on the Closing Statement (including the Final Acquisition Balance Sheet) within 30 days after Seller delivers the Closing Statement to Buyer, Buyer and Seller shall resolve any such Disputed Amounts pursuant to Section 10.14.
(e) Final Difference Payments. After Buyer agrees in writing that the Closing Statement (including the Final Acquisition Balance Sheet) is final (or fails to notify Seller of its acceptance or rejection of the Closing Statement within 30 days of the receipt thereof or any Disputed Amounts are resolved pursuant to Section 10.14), the parties shall determine whether either owes any amount to the other under this Section 1.02(e) (any such amount, the “Post-Closing Adjustment”).
(i) If the Initial Purchase Price is less than the Final Purchase Price, Buyer shall pay Seller, within five Business Days of the determination thereof, in cash the Holdback Amount and the amount by which the Final Purchase Price exceeds the Initial Purchase Price.
(ii) If the Initial Purchase Price is greater than the Final Purchase Price, (A) Buyer shall retain the difference from the Holdback Amount and pay the remaining Holdback Amount, if any, to Seller or (B) if the difference between the Initial Purchase Price and the Final Purchase Price is greater than the Holdback Amount, Buyer shall retain the Holdback Amount and Seller shall pay to Buyer, within five Business Days of the determination thereof, in cash the amount by which the difference between the Initial Purchase Price and the Final Purchase Price exceeds the Holdback Amount.
1.03 Closing. Subject to the terms and conditions of this Agreement, the purchase and sale of the Shares shall be completed at a closing (the “Closing”) to be held at 9:00 a.m. PDT on October 1, 2014; provided, however, that either Buyer or Seller may extend the Closing to a date not later than October 31, 2014 with written notice to the other party prior to October 1, 2014. The day on which the Closing takes place is the “Closing Date.”
SECTION 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth in the correspondingly numbered Section of the Disclosure Schedules, Seller represents and warrants to Buyer that the statements contained in this Section 2 are true and correct as of the date hereof and as of the Closing Date. The delivery of Disclosure Schedules and updates to the Disclosure Schedules to Buyer on or before July 15, 2014 as provided in Section 9.01(c) shall be deemed to amend and supplement the Disclosure Schedules as if delivered as of the date hereof. The representations and warranties contained in this Agreement are made for the purposes of allocating contractual risk between the parties and not as a means of establishing facts; they should not be relied on by shareholders or investors in Buyer.
2.01 Organization and Authority of Seller. Seller (a) is duly organized, validly existing and in good standing under the Laws of the British Virgin Islands; (b) has full corporate power and authority to enter into this Agreement and the other Seller Transaction Documents, to carry out its obligations hereunder and thereunder and to complete the transactions contemplated hereby and thereby; (c) has duly authorized all actions necessary to execute and deliver this Agreement and any other Seller Transaction Documents, and to perform the obligations and complete the transactions hereunder and thereunder. This Agreement has been duly executed and delivered by Seller, and (assuming due authorization, execution and delivery by Buyer) this Agreement constitutes a legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms. When each other Seller Transaction Document has been duly executed and delivered by Seller (assuming due authorization, execution and delivery by each other party thereto), such Seller Transaction Document will constitute a legal and binding obligation of Seller enforceable against it in accordance with its terms.
2.02 Organization, Authority and Qualification of the Company. The Company is a corporation duly organized, validly existing and in good standing under the Laws of the state of Delaware and has full corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as it has been and is currently conducted. Section 2.02 of the Disclosure Schedules sets forth each jurisdiction in which the Company is licensed or qualified to do business, and the Company is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business as currently conducted makes such licensing or qualification necessary under applicable Law except where the failure to be so licensed, qualified or in good standing would not reasonably be expected to have a Company Material Adverse Effect. All corporate actions taken by the Company in connection with this Agreement and the other Transaction Documents to which the Company is or will be a party as contemplated by this Agreement will be duly authorized on or prior to the Closing.
2.03 Capitalization.
(a) The authorized capital stock of the Company consists of 2,500,000 shares of Common Stock, of which 2,432,612 shares are issued and outstanding (except that the number of issued and outstanding shares may decrease between the date of this Agreement and the Closing Date due to Company share repurchases under the ESOP, the Company’s redemption of shares from the ESOP Trustee, the Lam Stock Redemption Agreement and any Company share repurchases from any shareholder as provided in Section 4.16). The shareholders of record of the Company are as set forth in Section 2.03 of the Disclosure Schedules. All of the Company Shares have been duly authorized, are validly issued, fully paid and non-assessable, and are owned of record and beneficially by the persons specified in Section 2.03 of the Disclosure Schedules. The Shares are owned free and clear of all Encumbrances.
(b) All of the Company Shares were issued in compliance with applicable Laws. None of the Company Shares were issued in violation of any agreement, arrangement or commitment of Seller or the Company or in violation of any preemptive or similar rights of any Person.
(c) Except as set forth in Section 2.03 of the Disclosure Schedules (i) there are no outstanding or authorized options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the capital stock of the Company or obligating Seller or the Company to issue or sell any shares of capital stock of, or any other interest in, the Company; (ii) the Company does not have outstanding or authorized any stock appreciation, phantom stock, profit participation or similar rights; and (iii) there are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the Company Shares.
2.04 Subsidiaries. Section 2.04 of the Disclosure Schedules sets forth the name of each Subsidiary, and, with respect to each Subsidiary, the jurisdiction in which it is incorporated or organized, the jurisdictions, if any, in which it is qualified to do business, the number of shares of its authorized share capital, the number and class of shares thereof duly issued and outstanding, the names of all shareholders or other equity owners and the number of shares of corporate capital owned by each shareholder or the amount of equity owned by each equity owner. Each Subsidiary is duly organized and is validly existing under the laws of the jurisdiction of its incorporation or organization and is duly qualified or authorized to do business as a foreign corporation or entity and is in good standing under the laws of each jurisdiction in which the conduct of its business or the ownership of its properties makes such qualification or authorization necessary under applicable Law, except where the failure to be so qualified, authorized or in good standing has not had and would not reasonably be expected to have a Company Material Adverse Effect.
Each Subsidiary has all requisite corporate or entity power and authority to own its properties and carry on its business as presently conducted. The outstanding shares of corporate capital or equity interests of each Subsidiary are validly issued, fully paid and non-assessable and were not issued in violation of any purchase or call option, right of first refusal, subscription right, preemptive right or any similar right. All such shares or other equity interests represented as being owned by the Company or any of the Subsidiaries are owned by them free and clear of any and all Encumbrances, except as set forth in Section 2.04 of the Disclosure Schedules. No shares of capital stock are held by any Subsidiary as treasury shares. There is no existing option, warrant, call, right or Contract to which any Subsidiary is a party requiring, and there are no convertible securities of any Subsidiary outstanding which upon conversion would require, the issuance of any shares of corporate capital or other equity interests of any Subsidiary or other securities convertible into shares of corporate capital or other equity interests of any Subsidiary. The Company does not own, directly or indirectly, any share capital or equity securities of any Person other than the Subsidiaries set forth in Section 2.04 of the Disclosure Schedules. Except as set forth on Section 2.04 of the Disclosure Schedules, there are no material restrictions on the ability of the Subsidiaries to make distributions of cash to their respective equity holders.
2.05 No Conflicts; Consents. The execution, delivery and performance by Seller of this Agreement and the other Seller Transaction Documents, and the completion of the transactions contemplated hereby and thereby, do not and will not: (a) conflict with or result in a violation or breach of, or default under, any provision of the certificate of incorporation, bylaws or other organizational documents of Seller, the Company or any Subsidiary; (b) conflict with or result in a violation or breach of any provision of any Law or Governmental Order applicable to Seller, the Company or any Subsidiary, assuming the receipt of all approvals relating to filings under the HSR Act, as described further below; (c) except as set forth in Section 2.05 of the Disclosure Schedules, require the consent, notice or other action by any Person under, materially conflict with, result in a material violation or breach of, constitute a material default or an event that, with or without notice or lapse of time or both, would constitute a material default under, result in the acceleration of or create in any party the right to accelerate, terminate, modify or cancel any Material Contract to which Seller, the Company or any Subsidiary is a party or by which Seller, the Company or any Subsidiary is bound or to which any of their respective properties and assets are subject or any material Permit affecting the properties, assets or business of the Company or any Subsidiary; or (d) result in the creation or imposition of any material Encumbrance other than Permitted Encumbrances on any properties or assets of the Company or any Subsidiary. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to Seller, the Company or any Subsidiary in connection with the execution and delivery of this Agreement and the other Transaction Documents to which Seller or the Company is party or will be a party as contemplated by this Agreement and the completion of the transactions contemplated hereby and thereby, except for such filings as may be required under the HSR Act.
2.06 Financial Statements. and its Subsidiaries at December 31 in each of the years 2011, 2012 and 2013 and the related statements of income and retained earnings, stockholders’ equity and cash flow for the years then ended (the “Audited Financial Statements”), and unaudited financial statements consisting of the balance sheet of the Company and its Subsidiaries as of April 30, 2014 and the related statements of income and cash flow for the four-month period then ended (the “Interim Financial Statements” and together with the Audited Financial Statements, the “Financial Statements”) have been delivered to Buyer. The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved, subject, in the case of the Interim Financial Statements, to normal and recurring year-end adjustments (the effect of which will not be materially adverse to the Company) and the absence of notes (that, if presented, would not differ materially from those presented in the Audited Financial Statements). The Financial Statements are based on the books and records of the Company and its Subsidiaries, and fairly present the financial condition of the Company and its Subsidiaries in all material respects as of the respective dates they were prepared and the results of the operations of the Company and its Subsidiaries for the periods indicated. The balance sheet of the Company and its Subsidiaries as of December 31, 2013 is referred to herein as the “Balance Sheet” and the date thereof as the “Balance Sheet Date,” and the balance sheet of the Company and its Subsidiaries as of April 30, 2014 is referred to herein as the “Interim Balance Sheet” and the date thereof as the “Interim Balance Sheet Date.”
The Company makes and keeps accurate books and records in all material respects and maintains a system of internal accounting controls and procedures sufficient to provide reasonable assurance that (a) transactions are executed in accordance with management’s general or specific authorization, (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP, and to maintain asset accountability, (c) access to material tangible assets is permitted only in accordance with management’s general or specific authorization and (d) the recorded accounting for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any material differences. To Seller’s Knowledge, the Company’s independent auditors and board of directors have been advised of: (i) all “material weaknesses” and “significant deficiencies” (each, as defined in Rule 12b-2 of the Exchange Act), if any, in the design or operation of internal controls which would reasonably be expected to adversely affect the Company’s ability to record, process, summarize and report financial data and (ii) all fraud, if any, whether or not material, that involves management or other employees who have a role in the Company’s internal controls (whether or not remediated). All such material weaknesses and significant deficiencies, if any, have been disclosed to Buyer in writing, and since the date of the most recent evaluation of such internal controls, there have been no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.
2.07 Undisclosed Liabilities. The Company and its Subsidiaries have no liabilities, obligations or commitments of any nature whatsoever, asserted or unasserted, absolute or contingent, accrued or unaccrued, matured or unmatured or otherwise, in each case, with an estimated liability in excess of $300,000.00 (“Liabilities”), except (a) those which are adequately reflected or reserved against in the Balance Sheet as of the Balance Sheet Date, and (b) those which have been incurred in the ordinary course of business consistent with past practice since the Balance Sheet Date and which are not material in amount.
2.08 Absence of Certain Changes, Events and Conditions. Since the Balance Sheet Date, and other than in the ordinary course of business consistent with past practice or as set forth in Section 2.08 of the Disclosure Schedules, there has not been, with respect to the Company or any of its Subsidiaries, any:
(a) event, occurrence or development that has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;
(b) amendment of its charter, bylaws or other organizational documents;
(c) split, combination or reclassification of any shares of its capital stock or other equity interests;
(d) issuance, sale or other disposition of any of its capital stock, other equity interests or other securities, or grant of any options, warrants or other rights to purchase or obtain (including upon conversion, exchange or exercise) any of its capital stock, other equity interests or other securities;
(e) declaration or payment of any dividends or distributions on or in respect of any of its capital stock or other equity interests, or redemption, purchase or acquisition of its capital stock, other equity interests or other securities;
(f) material change in any method of accounting or accounting practice, except as required by GAAP or as disclosed in the notes to the Financial Statements;
(g) material change in cash management practices and its policies, practices and procedures with respect to collection of accounts receivable, establishment of reserves for uncollectible accounts, accrual of accounts receivable, inventory control, prepayment of expenses, payment of trade accounts payable, accrual of other expenses, deferral of revenue and acceptance of customer deposits;
(h) transfer, assignment or grant of any license or sublicense of any material rights under or with respect to any Company Intellectual Property or Company IP Agreements;
(i) material damage, destruction or loss (whether or not covered by insurance) to its material property;
(j) imposition of any Encumbrance upon any of the material properties, capital stock or other equity interests or assets, tangible or intangible, of the Company or any Subsidiary;
(k) (i) grant of any previously unplanned bonuses, whether monetary or otherwise, or previously unplanned increase in any wages, salary, severance, pension or other compensation or benefits in respect of its current or former employees, officers, managers, directors, independent contractors or consultants, other than as provided for in any written agreements or required by applicable Law, or (ii) action to accelerate the vesting or payment of any compensation or benefit for any current or former employee, officer, manager, director, independent contractor or consultant;
(l) hiring or promoting any person as or to (as the case may be) an officer or hiring or promoting any employee below officer except in the ordinary course of business;
(m) entry into a new line of business or abandonment or discontinuance of existing lines of business;
(n) adoption of any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against it under any similar Law;
(o) acquisition by merger or consolidation with any Person;
(p) (i) action to make, change or rescind any Tax election; (ii) action to amend any Tax Return or take any position on any Tax Return; or (iii) action, omission or entrance into any transaction that would have the effect of increasing the Tax liability or reducing any Tax asset of Buyer in respect of any Post-Closing Tax Period; or
(q) any Contract to do any of the foregoing, or any action or omission that would result in any of the foregoing.
Notwithstanding the foregoing, anything expressly permitted by Buyer (including by waiver, consent or otherwise) under Section 4.01 (Conduct of Business Prior to Closing) shall not be deemed a breach of any provision under this Section 2.08.
2.09 Material Contracts.
(a) Section 2.09(a) of the Disclosure Schedules lists each of the following Contracts to which the Company or any Subsidiary is a party, excluding those disclosed in Sections 2.10(b) and 2.11(b) of the Disclosure Schedules (such Contracts, together with all Contracts concerning the occupancy, management or operation of any Real Property (including, without limitation, material brokerage contracts) listed or otherwise disclosed in Section 2.10(b) of the Disclosure Schedules and all Company IP Agreements set forth in Section 2.11(b) of the Disclosure Schedules, “Material Contracts”):
(i) each Contract involving aggregate consideration in excess of $300,000 in any twelve (12) month period and which, in each case, cannot be cancelled by the Company or any Subsidiary bound thereby without penalty or without more than ninety (90) days’ notice;
(ii) each Contract involving aggregate consideration in excess of $300,000 in any twelve (12) month period and that require the Company or any Subsidiary to purchase its total requirements of any product or service from a third party or that contain “take or pay” provisions;
(iii) all Contracts that provide for the indemnification by the Company or any Subsidiary of any Person in an amount exceeding $300,000 or the assumption of any Tax, environmental or other Liability of any Person which, in each case, would reasonably be expected to exceed $100,000;
(iv) all Contracts that relate to the acquisition or disposition of any business, a material amount of stock, or a material amount of other equity interests or other securities or assets of any other Person or real property (whether by merger, sale of stock or other equity interests, sale of assets or otherwise);
(v) all broker, distributor, dealer, manufacturer’s representative, agency, sales promotion, market research, marketing consulting and advertising Contracts, each of which involve an aggregate consideration in excess of $300,000 in any twelve (12) month period or cannot be cancelled by the Company or any Subsidiary bound thereby without penalty or without more than ninety (90) days’ notice;
(vi) all employment agreements and material Contracts with independent contractors or consultants (or similar arrangements) that are not cancellable by the Company or Subsidiary bound thereby without material penalty or without more than ninety (90) days’ notice;
(vii) except for Contracts relating to trade receivables, all Contracts relating to indebtedness (including, without limitation, guarantees) of the Company or any Subsidiary;
(viii) all Contracts with any Governmental Authority;
(ix) all Contracts that limit or purport to limit the ability of the Company or any Subsidiary to compete in any line of business or with any Person or in any geographic area or during any period of time;
(x) any Contracts that provide for any joint venture, partnership or similar arrangement;
(xi) all Contracts between Seller or any Affiliate of Seller (other than the Company or any Subsidiary), on the one hand, and the Company or any Subsidiary, on the other hand;
(xii) all Contracts (including collective bargaining agreements) with any Union;
(xiii) all Contracts with a Manufacturer authorizing the operation of a dealership (“Franchise Agreements”); and
(xiv) any other Contract involving aggregate consideration in excess of $300,000 in a twelve (12) month period and not previously disclosed pursuant to this Section 2.09(a) or Sections 2.10(b) and 2.11(b).
(b) Each Material Contract is valid and binding on the Company or the applicable Subsidiary in accordance with its terms and is in full force and effect. None of the Company or any Subsidiary or, to Seller’s Knowledge, any other party thereto is in breach of or default under (or is alleged to be in breach of or default under), in any material respect, or has provided or received any notice of any intention to terminate, any Material Contract. No event or circumstance has occurred that, with notice or lapse of time or both, would constitute an event of material default under any Material Contract or result in a termination thereof or would cause or permit the acceleration or other changes of any right or obligation or the loss of any benefit thereunder. To Seller’s Knowledge, none of the Company or any Subsidiary has sold any new vehicle to any Person who intended or intends to export the vehicle in violation of any Franchise Agreement. Complete and correct copies of each Material Contract (including all modifications, amendments and supplements thereto and waivers thereunder) in the Company’s possession have been made available to Buyer.
2.10 Title to Assets; Real Property.
(a) The Company or its applicable Subsidiary has good and valid (and, in the case of owned Real Property, good and marketable fee simple) title to, or a valid leasehold interest in, all Real Property and personal property and other assets reflected in the Audited Financial Statements or acquired after the Balance Sheet Date, other than properties and assets sold or otherwise disposed of in the ordinary course of business consistent with past practice since the Balance Sheet Date or as set forth in Section 2.10(a) of the Disclosure Schedules. All such properties and assets (including leasehold interests) are free and clear of Encumbrances except for the following (collectively referred to as “Permitted Encumbrances”):
(i) those items set forth in Section 2.10(a) of the Disclosure Schedules;
(ii) liens for Taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings;
(iii) mechanics, carriers’, workmen’s, repairmen’s or other like liens or similar Encumbrances arising or incurred in the ordinary course of business consistent with past practice for amounts that are not delinquent or the amount and validity of which is being contested in good faith and which have not and would not reasonably be expected to be, individually or in the aggregate, materially adverse to the business of the Company or any Subsidiary;
(iv) defects, exceptions, restrictions, easements, rights of way, zoning ordinances and other similar encumbrances affecting Real Property that are disclosed in the title reports used for the most recent appraisals of Real Property; or
(v) other than with respect to owned Real Property, liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business consistent with past practice which are not, individually or in the aggregate, material to the business of the Company and its Subsidiaries taken as a whole.
(b) Section 2.10(b) of the Disclosure Schedules lists (i) the street address of each parcel of Real Property; (ii) if such property is leased or subleased by the Company or any Subsidiary, the landlord under the lease, the rental amount currently being paid, and the expiration of the term of such lease or sublease for each leased or subleased property; and (iii) the current use of such property. With respect to owned Real Property, Seller has delivered or made available to Buyer, to the extent in Company’s possession, copies of the deeds and other instruments (as recorded) by which the Company or the applicable Subsidiary acquired such Real Property, and copies of all title insurance policies, opinions, abstracts and surveys in the possession of Seller, the Company or any Subsidiary and relating to the Real Property. With respect to leased Real Property, Seller has delivered or made available to Buyer copies of any leases affecting the Real Property. Except as set forth in Section 2.10(b) of the Disclosure Schedules, neither the Company nor any Subsidiary is a sublessor or grantor under any sublease or other instrument granting to any other Person any right to the possession, lease, occupancy or enjoyment of any leased Real Property. Except as would not reasonably be expected to have a Company Material Adverse Effect, (i) the use and operation of the Real Property in the conduct of the Company’s or any Subsidiary’s business do not violate in any material respect any Law, covenant, condition, restriction, easement, license, permit or agreement; (ii) no material improvements constituting a part of the Real Property materially encroach on real property owned or leased by a Person other than the Company or any Subsidiary; (iii) there are no Actions pending nor, to the Seller’s Knowledge, threatened against or affecting the Real Property or any portion thereof or interest therein in the nature or in lieu of condemnation or eminent domain proceedings. The information set forth on the first page of the Real Property Spreadsheet is substantially true and accurate.
2.11 Intellectual Property.
(a) Section 2.11(a) of the Disclosure Schedules lists all (i) Company IP Registrations and (ii) Company Intellectual Property, including software, that are not registered but that are material to the Company’s or any Subsidiary’s business or operations. Except as had not had, and would not reasonably be expected to have, a Company Material Adverse Effect, all required filings and fees related to the Company IP Registrations have been timely filed with and paid to the relevant Governmental Authorities and authorized registrars, and all Company IP Registrations are otherwise in good standing.
(b) Section 2.11(b) of the Disclosure Schedules lists all material Company IP Agreements. Seller has provided Buyer with copies of all such material Company IP Agreements in Seller’s possession, including all material modifications, amendments and supplements thereto and waivers thereunder. Each Company IP Agreement is valid and binding on the Company or its Subsidiary, as applicable, in accordance with its terms and is in full force and effect except for the failure to be so valid and binding as has not and would not reasonably be expected to have a Company Material Adverse Effect. To Seller’s Knowledge, none of the Company, any Subsidiary or any other party thereto is in material breach of or material default under (or, to Seller’s Knowledge, is alleged to be in material breach of or material default under), or has provided or received any notice of breach or default of or any intention to terminate, any material Company IP Agreement.
(c) Except as set forth in Section 2.11(c) of the Disclosure Schedules, and as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect the Company or its applicable Subsidiary is the sole and exclusive legal and beneficial, and with respect to the Company IP Registrations, record owner or licensee, as the case may be, of all right, title and interest in and to the Company Intellectual Property, and has the valid right to use all other Intellectual Property used in or necessary for the conduct of the current business or operations of the Company and its Subsidiaries, in each case, free and clear of Encumbrances other than Permitted Encumbrances.
(d) Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, the completion of the transactions contemplated hereunder will not result in the loss or impairment of or payment of any additional amounts with respect to, nor require the consent of any other Person in respect of, the Company’s or any Subsidiary’s right to own, use or hold for use any Intellectual Property as owned, used or held for use in the conduct of the business or operations of the Company and its Subsidiaries as currently conducted.
(e) Except as has not had, and would not reasonably be expected to have, a Company Material Adverse Effect, (i) the Company’s and each Subsidiary’s rights in the Company Intellectual Property are valid, subsisting and enforceable; and (ii) the Company and its Subsidiaries have taken all commercially reasonable steps to maintain the Company Intellectual Property and to protect and preserve the confidentiality of all trade secrets included in the Company Intellectual Property.
(f) Except as set forth in Section 2.11(f) of the Disclosure Schedules, Seller, the Company and its Subsidiaries have not received any written notice that the conduct of the business of the Company and its Subsidiaries as currently conducted, and the products, processes and services of the Company and its Subsidiaries, have materially infringed, misappropriated, diluted or otherwise violated, or materially infringe, dilute, misappropriate or otherwise violate, the Intellectual Property or other rights of any Person. To Seller’s Knowledge, no Person has materially infringed, misappropriated, diluted or otherwise violated, or is currently materially infringing, misappropriating, diluting or otherwise violating, any Company Intellectual Property.
(g) There are no Actions settled, pending or, to Seller’s Knowledge, threatened (including in the form of offers to obtain a license) where the estimated liability exceeds $300,000.00: (i) alleging any infringement, misappropriation, dilution or violation of the Intellectual Property of any Person by the Company or any Subsidiary; (ii) challenging the validity, enforceability, registrability or ownership of any Company Intellectual Property or the rights of the Company or any Subsidiary with respect to any Company Intellectual Property; or (iii) by the Company or any Subsidiary or any other Person alleging any infringement, misappropriation, dilution or violation by any Person of the Company Intellectual Property. Neither the Company nor any Subsidiary is subject to any outstanding or prospective Governmental Order (including any motion or petition therefor) that does or would materially restrict or impair the use of any material Company Intellectual Property.
2.12 Inventory. Except as has not had and would not reasonably be expected to have a Company Material Adverse Effect, all inventory of the Company and its Subsidiaries, whether or not reflected in the Balance Sheet, consists of a quality and quantity usable and salable in the ordinary course of business consistent with past practice, except for obsolete, damaged, defective or slow-moving items that have been written off or written down to fair market value or for which adequate reserves have been established. Except as has not had and would not reasonably be expected to have a Company Material Adverse Effect and except as specified in Section 2.12 of the Disclosure Schedules, all such inventory is owned by the Company free and clear of all Encumbrances, and no inventory is held on a consignment basis.
2.13 Accounts Receivable. The accounts receivable reflected on the Interim Balance Sheet and the accounts receivable arising after the date thereof (a) have arisen from bona fide transactions entered into by the Company or its Subsidiaries involving the sale of goods or the rendering of services in the ordinary course of business consistent with past practice; (b) constitute only valid, undisputed claims of the Company or its Subsidiaries not subject to claims of set-off or other defenses or counterclaims other than normal cash discounts accrued in the ordinary course of business consistent with past practice; and (c) subject to a reserve for bad debts shown on the Interim Balance Sheet or, with respect to accounts receivable arising after the Interim Balance Sheet Date, on the accounting records of the Company, are, to Seller’s Knowledge, collectible in full within 90 days after billing. The reserve for bad debts shown on the Interim Balance Sheet or, with respect to accounts receivable arising after the Interim Balance Sheet Date, on the accounting records of the Company, has been determined in accordance with GAAP, consistently applied, subject to normal year-end adjustments and the absence of disclosures normally made in footnotes.
2.14 Customers, Manufacturers and Suppliers.
(a) Section 2.14(a) of the Disclosure Schedules sets forth (i) each consumer who has paid aggregate consideration to the Company or a single Subsidiary for goods or services rendered in an amount greater than or equal to $300,000 for each of the two most recent fiscal years (collectively, the “Material Customers”); and (ii) the amount of consideration paid by each Material Customer during such periods. Except as set forth in Section 2.14(a) of the Disclosure Schedules, to Seller’s Knowledge neither the Company nor any Subsidiary has received any notice that any of its Material Customers has ceased, or intends to cease after the Closing, to use the goods or services of the Company or any Subsidiary or to otherwise terminate or materially reduce its relationship with the Company or any Subsidiary.
(b) Section 2.14(b) of the Disclosure Schedules sets forth (i) each supplier to whom the Company or any Subsidiary has paid aggregate consideration for goods or services rendered in an amount greater than or equal to $500,000 for each of the two most recent fiscal years (collectively, the “Material Suppliers”); and (ii) the amount of purchases from each Material Supplier during such periods. To Seller’s Knowledge, neither the Company nor any Subsidiary has received any notice, that any of its Material Suppliers has ceased, or intends to cease, to supply goods or services to the Company or any Subsidiary or to otherwise terminate or materially reduce such Material Supplier’s relationship with the Company or any Subsidiary. The term “supplier” shall not include any Manufacturer from which the Company and/or its Subsidiaries purchase any vehicles, parts, accessories and/or services in the ordinary course of business.
(c) Since December 31, 2012, except as set forth on Section 2.14(c) of the Disclosure Schedules, no Manufacturer with which the Company or any Subsidiary conducts business has: (i) notified the Company, any Subsidiary or Seller of any material deficiency in dealership operations (including brand imaging, facility conditions, sales efficiency, customer satisfaction, warranty work and reimbursement, or sales incentives), except in the ordinary course of business consistent with past practices; (ii) otherwise advised the Company, any Subsidiary or Seller of a present or future need for material facility improvements or upgrades in connection with any dealership or any dealership premises of the Company or any Subsidiary except as set forth in Section 2.14(c) of the Disclosure Schedules; (iii) notified the Company, any Subsidiary or Seller in writing of the awarding or possible awarding of a manufacturer franchise to any Person in the states in which any of the Company’s dealerships operate; or (iv) conducted any audit of the Company’s sales practices and documentation or service practices and warranty claim documentation, except in the ordinary course of business consistent with past practices. Except as set forth in Section 2.14(c) of the Disclosure Schedules, neither the Company nor any Subsidiary has been subject to a chargeback, or, to Seller’s Knowledge, a threatened chargeback, of monies previously paid to the Company or any Subsidiary with respect to its vehicle sales and warranty claims in an aggregate amount exceeding $500,000 in the twenty-four (24) month period preceding the date hereof.
(d) Other than Contracts that have expired pursuant to their express terms or that were terminated by the Company or any of its Subsidiaries in connection with the sale of a dealership business to a third party, since December 31, 2011, no Manufacturer has terminated its relationship with the Company or any Subsidiary or materially reduced its pricing with the Company or any Subsidiary and no Manufacturer has notified the Company or any Subsidiary in writing that it intends to terminate or materially reduce its pricing with the Company or any Subsidiary. Since December 31, 2011, neither the Company nor any Subsidiary has (i) received any written notice or other communication from any Manufacturer that such Manufacturer will not continue as a supplier of the Company and its Subsidiaries after the Closing or that such Manufacturer intends to terminate or materially modify existing Contracts with the Company or its Subsidiaries or (ii) received any written complaint from any Manufacturer regarding the products or services of the Company or its Subsidiaries, except in the ordinary course of business.
2.15 Insurance. Section 2.15 of the Disclosure Schedules sets forth a list, as of the date hereof, of all current policies or binders of fire, liability, product liability, umbrella liability, real and personal property, workers’ compensation, vehicular, directors’ and officers’ liability, fiduciary liability and other casualty and property insurance maintained by the Company or any Subsidiary and relating to the assets, business, operations, employees, officers and directors of the Company or its Subsidiaries (collectively, the “Insurance Policies”). Such Insurance Policies are in full force and effect, will be renewed in the ordinary course of business and shall remain in full force and effect following the completion of the transactions contemplated by this Agreement. Neither Seller nor, to Seller’s Knowledge, any of its Affiliates (including the Company and any Subsidiary), have received any written notice of cancellation of, premium increase with respect to, or material alteration of coverage under, any of such Insurance Policies. All premiums due on such Insurance Policies have either been paid or, if due and payable prior to Closing, will be paid prior to Closing in accordance with the payment terms of each Insurance Policy. Except as set forth in Section 2.15 of the Disclosure Schedules, the Insurance Policies do not provide for any retrospective premium adjustment or other experience-based liability on the part of the Company or any Subsidiary. All such Insurance Policies (a) are valid and binding in accordance with their terms; (b) are provided by carriers who are, to Seller’s Knowledge, financially solvent; and (c) have not, to Seller’s Knowledge, been subject to any lapse in coverage. Except as set forth on Section 2.15 of the Disclosure Schedules or otherwise delivered by Seller to Buyer in writing on or before July 15, 2014 with specific reference made to this Section of the Disclosure Schedules, there are no claims related to the business of the Company or any Subsidiary pending under any Insurance Policies as to which coverage has been denied or disputed or in respect of which there is an outstanding reservation of rights.
2.16 Legal Proceedings; Governmental Orders.
(a) Except as set forth in Section 2.16(a) of the Disclosure Schedules or otherwise delivered by Seller to Buyer in writing on or before July 15, 2014 with specific reference made to this Section of the Disclosure Schedules, there are no Actions pending or, to Seller’s Knowledge, threatened (a) against or by the Company or any Subsidiary affecting any of their respective properties or assets with an estimated or expected contingent liability in excess of $300,000; or (b) against or by the Company, any Subsidiary, Seller or any of their Affiliates that challenges or seeks to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. To Seller’s Knowledge, no event has occurred or circumstances exist that would be reasonably likely to give rise to any such Action.
(b) Except as set forth in Section 2.16(b) of the Disclosure Schedules or as otherwise delivered by Seller to Buyer in writing on or before July 15, 2014 with specific reference made to this Section of the Disclosure Schedules, there are no outstanding material Governmental Orders and no material unsatisfied judgments, penalties or awards against or affecting the Company, any Subsidiary or any of their respective material properties or assets. The Company and each Subsidiary is in compliance with the terms of each Governmental Order set forth in Section 2.16(b) of the Disclosure Schedules. To Seller’s Knowledge, no event has occurred that constitutes or could reasonably be expected to result in (with or without notice or lapse of time) a violation of any such Governmental Order.
2.17 Compliance with Laws; Permits.
(a) Except as set forth in Section 2.17(a) of the Disclosure Schedules, to Seller’s Knowledge the Company and each Subsidiary has complied, and is now in compliance, in all material respects with all Laws applicable to it or their respective business, properties or assets.
(b) All Permits required for the Company and its Subsidiaries to conduct their respective businesses substantially as conducted as of the date hereof have been obtained and are valid and in full force and effect. All fees and charges with respect to such Permits as of the date hereof have been paid in full except to the extent not required to have been paid in full. Section 2.17(b) of the Disclosure Schedules lists all current material Permits issued to the Company or any Subsidiary, including the names of the Permits and their respective dates of issuance and expiration, in each case, to the extent Known by the Seller. To Seller’s Knowledge, no event has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation or suspension of any material Permit set forth in Section 2.17(b) of the Disclosure Schedules.
2.18 Environmental Matters.
(a) Except as disclosed in the environmental reports listed in Section 2.18(a) of the Disclosure Schedules (the “Environmental Reports”), the Company and each Subsidiary is in compliance with all Environmental Laws and has not, and Seller has not, received from any Person any: (i) Environmental Notice or Environmental Claim; or (ii) written request for information pursuant to Environmental Law, which, in each case, either remains pending or unresolved, or is the source of ongoing obligations or requirements as of the Closing Date.
(b) Except as disclosed in the Environmental Reports, the Company and each Subsidiary has obtained and is in material compliance with all Environmental Permits ( the material ones of which are disclosed in Section 2.18(b) of the Disclosure Schedules) necessary for the ownership, lease, operation or use of the business or assets of the Company and each Subsidiary, and all such Environmental Permits are in full force and effect and will be maintained in full force and effect by Seller through the Closing Date in accordance with Environmental Law. Except as disclosed in the Environmental Reports, neither the Company nor Seller is aware of any condition, event or circumstance that might prevent or impede, after the Closing Date, the ownership, lease, operation or use of the business or assets of the Company or any Subsidiary as currently carried out. With respect to all Environmental Permits, Seller has undertaken, or will undertake prior to the Closing Date, all measures necessary to ensure that they continue in effect, and neither the Company nor Seller is aware of any condition, event or circumstance that might prevent or impede their continued effectiveness. Neither the Company nor Seller has received any Environmental Notice or written communication regarding any material adverse change in the status or terms and conditions of the Environmental Permits necessary for the ownership, lease, operation or use of the business or assets of the Company and each Subsidiary.
(c) Except as disclosed in the Environmental Reports, no real property currently or formerly owned, operated or leased by the Company or any Subsidiary is listed on, or has been proposed for listing on, the National Priorities List (or CERCLIS) under CERCLA, or any similar state list.
(d) Except as set forth on Section 2.18(d) of the Disclosure Schedules, to Seller’s Knowledge there has been no material Release of Hazardous Materials in contravention of Environmental Law with respect to the business or assets of the Company or any Subsidiary or any real property owned, operated or leased by the Company or any Subsidiary, and none of the Company, any Subsidiary or Seller has received an Environmental Notice that any real property owned, operated or leased in connection with the business of the Company or any Subsidiary (including soils, groundwater, surface water, buildings and other structure located on any such real property) has been contaminated with any Hazardous Material which could reasonably be expected to result in an Environmental Claim against, or a violation of Environmental Law or term of any Environmental Permit by, Seller, the Company or any Subsidiary.
(e) Section 2.18(e) of the Disclosure Schedules contains a complete and accurate list of all off-site Hazardous Materials collection companies used by the Company, any Subsidiary or Seller in the conduct of the business of the Company and its Subsidiaries as to which the Company, any Subsidiary or any Seller for the ten (10) year period preceding the date of this Agreement may retain liability, and none of Seller, the Company or any Subsidiary has received any Environmental Notice regarding potential liabilities with respect to such off-site Hazardous Materials collection companies used by the Company, any Subsidiary or Seller that has had, or would reasonably be expected to have, a Company Material Adverse Effect.
(f) Section 2.18(f) of the Disclosure Schedules sets forth a list or such list has otherwise been delivered by Seller to Buyer in writing before July 15, 2014 with specific reference made to this Section of the Disclosure Schedules: (i) any and all material environmental reports, studies, audits, records, sampling data, site assessments, risk assessments, economic models and other similar documents with respect to the business or assets of the Company or any Subsidiary or any currently owned, operated or leased real property which documents are in the possession of Seller, the Company or any Subsidiary related to compliance with Environmental Laws, Environmental Claims or an Environmental Notice or the Release of Hazardous Materials; and (ii) as of the date hereof, any and all material documents concerning planned or anticipated capital expenditures required to reduce, offset, limit or otherwise control pollution and/or emissions, manage waste or otherwise ensure compliance with current or future Environmental Laws (including, without limitation, costs of remediation, pollution control equipment and operational changes).
(g) To the Knowledge of Seller and the Company, there is no condition, event or circumstance concerning the Release or regulation of Hazardous Materials that might, after the Closing Date, prevent or materially increase the costs associated with the ownership, lease, operation, performance or use of the business or assets of the Company or any Subsidiary as currently carried out.
2.19 Employee Benefit Matters.
(a) Section 2.19(a) of the Disclosure Schedules contains a true and complete list, as of the date hereof, of each material pension, benefit, retirement, compensation, employment, consulting, profit-sharing, deferred compensation, incentive, bonus, performance award, phantom equity, stock or stock-based, change in control employment agreement, retention, severance, vacation, paid time off, welfare, fringe-benefit and other similar agreement, plan, policy, program or arrangement (and any material amendments thereto), in each case whether funded or unfunded, including each “employee benefit plan” within the meaning of Section 3(3) of ERISA, whether or not tax-qualified and whether or not subject to ERISA, which is or has been maintained, sponsored, contributed to, or required to be contributed to by the Company or any Subsidiary at any time during the three-year period preceding the Closing Date for the benefit of any current employee, officer, director, retiree, independent contractor or consultant of the Company or any Subsidiary or any spouse or dependent of such individual, (as listed on Section 2.19(a) of the Disclosure Schedules, each, a “Benefit Plan”). Section 2.19(a) of the Disclosure Schedules separately identifies (i) each Benefit Plan that contains a change in control provision and (ii) each Benefit Plan that is maintained, sponsored, contributed to, or required to be contributed to by the Company or any Subsidiary primarily for the benefit of employees outside of the United States (a “Non-U.S. Benefit Plan”).
(b) With respect to each Benefit Plan (other than any multiemployer plan within the meaning of Section 3(37) of ERISA (each a “Multiemployer Plan”)), Seller has made available to Buyer copies of each of the following as of the date hereof: (i) where the Benefit Plan has been reduced to writing, the material plan document together with all material amendments; (ii) where the Benefit Plan has not been reduced to writing, a written summary of all material plan terms; (iii) copies of any material summary plan descriptions, summaries of material modifications, employee handbooks relating to any Benefit Plan; (iv) in the case of any Benefit Plan that is intended to be qualified under Section 401(a) of the Code, a copy of the most recent determination, opinion or advisory letter from the Internal Revenue Service; (v) in the case of any Benefit Plan for which a Form 5500 is required to be filed, a copy of the two most recently filed Form 5500s, with schedules and financial statements attached; (vi) actuarial valuations and reports related to any Benefit Plans with respect to the two most recently completed plan years; (vii) the most recent nondiscrimination tests performed under the Code; and (viii) copies of material notices, letters or other correspondence from the Internal Revenue Service, Department of Labor, Pension Benefit Guaranty Corporation or other Governmental Authority relating to the Benefit Plan.
(c) Except as set forth in Section 2.19(c) of the Disclosure Schedules, to Seller’s Knowledge each Benefit Plan and related trust (other than any multiemployer plan) has been established, administered and maintained substantially in accordance with its terms and in substantial compliance with all applicable Laws (including ERISA, the Code and any applicable local Laws) in all material respects. Each Benefit Plan that is intended to be qualified under Section 401(a) of the Code (a “Qualified Benefit Plan”) (other than any Multiemployer Plans) is so qualified and has received a favorable and current determination letter from the Internal Revenue Service, or with respect to a prototype plan, can rely on an opinion letter from the Internal Revenue Service to the prototype plan sponsor, to the effect that such Qualified Benefit Plan is so qualified and that the plan and the trust related thereto are exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, has been amended to comply with all substantial legal requirements within the remedial amendment period applicable to those requirements or the remedial amendment period applicable to those requirements has not expired, and, to Seller’s Knowledge, nothing has occurred that would reasonably be expected to adversely affect the qualified status of any Qualified Benefit Plan (other than any Multiemployer Plans). Except as set forth in Section 2.19(c) of the Disclosure Schedules, all benefits, contributions and premiums (including any stop-loss insurance premiums associated with any “group health plan” (as such term is defined in Section 5000(b)(1) of the Code) relating to each Benefit Plan (other than any Multiemployer Plan) have been timely paid in accordance with the terms of such Benefit Plan and any related insurance contracts and all applicable Laws and accounting principles, and all benefits under any unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved to the extent required by, and in accordance with, GAAP in all material respects. All Non-U.S. Benefit Plans sponsored by Seller, if any, that are intended to be funded and/or book-reserved are funded and/or book-reserved, as appropriate, based upon reasonable actuarial assumptions. With respect to the ESOP, the Company or a Subsidiary or an ERISA Affiliate of the Company or the ESOP maintains and has always maintained since the initial effective date of the ESOP ERISA fiduciary liability insurance coverage.
(d) None of the Company, any Subsidiary or any of their ERISA Affiliates has (i) incurred, either directly or indirectly, any material Liability under Title I or Title IV of ERISA or related provisions of the Code or applicable local Law relating to employee benefit plans; (ii) failed to timely pay premiums to the Pension Benefit Guaranty Corporation; or (iii) withdrawn from any Benefit Plan during the six-year period prior to the Closing except for such material Liability, failure or withdrawal as has not had and would not reasonably be expected to have a Company Material Adverse Effect.
(e) With respect to each Benefit Plan as of the date hereof (i) except as set forth in Section 2.19(e) of the Disclosure Schedules, no such plan is a Multiemployer Plan, and (A) all contributions required to be paid by the Company, any Subsidiary or their ERISA Affiliates have been timely paid to the applicable Multiemployer Plan; (B) none of the Company, any Subsidiary or any ERISA Affiliate has had an obligation to contribute to or sponsored any defined pension plan, including a defined benefit pension plan is a Multiemployer Plan during the six-year period prior to the Closing; and (ii) no such plan is a “multiple employer plan” within the meaning of Section 413(c) of the Code or a “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA).
(f) Except as set forth in Section 2.19(f) of the Disclosure Schedules, other than any Multiemployer Plan there is no pending or, to Seller’s Knowledge, threatened material Action relating to a Benefit Plan (other than routine claims for benefits), and no Benefit Plan has within the three years before the date hereof been the subject of a material audit by a Governmental Authority or the subject of an application or filing under or is a participant in, an amnesty, voluntary compliance, self-correction or similar program sponsored by any Governmental Authority.
(g) There has been no amendment to, announcement by Seller, the Company, or any Subsidiary, or change in employee participation or coverage under any Benefit Plan or collective bargaining agreement (but excluding Multiemployer Plans) that would materially increase the annual expense of maintaining such plan above the level of the expense incurred for the most recently completed fiscal year with respect to any director, officer, employee, independent contractor or consultant, as applicable.
(h) Each Benefit Plan that is subject to Section 409A of the Code has during the six-year period prior to the Closing been administered in substantial compliance with its terms and the operational and documentary requirements of Section 409A of the Code and substantially all applicable regulatory guidance (including notices, rulings and proposed and final regulations) thereunder. None of the Company or any Subsidiary has any obligation to gross up, indemnify or otherwise reimburse any individual for any excise taxes, interest or penalties incurred pursuant to Section 409A of the Code.
(i) Except as set forth in Section 2.19(i) of the Disclosure Schedules, neither the execution of this Agreement nor the completion of any of the material transactions contemplated by this Agreement will (either alone or upon the occurrence of any additional or subsequent events): (i) entitle any current or former director, officer, employee, independent contractor or consultant of the Company or any Subsidiary to severance pay or any other payment; (ii) except as otherwise contemplated by the transactions contemplated by this Agreement and/or the Seller Transaction Documents, accelerate the time of payment, funding or vesting, or increase the amount of compensation due to any such individual; (iii) limit or restrict the right of the Company or any Subsidiary to merge, amend or terminate any Benefit Plan; (iv) increase the amount payable under or result in any other material obligation pursuant to any Benefit Plan; (v) result in “excess parachute payments” within the meaning of Section 280G(b) of the Code; or (vi) require a “gross-up” or other payment to any “disqualified individual” within the meaning of Section 280G(c) of the Code. Seller has made available to Buyer copies of any Section 280G calculations prepared (whether or not final) with respect to any disqualified individual in connection with the transactions.
(j) With respect to any Benefit Plan other than any Multiemployer Plans, there has been no prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code during the six-year period prior to the Closing which failed to qualify for a prohibited transaction exemption under Section 408 of ERISA or Section 4975(d) of the Code.
2.20 Employment Matters.
(a) A list has been made available to Buyer of all persons who are employees, independent contractors or consultants of the Company or any Subsidiary as May 1, 2014, including any employee who is on a leave of absence of any nature, paid or unpaid, authorized or unauthorized, and sets forth for each such individual the following: (i) name; (ii) title or position (including whether full or part time); (iii) hire date; (iv) current annual base compensation rate; (v) commission, bonus or other incentive-based compensation; and (vi) a description of the fringe benefits provided to each such individual as of the date hereof.
(b) Except as set forth in Section 2.20(b) of the Disclosure Schedules, as of the date hereof, none of the Company or any Subsidiary is, and has been for the past three years, a party to, bound by, or negotiating any collective bargaining agreement or other Contract with a union, works council or labor organization (collectively, “Union”), and there is not, and has not been for the past three years, any Union representing any employee of the Company or any Subsidiary, and, to Seller’s Knowledge, no Union or group of employees is seeking or has sought to organize employees for the purpose of collective bargaining. Except as set forth in Section 2.20(b) of the Disclosure Schedules, in the past two years there has not been, any strike, work stoppage, lockout, or collective refusal to work overtime or other similar labor disruption or dispute affecting the Company or any Subsidiary or any of their employees.
(c) To Seller’s Knowledge, the Company and each Subsidiary are in compliance in all material respects with the terms of the collective bargaining agreements and other Contracts listed on Section 2.20(b) of the Disclosure Schedules and all applicable Laws pertaining to employment and employment practices, including all Laws relating to labor relations, equal employment opportunities, fair employment practices, employment discrimination, harassment, retaliation, reasonable accomodation, disability rights or benefits, immigration, wages, hours, overtime compensation, child labor, hiring, promotion and termination of employees, working conditions, meal and break periods, privacy, health and safety, workers’ compensation, leaves of absence and unemployment insurance, except, in each case, to the extent that non-compliance has not and would not reasonably be expected to be materially adverse to the Company and its Subsidiaries taken as a whole. To Seller’s Knowledge, all individuals characterized and treated by the Company or any Subsidiary as independent contractors or consultants are properly treated as independent contractors under all applicable Laws. Except as set forth in Section 2.20(c) of the Disclosure Schedules, to Seller’s Knowledge, all employees of the Company or any Subsidiary classified as exempt under the Fair Labor Standards Act and state and local wage and hour laws are properly classified. Except as set forth in Section 2.20(c), there are no Actions for which liability is estimated to be in excess of $300,000.00 against the Company or any Subsidiary pending, or to the Seller’s Knowledge, threatened to be brought or filed, by or with any Governmental Authority or arbitrator in connection with the employment of any current or former applicant, employee, consultant, intern or independent contractor of the Company or any Subsidiary, including, without limitation, any claim relating to unfair labor practices, employment discrimination, harassment, retaliation, equal pay, wage and hours or any other employment related matter arising under applicable Laws.
(d) The Company and each Subsidiary has complied with the WARN Act and have no current plans to undertake any action in the future that would trigger the WARN Act.
(e) Neither the Company nor any Subsidiary is, or has been for the past two years, the subject of any audit, investigation or enforcement action by any Governmental Authority in connection with any Government Contract or related compliance with Executive Order No. 11246 of 1965 (“E.O. 11246”), Section 503 of the Rehabilitation Act of 1973 (“Section 503”) and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (“VEVRAA”), including all implementing regulations. Neither the Company nor any Subsidiary has been debarred, suspended or otherwise made ineligible from doing business with the United States government or any government contractor.
2.21 Taxes. Except as set forth in Section 2.21 of the Disclosure Schedules:
(a) All Tax Returns required to be filed on or before the Closing Date by the Company or any Subsidiary have been, or will be, timely filed. Such Tax Returns are, or will be, true, complete and correct in all material respects. All Taxes due and owing by the Company or any Subsidiary (whether or not shown on any Tax Return) have been, or will be, timely paid.
(b) The Company and each Subsidiary has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, customer, shareholder or other party, and has complied with all information reporting and backup withholding provisions of applicable Law.
(c) No claim has been made by any taxing authority in any jurisdiction where the Company or any Subsidiary does not file Tax Returns that it is, or may be, subject to Tax by that jurisdiction.
(d) No extensions other than for tax year 2013 or waivers of statutes of limitations are currently outstanding with respect to any Taxes of the Company or any Subsidiary.
(e) Section 2.21(e) of the Disclosure Schedules sets forth:
(i) the taxable years of the Company and each Subsidiary as to which the applicable statutes of limitations on the assessment and collection of Taxes have not expired;
(ii) those years for which examinations by the taxing authorities have been completed; and
(iii) those taxable years for which examinations by taxing authorities are presently being conducted.
(f) All deficiencies asserted, or assessments made, against the Company or any Subsidiary as a result of any examinations by any taxing authority have been fully paid.
(g) Neither the Company nor any Subsidiary is a party to any Action by any taxing authority. There are no pending or threatened Actions by any taxing authority.
(h) Seller has delivered to Buyer copies of all federal, state, local and foreign income, franchise and similar Tax Returns, examination reports, and statements of deficiencies assessed against, or agreed to by, the Company or any Subsidiary for all Tax periods ending after December 31, 2008.
(i) There are no Encumbrances for Taxes (other than for current Taxes not yet due and payable) upon the assets of the Company or any Subsidiary.
(j) Neither the Company nor any Subsidiary is a party to, or bound by, any Tax indemnity, Tax sharing or Tax allocation agreement, except among the Company and/or its Subsidiaries.
(k) No private letter rulings, technical advice memoranda or similar agreement or rulings have been requested, entered into or issued by any taxing authority with respect to the Company or any Subsidiary.
(l) None of the Company or any Subsidiary is party to any agreement, contract, arrangement or plan that has resulted or would result, separately or in the aggregate, in the payment of any “excess parachute payment” within the meaning of Section 280G of the Code (or any corresponding provision of state, local or foreign Tax law).
(m) Neither the Company nor any Subsidiary has been a member of an affiliated, combined, consolidated or unitary Tax group for Tax purposes. Neither the Company nor any Subsidiary has Liability for Taxes of any Person (other than the Company and its Subsidiaries) under Treasury Regulations Section 1.1502-6 (or any corresponding provision of state, local or foreign Law), as transferee or successor, by contract or otherwise.
(n) Neither the Company nor any Subsidiary will be required to include any item of income in, or exclude any item or deduction from, taxable income for any taxable period or portion thereof ending after the Closing Date as a result of:
(i) any change in a method of accounting under Section 481 of the Code (or any comparable provision of state, local or foreign Tax Laws), or use of an improper method of accounting, for a taxable period ending on or prior to the Closing Date;
(ii) an installment sale or open transaction occurring on or prior to the Closing Date;
(iii) a prepaid amount received on or before the Closing Date;
(iv) any closing agreement under Section 7121 of the Code, or similar provision of state, local or foreign Law; or
(v) any election under Section 108(i) of the Code.
(o) None of the Company nor any Subsidiary is or has been, during the applicable period specified in Section 897(c)(1)(a) of the Code, a United States real property holding corporation (as defined in Section 897(c)(2) of the Code).
(p) Neither the Company nor any Subsidiary has been a “distributing corporation” or a “controlled corporation” in connection with a distribution described in Section 355 of the Code.
(q) Neither the Company nor any Subsidiary is, or has been, a party to, or a promoter of, a “reportable transaction” within the meaning of Section 6707A(c)(1) of the Code and Treasury Regulations Section 1.6011-4(b) for any periods for which the applicable statute of limitations has not run.
(r) There is currently no limitation on the utilization of net operating losses, capital losses, built-in losses, tax credits or similar items of the Company or any Subsidiary under Sections 269, 382, 383, 384 or 1502 of the Code and the Treasury Regulations thereunder (and comparable provisions of state, local or foreign Law).
(s) Section 2.21(s) of the Disclosure Schedules sets forth all foreign jurisdictions in which the Company or any Subsidiary is subject to Tax, is engaged in business or has a permanent establishment. Neither the Company nor any Subsidiary has entered into a gain recognition agreement pursuant to Treasury Regulations Section 1.367(a)-8. Neither the Company nor any Subsidiary has transferred an intangible, the transfer of which would be subject to the rules of Section 367(d) of the Code.
(t) Section 2.21(t) of the Disclosure Schedules sets forth the Subsidiaries of the Company that are properly characterized as disregarded entities for Untied States federal income tax purposes and the Subsidiaries that are properly characterized as corporations for United States federal income tax purposes.
(u) Except a set forth in Section 2.21(u) of the Disclosure Schedules, each of the Company and its Subsidiaries has filed with the appropriate Governmental Authorities all unclaimed property reports as required under applicable Laws.
2.22 Books and Records. The minute books and stock record books of the Company and each Subsidiary for the five (5) year period preceding the date hereof have been made available to Buyer and are substantially complete and correct in all material respects and have been maintained in the ordinary course of business consistent with past practices. Since December 31, 2008 to the date hereof, the minute books of the Company and each Subsidiary contain accurate and complete records in all material respects of all meetings, and actions taken by written consent of, the stockholders (or other holders of equity interests), the board of directors (or manager(s)) and any committees of the board of directors (or manager(s)) of the Company or the applicable Subsidiary, and no meeting, or action taken by written consent, of any such stockholders (or other holders of equity interests), board of directors (or manager(s)) or committee has been held for which minutes have not been prepared and are not contained in such minute books, except for the minutes of the most recent meeting of the board of directors of the Company which have not yet been presented to and approved by the board of directors of the Company. At the Closing, all of those books and records in the possession of the Company or the applicable Subsidiary shall remain in their possession.
2.23 Brokers. Except for Houlihan Lokey, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Seller.
2.24 Product Warranties and Service and Maintenance Programs. To Seller’s Knowledge, each New Car, each Used Car and any Parts sold, installed or delivered by the Company or any Subsidiary has been in material conformity with all product specifications, all express and implied warranties and all applicable Laws. Neither the Company nor any Subsidiary has any Liability for replacement, servicing or repair of any New Car, Used Car, Parts or other damages in connection therewith or any other customer or product obligations not properly reserved against on the Balance Sheet as required under GAAP. To Seller’s Knowledge, neither the Company nor any Subsidiary has any material Liability arising out of any injury to individuals or property as a result of the ownership, possession, or use of any New Car, Used Car or Parts, or any other product repaired, maintained, delivered, sold or installed, or services rendered by or on behalf of, the Company or any Subsidiary. To Seller’s Knowledge, none of the Company or any Subsidiary has committed any act or failed to commit any act which would result in, and there has been no occurrence which would give rise to or form the basis of, any product liability or material Liability for breach of warranty (whether or not covered by insurance) on the part of the Company or any Subsidiary with respect to any New Car, Used Car, Parts, or any other products repaired, maintained, delivered, sold or installed, or services rendered by or on behalf of, the Company or any Subsidiary. To Seller’s Knowledge, all repairs to any New Car or Used Car, or any Parts installed or delivered by the Company or any Subsidiary, have been made materially in accordance with the applicable manufacturer’s specifications. None of the Company or any Subsidiary has, or has agreed to accept for others, any warranty or service obligations to any Person, or offered its customers any marketing or added-value programs or plans for which the Company or any Subsidiary is responsible for administration or the liability thereof, including, but not limited to, programs commonly called “tires for life,” “oil changes for life,” “car wash/detailing service plans,” “rewards programs” or any similar offers, except (a) as set forth in Section 2.24 of the Disclosure Schedules or (b) as may be required by any Manufacturer with respect to programs, warranties and similar products pursuant to the terms of the applicable Franchise Agreement. Except as provided for under the terms of service contracts sold by the Company or a Subsidiary and agreements with third-party service providers, neither the Company nor any Subsidiary has any agreement with a customer to return or refund any portion of amounts paid for an extended warranty or service contract.
2.25 Rights of First Refusal. Except as provided under this Agreement and pursuant to the Franchise Agreements (including framework agreements), no Person has any right to acquire all or any material portion of the business of the Company or any Subsidiary or any dealership rights or franchise rights or privileges of the Company or any Subsidiary.
2.26 No Other Representations and Warranties. Except for Seller's representations and warranties contained in the Seller Transaction Documents (including the Disclosure Schedules), Seller has not made and is not making to Buyer any other express or implied representation or warranty.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the correspondingly numbered Section of the Disclosure Schedules, Buyer represents and warrants to Seller that the statements contained in this Section 3 are true and correct as of the date hereof.
3.01 Organization and Authority of Buyer. Buyer is a corporation duly organized, validly existing and in good standing under the Laws of the state of Oregon. Buyer has full corporate power and authority to enter into this Agreement and the other Buyer Transaction Documents, to carry out its obligations hereunder and thereunder and to complete the transactions contemplated hereby and thereby. The execution and delivery by Buyer of this Agreement and any other Buyer Transaction Document, the performance by Buyer of its obligations hereunder and thereunder and the completion by Buyer of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer, and (assuming due authorization, execution and delivery by Seller) this Agreement constitutes a legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms, except insofar as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally, or by principles governing the availability of equitable remedies. When each other Buyer Transaction Document has been duly executed and delivered by Buyer (assuming due authorization, execution and delivery by each other party thereto), such Buyer Transaction Document will constitute a legal and binding obligation of Buyer enforceable against it in accordance with its terms.
3.02 Buyer Shares.
(a) When issued, the Lithia Shares to be used by Buyer as Stock Consideration for the transactions contemplated herein will be duly and validly issued, fully paid and non-assessable and free of all liens, claims and encumbrances and any restrictions on transfer except those imposed under applicable Law.
(b) The Lithia Shares will be issued in full compliance with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the “Act”) and the registration and qualification requirements of all applicable state securities laws, or in compliance with applicable exemptions therefrom, and all other provisions of applicable federal and state securities laws and other applicable Laws. Seller may rely on Rule 144 under the Act to resell the Lithia Shares.
3.03 No Conflicts; Consents. The execution, delivery and performance by Buyer of this Agreement and the other Buyer Transaction Documents, and the completion of the transactions contemplated hereby and thereby, do not and will not: (a) conflict with or result in a violation or breach of, or default under, any provision of the certificate of incorporation, by-laws or other organizational documents of Buyer; (b) conflict with or result in a violation or breach of any provision of any Law or Governmental Order applicable to Buyer; or (c) except for consents from manufacturers, consents from agents or Buyer’s lenders under its credit facility and as set forth in Section 3.03 of the Disclosure Schedules, require the consent, notice or other action by any Person under any Contract to which Buyer is a party. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to Buyer in connection with the execution and delivery of this Agreement and the other Buyer Transaction Documents and the completion of the transactions contemplated hereby and thereby, except for such filings as may be required under the HSR Act and such consents, approvals, Permits, Governmental Orders, declarations, filings or notices which, in the aggregate, if not obtained, would not have a Buyer Material Adverse Effect.
3.04 Buyer SEC Reports; Financial Statements.
(a) Each of the reports required by the SEC (the “Buyer SEC Reports”), at the time of its filing or being furnished, complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act and the rules and regulations promulgated thereunder applicable to the Buyer SEC Reports. As of their respective dates (or, if amended prior to the date hereof, as of the date of such amendment), the Buyer SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.
(b) Each of the audited consolidated statements of income, changes in stockholders’ equity and cash flows of the Buyer and its consolidated subsidiaries included in or incorporated by reference into the Buyer SEC Reports (including any related notes and schedules) (i) have been prepared in accordance with GAAP applied on a consistent basis during the periods involved and (ii) present fairly, in all material respects, the consolidated financial position of Buyer and its consolidated subsidiaries as at the dates thereof and the consolidated results of income, changes in stockholders’ equity and cash flows of Buyer and its consolidated subsidiaries for the periods then ended.
3.05 Absence of Certain Changes, Events and Conditions. Since March 31, 2014, and other than in the ordinary course of business consistent with past practice, there has not been, with respect to the Buyer or any of its subsidiaries, any event, occurrence or development that has had, or could reasonably be expected to have, individually or in the aggregate, a Buyer Material Adverse Effect.
3.06 Investment Purpose. Buyer is acquiring the Shares solely for its own account for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof. Buyer acknowledges that the Shares are not registered under the Securities Act or any state securities laws, and that the Shares may not be transferred or sold except pursuant to the registration provisions of the Securities Act or pursuant to an applicable exemption therefrom and subject to state securities laws and regulations, as applicable.
3.07 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document based upon arrangements made by or on behalf of Buyer.
3.08 Financing. Buyer has delivered to Seller a capital plan, subject to the terms and conditions set forth therein, representing sufficient financing for the cash portion of the Initial Purchase Price (the “Capital Plan”).
3.09 Legal Proceedings. There are no Actions pending or, to Buyer’s knowledge, threatened against or by Buyer or any Affiliate of Buyer that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. No event has occurred or circumstances exist that may give rise or serve as a basis for any such Action.
3.10 No Other Representations and Warranties. Except for Buyer’s representations and warranties contained in the Buyer Transaction Documents (including the Disclosure Schedules), Buyer has not made and is not making to Seller any other express or implied representation or warranty.
SECTION 4
COVENANTS OF SELLER.
4.01 Conduct of Business Prior to the Closing.
(a) From the date hereof until the Closing or termination of this Agreement, except as provided in Schedule 4.01(a) of the Disclosure Schedules or otherwise provided in this Agreement or consented to in writing by Buyer (which consent shall not be unreasonably conditioned, withheld or delayed) and except as required by applicable Law, Seller shall, and shall cause the Company and each of its Subsidiaries to, (x) conduct the business of the Company and its Subsidiaries in the ordinary course of business consistent with past practice; and (y) use reasonable best efforts to preserve intact the current operations, organization, business and goodwill of the Company and its Subsidiaries and to preserve the rights, goodwill and relationships of their respective employees, customers, lenders, suppliers, and regulators. Without limiting the foregoing, from the date hereof until the Closing Date or termination of this Agreement, Seller shall:
(i) cause the Company and each Subsidiary to preserve all of its material Permits and all of its Franchise Agreements;
(ii) cause the Company and each Subsidiary to pay their respective debts, Taxes and other obligations when due;
(iii) except for planned demolitions and in progress construction, cause the Company and each Subsidiary to maintain the properties and assets owned, operated or used by the Company or the Subsidiary in the same condition in all material respects as they were on the date of this Agreement, subject to reasonable wear and tear;
(iv) cause the Company and each Subsidiary to continue in full force and effect without material modification all Insurance Policies, except as required by applicable Law;
(v) cause the Company and each Subsidiary to perform in all material respects all of its obligations under all Material Contracts relating to or affecting their respective properties, assets or business;
(vi) cause the Company and each Subsidiary to maintain its books and records in accordance with past practice and continue to collect accounts receivable and pay accounts payable utilizing procedures consistent with past practices;
(vii) cause the Company and each Subsidiary to not violate any applicable Laws or Franchise Agreements; and
(viii) cause the Company and each Subsidiary not to take or permit any action that would knowingly cause any of the changes, events or conditions described in Section 2.08 to occur.
(b) Without limiting the generality of the foregoing, except as provided in Schedule 4.01(b) of the Disclosure Schedules or otherwise provided in this Agreement or with the prior written consent of Buyer in writing (which consent shall not be unreasonably conditioned, withheld or delayed) and except as required by applicable Law, Seller, the Company and each Subsidiary shall not, and Seller shall not permit the Company or any Subsidiary to:
(i) declare, set aside, make or pay any dividend or other distribution in respect of the capital stock of, or other equity interests in, the Company or any Subsidiary;
(ii) transfer, issue, sell, pledge, encumber or dispose of any shares of capital stock or other securities of, or other equity interests in, the Company or any Subsidiary or grant options, warrants, calls or other rights to purchase or otherwise acquire shares of the capital stock or other securities of, or other equity interests in, the Company or any Subsidiary;
(iii) effect any recapitalization, reclassification, stock split, combination or like change in the capitalization of the Company or any Subsidiary, or amend the terms of any outstanding securities of the Company or any Subsidiary;
(iv) amend the certificate of incorporation or bylaws or equivalent organizational or governing documents of the Company or any Subsidiary;
(v) except as set forth in Schedule 4.01(b)(v) of the Disclosure Schedules (A) increase the salary or other compensation of any director, officer or employee of the Company or any Subsidiary, except in the ordinary course of business, (B) grant any unusual or extraordinary bonus, benefit or other direct or indirect compensation to any director, officer, employee or consultant, (C) increase the coverage or benefits available under any (or create any new) Benefit Plan or otherwise modify or amend or terminate any such Benefit Plan except in the ordinary course of business, or (D) enter into any employment, deferred compensation, severance, special pay, consulting, non-competition or similar agreement or arrangement with any directors or officers of the Company or any Subsidiary (or amend any such agreement to which the Company or any Subsidiary is a party), except in the ordinary course of business;
(vi) except as set forth in Schedule 4.01(b)(vi) of the Disclosure Schedules (A) issue, create, incur, assume, guarantee, endorse or otherwise become liable or responsible with respect to (whether directly, contingently or otherwise) any indebtedness, except in the ordinary course of business; (B) pay, repay, discharge, purchase, repurchase or satisfy any indebtedness of the Company or any Subsidiary, except in the ordinary course of business; (C) modify the terms of any indebtedness or other Liability in any material aspect; or (D) default under any indebtedness of the Company or any Subsidiary; in each case (A) - (C) above, except for any such transactions between the Company and a Subsidiary of the Company or between Subsidiaries of the Company in the ordinary course of business, and except as provided in Section 6.01(m) (Payoff Letters);
(vii) subject to any Encumbrance except Permitted Encumbrances or otherwise encumber, any of the material properties or assets (whether tangible or intangible) of the Company or any Subsidiary ;
(viii) adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization or alter the corporate structure of the Company or any Subsidiary;
(ix) except as set forth in Schedule 4.01(b)(ix) of the Disclosure Schedules, acquire any dealerships or material properties or assets or sell, assign, license, transfer, convey, lease or otherwise dispose of any of the material properties or assets of, or used by, the Company or any Subsidiary, other than in the ordinary course of business;
(x) enter into or agree to enter into any merger or consolidation with any Person, and not engage in any material new business or invest in, make a loan, advance or capital contribution to, or otherwise acquire the securities, of any other Person other than the Company and its Subsidiaries;
(xi) except in the ordinary course of business, cancel or compromise any debt or claim or waive or release any material right of the Company or any Subsidiary except for the payment, discharge, settlement or satisfaction of liabilities (1) in accordance with their terms, (2) not in excess of $1,000,000 and (3) disclosed, reflected or reserved against in the Financial Statements;
(xii) enter into, modify or terminate any labor or collective bargaining agreement of the Company or any Subsidiary;
(xiii) except as set forth in Schedule 4.01(b)(xiii) of the Disclosure Schedules, introduce any material change with respect to the operation of the Company or its Subsidiaries as a whole involving any material change in the types, nature, composition or quality of its products or services, or, other than in the ordinary course of business, make any material change in product prices or terms of distributions of such products or materially change its pricing, discount, allowance or return policies or grant any material pricing, discount, allowance or return terms for any customer or supplier not in accordance with such policies except for policies sponsored or endorsed by any Manufacturer;
(xiv) except as set forth in Schedule 4.01(b)(xiv) of the Disclosure Schedules, enter into any material transaction or enter into, modify or renew any Contract which by reason of its size, nature or otherwise is not in the ordinary course of business except for the renewal of Franchise Agreements and framework agreements in the ordinary course of business;
(xv) except for transfers of cash pursuant to normal cash management practices in the ordinary course of business, make any investments in or loans to, or pay any fees or expenses to, or enter into or modify any Contract with Seller;
(xvi) make a change in its accounting or Tax reporting principles, methods or policies;
(xvii) enter into any Contract, understanding or commitment that restrains, restricts, limits or impedes the ability of the Company or any Subsidiary to compete with or conduct any business or line of business in any geographic area or solicit the employment of any persons;
(xviii) enter into any material new lines of business;
(xix) except in the ordinary course of business, terminate, amend, restate, supplement or waive any rights under any (A) Material Contract or (B) Permit;
(xx) settle or compromise any pending or threatened Action or any claim or claims for, or that would result in a loss of revenue of, an amount that could reasonably be expected to be greater than $1,000,000 in the aggregate;
(xxi) except in the ordinary course of business, materially change or modify its credit, collection or payment policies, procedures or practices, including receivables factoring (with or without recourse) or acceleration of collections of receivables (whether or not past due) or fail to pay or delay payment of payables or other liabilities;
(xxii) take any action that would materially adversely affect the ability of Seller, the Company or any Subsidiary to complete the transactions contemplated by this Agreement; or
(xxiii) agree to do anything (A) prohibited by this Section 4.01(b), (B) which makes any of the representations and warranties of Seller in any of the Seller Transaction Documents untrue or incorrect or that would reasonably be expected to result in any of the conditions to the Closing not being satisfied or (C) that would be reasonably expected to have a Company Material Adverse Effect.
4.02 Access to Information. From the date hereof until the Closing or the termination of this Agreement, Seller shall, and shall cause the Company and each Subsidiary to, (a) afford Buyer and its Representatives reasonable access, during normal business hours and upon reasonable prior notice, to and the right to inspect all of the Real Property, properties, assets, premises, books and records, Contracts and other documents and data related to the Company and its Subsidiaries; (b) furnish Buyer and its Representatives with such financial, operating and other data and information related to the Company and its Subsidiaries as Buyer or any of its Representatives may reasonably request; and (c) instruct the Representatives of Seller and the Company to reasonably cooperate with Buyer in its due diligence investigation of the Company and its Subsidiaries. Without limiting the foregoing, Seller shall permit Buyer and its Representatives to conduct environmental due diligence of the Company and its Subsidiaries and the Real Property, including the collecting and analysis of samples of indoor or outdoor air, surface water, groundwater or surface or subsurface land on, at, in, under or from the Company and its Subsidiaries and the Real Property, provided, that, Buyer shall not conduct any invasive testing without Seller’s prior written consent (which shall not be unreasonably withheld, delayed or conditioned) and Buyer shall restore the Real Property to the same condition it was in immediately prior to such testing at Buyer’s sole cost and expense. Any investigation pursuant to this Section 4.02 shall be conducted in such manner as not to interfere unreasonably with the conduct of the business of Seller or the Company and in a manner consistent with applicable Law and provisions of leases or other Contracts applicable to such investigations, if any. Buyer shall and shall cause its Representatives to hold all information received from Seller, the Company or any Subsidiary, directly or indirectly, in confidence in accordance with, and shall otherwise abide by and be subject to, the terms and conditions of that certain Mutual Confidentiality and Non-Disclosure Agreement, dated as of March 13, 2014 between Buyer and Seller.
4.03 No Solicitation of Other Bids.
(a) Except as required by applicable Law, Seller shall not, and shall not authorize or permit any of its Affiliates (including the Company and any Subsidiary) or any of their respective Representatives to, directly or indirectly, (i) encourage, solicit, initiate, facilitate or continue inquiries regarding an Acquisition Proposal; (ii) enter into discussions or negotiations with, or provide any information to, any Person concerning a possible Acquisition Proposal; or (iii) enter into any agreements or other instruments (whether or not binding) regarding an Acquisition Proposal. Seller shall immediately cease and cause to be terminated, and shall cause its Affiliates (including the Company and any Subsidiary) and all of their respective Representatives to immediately cease and cause to be terminated, all existing discussions or negotiations with any Persons conducted heretofore with respect to an Acquisition Proposal; provided, that the foregoing shall not prohibit Seller from strictly complying with the Franchise Agreements (including the framework agreements). An “Acquisition Proposal” means any inquiry, proposal or offer from any Person (other than Buyer or any of its Affiliates) concerning (i) a merger, consolidation, liquidation, recapitalization, share exchange or other business combination transaction involving the Company or any Subsidiary; (ii) the issuance or acquisition of shares of capital stock or other equity securities of the Company or any Subsidiary; or (iii) the sale, lease, exchange or other disposition of any significant portion of the properties or assets of the Company or any Subsidiary.
(b) In addition to the other obligations under this Section 4.03, Seller shall promptly (and in any event within three Business Days after receipt thereof by Seller or its Representatives) advise Buyer orally and in writing of any Acquisition Proposal, any request for information with respect to any Acquisition Proposal, or any inquiry with respect to or which could reasonably be expected to result in an Acquisition Proposal, the material terms and conditions of such request, Acquisition Proposal or inquiry, and the identity of the Person making the same.
(c) Seller agrees that the rights and remedies for noncompliance with this Section 4.03 shall include having such provision specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to Buyer and that money damages would not provide an adequate remedy to Buyer.
4.04 Notice of Certain Events.
(a) From the date hereof until the Closing or termination of this Agreement, Seller shall reasonably promptly notify Buyer in writing of:
(i) any fact, circumstance, event or action the existence, occurrence or taking of which (A) has had, or would reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (B) has resulted in, or could reasonably be expected to result in, any representation or warranty made by Seller hereunder not being true and correct or (C) has resulted in, or could reasonably be expected to result in, the failure of any of the conditions set forth in Section 6.01 to be satisfied;
(ii) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;
(iii) any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement; and
(iv) any Actions commenced or, to Seller’s Knowledge, threatened against, relating to or involving or otherwise affecting Seller, the Company or any Subsidiary that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 2.16 or that relates to the completion of the transactions contemplated by this Agreement.
(b) Subject to Seller’s delivery of updated Disclosure Schedules to Buyer on or before July 15, 2014 as provided in Section 2, Buyer’s receipt of information pursuant to this Section 4.04 shall not operate as a waiver or otherwise affect any representation, warranty or agreement given or made by Seller in this Agreement (including Section 8.02).
4.05 Resignations. Seller shall deliver to Buyer written resignations or notices of termination, effective as of the Closing Date, of the officers and directors of the Company and the applicable Subsidiaries designated by Buyer to Seller in writing not fewer than 10 days prior to Closing.
4.06 Confidentiality. From and after the Closing, Seller shall, and shall cause its Affiliates to, hold, and shall use their reasonable best efforts to cause their respective Representatives to hold, in confidence any and all material information, whether written or oral, concerning the Company or any Subsidiary, except to the extent that such information (a) is generally available to and known by the public through no fault of Seller, any of its Affiliates or their respective Representatives; (b) is lawfully acquired by Seller, any of its Affiliates or their respective Representatives from and after the Closing from sources which are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation; or (c) is provided to an indirect beneficial owner of the Sellers (including for the avoidance of doubt, any Affiliate of the shareholders of the Seller) who is informed that the information provided is confidential. If Seller or any of its Affiliates or their respective Representatives are compelled to disclose any information by judicial or administrative process or by other requirements of Law, Seller shall promptly notify Buyer in writing and shall disclose only that portion of such information which Seller is advised by its legal counsel in writing is legally required to be disclosed, provided that, if requested an authorized by Buyer, Seller shall use reasonable best efforts, at Buyer’s sole cost and expense, to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information.
4.07 Non-Competition; Non-Solicitation.
(a) For a period of three years commencing on the Closing Date (the “Restricted Period”), Seller shall not, and shall not permit any of its Affiliates (excluding, for purposes of this Section 4.07, any historical employees of the Company or its Subsidiaries) to, directly or indirectly, (i) engage in or assist others in engaging in the Restricted Business in the Territory; (ii) have an interest in any Person that engages directly or indirectly in the Restricted Business in the Territory in any capacity, including as a partner, shareholder, member, employee, principal, agent, trustee or consultant; or (iii) intentionally interfere in any material respect with the business relationships (whether formed prior to or after the date of this Agreement) between the Company, any Subsidiary and customers or suppliers of the Company or any Subsidiary. Notwithstanding the foregoing, Seller may own, directly or indirectly, solely as an investment, securities of any Person traded on any national securities exchange if Seller is not a controlling Person of, or a member of a group which controls, such Person and does not, directly or indirectly, own 5% or more of any class of securities of such Person.
(b) During the Restricted Period, Seller shall not, and shall not permit any of its Affiliates to, directly or indirectly, hire or solicit any employee of the Company or any Subsidiary or encourage any such employee to leave such employment or hire any such employee who has left such employment, except pursuant to a general solicitation which is not directed specifically to any such employees; provided, that nothing in this Section 4.07(b) shall prevent Seller or any of its Affiliates from hiring (i) any employee whose employment has been terminated by the Company, any Subsidiary or Buyer or (ii) after 120 days from the date of termination of employment, any employee whose employment has been terminated by the employee.
(c) During the Restricted Period, Seller shall not, and shall not permit any of its Affiliates to, directly or indirectly, solicit or entice, or attempt to solicit or entice, any clients or customers of the Company or any Subsidiary or potential clients or customers of the Company or any Subsidiary for purposes of diverting their business or services from the Company or any Subsidiary.
(d) Seller acknowledges that a breach or threatened breach of this Section 4.07 would give rise to irreparable harm to Buyer, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by Seller of any such obligations, Buyer shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).
(e) Seller acknowledges that the restrictions contained in this Section 4.07 are reasonable and necessary to protect the legitimate interests of Buyer and constitute a material inducement to Buyer to enter into this Agreement and complete the transactions contemplated by this Agreement. In the event that any covenant contained in this Section 4.07 should ever be adjudicated to exceed the time, geographic, product or service, or other limitations permitted by applicable Law in any jurisdiction, then any court is expressly empowered to reform such covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service, or other limitations permitted by applicable Law. The covenants contained in this Section 4.07 and each provision hereof are severable and distinct covenants and provisions. The invalidity or unenforceability of any such covenant or provision as written shall not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenant or provision in any other jurisdiction.
4.08 Governmental Approvals and Consents.
(a) Seller shall, as promptly as reasonably practicable and in coordination with Buyer, (i) make, or cause or be made, all filings and submissions (including those under the HSR Act) required under any Law applicable to Seller or any of its Affiliates; and (ii) use reasonable best efforts to obtain, or cause to be obtained, all consents, authorizations, orders and approvals from all Governmental Authorities that may be or become necessary for Seller’s execution and delivery of this Agreement, the performance of Seller’s obligations pursuant to this Agreement and the other Seller Transaction Documents and the completion of the transactions contemplated by this Agreement. Seller shall cooperate fully with Buyer and its Affiliates in promptly seeking to obtain all such consents, authorizations, orders and approvals. Seller shall not willfully take any action that will have the effect of materially delaying, impairing or impeding the receipt of any required consents, authorizations, orders and approvals.
(b) Seller shall use reasonable best efforts to give all notices to, and obtain all consents from, all third parties that are described in Section 2.05 and Section 3.03 of the Disclosure Schedules.
(c) Without limiting the generality of Seller’s undertakings pursuant to subsections (a) and (b) above, Seller shall use all reasonable best efforts to:
(i) respond to any inquiries by any Manufacturer regarding the transactions contemplated hereby or by any Governmental Authority regarding antitrust or other matters with respect to the transactions contemplated by this Agreement or any Seller Transaction Document;
(ii) avoid the imposition of any order or the taking of any action that would restrain, alter or enjoin the transactions contemplated by this Agreement or any Seller Transaction Document; and
(iii) in the event any Governmental Order adversely affecting the ability of the parties to complete the transactions contemplated by this Agreement or any Seller Transaction Document has been issued, to have such Governmental Order vacated or lifted.
(d) If any consent, approval or authorization necessary to preserve any right or benefit under any Contract to which the Company or any Subsidiary is a party is not obtained prior to the Closing, Seller, the Company and each Subsidiary shall, subsequent to the Closing, use its respective reasonable best efforts to obtain such consent, approval or authorization as promptly thereafter as practicable. If such consent, approval or authorization cannot be obtained, Seller shall use its reasonable efforts to provide the Company or the Subsidiary with the rights and benefits of the affected Contract for the term thereof, and, if Seller provides such rights and benefits, the Company or such Subsidiary shall assume all expenses, obligations and burdens thereunder.
(e) Notwithstanding the foregoing, nothing in this Section 4.08 shall require, or be construed to require, Seller or any of its Affiliates to agree to (i) sell, hold, divest, discontinue, limit or fail to renew, before the Closing Date or the termination of this agreement, any assets, businesses or interests of the Company, any Subsidiary or any of their respective Affiliates, in each case, that would reasonably be expected to result in a Company Material Adverse Effect or materially and adversely impact the economic or business benefits to Seller of the transactions contemplated by this Agreement; (ii) any conditions relating to, or changes or restrictions in, the operations of any such assets, businesses or interests which, in either case, would reasonably be expected to result in a Company Material Adverse Effect or materially and adversely impact the economic or business benefits to Seller of the transactions contemplated by this Agreement; or (iii) any material modification or waiver of the terms and conditions of this Agreement.
(f) All analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals made by or on behalf of Seller before any Governmental Authority or the staff or regulators of any Governmental Authority in connection with the transactions contemplated hereunder (but, for the avoidance of doubt, not including any interactions between Seller, the Company, any Subsidiary or Buyer with Governmental Authorities in the ordinary course of business, any disclosure which is not permitted by Law or any disclosure containing confidential information) shall be disclosed to Buyer in advance of any filing, submission or attendance, it being the intent that Seller will consult and cooperate with Buyer, and consider in good faith the views of Buyer, in connection with any such analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals. Seller shall give notice to Buyer with respect to any meeting, discussion, appearance or contact with any Governmental Authority or the staff or regulators of any Governmental Authority, in each case, in connection with the transactions contemplated by this Agreement, with such notice being sufficient to provide Buyer with the opportunity to attend and participate in such meeting, discussion, appearance or contact.
4.09 [Reserved]
4.10 Books and Records.
(a) To facilitate the resolution of any claims made by or against or incurred by Buyer, the Company or any Subsidiary after the Closing, or for any other reasonable purpose, for a period equal to the statute of limitations referenced in Section 7.08 following the Closing, Seller shall:
(i) retain any books and records (including personnel files) of Seller which relate to the Company and its Subsidiaries and their operations for periods prior to the Closing; and
(ii) upon reasonable notice, afford the Representatives of Buyer, the Company or any Subsidiary reasonable access (including the right to make, at Buyer’s expense, photocopies), during normal business hours, to such books and records;
provided, however, that any books and records related to Tax matters shall be retained pursuant to the periods set forth in Section 7.
(b) Notwithstanding the foregoing, Seller, shall not be obligated to provide Buyer with access to any books or records (including personnel files) pursuant to this Section 4.10 where such access would violate any Law.
4.11 Closing Conditions. From the date hereof until the Closing or the termination of this Agreement, Seller shall, and Seller shall cause the Company and each Subsidiary to, use reasonable best efforts to take such actions as are necessary to expeditiously satisfy the closing conditions set forth in Section 6 hereof.
4.12 Public Announcements. Unless otherwise required by applicable Law or stock exchange requirements (based upon the reasonable advice of counsel), Seller shall not, and Seller shall cause the Company and its Subsidiaries to not, make any public announcements in respect of this Agreement or the transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of the Buyer (which consent shall not be unreasonably conditioned, withheld or delayed), and the parties shall cooperate as to the timing and contents of any such announcement. Notwithstanding the foregoing, if any indirect beneficial owner of the Seller (including for the avoidance of doubt, any Affiliate of the shareholders of the Seller) is required by Law or by stock exchange rules or requirements to make a public announcement, the Seller shall prior to such announcement (to the extent permitted by applicable Law or the relevant stock exchange requirements):
(a) notify the Buyer of the requirement to make such public announcement;
(b) consult with the Buyer in respect of such announcement or circular;
(c) give the Buyer a reasonable opportunity to comment on such announcement or circular; and
(d) take into account such reasonable comments of the Buyer.
For the purpose of this Section 4.12, ‘stock exchange’ shall for the avoidance of doubt include The Stock Exchange of Hong Kong Limited and ‘stock exchange rules’ shall include The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.
4.13 Cooperation with Financing. Upon request of Buyer, Seller shall cause the Company and its Subsidiaries to provide reasonable cooperation and assistance to Buyer in connection with the arrangement of the financing contemplated by the Capital Plan or any Alternate Financing; provided, that such requested cooperation and assistance does not unreasonably interfere with the ongoing business of the Company and its Subsidiaries.
4.14 Real Property Spreadsheet. If any information set forth on the Real Property Spreadsheet other than the first page thereof is materially inaccurate, Seller shall renegotiate Schedule 1.02 with Buyer in good faith.
4.15 Further Assurances. Following the Closing, Seller shall, and Seller shall cause its Affiliates and the Company, its Subsidiaries and all of their respective Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement.
4.16 Other Matters. Unless otherwise agreed to by Buyer in its sole discretion, Seller shall redeem, prior to or at the Closing, all of the Company Shares other than the Shares on terms reasonably acceptable to Buyer.
SECTION 5
COVENANTS OF BUYER
5.01 Financing. Buyer shall use commercially reasonable best efforts to cause the financing contemplated by the Capital Plan, subject to the terms and conditions set forth therein, to be available at Closing including by (i) before August 14, 2014, delivering to Seller commercially acceptable commitment letters from lenders representing sufficient financing to fund the full cash portion of the Initial Purchase Price and any related fees and expenses (the “Commitments”) (ii) negotiating definitive agreements with the lenders set forth in the Capital Plan consistent with the terms and conditions contained therein and (iii) satisfying on a timely basis all conditions in such definitive agreements the satisfaction of which are within the control of Buyer. Buyer shall use its reasonable best efforts to comply with its obligations, and enforce its rights, under the Commitments. Buyer shall give Seller prompt notice of any material breach by any party to the Commitments of which Buyer has become aware or any termination of such commitments. Buyer shall not, without the prior written consent of Seller, (x) permit any amendment or modification to, or any waiver of any material provision or remedy under, the Commitments if such amendment, modification, waiver or remedy adds new (or adversely modifies existing) conditions to the consummation of the financing represented thereby or reduces the amount thereof, or (y) terminate the Commitments, unless the financing represented thereby becomes unavailable and Buyer is using its reasonable best efforts to obtain Alternate Financing (as defined below). In the event that any portion of the Commitments becomes unavailable, regardless of the reason therefor, Buyer will (i) use its reasonable best efforts to obtain alternative financing (in an amount sufficient to pay the cash portion of the Initial Purchase Price) from other sources and which do not include any conditions to the consummation of such alternative financing that are more onerous than the conditions set forth in the Capital Plan (the “Alternate Financing”), and (ii) promptly notify Seller of such unavailability and the reason therefor. Notwithstanding the foregoing, compliance by Buyer with this Section 5.01 shall not relieve Buyer of its obligation to consummate the transactions contemplated by this Agreement whether or not the financing is available.
5.02 Governmental Approvals and Consents.
(a) Buyer shall, as promptly as reasonably practicable and in coordination with Seller, (i) make, or cause or be made, all filings and submissions (including those under the HSR Act) required under any Law applicable to such party or any of its Affiliates; and (ii) use reasonable best efforts to obtain, or cause to be obtained, all consents, authorizations, orders and approvals from all Governmental Authorities that may be or become necessary for Buyer’s execution and delivery of this Agreement, the performance of Buyer’s obligations pursuant to this Agreement and the other Buyer Transaction Documents and the completion of the transactions contemplated by this Agreement. Buyer shall cooperate fully with Seller and Seller’s Affiliates in promptly seeking to obtain all such consents, authorizations, orders and approvals. Buyer shall not willfully take any action that will have the effect of materially delaying, impairing or impeding the receipt of any required consents, authorizations, orders and approvals.
(b) Buyer shall use reasonable best efforts to give all notices to, and obtain all consents from, all third parties that are described in Section 2.05 and Section 3.03 of the Disclosure Schedules including by granting any customary guarantees.
(c) Without limiting the generality of Buyer’s undertakings pursuant to subsections (a) and (b) above, Buyer shall use all reasonable best efforts to:
(i) respond to any inquiries by any Manufacturer regarding the transactions contemplated hereby or by any Governmental Authority regarding antitrust or other matters with respect to the transactions contemplated by this Agreement or any Buyer Transaction Document;
(ii) avoid the imposition of any order or the taking of any action that would restrain, alter or enjoin the transactions contemplated by this Agreement or any Buyer Transaction Document; and
(iii) in the event any Governmental Order adversely affecting the ability of the parties to complete the transactions contemplated by this Agreement or any Buyer Transaction Document has been issued, to have such Governmental Order vacated or lifted.
(d) Notwithstanding the foregoing, nothing in this Section 5.02 shall require, or be construed to require, Buyer or any of its Affiliates to agree to (i) sell, hold, divest, discontinue, limit or fail to renew, before the Closing Date or the termination of this agreement, any assets, businesses or interests of Buyer or any of its Affiliates, in each case, that would reasonably be expected to result in a Buyer Material Adverse Effect or materially and adversely impact the economic or business benefits to Buyer of the transactions contemplated by this Agreement; (ii) any conditions relating to, or changes or restrictions in, the operations of any such assets, businesses or interests which, in either case, would reasonably be expected to result in a Buyer Material Adverse Effect or materially and adversely impact the economic or business benefits to Buyer of the transactions contemplated by this Agreement; or (iii) any material modification or waiver of the terms and conditions of this Agreement.
(e) All analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals made by or on behalf of Buyer before any Governmental Authority or the staff or regulators of any Governmental Authority in connection with the transactions contemplated hereunder (but, for the avoidance of doubt, not including any interactions between Seller, the Company, any Subsidiary or Buyer with Governmental Authorities in the ordinary course of business, any disclosure which is not permitted by Law or any disclosure containing confidential information) shall be disclosed to Seller in advance of any filing, submission or attendance, it being the intent that Buyer will consult and cooperate with Seller, and consider in good faith the views of Seller, in connection with any such analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals. Buyer shall give notice to Seller with respect to any meeting, discussion, appearance or contact with any Governmental Authority or the staff or regulators of any Governmental Authority, in each case, in connection with the transactions contemplated by this Agreement, with such notice being sufficient to provide Seller with the opportunity to attend and participate in such meeting, discussion, appearance or contact.
5.03 Closing Conditions. From the date hereof until the Closing or the termination of this Agreement, Buyer shall use reasonable best efforts to take such actions as are necessary to expeditiously satisfy the closing conditions set forth in Section 6 hereof.
5.04 Public Announcements. Unless otherwise required by applicable Law the Franchise Agreements (including the framework agreements) or stock exchange requirements (based upon the reasonable advice of counsel), Buyer shall not make any public announcements in respect of this Agreement or the transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of Seller (which consent shall not be unreasonably conditioned, withheld or delayed), and the parties shall cooperate as to the timing and contents of any such announcement. Notwithstanding the foregoing, where Buyer is required by Law or by stock exchange requirements to make a public announcement, the Buyer shall prior to making such announcement (to the extent permitted by applicable Law or the relevant stock exchange requirements):
(a) notify Seller of the requirement to make such public announcement;
(b) consult with Seller in respect of such announcement or circular;
(c) give Seller a reasonable opportunity to comment on such announcement or circular; and
(d) take into account such reasonable comments of the Seller’s Representative.
Buyer acknowledges and consents that as a result of entering into, completing or terminating this Agreement and the transactions contemplated hereby, or otherwise as a result of any announcement of the Buyer, Seller and any indirect beneficial owner of the Seller (including for the avoidance of doubt, any Affiliate of the shareholders of the Sellers), may be required by applicable Law, Governmental Authorities, or by any applicable stock exchange rules to make an announcement. For the purpose of this Section 5.04, ‘stock exchange’ shall for the avoidance of doubt include The Stock Exchange of Hong Kong Limited and ‘stock exchange rules’ shall include The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.
5.05 Manufacturer Consent. Buyer will work with Seller, the Company and its Subsidiaries to submit promptly to each Manufacturer and in accordance with the Franchise Agreements (including the framework agreements) whose consent is required for the parties to complete the transactions contemplated by this Agreement (as identified on Section 2.05 of the Disclosure Schedules) a request for the Manufacturer’s written consent to the transactions contemplated by this Agreement.
5.06 Books and Records.
(a) To facilitate the resolution of any claims made against or incurred by Seller before the Closing, or for any other reasonable purpose, for a period equal to the statute of limitations period referenced in Section 7.08 after the Closing, Buyer shall:
(i) retain the books and records (including personnel files) of the Company and its Subsidiaries relating to periods prior to the Closing in a manner reasonably consistent with the prior practices of the Company and its Subsidiaries; and
(ii) upon reasonable notice, afford Seller reasonable access (including the right to make, at Seller’s expense, photocopies), during normal business hours, to such books and records;
provided, however, that any books and records related to Tax matters shall be retained pursuant to the periods set forth in Section 7.
(b) Notwithstanding the foregoing, Buyer shall not be obligated to provide Seller with access to any books or records (including personnel files) pursuant to this Section 5.06 where such access would violate any Law.
5.07 Further Assurances. Following the Closing, Buyer shall, and Buyer shall cause its Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement.
SECTION 6
CONDITIONS TO CLOSING
6.01 Conditions to Obligations of Buyer. The obligations of Buyer to complete the transactions contemplated by this Agreement shall be subject to the fulfillment or Buyer’s waiver, at or prior to the Closing, of each of the following conditions:
(a) Other than the representations and warranties of Seller contained in Section 2.01 (Organization and Authority of Seller), Section 2.02 (Organization, Authority and Qualification of the Company) and Section 2.03 (Capitalization), the representations and warranties of Seller contained in this Agreement, the other Seller Transaction Documents and any certificate or other writing delivered pursuant hereto shall be true and correct in all respects (without giving effect to any qualifications or limitations as to materiality or Company Material Adverse Effect) on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects), except, for such failures to be true and correct that have not resulted in and would not reasonably be expected to result in Losses to Buyer in excess of $20,000,000 individually or an annual average Loss of $2,500,000 for a period of no less than five (5) years . The representations and warranties of Seller contained in Section 2.01, Section 2.02 and Section 2.03 shall be true and correct in all respects (other than de minimis respects) on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects).
(b) Seller shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the other Seller Transaction Documents to be performed or complied with by it prior to or on the Closing Date; provided, that, with respect to agreements, covenants and conditions that are qualified by materiality, Seller shall have performed such agreements, covenants and conditions, as so qualified, in all respects.
(c) No Action shall have been commenced against Buyer, Seller, the Company or any Subsidiary that would or that seeks to prevent the Closing. No injunction or restraining order shall have been issued by any Governmental Authority, and be in effect, which prohibits the consummation of any material transaction contemplated hereby.
(d) From the date of this Agreement, there shall not have occurred any Company Material Adverse Effect, nor shall any event or events have occurred that, individually or in the aggregate, with or without the lapse of time, would reasonably be expected to result in a Company Material Adverse Effect.
(e) The Transaction Documents (other than this Agreement) shall have been executed and delivered by the parties thereto (other than Buyer) and true and complete copies thereof shall have been delivered to Buyer.
(f) Buyer shall have received a certificate, dated the Closing Date and signed by the chief executive officer of Seller, that each of the conditions set forth in Section 6.01(a) and Section 6.01(b) have been satisfied.
(g) Buyer shall have received an opinion of legal counsel to Seller substantially in the form attached as Exhibit B.
(h) Buyer shall have received a certificate, dated the Closing Date and signed by the Secretary or an Assistant Secretary (or equivalent officer) of Seller, certifying that attached thereto are true and complete copies of (A) the articles of incorporation and bylaws (or other equivalent organizational documents) of Seller and (B) all resolutions adopted by the board of directors of Seller authorizing the execution, delivery and performance of this Agreement and the other Seller Transaction Documents and the completion of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby.
(i) Buyer shall have received a certificate, dated the Closing Date and signed by the Secretary or an Assistant Secretary (or equivalent officer) of Seller, certifying the names and signatures of the officers of Seller authorized to sign this Agreement, the Seller Transaction Documents and the other documents to be delivered hereunder and thereunder.
(j) Buyer shall have received resignations of the directors and officers of the Company and each Subsidiary designated by Buyer in accordance with Section 4.05.
(k) Seller shall have delivered to Buyer a good standing certificate (or its equivalent) for the Company and each Subsidiary from the secretary of state or similar Governmental Authority of the jurisdiction under the Laws in which the Company or Subsidiary is organized.
(l) The Guaranty dated January 31, 2008 by the Company in favor of HSBC Bank USA, National Association, shall have been terminated.
(m) Seller shall have delivered to Buyer payoff letters, in a form reasonably acceptable to Buyer, from each Company lender that has a security interest in any assets of the Company or any of its Subsidiaries.
(n) The Company shall have delivered to Buyer an affidavit, signed under penalty of perjury, stating that the Company is not and has not been a United States real property holding corporation, dated as of the Closing Date and in form and substance required under Treasury Regulation Section1.897-2(h), and shall comply with the notice requirements pursuant to Treasury Regulation Section 1.897-2(h)(2).
(o) Seller shall have delivered, or caused to be delivered, to Buyer stock certificates evidencing the Shares, free and clear of Encumbrances, duly endorsed in blank or accompanied by stock powers or other instruments of transfer duly executed in blank and with all required stock transfer tax stamps affixed.
(p) Seller shall have delivered to Buyer such other documents or instruments as Buyer reasonably requests and are reasonably necessary to complete the transactions contemplated by this Agreement.
(q) The filings pursuant to the HSR Act, if any, shall have been made and the applicable waiting period and any extensions thereof shall have expired or been terminated.
(r) No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Governmental Order which is in effect and has the effect of making the transactions contemplated by this Agreement illegal, otherwise prohibiting completion of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion thereof.
(s) Seller shall have received all consents referred to in Section 2.05 and Buyer shall have received all consents referred to in Section 3.03, in each case, in form and substance reasonably satisfactory to Buyer and Seller, respectively, and no such consent, authorization, order and approval shall have been revoked.
(t) Unless waived by Buyer in its sole discretion:
(i) The Company shall have redeemed the ESOP Shares from the ESOP Trustee or the Company and the ESOP Trustee shall have entered into a legally binding agreement to sell the ESOP Shares to the Company concurrently with the Closing; and
(ii) The Company shall have taken all action necessary to terminate the ESOP on such terms and conditions as are satisfactory to Buyer.
6.02 Conditions to Obligations of Seller. The obligations of Seller to complete the transactions contemplated by this Agreement shall be subject to the fulfillment or Seller’s waiver, at or prior to the Closing, of each of the following conditions:
(a) Other than the representations and warranties of Buyer contained in Section 3.01 (Organization and Authority of Buyer) and the representations and warranties of Buyer contained in this Agreement, the other Buyer Transaction Documents and any certificate or other writing delivered pursuant hereto shall be true and correct in all respects (without giving effect to any qualifications or limitations as to materiality or Buyer Material Adverse Effect) on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects), except, for such failures to be true and correct that have not resulted in and would not reasonably be expected to result in a Seller Material Adverse Effect if the transactions contemplated by this Agreement were completed. The representations and warranties of Buyer contained in Section 3.01 shall be true and correct in all respects on and as of the date hereof and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects).
(b) Buyer shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement and each of the other Buyer Transaction Documents to be performed or complied with by it prior to or on the Closing Date; provided, that, with respect to agreements, covenants and conditions that are qualified by materiality, Buyer shall have performed such agreements, covenants and conditions, as so qualified, in all respects.
(c) No injunction or restraining order shall have been issued by any Governmental Authority, and be in effect, which prohibits the consummation of any material transaction contemplated hereby.
(d) From the date of this Agreement, there shall not have occurred any Buyer Material Adverse Effect, nor shall any event or events have occurred that, individually or in the aggregate, with or without the lapse of time, would reasonably be expected to result in a Buyer Material Adverse Effect.
(e) The Transaction Documents (other than this Agreement) shall have been executed and delivered by the parties thereto (other than Seller, the Company or any Subsidiary) and true and complete copies thereof shall have been delivered to Seller.
(f) Seller shall have received a certificate, dated the Closing Date and signed by the chief executive officer of Buyer, that each of the conditions set forth in Section 6.02(a) and Section 6.02(b) have been satisfied.
(g) Seller shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying that attached thereto are true and complete copies of all resolutions adopted by the board of directors of Buyer authorizing the execution, delivery and performance of this Agreement and the other Buyer Transaction Documents and the completion of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby.
(h) Buyer shall have delivered the Initial Purchase Price.
(i) Seller shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying the names and signatures of the officers of Buyer authorized to sign this Agreement, the Buyer Transaction Documents and the other documents to be delivered hereunder and thereunder.
(j) Buyer shall have delivered to Seller such other documents or instruments as Seller reasonably requests and are reasonably necessary to complete the transactions contemplated by this Agreement.
(k) The filings pursuant to the HSR Act, if any, shall have been made and the applicable waiting period and any extensions thereof shall have expired or been terminated.
(l) No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Governmental Order which is in effect and has the effect of making the transactions contemplated by this Agreement illegal, otherwise prohibiting completion of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion thereof.
SECTION 7
TAX MATTERS
7.01 Tax Covenants.
(a) Without the prior written consent of Buyer, Seller (and, prior to the Closing, the Company, its Subsidiaries, their Affiliates and their respective Representatives) shall not, to the extent it may affect, or relate to, the Company or its Subsidiaries, make, change or rescind any Tax election, amend any Tax Return or take any position on any Tax Return, take any action, omit to take any action or enter into any other transaction that would have the effect of increasing the Tax liability or reducing any Tax asset of Buyer, the Company or any Subsidiary in respect of any Post-Closing Tax Period. Seller agrees that Buyer is to have no liability for any Tax resulting from any action of Seller, the Company, its Subsidiaries, their Affiliates or any of their respective Representatives, and agrees to indemnify and hold harmless Buyer (and, after the Closing Date, the Company and its Subsidiaries) against any such Tax or reduction of any Tax asset.
(b) All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement and the other Transaction Documents (including any real property transfer Tax and any other similar Tax) shall be borne as set forth in Section 10.01 and paid when due. Seller shall, at its own expense, timely file any Tax Return or other document with respect to such Taxes or fees (and Buyer shall cooperate with respect thereto as necessary).
(c) Buyer shall prepare, or cause to be prepared, all Tax Returns required to be filed by the Company or any Subsidiary after the Closing Date with respect to a Pre-Closing Tax Period. Any such Tax Return shall be prepared in a manner consistent with past practice (unless otherwise required by Law) and without a change of any election or any accounting method and shall be submitted by Buyer to Seller (together with schedules, statements and, to the extent requested by Seller, supporting documentation) at least 45 days prior to the due date (including extensions) of such Tax Return. If Seller objects to any item on any such Tax Return, it shall, within 10 days after delivery of such Tax Return, notify Buyer in writing that it so objects, specifying with particularity any such item and stating the specific factual or legal basis for any such objection. Buyer shall take into account in good faith any such objection raised by Shareholders in finalizing any such Tax Return for filing. The preparation and filing of any Tax Return of the Company or any Subsidiary that does not relate to a Pre-Closing Tax Period shall be exclusively within the control of Buyer.
7.02 Termination of Existing Tax Sharing Agreements. At the request of Buyer, Seller shall cause the Company and its Subsidiaries to terminate any and all existing Tax sharing agreements (whether written or not) binding upon the Company or any Subsidiary effective as of the Closing Date, and no party shall have any further rights or liabilities thereunder.
7.03 Tax Indemnification. Except to the extent included as a liability in the calculation of Tangible Net Worth, Seller shall indemnify the Company, each Subsidiary, Buyer, and each Buyer Indemnitee and hold them harmless from and against (a) any Loss attributable to any breach of or inaccuracy in any representation or warranty made in Section 2.21; (b) any Loss attributable to any breach or violation of, or failure to fully perform, any covenant, agreement, undertaking or obligation in this Section 7; (c) all Pre-Closing Taxes; (d) all Taxes of any member of an affiliated, consolidated, combined or unitary group of which the Company or any Subsidiary (or any predecessor of the Company or any Subsidiary) is or was a member on or prior to the Closing Date by reason of a liability under Treasury Regulation Section 1.1502-6 or any comparable provisions of foreign, state or local Law; and (e) any and all Taxes of any person imposed on the Company or any Subsidiary arising under the principles of transferee or successor liability or by contract, relating to an event or transaction occurring before the Closing Date, in each of the above cases, together with any out-of-pocket fees and expenses (including attorneys’ and accountants’ fees) incurred in connection therewith. Seller shall reimburse Buyer for any Taxes of the Company or any Subsidiary that are the responsibility of Seller pursuant to this Section 7.03 within 10 Business Days after payment of such Taxes by Buyer, the Company or any Subsidiary. All indemnity payments pursuant to this Section 7.03 shall be made on an after-tax, grossed-up basis, such that the total amount received by Buyer places Buyer in the same after-tax position it would have occupied if it had not suffered such Loss or been liable for such Taxes.
7.04 Straddle Period. In the case of Taxes that are payable with respect to a taxable period that begins before and ends after the Closing Date (each such period, a “Straddle Period”), the portion of any such Taxes that are treated as Pre-Closing Taxes for purposes of this Agreement shall be:
(a) in the case of Taxes (i) based upon, or related to, income, receipts, profits, wages, capital or net worth, (ii) imposed in connection with the sale, transfer or assignment of property, or (iii) required to be withheld, deemed equal to the amount which would be payable if the taxable year ended with the Closing Date; and
(b) in the case of other Taxes, deemed to be the amount of such Taxes for the entire period multiplied by a fraction the numerator of which is the number of days in the period ending on the Closing Date and the denominator of which is the number of days in the entire period.
7.05 Contests. Buyer agrees to give written notice to Seller of the receipt of any written notice by the Company or any Subsidiary, Buyer or any of Buyer’s Affiliates which involves the assertion of any claim, or the commencement of any Action, in respect of which an indemnity may be sought by Buyer pursuant to this Section 7 (a “Tax Claim”); provided, that failure to comply with this provision shall not affect Buyer’s right to indemnification hereunder. Buyer shall control the contest or resolution of any Tax Claim; provided, however, that Buyer shall keep Seller reasonably informed of the status of such contest and shall take into account in good faith any comments or suggestions made by Seller before entering into any settlement of a claim or ceasing to defend such claim.
7.06 Cooperation and Exchange of Information. Seller and Buyer shall provide each other with such cooperation and information as either of them reasonably may request of the other in filing any Tax Return pursuant to this Section 7 or in connection with any audit or other proceeding in respect of Taxes of the Company or any Subsidiary. Such cooperation and information shall include providing copies of relevant Tax Returns or portions thereof, together with accompanying schedules, related work papers and documents relating to rulings or other determinations by tax authorities. Each of Seller and Buyer shall retain all Tax Returns, schedules and work papers, records and other documents in its possession relating to Tax matters of the Company or any Subsidiary for any taxable period beginning before the Closing Date until the expiration of the statute of limitations of the taxable periods to which such Tax Returns and other documents relate, without regard to extensions except to the extent notified by the other parties in writing of such extensions for the respective Tax periods. Prior to transferring, destroying or discarding any Tax Returns, schedules and work papers, records and other documents in its possession relating to Tax matters of the Company or any Subsidiary for any taxable period beginning before the Closing Date, Seller or Buyer (as the case may be) shall provide the other party with reasonable written notice and offer the other party the opportunity to take custody of such materials.
7.07 Tax Treatment of Indemnification Payments. Any indemnification payments pursuant to this Section 7 shall be treated as an adjustment to the Final Purchase Price by the parties for Tax purposes, unless otherwise required by Law.
7.08 Survival. Notwithstanding anything in this Agreement to the contrary, the provisions of Section 2.21 and this Section 7 shall survive for the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof).
7.09 Overlap. To the extent that any obligation or responsibility pursuant to Section 8 may overlap with an obligation or responsibility pursuant to this Section 7, the provisions of this Section 7 shall govern.
SECTION 8
INDEMNIFICATION AND ESCROW
8.01 Survival. Subject to the limitations and other provisions of this Agreement, the representations and warranties contained in the Seller Transaction Documents and the Buyer Transaction Documents (other than any representations or warranties contained in Section 2.21 (Taxes) which are subject to Section 7) shall survive the Closing until the date that is 21 months from the Closing Date; provided, that the representations and warranties in Section 2.01 (Organization and Authority of Seller), Section 2.02 (Organization, Authority and Qualification of the Company), Section 2.03 (Capitalization), Section 2.23 (Brokers), Section 3.01 (Organization and Authority of Buyer), Section 3.02 (Buyer Shares) and Section 3.07 (Brokers) shall survive until the expiration of the applicable statute of limitations. All covenants and agreements of the parties contained in the Seller Transaction Documents and the Buyer Transaction Documents (other than any covenants or agreements contained in Section 7, which are subject to Section 7) shall survive the Closing for 21 months or for the period explicitly specified therein. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity and in writing by notice from the Indemnified Party to the Indemnifying Party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved.
8.02 Indemnification by Seller. Subject to the other terms and conditions of this Section 8, Seller shall indemnify and defend each of Buyer and its Affiliates (including the Company and any Subsidiary) and their respective Representatives (collectively, the “Buyer Indemnitees”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, the Buyer Indemnitees based upon:
(a) any inaccuracy in or breach of any of the representations or warranties of Seller contained in the Seller Transaction Documents or any certificate delivered to Buyer pursuant to Section 6.01(f), 6.01(h) or 6.01(i) (other than in respect of Section 2.21, it being understood that the sole remedy for any such inaccuracy in or breach thereof shall be pursuant to Section 7), as of the date such representation or warranty was made or as if such representation or warranty was made on and as of the Closing Date (except for representations and warranties that expressly relate to a specified date, the inaccuracy in or breach of which will be determined with reference to such specified date);
(b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Seller, the Company or any Subsidiary pursuant to any Seller Transaction Document (other than any breach or violation of, or failure to fully perform, any covenant, agreement, undertaking or obligation in Section 7, it being understood that the sole remedy for any such breach, violation or failure shall be pursuant to Section 7); or
(c) (i) any Actions or Taxes related to or resulting from the redemption by the Company of any Company Shares or the Merger (defined below), including any Actions or Taxes arising under ERISA or the Code; or (ii) if the Company has not redeemed the Company Shares prior to or concurrently with the Closing, the Company completing a merger (the “Merger”) under Section 253 of the Delaware General Corporation Law (“DGCL”) after the Closing to acquire 100% of the Common Stock of the Company, including, in connection therewith, the Company’s payment to former holders of Company Shares who exercise appraisal or dissenters’ rights under the DGCL.
8.03 Indemnification by Buyer. Subject to the other terms and conditions of this Section 8, Buyer shall indemnify and defend Seller and its Affiliates and their respective Representatives (collectively, the “Seller Indemnitees”) against, and shall hold each of them harmless from and against, and shall pay and reimburse each of them for, any and all Losses incurred or sustained by, or imposed upon, the Seller Indemnitees based upon:
(a) any inaccuracy in or breach of any of the representations or warranties of Buyer contained in any Buyer Transaction Document or any certificate delivered to Seller pursuant to Section 6.02(f), 6.02(g) or 6.02(i), as of the date such representation or warranty was made or as if such representation or warranty was made on and as of the Closing Date (except for representations and warranties that expressly relate to a specified date, the inaccuracy in or breach of which will be determined with reference to such specified date);
(b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Buyer pursuant to any Buyer Transaction Document (other than Section 7, it being understood that the sole remedy for any such breach thereof shall be pursuant to Section 7) ; or
(c) any Loss arising from any access granted or testing conducted by Buyer or its Representatives pursuant to Section 4.02 (Access to Information) hereof.
8.04 Certain Limitations. The indemnification provided for in Section 8.02 and Section 8.03 shall be subject to the following limitations:
(a) Seller shall not be liable to any Buyer Indemnitee for indemnification under Section 8.02(a) for any claim where the aggregate Losses related to such claim are less than $200,000 unless the claim is part of a series of claims arising from the same facts and circumstances where the aggregate Losses relating to such series of claims are greater than $200,000. Seller shall be liable to Buyer Indemnitees for indemnification under Section 8.02(a) only to the extent that Buyer Indemnitees’ Losses under Section 8.02(a), in the aggregate, exceed $2,000,000 (the “Basket”), in which event Seller shall be required to pay or be liable for all such Losses from the first dollar.
(b) Buyer shall not be liable to any Seller Indemnitees for indemnification under Section 8.03(a) for any claim where the aggregate Losses related to such claim are less than $200,000 unless the claim is part of a series of claims arising from the same facts and circumstances where the aggregate Losses relating to such series of claims are greater than $200,000. Buyer shall be liable to Seller Indemnitees for indemnification under Section 8.03(a) only to the extent that Seller Indemnitees’ Losses under Section 8.03(a), in the aggregate, exceed the Basket, in which event Buyer shall be required to pay or be liable for all such Losses from the first dollar.
(c) Notwithstanding anything to the contrary in this Agreement, other than Section 8.04(d) and except as provided in Section 10.12 (Liquidated Damages), the maximum amount of indemnifiable Losses which may be recovered by Seller or by Buyer pursuant to this Section 8 shall be an amount equal to 10% of the Final Purchase Price (the “Cap”).
(d) The provisions of Section 8.04(a), Section 8.04(b) or Section 8.04(c) shall not apply to Losses based upon any inaccuracy in or breach of any representation, warranty or covenant in Section 2.01, Section 2.03, Section 2.21, Section 3.01, Section 3.02, Section 4.16 or Section 7 or indemnification under Section 8.02(c) and shall not apply to Losses based upon claims of fraud.
(e) For purposes of this Section 8, any inaccuracy in or breach of any representation or warranty shall be determined (i) without regard to any materiality, Material Adverse Effect, or Knowledge contained in such representation or warranty and (ii) assuming that each dollar amount set forth in Sections 2.07, 2.11(g), 2.16(a) and 2.20(c) was $0.00.
8.05 Indemnification Procedures. The party making a claim under this Section 8 is referred to as the “Indemnified Party,” and the party against whom such claims are asserted under this Section 8 is referred to as the “Indemnifying Party.”
(a) Third-Party Claims. If any Indemnified Party receives notice of the assertion or commencement of any Action made or brought by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement or a Representative of the foregoing (a “Third-Party Claim”) against such Indemnified Party with respect to which the Indemnifying Party is obligated to provide indemnification under this Agreement, the Indemnified Party shall give the Indemnifying Party reasonably prompt written notice thereof, but in any event not later than 30 calendar days after receipt of such notice of such Third-Party Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses or is otherwise prejudiced by reason of such failure.
Such notice by the Indemnified Party shall describe the Third-Party Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have the right to participate in, or by giving written notice to the Indemnified Party, to assume the defense of any Third-Party Claim at the Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, and the Indemnified Party shall cooperate in good faith in such defense; provided, that if the Indemnifying Party is Seller, Seller shall not have the right to defend or direct the defense of any such Third Party Claim that seeks an injunction or other equitable relief against the Indemnified Party. In the event that the Indemnifying Party assumes the defense of any Third-Party Claim, subject to Section 8.05(b), it shall have the right to take such action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third-Party Claim in the name and on behalf of the Indemnified Party.
The Indemnified Party shall have the right to participate in the defense of any Third-Party Claim with counsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. The fees and disbursements of such counsel shall be at the expense of the Indemnified Party, provided, that if in the reasonable opinion of counsel to the Indemnified Party, (A) there are legal defenses available to an Indemnified Party that are different from or additional to those available to the Indemnifying Party which the Indemnifying Party is unable to or refuses to assert; or (B) there exists a conflict of interest between the Indemnifying Party and the Indemnified Party that cannot be waived, the Indemnifying Party shall be liable for the reasonable fees and expenses of counsel to the Indemnified Party in each jurisdiction for which the Indemnified Party determines counsel is necessary or appropriate. If the Indemnifying Party elects not to compromise or defend such Third-Party Claim, fails to promptly notify the Indemnified Party in writing of its election to defend as provided in this Agreement, or fails to diligently prosecute the defense of such Third-Party Claim, the Indemnified Party may, subject to Section 8.05(b), pay, compromise, defend such Third-Party Claim and seek indemnification for any and all Losses based upon, arising from or relating to such Third-Party Claim. Seller and Buyer shall cooperate with each other in all reasonable respects in connection with the defense of any Third-Party Claim, including making available (subject to the provisions of Section 4.06) records relating to such Third-Party Claim and furnishing, without expense (other than reimbursement of actual out-of-pocket expenses) to the defending party, management employees of the non-defending party as may be reasonably necessary for the preparation of the defense of such Third-Party Claim.
(b) Settlement of Third-Party Claims. Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not enter into settlement of any Third-Party Claim without the prior written consent of the Indemnified Party unless such settlement (1) includes, as an unconditional term thereof, a written release of each Indemnified Party from all liabilities and obligations in connection with such Third-Party Claim and (2) does not impose any liability or obligation on the Indemnified Party. If the Indemnified Party has assumed the defense pursuant to Section 8.05(a), it shall not agree to any settlement without the written consent of the Indemnifying Party unless such settlement (x) includes, as an unconditional term thereof, a written release of the Indemnifying Party from all liabilities and obligations in connection with such Third-Party Claim and (y) does not impose any liability or obligation on the Indemnifying Party other than financial obligation for which the Indemnified Party is indemnified hereunder.
(c) Direct Claims. Any Action by an Indemnified Party on account of a Loss which does not result from a Third-Party Claim (a “Direct Claim”) shall be asserted by the Indemnified Party giving the Indemnifying Party reasonably prompt and complete written notice thereof. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses or is otherwise prejudiced by reason of such failure. Such notice by the Indemnified Party shall describe the Direct Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have 30 days after its receipt of such notice to respond in writing to such Direct Claim. The Indemnified Party shall allow the Indemnifying Party and its professional advisors to investigate the matter or circumstance alleged to give rise to the Direct Claim, and whether and to what extent any amount is payable in respect of the Direct Claim and the Indemnified Party shall assist the Indemnifying Party’s investigation by giving such information and assistance (including access to the Buyer’s or the Company’s and each Subsidiary’s, as applicable, premises and personnel and the right to examine and copy any accounts, documents or records) as the Indemnifying Party or any of its professional advisors may reasonably request. If the Indemnifying Party rejects the claim, in whole or in part, or does not so respond within such 30 day period, the Indemnifying Party shall be deemed to have rejected such claim, in which case the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement.
(d) Tax Claims. Notwithstanding any other provision of this Agreement, the control of any claim, assertion, event or proceeding in respect of Taxes of the Company or any Subsidiary (including, but not limited to, any such claim in respect of a breach of the representations and warranties in Section 2.21 hereof or any breach or violation of or failure to fully perform any covenant, agreement, undertaking or obligation in Section 7) shall be governed exclusively by Section 7 hereof.
8.06 Payments. The amount of any Losses payable under this Section 8 (or any provisions of this Agreement that expressly provides for indemnification) by the Indemnifying Party shall be net of any (a) amounts recovered by the Indemnified Party under applicable insurance policies or from any other Person alleged to be responsible therefor and (b) Tax benefit realized by the Indemnified Party arising from the incurrence or payment of any such Losses. If the Indemnified Party receives any amounts under applicable insurance policies, or from any other Person alleged to be responsible for any Damages, subsequent to an indemnification payment by the Indemnifying Party, then such Indemnified Party shall promptly reimburse the Indemnifying Party for any payment made or expense incurred by such Indemnifying Party in connection with providing such indemnification payment up to the amount received by the Indemnified Party. The Indemnified Party shall use commercially reasonable efforts to collect any amounts available under insurance coverage, or from any other Person potentially responsible, for any Losses payable under this Section 8 (or any other provision of this Agreement that expressly provides for indemnification). The Indemnifying Party shall have no obligation to provide any indemnity hereunder to the extent the Indemnified Party’s claim under any applicable insurance policies remains outstanding. Once a Loss is agreed to by the Indemnifying Party or finally adjudicated to be payable pursuant to this Section 8, the Indemnifying Party shall satisfy its obligations within 30 Business Days of such final, non-appealable adjudication by wire transfer of immediately available funds to the Indemnified Party. The parties hereto agree that should an Indemnifying Party not make full payment of any such obligations within such 30 Business Day period, any amount payable shall accrue interest from and including the date of agreement of the Indemnifying Party or final, non-appealable adjudication to but excluding the date such payment has been made at a rate per annum equal to 5%. Such interest shall be calculated daily on the basis of a 365 day year and the actual number of days elapsed, without compounding.
8.07 Tax Treatment of Indemnification Payments. All indemnification payments made under this Agreement shall be treated by the parties as an adjustment to the Final Purchase Price for Tax purposes, unless otherwise required by Law.
8.08 Duty to Mitigate. After the Closing, the Indemnified Party shall use commercially reasonable efforts to mitigate any Losses under this Section 8, including notifying the Indemnifying Party of any inaccuracy of a representation or warranty or any breach of a covenant or agreement contained herein within thirty (30) days after discovering such inaccuracy or breach.
8.09 Exclusive Remedies. Except with respect to any adjustment under Section 1.02(e), and subject to Section 4.15, Section 10.11 and Section 10.12, the parties acknowledge and agree that their sole and exclusive remedy with respect to any and all claims (other than claims arising from fraud, criminal activity or willful misconduct on the part of a party hereto in connection with the transactions contemplated by this Agreement) for any breach of any representation, warranty, covenant, agreement or obligation set forth in the Seller Transaction Documents and the Buyer Transaction Documents or otherwise relating to the subject matter of this Agreement shall be pursuant to the indemnification provisions set forth in Section 7 and this Section 8. In furtherance of the foregoing, each party hereby waives, to the fullest extent permitted under Law, any and all rights, claims and causes of action for any breach of any representation, warranty, covenant, agreement or obligation set forth in the Seller Transaction Documents and the Buyer Transaction Documents or otherwise relating to the subject matter of this Agreement it may have against the other party hereto and its Affiliates and each of their respective Representatives arising under or based upon any Law, except pursuant to the indemnification provisions set forth in Section 7 and this Section 8. Nothing in this Section 8.09 shall limit any Person’s right to seek and obtain any equitable relief (including specific performance) to which any Person shall be entitled or to seek any remedy on account of any party’s fraudulent, criminal or intentional misconduct. To the extent any Losses are included in the calculation of Tangible Net Worth, Buyer Indemnitees are not entitled to recover for such Losses through this Section 8.
SECTION 9
TERMINATION
9.01 Termination. This Agreement may be terminated at any time prior to the Closing:
(a) by the mutual written consent of Seller and Buyer;
(b) by Buyer by written notice to Seller if:
(i) Buyer is not then in material breach of any provision of this Agreement and there has been a material breach or inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Seller pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Section 6 and such material breach, inaccuracy or failure has not been cured by Seller within 30 days of Seller’s receipt of written notice of such breach from Buyer; or
(ii) any of the conditions set forth Section 6.01 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by October 31, 2014, unless such failure shall be due to the failure of Buyer to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing;
(c) at any time on or before August 14, 2014, by Buyer in its reasonable discretion based on the results of its ongoing due diligence investigation relating to the business of the Company and the Subsidiaries; provided, however, that Seller shall have the right to deliver and update the Disclosure Schedules at any time on or before July 15, 2014;
(d) Prior to August 14, 2014, by Buyer by written notice to Seller if Buyer determines that it will not be able to obtain the financing contemplated by the Capital Plan or Alternate Financing by the Closing Date through the use of commercially reasonable efforts;
(e) by Seller by written notice to Buyer if:
(i) Seller is not then in material breach of any provision of this Agreement and there has been a material breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Buyer pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Section 6 and such material breach, inaccuracy or failure has not been cured by Buyer within 30 days of Buyer’s receipt of written notice of such breach from Seller; or
(ii) any of the conditions set forth in Section 6.02 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by October 31, 2014, unless such failure shall be due to the failure of Seller to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing;
(f) by Buyer or Seller in the event that (i) there shall be any Law that makes completion of the transactions contemplated by this Agreement illegal or otherwise prohibited or (ii) any Governmental Authority shall have issued a Governmental Order enjoining the transactions contemplated by this Agreement, and such Governmental Order shall have become final and non-appealable.
9.02 Effect of Termination. In the event of the termination of this Agreement in accordance with this Section 9, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto except:
(a) as set forth in this Section 9, Section 4.06 and Section 10.12 hereof; and
(b) that nothing herein shall relieve any party hereto from liability for any willful material breach of any provision hereof.
SECTION 10
MISCELLANEOUS
10.01 Expenses. Except as otherwise expressly provided herein, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors, experts and accountants, incurred in connection with this Agreement and the transactions contemplated hereby and related due diligence shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred; provided, however, (i) Buyer shall be responsible for all filing and other similar fees payable in connection with any filings or submissions under the HSR Act; (ii) Seller shall pay all amounts payable to Houlihan Lokey; and (iii) Buyer and Seller shall be equally responsible for all costs and expenses for property appraisals in connection with the transactions contemplated by this Agreement, all costs and expenses relating to the Indemnity Escrow, all Real Property Transfer Taxes and related fees and the cost of Seller’s Accountant’s for preparing the audited financial statements as provided in Section 1.02(c).
10.02 Notices. All notices, requests, consents, claims, demands, waivers and other communications under this Agreement must be in writing and will be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Communications must be sent to the respective parties at the addresses or telecopy numbers set forth on the first page of this Agreement (or at such other address or telecopy number for a party specified in a notice given in accordance with this Section 10.02), with copies to:
In the case of Buyer: |
Stoel Rives LLP 900 SW Fifth Avenue, Suite 2600 Portland, Oregon 97204 Facsimile: 503.220.2480 Attn: James M. Kearney Email: jmkearney@stoel.com |
In the case of Seller: |
Loeb, Block & Partners LLP 505 Park Avenue, 8th Floor New York, NY 10022 Facsimile: 212.755.1777 Attn: Jeffrey E. Wacksman Email:jwacksman@loebblock.com |
10.03 Interpretation. For purposes of this Agreement, (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole; and (d) words denoting any gender shall include all genders. Unless the context otherwise requires, references herein: (x) to sections, Disclosure Schedules and Exhibits mean the sections of, and Disclosure Schedules and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The Disclosure Schedules and Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.
10.04 Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.
10.05 Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Except as provided in Section 4.07(e), upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be completed as originally contemplated to the greatest extent possible.
10.06 Entire Agreement. This Agreement and the other Transaction Documents constitute the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement and those in the other Transaction Documents, the statements in the body of this Agreement will control.
10.07 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the prior written consent of the other parties, which consent shall not be unreasonably conditioned, withheld or delayed; provided, however, that prior to the Closing Date, Buyer may, without the prior written consent of Seller, assign all or any portion of its rights under this Agreement to one or more of its direct or indirect wholly owned subsidiaries. No assignment shall relieve the assigning party of any of its obligations hereunder.
10.08 No Third-Party Beneficiaries. Except as provided in Section 7.03 and Section 8, this Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
10.09 Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
10.10 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
(a) This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction).
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY SHALL BE INSTITUTED EXCLUSIVELY IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE DISTRICT OF DELAWARE OR THE COURTS OF THE STATE OF DELAWARE (AND IN NO OTHER), AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.10(C).
10.11 Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.
10.12 Liquidated Damages.
(a) If, before October 1, 2014 (or such later date as extended pursuant to Section 1.03):
(i) the conditions in Section 6.02 have been met but Seller fails to deliver the Shares to Buyer, or if failure to fulfill such conditions is due to Seller’s willful or intentional breach of this Agreement (the “Seller’s Failure to Close”), and Buyer has financing available to pay the Initial Purchase Price and is willing and able to consummate the Closing, then Buyer may terminate this Agreement and Seller shall pay, on Buyer’s demand and in lieu of all other remedies available to it, to Buyer, $20,000,000; and
(ii) the conditions in Section 6.01 have been met but the Buyer fails to deliver the Initial Purchase Price in accordance with Section 1.02(b), or if failure to fulfill such conditions is due to Buyer’s willful or intentional breach of this Agreement (the “Buyer’s Failure to Close”), and Seller is willing and able to deliver the Shares to Buyer, then Seller may terminate this Agreement and Buyer shall pay, on Seller’s demand and in lieu of other remedies available to Seller, to Seller $20,000,000.
Any payment owing by Seller pursuant to Section 10.12(a)(i) or owing by Buyer pursuant to Section 10.12(a)(ii) is referred to herein as “Liquidated Damages.”
(b) The parties intend that the Liquidated Damages constitute compensation, and not a penalty. The parties acknowledge and agree that the harm caused by Seller’s Failure to Close or the Buyer’s Failure to Close would be impossible or very difficult to accurately estimate as of the date of this Agreement and as of the date when the conditions in specified above have been fulfilled, and that the Liquidated Damages are a reasonable estimate of the anticipated or actual harm that would likely arise from the Seller’s Failure to Close or the Buyer’s Failure to Close. If Buyer or Seller elect to receive Liquidated Damages, the payment of the Liquidated Damages will be the Seller’s or Buyer’s respective sole liability and entire obligation and the Buyer’s or Seller’s respective exclusive remedy for the Seller’s Failure to Close or the Buyer’s Failure to Close, as applicable.
10.13 Disclosure Schedules. If a disclosure is made in any section of the Disclosure Schedules, such disclosure will be deemed to have also been made in any another section of the Disclosure Schedules to the extent it is reasonably apparent on the face of such disclosure that such disclosure is applicable to the other section. The fact that any item or information has been included in the Disclosure Schedules shall not be deemed an admission of liability under any applicable Law, or construed to establish, in whole or in part, that such information is required to be disclosed in or by the Disclosure Schedules or this Agreement, or to mean that such information is material . Such information shall not be used as a basis for interpreting the term “material,” “materially,” “materiality,” “Company Material Adverse Effect” or any similar qualification in this Agreement.
10.14 Resolution of Disputes Regarding Initial Acquisition Balance Sheet or Closing Statement (Including Final Acquisition Balance Sheet).
(a) Resolution of Disputes. If Seller and Buyer fail to reach an agreement with respect to all of the matters set forth in the Initial Acquisition Balance Sheet or Closing Statement (including the Final Acquisition Balance Sheet), then any amounts remaining in dispute (“Disputed Amounts”) shall be submitted for resolution to the office of Moss Adams LLP or, if Moss Adams LLP is unable to serve, Buyer and Seller shall appoint by mutual agreement the office of an impartial nationally recognized firm of independent certified public accountants other than Seller’s Accountants or Buyer’s Accountants (the “Independent Accountants”) who, acting as experts and not arbitrators, shall resolve the Disputed Amounts only and make any adjustments. The parties hereto agree that all adjustments shall be made without regard to materiality. The Independent Accountants shall only decide the specific items under dispute by the parties, and their decision for each Disputed Amount must be within the range of values assigned to each such item by Seller and Buyer.
(b) Fees of the Independent Accountants. The fees and expenses of the Independent Accountants shall be paid by Seller, on the one hand, and by Buyer, on the other hand, based upon the percentage that the amount actually contested but not awarded to Seller or Buyer, respectively, bears to the aggregate amount actually contested by Seller and Buyer.
(c) Determination by Independent Accountants. The Independent Accountants shall make a determination as soon as practicable within 30 days (or such other time as the parties hereto shall agree in writing) after their engagement, and their resolution of the Disputed Amounts and their adjustments to the Closing Statement (including the Final Acquisition Balance Sheet) shall be conclusive and binding upon the parties hereto.
10.15 Withholding Tax. Buyer and the Company shall be entitled to deduct and withhold from the Final Purchase Price all Taxes that Buyer and the Company are required to deduct and withhold under any provision of Tax Law. All such withheld amounts shall be treated for all purposes under this Agreement as paid hereunder.
10.16 Tax Treatment of Payments and Adjustments. All payments from Buyer to Seller pursuant to Section 1, including any adjustment payments made pursuant to Section 1.02(e), shall be treated as payments of, or adjustments to, the Final Purchase Price for all Tax purposes, unless otherwise required by Law.
10.17 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
[SIGNATURE PAGE FOLLOWS]
The parties hereto have caused this Agreement to be executed as of the date first written above by their respective, duly authorized officers.
BUYER:
LITHIA MOTORS, INC.
By: /s/ Bryan DeBoer
Name: Bryan DeBoer
Title: Chief Executive Officer
The parties hereto have caused this Agreement to be executed as of the date first written above by their respective, duly authorized officers.
SELLER:
DCH AUTO GROUP (USA) LIMITED
By: /s/ Shau-wai Lam
Name: Shau-wai Lam
Title: Vice President
Appendix I
Defined Terms
“Acquisition Proposal” has the meaning set forth in Section 4.03(a).
“Act” has the meaning set forth in Section 3.02(b).
“Action” means any claim, action, cause of action, demand, lawsuit, arbitration, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or governmental investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.
“Affiliate” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Agreement” has the meaning set forth in the preamble.
“Alternate Financing” has the meaning set forth in Section 5.01.
“Audited Financial Statements” has the meaning set forth in Section 2.06.
“Balance Sheet” has the meaning set forth in Section 2.06.
“Balance Sheet Date” has the meaning set forth in Section 2.06.
“Basket” has the meaning set forth in Section 8.04(a).
“Benefit Plan” has the meaning set forth in Section 2.19(a).
“Business Day” means any day except Saturday, Sunday or any other day on which commercial banks located in New York, New York are authorized or required by Law to be closed for business.
“Buyer” has the meaning set forth in the preamble.
“Buyer Indemnitees” has the meaning set forth in Section 8.02.
“Buyer Material Adverse Effect” means a Material Adverse Effect on the Buyer and its Subsidiaries, taken as a whole.
“Buyer SEC Reports” has the meaning set forth in Section 3.04(a).
“Buyer Transaction Documents” means this Agreement and the other Transaction Documents to which Buyer is or will be a party as contemplated by this Agreement.
“Buyer’s Accountants” means KPMG LLP.
“Buyer’s Failure to Close” has the meaning set forth in Section 10.12(a)(ii).
“Cap” has the meaning set forth in Section 8.04(c).
“Capital Plan” has the meaning set forth in Section 3.08.
“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. § 9601 et seq.
“Closing” has the meaning set forth in Section 1.03.
“Closing Date” has the meaning set forth in Section 1.03.
“Closing Statement” has the meaning set forth in Section 1.02(c).
“Code” means the Internal Revenue Code of 1986, as amended.
“Commitments” has the meaning set forth in Section 5.01.
“Common Stock” has the meaning set forth in the preamble.
“Company” has the meaning set forth in the preamble.
“Company Intellectual Property” means all Intellectual Property that is owned or held for use by the Company or any Subsidiary.
“Company IP Agreements” means all licenses, sublicenses, consent to use agreements, settlements, coexistence agreements, covenants not to sue, permissions and other Contracts (including any right to receive or obligation to pay royalties or any other consideration), relating to Intellectual Property to which the Company or any Subsidiary is a party or otherwise bound excluding Franchise Agreements and framework agreements.
“Company IP Registrations” means all Company Intellectual Property that is registered with any Governmental Authority or authorized private registrar in any jurisdiction, including registered trademarks, domain names and copyrights, issued and reissued patents and pending applications for any of the foregoing.
“Company Material Adverse Effect” means a Material Adverse Effect on the Company and its Subsidiaries, taken as a whole.
“Company Shares” has the meaning set forth in the preamble.
“Contracts” means all contracts, leases, deeds, mortgages, licenses, instruments, notes, commitments, undertakings, indentures, joint ventures and all other agreements, commitments and legally binding arrangements, whether written or oral.
“Direct Claim” has the meaning set forth in Section 8.05(c).
“Disclosure Schedules” means the Disclosure Schedules delivered by Buyer concurrently with the execution and delivery of this Agreement and by Seller prior to July 15, 2014.
“Disputed Amounts” has the meaning set forth in Section 10.14(a).
“DGCL” means the Delaware General Corporation Law.
“Dollar” or $” means the lawful currency of the United States.
“Encumbrance” means any charge, claim, community property interest, pledge, condition, equitable interest, lien (statutory or other), option, security interest, mortgage, easement, encroachment, right of way, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.
“Environmental Claim” means any Action, Governmental Order, lien, fine, penalty, or, as to each, any settlement or judgment arising therefrom, by or from any Person alleging liability of whatever kind or nature (including liability or responsibility for the costs of enforcement proceedings, investigations, cleanup, governmental response, removal or remediation, natural resources damages, property damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from: (a) the presence of, Release of, or exposure to any Hazardous Materials; or (b) any actual or alleged non-compliance with any Environmental Law or term or condition of any Environmental Permit.
“Environmental Law” means any applicable Law and any Governmental Order or binding agreement with any Governmental Authority: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety (but only as it related to the environment), or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term “Environmental Law” includes, without limitation, the following (including their implementing regulations and any state analogs): the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. § 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. § 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. § 1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. § 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. § 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. § 7401 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. § 651 et seq.
“Environmental Notice” means any written directive, notice of violation or infraction, or written notice respecting any Environmental Claim relating to actual or alleged non-compliance with any Environmental Law or any Environmental Permit.
“Environmental Permit” means any Permit clearance, consent, waiver, closure, or exemption required under or issued, granted, given, authorized by or made pursuant to Environmental Law.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.
“ERISA Affiliate” means all employers (whether or not incorporated) that would be treated together with the Company or any Subsidiary or any of their Affiliates as a “single employer” within the meaning of Section 414 of the Code.
“ESOP” means the Employee Stock Ownership Plan of the DCH Group of Companies.
“ESOP Payment” has the meaning set forth in the recitals.
“ESOP Stock Redemption Amount” has the meaning set forth in Section 1.02.
“ESOP Shares” has the meaning set forth in the preamble.
“ESOP Trustee” means Greatbanc Trust Company, an Illinois company.
“ESOT” means the Employee Stock Ownership Trust of the DCH Group of Companies.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Final Acquisition Balance Sheet” has the meaning set forth in Section 1.02(c).
“Final Purchase Price” has the meaning set forth in Section 1.02(c).
“Financial Statements” has the meaning set forth in Section 2.06.
“Franchise Agreement” means each franchise agreement listed in Section 2.09(a)(xiii) of the Disclosure Schedules entered into by the Company or any Subsidiary with the applicable Manufacturer, regulating the relationship of the Company or its applicable Subsidiary with such Manufacturer.
“GAAP” has the meaning set forth in Section 1.02.
“Goodwill” has the meaning set forth in in Section 1.02.
“Governmental Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.
“Governmental Order” means any order, writ, judgment, injunction, decree, determination or award entered by or with any Governmental Authority.
“Hazardous Materials” means: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation, and polychlorinated biphenyls.
“Holdback Amount” has the meaning set forth in Section 1.02(b)(i).
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
“Indemnified Party” has the meaning set forth in Section 8.05.
“Indemnifying Party” has the meaning set forth in Section 8.05.
“Indemnity Escrow” has the meaning set forth in Section 1.02(b)(i)(A).
“Indemnity Escrow Agreement” has the meaning set forth in Section 1.02(b)(i)(A).
“Independent Accountants” has the meaning set forth in Section 10.14(a).
“Initial Acquisition Balance Sheet” has the meaning set forth in Section 1.02(a).
“Initial Purchase Price” has the meaning set forth in Section 1.02(a).
“Insurance Policies” has the meaning set forth in Section 2.15.
“Intellectual Property” means all (i) trademarks, service marks, trade names, brand names, logos, trade dress or design rights; (ii) internet domain names, web addresses, web pages and websites; (iii) works of authorship and designs, whether or not copyrightable, including copyrights, moral rights and neighboring rights; (iv) inventions, discoveries, trade secrets, business and technical information and know-how and, data and other confidential or proprietary information; or (v) patents (including all reissues, divisionals, provisionals, continuations and continuations in part, re-examinations, renewals, substitutions and extensions thereof), patent applications and other patent rights; and (vi) software and firmware, including data files, source code, object code, architecture, files, records.
“Interim Balance Sheet” has the meaning set forth in Section 2.06.
“Interim Balance Sheet Date” has the meaning set forth in Section 2.06.
“Interim Financial Statements” has the meaning set forth in Section 2.06.
“Knowledge of Seller or Seller’s Knowledge” or any other similar knowledge qualification, means the actual knowledge of Mr. Shau-wai Lam and any director or officer of DCH Auto Group (USA) Limited or the Company.
“Lam Shares” has the meaning set forth in the preamble.
“Lam Stock Price” has the meaning set forth in the preamble.
“Lam Stock Redemption Agreement” has the meaning set forth in the preamble.
“Law” means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.
“Liabilities” has the meaning set forth in Section 2.07.
“Liquidated Damages” has the meaning set forth in Section 10.12(a).
“Lithia Shares” has the meaning set forth in Section 1.02(b).
“Losses” means losses, damages, liabilities, deficiencies, judgments, interest, awards, penalties or fines, or costs or expenses relating to the foregoing, including reasonable attorneys’ fees (including reasonable attorney’s fees associated with the cost of enforcing any right to indemnification hereunder and the cost of pursuing any insurance providers); provided, however, that “Losses” shall not include punitive, incidental, consequential or special damages, except in the case of fraud or to the extent actually awarded to a Governmental Authority or other third party.
“Manufacturer” means Honda/Acura, Audi, BMW, Chrysler Jeep Dodge, Kia, Lexus, Nissan, and Toyota.
“Manufacturer Consent” means the written consent of each Manufacturer counterparty under each agreement with a Manufacturer listed in Section 2.05 of the Disclosure Schedules to the completion of the transactions contemplated by the Agreement which are required pursuant to the applicable Franchise Agreement.
“Material Adverse Effect” means any event, occurrence, fact, condition or change that is individually or in the aggregate, materially adverse to (a) the business, operations, financial condition or assets of the Company and its Subsidiaries, the Buyer and its Subsidiaries or Seller, as applicable, in each case, considered as a whole, or (b) the ability of Seller or Buyer, as applicable, to complete the transactions contemplated hereby on a timely basis; provided, however, that “Material Adverse Effect” shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (i) general economic, regulatory or political conditions; (ii) conditions affecting car dealerships, the automotive industry or a particular Manufacturer generally; (iii) any changes in financial or securities markets in general; (iv) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (v) any action required or permitted by this Agreement, except to obtain consents or approvals listed on Section 2.05 of the Disclosure Schedules or pursuant to Section 4.08 or Section 5.02; (vi) any changes in applicable Laws or accounting rules, including GAAP; or (vii) the public announcement, pendency or completion of the transactions contemplated by this Agreement; provided further, however, that any event, occurrence, fact, condition or change referred to in clauses (i) through (iv) immediately above shall be taken into account in determining whether a Material Adverse Effect has occurred or could reasonably be expected to occur to the extent that such event, occurrence, fact, condition or change has a disproportionate effect on the Company and its Subsidiaries, the Buyer and its Subsidiaries or Seller, as applicable, in each case, considered as a whole, compared to other car dealerships, in the case of the Company or Buyer, or other holding companies, in the case of Seller.
“Material Contracts” has the meaning set forth in Section 2.09(a).
“Material Customers” has the meaning set forth in Section 2.14(a).
“Material Suppliers” has the meaning set forth in Section 2.14(b).
“Merger” has the meaning set forth in Section 8.02(c).
“Multiemployer Plan” has the meaning set forth in Section 2.19(b).
“New Cars” means vehicles that are unregistered and meet state requirements to be sold as a new vehicle and not reported as sold to the factory.
“Non-U.S. Benefit Plan” has the meaning set forth in Section 2.19(a).
“Parts” means all new and used parts, accessories and other inventory used to repair, service or accessorize any New Cars, Used Cars or any other vehicles repaired, serviced or accessorized as part of the business of the Company and its Subsidiaries.
“Permits” means all permits, licenses, franchises, approvals, authorizations, registrations, certificates, variances and similar rights obtained from Governmental Authorities.
“Permitted Encumbrances” has the meaning set forth in Section 2.10(a).
“Person” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.
“Post-Closing Adjustment” has the meaning set forth in Section 1.02(e).
“Post-Closing Tax Period” means any taxable period beginning after the Closing Date and, with respect to any taxable period beginning before and ending after the Closing Date, the portion of such taxable period beginning after the Closing Date.
“Pre-Closing Tax Period” means any taxable period ending on or before the Closing Date and, with respect to any taxable period beginning before and ending after the Closing Date, the portion of such taxable period ending on and including the Closing Date.
“Pre-Closing Taxes” means Taxes of the Company and its Subsidiaries for any Pre-Closing Tax Period, determined in accordance with Section 7.04.
“Purchase Price” has the meaning set forth in Section 1.02.
“Qualified Benefit Plan” has the meaning set forth in Section 2.19(c).
“Real Property” means the real property owned, leased or subleased by the Company or any Subsidiary, together with all buildings, structures and facilities located thereon.
“Release” means any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including, without limitation, ambient air (indoor or outdoor), surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture).
“Representative” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.
“Restricted Business” means the ownership or operation of a car dealership.
“Restricted Period” has the meaning set forth in Section 4.07(a).
“Securities Act” means the Securities Act of 1933, as amended.
“Seller” has the meaning set forth in the preamble.
“Seller Indemnitees” has the meaning set forth in Section 8.03.
“Seller Material Adverse Effect” means a Material Adverse Effect on the Seller.
“Seller Transaction Documents” means this Agreement and the other Transaction Documents to which Seller is or will be a party as contemplated by this Agreement.
“Seller’s Failure to Close” has the meaning set forth in Section 10.12(a)(i).
“Seller’s Accountants” means Crowe Horwath LLP.
“Shares” has the meaning set forth in the preamble.
“Straddle Period” has the meaning set forth in Section 7.04.
“Subsidiaries” means each corporation, limited liability company, partnership, association or other Person of which shares or any other equity or ownership interests are owned, controlled or held by the Company or one or more Subsidiaries of the Company or by the Company and one or more Subsidiaries of the Company, in each case, as of the date of this Agreement.
“Tangible Net Worth” has the meaning set forth in Section 1.02.
“Tax Claim” has the meaning set forth in Section 7.05.
“Tax Return” means any return, declaration, report, claim for refund, information return or statement or other document relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
“Tax” or “Taxes” means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, unclaimed property, escheat, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.
“Territory” means New Jersey, New York and California.
“Third-Party Claim” has the meaning set forth in Section 8.05(a).
“Transaction Documents” means this Agreement, the Indemnity Escrow Agreement, the Lam Stock Redemption Agreement and each other agreement, instrument, certificate or document delivered pursuant hereto or thereto.
“Union” has the meaning set forth in Section 2.20(b).
“Used Car” means any vehicles held for sale other than a New Car.
“WARN Act” means the federal Worker Adjustment and Retraining Notification Act of 1988, and similar state, local and foreign laws related to plant closings, relocations, mass layoffs and employment losses.
Index of Exhibits and Schedules*
The following exhibits and schedules to the Stock Purchase Agreement, dated as of June 14, 2014, between Lithia Motors, Inc. and DCH Auto Group (USA) Limited have not been provided herein:
Exhibit A - Form of Indemnity Escrow Agreement
Exhibit B - Form of Legal Opinion
Schedule 1.02 - Adjustments to Reflect Fair Value of Real Property and Leaseholds
Schedule 1.02(a) - Initial Purchase Price
Schedule 1.02(b) - Final Purchase Price
Seller Disclosure Schedules
Section 2.02 - Jurisdictions of the Company
Section 2.03 - Company Shareholders of Record
Section 2.04 - Subsidiaries
Section 2.05 - No Conflicts; Consents
Section 2.07 - Undisclosed Liabilities
Section 2.08 - Absence of Changes
Section 2.09(a) - Material Contracts
Section 2.10(a) - Permitted Encumbrances
Section 2.10(b) - Real Property
Section 2.11(a) - Company IP Registrations and Company Intellectual Property
Section 2.11(b) - Company IP Agreements
Section 2.11(c) - IP Ownership
Section 2.11(f) - Notice of Violations
Section 2.12 - Inventory
Section 2.14(a) - Material Customers
Section 2.14(b) - Material Suppliers
Section 2.14(c) - Notice of Deficiency
Section 2.15 - Insurance
Section 2.16(a) - Actions
Section 2.16(b) - Governmental Orders
Section 2.17(a) - Compliance with Laws
Section 2.17(b) - Permits
Section 2.18(a) - Environmental Matters
Section 2.18(b) - Environmental Permits
Section 2.18(c) - Environmental Matters - CERCLA Listings
Section 2.18(d) - Releases
Section 2.18(e) - Hazardous Materials
Section 2.18(f) - Compliance with Environmental Matters
Section 2.18(g) - Environmental Matters - Environmental Impediments/Easement
Section 2.19(a) - Benefits Plans
Section 2.19(c) - Benefits Plans - Compliance
Section 2.19(e) - Benefits Plans - Multiemployer Plans
Section 2.19(f) - Benefits Plans - Actions; Audits
Section 2.19(i) - Benefit Plans - Payments; Restrictions
Section 2.20(b) - Labor Matters - Collective Bargaining Agreements; Work Stoppages
Section 2.20(c) - Labor Matters - Compliance
Section 2.21 - Tax Matters
Section 2.21(e) - Tax Matters - Taxable Years
Section 2.21(s) - Tax Matters - Foreign Jurisdictions Subject to Taxes
Section 2.21(t) - Tax Matters - Tax Status of Subsidiaries
Section 2.21(u) - Tax Matters - Unclaimed Property Reports
Section 2.24 - Customer Programs
Buyer Disclosure Schedules
Section 3.03 - No Conflicts; Consents
* Exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Lithia Motors, Inc. hereby undertakes to furnish supplementally a copy of any omitted exhibit or schedule to the Securities and Exchange Commission upon request.
82
Exhibit 10.1
Deal CUSIP____________
New Vehicle Floorplan Facility CUSIP____________
Used Vehicle Floorplan Facility CUSIP____________
Revolving Line of Credit Facility CUSIP____________
AMENDED AND RESTATED
LOAN AGREEMENT
among
LITHIA MOTORS, INC.,
CERTAIN OF ITS SUBSIDIARIES,
THE LENDERS PARTY HERETO FROM TIME TO TIME,
and
U.S. BANK NATIONAL ASSOCIATION,
as Administrative Agent and Agent
and
JPMorgan Chase Bank, N.A., and Toyota Motor Credit Corporation as Co-Syndication Agents
U.S. Bank National Association and J.P. Morgan Securities LLC,
As Co-Lead Arrangers and Joint Bookrunners
American Honda Finance Corporation, TD Bank, N.A., and
Mercedes-Benz Financial Services USA LLC,
as Co-Documentation Agents
Dated as of [October 1], 2014
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS AND INTERPRETIVE PROVISIONS |
1 | ||
1.1 |
Defined Terms |
1 | |
1.2 |
Other Interpretive Provisions |
29 | |
ARTICLE 2 NEW VEHICLE FLOORPLAN LINE OF CREDIT |
31 | ||
2.1 |
New Vehicle Floorplan Loans |
31 | |
2.2 |
New Vehicle Swing Line Loans |
33 | |
2.3 |
Terms Applicable to New Vehicle Floorplan Loans and New Vehicle Swing Line Loans |
37 | |
2.4 |
New Vehicle Floorplan Borrowers |
40 | |
2.5 |
Addition of New Vehicle Floorplan Dealerships |
45 | |
ARTICLE 3 USED VEHICLE FLOORPLAN LINE OF CREDIT |
47 | ||
3.1 |
Used Vehicle Floorplan Loans |
47 | |
3.2 |
Used Vehicle Swing Line Loans |
50 | |
ARTICLE 4 REVOLVING LINE OF CREDIT |
53 | ||
4.1 |
Revolving Loans |
53 | |
4.2 |
Revolving Swing Line Loans |
57 | |
ARTICLE 5 LETTERS OF CREDIT |
59 | ||
5.1 |
Letter of Credit Commitment |
60 | |
5.2 |
Existing Letters of Credit |
60 | |
5.3 |
LC Agreements |
60 | |
5.4 |
Expiry Date |
60 | |
5.5 |
Requests for Letters of Credit |
60 | |
5.6 |
Participation in Letters of Credit |
61 | |
5.7 |
Payments |
61 | |
5.8 |
Terms Satisfactory to LC Issuer |
62 | |
5.9 |
Obligations Absolute |
62 | |
5.10 |
Letter of Credit Fees |
63 | |
5.11 |
LC Collateral Account |
63 | |
5.12 |
Borrower Indemnification |
63 | |
5.13 |
Lenders’ Indemnification |
64 | |
ARTICLE 6 CERTAIN ADDITIONAL PROVISIONS |
64 | ||
6.1 |
Interest |
64 | |
6.2 |
Evidence of Debt |
65 | |
6.3 |
Borrowing Procedure |
65 | |
6.4 |
Obligations Several |
66 | |
6.5 |
Non-Receipt of Funds by Agent |
66 | |
6.6 |
Authorization |
66 | |
6.7 |
Interest and Fee Basis |
67 | |
6.8 |
Method of Payment |
67 | |
6.9 |
Payment by Automatic Debit |
67 | |
6.10 |
Late Charges |
67 | |
6.11 |
Limitation of Interest |
68 | |
6.12 |
Increase Option |
69 | |
6.13 |
Authorization |
70 | |
6.14 |
Defaulting Lenders |
70 |
6.15 |
Replacement of Lender |
73 | |
6.16 |
Per Annum Fee |
74 | |
6.17 |
Reallocation of Commitments |
74 | |
ARTICLE 7 YIELD PROTECTION; TAXES |
75 | ||
7.1 |
Yield Protection |
75 | |
7.2 |
Changes in Capital Adequacy Regulations |
76 | |
7.3 |
Availability of Types of Advances; Adequacy of Interest Rate |
77 | |
7.4 |
Taxes |
77 | |
7.5 |
Selection of Lending Installation; Mitigation Obligations; Lender Statements; Survival of Indemnity |
80 | |
ARTICLE 8 SECURITY AND GUARANTIES |
81 | ||
8.1 |
Security |
81 | |
8.2 |
Guaranties |
82 | |
ARTICLE 9 CONDITIONS PRECEDENT |
82 | ||
9.1 |
Initial Conditions Precedent |
82 | |
9.2 |
Conditions Precedent to Each Credit Extension |
85 | |
9.3 |
Conditions Precedent to Initial Advance to any New Vehicle Floorplan Borrower |
86 | |
9.4 |
Real Property Conditions |
87 | |
ARTICLE 10 REPRESENTATIONS AND WARRANTIES |
88 | ||
10.1 |
Existence and Standing |
88 | |
10.2 |
Authorization and Validity |
88 | |
10.3 |
Conflict; Government Consent |
88 | |
10.4 |
Financial Statements |
88 | |
10.5 |
Material Adverse Change |
89 | |
10.6 |
Taxes |
89 | |
10.7 |
Litigation and Contingent Obligations |
89 | |
10.8 |
Subsidiaries and Affiliates |
89 | |
10.9 |
ERISA |
90 | |
10.10 |
Accuracy of Information |
90 | |
10.11 |
Regulation U |
90 | |
10.12 |
Material Agreements |
90 | |
10.13 |
Compliance with Laws |
90 | |
10.14 |
Ownership of Properties |
90 | |
10.15 |
Plan Assets; Prohibited Transactions |
91 | |
10.16 |
Trademarks; Patents, Etc. |
91 | |
10.17 |
Burdensome Restrictions |
91 | |
10.18 |
Force Majeure |
91 | |
10.19 |
Investment Company Act, Etc. |
91 | |
10.20 |
Solvency |
91 | |
10.21 |
Franchise Agreements; Material Business Relationships |
91 | |
10.22 |
Security Interests |
92 | |
10.23 |
Continuing Representations and Warranties |
92 | |
ARTICLE 11 FINANCIAL COVENANTS AND INFORMATION |
92 | ||
11.1 |
Financial Covenants |
92 | |
11.2 |
Financial Information |
94 | |
ARTICLE 12 AFFIRMATIVE COVENANTS |
96 |
12.1 |
Maintenance of Existence and Permits |
96 | |
12.2 |
ERISA |
96 | |
12.3 |
Inspection |
96 | |
12.4 |
Collateral Audits |
97 | |
12.5 |
Books and Records |
97 | |
12.6 |
Maintenance of Properties |
97 | |
12.7 |
Taxes and Other Obligations |
97 | |
12.8 |
Insurance |
98 | |
12.9 |
Compliance with Laws |
98 | |
12.10 |
Agreements with Sellers |
98 | |
12.11 |
Repurchase Agreements |
99 | |
12.12 |
Management |
99 | |
12.13 |
Landlord’s Consents |
99 | |
12.14 |
Notification |
99 | |
12.15 |
Further Assurances |
100 | |
12.16 |
Deposit Accounts |
101 | |
12.17 |
Joinder of New Subsidiaries |
101 | |
ARTICLE 13 NEGATIVE COVENANTS |
101 | ||
13.1 |
Mergers, Etc. |
101 | |
13.2 |
Guaranties, Etc. |
102 | |
13.3 |
Liens |
102 | |
13.4 |
Restricted Payments |
104 | |
13.5 |
Subordinated Debt |
105 | |
13.6 |
Loans and Investments |
105 | |
13.7 |
Transactions with Affiliates |
106 | |
13.8 |
Type of Business |
107 | |
13.9 |
Structure |
107 | |
13.10 |
Indebtedness |
107 | |
13.11 |
Margin Stock; Speculation |
108 | |
13.12 |
Restrictive Agreements |
109 | |
13.13 |
Permitted Acquisitions |
109 | |
13.14 |
Accounting Changes; Fiscal Year |
111 | |
13.15 |
Excluded Subsidiaries and Real Estate Subsidiaries |
111 | |
ARTICLE 14 DEFAULT AND REMEDIES |
111 | ||
14.1 |
Events of Default |
111 | |
14.2 |
Consequences of Default; Rights and Remedies. Time is of the essence of this Agreement |
114 | |
14.3 |
Application of Payments |
115 | |
ARTICLE 15 HAZARDOUS SUBSTANCES |
115 | ||
15.1 |
Representations and Warranties |
116 | |
15.2 |
Activities |
116 | |
15.3 |
Inspections |
116 | |
15.4 |
Release and Indemnity |
116 | |
15.5 |
Survival |
116 | |
ARTICLE 16 THE AGENT |
116 | ||
16.1 |
Appointment; Nature of Relationship |
116 |
16.2 |
Powers |
117 | |
16.3 |
General Immunity |
117 | |
16.4 |
No Responsibility for Loans, Recitals, Etc. |
117 | |
16.5 |
Action on Instructions of Lenders |
117 | |
16.6 |
Employment of Agents and Counsel |
118 | |
16.7 |
Reliance on Documents; Counsel |
118 | |
16.8 |
Reimbursement and Indemnification |
118 | |
16.9 |
Notice of Event of Default |
119 | |
16.10 |
Rights as a Lender |
119 | |
16.11 |
Lender Credit Decision, Legal Representation |
119 | |
16.12 |
Successor Agent |
120 | |
16.13 |
Agent’s Fees |
120 | |
16.14 |
Delegation to Affiliates |
120 | |
16.15 |
Execution of Collateral Documents |
120 | |
16.16 |
Collateral Releases |
121 | |
16.17 |
No Advisory or Fiduciary Responsibility |
121 | |
16.18 |
Co-Documentation Agents, Syndication Agent, etc. |
121 | |
ARTICLE 17 MISCELLANEOUS |
121 | ||
17.1 |
Expenses; Indemnification |
121 | |
17.2 |
Successors and Assigns |
123 | |
17.3 |
Participations |
123 | |
17.4 |
Assignments |
124 | |
17.5 |
Register |
126 | |
17.6 |
Dissemination of Information |
126 | |
17.7 |
Ratable Payments |
126 | |
17.8 |
Setoff |
126 | |
17.9 |
Amendments and Waivers |
127 | |
17.10 |
Waiver; Cumulative Remedies |
128 | |
17.11 |
Notices |
128 | |
17.12 |
Integration; Conflicting Terms |
129 | |
17.13 |
Governing Law |
129 | |
17.14 |
Consent To Jurisdiction |
130 | |
17.15 |
Documents Satisfactory to Agent and Required Lenders |
130 | |
17.16 |
Exhibits |
130 | |
17.17 |
Headings |
130 | |
17.18 |
Nonliability of Lenders |
130 | |
17.19 |
Survival of Representations |
131 | |
17.20 |
Governmental Regulation |
131 | |
17.21 |
Counterparts |
131 | |
17.22 |
Severability |
131 | |
17.23 |
Construction |
131 | |
17.24 |
USA Patriot Act Notification |
131 | |
17.25 |
Nonreliance |
132 | |
17.26 |
Confidentiality |
132 | |
17.27 |
Ford Letter Agreement |
132 | |
17.28 |
Waiver of Jury Trial |
133 |
17.29 |
Disclosure |
133 |
SCHEDULE 1
PRICING SCHEDULE
DISCLOSURE SCHEDULE
EXHIBIT A – COMPLIANCE CERTIFICATE
EXHIBIT B – USED VEHICLE BORROWING BASE CERTIFICATE
EXHIBIT C – REVOLVING LOAN BORROWING BASE CERTIFICATE
EXHIBIT D – ASSIGNMENT AGREEMENT
EXHIBIT E – PLEDGE AGREEMENT
EXHIBIT F – SECURITY AGREEMENT
EXHIBIT G – COMMERCIAL GUARANTY
EXHIBIT H – TERMINATION AGREEMENT
EXHIBIT I – BORROWER JOINDER AGREEMENT
EXHIBIT J – GUARANTOR JOINDER AGREEMENT
EXHIBIT K – EXISTING SUBSIDIARY JOINDER AGREEMENT
EXHIBIT L – BORROWER TERMINATION AGREEMENT
EXHIBIT M – ADDITIONAL LENDER AGREEMENT
EXHIBIT N – INCREASING LENDER AGREEMENT
EXHIBIT O – REALLOCATION REQUEST
AMENDED AND RESTATED LOAN AGREEMENT
This Amended and Restated Loan Agreement (“Agreement”) is entered into as of [October 1], 2014, among Lithia Motors, Inc., an Oregon corporation (the “Company”), each of the Subsidiaries of the Company listed on the signature pages of this Agreement or which hereafter becomes a Borrower hereunder, each financial institution listed on the signature pages of this Agreement or which hereafter becomes a party hereto (each a “Lender” and any two or more, “Lenders”); and U.S. Bank National Association (“U.S. Bank”), as Agent for the Lenders.
RECITALS
A. The Company, certain of its Subsidiaries, the lenders from time to time parties thereto, and the Agent, have entered into a Loan Agreement dated as of April 17, 2012 (as amended by that certain Amendment to Loan Agreement dated as of December 19, 2012, by that certain Second Amendment to Loan Agreement dated as of December 16, 2013 and by that certain Third Amendment to Loan Agreement dated as of March 26, 2014, the “Existing Loan Agreement”), pursuant to which such lenders under the Existing Loan Agreement extended a revolving credit facility to the Company and certain of its Subsidiaries, such lenders extended a new vehicle floorplan line of credit to the New Vehicle Floorplan Borrowers, and such lenders extended a used vehicle floorplan line of credit to the Company.
B. The Company and the other Borrowers have asked the Lenders and Agent to amend and restate the Existing Loan Agreement to (a) permit the Company to consummate the purchase of all of the issued and outstanding capital stock of DCH Auto Group (USA) Inc., a Delaware corporation, (b) increase the “Aggregate Commitment” specified in the Existing Loan Agreement from $1,000,000,000 to $1,700,000,000, (c) increase the maximum allowable amount of the “Aggregate Revolving Loan Commitment” specified in the Existing Loan Agreement from $200,000,000 to $300,000,000, (d) increase the maximum allowable amount of the “Aggregate Used Vehicle Floor Plan Commitment” specified in the Existing Loan Agreement from $200,000,000 to $250,000,000, and (e) make such additional amendments and modifications to the terms and conditions of the Existing Loan Agreement as are more specifically set forth herein.
In consideration of the mutual covenants and agreements set forth herein and for other valuable consideration, the parties hereto agree that the Existing Loan Agreement is amended and restated in its entirety as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETIVE PROVISIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings:
“Access Laws” means the Americans With Disabilities Act of 1990; the Fair Housing Amendments Act of 1988; all other federal, state and local laws or ordinances related to disabled access; and all statutes, rules, regulations, ordinances, orders of governmental bodies and regulatory agencies and orders and decrees of any court adopted, enacted or issued with respect thereto; all as now existing or hereafter amended or adopted.
“Acquisition” has the meaning set forth in Section 13.13.
“Acquisition Subsidiary” has the meaning set forth in Section 3.13(d).
“Additional Lender” has the meaning set forth in Section 6.12.2.
“Advance” means a New Vehicle Floorplan Advance, Used Vehicle Floorplan Advance, Revolving Loan Advance, or (unless otherwise expressly provided), a Swing Line Loan.
“Affected Lender” has the meaning set forth in Section 6.15.
“Affiliate” means with respect to any Person (a) each other Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, five percent (5%) or more of the stock or other ownership interests having ordinary voting power of such Person; (b) each Person that Controls, is Controlled by or is under common Control with such Person or any Affiliate of such Person; and (c) each of such Person’s executive officers, directors, joint venturers, members and general partners.
“Agent” or “Administrative Agent” means U.S. Bank in its capacity as contractual representative of the Lenders pursuant to Article 16, and not in its individual capacity as a Lender, and any successor Agent appointed pursuant to Article 16.
“Aggregate Commitment” means, at any time, the sum of the Aggregate New Vehicle Floorplan Commitment, plus the Aggregate Used Vehicle Floorplan Commitment, plus the Aggregate Revolving Loan Commitment, as adjusted from time to time pursuant to the terms hereof, provided that, except as provided in Section 6.12, the Aggregate Commitment shall not be more than $1,700,000,000.00.
“Aggregate Lender Commitment” means, for any Lender, the sum of such Lender’s New Vehicle Floorplan Commitment, Used Vehicle Floorplan Commitment, and Revolving Loan Commitment.
“Aggregate New Vehicle Floorplan Commitment” means, at any time, the aggregate of the New Vehicle Floorplan Commitments of all Lenders at such time.
“Aggregate Outstanding Credit Exposure” means, at any time, the aggregate of the Outstanding Credit Exposure of all Lenders at such time.
“Aggregate Outstanding New Vehicle Floorplan Exposure” means, at any time, the aggregate of the Outstanding New Vehicle Floorplan Exposure of all Lenders at such time.
“Aggregate Outstanding Revolving Loan Exposure” means, at any time, the aggregate of the Outstanding Revolving Loan Exposure of all Lenders at such time.
“Aggregate Outstanding Used Vehicle Floorplan Exposure” means, at any time, the aggregate of the Outstanding Used Vehicle Floorplan Exposure of all Lenders at such time.
“Aggregate Revolving Loan Commitment” means, at any time, the aggregate of the Revolving Loan Commitments of all Lenders at such time; provided that, except as provided in Section 6.12 the Aggregate Revolving Loan Commitment shall not at any time be more than $300,000,000.00.
“Aggregate Used Vehicle Floorplan Commitment” means, at any time, the aggregate of the Used Vehicle Floorplan Commitments of all Lenders at such time; provided that, except as provided in Section 6.12 the Aggregate Used Vehicle Floorplan Commitment shall not at any time be more than $250,000,000.00.
“Agreement” has the meaning set forth in the introductory paragraph.
“Alternate Base Rate” means, for any day, a rate of interest per annum equal to the highest of (a) the Prime Rate for such day, (b) the sum of the Federal Funds Effective Rate for such day plus .50% per annum and (c) the Eurocurrency Rate in effect for such day plus 1.50%, provided that, for the avoidance of doubt, the Eurocurrency Rate for any day shall be based on the rate reported by the applicable financial information service at approximately 11:00 a.m. London time on such day.
“Alternate Base Rate Margin (New Vehicle)” has the meaning set forth in the Pricing Schedule.
“Alternate Base Rate Margin (Revolving)” has the meaning set forth in the Pricing Schedule.
“Alternate Base Rate Margin (Used Vehicle)” has the meaning set forth in the Pricing Schedule.
“Applicable Law” means all applicable provisions and requirements of (a) all constitutions, statutes, ordinances, rules, regulations, standards, orders, and directives of any Governmental Bodies, (b) Governmental Approvals, and (c) orders, decisions, decrees, judgments, injunctions, and writs of all courts and arbitrators, whether such Applicable Laws presently exist, or are modified, promulgated, or implemented after the date hereof.
“Appraisal” means an appraisal of real property which is (a) ordered by Agent, (b) prepared by an appraiser satisfactory to Agent, (c) in compliance with all federal and state standards for appraisals and all regulatory requirements, (d) reviewed by Agent, and (e) in form and substance satisfactory to Agent in its sole and absolute discretion.
“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
“Assignee” has the meaning set forth in Section 17.4.
“Assignment Agreement” means an agreement substantially in the form attached as Exhibit D.
“Attorney Costs” means and includes all reasonable fees and disbursements of any law firm or retained counsel and of any in-house or internal counsel whether or not litigation or arbitration is commenced, and if litigation or arbitration is commenced shall include fees and disbursements incurred at trial, in any appellate proceeding, bankruptcy proceeding (including efforts to modify or vacate any automatic stay or injunction) or receivership, and post-judgment attorney fees incurred in enforcing any judgment.
“Borrower” means a New Vehicle Floorplan Borrower, the Used Vehicle Floorplan Borrower, or the Revolving Loan Borrower and “Borrowers” means any two or more of them.
“Borrower Joinder Agreement” means an agreement substantially in the form attached hereto as Exhibit I.
“Borrower Termination Agreement” means an agreement substantially in the form attached hereto as Exhibit L.
“Business Day” means (a) with respect to any borrowing, payment or rate determination, a day (other than a Saturday or Sunday) on which banks generally are open in New York City or Seattle, Washington for the conduct of substantially all of their commercial lending activities, interbank wire transfers can be made on the Fedwire system and dealings in United States dollars are carried on in the London interbank market and (b) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in New York City for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system.
“Capitalized Lease” of a Person means any lease of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP.
“Capitalized Lease Obligations” of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with GAAP.
“Cash Collateralize” means to deposit in the LC Collateral Account or to pledge and deposit with or deliver to the Agent, for the benefit of one or more of the LC Issuer or Lenders, as collateral for the LC Obligations or obligations of Lenders to fund participations in respect of LC Obligations, cash or deposit account balances or, if the Agent and the LC Issuer shall agree in their sole discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to the Agent and the LC Issuer.
“Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.
“Cash Equivalent Investments” means (i) short-term obligations of, or fully guaranteed by, the United States of America, (ii) commercial paper rated A-1 or better by S&P or P-1 or better by Moody’s, (iii) demand deposit accounts maintained in the ordinary course of business, and (iv) certificates of deposit issued by and time deposits with commercial banks (whether domestic or foreign) having capital and surplus in excess of $500,000,000; provided in each case that the same provides for payment of both principal and interest (and not principal alone or interest alone) and is not subject to any contingency regarding the payment of principal or interest, (v) shares of money market mutual funds that are rated at least “AAAm” or “AAAG” by S&P or “P-1” or better by Moody’s, and (vi) other cash equivalent investments approved in writing by Agent.
“Change in Control” means:
(a) Lithia Holding Company, L.L.C. (“LHC”) and the Principal cease to directly own more than 51% of the voting power of the Company’s capital stock ordinarily having the right to vote at an election of directors, or the Principal ceases to Control LHC (through the ownership of voting membership interests or by contract or otherwise);
(b) The Company consolidates with or merges into another Person or conveys, transfers or leases all or substantially all of its property to any Person, or any Person consolidates with or merges into the Company, in either event pursuant to a transaction in which the outstanding capital stock of the Company is reclassified or changed into or exchanged for (i) cash or Cash Equivalent Investments or (ii) securities, and the holders of the capital stock in the Company immediately prior to such transaction do not, as a result of such transaction, own, directly or indirectly, more than 51% of the combined voting power of the Company’s capital stock or the capital stock of its successor entity in such transaction.
“Change in Law” has the meaning set forth in Section 7.1.
“Claims” has the meaning set forth in Section 5.12.
“Closing Date” means [October 1], 2014, the date on which all conditions precedent in Section 9.1 are satisfied.
“Code” means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time or any successor federal income tax statute or code and the regulations and published interpretations promulgated thereunder.
“Collateral” has the meaning set forth in Section 8.1.1.
“Collateral Documents” means and includes the Security Agreement, the Pledge Agreement, and all deeds of trust, assignments, mortgages, security agreements, bank account control agreements, and other documents executed or delivered to Agent by any Person at any time to evidence and/or perfect security interests in the Collateral.
“Commitment” means, as to any Lender, such Lender’s Revolving Loan Commitment, New Vehicle Floorplan Commitment, Used Vehicle Floorplan Commitment, Letter of Credit Commitment, Revolving Swing Line Commitment, New Vehicle Swing Line Commitment, or Used Vehicle Swing Line Commitment.
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. Section 1 et seq.), as amended from time to time, and any successor statute.
“Company” means Lithia Motors, Inc., an Oregon corporation.
“Compliance Certificate” means a certificate substantially in the form attached as Exhibit A, or in such other form as is acceptable to Agent.
“Contingent Obligation” means any guarantee of Indebtedness or any other obligation of any other Person or any agreement to maintain the net worth, working capital or other financial condition of any other Person, whether direct, indirect or contingent, including, without limitation, any purchase or repurchase agreement, comfort letter, or keep-well, take-or-pay, through-put or other arrangement of whatever nature having the effect of assuring or holding harmless any Person against loss with respect to any obligation of such other Person; provided, however, that the term “Contingent Obligation” shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined in good faith by the Person subject to such obligation.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise and “Controlled by” shall have the concomitant meaning.
“Controlled Group” means all members of a controlled group of corporations or other business entities and all trades or businesses (whether or not incorporated) under common control which, together with any Loan Party or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code.
“Credit Extension” means the making of an Advance or the issuance of a Letter of Credit hereunder.
“Current Assets” has the meaning set forth in Section 11.1.1.
“Current Liabilities” has the meaning set forth in Section 11.1.1.
“Current Ratio” has the meaning set forth in Section 11.1.1.
“DCH” means DCH Auto Group (USA) Inc., a Delaware corporation.
“DCH Acquisition” means the purchase by the Company of all of the issued and outstanding capital stock of DCH pursuant to and in accordance with the terms of the DCH Acquisition Agreement and the other DCH Acquisition Documents.
“DCH Acquisition Agreement” means the Stock Purchase Agreement, dated June 14, 2014, between the Company and DCH Auto Group (USA) Limited, a British Virgin Islands corporation, as amended by that certain memorandum from George Liang to Chris Holzshu dated June 30, 2014 and consented to by the Company, and as amended by that certain First Amendment to Stock Purchase Agreement, dated as of July 15, 2014, between the Company and DCH Auto Group (USA) Limited.
“DCH Acquisition Documents” means, collectively, (a) the DCH Acquisition Agreement, (b) the Stock Redemption Agreement, dated June 14, 2014, between DCH and Shau-wai Lam, and (c) each of the other “Transaction Documents” as such term is defined in the DCH Acquisition Agreement.
“DDA” has the meaning set forth in Section 4.2.7(b).
“Dealership” means a Subsidiary of the Company whose primary business is the retail sales or retail sale and lease of new and/or used automobiles and trucks.
“Dealership Loan Limit” has the meaning set forth in Section 2.3.1(b).
“Dealership Sublimit” has the meaning set forth in Section 2.3.1(b).
“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.
“Deemed Sale” has the meaning set forth in Section 2.3.3(c).
“Default” means any Event of Default or any event which with the giving of notice or the passage of time, or both, would constitute an Event of Default.
“Defaulting Lender” means, subject to 6.14.2, any Lender that (a) has failed to (i) fund all or any portion of its Loans within three (3) Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Agent and Company in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied or waived, or (ii) pay to the Agent, the LC Issuer, the Swing Line Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swing Line Loans) within three (3) Business Days of the date when due, (b) has notified any Borrower, the Agent, the LC Issuer or the Swing Line Lender in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three (3) Business Days after written request by the Agent or the Company, to confirm in writing to the Agent and the Company that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Agent and the Company), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, or (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets (other than an Undisclosed Administration), including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a governmental authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such governmental authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 6.14.2) upon delivery of written notice of such determination to the Company, the LC Issuer, the Swing Line Lender and each Lender.
“Default Rate” has the meaning set forth in Section 6.1.2.
“Demo” means any New Vehicle (except that any mileage limitations included in the definition for a particular type of Vehicle shall not be applicable to Demos) that is used by a Dealership as a demonstration unit.
“Disclosure Schedule” means the Disclosure Schedule attached hereto.
“Dollar” or “$” means lawful money of the United States of America.
“EBITDAR” has the meaning set forth in Section 11.1.2.
“Eligible Account” means amounts owed by a customer to a Dealership for parts or accessories sold to such customer or for services performed for such customer, in which Agent has a perfected first priority security interest, which is due and payable in full not more than 60 days after date of sale or invoice, and which is not more than 60 days past due.
“Eligible Assignee” means (a) a Lender; (b) an Approved Fund; (c) a commercial bank organized under the laws of the United States, or any state thereof, and having total assets in excess of $3,000,000,000, calculated in accordance with the accounting principles prescribed by the regulatory authority applicable to such bank in its jurisdiction of organization; (d) a commercial bank organized under the laws of any other country that is a member of the OECD, or a political subdivision of any such country, and having total assets in excess of $3,000,000,000, calculated in accordance with the accounting principles prescribed by the regulatory authority applicable to such bank in its jurisdiction of organization, so long as such bank is acting through a branch or agency located in the country in which it is organized or another country that is described in this clause (d); or (e) the central bank of any country that is a member of the OECD; provided, however, that neither the Borrower nor an Affiliate of the Borrower shall qualify as an Eligible Assignee.
“Eligible New Vehicle” means a New Vehicle owned by a New Vehicle Floorplan Dealership which is an Eligible Vehicle and in which Agent has a perfected first priority security interest.
“Eligible Real Property” means Real Property owned exclusively by any Real Estate Subsidiary, which satisfies all requirements set forth in Section 9.4 and which is included in the Revolving Loan Borrowing Base.
“Eligible Receivables” means amounts owing to the Company or a Subsidiary in which Agent has a perfected first priority security interest, which are (a) Eligible Accounts; (b) commissions owed to the Dealerships by financial institutions or finance companies which are not Affiliates of any Loan Party in connection with the purchase by such institutions of retail installment contracts and leases arising from the sale or lease of New Vehicles and Used Vehicles (finance receivables), which have not remained unpaid for more than 90 days, or (c) amounts owed to the Company or a Dealership by a manufacturer of Vehicles as incentive payments, rebates, factory credits and the like, but excluding factory holdbacks (factory receivables),which have not remained unpaid for more than 90 days, subject to the exclusion by Agent of such amounts which are owed to the Company or a Dealership by a manufacturer which has commenced or had commenced against it, any proceeding under any present or future bankruptcy law.
“Eligible Vehicle” means an automobile or truck with a gross vehicle weight of no more than 16,000 pounds, which satisfies the following requirements:
(a) The vehicle is owned by a Dealership, subject to a perfected security interest in favor of Agent, and free of any title defects, liens, security interests, leases, bailments, consignments or other interests of any Person other than Agent, except as agreed by Agent in writing.
(b) Unless the vehicle is a Demo, or is in transit from the seller, it is located at locations which the Dealerships disclosed to Agent and which are acceptable to Agent. If the vehicle is in transit from a seller, then upon receipt by a Dealership it will be located at one of such locations.
(c) The vehicle is held for sale or lease in the ordinary course of a Dealership’s business.
(d) The vehicle is undamaged and of good and merchantable quality.
(e) The vehicle is otherwise acceptable to Agent.
“Environmental Laws” means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to (a) Hazardous Substances, (b) the protection of the environment, (c) personal injury or property damage relating to the release or discharge of Hazardous Materials, (d) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into surface water, ground water or land, or (e) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof, all as now existing or hereafter amended or adopted.
“Environmental Reports” has the meaning set forth in Section 9.4.2.
“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time and any rule or regulation promulgated thereunder.
“ERISA Affiliate” means, as applied to a Loan Party, any trade or business (whether or not incorporated) that, together with such Loan Party, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
“ERISA Event” means (a) any “Reportable Event” (b) failure with respect to any Plan to satisfy the “minimum funding standard” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(c) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by any Loan Party or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by any Loan Party or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by any Loan Party or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal of any Loan Party or any of its ERISA Affiliates from any Plan or Multiemployer Plan; or (g) the receipt by any Loan Party or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from any Loan Party or any ERISA Affiliate of any notice, concerning the imposition upon any Loan Party or any of its ERISA Affiliates of withdrawal liability under Section 4201 of ERISA or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.
“Eurocurrency Base Rate” means the applicable interest settlement rate for Dollar LIBOR for one month appearing on the applicable Reuters Screen LIBOR01 as of 11:00 a.m. (London time) on the Business Day which is two (2) Business Days prior to the Reprice Date, provided that, if the applicable Reuters Screen LIBOR01 (or any successor or substitute page on such screen) for Dollar LIBOR (or any successor or substitute page) is not available to the Agent for any reason, the applicable Eurocurrency Base Rate for one month shall instead be the applicable interest settlement rate for deposits in Dollar LIBOR for one month as reported by any other generally recognized financial information service selected by the Agent, as of 11:00 a.m. (London time) on the applicable Business Day, provided that, if no such interest settlement rate is available to the Agent, the applicable Eurocurrency Base Rate for one month shall instead be the rate determined by the Agent to be the rate at which Agent or one of its Affiliate banks offers to place deposits in U.S. dollars with first-class banks in the interbank market at approximately 11:00 a.m. (London time) on the applicable Business Day in the approximate amount of the relevant Revolving Loan Advance, New Vehicle Floorplan Advance, Used Vehicle Floorplan Advance, or Swing Line Loan and having a maturity equal to one month. For purposes of determining any interest rate hereunder or under any other Loan Document which is based on the Eurocurrency Base Rate, such interest rate shall change monthly on each Reprice Date.
“Eurocurrency Loans” has the meaning set forth in Section 7.1(b).
“Eurocurrency Rate” means the quotient of (a) the Eurocurrency Base Rate divided by (b) one minus the applicable Reserve Requirement (expressed as a decimal).
“Event of Default” means the occurrence of any event described in Section 14.1.
“Excluded Funded Debt” has the meaning set forth in Section 13.10(l).
“Excluded Items” has the meaning set forth in Section 11.1.2.
“Excluded Subsidiary” means any of (a) LCDC or (b) any present or future Subsidiary of the Company that is formed for the sole purpose of making Investments permitted under Section 13.6(p).
“Excluded Swap Obligation” means, with respect to any Guarantor, any Guarantor Swap Obligation if, and only to the extent that, all or a portion of the guaranty of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Guarantor Swap Obligation (or any guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof), including by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the guaranty of such Guarantor or the grant of such security interest becomes effective with respect to such Guarantor Swap Obligation. If a Guarantor Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Guarantor Swap Obligation that is attributable to swaps for which such guaranty or security interest is or becomes illegal.
“Excluded Taxes” means, in the case of each Lender or applicable Lending Installation, the LC Issuer, and the Agent, (a) Taxes imposed on its overall net income, franchise Taxes, and branch profits Taxes imposed on it, by the respective jurisdiction under the laws of which such Lender, the LC Issuer or the Agent is incorporated or is organized or in which its principal executive office is located or, in the case of a Lender, in which such Lender’s applicable Lending Installation is located, (b) in the case of a Non-U.S. Lender, any withholding tax that is imposed on amounts payable to such Non-U.S. Lender pursuant to the laws in effect at the time such NonU.S. Lender becomes a party to this Agreement or designates a new Lending Installation, except in each case to the extent that, pursuant to Section 7.4.1, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its Lending Installation, or is attributable to the Non-U.S. Lender’s failure to comply with Section 7.4.6, and (c) any U.S. federal withholding taxes imposed by FATCA.
“Existing Letters of Credit” has the meaning set forth in Section 5.2.
“Existing Loan Agreement” has the meaning set forth in Recital A.
“Existing Subsidiary Joinder Agreement” means an agreement substantially in the form attached hereto as Exhibit K.
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), and any current or future regulations or official interpretations thereof.
“Federal Funds Effective Rate” means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Pacific time) on such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by the Agent in its sole discretion.
“Fiscal Year” means the fiscal year of the Company and its Subsidiaries, the last day of which is December 31.
“Fixed Charge Coverage Ratio” has the meaning set forth in Section 11.1.2.
“Fleet Sale Contract” means an agreement or series of agreements by a Dealership to sell more than five New Vehicles to a purchaser if at any time there will be more than five Vehicles for which such Dealership has not been paid in full, and shall include all documents evidencing such sale, including the contract or contracts between such Dealership and the purchaser, delivery agreements and purchase orders.
“Fleet Vehicle” means a New Vehicle that is to be sold by a Dealership pursuant to a Fleet Sale Contract.
“FLSA” means the Fair Labor Standards Act of 1938, as amended from time to time, and the regulations promulgated thereunder.
“Former Lender” has the meaning set forth in Section 9.3.1.
“Former Lender Loan” means a loan made by a Former Lender to finance a New Vehicle Floorplan Dealership’s New Vehicles.
“Franchise Agreement” has the meaning set forth in Section 10.21.
“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with respect to the LC Issuer, such Defaulting Lender’s ratable share of the LC Obligations with respect to Letters of Credit issued by the LC Issuer other than LC Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to the Swing Line Lender, such Defaulting Lender’s ratable share of outstanding Swing Line Loans made by the Swing Line Lender other than Swing Line Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders.
“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
“Funded Debt” means (a) Indebtedness of the type described in clauses (a), (b), (c), and (f) of the definition of Indebtedness, and (b) indebtedness of Crown Automotive to Bank of the West which is guaranteed by the Company; provided, however, that Funded Debt shall not include unsecured trade accounts payable incurred in the ordinary course of business.
“GAAP” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession) which are applicable to the circumstances as of the date of application.
“Governmental Approval” means any authorization, order, consent, adjudication, approval, certificate of compliance, license, permit, validation, or exemption from, contract with, registration or filing with, or report or notice to, any Governmental Body required or permitted by Applicable Law.
“Governmental Body” means (a) any foreign or domestic federal, state or local government or municipality or political subdivision of any government or municipality, (b) any assessment, improvement, community facilities or other special taxing district, (c) any governmental or quasi-governmental body, authority, board, bureau, commission, corporation, department, instrumentality or public body, (d) any court, administrative tribunal, arbitrator, public utility or regulatory body, or (e) any central bank or comparable authority.
“Guarantor” means each Subsidiary which at any time executes a Guaranty of the Revolving Loan Obligations and Used Vehicle Floorplan Obligations for the benefit of Agent and the Lenders, it being understood that each present and future Subsidiary of the Company shall be or become a Guarantor, including, without limitation, DCH and each Subsidiary of DCH, but excluding Excluded Subsidiaries.
“Guarantor Joinder Agreement” means an agreement substantially in the form attached hereto as Exhibit J.
“Guarantor Obligations” means all present and future indebtedness and obligations of each present and future Guarantor to Agent and the Lenders pursuant to any Guaranty at any time executed by any Guarantor; provided that the Guarantor Obligations shall exclude all Excluded Swap Obligations.
“Guarantor Swap Obligation” means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.
“Guaranty” means each guaranty of the Revolving Loan Obligations and Used Vehicle Floorplan Obligations heretofore, contemporaneously herewith or hereafter executed by any Person, substantially in the form attached hereto as Exhibit G.
“Hazardous Substance” means (a) any substance or material now or hereafter defined or designated as a hazardous, toxic or radioactive material, waste or substance, or as a pollutant or contaminant (or designated by any other similar term), by any Environmental Law now or hereafter in effect; (b) asbestos and any substance or compound containing asbestos; (c) petroleum, natural gas, natural gas liquids, liquefied natural gas, synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas) and ash produced by a resource recovery facility utilizing a municipal solid waste stream, and drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas, or geothermal resources; (d) urea formaldehyde foam insulation; (e) polychlorinated biphenyls (PCBs); (f) radon; and (g) any other chemical, material, or substance, exposure to which (because of its quantity, concentration, or physical or chemical characteristics) is limited or regulated for health and safety reasons by any governmental authority, or which poses a significant present or potential hazard to human health and safety or to the environment if released into the workplace or the environment.
“Highest Lawful Rate” shall mean, on any day, the maximum non-usurious rate of interest permitted for that day by applicable federal or state law, stated as a rate per annum.
“Increasing Lender” has the meaning set forth in Section 6.12.2.
“Indebtedness” means, without duplication, with respect to any Person, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (b) all obligations evidenced by bonds, notes, debentures, convertible debentures or other similar instruments, (c) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired (even though the rights and remedies of the seller or lender under such agreement in the event of default, acceleration, or termination are limited to repossession or sale of such property), (d) all obligations under letters of credit, bankers’ and trade acceptances, surety bonds and similar instruments, (e) all obligations under Swap Contracts, (f) all Capitalized Lease Obligations and all obligations as lessee under Synthetic Leases, (g) all obligations that are required in accordance with GAAP to be included as liabilities on such Person’s balance sheet, (h) all Contingent Obligations, and (i) all Indebtedness referred to in clause (a), (b), (c), (d), (e), (f), (g), and (h) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien, security interest or other charge or encumbrance upon or in property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness, and (j) if any Event of Default described in Section 14.1.12 has occurred, the liability, if any, related thereto. For purposes of this definition, the Indebtedness of any Person shall include the indebtedness of any partnership or joint venture in which such Person is a general partner or joint venturer.
“Indemnified Persons” has the meaning set forth in Section 5.12.
“Indemnified Taxes” means Taxes imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document, other than Excluded Taxes and Other Taxes.
“Initial Condition” has the meaning set forth in Section 9.1.
“Investments” has the meaning set forth in Section 13.6.
“Landlord’s Consent” has the meaning set forth in Section 12.13.
“LC Agreement” has the meaning set forth in Section 5.3.
“LC Application” has the meaning set forth in Section 5.3.
“LC Collateral Account” has the meaning set forth in Section 5.11.
“LCDC” means Lithia Community Development Company, Inc., an Oregon corporation.
“LC Fee” has the meaning set forth in Section 5.10.1.
“LC Fee Percentage” has the meaning set forth in the Pricing Schedule.
“LC Issuer” means U.S. Bank (or any subsidiary or affiliate of U.S. Bank designated by U.S. Bank) in its capacity as issuer of Letters of Credit hereunder.
“LC Obligations” means, as of any date of determination, the sum, without duplication, of (a) the aggregate undrawn stated amount under Letters of Credit outstanding at such time, plus (b) the aggregate unpaid amount at such time of all Reimbursement Obligations.
“Lender” has the meaning set forth in the introductory paragraph and includes, as the context requires, the LC Issuer and Swing Line Lender.
“Lending Installation” means, with respect to a Lender or the Agent, the office, branch, subsidiary or affiliate of such Lender or the Agent listed on the signature pages hereof (in the case of the Agent) or on its Questionnaire (in the case of a Lender) or otherwise selected by such Lender or the Agent pursuant to Section 6.3.2.
“Letter of Credit” means any of the Existing Letters of Credit and any letter of credit issued pursuant to Article 5.
“Letter of Credit Commitment” (which is a sublimit of the Revolving Loan Commitment) means an amount equal to $30,000,000.00.
“Leverage Ratio” has the meaning set forth in Section 11.1.3.
“Lien” means any mortgage, deed of trust, pledge, security interest, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority, or other security agreement or preferential arrangement, charge, or encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, the interest of a lessor under a Capital Lease or Synthetic Lease and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction to evidence of any of the foregoing).
“Loan” or “Loans” means any one or more of the New Vehicle Floorplan Loans, Used Vehicle Floorplan Loans, Revolving Loans and Swing Line Loans.
“Loan Documents” means this Agreement, the LC Agreements, the Letters of Credit, the LC Applications, the Collateral Documents, the Guaranties, and all other documents and instruments attached hereto, referred to herein, heretofore or contemporaneously herewith or hereafter executed or delivered to Agent and the Lenders by any Loan Party in connection with the Obligations.
“Loan Party” means any Borrower or Guarantor.
“LRE” means Lithia Real Estate, Inc., an Oregon corporation.
“Majority Acquisition” means any Acquisition of Equity Interests of an entity, in which the Company is not permitted to hold 100% of such equity interests because of limitations imposed by the relevant manufacturer’s Franchise Agreement.
“Material Adverse Effect” means a (a) material adverse change in or material adverse effect upon the business, management, properties, prospects, condition (financial or otherwise), assets or operations of a Borrower, or the Company and its Subsidiaries taken as a whole; or (b) a material adverse effect upon or material impairment in (i) the attachment, perfection, or priority of the security interests of Agent and the Lenders in the Collateral or in the value of any material part of the Collateral; (ii) the ability of a Borrower or the Company and its Subsidiaries taken as a whole to perform its or their obligations under this Agreement or any other Loan Document; or (iii) the legality, validity, binding effect or enforceability of or the rights and remedies available to Agent and the Lenders under this Agreement or any other Loan Document.
“Maximum Revolving Loan Amount” means, as of any date of determination, the lesser of (a) the Aggregate Revolving Loan Commitment minus any Reserve Amount; and (b) the Revolving Loan Borrowing Base at such time minus any Reserve Amount.
“Maximum Used Vehicle Floorplan Amount” means, as of any date of determination, the lesser of (a) the Aggregate Used Vehicle Floorplan Commitment; and (b) the Used Vehicle Borrowing Base.
“Measurement Period” has the meaning set forth in Section 11.1.2.
“Minimum Collateral Amount” means, with respect to a Defaulting Lender, at any time, (a) with respect to Cash Collateral consisting of cash or deposit account balances, an amount equal to 100% of the Fronting Exposure of the LC Issuer with respect to such Defaulting Lender for all Letters of Credit issued and outstanding at any such time and (b) otherwise, an amount determined by the Agent and the LC Issuer in their sole discretion.
“Minority Dealer Affiliate” has the meaning set forth in Section 13.6(k).
“Modify” and “Modification” has the meaning set forth in Section 5.1.
“Moody’s” means Moody’s Investors Service, Inc.
“Multiemployer Plan” means a Plan maintained pursuant to a collective bargaining agreement or any other arrangement to which any Loan Party or any ERISA Affiliate is a party to which more than one employer is obligated to make contributions.
“Net Mark-to-Market Exposure” of a Person means, as of any date of determination, with respect to any Swap Contract, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from such Swap Contract. “Unrealized losses” means the fair market value of the cost to such Person of replacing such Swap Contract as of the date of determination (assuming the Swap Contract were to be terminated as of that date), and “unrealized profits” means the fair market value of the gain to such Person of replacing such Swap Contract as of the date of determination (assuming such Swap Contract were to be terminated as of that date).
“New Dealership” has the meaning set forth in Section 13.13(a).
“New Vehicle” means a Vehicle that has never been owned except by a manufacturer, distributor or dealer (including a vehicle acquired by trade with another dealer); has never been registered or titled; is of the current or immediately preceding model year; and, except for a Demo, has not been driven more than 500 total miles.
“New Vehicle Floorplan Advance” means a borrowing consisting of the New Vehicle Floorplan Loans to be made by the Lenders on any date.
“New Vehicle Floorplan Borrower” means the Company, any Dealership executing this Agreement as a New Vehicle Floorplan Borrower and any Dealership which hereafter becomes a New Vehicle Floorplan Borrower in accordance with the requirements of this Agreement, in its capacity as a borrower under the credit facilities described in Article 2 of this Agreement.
“New Vehicle Floorplan Borrowing Rate” means the sum of (a) the Eurocurrency Rate plus (b) the New Vehicle Floorplan Margin.
“New Vehicle Floorplan Commitment” means for each Lender, the obligation of such Lender to make New Vehicle Floorplan Loans to the New Vehicle Floorplan Borrowers and to participate in New Vehicle Swing Line Loans, in an aggregate amount not exceeding the amount set forth for such Lender on Schedule 1, as such amount may be modified as the result of any assignment or as otherwise modified from time to time pursuant to Section 6.17 or the other provisions hereof.
“New Vehicle Floorplan Commitment Fee” has the meaning set forth in Section 2.1.7.
“New Vehicle Floorplan Commitment Fee Rate” has the meaning set forth in the Pricing Schedule.
“New Vehicle Floorplan Dealership” means each New Vehicle Floorplan Borrower except the Company.
“New Vehicle Floorplan Loan” has the meaning set forth in Section 2.1.1.
“New Vehicle Floorplan Margin” has the meaning set forth in the Pricing Schedule.
“New Vehicle Floorplan Obligations” means all present and future New Vehicle Floorplan Loans, New Vehicle Swing Line Loans, and other debts, liabilities, obligations, reimbursements, indemnities, covenants, warranties, duties and obligations relating thereto of each New Vehicle Floorplan Borrower to Agent and the Lenders under this Agreement, and the other Loan Documents, whether now or hereafter existing or incurred, whether liquidated or unliquidated, whether absolute or contingent, and including without limitation principal, interest, fees, Attorney Costs, expenses and charges relating to any of the foregoing.
“New Vehicle Loan” means a New Vehicle Floorplan Loan or New Vehicle Swing Line Loan.
“New Vehicle Loan Advance” means any New Vehicle Floorplan Advance or any New Vehicle Swing Line Loan made to finance Eligible New Vehicles.
“New Vehicle Loan Advance Date” means (a) with respect to any New Vehicle (other than a New Vehicle previously financed with a Former Lender Loan or an advance under the Existing Loan Agreement), the date the New Vehicle Loan Advance was made to finance such Vehicle; (b) with respect to any New Vehicle previously financed by a Former Lender and refinanced with a New Vehicle Loan Advance, the date the advance was made by the Former Lender to finance the applicable Vehicle; and (c) with respect to any New Vehicle previously financed under the Existing Loan Agreement, the date the advance was made under the Existing Loan Agreement to finance the applicable Vehicle.
“New Vehicle Monthly Payment Date” means the tenth day of each month, or if such day is not a Business Day, the next Business Day.
“New Vehicle Swing Line Commitment” (which is a sublimit of the Aggregate New Vehicle Floorplan Commitment) means an amount equal to $60,000,000.00 plus the aggregate balance in all PR Accounts.
“New Vehicle Swing Line Loan” has the meaning set forth in Section 2.2.1.
“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting Lender at such time.
“Non-U.S. Lender” means a Lender that is not a United States person as defined in Section 7701(a)(30) of the Code.
“Obligations” means all present and future Loans, New Vehicle Floorplan Obligations, Used Vehicle Floorplan Obligations, Revolving Loan Obligations, LC Obligations, and other debts, liabilities, obligations, reimbursements, indemnities, covenants, warranties, duties and obligations of any one or more of the Borrowers to Agent and the Lenders under the LC Agreements, LC Applications, the Letters of Credit, this Agreement, and the other Loan Documents, whether now or hereafter existing or incurred, whether liquidated or unliquidated, whether absolute or contingent, and including without limitation principal, interest, fees, Attorney Costs, expenses and charges relating to any of the foregoing; provided, however, that the Obligations shall exclude all Excluded Swap Obligations.
“Other Floor Plan Financing” means extensions of credit to a Dealership by an Other Floorplan Lender (other than extensions of credit under this Agreement), all proceeds of which are used to purchase or finance Service Loaner Vehicles.
“Other Floor Plan Lender” means a motor vehicle manufacturer or distributor or a financial institution or commercial finance company acceptable to Agent which is affiliated with a motor vehicle manufacturer or distributor and which provides financing for Service Loaner Vehicles to a Dealership.
“Other New Subsidiary” means a Subsidiary, (a) 100% of the Equity Interests of which are owned, directly or indirectly by the Company, (b) which is not in the business of selling, servicing or leasing motor vehicles or owning real property and (c) with respect to which the Loan Parties have complied with the requirements of Section 12.17.
“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document.
“Outstanding Credit Exposure” means, as to any Lender at any time, the sum of (a) the then outstanding principal amount of its New Vehicle Floorplan Loans, Used Vehicle Floorplan Loans and Revolving Loans, plus (b) an amount equal to its ratable share of the aggregate principal amount of Swing Line Loans outstanding at such time, plus (c) an amount equal to its ratable share of the LC Obligations at such time.
“Outstanding New Vehicle Floorplan Exposure” means, as to any Lender at any time, the sum of (a) the then outstanding principal amount of its New Vehicle Floorplan Loans, plus (b) an amount equal to its ratable share of the aggregate principal amount of New Vehicle Swing Line Loans outstanding at such time.
“Outstanding Revolving Loan Exposure” means, as to any Lender at any time, the sum of (a) the then outstanding principal amount of its Revolving Loans, plus (b) an amount equal to its ratable share of the aggregate principal amount of Revolving Swing Line Loans outstanding at such time, plus (c) an amount equal to its ratable share of the LC Obligations at such time.
“Outstanding Used Vehicle Floorplan Exposure” means, as to any Lender at any time, the sum of (a) the then outstanding principal amount of its Used Vehicle Floorplan Loans, plus (b) an amount equal to its ratable share of the aggregate principal amount of Used Vehicle Swing Line Loans outstanding at such time.
“Participant” has the meaning set forth in Section 17.3.1.
“Participant Register” has the meaning set forth in Section 17.3.3.
“Payment Commitment” means a commitment entered into between Agent and a manufacturer or distributor, providing for payment of funds directly to such manufacturer or distributor in payment for a New Vehicle Floorplan Borrower’s purchase of New Vehicles from such manufacturer or distributor.
“Payment Commitment Collateral Account” has the meaning set forth in Section 2.3.5.
“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.
“Per Annum Fee” has the meaning set forth in Section 6.16.
“Permitted Acquisition” means an Acquisition which is permitted by Section 13.13.
“Permitted Brand” means Acura, Audi, BMW, Buick, Cadillac, Chevrolet, Chrysler, Dodge, Fiat, Ford, GMC, Honda, Hyundai, Infiniti, Jaguar, Jeep, Kia, Land Rover, Lexus, Lincoln, Mazda, Mercedes-Benz, MINI, Mitsubishi, Nissan, Porsche, Ram, Scion, smart, Sprinter, Subaru, Suzuki, Toyota, Volkswagen or Volvo.
“Permitted Liens” means Liens permitted by Section 13.3.
“Permitted New Dealership” means a Dealership (a) 100% (or if the Company is not permitted to hold 100% of such Equity Interests because of limitations imposed by the relevant manufacturer’s franchise agreement, at least 80%) of the Equity Interests of which are owned, directly or indirectly by the Company, (b) which is organized to own and operate a newly established automobile dealership point, and (c) with respect to which the Loan Parties have complied with the requirements of Section 12.17.
“Permitted Restrictions” means restrictions on the ability of any Subsidiary to declare or pay any dividend or make other distributions, or to advance or loan funds, to the Company, to grant Liens on the assets of such Subsidiary, to secure the Obligations or the Guarantor Obligations or to guaranty the Obligations: (a) as set forth on the Disclosure Schedule on the Closing Date, including restrictions imposed by existing Other Floor Plan Financing arrangements; (b) pursuant to modifications to Other Floor Plan Financing arrangements in effect on the Closing Date, provided that such modifications are not materially more restrictive; (c) pursuant to Other Floor Plan Financing arrangements with any Other Floor Plan Lender other than a Person which is an Other Floor Plan Lender on the Closing Date; (d) applicable to a Person at the time such Person becomes a Subsidiary and not created in contemplation of such an event; (e) resulting from manufacturer-imposed modifications to any Franchise Agreement; or (f) imposed by applicable law.
“Permitted Swap Obligations” means Swap Obligations of the Company under Swap Contracts which are entered into or maintained by the Company with a Lender, which are entered into in the ordinary course of business for risk management purposes and not for speculative purposes, and which are permitted by the terms of Section 13.10 (c) of this Agreement .
“Person” means any natural person, corporation, general or limited partnership, joint venture, limited liability company, firm, trust, association, unincorporated organization, government, political subdivision or any agency, department, or instrumentality thereof, or any other entity or organization, whether acting in an individual, fiduciary or other capacity.
“Plan” means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which any Loan Party or any ERISA Affiliate may have any liability.
“Pledge Agreement” means a pledge agreement substantially in the form attached hereto as Exhibit E.
“PR Account” has the meaning set forth in Section 2.6.
“PR Account Advance” has the meaning set forth in Section 2.6.2.
“PR Account Borrower” has the meaning set forth in Section 2.6.
“PR Account Payment” has the meaning set forth in Section 2.6.1.
“Pricing Schedule” means the Schedule attached hereto which is identified as such.
“Prime Rate” means a rate per annum equal to the prime rate of interest announced from time to time by Agent or its parent (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes.
“Principal” means Sidney D. DeBoer, Bryan DeBoer or another successor, or successors, reasonably acceptable to Agent and the Required Lenders.
“Prohibited Transaction” means any prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code.
“Properties” has the meaning set forth in Section 12.6.
“Pro Rata Share” means, as the context requires (a) with respect to the Aggregate Lender Commitment or Outstanding Credit Exposure of any Lender, (i) the percentage obtained by dividing such Lender’s Aggregate Lender Commitment by the Aggregate Commitment, or (ii) if all of the Commitments have been terminated or have expired, the percentage obtained by dividing such Lender’s Outstanding Credit Exposure at such time by the Aggregate Outstanding Credit Exposure at such time;
(b) with respect to the New Vehicle Floorplan Commitment or Outstanding New Vehicle Floorplan Exposure of any Lender (i) the percentage obtained by dividing such Lender’s New Vehicle Floorplan Commitment by the Aggregate New Vehicle Floorplan Commitment, or (ii) if all New Vehicle Floorplan Commitments have been terminated or expired, the percentage obtained by dividing such Lender’s Outstanding New Vehicle Floorplan Exposure by the Aggregate Outstanding New Vehicle Floorplan Exposure;
(c) with respect to the Used Vehicle Floorplan Commitment or Outstanding Used Vehicle Floorplan Exposure of any Lender (i) the percentage obtained by dividing such Lender’s Used Vehicle Floorplan Commitment by the Aggregate Used Vehicle Floorplan Commitment, or (ii) if all Used Vehicle Floorplan Commitments have been terminated or expired, the percentage obtained by dividing such Lender’s Outstanding Used Vehicle Floorplan Exposure by the Aggregate Outstanding Used Vehicle Floorplan Exposure; or
(d) with respect to the Revolving Loan Commitment or Outstanding Revolving Loan Exposure of any Lender, (i) the percentage obtained by dividing such Lender’s Revolving Loan Commitment by the Aggregate Revolving Loan Commitment, or (ii) if all Revolving Loan Commitments have been terminated or expired the percentage obtained by dividing such Lender’s Outstanding Revolving Loan Exposure by the Aggregate Outstanding Revolving Loan Exposure;
provided, however that when a Defaulting Lender shall exist, the Commitments, Outstanding Credit Exposure, Outstanding New Vehicle Floorplan Exposure, Outstanding Used Vehicle Floorplan Exposure and Outstanding Revolving Loan Exposure of the Defaulting Lender shall be disregarded in determining the Aggregate Commitment (or Aggregate Outstanding Credit Exposure), Aggregate New Vehicle Floorplan Commitment (or Aggregate Outstanding New Vehicle Floorplan Exposure), Aggregate Used Vehicle Floorplan Commitment (or Aggregate Outstanding Used Vehicle Floorplan Exposure), or Aggregate Revolving Loan Commitment (or Aggregate Outstanding Revolving Loan Exposure).
“Quarterly Payment Date” means the tenth day of each January, April, July and October or, if such day is not a Business Day, the next succeeding Business Day.
“Real Estate Subsidiary” means any of (a) Montclair Development LLC, a New Jersey limited liability company, (b) DCH California Investments LLC, a California limited liability company, (c) DCH Investments Inc., a New York corporation, (d) DCH Investments Inc., a New Jersey corporation, (e) DCH Delaware LLC, a Delaware limited liability company, (f) DCH Urban Renewal, L.L.C., a New Jersey limited liability company, and (g) LRE.
“Real Property” means real property acceptable to Agent which is owned by any Real Estate Subsidiary occupied by a Dealership as a motor vehicle sales facility.
“Reallocation” has the meaning set forth in Section 6.17.1.
“Reallocation Request” has the meaning set forth in Section 6.17.2.
“Refunding New Vehicle Floorplan Loan” has the meaning set forth in Section 2.2.6(a).
“Refunding Revolving Loan” has the meaning set forth in Section 4.2.6(a)(i).
“Refunding Used Vehicle Floorplan Loan” has the meaning set forth in Section 3.2.6(a)(i).
“Register” has the meaning set forth in Section 17.5.
“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System.
“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System.
“Reimbursement Obligations” means, at any time, the aggregate of all obligations of the Revolving Loan Borrower then outstanding to reimburse the LC Issuer for amounts paid by the LC Issuer in respect of any one or more drawings under Letters of Credit.
“Related Principal Portion” means, with respect to each New Vehicle financed with a New Vehicle Loan Advance, the principal amount advanced under this Agreement to finance that Vehicle.
“Reportable Event” means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code.
“Reprice Date” means the first day of each month.
“Repurchase Agreement” means an agreement by a manufacturer or distributor of New Vehicles (which may be a separate agreement or may be included in a Seller Agreement or Payment Commitment), in which such manufacturer agrees to repurchase New Vehicles originally purchased by a New Vehicle Floorplan Dealership from such manufacturer, all in form and substance reasonably acceptable to Agent.
“Required Lenders” means Lenders holding in the aggregate more than 50% of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders holding in the aggregate more than 50% of the Aggregate Outstanding Credit Exposure provided that, Required Lenders shall at no time be less than two unaffiliated Lenders. The Commitments and Outstanding Credit Exposure of any Defaulting Lender shall be disregarded in determining Required Lenders.
“Required Repayment Date” has the meaning set forth in Section 2.3.3(b).
“Reserve Amount” has the meaning set forth in Section 4.1.9.
“Reserve Requirement” means the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D on Eurocurrency liabilities.
“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in any Loan Party or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests in any Loan Party, or any option, warrant or other right to acquire any such Equity Interests in any Loan Party.
“Revolving Loan” has the meaning set forth in Section 4.1.1.
“Revolving Loan Advance” means a borrowing consisting of the Revolving Loans to be made by the Lenders on any date.
“Revolving Loan Availability” means, as of any date of determination, an amount equal to (a) the Maximum Revolving Loan Amount at such time minus (b) the sum of the then outstanding principal balance of the Revolving Loans, Revolving Swing Line Loans and LC Obligations.
“Revolving Loan Borrower” means the Company, in its capacity as an obligor on the Revolving Loan Obligations and LC Obligations which relate to the credit facilities described in Article 4.
“Revolving Loan Borrowing Base” means, as of any date of determination:
(a) an amount equal to the sum, without duplication, on such date of:
(i) 100% of the amounts (excluding commissions included in clause (b) of the definition of Eligible Receivables) owing to the Dealerships in which Agent has a perfected first priority security interest, which are owed to the Dealerships by financial institutions or finance companies which are not Affiliates of any Loan Party for the purchase by such institutions of retail installment contracts and leases arising from the sale or lease of New Vehicles and Used Vehicles (contracts in transit), which have not remained unpaid for more than 15 days.
(ii) 80% of the amount of Eligible Receivables.
(iii) 100% of the sum of the manufacturer’s or distributor’s invoices (including freight, advertising and holdbacks) for Eligible New Vehicles.
(iv) 100% of the amount of the Used Vehicle Borrowing Base.
(v) 75% of the Value of Eligible Real Property; provided, that this component of the Revolving Loan Borrowing Base shall not at any time exceed $25,000,000.00.
(vi) 60% of (A) the net book value of the inventory of the Company and its Subsidiaries consisting of new parts and accessories in which Agent has a perfected first priority security interest; minus (B) the unpaid acquisition cost owed to sellers or financers of such inventory.
(vii) 30% of (A) the net book value of equipment (excluding fixtures, aircraft, and Service Loaner Vehicles) of the Company and its Subsidiaries in which Agent has a perfected first priority security interest, minus (B) the principal amount of indebtedness or obligations to any Person (other than the Obligations) which is secured by any equipment.
(b) Minus, the sum of the then outstanding aggregate principal balance of New Vehicle Floorplan Loans, New Vehicle Swing Line Loans, Used Vehicle Floorplan Loans and Used Vehicle Swing Line Loans.
“Revolving Loan Borrowing Base Certificate” means a certificate substantially in the form attached as Exhibit C, or in such other form as is acceptable to Agent.
“Revolving Loan Borrowing Rate” means the sum of (a) the Eurocurrency Rate, plus (b) the Revolving Loan Margin.
“Revolving Loan Commitment” means, for each Lender, the obligation of such Lender to make Revolving Loans to the Revolving Loan Borrower, and participate in Revolving Swing Line Loans and Letters of Credit in an aggregate amount not exceeding the amount set forth on Schedule 1, as such amount may be modified as a result of any assignment or as otherwise modified from time to time pursuant to Section 6.17 or the other provisions hereof.
“Revolving Loan Commitment Fee” has the meaning set forth in Section 4.1.7.
“Revolving Loan Commitment Fee Rate” has the meaning set forth in the Pricing Schedule.
“Revolving Loan Margin” has the meaning set forth in the Pricing Schedule.
“Revolving Loan Obligations” means all present and future Revolving Loans, Revolving Swing Line Loans, LC Obligations, and other debts, liabilities, obligations, reimbursements, indemnities, covenants, warranties, duties and obligations relating thereto of the Revolving Loan Borrower to Agent and the Lenders under the LC Agreements, LC Applications, the Letters of Credit, this Agreement, and the other Loan Documents, whether now or hereafter existing or incurred, whether liquidated or unliquidated, whether absolute or contingent, and including without limitation principal, interest, fees, Attorney Costs, expenses and charges relating to any of the foregoing.
“Revolving Swing Line Commitment” (which is a sublimit of the Aggregate Revolving Loan Commitment) means an amount equal to $40,000,000.00.
“Revolving Swing Line Loan” has the meaning set forth in Section 4.2.1.
“Risk-Based Capital Guidelines” means (a) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (b) the corresponding capital regulations promulgated by regulatory authorities outside the United States, including transition rules, and, in each case, any amendments to such regulations.
“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business.
“Security Agreement” means a security agreement substantially in the form attached hereto as Exhibit F.
“Seller Agreement” means any material agreement between the Company or any of its Subsidiaries and a manufacturer, distributor or other seller of New Vehicles (including without limitation Franchise Agreements, distribution agreements, framework agreements, and the like).
“Seller Notes” has the meaning set forth in Section 13.6(m).
“Service Loaner Vehicle” means a Vehicle that is obtained by a Dealership directly from a manufacturer or distributor and which is used for short-term rental in the ordinary course of business or as a service loaner.
“Solvent” means, with respect to any Person on any date, that on such date (a) the fair value of the assets of such Person, at a fair valuation is greater than the debts and liabilities, subordinated, contingent or otherwise, of such Person; (b) the present fair saleable value of the assets of such Person is greater than the amount that will be required to pay the probable liability of such Person on its debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) such Person will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; (d) such Person does not have unreasonably small capital with which to conduct the businesses in which it is engaged as such businesses are now conducted; and (e) such Person does not intend to, and does not believe that it will incur debts or liabilities beyond its ability to pay such debts and liabilities as they mature, taking into account the timing of and amounts of cash to be received by it and the timing of the amounts of cash to be payable on or in respect of its indebtedness.
“Stated Rate” has the meaning set forth in Section 6.11.
“Subordinated Debt” means unsecured indebtedness of a Borrower which is subordinated to the payment of the Obligations by an agreement acceptable to Agent and Required Lenders and that has subordination terms, covenants, pricing and other terms that have been approved in writing by the Required Lenders.
“Subsidiary” of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or Controlled, directly or indirectly, by such Person or by one or more of such Person’s Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or other business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or Controlled. Unless otherwise expressly provided, all references herein to a “Subsidiary” shall mean a Subsidiary of the Company.
“Swap Contract” means any rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures and including without limitation all contracts, agreements, master agreements, schedules, confirmations, and other documents relating thereto.
“Swap Obligations” means any and all obligations, whether absolute or contingent and however and whenever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) Swap Contracts and (b) cancellations, buy backs, reversals, terminations or assignments of Swap Contracts.
“Swap Termination Value” means in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) prior to such date the Net Mark to Market Exposure with respect thereto.
“Sweep Advance” has the meaning set forth in Section 3.2.7(a).
“Swing Line Lender” means U.S. Bank.
“Swing Line Loan” means a New Vehicle Swing Line Loan, Used Vehicle Swing Line Loan, or Revolving Swing Line Loan.
“Synthetic Lease” means any lease of goods or other property, whether real or personal, which is treated as an operating lease under GAAP and as a loan or financing for U.S. income tax purposes.
“Taxes” means any and all present or future taxes, duties, levies, imposts, deductions, fees, assessments, charges or withholdings, and any and all liabilities with respect to the foregoing, including interest, additions to tax and penalties applicable thereto.
“Terminating Borrower” has the meaning set forth in Section 13.1.1(b).
“Termination Agreement” means an agreement substantially in the form attached as Exhibit H.
“Termination Date” means [October 1], 2019, or any earlier date on which the Aggregate Commitment is reduced to zero or otherwise terminated pursuant to the terms hereof.
“Title Documents” means all manufacturer’s certificates of origin, manufacturers’ statements of origin, certificates of title, certificates of ownership and any other documents evidencing ownership of a motor vehicle or the transfer of ownership of a motor vehicle from a manufacturer or another dealer to a Dealership, and all warehouse receipts, bills of lading and other negotiable documents of title.
“Title Report” has the meaning set forth in Section 9.4.2.
“U.S. Bank” means U.S. Bank National Association, a national banking association, in its individual capacity, and its successors.
“Undisclosed Administration” means in relation to a Lender the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official by a supervisory authority or regulator under or based on the law in the country where such Lender is subject to home jurisdiction supervision if applicable law requires that such appointment is not to be publicly disclosed.
“Used Vehicle” means a Vehicle which is held by a Dealership for sale in the ordinary course of business and which is not a New Vehicle or Service Loaner Vehicle.
“Used Vehicle Borrowing Base” means, as of any date of determination, an amount equal to the sum, without duplication, on such date of: 85% of (a) the net book value of Used Vehicles of the Dealerships which are Eligible Vehicles in which Agent has a perfected first priority security interest and which have been owned or held for sale or lease by any Dealership for 180 days or less; minus (b) the aggregate outstanding principal amount of any indebtedness or obligation to any Person (other than the Obligations) which is secured by the Used Vehicles, including but not limited to amounts owing to holders of any lien or security interest in a Used Vehicle at the time it is traded in, sold to, or otherwise acquired by any Dealership.
“Used Vehicle Borrowing Base Certificate” means a certificate substantially in the form attached as Exhibit B, or in such other form as is acceptable to Agent.
“Used Vehicle Floorplan Advance” means a borrowing consisting of the Used Vehicle Floorplan Loans to be made by the Lenders on any date.
“Used Vehicle Floorplan Borrower” means the Company, in its capacity as an obligor on the Used Vehicle Floorplan Obligations which relate to the credit facilities described in Article 3.
“Used Vehicle Floorplan Borrowing Rate” means the sum of (a) the Eurocurrency Rate plus (b) the Used Vehicle Floorplan Margin.
“Used Vehicle Floorplan Commitment” means for each Lender, the obligation of such Lender to make Used Vehicle Floorplan Loans to the Used Vehicle Floorplan Borrower and to participate in Used Vehicle Swing Line Loans in an aggregate amount not exceeding the amount set forth on Schedule 1, as such amount may be modified as a result of any assignment or as otherwise modified from time to time pursuant to Section 6.17 or the other provisions hereof.
“Used Vehicle Floorplan Commitment Fee” has the meaning set forth in Section 3.1.7.
“Used Vehicle Floorplan Commitment Fee Rate” has the meaning set forth in the Pricing Schedule.
“Used Vehicle Floorplan Loan” has the meaning set forth in Section 3.1.1.
“Used Vehicle Floorplan Margin” has the meaning set forth in the Pricing Schedule.
“Used Vehicle Floorplan Obligations” means all present and future Used Vehicle Floorplan Loans, Used Vehicle Swing Line Loans, and other debts, liabilities, obligations, reimbursements, indemnities, covenants, warranties, duties and obligations relating thereto of the Used Vehicle Floorplan Borrower to Agent and the Lenders under this Agreement, and the other Loan Documents, whether now or hereafter existing or incurred, whether liquidated or unliquidated, whether absolute or contingent, and including without limitation principal, interest, fees, Attorney Costs, expenses and charges relating to any of the foregoing.
“Used Vehicle/Revolving Monthly Payment Date” means the twentieth day of each month, or if such day is not a Business Day, the next Business Day.
“Used Vehicle Swing Line Commitment” (which is a sublimit of the Aggregate Used Vehicle Floorplan Loan Commitment) means an amount equal to $40,000,000.00.
“Used Vehicle Swing Line Loan” has the meaning set forth in Section 3.2.1.
“Value” means, with respect to any Real Property, the fair market value of the applicable real property as determined by Agent based upon appraisals or other evaluations acceptable to Agent and in compliance with all regulatory requirements.
“Vehicle” means an automobile, truck, van, or other motor vehicle.
1.2 Other Interpretive Provisions.
1.2.1 Unless otherwise specified, the words “herein,” “hereof,” “hereto,” “hereunder” and similar terms refer to this Agreement as a whole and not to any particular provision of this Agreement and subsection, Section, and exhibit references are to this Agreement.
1.2.2 The word “or” shall not be exclusive; the singular includes the plural and the plural includes the singular; the masculine, the feminine and neuter gender, each include the masculine, feminine and neuter gender; and the word “including” is not limiting and means “including without limitation.”
1.2.3 References to any Loan Document shall mean such Loan Document as amended, modified, supplemented or extended from time to time and any number of substitutions, renewals, restatements, consolidations, and replacements thereof or therefor.
1.2.4 References to governmental laws, statutes, ordinances, rules and regulations shall be construed as including all amendments, consolidations and replacements thereof or therefor.
1.2.5 Headings in this Agreement and each of the other Loan Documents are for convenience of reference only and are not part of the substance hereof or thereof.
1.2.6 Terms used herein without definition which are defined in the Uniform Commercial Code shall have the meanings given to them in such Uniform Commercial Code.
1.2.7 Except as provided to the contrary in this Agreement or any other Loan Documents, all accounting terms used in this Agreement and the other Loan Documents shall be interpreted and all accounting determinations shall be made in accordance with GAAP, in a manner consistent with that used in preparing the financial statements referred to in Section 11.2, except that any calculation or determination which is to be made on a consolidated basis shall be made for the Company and all of its Subsidiaries, including those Subsidiaries, if any, which are unconsolidated on the Company’s audited financial statements; provided, however that, notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to (a) any election under Accounting Standards Codification Section 825-10-25 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any indebtedness or other liabilities of the Company or any of its Subsidiaries at “fair value,” as defined therein, or (b) any treatment of Indebtedness in respect of convertible debt instruments under Financial Accounting Standards Codification Subtopic 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof. If at any time any change in GAAP would affect the computation of any financial covenant or requirement set forth in any Loan Document, and the Company, the Agent or the Required Lenders shall so request, the Agent, the Lenders and the Borrowers shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders), provided that, until so amended, such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and the Borrowers shall provide to the Agent and the Lenders reconciliation statements showing the difference in such calculation, together with the delivery of the financial statements required hereunder.
ARTICLE 2
NEW VEHICLE FLOORPLAN LINE OF CREDIT
2.1 New Vehicle Floorplan Loans.
2.1.1 New Vehicle Floorplan Loan Commitment. Subject to the terms and conditions of this Agreement, each Lender severally and not jointly agrees to make loans (each a “New Vehicle Floorplan Loan” and collectively, the “New Vehicle Floorplan Loans”) to the New Vehicle Floorplan Borrowers on a revolving credit basis during the period from the Closing Date to but not including the Termination Date; provided that (a) the aggregate outstanding principal balance of the New Vehicle Floorplan Loans made by each Lender, plus the outstanding principal balance of such Lender’s participating interest in the New Vehicle Swing Line Loans, shall not at any time exceed an amount equal to such Lender’s New Vehicle Floorplan Commitment; (b) the outstanding principal balance of all New Vehicle Floorplan Loans shall not at any time exceed, in the aggregate, as to all Lenders, the Aggregate New Vehicle Floorplan Commitment, and (c) except as set forth in Section 2.2.7(b), the outstanding principal balance of all New Vehicle Floorplan Loans, plus the outstanding principal balance of all New Vehicle Swing Line Loans, shall not at any time exceed, in the aggregate, as to all Lenders, the Aggregate New Vehicle Floorplan Commitment. Subject to the terms and conditions hereof, the New Vehicle Floorplan Borrowers may borrow, prepay and reborrow New Vehicle Floorplan Loans.
2.1.2 Purpose of New Vehicle Floorplan Loans. The New Vehicle Floorplan Borrowers shall use the proceeds of the New Vehicle Floorplan Loans to finance Eligible New Vehicles owned by the New Vehicle Floorplan Dealerships (including to re-finance Former Lender Loans and advances under the Existing Loan Agreement) and to refinance New Vehicle Swing Line Loans.
2.1.3 Requests for New Vehicle Floorplan Loans. Subject to Section 2.2.6, whenever the New Vehicle Floorplan Borrowers wish to obtain a New Vehicle Floorplan Loan Advance, the Company shall give Agent irrevocable notice thereof no later than 11:00 a.m. (Pacific Time) at least one Business Day prior to the date of the requested borrowing. Such notice shall specify the requested borrowing date (which must be a Business Day), the amount of the New Vehicle Floorplan Loan Advance, and include any other information and documentation reasonably requested by Agent. Agent will promptly notify each Lender of its receipt of any request for a New Vehicle Floorplan Loan Advance and of the amount of its Pro Rata Share of such New Vehicle Floorplan Loan Advance.
2.1.4 Funding of New Vehicle Floorplan Loans. If the Agent notifies the Lenders of a request for a New Vehicle Floorplan Loan Advance by 1:00 p.m. (Pacific Time) on any Business Day, each Lender will deliver its Pro Rata Share of such New Vehicle Floorplan Loan Advance to Agent by 11:00 a.m. (Pacific Time) on the Business Day after such notification.
2.1.5 New Vehicle Floorplan Payments.
(a) Interest Payments. Interest on the unpaid principal balance of the New Vehicle Floorplan Loans shall be paid monthly by the New Vehicle Floorplan Borrowers in an amount equal to all interest accrued during the prior calendar month. Such interest payments shall be made on each New Vehicle Monthly Payment Date commencing with the first such date to occur following the Closing Date and continuing thereafter. All accrued interest outstanding on the Termination Date shall be due and payable in full on the Termination Date.
(b) Voluntary Principal Payments. The New Vehicle Floorplan Borrowers may make voluntary repayments of all or a portion of the outstanding principal balance of the New Vehicle Floorplan Loans if the Company gives Agent written or telephonic notice of such voluntary repayment no later than 11:00 a.m. (Pacific Time) at least one Business Day prior to the date of such repayment; provided that each such voluntary principal repayment shall be in a minimum amount of $1,000,000.00 and in multiples of $100,000.00 above such amount. Such notice shall specify the anticipated date of the voluntary repayment and the principal amount of the New Vehicle Floorplan Loans that will be repaid on such date. Any voluntary repayment of the New Vehicle Floorplan Loans that is received by Agent without such notice shall be deemed to have been received by Agent on the Business Day after such payment is actually received by Agent and interest shall accrue on the amounts so repaid through the date of such deemed receipt.
(c) Principal Payment at Maturity. The entire outstanding principal balance of the New Vehicle Floorplan Loans plus all interest accrued thereon shall be due and payable in full by the Floorplan Borrowers on the Termination Date.
2.1.6 Voluntary Reduction or Termination of Commitment. The New Vehicle Floorplan Borrowers may from time to time on at least ten (10) Business Day’s prior written notice by the Company to the Agent (which shall promptly advise each Lender thereof) permanently reduce the Aggregate New Vehicle Floorplan Commitment to an amount not less than the then outstanding principal balance of the New Vehicle Floorplan Loans and New Vehicle Swing Line Loans (which, for purposes of this determination, shall not be deemed to be reduced by amounts in PR Accounts). Concurrently with any reduction of the Aggregate New Vehicle Floorplan Commitment to zero, (a) no further New Vehicle Floorplan Loans or New Vehicle Swing Line Loans will be made, (b) New Vehicle Floorplan Borrowers shall pay all principal and interest on the New Vehicle Floorplan Loans and New Vehicle Swing Line Loans and all fees and other amounts owing to Agent and the Lenders, and (c) the New Vehicle Floorplan Borrowers shall deliver to Agent funds in an amount which Agent estimates it or the Swing Line Lender may be required to pay pursuant to Payment Commitments which may be presented after the Termination Date, such collateral to be held in the Payment Commitment Collateral Account. All reductions of the Aggregate New Vehicle Floorplan Commitment shall reduce the New Vehicle Floorplan Commitments pro rata among the Lenders according to their respective Pro Rata Shares; and except as otherwise set forth in the proviso to this Section 2.1.6, shall reduce the New Vehicle Swing Line Commitment in proportion to the reduction of the Aggregate New Vehicle Floorplan Commitment; provided, however, that (unless the Aggregate New Vehicle Floorplan Commitment is reduced to less than such amount), the New Vehicle Swing Line Commitment shall not be reduced.
2.1.7 New Vehicle Floorplan Commitment Fee. The New Vehicle Floorplan Borrowers agree to pay to Agent, for the account of the Lenders, a commitment fee (the “New Vehicle Floorplan Commitment Fee”) calculated at a per annum rate equal to the New Vehicle Floorplan Commitment Fee Rate on the average daily amount by which the Aggregate New Vehicle Floorplan Commitment exceeds the sum of (a) the actual aggregate outstanding principal balance of the New Vehicle Swing Line Loans on each day (it being understood that any portion of the outstanding principal balance of the New Vehicle Swing Line Loans ceases to be outstanding under the New Vehicle Swing Line Loans and commences being a portion of the outstanding principal balance under the New Vehicle Floorplan Loans on the date that the New Vehicle Floorplan Loans are funded to repay such portion of the outstanding principal balance of the New Vehicle Swing Line Loans); plus (b) the actual aggregate outstanding principal balance of the New Vehicle Floorplan Loans on each day; provided that, if the aggregate amount of the New Vehicle Floorplan Commitment Fee payable for any period to the Lenders other than the Swing Line Lender (as set forth in the third sentence of this paragraph) exceeds the amount calculated under this sentence, then the New Vehicle Floorplan Borrowers agree to pay to the Agent, for the account of such Lenders, such additional amounts so that each Lender other than the Swing Line Lender receives the full amount of New Vehicle Floorplan Commitment Fee described in the third sentence of this paragraph. The accrued New Vehicle Floorplan Commitment Fee shall be due and payable in arrears on each Quarterly Payment Date hereafter and on the Termination Date for the three month period or other time period ending on the last day of the preceding fiscal quarter or on the Termination Date. The New Vehicle Floorplan Commitment Fee payable to each Lender other than the Swing Line Lender shall be based upon the amount determined by multiplying such Lender’s Pro Rata Share by the average daily amount by which the Aggregate New Vehicle Floorplan Commitment exceeds the actual aggregate outstanding principal balance of the New Vehicle Floorplan Loans on each day. The New Vehicle Floorplan Commitment Fee payable to the Lender which is the Swing Line Lender shall be based upon the amount determined by multiplying such Lender’s Pro Rata Share by the average daily amount by which the Aggregate New Vehicle Floorplan Commitment exceeds the actual aggregate outstanding principal balance of the New Vehicle Floorplan Loans on each day and subtracting from that amount the average daily outstanding principal balance of the New Vehicle Swing Line Loans; provided, however, that notwithstanding any contrary provision of Section 2.6, solely for purposes of calculating the amount payable to Swing Line Lender, the principal balance of the New Vehicle Swing Line Loans shall be deemed to be reduced by the aggregate balance in the PR Accounts.
2.2 New Vehicle Swing Line Loans.
2.2.1 New Vehicle Swing Line Commitment. Subject to the terms and conditions of this Agreement, the Swing Line Lender may, at its option, make loans (each, a “New Vehicle Swing Line Loan”) to the New Vehicle Floorplan Borrowers on a revolving credit basis during the period from the Closing Date to but not including the Termination Date; provided that, except as set forth in Section 2.2.7(b), (a) the aggregate outstanding principal balance of the New Vehicle Swing Line Loans shall not at any time exceed the New Vehicle Swing Line Commitment; and (b) the outstanding principal balance of all New Vehicle Floorplan Loans made by all Lenders plus the outstanding principal balance of all New Vehicle Swing Line Loans, shall not at any time exceed the Aggregate New Vehicle Floorplan Commitment. Subject to the terms and conditions hereof, the New Vehicle Floorplan Borrowers may borrow, prepay and reborrow New Vehicle Swing Line Loans.
2.2.2 Purpose of New Vehicle Swing Line Loans. The New Vehicle Floorplan Borrowers shall use the proceeds of the New Vehicle Swing Line Loans to finance Eligible New Vehicles (including to refinance Former Lender Loans).
2.2.3 Requests for New Vehicle Swing Line Loans. Subject to Sections 2.2.7 and 2.6.2, whenever the New Vehicle Floorplan Borrowers wish to obtain a New Vehicle Swing Line Loan, the Company shall give Agent irrevocable notice thereof no later than 1:00 p.m. (Pacific Time) on the requested date of such New Vehicle Swing Line Loan unless Swing Line Lender agrees in each instance, in its sole discretion, to a shorter time period. Such notice shall specify the requested borrowing date (which must be a Business Day) and the amount of the New Vehicle Swing Line Loan, and include any other information and documentation reasonably requested by Agent.
2.2.4 New Vehicle Swing Line Loan Payments.
(a) Interest Payments. Interest on the unpaid principal balance of the New Vehicle Swing Line Loans shall be paid monthly by the New Vehicle Floorplan Borrowers in an amount equal to all interest accrued during the prior calendar month. Such interest payments shall be made on each New Vehicle Monthly Payment Date commencing with the first such date to occur following the Closing Date and continuing thereafter. All accrued interest outstanding on the Termination Date shall be due and payable in full on the Termination Date.
(b) Principal Payments. The entire outstanding principal balance of the New Vehicle Swing Line Loans plus all interest accrued thereon shall be due and payable in full by the New Vehicle Floorplan Borrowers on the Termination Date. In addition, the principal balance of the New Vehicle Swing Line Loans shall be due and payable as required by Section 2.2.6.
2.2.5 Participation in New Vehicle Swing Line Loans. Immediately upon the making of a New Vehicle Swing Line Loan by the Swing Line Lender, the Swing Line Lender shall be deemed to have sold and transferred to each Lender and each Lender shall be deemed to have purchased and received from the Swing Line Lender, without any further action by any party, an undivided participating interest in each New Vehicle Swing Line Loan in an amount equal to such Lender’s Pro Rata Share; provided, however, that (a) no Lender shall be required to fund its participation in any New Vehicle Swing Line Loan except as set forth in Section 2.2.6(b), and (b) no Lender shall be entitled to share in any payments of principal or interest in respect of its participation except, with respect to any participation funded by such Lender, as set forth herein. Such participation shall be subject to the terms and conditions of this Agreement.
2.2.6 Settlement of New Vehicle Swing Line Loans.
(a) Refunding of Loans.
(i) Upon the request of the Swing Line Lender, the Agent from time to time shall, on behalf of the New Vehicle Floorplan Borrowers (and each New Vehicle Floorplan Borrower hereby irrevocably authorizes the Agent to so act on its behalf) request each Lender (including Swing Line Lender in its capacity as a Lender) to make a New Vehicle Floorplan Loan Advance to the New Vehicle Floorplan Borrowers, in accordance with the provisions of this Section 2.2.6(a), which shall be applied to repay all or a portion of the outstanding principal balance of the New Vehicle Swing Line Loans (each such New Vehicle Floorplan Loan, a “Refunding New Vehicle Floorplan Loan”), in an amount equal to that Lender’s Pro Rata Share of all or a portion of the then outstanding principal balance of the New Vehicle Swing Line Loans.
(ii) Without limiting the foregoing, each Lender agrees that Agent may request the Lenders to make Refunding New Vehicle Floorplan Loans at any time if (A) a Default has occurred and is continuing, or (B) in the judgment of Swing Line Lender, taking into account the outstanding principal balance of the New Vehicle Swing Line Loans, the anticipated usage of the New Vehicle Swing Line Loans, such Refunding New Vehicle Floorplan Loans are reasonably necessary to ensure that the outstanding principal balance of the New Vehicle Swing Line Loans will not at any time exceed the New Vehicle Swing Line Commitment (it being understood that in order to attain such objective, Swing Line Lender may request refunding of the New Vehicle Swing Line Loans even though the principal balance of the New Vehicle Swing Line Loans at the time of such request is less than the New Vehicle Swing Line Commitment).
(iii) If Agent makes a request for funding under this Section 2.2.6(a) by 1:00 p.m. (Pacific Time) on any Business Day, the Lenders will deliver the required amount to Agent no later than 11:00 a.m. (Pacific Time) on the Business Day after such request. The proceeds of all Refunding New Vehicle Floorplan Loans shall be paid by Agent to the Swing Line Lender in repayment of the outstanding principal balance of the applicable New Vehicle Swing Line Loans.
(b) Funding of Participations. In addition to the right of the Swing Line Lender to request refunding of the New Vehicle Swing Line Loans pursuant to Section 2.2.6(a), upon the request of the Swing Line Lender, Agent may request each Lender (including Swing Line Lender in its capacity as a Lender) to fund its participation in the New Vehicle Swing Line Loans by paying to Agent, for the account of the Swing Line Lender, its Pro Rata Share of the principal amount of the New Vehicle Swing Line Loans. If Agent makes such request by 1:00 p.m. (Pacific Time) on any Business Day, the Lenders will deliver such amount to Agent no later than 11:00 a.m. (Pacific Time) on the Business Day after such request. All participations funded by the Lenders under this Section 2.2.6(b) shall be treated as the funding of New Vehicle Floorplan Loans for purposes of the calculation of the New Vehicle Floorplan Commitment Fee. If any payment paid to any Lender with respect to its participating interest in any New Vehicle Swing Line Loan is thereafter recovered from or must be returned or paid over by Swing Line Lender for any reason, such Lender will pay to Agent for the account of the Swing Line Lender, such Lender’s Pro Rata Share of such amount and of any interest and other amounts paid or payable by the Swing Line Lender with respect to such amount. Agent agrees not to request any funding of the Lender’s participations in the New Vehicle Swing Line Loans under this Section 2.2.6(b) at any time that such participations may be legally repaid using advances of the New Vehicle Floorplan Loans under Section 2.2.6(a).
(c) Payment to Swing Line Lender. Notwithstanding any contrary provision of this Agreement (i) except as set forth in clause (ii) of this Section 2.2.6(c) all payments of principal and interest on the New Vehicle Swing Line Loans shall be paid by Agent solely to the Swing Line Lender; and (ii) with respect to each participation in New Vehicle Swing Line Loans which is funded by any Lender, such Lender (including Swing Line Lender in its capacity as Lender) shall be entitled to receive its Pro Rata Share of payments of (A) principal on such New Vehicle Swing Line Loans and (B) interest on such New Vehicle Swing Line Loans only for the period following the date such participation is funded.
(d) Obligations Unconditional. The obligation of each Lender to make New Vehicle Floorplan Loans to repay New Vehicle Swing Line Loans pursuant to Section 2.2.6(a) or to fund its participation interests in New Vehicle Swing Line Loans pursuant to Section 2.2.6(b) shall be absolute and unconditional and shall not be affected by the occurrence of a Default or Event of Default, the fact that any one or more of the conditions in Article 9 is not satisfied, the termination of the availability of Loans, the fact that such New Vehicle Floorplan Loan is made after the Termination Date in compliance with the terms of a Payment Commitment or to refinance New Vehicle Swing Line Loans made prior to the Termination Date, any defense, setoff, counterclaim or claim for recoupment of any Lender against Agent or Swing Line Lender or any other circumstance, whether or not similar to the foregoing. Notwithstanding the foregoing, the Lenders shall not be required to refinance New Vehicle Swing Line Loans pursuant to Section 2.2.6(a) or to fund their participation interests in Swing Line Loans pursuant to Section 2.2.6(b) (i) if after giving effect thereto, the outstanding principal balance of such Lender’s New Vehicle Floorplan Loans would exceed its New Vehicle Floorplan Commitment, or (ii) with respect to any portions of the outstanding principal balance of the New Vehicle Swing Line Loans that are funded by Swing Line Lender after Agent is deemed to have knowledge or notice of the occurrence of a Default or after the Termination Date.
2.2.7 Advances Pursuant to Payment Commitment.
(a) In addition to New Vehicle Swing Line Loans made pursuant to Section 2.2.3, each New Vehicle Floorplan Borrower authorizes Agent and Swing Line Lender to make payment directly to manufacturers or distributors of Vehicles in payment for New Vehicles purchased by any New Vehicle Floorplan Borrower, in accordance with the terms and conditions of the applicable Payment Commitment. Each payment pursuant to a Payment Commitment shall constitute a New Vehicle Swing Line Loan hereunder in the amount of such payment. Agent, in its sole discretion, (i) may revise a Payment Commitment at any time, whether or not a Default has occurred, by giving written notice to the applicable manufacturer or distributor and the Company, and (ii) may terminate or suspend a Payment Commitment at any time, whether or not a Default has occurred, by giving written notice to the applicable manufacturer or distributor, and if no Default has occurred and is continuing, to the Company. Each New Vehicle Floorplan Borrower shall be and remain jointly and severally liable to Swing Line Lender for all payments made to a manufacturer or distributor pursuant to a Payment Commitment. Agent and the Lenders do not assume any responsibility for (and each New Vehicle Floorplan Borrower’s obligation to repay any Advance hereunder will not be affected or impaired in any way by) the correctness, validity, genuineness or sufficiency of any request for payment by a manufacturer or distributor under a Payment Commitment, any documents pertaining thereto or the existence, character, quantity, quality, condition, weight, value or delivery of any Vehicles purchased with the proceeds of any Advance. In this regard, Agent may conclusively presume and rely upon the validity and the appropriateness of any payment request by a manufacturer or distributor under a Payment Commitment and any and all documents or information related thereto. Notwithstanding any contrary provision hereof, the Agent may take such action as is necessary to terminate any Payment Commitments up to ten (10) days prior to the Termination Date, so that no Payment Commitments shall become payable later than the Termination Date or, at Agent’s discretion, up to ten (10) days prior thereto.
(b) The parties acknowledge that, due to Payment Commitments with Vehicle manufacturers and distributors, New Vehicle Floorplan Dealerships may be required to purchase New Vehicles which may cause the outstanding principal balance of the New Vehicle Floorplan Loans and New Vehicle Swing Line Loans to exceed the Aggregate New Vehicle Floorplan Commitment and/or the outstanding principal balance of the New Vehicle Swing Line Loans to exceed the New Vehicle Swing Line Commitment. The Swing Line Lender may, at its option, but without any obligation to do so, make a New Vehicle Swing Line Loan to fund the amount due under any Payment Commitment even if such New Vehicle Swing Line Loan would cause the outstanding principal balance of the New Vehicle Floorplan Loans and New Vehicle Swing Line Loans to exceed the Aggregate New Vehicle Floorplan Commitment and/or the outstanding principal balance of the New Vehicle Swing Line Loans to exceed the New Vehicle Swing Line Commitment. The New Vehicle Floorplan Borrowers shall pay the amount of such excess to Agent upon demand as set forth in Section 2.3.4.
2.3 Terms Applicable to New Vehicle Floorplan Loans and New Vehicle Swing Line Loans.
2.3.1 New Vehicle Loan Limits.
(a) The aggregate outstanding principal balance of New Vehicle Floorplan Loans and New Vehicle Swing Line Loans shall not at any time exceed the Aggregate New Vehicle Floorplan Commitment.
(b) New Vehicle Loans shall only be made to finance Eligible New Vehicles owned by a New Vehicle Floorplan Dealership. The aggregate outstanding principal balance of the New Vehicle Loans made to finance Eligible New Vehicles (including Fleet Vehicles and Demos) owned by any New Vehicle Floorplan Dealership shall not at any time exceed the limit (“Dealership Loan Limit”) for such New Vehicle Floorplan Dealership which is agreed to between Agent and the Company from time to time or, if applicable, any manufacturer, distributor, dealership location or other sublimit set forth within such limit (“Dealership Sublimit”).
(c) No New Vehicle Loans shall be made to finance Eligible New Vehicles obtained by any New Vehicle Floorplan Dealership from any manufacturer or distributor (or division or brand of a manufacturer or distributor) other than one agreed to by Agent for such New Vehicle Floorplan Dealership.
(d) No more than 10 Demos owned by any New Vehicle Floorplan Dealership or dealership location of a New Vehicle Floorplan Dealership may be financed at any one time.
(e) No New Vehicle Loan Advance to finance Eligible New Vehicles (including Fleet Vehicles and Demos) shall exceed an amount equal to 100% of the amount of the manufacturer’s or distributor’s invoice (including freight, advertising and holdbacks) for such Vehicles. No New Vehicle Loan Advance to refinance Former Lender Loans shall exceed an amount equal to the lesser of (i) the amount calculated in accordance with the preceding sentence or (ii) the then outstanding principal amount of the Former Lender Loans made by the Former Lender to finance the Vehicles being refinanced with such New Vehicle Loan Advance.
(f) Except with the prior written consent of Required Lenders, no New Vehicle Loans shall be made to finance Eligible New Vehicles other than Eligible New Vehicles which are a Permitted Brand.
2.3.2 Changes to New Vehicle Floorplan Limits and New Vehicle Floorplan Dealerships. Agent and the Company may from time to time agree (without requiring the consent of any Lender or any other Borrower) to (a) increase or decrease the Dealership Loan Limit (or any Dealership Sublimit) for any New Vehicle Floorplan Dealership, (b) change the permitted manufacturers, distributors or brands listed for any New Vehicle Floorplan Dealership, so long as such manufacturers, distributors or brands are Permitted Brands; and (c) add or delete New Vehicle Floorplan Dealerships and establish Dealership Loan Limits and permitted manufacturers, distributors and brands for additional New Vehicle Floorplan Dealerships, so long as such manufacturers, distributors or brands are Permitted Brands.
2.3.3 Additional Required Payments. In addition to payments required by Sections 2.1.5(a), 2.1.5(c), 2.2.4(a), 2.2.4(b), 2.2.6, and the other provisions hereof, New Vehicle Floorplan Borrowers shall also repay the New Vehicle Loans as follows (which payments do not require prior notice to Agent or Lenders):
(a) Sale of Vehicles. (i) The New Vehicle Floorplan Borrowers shall pay to Agent the entire Related Principal Portion for each financed New Vehicle (except Fleet Vehicles) by the earlier of (A) 3 Business Days following a New Vehicle Floorplan Dealership’s receipt of proceeds from the sale of such New Vehicle; or (B) 10 calendar days following the date of sale of such New Vehicle; and (ii) New Vehicle Floorplan Borrowers shall pay to Agent the entire Related Principal Portion for each financed Fleet Vehicle by the earlier of (A) 3 Business Days following any New Vehicle Floorplan Dealership’s receipt of proceeds from the sale of such Fleet Vehicle, or (B) (1) 45 calendar days following the date of sale of any Fleet Vehicle sold to a governmental agency, or (2) 30 calendar days following the date of sale of any other Fleet Vehicle.
(b) Unsold New Vehicles. If any New Vehicle has not been previously sold, the New Vehicle Floorplan Borrowers shall pay the entire Related Principal Portion for such New Vehicle to Agent on the first New Vehicle Monthly Payment Date which is at least one year following the New Vehicle Loan Advance Date for such New Vehicle (“Required Repayment Date”). Notwithstanding the foregoing, the Related Principal Portion for unsold New Vehicles representing up to 5% of the outstanding principal balance of the New Vehicle Loans may remain unpaid following the Required Repayment Date; provided that the Related Principal Portion for each unsold New Vehicle must be repaid no later than the third New Vehicle Monthly Payment Date following the Required Repayment Date for such New Vehicle.
(c) Deemed Sales. If a Deemed Sale of a New Vehicle financed by the Lenders occurs, the New Vehicle Floorplan Borrowers shall pay to Agent the Related Principal Portion for such Vehicle no later than 6 Business Days following the date of any Deemed Sale. A “Deemed Sale” means any of the following:
(i) A New Vehicle Floorplan Dealership disposes of a New Vehicle by trade with another dealer or other disposition, other than a sale in the ordinary course of such New Vehicle Floorplan Dealership’s business, regardless of whether any payment is due to be made by or to such New Vehicle Floorplan Dealership in respect of such trade or other disposition.
(ii) The New Vehicle ceases to meet the criteria contained in the definition of “Eligible New Vehicle” in this Agreement.
(iii) Agent reasonably determines that the fair market value of a New Vehicle has significantly declined, regardless of the reason.
2.3.4 Additional Payments. Agent and the Lenders shall have no obligation whatsoever, and they have no present intention, to make any New Vehicle Floorplan Loan or New Vehicle Swing Line Loan after the Termination Date or which would cause the principal amount outstanding under this Agreement to exceed any of the limitations stated in this Agreement. The New Vehicle Floorplan Borrowers are and shall be and remain unconditionally jointly and severally liable to the Lenders for, and the New Vehicle Floorplan Borrowers hereby jointly and severally promise to pay to Agent for the account of the Lenders the amount of all New Vehicle Floorplan Obligations hereunder, including without limitation New Vehicle Floorplan Loans and New Vehicle Swing Line Loans in excess of the Swing Line Commitment and/or the Aggregate New Vehicle Floorplan Commitment (whether funded pursuant to Payment Commitments or otherwise) and New Vehicle Floorplan Loans and New Vehicle Swing Line Loans made after the Termination Date. The New Vehicle Floorplan Borrowers shall pay to Agent: (a) upon demand, or if earlier immediately upon becoming aware of the overadvance, the amount of any New Vehicle Floorplan Loans and New Vehicle Swing Line Loans in excess of any limitation contained in this Agreement; and (b) upon demand, the amount of any New Vehicle Floorplan Loans and New Vehicle Swing Line Loans made after the Termination Date; together with interest on the principal amount of such New Vehicle Floorplan Loans and New Vehicle Swing Line Loans, as set forth herein.
2.3.5 Payment Commitment Collateral Account. At any time after the Termination Date or, if earlier, the date on which the availability of New Vehicle Floorplan Loans and New Vehicle Swing Line Loans is terminated, the New Vehicle Floorplan Borrowers shall deliver to Agent funds in an amount equal to the amount which Agent or Swing Line Lender estimates it may be required to pay to manufacturers and distributors pursuant to Payment Commitments which may be presented on or after such date. Such funds shall be held in a non-interest bearing deposit account (“Payment Commitment Collateral Account”) as additional Collateral for the indebtedness of the New Vehicle Floorplan Borrowers to the Lenders. Each New Vehicle Floorplan Borrower hereby grants to Agent, for the benefit of the Lenders, a security interest in such funds and such account to secure all New Vehicle Floorplan Obligations.
2.4 New Vehicle Floorplan Borrowers.
2.4.1 Joint and Several Liability. Each New Vehicle Floorplan Borrower shall be jointly and severally liable (each as a primary obligor and not merely as a surety or accommodation maker) for repayment of the New Vehicle Floorplan Loans and New Vehicle Swing Line Loans, and payment and performance of all Obligations of a New Vehicle Floorplan Borrower and/or the New Vehicle Floorplan Borrowers to Agent and the Lenders under this Agreement and the other Loan Documents. Without limiting the foregoing, each New Vehicle Floorplan Borrower acknowledges and agrees that each of them is jointly and severally liable for all New Vehicle Floorplan Obligations, even if an invoice, billing or other request for payment of some or all of the New Vehicle Floorplan Obligations is addressed to, or stated to be payable by one or more, but less than all of the New Vehicle Floorplan Borrowers. Each New Vehicle Floorplan Borrower jointly and severally promises to pay to Agent, for the account of the Lenders (including Swing Line Lender), in accordance with the terms of this Agreement, and the other Loan Documents, the principal amount of the New Vehicle Floorplan Loans and New Vehicle Swing Line Loans, plus interest thereon, plus all other New Vehicle Floorplan Obligations. Each New Vehicle Floorplan Borrower shall be jointly and severally liable and responsible for all New Vehicle Floorplan Obligations and payment and performance of all terms, conditions, obligations and agreements applicable to a New Vehicle Floorplan Borrower or New Vehicle Floorplan Borrowers under the Loan Documents.
2.4.2 Maximum Liability. Notwithstanding any contrary provision of this Agreement or the other Loan Documents, the liability of each New Vehicle Floorplan Borrower with respect to the New Vehicle Floorplan Obligations shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance as a fraudulent transfer or fraudulent conveyance (or similar term) under any applicable federal or state law (including Section 548 of the Bankruptcy Code of the United States or any successor provision); provided, however that release or reduction of the liabilities of one New Vehicle Floorplan Borrower shall not release or reduce the liability of any other New Vehicle Floorplan Borrower for payment and performance of all New Vehicle Floorplan Obligations.
2.4.3 Appointment of Company. Each Subsidiary that is or becomes a New Vehicle Floorplan Borrower hereby irrevocably appoints the Company to act on its behalf in its capacity as a New Vehicle Floorplan Borrower for all purposes relevant to this Agreement and the other Loan Documents. Without limiting the foregoing, each New Vehicle Floorplan Borrower authorizes the Company, on its behalf, to give and receive notices, to request New Vehicle Floorplan Loans and New Vehicle Swing Line Loans, to execute and deliver all documents, instruments, agreements, reports, and certificates required hereunder (including without limitation Borrower Joinder Agreements and Existing Subsidiary Joinder Agreements), to make any election or decision which is required of the New Vehicle Floorplan Borrowers, and to receive and/or direct the receipt of the proceeds of any New Vehicle Floorplan Loans or New Vehicle Swing Line Loans. Any acknowledgement, consent, direction, certification, agreement or other action which might otherwise be valid or effective only if given or taken by all New Vehicle Floorplan Borrowers, or by any one or more of the New Vehicle Floorplan Borrowers, shall be valid and effective if given or taken only by the Company, whether or not any other New Vehicle Floorplan Borrower also joins therein. Any notice, demand, consent, acknowledgment, direction, certification or other communication delivered to the Company as a New Vehicle Floorplan Borrower in accordance with the terms of this Agreement and the other Loan Documents shall be deemed to have been delivered to the Company and each other New Vehicle Floorplan Borrower. Each New Vehicle Floorplan Borrower other than the Company agrees that each notice, election, representation and warranty, covenant, agreement and undertaking made on its behalf by the Company shall be deemed for all purposes to have been made by such New Vehicle Floorplan Borrower and shall be binding upon and enforceable against such New Vehicle Floorplan Borrower to the same extent as if the same had been made directly by such New Vehicle Floorplan Borrower. Notwithstanding the foregoing, Agent and the Lenders may at any time and from time to time require any one or more of the New Vehicle Floorplan Borrowers to join in or take any action which the Company is authorized to take alone.
2.4.4 Waivers.
(a) Each New Vehicle Floorplan Borrower acknowledges that the New Vehicle Floorplan Loans and New Vehicle Swing Line Loans herein will or may be made for the benefit of the other New Vehicle Floorplan Borrowers as well as such New Vehicle Floorplan Borrower and, in full recognition of that fact, each New Vehicle Floorplan Borrower consents and agrees that Agent and the Lenders may, at any time and from time to time, without notice or demand, and without affecting the enforceability of this Agreement and the other Loan Documents, or the liability of any New Vehicle Floorplan Borrower hereunder or thereunder: (i) supplement, modify, amend, extend, renew, accelerate or otherwise change the time for payment or the terms of the New Vehicle Floorplan Obligations or any part thereof, including any increase or decrease of the rates of interest thereon; (ii) supplement, modify, amend or waive, or enter into or give any agreement, approval or consent with respect to, the New Vehicle Floorplan Obligations or any part thereof, or any of the Loan Documents or any additional security or guaranties, or any condition, covenant, default, remedy, right, representation or term thereof or thereunder; (iii) accept new or additional instruments, documents or agreements in exchange for or relative to any of the Loan Documents or the New Vehicle Floorplan Obligations or any part thereof; (iv) accept partial payments on the New Vehicle Floorplan Obligations; (v) receive and hold additional security or guaranties for the New Vehicle Floorplan Obligations or any part thereof; (vi) release, reconvey, terminate, waive, abandon, fail to perfect, subordinate, exchange, substitute, transfer and/or enforce any security or guaranties, and apply any security and direct the order or manner of sale thereof as the Agent in its sole and absolute discretion may determine; (vii) release any Person from any personal liability with respect to the New Vehicle Floorplan Obligations or any part thereof; (viii) settle, release on terms satisfactory to the Agent or by operation of Applicable Law or otherwise liquidate or enforce any New Vehicle Floorplan Obligations and any security or guaranty in any manner; (ix) consent to the transfer of any security and bid and purchase at any sale; and/or (x) consent to the merger, change or any other restructuring or termination of the corporate or other existence of any New Vehicle Floorplan Borrower or any other Person, and correspondingly restructure the New Vehicle Floorplan Obligations, and any such merger, change, restructuring or termination shall not affect the liability of any New Vehicle Floorplan Borrower hereunder, or under any other Loan Document to which any New Vehicle Floorplan Borrower is a party, or affect the enforceability hereof or thereof with respect to all or any part of the New Vehicle Floorplan Obligations.
(b) The Agent may enforce this Agreement and the other Loan Documents independently as to each New Vehicle Floorplan Borrower and independently of any other remedy or security the Agent or any Lender at any time may have or hold in connection with the New Vehicle Floorplan Obligations, and it shall not be necessary for the Agent to marshal assets in favor of any New Vehicle Floorplan Borrower or any other Person or to proceed upon or against and/or exhaust any other security or remedy before proceeding against any New Vehicle Floorplan Borrower. Each New Vehicle Floorplan Borrower expressly waives any right to require the Agent to marshal assets in favor of any New Vehicle Floorplan Borrower or any other Person or to proceed against any other New Vehicle Floorplan Borrower or any Collateral provided by any other New Vehicle Floorplan Borrower, and agrees that the Agent may proceed against New Vehicle Floorplan Borrowers and/or the Collateral in such order as it shall determine in its sole and absolute discretion. To the extent permitted by Applicable Law, the Agent and the Lenders may file a separate action or actions against any New Vehicle Floorplan Borrower, whether action is brought or prosecuted with respect against any other Person, or whether any other Person is joined in any such action or actions. Each New Vehicle Floorplan Borrower agrees that the Agent, the Lenders and each New Vehicle Floorplan Borrower and Affiliate of any New Vehicle Floorplan Borrower may deal with each other in connection with the New Vehicle Floorplan Obligations or otherwise, or alter any contracts or agreements now or hereafter existing between any of them, in any manner whatsoever, all without in any way altering or affecting the enforceability of this Agreement and the other Loan Documents or the liability of any New Vehicle Floorplan Borrower. Each New Vehicle Floorplan Borrower shall at all times remain liable for the full amount of the New Vehicle Floorplan Obligations even though the New Vehicle Floorplan Obligations, including any part thereof or any other security or guaranty therefor, may be or hereafter may become invalid or otherwise unenforceable as against any other New Vehicle Floorplan Borrower, or any one or more of them or any other Person and whether or not any other New Vehicle Floorplan Borrower or any other Person shall have any personal liability with respect thereto. To the fullest extent permitted by Applicable Law, each New Vehicle Floorplan Borrower expressly waives any and all defenses now or hereafter arising or asserted by reason of (i) any disability or other defense of any other New Vehicle Floorplan Borrower or any other Person with respect to the New Vehicle Floorplan Obligations, (ii) the unenforceability or invalidity of any security or guaranty for the New Vehicle Floorplan Obligations or the lack of perfection or continuing perfection or failure of priority of any security for the New Vehicle Floorplan Obligations, (iii) the cessation from any cause whatsoever of the liability of any other New Vehicle Floorplan Borrower or any other Person (other than by reason of the full payment and performance of all New Vehicle Floorplan Obligations), (iv) any failure of the Agent to marshal assets in favor of any New Vehicle Floorplan Borrower or any other Person, (v) except as otherwise provided in this Agreement, or in the other Loan Documents, any failure of the Agent to give notice of sale or other disposition of Collateral to any New Vehicle Floorplan Borrower or any other Person or any defect in any notice that may be given in connection with any sale or disposition of Collateral, (vi) any act or omission of Agent or any Lender or others that directly or indirectly results in or aids the discharge or release of any other New Vehicle Floorplan Borrower or any other Person or the New Vehicle Floorplan Obligations or any security or guaranty therefor by operation of Applicable Law or otherwise, (vii) any Applicable Law which provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a surety’s or guarantor’s obligation in proportion to the principal obligation, (viii) any failure of Agent or any Lender to file or enforce a claim in any bankruptcy or other proceeding with respect to any Person, (ix) any election made by Agent or any Lender in any bankruptcy proceeding of any Person, (x) any extension of credit or the grant of any security interest under any provision of the United States Bankruptcy Code, (xi) any use of cash collateral under the United States Bankruptcy Code, (xii) any agreement or stipulation with respect to the provision of adequate protection in any bankruptcy proceeding of any Person, (xiii) the avoidance of any security in favor of the Agent or the Lenders for any reason, (xiv) any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, liquidation or dissolution proceeding commenced by or against any Person, including any discharge of, or bar or stay against collecting, all or any of the New Vehicle Floorplan Obligations (or any interest thereon) in or as a result of any such proceeding, (xv) to the extent permitted, the benefits of any form of one-action rule under any Applicable Law, or (xvi) any action taken by the Agent or any Lender that is authorized by this Agreement or any provision of any other Loan Document. Each New Vehicle Floorplan Borrower expressly waives any right to enforce any remedy that Agent or any Lender now has or hereafter may have against any other Person and waives the benefit of, or any right to participate in, any Collateral now or hereafter held by the Agent or any Lender. Each New Vehicle Floorplan Borrower waives all rights and defenses arising out of an election of remedies by Agent or any Lender, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for the New Vehicle Floorplan Obligations has destroyed such New Vehicle Floorplan Borrower’s rights of subrogation and reimbursement against the principal.
2.4.5 Condition of the New Vehicle Floorplan Borrowers. Each New Vehicle Floorplan Borrower represents and warrants to Agent and the Lenders that such New Vehicle Floorplan Borrower has established adequate means of obtaining from the other New Vehicle Floorplan Borrowers, on a continuing basis, financial and other information pertaining to the businesses, operations and condition (financial and otherwise) of the New Vehicle Floorplan Borrowers and their properties, and each New Vehicle Floorplan Borrower now is and hereafter will be completely familiar with the businesses, operations and condition (financial and otherwise) of the other New Vehicle Floorplan Borrowers and their properties. Each New Vehicle Floorplan Borrower hereby expressly waives and relinquishes any duty on the part of Agent and the Lenders (should any such duty exist) to disclose to such New Vehicle Floorplan Borrower any matter, fact or thing related to the businesses, operations or condition (financial or otherwise) of any other New Vehicle Floorplan Borrower or its properties, whether now known or hereafter known by Agent or any Lender during the life of this Agreement. With respect to any of the New Vehicle Floorplan Obligations, the Agent and the Lenders need not inquire into the powers of any New Vehicle Floorplan Borrower or the officers or employees acting or purporting to act on its behalf, and each New Vehicle Floorplan Borrower shall be liable for all New Vehicle Floorplan Obligations made or created in good faith reliance upon the professed exercise of such powers.
2.4.6 Liens on Real Property. In the event that all or any part of the New Vehicle Floorplan Obligations at any time are secured by any one or more deeds of trust or mortgages or other instruments creating or granting Liens on any interests in real property, each New Vehicle Floorplan Borrower authorizes the Agent, upon the occurrence of and during the continuance of any Event of Default, at its sole option, without notice or demand and without affecting any New Vehicle Floorplan Obligations of any New Vehicle Floorplan Borrower, the enforceability of this Agreement, or the validity or enforceability of any security interests of the Agent on any Collateral, to foreclose any or all of such deeds of trust or mortgages or other instruments by judicial or nonjudicial sale. Each New Vehicle Floorplan Borrower expressly waives any defenses to the enforcement of any security interests created by any Collateral Documents or to the recovery by Agent or any Lender against any New Vehicle Floorplan Borrower or any guarantor or any other Person liable therefor of any deficiency after a judicial or nonjudicial foreclosure or sale, even though such a foreclosure or sale may impair the subrogation rights of such New Vehicle Floorplan Borrower and may preclude such New Vehicle Floorplan Borrower from obtaining reimbursement or contribution from any other Person. Each New Vehicle Floorplan Borrower expressly waives any right to receive notice of any judicial or nonjudicial foreclosure or sale of any real property or interest therein which is owned by another New Vehicle Floorplan Borrower or any other Person and is subject to any such deeds of trust or mortgages or other instruments and any New Vehicle Floorplan Borrower’s failure to receive any such notice shall not impair or affect such New Vehicle Floorplan Borrower’s obligations hereunder or the enforceability of this Agreement and the other Loan Documents.
2.4.7 Waiver of Rights of Subrogation. Notwithstanding anything to the contrary elsewhere contained herein or in any other Loan Document to which any New Vehicle Floorplan Borrower is a party, each New Vehicle Floorplan Borrower hereby waives with respect to each other New Vehicle Floorplan Borrower and its successors and assigns (including any surety), any and all rights at law or in equity to subrogation, to reimbursement, to indemnity, to exoneration, to contribution, to setoff or to any other rights that could accrue to a surety against a principal, to a guarantor against a maker or obligor, to an accommodation party against the party accommodated, or to a holder or transferee against a maker which any New Vehicle Floorplan Borrower may have or hereafter acquire against any other New Vehicle Floorplan Borrower in connection with or as a result of such New Vehicle Floorplan Borrowers’ execution, delivery and/or performance of this Agreement or any other Loan Document to which any New Vehicle Floorplan Borrower is a party. Until the full and final payment of the New Vehicle Floorplan Obligations and the termination of the Commitments under this Agreement, each New Vehicle Floorplan Borrower agrees that it shall not have or assert any such rights against any other New Vehicle Floorplan Borrower or its successors and assigns (including any surety) which is directly or indirectly a creditor of any other New Vehicle Floorplan Borrower or any surety for any other New Vehicle Floorplan Borrower, either directly or as an attempted setoff to any action commenced against any New Vehicle Floorplan Borrower by any other New Vehicle Floorplan Borrower (as a borrower or in any other capacity). Each New Vehicle Floorplan Borrower hereby acknowledges and agrees that this waiver is intended to benefit the Agent and the Lenders and shall not limit or otherwise affect its liability hereunder, under any other Loan Document to which any New Vehicle Floorplan Borrower is a party, or the enforceability hereof or thereof.
2.4.8 Waiver of Discharge. Without limiting the generality of the foregoing, to the fullest extent permitted by Applicable Law, each New Vehicle Floorplan Borrower hereby waives discharge based upon all defenses based on suretyship or impairment of collateral.
2.4.9 Understandings with Respect to Waivers and Consents. Each New Vehicle Floorplan Borrower warrants and agrees that each of the waivers and consents set forth herein are made after consultation with legal counsel and with full knowledge of their significance and consequences, with the understanding that events giving rise to any defense or right waived may diminish, destroy or otherwise adversely affect rights which such New Vehicle Floorplan Borrowers otherwise may have against the other New Vehicle Floorplan Borrowers, the Agent, any Lender, or against Collateral, and that, under the circumstances, the waivers and consents herein given are reasonable. If any of the waivers or consents herein is determined to be contrary to any Applicable Law or public policy, such waivers and consents shall be effective to the maximum extent permitted by Applicable Law.
2.4.10 Mutual Benefit. Each New Vehicle Floorplan Borrower agrees that the credit accommodations to be extended by the Lenders under this Agreement and the other Loan Documents are of benefit to each of them, that each New Vehicle Floorplan Borrower is a direct and indirect beneficiary of the value given thereunder, and each extension of credit under this Agreement, and the other Loan Documents will be of substantial benefit to each New Vehicle Floorplan Borrower.
2.5 Addition of New Vehicle Floorplan Dealerships. As of the Closing Date, the New Vehicle Floorplan Dealerships shall be the Dealerships signing this Agreement, which shall be all Dealerships existing as of the date of this Agreement (except any Dealership which does not require financing for its New Vehicles). Thereafter, if any new Dealership is established or any existing Dealership requires financing for its New Vehicles, the Company shall deliver to Agent a written notice specifying the name of the additional New Vehicle Floorplan Dealership, the proposed Dealership Loan Limit for such Dealership, the applicable manufacturers to be financed for such Dealership and any other information requested by Agent. Upon approval by Agent, establishment of a Dealership Loan Limit and, if applicable, Dealership Loan Sublimit(s), and satisfaction of the requirements in Section 9.3, such Dealership shall become a New Vehicle Floorplan Dealership and entitled to finance Eligible New Vehicles hereunder. For purposes of clarification, no Dealership shall incur any indebtedness to finance New Vehicles, except for New Vehicle Floorplan Loans under this Agreement, without the consent of the Agent and the Lenders.
2.6. PR Account. In addition to any payments otherwise required by this Agreement, the New Vehicle Floorplan Borrowers may reduce the outstanding principal balance of the New Vehicle Swing Line Loans by means of one or more flooring line principal reduction accounts (each, a “PR Account”). At the Company’s request, Swing Line Lender will establish a PR Account for a New Vehicle Floorplan Borrower (each New Vehicle Floorplan Borrower having a PR Account, a “PR Account Borrower”) for the sole purpose of recording voluntary reductions in principal. A PR Account is not a deposit account, and PR Account Borrowers shall have no right or interest in any balance in such account, except as expressly provided in this Section 2.6. Each PR Account is subject to the following provisions.
2.6.1 PR Account Payments. A PR Account Borrower, at its discretion, may make payments to a PR Account (each, a “PR Account Payment”) at any time, subject to the provisions of subsections 2.6.3 and 2.6.7 of this Section 2.6 and further subject to the following conditions:
(a) All payments into a PR Account must be made as transfers of collected funds from a deposit account of a PR Account Borrower with Swing Line Lender.
(b) Payments into a PR Account must be in amounts of at least $1,000,000.00.
(c) The balance in a PR Account may not at any time exceed the aggregate outstanding principal balance of the New Vehicle Swing Line Loans for the applicable PR Account Borrower. If the amount in a PR Account exceeds the maximum amount permitted hereunder, Swing Line Lender is authorized to make a PR Account Advance (defined below) in the amount of any such excess and deposit such amount in a deposit account of the applicable PR Account Borrower with Swing Line Lender.
(d) The aggregate of the balances in all PR Accounts may not at any time exceed $50,000,000.00. If the aggregate amount in the PR Accounts exceeds such amount, Swing Line Lender is authorized to make one or more PR Account Advances in the amount of any such excess and deposit such amount in any deposit account of a PR Account Borrower with Swing Line Lender.
2.6.2 PR Account Advances. The New Vehicle Floorplan Borrowers may re-borrow any balance in a PR Account as a New Vehicle Swing Line Loan (a “PR Account Advance”) at any time during the term of this Agreement, subject to the provisions of subsections 2.6.3 and 2.6.6 of this Section 2.6 and further subject to the following conditions:
(a) No Event of Default shall have occurred and be continuing under this Agreement.
(b) PR Account Advances must be in amounts of at least $1,000,000.00, except the Company (on behalf of a PR Account Borrower) may request a PR Account Advance in the amount of the remaining balance in a PR Account if the remaining balance is less than $1,000,000.00; provided, however, that PR Account Advances made by Swing Line Lender pursuant to subsections 2.6.1 and 2.6.7 of this Section 2.6 shall not be so limited.
2.6.3 Requests for PR Account Payments and Advances. Whenever a PR Account Borrower wishes to make a PR Account Payment or obtain a PR Account Advance, the Company shall give Agent irrevocable notice thereof no later than 11:00 a.m. (Pacific time) at least one Business Day prior to the date of the requested PR Account Payment or PR Account Advance. Such notice shall specify the amount of, and requested date of, the requested PR Account Payment or PR Account Advance and include any other information requested by Swing Line Lender.
2.6.4 Limitation on Transactions in PR Account. The total number of payments to and advances from a PR Account shall not exceed 6 transactions per calendar month in the aggregate.
2.6.5 Application of PR Account Balance. The balance in any PR Account shall be applied to reduce the outstanding principal balance of the New Vehicle Swing Line Loans for New Vehicles owned by the applicable PR Account Borrower for the purpose of computation of interest only, and shall in no way limit or modify the principal payment requirements set forth elsewhere in this Agreement. Notwithstanding any other provision in this Section 2.6, except as set forth in the last sentence of Section 2.1.7 with respect to the New Vehicle Floorplan Commitment Fee payable to Swing Line Lender, the balance in a PR Account may not be used to reduce any principal amount outstanding for purposes of determining any remaining availability under the lines of credit established by Sections 2.1 or 2.2 of this Agreement or any of the other limitations stated in this Agreement.
2.6.6 Record of PR Account. All payments into a PR Account and all PR Account Advances shall be recorded on Swing Line Lender’s books.
2.6.7 Termination of PR Accounts. Swing Line Lender and the Company on behalf of the New Vehicle Floorplan Borrowers, may mutually agree to terminate this Section 2.6 at such time as is agreed upon between them. In addition, Swing Line Lender may terminate this Section 2.6 (a) without prior notice upon the occurrence (or at any time during the continuation) of an Event of Default or (b) upon 30 days’ notice to the Company if the reason for the termination is that the Swing Line Lender has decided not to offer PR Accounts to its customers generally or that Swing Line Lender is prohibited or restricted by law or regulation from offering PR Accounts. Provided that no Event of Default exists, upon termination of this Section 2.6, Swing Line Lender shall make a PR Account Advance in an amount equal to the balance in each PR Account and deposit such amount in a deposit account of the applicable New Vehicle Floorplan Borrower with Swing Line Lender. If an Event of Default has occurred and is continuing, then upon termination of this Section 2.6, PR Account Borrowers shall have no further right to receive any PR Account Advances and Agent may apply the balance in any PR Account to the Obligations in accordance with the provisions of this Agreement.
ARTICLE 3
USED VEHICLE FLOORPLAN LINE OF CREDIT
3.1 Used Vehicle Floorplan Loans.
3.1.1 Used Vehicle Floorplan Commitment. Subject to the terms and conditions of this Agreement, each Lender severally and not jointly agrees to make loans (each a “Used Vehicle Floorplan Loan”) to the Used Vehicle Floorplan Borrower on a revolving credit basis during the period from the Closing Date to but not including the Termination Date; provided that (a) the aggregate outstanding principal balance of the Used Vehicle Floorplan Loans made by each Lender, plus the outstanding principal balance of such Lender’s participating interest in the Used Vehicle Swing Line Loans shall not at any time exceed an amount equal to such Lender’s Used Vehicle Floorplan Commitment; (b) the outstanding principal balance of all Used Vehicle Floorplan Loans shall not at any time exceed, in the aggregate, as to all Lenders, the Maximum Used Vehicle Floorplan Amount, and (c) the outstanding principal balance of all Used Vehicle Floorplan Loans, plus the outstanding principal balance of all Used Vehicle Swing Line Loans, shall not at any time exceed, in the aggregate, as to all Lenders, the Maximum Used Vehicle Floorplan Amount. Subject to the terms and conditions hereof, Borrower may borrow, prepay and reborrow Used Vehicle Floorplan Loans.
3.1.2 Purpose of Used Vehicle Floorplan Loans. The Used Vehicle Floorplan Borrower shall use the proceeds of the Used Vehicle Floorplan Loans to finance Used Vehicles owned by a Dealership, and to refinance Used Vehicle Swing Line Loans.
3.1.3 Requests for Used Vehicle Floorplan Loans. Whenever the Used Vehicle Floorplan Borrower wishes to obtain a Used Vehicle Floorplan Advance, it shall give Agent irrevocable notice thereof no later than 11:00 a.m. (Pacific Time) at least one Business Day prior to the date of the requested borrowing. Such notice shall specify the requested borrowing date (which must be a Business Day), the amount of the Used Vehicle Floorplan Loan Advance, and include any other information and documentation reasonably requested by Agent. Agent will promptly notify each Lender of its receipt of any request for a Used Vehicle Floorplan Advance and of the amount of its Pro Rata Share of such Used Vehicle Floorplan Advance. Each Used Vehicle Floorplan Advance shall be in a minimum amount of $1,000,000.00 and in multiples of $100,000.00 above such amount.
3.1.4 Funding of Used Vehicle Floorplan Loans. If the Agent notifies the Lenders of a request for a Used Vehicle Floorplan Advance by 1:00 p.m. (Pacific Time) on any Business Day, each Lender will deliver its Pro Rata Share of such Used Vehicle Floorplan Advance to Agent by 11:00 a.m. (Pacific Time) on the Business Day after such notification.
3.1.5 Used Vehicle Floorplan Payments.
(a) Interest Payments. Interest on the unpaid principal balance of the Used Vehicle Floorplan Loans shall be paid monthly by the Used Vehicle Floorplan Borrower in an amount equal to all interest accrued during the prior calendar month. Such interest payments shall be made on each Used Vehicle/Revolving Monthly Payment Date commencing with the first such date to occur following the Closing Date and continuing thereafter. All accrued interest outstanding on the Termination Date shall be due and payable in full on the Termination Date.
(b) Voluntary Principal Payments. The Used Vehicle Floorplan Borrower may make voluntary repayments of all or a portion of the outstanding principal balance of the Used Vehicle Floorplan Loans if the Used Vehicle Floorplan Borrower gives Agent written or telephonic notice of such voluntary repayment no later than 11:00 a.m. (Pacific Time) at least one Business Day prior to the date of such repayment; provided that each such voluntary principal repayment shall be in a minimum amount of $1,000,000.00 and in multiples of $100,000.00 above such amount. Such notice shall specify the anticipated date of the voluntary repayment and the principal amount of the Used Vehicle Floorplan Loans that will be repaid on such date. Any voluntary repayment of the Used Vehicle Floorplan Loans that is received by Agent without such notice shall be deemed to have been received by Agent on the Business Day after such payment is actually received by Agent and interest shall accrue on the amounts so repaid through the date of such deemed receipt.
(c) Principal Payment at Maturity. The entire outstanding principal balance of the Used Vehicle Floorplan Loans plus all interest accrued thereon shall be due and payable in full by the Used Vehicle Floorplan Borrower on the Termination Date.
3.1.6 Voluntary Reduction or Termination of Commitment. The Used Vehicle Floorplan Borrower may from time to time on at least ten (10) Business Day’s prior written notice to the Agent (which shall promptly advise each Lender thereof) permanently reduce the Aggregate Used Vehicle Floorplan Commitment to an amount not less than the then outstanding principal balance of the Used Vehicle Floorplan Loans and Used Vehicle Swing Line Loans. Concurrently with any reduction of the Aggregate Used Vehicle Floorplan Commitment to zero, (a) no further Used Vehicle Floorplan Loans or Used Vehicle Swing Line Loans will be made, and (b) the Used Vehicle Floorplan Borrower shall pay all principal and interest on the Used Vehicle Floorplan Loans and Used Vehicle Swing Line Loans and all fees and other amounts owing to Agent and the Lenders. All reductions of the Aggregate Used Vehicle Floorplan Commitment shall reduce the Used Vehicle Floorplan Commitments pro rata among the Lenders according to their respective Pro Rata Shares; and except as otherwise set forth in the proviso to this Section 3.1.6, shall reduce the Used Vehicle Swing Line Commitment in proportion to the reduction of the Aggregate Used Vehicle Floorplan Commitment; provided, however, that (unless the Aggregate Used Vehicle Floorplan Commitment is reduced to less than such amount), the Used Vehicle Swing Line Commitment shall not be reduced.
3.1.7 Used Vehicle Floorplan Commitment Fee. The Used Vehicle Floorplan Borrower agrees to pay to Agent, for the account of the Lenders, a commitment fee (the “Used Vehicle Floorplan Commitment Fee”) calculated at a per annum rate equal to the Used Vehicle Floorplan Commitment Fee Rate on the average daily amount by which the Aggregate Used Vehicle Floorplan Commitment exceeds the sum of (a) the actual aggregate outstanding principal balance of the Used Vehicle Swing Line Loans on each day (it being understood that any portion of the outstanding principal balance of the Used Vehicle Swing Line Loans ceases to be outstanding under the Used Vehicle Swing Line Loans and commences being a portion of the outstanding principal balance under the Used Vehicle Floorplan Loans on the date that the Used Vehicle Floorplan Loans are funded to repay such portion of the outstanding principal balance of the Used Vehicle Swing Line Loans); plus (b) the actual aggregate outstanding principal balance of the Used Vehicle Floorplan Loans on each day; provided that, if the aggregate amount of the Used Vehicle Floorplan Commitment Fee payable for any period to the Lenders other than the Swing Line Lender (as set forth in the third sentence of this paragraph) exceeds the amount calculated under this sentence, then the Used Vehicle Floorplan Borrower agrees to pay to the Agent, for the account of such Lenders, such additional amounts so that each Lender other than the Swing Line Lender receives the full amount of Used Vehicle Floorplan Commitment Fee described in the third sentence of this paragraph. The accrued Used Vehicle Floorplan Commitment Fee shall be due and payable in arrears on each Quarterly Payment Date hereafter and on the Termination Date for the three month period or other time period ending on the last day of the preceding fiscal quarter or on the Termination Date. The Used Vehicle Floorplan Commitment Fee payable to each Lender other than the Swing Line Lender shall be based upon the amount determined by multiplying such Lender’s Pro Rata Share by the average daily amount by which the Aggregate Used Vehicle Floorplan Commitment exceeds the actual aggregate outstanding principal balance of the Used Vehicle Floorplan Loans on each day. The Used Vehicle Floorplan Commitment Fee payable to the Lender which is the Swing Line Lender shall be based upon the amount determined by multiplying such Lender’s Pro Rata Share by the average daily amount by which the Aggregate Used Vehicle Floorplan Commitment exceeds the actual aggregate outstanding principal balance of the Used Vehicle Floorplan Loans on each day and subtracting from that amount the average daily outstanding principal balance of the Used Vehicle Swing Line Loans.
3.1.8 Additional Payments. The Lenders shall have no obligation whatsoever, and they have no present intention, to make any Used Vehicle Floorplan Loan or Used Vehicle Swing Line Loan after the Termination Date or which would cause the principal amount outstanding under this Agreement to exceed any of the limitations stated in this Agreement. Notwithstanding the foregoing, the Used Vehicle Floorplan Borrower is and shall be and remain unconditionally liable to the Lenders for, and the Used Vehicle Floorplan Borrower hereby promises to pay to Agent for the account of the Lenders the amount of all Used Vehicle Floorplan Loans, Used Vehicle Swing Line Loans, and other Used Vehicle Floorplan Obligations hereunder, including without limitation Loans in excess of the limitations set forth herein and Used Vehicle Floorplan Loans and Used Vehicle Swing Line Loans made after the Termination Date. The Used Vehicle Floorplan Borrower shall pay to Agent: (a) upon demand, or if earlier immediately upon becoming aware of the overadvance, the amount of any Used Vehicle Floorplan Loans and Used Vehicle Swing Line Loans in excess of any limitation contained in this Agreement; and (b) upon demand, the amount of any Used Vehicle Floorplan Loans and Used Vehicle Swing Line Loans made after the Termination Date; together with interest on the principal amount of such Used Vehicle Floorplan Loans and Used Vehicle Swing Line Loans, as set forth herein.
3.2 Used Vehicle Swing Line Loans.
3.2.1 Used Vehicle Swing Line Commitment. Subject to the terms and conditions of this Agreement, the Swing Line Lender may, at its option, make loans (each, a “Used Vehicle Swing Line Loan”) to the Used Vehicle Floorplan Borrower on a revolving credit basis during the period from the Closing Date to but not including the Termination Date; provided that (a) the aggregate outstanding principal balance of the Used Vehicle Swing Line Loans shall not at any time exceed the Used Vehicle Swing Line Commitment; and (b) the outstanding principal balance of all Used Vehicle Floorplan Loans made by all Lenders plus the outstanding principal balance of all Used Vehicle Swing Line Loans, shall not at any time exceed the Maximum Used Vehicle Floorplan Amount. Subject to the terms and conditions hereof, the Used Vehicle Floorplan Borrower may borrow, prepay and reborrow Used Vehicle Swing Line Loans.
3.2.2 Purpose of Used Vehicle Swing Line Loans. The Used Vehicle Floorplan Borrower shall use the proceeds of Used Vehicle Swing Line Loans for purposes permitted by Section 3.1.2 and to fund Sweep Advances pursuant to Section 3.2.7.
3.2.3 Requests for Used Vehicle Swing Line Loans. Except as set forth in Section 3.2.7, whenever the Used Vehicle Floorplan Loan Borrower wishes to obtain a Used Vehicle Swing Line Loan, the Used Vehicle Floorplan Borrower shall give Agent irrevocable notice thereof no later than 1:00 p.m. (Pacific Time) on the requested date of such Used Vehicle Swing Line Loan, unless Swing Line Lender agrees in each instance, in its sole discretion, to a shorter time period. Such notice shall specify the requested borrowing date (which must be a Business Day) and the amount of the Used Vehicle Swing Line Loan and include any other documentation and information reasonably requested by Agent.
3.2.4 Used Vehicle Swing Line Loan Payments.
(a) Interest Payments. Interest on the unpaid principal balance of the Used Vehicle Swing Line Loans shall be paid monthly by the Used Vehicle Floorplan Borrower in an amount equal to all interest accrued during the prior calendar month. Such interest payments shall be made on each Used Vehicle/Revolving Monthly Payment Date commencing with the first such date to occur following the Closing Date and continuing thereafter. All accrued interest outstanding on the Termination Date shall be due and payable in full on the Termination Date.
(b) Principal Payments. The entire outstanding principal balance of the Used Vehicle Swing Line Loans plus all interest accrued thereon shall be due and payable in full by the Used Vehicle Floorplan Borrower on the Termination Date. In addition, the principal balance of the Used Vehicle Swing Line Loans shall be due and payable as required by Section 3.2.6.
3.2.5 Participation in Used Vehicle Swing Line Loans. Immediately upon the making of a Used Vehicle Swing Line Loan by the Swing Line Lender, the Swing Line Lender shall be deemed to have sold and transferred to each Lender and each Lender shall be deemed to have purchased and received from the Swing Line Lender, without any further action by any party, an undivided participating interest in each Used Vehicle Swing Line Loan in an amount equal to such Lender’s Pro Rata Share; provided, however, that (a) no Lender shall be required to fund its participation in any Used Vehicle Swing Line Loan except as set forth in Section 3.2.6(b), and (b) no Lender shall be entitled to share in any payments of principal or interest in respect of its participation except, with respect to any participation funded by such Lender, as set forth herein. Such participation shall be subject to the terms and conditions of this Agreement.
3.2.6 Settlement of Used Vehicle Swing Line Loans.
(a) Refunding of Loans.
(i) Upon the request of the Swing Line Lender, the Agent from time to time shall, on behalf of the Used Vehicle Floorplan Borrower (and the Used Vehicle Floorplan Borrower hereby irrevocably authorizes the Agent to so act on its behalf) request each Lender (including Swing Line Lender in its capacity as a Lender) to make a Used Vehicle Floorplan Loan to the Used Vehicle Floorplan Borrower, in accordance with the provisions of this Section 3.2.6(a), which shall be applied to repay all or a portion of the outstanding principal balance of the Used Vehicle Swing Line Loans (each such Used Vehicle Floorplan Loan, a “Refunding Used Vehicle Floorplan Loan”), in an amount equal to that Lender’s Pro Rata Share of all or a portion of the then outstanding principal balance of the Used Vehicle Swing Line Loans.
(ii) Without limiting the foregoing, each Lender agrees that Agent may request the Lenders to make Refunding Used Vehicle Floorplan Loans at any time if (A) a Default has occurred and is continuing, or (B) in the judgment of Swing Line Lender, taking into account the outstanding principal balance of the Used Vehicle Swing Line Loans and the anticipated usage of the Used Vehicle Swing Line Loans, and the operation of the Credit Sweep pursuant to Section 3.2.7, such Refunding Used Vehicle Floorplan Loans are reasonably necessary to ensure that the outstanding principal balance of the Used Vehicle Swing Line Loans will not at any time exceed the Used Vehicle Swing Line Commitment or such lesser amount as is permitted to be outstanding on the Used Vehicle Swing Line Loans at such time (it being understood that in order to attain such objective, Swing Line Lender may request refunding of the Used Vehicle Swing Line Loans even though the principal balance of the Used Vehicle Swing Line Loans at the time of such request is less than the Used Vehicle Swing Line Commitment or the amount permitted to be outstanding on the Used Vehicle Swing Line Loans).
(iii) If the Agent makes a request for funding under this Section 3.2.7(a) by 1:00 p.m. (Pacific Time) on any Business Day, the Lenders will deliver the required amount to Agent no later than 11:00 a.m. (Pacific Time) on the Business Day after such request. The proceeds of all Refunding Used Vehicle Floorplan Loans shall be paid by the Agent to the Swing Line Lender in repayment of the outstanding principal balance of the applicable Used Vehicle Swing Line Loans.
(b) Funding of Participations. In addition to the right of the Swing Line Lender to request refunding of the Used Vehicle Swing Line Loans pursuant to Section 3.2.6(a), upon the request of the Swing Line Lender, the Agent may request each Lender (including Swing Line Lender in its capacity as a Lender) to fund its participation in the Used Vehicle Swing Line Loans by paying to the Agent, for the account of the Swing Line Lender, its Pro Rata Share of the principal amount of the Used Vehicle Swing Line Loans. If the Agent makes such request by 1:00 p.m. (Pacific Time) on any Business Day, the Lenders will deliver such amount to Agent no later than 11:00 a.m. (Pacific Time) on the Business Day after such request. All participations funded by the Lenders under this Section 3.2.6(b) shall be treated as the funding of the Revolving Loans for purposes of the calculation of the Used Vehicle Floorplan Commitment Fee. If any payment paid to any Lender with respect to its participating interest in any Used Vehicle Swing Line Loan is thereafter recovered from or must be returned or paid over by Swing Line Lender for any reason, such Lender will pay to the Agent for the account of the Swing Line Lender, such Lender’s Pro Rata Share of such amount and of any interest and other amounts paid or payable by the Swing Line Lender with respect to such amount. Agent agrees not to request any funding of the Lender’s participations in the Used Vehicle Swing Line Loans under this Section 3.2.6(b) at any time that such participations may be legally repaid using advances of Used Vehicle Floorplan Loans under Section 3.2.6(a).
(c) Payment to Swing Line Lender. Notwithstanding any contrary provision of this Agreement (i) except as set forth in clause (ii) of this Section 3.2.6(c) all payments of principal and interest on the Used Vehicle Swing Line Loans shall be paid by Agent solely to the Swing Line Lender; and (ii) with respect to each participation in Used Vehicle Swing Line Loans which is funded by any Lender, such Lender (including Swing Line Lender in its capacity as Lender) shall be entitled to receive its Pro Rata Share of payments of (A) principal on such Used Vehicle Swing Line Loans and (B) interest on such Used Vehicle Swing Line Loans only for the period following the date such participation is funded.
(d) Obligations Unconditional. The obligation of each Lender to make Used Vehicle Floorplan Loans to repay Used Vehicle Swing Line Loans pursuant to Section 3.2.6(a) or to fund its participation interests in Used Vehicle Swing Line Loans pursuant to Section 3.2.6(b) shall be absolute and unconditional and shall not be affected by the occurrence of a Default or Event of Default, the fact that any one or more of the conditions in Article 9 is not satisfied, the termination of the availability of Loans, the fact that such Used Vehicle Floorplan Loan is made after the Termination Date to refinance Used Vehicle Swing Line Loans made prior to the Termination Date, any defense, setoff, counterclaim or claim for recoupment of any Lender against Agent or Swing Line Lender or any other circumstance, whether or not similar to the foregoing. Notwithstanding the foregoing, the Lenders shall not be required to repay Used Vehicle Swing Line Loans pursuant to Section 3.2.6(a) or to fund their participation interests in Used Vehicle Swing Line Loans pursuant to Section 3.2.6(b) with respect to any portions of the outstanding principal balance of the Used Vehicle Swing Line Loans that are funded by Swing Line Lender after Agent is deemed to have knowledge or notice of the occurrence of a Default or after the Termination Date.
3.2.7 Credit Sweep.
(a) Notwithstanding the provisions of Section 3.2.3, in addition to Used Vehicle Swing Line Loans requested pursuant to Section 3.2.3, the Used Vehicle Floorplan Borrower may also obtain and repay Used Vehicle Swing Ling Loans in accordance with the provisions of this Section 3.2.7 (each, a “Sweep Advance”). Sweep Advances shall be Used Vehicle Swing Line Loans.
(b) Funds may be transferred between one or more deposit accounts maintained by the Used Vehicle Floorplan Borrower with Agent (each, a “DDA”) and the Swing Line Loans. Collected funds in the DDA may be transferred to the Used Vehicle Swing Line Loans to reduce the outstanding principal balance thereof and Sweep Advances may be made to maintain an agreed upon collected balance in the DDA.
(c) All Sweep Advances shall be deemed to have been requested by the Used Vehicle Floorplan Borrower and shall be subject to the terms and conditions of this Agreement and the other Loan Documents, and shall also be subject to Agent’s deposit account, treasury management and other agreements with the Used Vehicle Floorplan Borrower; provided, however, that if there is any conflict between the terms of such agreements and the Loan Documents, the terms of the Loan Documents shall control.
(d) The Used Vehicle Floorplan Borrower may terminate this service by written notice executed by the Used Vehicle Floorplan Borrower and delivered to Agent. Agent may change the terms or discontinue this service at any time upon written notice to the Used Vehicle Floorplan Borrower.
(e) The Used Vehicle Floorplan Borrower shall pay such fees for this sweep service as may be disclosed to the Used Vehicle Floorplan Borrower by Agent. Such fees shall be for the sole account of Agent.
ARTICLE 4
REVOLVING LINE OF CREDIT
4.1 Revolving Loans.
4.1.1 Revolving Loan Commitment. Subject to the terms and conditions of this Agreement, each Lender severally and not jointly agrees to make loans (each a “Revolving Loan”) to the Revolving Loan Borrower on a revolving credit basis during the period from the Closing Date to but not including the Termination Date; provided that (a) the aggregate outstanding principal balance of the Revolving Loans made by each Lender, plus the outstanding principal balance of such Lender’s participating interest in the Revolving Swing Line Loans and Letters of Credit shall not at any time exceed an amount equal to such Lender’s Revolving Loan Commitment; (b) the outstanding principal balance of all Revolving Loans shall not at any time exceed, in the aggregate, as to all Lenders, the Maximum Revolving Loan Amount, and (c) the outstanding principal balance of all Revolving Loans, plus the outstanding principal balance of all Revolving Swing Line Loans, plus the LC Obligations shall not at any time exceed, in the aggregate, as to all Lenders, the Maximum Revolving Loan Amount. Subject to the terms and conditions hereof, Borrower may borrow, prepay and reborrow Revolving Loans.
4.1.2 Purpose of Revolving Loans. The Revolving Loan Borrower shall use the proceeds of the Revolving Loans, for its general corporate purposes (including to pay the purchase price payable to consummate the DCH Acquisition in accordance with the DCH Acquisition Agreement and to finance the purchase price of Permitted Acquisitions), and to refinance Revolving Swing Line Loans.
4.1.3 Requests for Revolving Loans. Whenever the Revolving Loan Borrower wishes to obtain a Revolving Loan Advance, it shall give Agent irrevocable notice thereof no later than 11:00 a.m. (Pacific Time) at least one Business Day prior to the date of the requested borrowing. Such notice shall specify the requested borrowing date (which must be a Business Day), the amount of the Revolving Loan Advance, and include any other information and documentation reasonably requested by Agent. Agent will promptly notify each Lender of its receipt of any request for a Revolving Loan Advance and of the amount of its Pro Rata Share of such Revolving Loan Advance. Each Revolving Loan Advance shall be in a minimum amount of $1,000,000.00 and in multiples of $100,000.00 above such amount.
4.1.4 Funding of Revolving Loans. If the Agent notifies the Lenders of a request for a Revolving Loan Advance by 1:00 p.m. (Pacific Time) on any Business Day, each Lender will deliver its Pro Rata Share of such Revolving Loan Advance to Agent by 11:00 a.m. (Pacific Time) on the Business Day after such notification.
4.1.5 Revolving Loan Payments.
(a) Interest Payments. Interest on the unpaid principal balance of the Revolving Loans shall be paid monthly by the Revolving Loan Borrower in an amount equal to all interest accrued during the prior calendar month. Such interest payments shall be made on each Used Vehicle/Revolving Monthly Payment Date commencing with the first such date to occur following the Closing Date and continuing thereafter. All accrued interest outstanding on the Termination Date shall be due and payable in full on the Termination Date.
(b) Voluntary Principal Payments. The Revolving Loan Borrower may make voluntary repayments of all or a portion of the outstanding principal balance of the Revolving Loans if the Revolving Loan Borrower gives Agent written or telephonic notice of such voluntary repayment no later than 11:00 a.m. (Pacific Time) at least one Business Day prior to the date of such repayment; provided that each such voluntary principal repayment shall be in a minimum amount of $1,000,000.00 and in multiples of $100,000.00 above such amount. Such notice shall specify the anticipated date of the voluntary repayment and the principal amount of the Revolving Loans that will be repaid on such date. Any voluntary repayment of the Revolving Loans that is received by Agent without such notice shall be deemed to have been received by Agent on the Business Day after such payment is actually received by Agent and interest shall accrue on the amounts so repaid through the date of such deemed receipt.
(c) Principal Payment at Maturity. The entire outstanding principal balance of the Revolving Loans plus all interest accrued thereon shall be due and payable in full by the Revolving Loan Borrower on the Termination Date.
4.1.6 Voluntary Reduction or Termination of Commitment. The Revolving Loan Borrower may from time to time on at least ten (10) Business Day’s prior written notice to the Agent (which shall promptly advise each Lender thereof) permanently reduce the Aggregate Revolving Loan Commitment to an amount not less than the then outstanding principal balance of the Revolving Loans and Revolving Swing Line Loans plus the LC Obligations. Concurrently with any reduction of the Aggregate Revolving Loan Commitment to zero, (a) no further Revolving Loans or Revolving Swing Line Loans will be made and no further Letters of Credit will be issued, (b) the Revolving Loan Borrower shall pay all principal and interest on the Revolving Loans and Revolving Swing Line Loans and all fees and other amounts owing to Agent and the Lenders, and (c) the Revolving Loan Borrower shall grant to Agent a security interest in cash collateral to be held in the LC Collateral Account in an amount equal to the LC Obligations at such time. All reductions of the Aggregate Revolving Loan Commitment shall reduce the Revolving Loan Commitments pro rata among the Lenders according to their respective Pro Rata Shares; and except as otherwise set forth in the proviso to this Section 4.1.6, shall reduce the Revolving Swing Line Commitment in proportion to the reduction of the Aggregate Revolving Loan Commitment; provided, however, that (unless the Aggregate Revolving Loan Commitment is reduced to less than such amount), the Revolving Swing Line Commitment shall not be reduced.
4.1.7 Revolving Loan Commitment Fee. The Revolving Loan Borrower agrees to pay to Agent, for the account of the Lenders, a commitment fee (the “Revolving Loan Commitment Fee”) calculated at a per annum rate equal to the Revolving Loan Commitment Fee Rate on the average daily amount by which the Aggregate Revolving Loan Commitment exceeds the sum of (a) the actual aggregate outstanding principal balance of the Revolving Swing Line Loans on each day (it being understood that any portion of the outstanding principal balance of the Revolving Swing Line Loans ceases to be outstanding under the Revolving Swing Line Loans and commences being a portion of the outstanding principal balance under the Revolving Loans on the date that the Revolving Loans are funded to repay such portion of the outstanding principal balance of the Revolving Swing Line Loans); plus (b) the actual aggregate outstanding principal balance of the Revolving Loans plus the LC Obligations on each day; provided that, if the aggregate amount of the Revolving Loan Commitment Fee payable for any period to the Lenders other than the Swing Line Lender (as set forth in the third sentence of this paragraph) exceeds the amount calculated under this sentence, then the Revolving Loan Borrower agrees to pay to the Agent, for the account of such Lenders, such additional amounts so that each Lender other than the Swing Line Lender receives the full amount of Revolving Loan Commitment Fee described in the third sentence of this paragraph. The accrued Revolving Loan Commitment Fee shall be due and payable in arrears on each Quarterly Payment Date hereafter and on the Termination Date for the three month period or other time period ending on the last day of the preceding fiscal quarter or on the Termination Date. The Revolving Loan Commitment Fee payable to each Lender other than the Swing Line Lender shall be based upon the amount determined by multiplying such Lender’s Pro Rata Share by the average daily amount by which the Aggregate Revolving Loan Commitment exceeds the actual aggregate outstanding principal balance of the Revolving Loans plus the LC Obligations on each day. The Revolving Loan Commitment Fee payable to the Lender which is the Swing Line Lender shall be based upon the amount determined by multiplying such Lender’s Pro Rata Share by the average daily amount by which the Aggregate Revolving Loan Commitment exceeds the actual aggregate outstanding principal balance of the Revolving Loans plus the LC Obligations on each day and subtracting from that amount the average daily outstanding principal balance of the Revolving Swing Line Loans.
4.1.8 Additional Payments. The Lenders shall have no obligation whatsoever, and they have no present intention, to make any Revolving Loan or Revolving Swing Line Loan after the Termination Date or which would cause the principal amount outstanding under this Agreement to exceed any of the limitations stated in this Agreement. Notwithstanding the foregoing, the Revolving Loan Borrower is and shall be and remain unconditionally liable to the Lenders for, and the Revolving Loan Borrower hereby promises to pay to Agent for the account of the Lenders the amount of all Revolving Loans, Revolving Swing Line Loans, LC Obligations and other Revolving Loan Obligations hereunder, including without limitation Loans in excess of the limitations set forth herein and Revolving Loans and Revolving Swing Line Loans made after the Termination Date. The Revolving Loan Borrower shall pay to Agent: (a) upon demand, or if earlier immediately upon becoming aware of the overadvance, the amount of any Revolving Loans and Revolving Swing Line Loans and LC Obligations in excess of any limitation contained in this Agreement; and (b) upon demand, the amount of any Revolving Loans and Revolving Swing Line Loans made after the Termination Date; together with interest on the principal amount of such Revolving Loans and Revolving Swing Line Loans and LC Obligations, as set forth herein.
4.1.9 Reserve Amount.
(a) In addition to any other limitations set forth in this Article 4, in the event that on any day the outstanding principal balance of all New Vehicle Floorplan Loans, plus New Vehicle Swing Line Loans, plus requests for New Vehicle Floorplan Loans and New Vehicle Swing Line Loans exceeds ninety-five percent (95%) of the Aggregate New Vehicle Floorplan Loan Commitment as of such date, then until the next Business Day on which such condition no longer exists (i) a portion of the Aggregate Revolving Loan Commitment (the “Reserve Amount”) in an amount equal to the lesser of (A) Fifteen Million Dollars ($15,000,000.00) or (B) an amount equal to the Maximum Revolving Loan Amount as of any date, minus the sum of the outstanding principal balance of the Revolving Loans, Revolving Swing Lines Loans and LC Obligations as of such date, shall be reserved and, except as set forth in Section 4.1.9 (b) shall no longer be available for funding Revolving Loans or Revolving Swing Line Loans or for issuance of Letters of Credit, and (ii) the Maximum Revolving Loan Amount shall be reduced by the amount of the Reserve Amount.
(b) (i) Notwithstanding any contrary provision in Section 4.1.9(a), the Reserve Amount may be used to fund Revolving Loans and Revolving Swing Line Loans which are used to repay New Vehicle Swing Line Loans or New Vehicle Floorplan Loans, so long as after giving effect to such Loans, the outstanding principal balance of the Revolving Loans, Revolving Swing Line Loans and LC Obligations does not exceed the Maximum Revolving Loan Amount (calculated without giving effect to reduction by the Reserve Amount); and (ii) if, after giving effect to any payment described in Section 4.1.9(b)(i), the circumstances giving rise to the requirement for a Reserve Amount are still in effect, then the requirements and limitations in Section 4.1.9(a) shall continue in effect, including without limitation the requirement to maintain the Reserve Amount and the restrictions on borrowing set forth therein.
4.2 Revolving Swing Line Loans.
4.2.1 Revolving Swing Line Commitment. Subject to the terms and conditions of this Agreement, the Swing Line Lender may, at its option, make loans (each, a “Revolving Swing Line Loan”) to the Revolving Loan Borrower on a revolving credit basis during the period from the Closing Date to but not including the Termination Date; provided that (a) the aggregate outstanding principal balance of the Revolving Swing Line Loans shall not at any time exceed the Revolving Swing Line Commitment; and (b) the outstanding principal balance of all Revolving Loans made by all Lenders plus the outstanding principal balance of all Revolving Swing Line Loans, plus the LC Obligations, shall not at any time exceed the Maximum Revolving Loan Amount. Subject to the terms and conditions hereof, the Revolving Loan Borrower may borrow, prepay and reborrow Revolving Swing Line Loans.
4.2.2 Purpose of Revolving Swing Line Loans. The Revolving Loan Borrower shall use the proceeds of Revolving Swing Line Loans for purposes permitted by Section 4.1.2.
4.2.3 Requests for Revolving Swing Line Loans. Whenever the Revolving Loan Borrower wishes to obtain a Revolving Swing Line Loan, the Revolving Loan Borrower shall give Agent irrevocable notice thereof no later than 1:00 p.m. (Pacific Time) on the requested date of such Revolving Swing Line Loan, unless Swing Line Lender agrees in each instance, in its sole discretion, to a shorter time period. Such notice shall specify the requested borrowing date (which must be a Business Day) and the amount of the Revolving Swing Line Loan and include any other documentation and information reasonably requested by Agent.
4.2.4 Revolving Swing Line Loan Payments.
(a) Interest Payments. Interest on the unpaid principal balance of the Revolving Swing Line Loans shall be paid monthly by the Revolving Loan Borrower in an amount equal to all interest accrued during the prior calendar month. Such interest payments shall be made on each Used Vehicle/Revolving Monthly Payment Date commencing with the first such date to occur following the Closing Date and continuing thereafter. All accrued interest outstanding on the Termination Date shall be due and payable in full on the Termination Date.
(b) Principal Payments. The entire outstanding principal balance of the Revolving Swing Line Loans plus all interest accrued thereon shall be due and payable in full by the Revolving Loan Borrower on the Termination Date. In addition, the principal balance of the Revolving Swing Line Loans shall be due and payable as required by Section 4.2.6.
4.2.5 Participation in Revolving Swing Line Loans. Immediately upon the making of a Revolving Swing Line Loan by the Swing Line Lender, the Swing Line Lender shall be deemed to have sold and transferred to each Lender and each Lender shall be deemed to have purchased and received from the Swing Line Lender, without any further action by any party, an undivided participating interest in each Revolving Swing Line Loan in an amount equal to such Lender’s Pro Rata Share; provided, however, that (a) no Lender shall be required to fund its participation in any Revolving Swing Line Loan except as set forth in Section 4.2.6(b), and (b) no Lender shall be entitled to share in any payments of principal or interest in respect of its participation except, with respect to any participation funded by such Lender, as set forth herein. Such participation shall be subject to the terms and conditions of this Agreement.
4.2.6 Settlement of Revolving Swing Line Loans.
(a) Refunding of Loans.
(i) Upon the request of the Swing Line Lender, the Agent from time to time shall, on behalf of the Revolving Loan Borrower (and the Revolving Loan Borrower hereby irrevocably authorizes the Agent to so act on its behalf) request that each Lender (including Swing Line Lender in its capacity as a Lender) make a Revolving Loan to the Revolving Loan Borrower, in accordance with the provisions of this Section 4.2.6(a), which shall be applied to repay all or a portion of the outstanding principal balance of the Revolving Swing Line Loans (each such Revolving Loan, a “Refunding Revolving Loan”), in an amount equal to that Lender’s Pro Rata Share of all or a portion of the then outstanding principal balance of the Revolving Swing Line Loans.
(ii) Without limiting the foregoing, each Lender agrees that Agent may request the Lenders to make Refunding Revolving Loans at any time if (A) a Default has occurred and is continuing, or (B) in the judgment of Swing Line Lender, taking into account the outstanding principal balance of the Revolving Swing Line Loans, and the anticipated usage of the Revolving Swing Line Loans, such Refunding Revolving Loans are reasonably necessary to ensure that the outstanding principal balance of the Revolving Swing Line Loans will not at any time exceed the Revolving Swing Line Commitment or such lesser amount as is permitted to be outstanding on the Revolving Swing Line Loans at such time (it being understood that in order to attain such objective, Swing Line Lender may request refunding of the Revolving Swing Line Loans even though the principal balance of the Revolving Swing Line Loans at the time of such request is less than the Revolving Swing Line Commitment or the amount permitted to be outstanding on the Revolving Swing Line Loans).
(iii) If the Agent makes a request for funding under this Section 4.2.6(a) by 1:00 p.m. (Pacific Time) on any Business Day, the Lenders will deliver the required amount to Agent no later than 11:00 a.m. (Pacific Time) on the Business Day after such request. The proceeds of all Refunding Revolving Loans shall be paid by the Agent to the Swing Line Lender in repayment of the outstanding principal balance of the applicable Revolving Swing Line Loans.
(b) Funding of Participations. In addition to the right of the Swing Line Lender to request refunding of the Revolving Swing Line Loans pursuant to Section 4.2.6(a), upon the request of the Swing Line Lender, the Agent may request each Lender (including Swing Line Lender in its capacity as a Lender) to fund its participation in the Revolving Swing Line Loans by paying to the Agent, for the account of the Swing Line Lender, its Pro Rata Share of the principal amount of the Revolving Swing Line Loans. If the Agent makes such request by 1:00 p.m. (Pacific Time) on any Business Day, the Lenders will deliver such amount to Agent no later than 11:00 a.m. (Pacific Time) on the Business Day after such request. All participations funded by the Lenders under this Section 4.2.6(b) shall be treated as the funding of the Revolving Loans for purposes of the calculation of the Revolving Loan Commitment Fee. If any payment paid to any Lender with respect to its participating interest in any Revolving Swing Line Loan is thereafter recovered from or must be returned or paid over by Swing Line Lender for any reason, such Lender will pay to the Agent for the account of the Swing Line Lender, such Lender’s Pro Rata Share of such amount and of any interest and other amounts paid or payable by the Swing Line Lender with respect to such amount. Agent agrees not to request any funding of the Lender’s participations in the Revolving Swing Line Loans under this Section 4.2.6(b) at any time that such participations may be legally repaid using advances of the Revolving Loan under Section 4.2.6(a).
(c) Payment to Swing Line Lender. Notwithstanding any contrary provision of this Agreement (i) except as set forth in clause (ii) of this Section 4.2.6(c) all payments of principal and interest on the Revolving Swing Line Loans shall be paid by Agent solely to the Swing Line Lender; and (ii) with respect to each participation in Revolving Swing Line Loans which is funded by any Lender, such Lender (including Swing Line Lender in its capacity as Lender) shall be entitled to receive its Pro Rata Share of payments of (A) principal on such Revolving Swing Line Loans and (B) interest on such Revolving Swing Line Loans only for the period following the date such participation is funded.
(d) Obligations Unconditional. The obligation of each Lender to make Revolving Loans to repay Revolving Swing Line Loans pursuant to Section 4.2.6(a) or to fund its participation interests in Revolving Swing Line Loans pursuant to Section 4.2.6(b) shall be absolute and unconditional and shall not be affected by the occurrence of a Default or Event of Default, the fact that any one or more of the conditions in Article 9 is not satisfied, the termination of the availability of Loans, the fact that such Revolving Loan is made after the Termination Date to refinance Revolving Swing Line Loans made prior to the Termination Date, any defense, setoff, counterclaim or claim for recoupment of any Lender against Agent or Swing Line Lender or any other circumstance, whether or not similar to the foregoing. Notwithstanding the foregoing, the Lenders shall not be required to repay Revolving Swing Line Loans pursuant to Section 4.2.6(a) or to fund their participation interests in Revolving Swing Line Loans pursuant to Section 4.2.6(b) with respect to any portions of the outstanding principal balance of the Revolving Swing Line Loans that are funded by Swing Line Lender after Agent is deemed to have knowledge or notice of the occurrence of a Default or after the Termination Date.
ARTICLE 5
LETTERS OF CREDIT
5.1 Letter of Credit Commitment. Subject to and upon the terms and conditions of this Agreement, LC Issuer may from time to time during the period from the Closing Date to the date which is 30 days prior to the Termination Date issue and renew, extend and amend (“Modify” and such action, a “Modification”) one or more standby letters of credit for the account of the Revolving Loan Borrower or a Subsidiary acceptable to LC Issuer, (so long as the Revolving Loan Borrower is the applicant on and liable for repayment of such Letter of Credit under the applicable LC Agreement); provided that (a) the LC Obligations shall not exceed at any time the Letter of Credit Commitment; and (b) the outstanding principal balance of all Revolving Loans made by all Lenders, plus the outstanding principal balance of all Revolving Swing Line Loans, plus the LC Obligations shall not at any time exceed the Maximum Revolving Loan Amount.
5.2 Existing Letters of Credit. LC Issuer has previously issued certain letters of credit for the account of the Revolving Loan Borrower or a Subsidiary under the Existing Loan Agreement (“Existing Letters of Credit”). Each of the Existing Letters of Credit shall be a Letter of Credit under and shall be subject to the terms and conditions of this Agreement.
5.3 LC Agreements. From time to time as required by LC Issuer, the Revolving Loan Borrower shall execute and deliver to LC Issuer a letter of credit reimbursement agreement or an amendment to existing agreements executed by the Revolving Loan Borrower (each, an “LC Agreement”) in a form acceptable to LC Issuer. Whenever the Revolving Loan Borrower wishes to request the issuance of a Letter of Credit, the Revolving Loan Borrower shall execute and deliver to LC Issuer an application therefor in LC Issuer’s standard form appropriately completed with all required information (an “LC Application”) and such other documents and information as LC Issuer reasonably requires. Each Letter of Credit shall be subject to all terms and conditions of this Agreement and of the applicable LC Application and LC Agreement. In the event of any express conflict between the terms of this Agreement and of the applicable LC Agreement, the terms of this Agreement shall control.
5.4 Expiry Date. No Letter of Credit shall be issued later than 30 days prior to the Termination Date. Each Letter of Credit shall have an expiration date no later than the earlier of (a) two years after the issuance date (or date of extension or renewal, if applicable); or (b) the Termination Date. Drafts drawn under a Letter of Credit may be sight drafts or time drafts; provided, however, that no draft shall have a maturity date later than the Termination Date. If there are any Letters of Credit outstanding on the Termination Date, Agent may require the Revolving Loan Borrower to deliver to Agent funds in an amount equal to the LC Obligations. The Revolving Loan Borrower immediately shall deliver to Agent all such funds required by Agent and Agent shall hold such funds in the LC Collateral Account as collateral for the Obligations and Permitted Swap Obligations.
5.5 Requests for Letters of Credit. Each LC Application or request for a Modification shall be submitted to the LC Issuer, with a copy to the Agent, at least five Business Days prior to the proposed date of issuance or Modification (unless the LC Issuer, in any instance, in its sole discretion, agrees to a shorter time period). The Agent shall promptly notify the LC Issuer whether such LC Application, and the issuance of a Letter of Credit pursuant thereto, conform to the requirements of this Agreement. Upon issuance or Modification of a Letter of Credit, the LC Issuer shall promptly notify the Agent, and Agent shall promptly notify the Lenders, of the amount and terms thereof. The LC Issuer shall have no independent duty to ascertain whether the conditions set forth in Article 9 have been satisfied; provided, however, that the LC Issuer shall not issue a Letter of Credit if, on or before the proposed date of issuance, the LC Issuer has received notice from Agent or Required Lenders that any such condition has not been satisfied or waived. In the event of any conflict between the terms of this Agreement and the terms of any LC Application or LC Agreement, the terms of this Agreement shall control.
5.6 Participation in Letters of Credit. Upon the issuance of a Letter of Credit in accordance with this Agreement (or on the Closing Date with respect to Existing Letters of Credit), each Lender shall be deemed to have purchased a pro rata participation in such Letter of Credit and the related LC Obligations from the LC Issuer in an amount equal to its Pro Rata Share of the related LC Obligations. Without limiting the scope and nature of each Lender’s participation in any Letter of Credit, to the extent that the LC Issuer is not reimbursed by the Revolving Loan Borrower (and funds are not available in the LC Collateral Account) for any payment made by the LC Issuer under any Existing Letter of Credit or any other Letter of Credit issued in accordance with the terms hereof, or if any reimbursement received by LC Issuer is rescinded or must be returned, each Lender shall reimburse Agent, for the benefit of the LC Issuer, an amount equal to its Pro Rata Share of such reimbursement amount as set forth below. To obtain funding by the Lenders of any reimbursement amount, Agent shall request, before 1:00 p.m. (Pacific Time) on a Business Day, each Lender (including the LC Issuer in its capacity as a Lender) to fund an amount equal to each Lender’s Pro Rata Share of the reimbursement amount. The Lenders shall fund to Agent the amounts so requested no later than 11:00 a.m. (Pacific Time) on the Business Day after the date that such request is delivered to the Lenders and all amounts so funded shall be paid by the Agent to the LC Issuer in satisfaction of each Lender’s participation obligations. The obligation of each Lender to so reimburse Agent, on behalf of the LC Issuer, shall be absolute and unconditional and shall not be affected by the occurrence of a Default or Event of Default, the termination of the availability of Letters of Credit, the fact that any one or more of the conditions in Article 9 is not satisfied, the fact that reimbursement is requested after the Termination Date, any defense, setoff, counterclaim or claim for recoupment against Agent or LC Issuer, or any other circumstance, whether or not similar to the foregoing. Any such reimbursement shall not relieve or otherwise impair the obligation of the Revolving Loan Borrower to reimburse the LC Issuer for the amount of any payment made by the LC Issuer under any Letter of Credit, together with interest as provided herein.
5.7 Payments. The Revolving Loan Borrower agrees to pay to the LC Issuer, on the date any payment is made by the LC Issuer, an amount equal to any payment made by the LC Issuer with respect to each Letter of Credit, together with interest on such amount from the date of any payment made by the LC Issuer at the Revolving Loan Borrowing Rate for the first three days and thereafter at the Default Rate applicable to Revolving Loans. The principal amount of any such payment shall be used to reimburse the LC Issuer for the payment made by it under the Letter of Credit and, to the extent that the Lenders have not reimbursed the Agent pursuant to Section 5.6, the interest amount of any such payment shall be solely for the account of the LC Issuer. Each Lender that has reimbursed the Agent pursuant to Section 5.6 for its Pro Rata Share of any payment made by the LC Issuer under a Letter of Credit shall thereupon acquire a pro rata participation, to the extent of such reimbursement, in the claim of the LC Issuer against the Revolving Loan Borrower for reimbursement of principal and interest under this Section 5.7 and shall share, in accordance with that pro rata participation, in any principal payment made by the Revolving Loan Borrower with respect to such claim and in any interest payment made by the Revolving Loan Borrower (but only with respect to periods subsequent to the date such Lender reimbursed the Agent) with respect to such claim. The LC Issuer shall promptly make available to the Agent, in immediately available funds, any amounts due to the Lenders under this Section 5.7. The LC Issuer shall notify the Revolving Loan Borrower and Agent whenever any demand for payment is made under any Letter of Credit by the beneficiary thereof.
5.8 Terms Satisfactory to LC Issuer. Notwithstanding any contrary provision of this Agreement, any LC Agreement, LC Application, or any other Loan Document, all terms and conditions of each Letter of Credit must be acceptable to LC Issuer in its sole discretion and each Letter of Credit must conform to all requirements of the LC Issuer.
5.9 Obligations Absolute. The obligation of the Revolving Loan Borrower to pay to the LC Issuer the amount of any payment made by the LC Issuer under any Letter of Credit shall be absolute, unconditional, and irrevocable. Without limiting the foregoing, the Revolving Loan Borrower’s obligation shall not be affected by any of the following circumstances, except in the event of LC Issuer’s gross negligence or intentional misconduct:
(a) any lack of validity or enforceability of the Letter of Credit, this Agreement, the other Loan Documents, or any other agreement or instrument relating thereto;
(b) the existence of any claim, setoff, defense, or other rights which any Loan Party may have at any time against the LC Issuer, any beneficiary of the Letter of Credit (or any Persons for whom any such beneficiary may be acting) or any other Person, whether in connection with the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto, or any unrelated transactions;
(c) any draft, demand, statement, or any other document presented under the Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect whatsoever;
(d) the solvency or financial responsibility of any party issuing any documents in connection with a Letter of Credit;
(e) any failure or delay in notice of shipments or arrival of any property;
(f) any error, omission, interruption, delay, or loss in the transmission or delivery of any draft, message, notice, advice, or other communication relating to a Letter of Credit or any delay or interruption in any such message;
(g) any error, neglect or default of any correspondent of the LC Issuer in connection with a Letter of Credit;
(h) any error in interpretation of technical terms or any consequence arising from circumstances beyond the control of the LC Issuer;
(i) any other circumstance whatsoever, whether or not similar to any of the foregoing that might constitute a legal or equitable discharge of, or provide a right of setoff against, the Obligations of the Revolving Loan Borrower.
5.10 Letter of Credit Fees.
5.10.1 The Revolving Loan Borrower agrees to pay to Agent, for the account of the Lenders ratably in accordance with their Pro Rata Shares, on the date any Letter of Credit is issued, renewed or extended, with respect to each Letter of Credit, a letter of credit fee at a per annum rate equal to the LC Fee Percentage (“LC Fee”) on the face amount thereof, calculated from the date of issuance (or renewal or extension) to the expiry date thereof. All fees paid under this Section 5.10.1 are non-refundable, even if the Letter of Credit for which they are paid is terminated or amended before its anticipated expiration or extended expiration date.
5.10.2 The Revolving Loan Borrower agrees to pay to LC Issuer, for its sole account on demand, (a) the fees agreed to between them as set forth in any fee letter or as otherwise agreed from time to time, and (b) with respect to each Letter of Credit and each draft drawn thereunder, LC Issuer’s customary fees and charges, including processing, drawing, transfer, amendment, negotiation, acceptance, and other fees and all out-of-pocket expenses incurred by the LC Issuer in accordance with the issuance, Modification, administration or payment of any Letter of Credit.
5.11 LC Collateral Account. The Revolving Loan Borrower will, upon the request of Agent or Required Lenders and until the final expiration date of any Letter of Credit and thereafter as long as any amount is payable to the LC Issuer or the Lenders in respect of any Letter of Credit, maintain a special collateral account pursuant to arrangements satisfactory to the Agent (the “LC Collateral Account”), in the name of the Revolving Loan Borrower but under the sole dominion and control of the Agent, for the benefit of the Lenders and in which the Revolving Loan Borrower shall have no interest. The Revolving Loan Borrower hereby pledges, assigns and grants to the Agent, on behalf of and for the ratable benefit of the Lenders and the LC Issuer, a security interest in all of the Revolving Loan Borrower’s right, title and interest in and to all funds which may from time to time be on deposit in the LC Collateral Account to secure the prompt and complete payment and performance of the Obligations and Permitted Swap Obligations. The Agent will invest any funds on deposit from time to time in the LC Collateral Account in certificates of deposit of Agent having a maturity not exceeding 30 days. Nothing in this Section shall either obligate the Agent to require the Revolving Loan Borrower to deposit any funds in the LC Collateral Account or limit the right of the Agent to release any funds held in the LC Collateral Account.
5.12 Borrower Indemnification. The Revolving Loan Borrower hereby agrees to indemnify and hold harmless each Lender, the LC Issuer and the Agent, and their respective parent corporations, affiliates, subsidiaries, successors, assigns, officers, directors, employees, agents, attorneys and advisors (the “Indemnified Persons”) from and against any and all claims, losses, liabilities, demands, damages, actions, causes of action, penalties, costs and expenses (including Attorney Costs), defenses, counterclaims, setoffs and claims for recoupment (collectively, “Claims”) which such Lender, the LC Issuer or the Agent may incur (or which may be claimed against such Lender, the LC Issuer or the Agent by any Person whatsoever) by reason of or in connection with the issuance, execution and delivery or transfer of or payment or failure to pay under any Letter of Credit or any actual or proposed use of any Letter of Credit, including, without limitation, any claims, damages, losses, liabilities, costs or expenses which the LC Issuer may incur by reason of or in connection with (a) the failure of any other Lender to fulfill or comply with its obligations to the LC Issuer hereunder (but nothing herein contained shall affect any rights the Revolving Loan Borrower may have against any Defaulting Lender) or (b) by reason of or on account of the LC Issuer issuing any Letter of Credit which specifies that the term “Beneficiary” included therein includes any successor by operation of law of the named Beneficiary, but which Letter of Credit does not require that any drawing by any such successor Beneficiary be accompanied by a copy of a legal document, satisfactory to the LC Issuer, evidencing the appointment of such successor Beneficiary; provided that the Revolving Loan Borrower shall not be required to indemnify any Lender, the LC Issuer or the Agent for any Claim to the extent, but only to the extent, caused by (y) the willful misconduct or gross negligence of the LC Issuer in determining whether a request presented under any Letter of Credit complied with the terms of such Letter of Credit or (z) the LC Issuer’s failure to pay under any Letter of Credit after the presentation to it of a request strictly complying with the terms and conditions of such Letter of Credit. Nothing in this Section 5.12 is intended to limit the obligations of the Revolving Loan Borrower under any other provision of this Agreement.
5.13 Lenders’ Indemnification. Each Lender shall, ratably in accordance with its Pro Rata Share, indemnify the LC Issuer, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Revolving Loan Borrower) against any Claims (except such as result from the LC Issuer’s gross negligence or willful misconduct or the LC Issuer’s failure to pay under any Letter of Credit after the presentation to it of a request strictly complying with the terms and conditions of the Letter of Credit) that such indemnitees may suffer or incur in connection with this Article 5 or any action taken or omitted by such indemnitees hereunder.
ARTICLE 6
CERTAIN ADDITIONAL PROVISIONS
6.1 Interest.
6.1.1 Interest Rate. Unless the Default Rate or the rate set forth in Section 7.3 is applicable, (a) New Vehicle Floorplan Loans and New Vehicle Swing Line Loans shall bear interest at a variable rate per annum equal to the New Vehicle Floorplan Borrowing Rate, (b) Used Vehicle Floorplan Loans and Used Vehicle Swing Line Loans shall bear interest at a variable rate per annum equal to the Used Vehicle Floorplan Borrowing Rate; and (c) Revolving Loans and Revolving Swing Line Loans shall bear interest at a variable rate per annum equal to the Revolving Loan Borrowing Rate, in each case adjusted without notice on the date of each change in the Eurocurrency Rate.
6.1.2 Rates Applicable After Event of Default. During the continuance of an Event of Default the Required Lenders may, at their option, by notice to the Company, declare that (a) the Loans shall bear interest at a rate per annum equal to the interest rate which would otherwise be in effect from time to time pursuant to Section 6.1.1, plus 3% per annum (each, a “Default Rate”), and (b) the LC Fee shall be increased by 3% per annum, provided that, during the continuance of an Event of Default under Section 14.1.8, the interest rate set forth in clause (a) above and the increase in the LC Fee set forth in clause (b) above shall automatically be applicable to all Loans, Letters of Credit, and Credit Extensions without any election or action on the part of the Agent or any Lender. After an Event of Default has been cured or waived, the interest rate applicable to the Loans and the LC Fee shall revert to the rates applicable prior to the occurrence of an Event of Default.
6.1.3 Determination of Rate. Notwithstanding any provision of this Agreement to the contrary, each Lender shall be entitled to fund and maintain its funding of all or any part of the Loans in any manner it elects; it being understood, however, that with respect to Eurocurrency Loans, all determinations hereunder shall be made as if each Lender had actually funded and maintained such Loans through the purchase of deposits in the London interbank eurodollar market.
6.2 Evidence of Debt. The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Agent in the ordinary course of business. The accounts or records maintained by the Agent and each Lender shall be conclusive absent manifest error of the amount of the Loans made by the Lenders to the New Vehicle Floorplan Borrowers, Used Vehicle Floorplan Borrower, and Revolving Loan Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrowers hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Agent in respect of such matters, the accounts and records of the Agent shall control in the absence of manifest error.
6.3 Borrowing Procedure.
6.3.1 Requests for Loans. Whenever the New Vehicle Floorplan Borrowers, the Used Vehicle Floorplan Borrower, or the Revolving Loan Borrower, as applicable, wishes to request a Loan, the Company shall give Agent irrevocable notice thereof within the time required by this Agreement. The Company (on behalf of the applicable Borrower or Borrowers) may request a Loan in writing or by telephone (or with respect to Sweep Advances, as set forth in Section 3.2.7) for deposit into the Company’s deposit account(s) with Agent. Requests for Loans to be deposited or forwarded elsewhere shall be in writing in such form and containing such additional information as Agent may reasonably require in order to confirm the request and transmit funds. Each Borrower hereby authorizes Lenders and Agent to make Advances and to transfer funds based on telephonic notices made by any Person which Agent or any Lender in good faith believes to be acting on behalf of the Company, it being understood that the foregoing authorization is specifically intended to allow requests for Advances to be given telephonically. The Company agrees to deliver promptly to the Agent a written confirmation (which may include e-mail) of each telephonic notice. If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, the records of Agent and the Lenders shall govern absent manifest error.
6.3.2 Lending Installations. Each Lender may book its Advances and its participation in any LC Obligations and Swing Line Loans and the LC Issuer may book the Letters of Credit at any Lending Installation selected by such Lender or the LC Issuer, as the case may be, and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and the Loans, Letters of Credit, and participations in LC Obligations and Swing Line Loans shall be deemed held by each Lender or the LC Issuer, as the case may be, for the benefit of any such Lending Installation. Each Lender and the LC Issuer may, by written notice to the Agent and the Company, designate replacement or additional Lending Installations through which Loans will be made by it or Letters of Credit will be issued by it and for whose account Loan payments or payments with respect to Letters of Credit are to be made.
6.4 Obligations Several. The failure of any Lender to make any Loan shall not relieve any other Lender of its obligation to make its Loan on any date, but no Lender shall be responsible for the failure of any other Lender to make any Loan to be made by such other Lender.
6.5 Non-Receipt of Funds by Agent. Unless the Company (on behalf of any Borrower or Borrowers) or a Lender, as the case may be, notifies Agent prior to the date on which Lender or a Borrower or Borrowers is scheduled to make payment to Agent of (a) in the case of a Lender, the proceeds of a Loan or participation or (b) in the case of a Borrower or Borrowers, a payment of principal, interest or fees to Agent for the account of the Lenders, that it does not intend to make such payment, Agent may assume that such payment has been made. The Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption. If such Lender or Borrower or Borrowers, as the case may be, has not in fact made such payment to Agent, the recipient of such payment shall, on demand by Agent, repay to Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by Agent until the date Agent recovers such amount at a rate per annum equal to (y) in the case of payment by a Lender, the Federal Funds Effective Rate for such day for the first three days and, thereafter, the interest rate applicable to the relevant Loan or (z) in the case of payment by a Borrower or Borrowers, the interest rate applicable to the relevant Loan or Reimbursement Obligations.
6.6 Authorization. Any Loan made to any one or more of the Borrowers shall be conclusively presumed to have been made to or for the benefit of such Borrower or Borrowers when the proceeds of such Loan (a) are deposited to the credit of a Borrower in an account of a Borrower with Agent, or (b) are transmitted to any other bank with directions to credit the same to the account of any Borrower at such bank, regardless of whether Persons other than those authorized to make requests for Loans have authority to draw against any such account. Each Borrower acknowledges that Agent cannot effectively determine whether a particular request for a Loan is valid, authorized, or authentic. Therefore, each Borrower assumes all risk of the validity, authenticity, and authorization of such requests, whether or not the individual making such requests has authority to request Loans. Agent shall be entitled to act on the instructions of anyone identifying himself or herself as authorized to request Loans and each Borrower shall be bound thereby in the same manner as if the Person were actually so authorized. Agent is authorized to credit any account of (x) any New Vehicle Floorplan Borrower with Agent (or any account any New Vehicle Floorplan Borrower designates in writing) for Loans made to the New Vehicle Floorplan Borrowers, (y) the Used Vehicle Floorplan Borrower with Agent (or any account the Used Vehicle Floorplan Borrower designates in writing) for loans made to the Used Vehicle Floorplan Borrower, and (z) the Revolving Loan Borrower with Agent (or any account the Revolving Loan Borrower designates in writing) for loans made to the Revolving Loan Borrower. A Borrower’s failure to confirm any telephonic request or otherwise comply with the provisions of this Section 6.6 shall not in any manner affect the obligation of the applicable Borrower or Borrowers to repay such Loans in accordance with the terms of this Agreement. Each Borrower agrees not to hold Agent or the Lenders liable for any errors or misunderstanding in complying with any written or oral directions for Loans; and each Borrower agrees to indemnify and hold Agent and the Lenders and the other Indemnified Persons harmless from any and all Claims which may arise or be created by the acceptance of instructions (telephonic or otherwise) for making Loans by wire transfer or otherwise, or for application of payments, other than as a result of Agent’s gross negligence or willful misconduct.
6.7 Interest and Fee Basis. All interest rates and fees referred to herein shall be calculated for actual days elapsed on the basis of a 360-day year. Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to noon (Pacific Time) at the place of payment. If any payment of principal of or interest shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in computing interest on such payment.
6.8 Method of Payment. All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available funds to Agent at Agent’s address specified for notice herein, or at any other Lending Installation of the Agent specified in writing by Agent to the Company, by noon (Pacific Time) on the date when due and shall (except (a) with respect to repayments of Swing Line Loans, (b) in the case of Reimbursement Obligations for which the LC Issuer has not been fully indemnified by the Lenders, or (c) as otherwise specifically required hereunder) be applied ratably by the Agent among the Lenders, in accordance with their Pro Rata Shares. Each payment delivered to the Agent for the account of any Lender shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent received at its address specified for notice herein, or at any Lending Installation specified in a notice received by the Agent from such Lender. Each reference to the Agent in this Section shall also be deemed to refer, and shall apply equally, to the LC Issuer, in the case of payments required to be made by the Revolving Loan Borrower to the LC Issuer.
6.9 Payment by Automatic Debit. Each Borrower hereby authorizes Agent to automatically deduct the amount of all principal and interest payments, Reimbursement Obligations and fees from one or more deposit accounts of the Company with Agent specified in a writing provided by the Company to Agent. Each Borrower will pay all the fees on the account which result from the automatic deductions, including any overdraft and non-sufficient funds charges. If for any reason Agent does not charge the account for a payment, or if an automatic payment is reversed, the payment is still due. The Company may change any account number by notifying Agent of the new account number.
6.10 Late Charges. Subject to any limitations imposed by Applicable Law, if any payment of principal or interest on the Loans, the LC Obligations, or other Obligations is fifteen (15) days or more past due, the New Vehicle Floorplan Borrowers, Used Vehicle Floorplan Borrower, or the Revolving Loan Borrower, as applicable, shall pay to Agent on demand, for the account of the Lenders, a late charge of five percent of the delinquent payment. Each party hereto agrees that it would be difficult or costly to determine the actual costs incurred by any Lender by reason of late payment. Therefore, the parties agree that this late charge represents a fair and reasonable estimate of the costs incurred by each Lender and is reasonable under the circumstances existing as of the date hereof. Collection of the late payment fee shall not be deemed to be a waiver of any Default hereunder.
6.11 Limitation of Interest. Borrowers, Agent and Lenders intend to strictly comply with all Applicable Laws, including applicable usury laws. Accordingly, the provisions of this Section shall govern and control over every other provision of this Agreement or any other Loan Document which conflicts or is inconsistent with this Section, even if such provision declares that it controls. As used in this Section, the term “interest” includes the aggregate of all charges, fees, benefits or other compensation which constitute interest under Applicable Law, provided that, to the maximum extent permitted by Applicable Law, (a) any non-principal payment shall be characterized as an expense or as compensation for something other than the use, forbearance or detention of money and not as interest, and (b) all interest at any time contracted for, reserved, charged or received shall be amortized, prorated, allocated and spread, in equal parts during the full term of the Obligations. In no event shall any Borrower or any other Person be obligated to pay, or any Lender have any right or privilege to reserve, receive or retain, (y) any interest in excess of the maximum amount of nonusurious interest permitted under the Applicable Laws (if any) of the United States or of any applicable state, or (z) total interest in excess of the amount which such Lender could lawfully have contracted for, reserved, received, retained or charged had the interest been calculated for the full term of the Obligations at the Highest Lawful Rate. On each day, if any, that the interest rate (the “Stated Rate”) called for under this Agreement or any other Loan Document exceeds the Highest Lawful Rate, the rate at which interest shall accrue shall automatically be fixed by operation of this sentence at the Highest Lawful Rate for that day, and shall remain fixed at the Highest Lawful Rate for each day thereafter until the total amount of interest accrued equals the total amount of interest which would have accrued if there were no such ceiling rate as is imposed by this sentence. Thereafter, interest shall accrue at the Stated Rate unless and until the Stated Rate again exceeds the Highest Lawful Rate when the provisions of the immediately preceding sentence shall again automatically operate to limit the interest accrual rate. The daily interest rates to be used in calculating interest at the Highest Lawful Rate shall be determined by dividing the applicable Highest Lawful Rate per annum by the number of days in the calendar year for which such calculation is being made. None of the terms and provisions contained in this Agreement or in any other Loan Document which directly or indirectly relate to interest shall ever be construed without reference to this Section, or be construed to create a contract to pay for the use, forbearance or detention of money at an interest rate in excess of the Highest Lawful Rate. If the term of any Obligation is shortened by reason of acceleration of maturity as a result of any Event of Default or by any other cause, or by reason of any required or permitted prepayment, and if for that (or any other) reason any Lender at any time, including but not limited to, the stated maturity, is owed or receives (and/or has received) interest in excess of interest calculated at the Highest Lawful Rate, then and in any such event all of any such excess interest shall be canceled automatically as of the date of such acceleration, prepayment or other event which produces the excess, and, if such excess interest has been paid to such Lender, it shall be credited against the then-outstanding principal balance of the obligations of the applicable Borrower or Borrowers to such Lender, effective as of the date or dates when the event occurs which causes it to be excess interest, until such excess is exhausted or all of such principal has been fully paid and satisfied, whichever occurs first, and any remaining balance of such excess shall be promptly refunded to its payor.
6.12 Increase Option.
6.12.1 The Company may from time to time request an increase in the Aggregate New Vehicle Floorplan Commitment, in minimum increments of $50,000,000.00 or such lower amount as is agreed to between the Company and Agent, so long as, after giving effect thereto, (a) the aggregate amount of all such increases (including the requested increase and any other increases after the Closing Date) does not exceed $150,000,000.00, and (b) the Aggregate Commitment does not exceed $1,850,000,000.00.
6.12.2 The Company may arrange for any such increase to be provided by one or more Lenders (each Lender so agreeing to an increase in its Commitment, an “Increasing Lender”), or by one or more new banks, financial institutions (each such new bank, financial institution or other entity, an “Additional Lender”), which Lender or Lenders shall increase their existing Commitments, or extend Commitments, as the case may be; provided that (a) each Additional Lender and each Increasing Lender and the amount of the increase of each Additional Lender and Increasing Lender shall be subject to the reasonable approval of the Company, the Agent and the LC Issuer, (b) (i) in the case of an Increasing Lender, the Agent, Borrowers and such Increasing Lender shall execute an Increasing Lender Agreement substantially in the form of Exhibit N hereto, and (ii) in the case of an Additional Lender, the Agent, Borrowers and such Additional Lender shall execute an Additional Lender Agreement substantially in the form of Exhibit M hereto, and (c) the applicable Borrower or Borrowers, Increasing Lender, Additional Lender and any other Loan Party shall each deliver to Agent such other documents or amendments to existing Loan Documents as Agent reasonably deems necessary.
6.12.3 No consent of any Lender (other than the Lenders participating in the increase) shall be required for any increase pursuant to this Section 6.12. Increases and new Commitments created pursuant to this Section 6.12 shall become effective on the date agreed by the Company, the Agent and the relevant Increasing Lenders or Additional Lenders, and the Agent shall notify each Lender thereof. Notwithstanding the foregoing, no increase in the Aggregate New Vehicle Floorplan Commitment (or in the Commitment of any Lender) shall become effective unless (a) on the proposed effective date of such increase, (i) no Default has occurred and is continuing or will exist after giving effect to the increase and any Credit Extensions to be made on the effective date, (ii) all representations and warranties in this Agreement are true and correct in all material respects as of the effective date, (iii) the Company and its Subsidiaries will be in compliance (on a pro forma basis reasonably acceptable to the Agent) with the financial covenants in Section 11.1 after giving effect to the increase, and (iv) Agent has received a certificate with respect to the matters set forth in the foregoing clauses (a)(i) (ii) and (iii) dated the effective date and executed by the Company’s chief financial officer or other officer acceptable to Agent, together with such supporting documentation as Agent requires; and (b) the Agent has received such documents as it requires to evidence the power and authority of the Borrowers to borrow and the Guarantors to guaranty hereunder after giving effect to such increase.
6.12.4 On the effective date of any increase in the Aggregate New Vehicle Floorplan Commitment, (a) each relevant Increasing Lender and Additional Lender shall make available to the Agent such amounts in immediately available funds as the Agent shall determine, for the benefit of the other Lenders, as being required in order to cause, after giving effect to such increase and the use of such amounts to make payments to such other Lenders, each Lender’s portion of the outstanding New Vehicle Floorplan Loans of all the Lenders to equal its applicable Pro Rata Share of such outstanding Loans, and (b) the Borrowers shall make such other payments and adjustments as Agent reasonably deems necessary in connection with the changes in the Commitments and Pro Rata Shares of the Lenders.
6.13 Authorization. Each Borrower authorizes Agent and the Lenders (a) to furnish information about the Loans to each manufacturer or distributor of Vehicles, and (b) to advise each such manufacturer or distributor of any change or termination which may occur with respect to the Obligations.
6.14 Defaulting Lenders.
6.14.1 Defaulting Lender Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable law:
(a) Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of Required Lenders.
(b) Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by the Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article 14 or otherwise) or received by the Agent from a Defaulting Lender pursuant to Section 17.8 shall be applied at such time or times as may be determined by the Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the LC Issuer and Swing Line Lender hereunder; third, to Cash Collateralize the LC Issuer’s Fronting Exposure with respect to such Defaulting Lender in accordance with Section 6.14.4; fourth, as the Company may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Agent; fifth, if so determined by the Agent and the Company, to be held in a deposit account (including the LC Collateral Account) and released pro rata in order to (i) satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement and (ii) Cash Collateralize the LC Issuer’s future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in accordance with Section 6.14.4; sixth, to the payment of any amounts owing to the Lenders, the LC Issuer or Swing Line Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, the LC Issuer or Swing Line Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to any Borrower as a result of any judgment of a court of competent jurisdiction obtained by such Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; eighth, if so determined by the Agent, distributed to the Lenders other than the Defaulting Lender until the ratio of the Outstanding Credit Exposure of such Lenders to the Aggregate Outstanding Exposure equals such ratio immediately prior to the Defaulting Lender’s failure to fund any portion of any Loans or participations in Letters of Credit or Swing Line Loans; and ninth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (i) such payment is a payment of the principal amount of any Loans or Letters of Credit issuances in respect of which such Defaulting Lender has not fully funded its appropriate share, and (ii) such Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in Sections 9.2 and 9.3 were satisfied or waived, such payment shall be applied solely to pay the Credit Extensions and funded participations of all Non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Credit Extensions or funded participations of such Defaulting Lender until such time as all Loans and funded and unfunded participations in LC Obligations and Swing Line Loans are held by the Lenders pro rata in accordance with the Commitments without giving effect to Section 6.14.1(d). Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 6.14.1(b) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.
(c) Certain Fees.
(i) No Defaulting Lender shall be entitled to receive any New Vehicle Floorplan Commitment Fee, Used Vehicle Floorplan Commitment Fee, Revolving Loan Commitment Fee or Per Annum Fee for any period during which that Lender is a Defaulting Lender (and no Borrower shall be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).
(ii) Each Defaulting Lender shall be entitled to receive LC Fees for any period during which that Lender is a Defaulting Lender only to the extent allocable to its ratable share of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to Section 6.14.4.
(iii) With respect to any New Vehicle Floorplan Commitment Fee, Used Vehicle Floorplan Commitment Fee, Revolving Loan Commitment Fee or LC Fee not required to be paid to any Defaulting Lender pursuant to clause (c)(i) or (ii) above, the applicable Borrower or Borrowers shall (X) pay to each Non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in LC Obligations or Swing Line Loans that has been reallocated to such Non-Defaulting Lender pursuant to clause (d) below, (Y) pay to the LC Issuer and Swing Line Lender, as applicable, the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to the LC Issuer’s or Swing Line Lender’s Fronting Exposure to such Defaulting Lender, and (Z) not be required to pay the remaining amount of any such fee.
(d) Reallocation of Participations to Reduce Fronting Exposure. All or any part of such Defaulting Lender’s participation in LC Obligations and Swing Line Loans shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Pro Rata Shares (calculated without regard to such Defaulting Lender’s interest as provided in the definition of Pro Rata Share) but only to the extent that (i) the conditions set forth in Sections 9.2 and 9.3 are satisfied at the time of such reallocation (and, unless the Company shall have otherwise notified the Agent at such time, each Borrower shall be deemed to have represented and warranted that such conditions are satisfied at such time), and (ii) such reallocation does not cause the aggregate Outstanding Credit Exposure, Outstanding New Vehicle Floorplan Exposure, Outstanding Used Vehicle Floorplan Exposure or Outstanding Revolving Loan Exposure of any Non-Defaulting Lender to exceed such Non-Defaulting Lender’s applicable Commitment. No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.
(e) Cash Collateral, Repayment of Swing Line Loans. If the reallocation described in clause (d) above cannot, or can only partially, be effected, the applicable Borrowers shall, without prejudice to any right or remedy available to it hereunder or under law, (i) first, prepay Swing Line Loans in an amount equal to the Swing Line Lender’s Fronting Exposure and (ii) second, Cash Collateralize the LC Issuer’s Fronting Exposure in accordance with the procedures set forth in Section 6.14.4.
6.14.2 Defaulting Lender Cure. If the Borrower, the Agent, the Swing Line Lender and the LC Issuer agree in writing that a Lender is no longer a Defaulting Lender, the Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as the Agent may determine to be necessary to cause the Loans and funded and unfunded participations in Letters of Credit and Swing Line Loans to be held pro rata by the Lenders in accordance with the Commitments (without giving effect to Section 6.14.1(d)), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of any Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.
6.14.3 New Swing Line Loans/Letters of Credit. So long as any Lender is a Defaulting Lender, (a) the Swing Line Lender shall not be required to fund any Swing Line Loans unless it is satisfied that it will have no Fronting Exposure after giving effect to such Swing Line Loan and (b) the LC Issuer shall not be required to issue, extend, renew or increase any Letter of Credit unless it is satisfied that it will have no Fronting Exposure after giving effect thereto.
6.14.4 Cash Collateral. At any time that there shall exist a Defaulting Lender, within one (1) Business Day following the written request of the Agent or the LC Issuer (with a copy to the Agent) the Revolving Loan Borrower shall Cash Collateralize the LC Issuer’s Fronting Exposure with respect to such Defaulting Lender (determined after giving effect to Section 6.14.1(d) and any Cash Collateral provided by such Defaulting Lender) in an amount not less than the Minimum Collateral Amount.
(a) Grant of Security Interest. The Revolving Loan Borrower, and to the extent provided by any Defaulting Lender, such Defaulting Lender, hereby grants to the Agent, for the benefit of the LC Issuer, and agrees to maintain, a first priority security interest in all such Cash Collateral as security for the Defaulting Lender’s obligation to fund participations in respect of LC Obligations, to be applied pursuant to clause (b) below. If at any time the Agent determines that Cash Collateral is subject to any right or claim of any Person other than the Agent and the LC Issuer as herein provided, or that the total amount of such Cash Collateral is less than the Minimum Collateral Amount, the Revolving Loan Borrower will, promptly upon demand by the Agent, pay or provide to the Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency (after giving effect to any Cash Collateral provided by the Defaulting Lender).
(b) Application. Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under this Section 6.14 in respect of Letters of Credit shall be applied to the satisfaction of the Defaulting Lender’s obligation to fund participations in respect of LC Obligations (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) for which the Cash Collateral was so provided, prior to any other application of such property as may otherwise be provided for herein.
(c) Termination of Requirement. Cash Collateral (or the appropriate portion thereof) provided to reduce the LC Issuer’s Fronting Exposure shall no longer be required to be held as Cash Collateral pursuant to this Section 6.14.4 following (i) the elimination of the applicable Fronting Exposure (including by the termination of Defaulting Lender status of the applicable Lender), or (ii) the determination by the Agent and the LC Issuer that there exists excess Cash Collateral; provided that, subject to this Section 6.14 the Person providing Cash Collateral and the LC Issuer may agree that Cash Collateral shall be held to support future anticipated Fronting Exposure or other obligations and provided further, such Cash Collateral shall remain subject to the security interest granted pursuant to the Loan Documents.
6.15 Replacement of Lender. If Borrowers are required pursuant to Section 7.1, 7.2 or 7.4 to make any additional payment to any Lender or if any Lender’s obligation to make Advances based on the Eurocurrency Base Rate is suspended pursuant to Section 7.3 or if any Lender defaults in its obligation to make a Loan, reimburse the LC Issuer pursuant to Section 5.6 or the Swing Line Lender pursuant to Section 2.2.6, 3.2.6, or 4.2.6 or otherwise becomes a Defaulting Lender (any Lender so affected an “Affected Lender”), the Company may elect, if such amounts continue to be charged or such suspension is still effective, to replace such Affected Lender as a Lender party to this Agreement, provided that no Default or Event of Default shall have occurred and be continuing at the time of such replacement, and provided further that, concurrently with such replacement, (a) another bank or other entity which is reasonably satisfactory to the Company and the Agent shall agree, as of such date, to purchase for cash and to pay the Affected Lender on such date 100% of the outstanding principal amount of the Loans and other Obligations due to the Affected Lender pursuant to an Assignment Agreement and to become a Lender for all purposes under this Agreement and to assume all obligations of the Affected Lender to be terminated as of such date and to comply with the requirements of Section 17.4 applicable to assignments, and (b) the Borrowers shall pay to such Affected Lender in same day funds on the day of such replacement all interest, fees and other amounts then accrued but unpaid to such Affected Lender by the Borrowers hereunder to and including the date of termination, including without limitation payments due to such Affected Lender under Sections 7.1, 7.2 and 7.4.
6.16 Per Annum Fee. The Borrowers agree to pay to Agent, for the account of each Lender, a fee (“Per Annum Fee”), calculated for each Lender at a per annum rate equal to the rate set forth in the fee letter between such Lender and Borrowers, on the Aggregate Lender Commitment of such Lender as of the last day of each fiscal quarter. The Per Annum Fee shall be due and payable in arrears on each Quarterly Payment Date hereafter and on the Termination Date for the three month period or other time period ending on the last day of the preceding fiscal quarter or on the Termination Date.
6.17 Reallocation of Commitments.
6.17.1 Subject to the provisions of this Section 6.17 and so long as no Event of Default has occurred and is continuing or will exist after giving effect thereto, Borrowers may from time to time request a reallocation of all or part of any unused portion of (a) the Aggregate New Vehicle Floorplan Commitment to the Aggregate Used Vehicle Floorplan Commitment and/or the Aggregate Revolving Loan Commitment, (b) the Aggregate Used Vehicle Floorplan Commitment to the Aggregate New Vehicle Floorplan Commitment and/or the Aggregate Revolving Loan Commitment or (c) the Aggregate Revolving Loan Commitment to the Aggregate New Vehicle Floorplan Commitment and/or the Aggregate Used Vehicle Floorplan Commitment (each a “Reallocation”);
6.17.2 Borrowers may request a Reallocation no more frequently than once in any calendar month. If Borrowers wish to request a Reallocation, the Company shall give the Agent irrevocable written notice thereof substantially in the form attached hereto as Exhibit O, or in such other form as is acceptable to Agent (a “Reallocation Request”) no later than 11:00 a.m. (Pacific Time) at least two Business Days prior to the requested effective date of the Reallocation. If Borrowers wish to increase the Aggregate Used Vehicle Floorplan Commitment or the Aggregate Revolving Loan Commitment to an amount which exceeds the Used Vehicle Borrowing Base or Revolving Loan Borrowing Base, as shown on the most recently provided Used Vehicle Borrowing Base Certificate or Revolving Loan Borrowing Base Certificate, as applicable, the Company shall deliver to Agent a Used Vehicle Borrowing Base Certificate or Revolving Loan Borrowing Base Certificate, as applicable, prepared as of the date of the request for Reallocation, establishing that the amount of the Reallocation request complies with the requirements of Section 6.17.3. Agent will promptly notify the Company and the Lenders of the effective date of any Reallocation, and the amount of the new Commitments for each Lender.
6.17.3 Following any Reallocation, (a) the Aggregate Commitment shall not change; (b) the Aggregate New Vehicle Floorplan Commitment shall not be less than the then outstanding principal balance of the New Vehicle Floorplan Loans and the New Vehicle Swing Line Loans (which, for purposes of this determination, shall not be deemed to be reduced by amounts in the PR Accounts); (c) the Aggregate Used Vehicle Floorplan Commitment shall not be (i) more than $250,000,000.00 or (ii) less than the then outstanding principal balance of the Used Vehicle Floorplan Loans and the Used Vehicle Swing Line Loans; and (d) the Aggregate Revolving Loan Commitment shall not be (i) more than $300,000,000.00 or (ii) less than the then outstanding principal balance of the Revolving Loans and Revolving Swing Line Loans plus the LC Obligations and any Reserve Amount.
6.17.4 All Reallocations shall be made pro rata among the Lenders according to their respective Pro Rata Shares of the Aggregate New Vehicle Floorplan Commitment, Aggregate Used Vehicle Floorplan Commitment and/or Aggregate Revolving Loan Commitment, so that after giving effect to any Reallocation, there is no change in the Pro Rata Shares of the Lenders.
6.17.5 In connection with a Reallocation (a) the New Vehicle Swing Line Commitment, Used Vehicle Swing Line Commitment, Revolving Swing Line Commitment and LC Commitment shall not be increased, (b) the New Vehicle Swing Line Commitment shall not be reduced, (c) the Used Vehicle Swing Line Commitment shall not be reduced unless the Aggregate Used Vehicle Floorplan Commitment is reduced to less than the amount of the Used Vehicle Swing Line Commitment, and (d) the Revolving Swing Line Commitment and the Letter of Credit Commitment shall not be reduced unless the Aggregate Revolving Loan Commitment is reduced to less than the amount of the Revolving Swing Line Commitment and Letter of Credit Commitment.
6.17.6 Following any Reallocation, the Aggregate New Vehicle Floorplan Commitment, Aggregate Used Vehicle Floorplan Commitment and Aggregate Revolving Loan Commitment and the Pro Rata Shares and New Vehicle Floorplan Commitment, Used Vehicle Floorplan Commitment and Revolving Loan Commitment of each Lender shall be noted in the Agent’s records, which records will be conclusive evidence thereof, absent manifest error; provided, however, that any failure by the Agent to record such information shall not affect or limit the obligations of the Borrowers hereunder.
ARTICLE 7
YIELD PROTECTION; TAXES
7.1 Yield Protection. If, after the date of this Agreement, there occurs any adoption of or change in any law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) or in the interpretation, promulgation, implementation or administration thereof by any governmental or quasi-governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, including, notwithstanding the foregoing, all requests, rules, guidelines or directives (x) in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act or (y) promulgated by the Bank for International Settlements, the Basel Committee on Banking Regulations and Supervisory Practices (or any successor or similar authority) or the United States financial regulatory authorities, in each case of clauses (x) and (y), regardless of the date enacted, adopted, issued, promulgated or implemented, or compliance by any Lender or applicable Lending Installation or the LC Issuer with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency (any of the foregoing, a “Change in Law”) which:
(a) subjects any Lender or any applicable Lending Installation, the LC Issuer, or the Agent to any Taxes (other than with respect to Indemnified Taxes, Excluded Taxes, and Other Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto, or
(b) imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation or the LC Issuer (other than reserves and assessments taken into account in determining the interest rate applicable to Loans bearing interest based on the Eurocurrency Base Rate (“Eurocurrency Loans”)), or
(c) imposes any other condition (other than Taxes) the result of which is to increase the cost to any Lender or any applicable Lending Installation or the LC Issuer of making, funding or maintaining its Eurocurrency Loans, or of issuing or participating in Letters of Credit, or reduces any amount receivable by any Lender or any applicable Lending Installation or the LC Issuer in connection with its Eurocurrency Loans, Letters of Credit, or participations therein, or requires any Lender or any applicable Lending Installation or the LC Issuer to make any payment calculated by reference to the amount of Eurocurrency Loans, Letters of Credit, or participations therein held or interest or fees received by it, by an amount deemed material by such Lender or the LC Issuer as the case may be, and the result of any of the foregoing is to increase the cost to such Lender or the LC Issuer of making or maintaining its Loans or Commitments or of issuing or participating in Letters of Credit or to reduce the return received by such Lender or the LC Issuer in connection with such Loans or Commitment, Letters of Credit or participations therein, then, within fifteen (15) days after demand by such Lender or the LC Issuer, the Borrowers shall pay such Lender or the LC Issuer such additional amount or amounts as will compensate such Lender or the LC Issuer for such increased cost or reduction in amount received.
7.2 Changes in Capital Adequacy Regulations. If a Lender or the LC Issuer determines the amount of capital or liquidity required or expected to be maintained by such Lender or the LC Issuer, any Lending Installation of such Lender or the LC Issuer, or any corporation or holding company controlling such Lender or the LC Issuer is increased as a result of (a) a Change in Law or (b) any change after the date of this Agreement in the Risk-Based Capital Guidelines, then, within fifteen (15) days of demand by such Lender or the LC Issuer, the Borrowers shall pay such Lender or the LC Issuer the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender or the LC Issuer determines is attributable to this Agreement, its Outstanding Credit Exposure or its Commitment to make Loans and issue or participate in Letters of Credit, as the case may be, hereunder (after taking into account such Lender’s or the LC Issuer’s policies as to capital adequacy or liquidity), in each case that is attributable to such Change in Law or change in the Risk-Based Capital Guidelines, as applicable.
7.3 Availability of Types of Advances; Adequacy of Interest Rate. If the Agent or the Required Lenders determine that deposits of a type and maturity appropriate to match fund Eurocurrency Loans are not available to such Lenders in the relevant market or the Agent, in consultation with the Lenders, determines that the Eurocurrency Base Rate is not ascertainable or does not adequately and fairly reflect the cost of making or maintaining Eurocurrency Loans, then the Agent shall suspend the availability of the New Vehicle Floorplan Borrowing Rate, Used Vehicle Floorplan Borrowing Rate, and Revolving Loan Borrowing Rate, the loans shall thereafter bear interest at the Alternate Base Rate plus the Alternate Base Rate Margin (New Vehicle) for New Vehicle Floorplan Loans and New Vehicle Swing Line Loans, the Alternate Base Rate Margin (Used Vehicle) for Used Vehicle Floorplan Loans and Used Vehicle Swing Line Loans, and the Alternate Base Rate Margin (Revolving) for Revolving Loans and Revolving Swing Line Loans.
7.4 Taxes.
7.4.1 Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law requires the deduction or withholding of any Tax from any such payment, then the applicable Loan Party shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant governmental authority in accordance with applicable law and, if such Tax is an Indemnified Tax or Other Tax, then the sum payable by the applicable Loan Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 7.4) the applicable Lender, the LC Issuer or the Agent receives an amount equal to the sum it would have received had no such deduction or withholding been made as provided in this Section 7.4.
7.4.2 The Loan Parties shall timely pay to the relevant governmental authority in accordance with applicable law or at the option of the Agent timely reimburse it for the payment of, any Other Taxes.
7.4.3 The Loan Parties shall indemnify the Lender, the LC Issuer or the Agent, within fifteen (15) days after demand therefor, for the full amount of any Indemnified Taxes and Other Taxes (including Indemnified Taxes and Other Taxes imposed or asserted on or attributable to amounts payable under this Section 7.4) payable or paid by such Lender, the LC Issuer or the Agent or required to be withheld or deducted from a payment to such Lender, the LC Issuer or the Agent and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes and Other Taxes were correctly or legally imposed or asserted by the relevant governmental authority. A certificate as to the amount of such payment or liability delivered to a Borrower by a Lender or LC Issuer (with a copy to the Agent), or by the Agent on its own behalf or on behalf of a Lender or LC Issuer, shall be conclusive absent manifest error.
7.4.4 Each Lender shall severally indemnify the Agent, within fifteen (15) days after demand therefor, for (a) any Indemnified Taxes and Other Taxes attributable to such Lender (but only to the extent that any Loan Party has not already indemnified the Agent for such Indemnified Taxes and Other Taxes and without limiting the obligation of the Loan Parties to do so), (b) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 17.3.3 relating to the maintenance of a Participant Register, and (c) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant governmental authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Agent to the Lender from any other source against any amount due to the Agent under this Section 7.4.4.
7.4.5 As soon as practicable after any payment of Taxes by any Loan Party to a governmental authority pursuant to this Section 7.4, such Loan Party shall deliver to the Agent the original or a certified copy of a receipt issued by such governmental authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Agent.
7.4.6 (a) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Company and the Agent, at the time or times reasonably requested by the Company or the Agent, such properly completed and executed documentation reasonably requested by the Company or the Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Company or the Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Company or the Agent as will enable the Company or the Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 7.4.6(b)(i), (b)(ii), and (b)(iv)) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.
(b) Without limiting the generality of the foregoing,
(i) any Lender that is a United States person for U.S. federal income Tax purposes shall deliver to the Company and the Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Company or the Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding Tax;
(ii) any Non-U.S. Lender shall, to the extent it is legally entitled to do so, deliver to the Company and the Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Non-U.S. Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Company or the Agent), whichever of the following is applicable:
(A) in the case of a Non-U.S. Lender claiming the benefits of an income Tax treaty to which the United States is a party (1) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such Tax treaty and (2) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such Tax treaty;
(B) executed originals of IRS Form W-8ECI;
(C) in the case of a Non-U.S. Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (1) a certificate to the effect that such Non-U.S. Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code and (2) executed originals of IRS Form W-8BEN; or
(D) to the extent a Non-U.S. Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, IRS Form W-8IMY or IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable.
(iii) any Non-U.S. Lender shall, to the extent it is legally entitled to do so, deliver to the Company and the Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Non-U.S. Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Company or the Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Company or the Agent to determine the withholding or deduction required to be made; and
(iv) if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Company and the Agent at the time or times prescribed by law and at such time or times reasonably requested by the Company or the Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Company or the Agent as may be necessary for the Company and the Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (iv), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
(c) Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Company and the Agent in writing of its legal inability to do so.
7.4.7 If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 7.4 (including by the payment of additional amounts pursuant to this Section 7.4), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant governmental authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (plus any penalties, interest or other charges imposed by the relevant governmental authority) in the event that such indemnified party is required to repay such refund to such governmental authority. Notwithstanding anything to the contrary in this paragraph, in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
7.4.8 Each party’s obligations under this Section 7.4 shall survive the resignation or replacement of the Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.
7.4.9 For purposes of Sections 7.4.4 and 7.4.6, the term “Lender” includes the LC Issuer.
7.5 Selection of Lending Installation; Mitigation Obligations; Lender Statements; Survival of Indemnity. To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its Eurocurrency Loans to reduce any liability of the Borrowers to such Lender under Sections 7.1, 7.2, and 7.4 or to avoid the unavailability of Eurocurrency Loans under Section 7.3, so long as such designation is not, in the judgment of such Lender, disadvantageous to such Lender. Each Lender shall deliver a written statement of such Lender to the Company (with a copy to the Agent) as to the amount due, if any, under Sections 7.1, 7.2 or 7.4. Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrowers in the absence of manifest error. Determination of amounts payable under such Sections in connection with a Eurocurrency Loan shall be calculated as though each Lender funded its Eurocurrency Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the Eurocurrency Rate applicable to such Loan, whether in fact that is the case or not. Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by the Company of such written statement. The obligations of the Borrowers under Sections 7.1, 7.2 and 7.4 shall survive payment of the Obligations and termination of this Agreement.
ARTICLE 8
SECURITY AND GUARANTIES
8.1 Security.
8.1.1 Collateral. All present and future Loans, Letters of Credit, Obligations, Guarantor Obligations, and Permitted Swap Obligations of the Loan Parties to Agent and the Lenders under this Agreement and the other Loan Documents shall be secured by a perfected security interest, subject only to Permitted Liens, in the property described in the Collateral Documents (collectively, “Collateral”); including, without limitation, the following property of the Company and all of its present and future Subsidiaries, except Excluded Subsidiaries, whether now owned or existing or hereafter acquired and wherever located, and all products and proceeds thereof:
(a) All inventory (including, without limitation, all Vehicles, automobiles, trucks and other motor vehicles of whatever make, model and description, trade ins, repossessions and inventory held for display or demonstration purposes); equipment (other than fixtures); investment property (excluding the capital stock or other Equity Interests of the Dealerships and, to the extent prohibited by any manufacturer of Vehicles, any Subsidiary of the Company that is the holder of five percent (5%) or more of the Equity Interests of a Dealership); accounts; instruments; documents; chattel paper; general intangibles; deposit accounts; contract rights and other rights to payment; leases, rebates, credits, factory holdbacks, incentive payments and other payments from any manufacturer, factory or distributor.
(b) All attachments, accessions, accessories, tools, parts, supplies, increases and additions to, and all replacements of, and substitutions for any property described in this Section 8.1.1; all products, produce, and supporting obligations of any of the property described in this Section 8.1.1; all proceeds (including insurance proceeds) of any of the property described in this Section 8.1.1; and all records and data relating to any of the property described in this Section 8.1.1, whether in the form of a writing, photograph, microfilm, microfiche, or electronic media, together with all right, title and interest of the Company and each Subsidiary in and to all computer software required to utilize, create, maintain, and process any such records or data on electronic media.
Notwithstanding the foregoing, the New Vehicle Floorplan Loan Obligations shall be secured only by the Collateral owned by the New Vehicle Floorplan Borrowers.
8.1.2 Collateral Documents. The security interests in the Collateral shall be evidenced by such security agreements, assignments, Uniform Commercial Code financing statements, Title Documents, trust deeds, mortgages, and other Collateral Documents covering the Collateral as Agent or Required Lenders may at any time reasonably require.
8.1.3 Additional Acts. As a condition precedent to the effectiveness of this Agreement, and from time to time at Agent’s or any Lender’s request, each Person granting Collateral shall execute and/or deliver to Agent such security agreements, assignments, pledge agreements, control agreements, Title Documents, landlord and owner consents, amendments to any of the foregoing documents and any other documents and instruments (endorsed or assigned to Agent as Agent may request), and shall take such other actions, as may be required under Applicable Law or which Agent or any Lender may reasonably request to effectuate the transactions contemplated hereunder and to grant, preserve, protect, perfect and continue the validity and priority of their security interests (subject to Permitted Liens).
8.1.4 Limitations. Notwithstanding any contrary provision of this Agreement or any Collateral Document, unless Agent otherwise requires (which Agent may do at any time) (a) the security interest of Agent and the Lenders in any Loan Party’s patents, trademarks, copyrights, trade names and other intellectual property will not be perfected by filing with the United States Patent and Trademark Office or any other agency of the United States government; (b) the security interest of Agent and the Lenders will not be noted on the Title Document for any Vehicle; (c) the security interest of Agent and the Lenders in deposit accounts maintained by any Loan Party with a financial institution other than U.S. Bank may not be perfected if Agent reasonably determines that the amounts generally maintained in such deposit accounts are not material, (d) the security interest of Agent and the Lenders in investment property will not be perfected by control, and (e) the security interest of Agent and the Lenders in aircraft will not be perfected.
8.2 Guaranties. All present and future Revolving Loans, Revolving Swing Line Loans, LC Obligations, Used Vehicle Floorplan Loans, Used Vehicle Swing Line Loans and other Revolving Loan Obligations and Used Vehicle Floorplan Obligations of Revolving Loan Borrower and Used Vehicle Floorplan Borrower to Agent and the Lenders shall be guaranteed by each of the Guarantors.
ARTICLE 9
CONDITIONS PRECEDENT
9.1 Initial Conditions Precedent. The effectiveness of this Agreement and the obligation of the Lenders to make the initial Credit Extensions are subject to satisfaction of the following conditions (each, an “Initial Condition”):
9.1.1 Agent has received the following:
(a) Such fully executed original Loan Documents as Agent or any Lender requires, including, without limitation, this Agreement; the Security Agreement, the Pledge Agreement, and any other Collateral Documents; the Guaranty signed by each Guarantor; any required LC Agreement; and each other Loan Document required by Agent or any Lender.
(b) Documentation satisfactory to the Agent to establish the due organization, valid existence and (if applicable) good standing of each Loan Party; its qualification to engage in business in each jurisdiction in which it is engaged in business or required to be so qualified; its authority to execute, deliver and perform any Loan Documents to which it is a party and the identity, authority and capacity of each Person authorized to act on its behalf, which shall, without limitation, include certified copies of articles or certificates of incorporation and amendments thereto, bylaws and amendments thereto, certificates of good standing, existence and/or qualification to engage in business, corporate resolutions, incumbency certificates, and the like.
(c) A favorable opinion of acceptable independent counsel for each Loan Party covering such matters as Agent or any Lender may reasonably request, including without limitation the matters specified in Sections 10.1, 10.2, 10.3, and 10.7.
(d) A certificate, signed by the chief financial officer of the Company, stating that on the date of the initial Credit Extension no Default or Event of Default has occurred and is continuing.
(e) A pro forma Used Vehicle Borrowing Base Certificate, dated as of the last day of the calendar month most recently ended at least fifteen days prior to the date of this Agreement, giving pro forma effect to the DCH Acquisition as if the DCH Acquisition had been consummated on the last day of such calendar month.
(f) A pro forma Revolving Loan Borrowing Base Certificate, dated as of the last day of the calendar month most recently ended at least fifteen days prior to the date of this Agreement, giving pro forma effect to the DCH Acquisition as if the DCH Acquisition had been consummated on the last day of such calendar month.
(g) A pro forma Compliance Certificate, dated as of the last day of the calendar month most recently ended at least fifteen days prior to the date of this Agreement, giving pro forma effect to the DCH Acquisition as if the DCH Acquisition had been consummated on the last day of such calendar month.
(h) One or more intercreditor agreements between Agent and each Person extending floorplan financing to the Dealerships or an amendment to the existing intercreditor agreement, in form and content satisfactory to Agent and the Required Lenders, and (ii) any other subordination or intercreditor agreements or amendments to existing intercreditor agreements required by Agent or the Required Lenders, all in form and content satisfactory to Agent and the Lenders.
(i) Pro forma financial statements giving effect to the DCH Acquisition (including, without limitation, giving effect to the repayment of any Indebtedness of DCH and its Subsidiaries contemplated to occur in connection with the DCH Acquisition) and the Credit Extensions to be made on or near the Closing Date (including without limitation the initial New Vehicle Floorplan Loans for each New Vehicle Floorplan Dealership), which demonstrate, together with all other information then available to the Lenders, that the Borrowers can repay their debts and satisfy their other obligations as and when they become due, and can comply with the financial covenants set forth in Section 11.1, and (ii) such information as the Agent may reasonably request to confirm the tax, legal, and business assumptions made in such pro forma financial statements.
(j) A certificate from a duly authorized officer of the Company (i) attaching, and certifying as true, correct and complete, copies of the DCH Acquisition Documents (with all amendments, modifications, supplements, attachments, schedules and exhibits thereto), (ii) confirming that there have been no material modifications to the DCH Acquisition Documents, (iii) confirming that (A) all governmental consents, approvals and filings required in connection with the Acquisition have been made and obtained and remain in full force and effect, that all applicable waiting periods have lapsed, in connection with the Acquisition, including, without limitation any and all consents, approvals, filings and waiting periods required under the Hart-Scott-Rodino Antitrust Improvements Act, (B) all consents and approvals required in connection with the DCH Acquisition under all material Seller Agreements (including without limitation Franchise Agreements), between DCH or any of its Subsidiaries and any manufacturer or distributor of Vehicles for which DCH or any of its Subsidiaries act as a dealer have been obtained and remain in full force and effect, and (C) the DCH Acquisition has been, or contemporaneously with the closing and initial Credit Extensions will be, consummated in accordance with the terms of the DCH Acquisition Agreement and in compliance with applicable law, all such governmental consents, approvals and filings and all such auto manufacturer’s approvals, and (iv) attaching, and certifying as true, correct and complete, copies of all material Seller Agreements, other than those disclosure of which is prohibited by the relevant manufacturer or distributor, between DCH or any of its Subsidiaries and any manufacturer or distributor of Vehicles for which DCH or any of its Subsidiaries act as a dealer.
(k) Signed lien releases, termination statements, payoff letters and other documents as Agent or any Lender deems appropriate, evidencing the termination of, or reasonably satisfactory arrangements for the termination of, the security interests of any secured party in any of the assets of DCH and its Subsidiaries.
9.1.2 Agent shall have received copies of any Seller Agreements which it has requested, other than those disclosure of which is prohibited by the relevant manufacturer or distributor, which must be reasonably satisfactory to Agent, and has received such evidence as it reasonably requires that all Seller Agreements which are necessary for the conduct of the Company’s and each Dealership’s business, are in full force and effect.
9.1.3 Agent shall have a valid and perfected security interest in the Collateral (subject to the limitations found in Section 8.1.4) with a priority acceptable to Agent and the Required Lenders and subject only to Permitted Liens and Agent shall have received satisfactory evidence of perfection and the priority of such security interests, including without limitation such Uniform Commercial Code and other searches, termination statements, and other filings as it deems appropriate.
9.1.4 All required insurance, including, without limitation, all insurance required with respect to DCH and its Subsidiaries shall be in full force and effect and Agent shall have received such evidence thereof as it requires.
9.1.5 The representations and warranties contained in this Agreement and in each Loan Document shall be correct, accurate and complete in all material respects as of the Closing Date.
9.1.6 No Default shall have occurred and is continuing on the Closing Date or will exist after giving effect to the making of the Loans to be made on the Closing Date, the Existing Letters of Credit, and any Letters of Credit to be issued on the Closing Date.
9.1.7 The principal amount owing under the Existing Loan Agreement, all fees accrued under the Existing Loan Agreement for periods prior to the Closing Date and all interest accrued on the outstanding principal balance of the loans made under the Existing Loan Agreement as of the Closing Date shall be repaid, and all commitments under the Existing Loan Agreement shall be terminated.
9.1.8 All fees and Attorney Costs payable on or prior to the Closing Date shall have been paid.
9.1.9 Agent shall have received such additional documents, opinions, approvals, consents and information and each Loan Party shall have satisfied such additional requirements as Agent or any Lender may reasonably require.
9.2 Conditions Precedent to Each Credit Extension. Except as otherwise set forth herein (including without limitation Sections 2.2.6(d), 3.2.6(d), and 4.2.6(d)), all of the following conditions must be satisfied on the date of any Credit Extension:
9.2.1 Agent shall have received a request for the Loan or Letter of Credit as required by the provisions of this Agreement.
9.2.2 No Default shall have occurred and be continuing or will exist after giving effect to the making of such Credit Extension.
9.2.3 All representations and warranties in this Agreement and the other Loan Documents shall be true and correct in all material respects as of such date, except to the extent they relate to another date, and except as previously disclosed to and accepted by Agent in writing.
9.2.4 All Initial Conditions have been satisfied at the time of the initial Credit Extension.
9.2.5 Agent, and/or any Lender, as applicable, shall have received such documents and information as they reasonably require.
9.2.6 All conditions in any other provision of this Agreement or any other Loan Document have been satisfied as of the time required.
9.2.7 With respect to each New Vehicle Loan Advance, Agent shall have received the following:
(a) For New Vehicle Loan Advances made under a Payment Commitment. Manufacturer or distributor invoice, cash draft, electronic record, depository transfer check, sight draft, or such other documents as specified in the applicable Payment Commitment, identifying the Vehicles delivered or to be delivered to a New Vehicle Floorplan Dealership.
(b) For New Vehicle Loan Advances made to finance Fleet Vehicles. If required by Agent, a copy of the applicable Fleet Sale Contract and/or an agreement from the purchaser of the Fleet Vehicles agreeing to pay the purchase price due to a New Vehicle Floorplan Dealership directly to Agent.
(c) For New Vehicle Loan Advances made to finance New Vehicles which are obtained from another dealer. Copy of manufacturer or distributor invoice (or substitute acceptable to Agent) and bill of sale duly executed by the parties to the transaction or other documentation acceptable to Agent evidencing the acquisition cost to a New Vehicle Floorplan Dealership of such Vehicles.
(d) For New Vehicle Loan Advances made to finance any other New Vehicles. Manufacturer or distributor invoice or other documents acceptable to Agent identifying the Vehicles purchased by a New Vehicle Floorplan Dealership.
9.3 Conditions Precedent to Initial Advance to any New Vehicle Floorplan Borrower. In addition to the requirements in Section 9.1 and 9.2, no New Vehicle Loans shall be made to finance New Vehicles owned by any Dealership (including the initial New Vehicle Floorplan Borrowers) and no Dealership shall become a New Vehicle Floorplan Borrower unless all of the following conditions have been satisfied with respect to such Dealership:
9.3.1 All indebtedness and obligations of the Dealership (or if Required Lenders, in their sole discretion, consent in writing, a franchise or location of a Dealership) to any lender (“Former Lender”) for flooring lines of credit (other than permitted Other Floorplan Financing) have been repaid or will be repaid with the proceeds of the first New Vehicle Loan Advance to be made to finance New Vehicles owned by such Dealership and all commitments of any Former Lender to extend floorplan financing to such Dealership (or if Required Lenders, in their sole discretion, consent in writing, the applicable franchise or location of such Dealership) have been terminated.
9.3.2 All Liens of any Former Lender in the Collateral (other than Permitted Liens) have been terminated, or at Agent’s sole discretion, satisfactory arrangements have been made for termination of such Liens, or if such Liens are permitted hereunder, any subordination or intercreditor agreement or amendment to any such agreement required by Agent has been executed and delivered to Agent.
9.3.3 Agent shall have conducted such audits of the Collateral of the New Vehicle Floorplan Dealership as it requires, the results of which are satisfactory to Agent.
9.3.4 Agent shall have received such Repurchase Agreements relating to the New Vehicle Floorplan Dealership as it requires.
9.3.5 All conditions in Section 9.1.2, 9.1.3, and 9.1.4 shall be satisfied for such Dealership as of the date it becomes a New Vehicle Floorplan Dealership, and with respect to the Dealership, (i) if it is a Subsidiary as of the date of this Agreement or has previously executed a Guarantor Joinder Agreement, it shall have executed an Existing Subsidiary Joinder Agreement (ii) if it is a new Acquisition Subsidiary, all conditions in Section 13.13 shall have been satisfied, or (iii) if it is a new Subsidiary which is not an Acquisition Subsidiary, all conditions in Section 12.17 shall have been satisfied.
9.3.6 Each Loan Party has satisfied such other conditions as are reasonably required by Agent.
9.4 Real Property Conditions. In addition to the other requirements set forth herein, no Real Property shall be included or remain in the Revolving Loan Borrowing Base as Eligible Real Property unless all of the following conditions have been satisfied and continue to be satisfied with respect to such Real Property.
9.4.1 A Real Estate Subsidiary shall hold fee simple title to the Real Property free and clear of all Liens and encumbrances of any nature or kind whatsoever except any easements, rights of way, zoning restrictions and other minor encumbrances and exceptions which are acceptable to Agent in its sole discretion and which shall be the only encumbrances on the Real Property, and such Real Estate Subsidiary shall not have entered into any agreement prohibiting or limiting its ability to grant a lien on such Real Property to Agent and the Lenders.
9.4.2 Prior to inclusion of the Real Property in the Revolving Loan Borrowing Base, Agent shall receive the following, each in form and substance satisfactory to Agent and Agent shall deliver to Lenders: (a) an acceptable Appraisal of the Real Property; and (b) a title report regarding the Real Property from a title insurance company acceptable to Agent, showing the status of title to the Real Property, and all liens, encumbrances, easements and other matters affecting the Real Property (“Title Report”).
9.4.3 If any Real Property remains in the Revolving Loan Borrowing Base for one year or more, Agent shall receive the following, each in form and substance satisfactory to Agent, on an annual basis (or, if required by Agent, more frequently following the occurrence of an Event of Default) (a) an initial Phase I environmental site assessment report and such other environmental audits, assessments, studies and reports as Agent requires, prepared by a geotechnical engineer or other qualified Person acceptable to Agent (“Environmental Reports”) and thereafter such new or updated Environmental Reports as Agent requires, (b) such new or updated appraisals, evaluations or reports as Agent requires to determine the Value of the Real Property, and (c) such Title Reports as Agent requires.
9.4.4 In addition to any other insurance required hereunder, all insurance covering the Real Property which is reasonably required by Agent shall be in full force and effect and Agent shall receive from time to time such evidence thereof as it requires.
9.4.5 The Real Property and improvements thereon shall be in good condition, and no part of the Real Property and improvements shall have been damaged by fire or other casualty or have been the subject of any eminent domain or condemnation proceedings.
9.4.6 There are no circumstances affecting the Real Property, including without limitation any requirement of Applicable Law of the jurisdiction in which it is located which, in the opinion of Agent or its counsel, may materially affect the value of the Real Property.
9.4.7 Agent shall have received such additional documents and information and each Loan Party shall have satisfied such additional requirements as Agent reasonably requires, with respect to the Real Property.
9.4.8 The Revolving Loan Borrower shall pay all costs and expenses incurred by Agent in connection with the Real Property, including without limitation all appraisal and appraisal review fees, costs of environmental audits and inspections, and fees of Agent’s counsel.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
Except as set forth in the Disclosure Schedule, each Borrower hereby represents and warrants to and agrees with Agent and the Lenders:
10.1 Existence and Standing. Each Loan Party is a corporation, partnership or limited liability company duly and properly incorporated, organized or formed, as the case may be, validly existing and in good standing (to the extent such concept applies to such entity) or current status, in each jurisdiction where the conduct of its business or the ownership of its properties requires such qualification, and each Loan Party has full power, authority and legal right to carry on its business as presently conducted, and to own and operate its properties and assets.
10.2 Authorization and Validity. Each Loan Party has the power and authority and legal right to execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder. The execution, delivery, and performance of the Loan Documents by each Loan Party have been duly authorized by proper corporate, limited liability company partnership or other entity proceedings. This Agreement constitutes, and each other Loan Document to which any Loan Party is a party when executed and delivered to Agent will constitute a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, moratorium, fraudulent transfer and other similar laws affecting creditors’ rights generally.
10.3 Conflict; Government Consent. Neither the execution and delivery by any Loan Party of the Loan Documents to which it is a party, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate (a) any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on any Loan Party or (b) any Loan Party’s articles or certificate of incorporation, partnership agreement, certificate of limited partnership, articles or certificate of formation or organization, by-laws, or operating or other management agreement, as the case may be, or (c) the provisions of any loan, loan agreement, indenture, instrument or agreement to which any Loan Party is a party or is subject, or by which it, or its property, is bound, or conflict with or constitute a default thereunder, or result in, or require, the creation or imposition of any Lien in, of or on the property of any Loan Party pursuant to the terms of any such indenture, instrument or agreement. No Governmental Approval of any Governmental Body is required for the due execution, delivery and performance of the Loan Documents except such as have been obtained and are in full force and effect.
10.4 Financial Statements. The financial statements that have heretofore been delivered to Agent or any Lender, and all schedules and notes included in such financial statements, are true and correct in all material respects and present fairly (a) the financial position of the Company and its Subsidiaries as of the date of such statements and (b) the results of its operations for the periods covered thereby; and with respect to the consolidated financial statements of the Company and its Subsidiaries, there are not any material liabilities that should have been reflected in the financial statements or the notes thereto under GAAP, contingent or otherwise, including liabilities for taxes or any unusual forward or long-term commitments, that are not disclosed or reserved against in the statements referred to above or in the notes thereto or that are not disclosed herein. The consolidated financial statements of the Company and its Subsidiaries have been prepared in accordance with GAAP, except, as to interim financial statements, for the absence of footnotes and subject to year-end adjustments.
10.5 Material Adverse Change. Since the date of the most recent audited financial statements delivered to the Agent, no event or circumstance has occurred which has had or which could reasonably be expected to have, a Material Adverse Effect.
10.6 Taxes. Each Loan Party has filed all federal, state, local, and other tax returns which are required to be filed and has paid all taxes due pursuant to said returns or pursuant to any assessment received by any Loan Party, except such taxes, if any, as are being contested in good faith and by proper proceedings and as to which adequate reserves have been provided in accordance with GAAP and as to which no Lien exists. No tax liens have been filed and no claims are being asserted with respect to any such taxes. The charges, accruals and reserves on the books of each Loan Party in respect of any taxes or other governmental charges are adequate.
10.7 Litigation and Contingent Obligations. There is no litigation, arbitration, governmental investigation, proceeding or inquiry pending against any Loan Party or, to the knowledge of any of their officers, threatened against or affecting any Loan Party which could reasonably be expected to result in one or more judgments or orders against any Loan Party (in excess of insurance coverage) for more than $5,000,000.00 individually or in the aggregate; and there are no actions, proceedings, investigations, or claims pending against any Loan Party, or to the knowledge of any of their officers, threatened against or affecting any Loan Party, which purport to affect or relate to the Loan Documents or the transactions contemplated thereby, which seeks to prevent, enjoin or delay the making of any Credit Extension, or if determined adversely would materially impair the ability of any Loan Party to perform its obligations under the Loan Documents. Other than any liability incident to any litigation, arbitration or proceeding which could not reasonably be expected to have a Material Adverse Effect, no Loan Party has any material Contingent Obligations not provided for or disclosed in the financial statements most recently provided to Agent.
10.8 Subsidiaries and Affiliates. Set forth in the Disclosure Schedule is a complete and accurate list as of the Closing Date of the Subsidiaries of the Company and its Subsidiaries and Affiliates excluding, as to Affiliates, (a) persons included in clause (c) of the definition of Affiliate, and (b) Persons holding 5% or more of the Company’s Class A Common Stock who have filed required reports under Sections 13(d), 13(g) or 16 of the Securities Exchange Act of 1934, as amended, or are not required to file such reports, showing the jurisdiction of incorporation of each and showing the percentage of the Company’s ownership of the outstanding stock of each Subsidiary and Affiliate. All of the outstanding capital stock or other Equity Interests of each such Subsidiary and Affiliate has been validly issued, is fully paid and nonassessable, and is owned directly or indirectly by the Company free and clear of all Liens.
10.9 ERISA. With respect to each Plan, each Loan Party and all ERISA Affiliates have paid all required minimum contributions and installments on or before the due dates provided under Section 430(j) of the Code and could not reasonably be subject to a lien under Section 430(k) of the Code or Title IV of ERISA. Neither any Loan Party nor any ERISA Affiliate has filed, pursuant to Section 412(c) of the Code or Section 302(c) of ERISA, an application for a waiver of the minimum funding standard. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect.
10.10 Accuracy of Information. All reports, financial statements, representations, and other information heretofore or contemporaneously herewith furnished in writing by any Loan Party to Agent or any Lender in connection with or relating to this Agreement and the transactions contemplated hereby is, and all information hereafter furnished by or on behalf of any Loan Party to the Agent or any Lender pursuant hereto or in connection herewith will be, true and accurate in every material respect on the date as of which such information is dated or certified, and none of such information is or will be incomplete by omitting to state any material fact necessary to make such information not misleading in light of the circumstances under which made.
10.11 Regulation U. Margin stock (as defined in Regulation U) constitutes less than 25% of the value of those assets which are subject to any limitation on sale, pledge, or other restriction hereunder.
10.12 Material Agreements. The Company and each other Loan Party which is a Dealership is in material compliance with all Seller Agreements. No Loan Party is a party to any agreement or instrument or subject to any charter or other corporate, partnership, or limited liability company or other restriction which could reasonably be expected to have a Material Adverse Effect. No Loan Party is in breach of or default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (a) any agreement to which it is a party, or which is binding on it or any of its assets, which default or default could reasonably be expected to have a Material Adverse Effect or (b) any agreement or instrument evidencing or governing Indebtedness.
10.13 Compliance with Laws. Each Loan Party is in compliance in all material respects with all Applicable Laws, including without limitation all environmental permits, Environmental Laws, Access Laws, and the FLSA.
10.14 Ownership of Properties. Each Loan Party is the true and lawful owner of and has good title to, or valid leasehold interests in, all properties and assets material to its business, real and personal, intangible and tangible which it now owns or leases and it will have good title to or a leasehold interest in, all Collateral and other property acquired hereafter, free of any liens and encumbrances, except Permitted Liens. Except as permitted by this Agreement, no Loan Party has subordinated any of its rights under any obligation owing to it to the rights of any other Person.
10.15 Plan Assets; Prohibited Transactions. No Loan Party is an entity deemed to hold “plan assets” within the meaning of 29 C.F.R. § 2510.3-101 of an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan (within the meaning of Section 4975 of the Code), and neither the execution of this Agreement nor the making of Credit Extensions hereunder gives rise to a Prohibited Transaction.
10.16 Trademarks; Patents, Etc. Each Loan Party possesses or has the right to use all licenses, permits, franchises, patents, copyrights, trademarks, trade names, servicemarks, or rights thereto, material to the conduct of its business substantially as now conducted and as presently proposed to be conducted and none of the Loan Parties are in material violation of any valid rights of others with respect to any of the foregoing.
10.17 Burdensome Restrictions. No Loan Party is a party to or otherwise bound by any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any charter, corporate, limited liability company or partnership or other restriction which could reasonably be expected to have a Material Adverse Effect.
10.18 Force Majeure. Since the date of the most recent financial statements provided to Agent, the business, properties and other assets of Loan Parties have not been materially and adversely affected in any way as the result of any fire or other casualty, strike, lockout, or other labor trouble, embargo, sabotage, confiscation, condemnation, riot, civil disturbance, activity of armed forces or act of God.
10.19 Investment Company Act, Etc. No Loan Party, Person Controlling any Loan Party, or Subsidiary is an “Investment Company” within the meaning of the Investment Company Act of 1940. No Loan Party is subject to regulation under the Federal Power Act, any state public utilities code, or any other federal or state statute or regulation limiting its ability to incur indebtedness.
10.20 Solvency. Each Loan Party is Solvent and, after the execution and delivery of the Loan Documents and the consummation of the transactions contemplated thereby, including the making of each Credit Extension and the use of the proceeds thereof, will be Solvent.
10.21 Franchise Agreements; Material Business Relationships. As of the Closing Date, neither the Company nor any of its Subsidiaries is a party to any dealer franchise agreement, dealer agreement, dealer sales and service agreement or similar agreement (each, a “Franchise Agreement”) other than those specifically listed in the Disclosure Schedule, which schedule shows the applicable manufacturer or distributor and the Company or Subsidiary, as the case may be, that is a party to each such agreement, the date such agreement was entered into and the expiration date of such agreement. Each of such Franchise Agreements is currently in full force and effect, and neither the Company nor any Subsidiary has received any notice of termination with respect to any such agreement; and, except as disclosed on the Disclosure Schedule, neither the Company nor any Subsidiary is aware of any event that with notice, lapse of time or both would allow any manufacturer or distributor that is a party of any Franchise Agreement to terminate any such agreement. There exists no actual or threatened termination, cancellation or limitation of, or any modification or change in, the business relationship between the Company or any of its Subsidiaries and any customer or any group of customers or with any manufacturer or distributor that, in any case, could reasonably be expected to have a Material Adverse Effect with respect to any Borrower or the Company and its Subsidiaries as a whole.
10.22 Security Interests. The Liens created or to be created in favor of Agent and the Lenders under the Collateral Documents do and will at all times on and after the Closing Date, constitute perfected security interests (subject to Section 8.1.4), with a priority acceptable to Agent, subject only to the Permitted Liens, in the Collateral as security for the Obligations, Guarantor Obligations, and Permitted Swap Obligations.
10.23 Continuing Representations and Warranties. Each request for a Credit Extension shall be deemed to be each Borrower’s representation and warranty that (a) such Credit Extension may be made without exceeding the applicable maximum amount determined in accordance with the provisions of this Agreement, (b) no Default has occurred, or will exist after giving effect to the making of such Credit Extension, and (c) all representations and warranties set forth in this Agreement, the Collateral Documents and the other Loan Documents are true, accurate and complete in all material respects as of the date of such request with the same effect as if made on each date, except as previously disclosed to and accepted by Agent in writing, and except for representations and warranties which specifically refer only to another date.
ARTICLE 11
FINANCIAL COVENANTS AND INFORMATION
During the term of this Agreement and until termination of the availability of Credit Extensions and payment and performance in full of all Obligations and Guarantor Obligations of each Loan Party under the Loan Documents, each Borrower agrees that, unless Required Lenders shall otherwise consent in writing:
11.1 Financial Covenants.
11.1.1 Current Ratio. The Current Ratio for the Company and its Subsidiaries on a consolidated basis shall not be less than 1.20 to 1.0 as of the last day of any fiscal quarter.
As used herein,
“Current Assets” means the total assets of any Person that may properly be classified as current assets in accordance with GAAP, but excluding all loans to and notes and receivables from officers, employees, directors, owners and affiliates of such Person.
“Current Liabilities” means the total liabilities of any Person that may properly be classified as current liabilities in accordance with GAAP.
“Current Ratio” means, for any Person at any time, the ratio at such time of (a) such Person’s Current Assets, plus the lesser of (i) Revolving Loan Availability at such time or (ii) $145,000,000.00, to (b) such Person’s Current Liabilities.
11.1.2 Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio for the Company and its Subsidiaries, on a consolidated basis, as of the last day of any fiscal quarter, for the period of four consecutive fiscal quarters ending on such date (each, a “Measurement Period”), shall not be less than 1.20 to 1.0.
As used herein,
“EBITDAR” means, for any Person, for any time period, (a) such Person’s net income (or loss) for such time period (adjusted as set forth in the immediately following sentence), plus (b) without duplication, the amounts which, in determining net income or loss, have been deducted for (i) interest expense, (ii) income tax expense, (iii) depreciation, amortization, goodwill impairment charges, stock-based compensation charges and other non-cash charges approved by Required Lenders (less non-cash gains) and (iv) rental or lease expense. For purposes of clause (a) of this paragraph, net income or loss (A) shall exclude (1) extraordinary gains or losses, and (2) Excluded Items, and (B) shall include net income or loss from discontinued operations.
“Excluded Items” means gain or loss from (a) the sale, sale and leaseback or financing of real estate, or (b) the sale of all or substantially all of the Equity Interests or assets of (i) a Dealership or other Subsidiary, (ii) a Dealership location, or (iii) any business unit or franchise of a Dealership or other Subsidiary or a Dealership location.
“Fixed Charge Coverage Ratio” means, as of the last day of any fiscal quarter, the ratio for the Measurement Period ending on such date of (a) (i) EBITDAR, minus (ii) dividends and other distributions in respect of Equity Interests and amounts expended to repurchase Equity Interests, minus (iii) income tax expense to the extent paid in cash, minus (iv) an allowance for maintenance capital expenditures in an amount equal to $85,000 for each Dealership location, plus (v) if the DCH Acquisition or any Permitted Acquisition has occurred during any Measurement Period, pro forma EBITDAR minus rental or lease expense attributable to DCH and its Subsidiaries or any new Acquisition Subsidiary or business acquired in connection with such Permitted Acquisition, as applicable, calculated as if the DCH Acquisition or such Permitted Acquisition, as applicable, had occurred on the first day of such Measurement Period (it being understood and agreed that, except when calculating pro forma EBITDAR minus rental or lease expense attributable to DCH and its Subsidiaries, pro forma EBITDAR minus rental or lease expense may not be included in this calculation to the extent that it results in an annualized increase of more than 10% in the Company’s consolidated EBITDAR minus rental or lease expense prior to such adjustment, unless the Company provides to the Agent and the Required Lenders the supporting calculations for such adjustment and such other information as they may reasonably request to determine the accuracy of such calculations), minus (vi) if the DCH Acquisition has occurred during any Measurement Period, pro forma income tax expense to the extent paid in cash by DCH and its Subsidiaries, calculated as if the DCH Acquisition had occurred on the first day of such Measurement Period; to (b) the sum for the applicable Measurement Period of (i) cash interest, plus (ii) required principal payments on Indebtedness plus (iii) rental or lease expense, plus (iv) if the DCH Acquisition has occurred during any Measurement Period, pro forma cash interest expense and pro forma required principal payments on Indebtedness (which pro forma required principal payments on Indebtedness shall be deemed to be equal to $500,000 for each full and partial month during such Measurement Period and prior to the date of this Agreement), attributable to DCH and its Subsidiaries, calculated as if the DCH Acquisition had occurred on the first day of such Measurement Period.
11.1.3 Leverage Ratio. The Leverage Ratio for the Company and its Subsidiaries on a consolidated basis, as of the last day of any fiscal quarter, shall not be greater than 5.00 to 1.0.
As used herein:
“Leverage Ratio” means, as of the last day of any fiscal quarter, the ratio for the Company and its Subsidiaries on a consolidated basis of: (a) (i) the then outstanding principal balance of all Funded Debt, minus (ii) the sum of the then outstanding principal balance of the New Vehicle Floorplan Loans, New Vehicle Swing Line Loans, Used Vehicle Floorplan Loans and Used Vehicle Swing Line Loans, plus (iii) eight times rental or lease expense for the Measurement Period ending on such date; to (b) (i) EBITDAR for the Measurement Period ending on such date, minus (ii) interest expense with respect to the New Vehicle Floorplan Loans, New Vehicle Swing Line Loans, Used Vehicle Floorplan Loans and Used Vehicle Swing Line Loans for the Measurement Period ending on such date, plus (iii) if the DCH Acquisition has occurred during the Measurement Period ending on such date, pro forma EBITDAR attributable to DCH and its Subsidiaries, calculated as if the DCH Acquisition had occurred on the first day of such Measurement Period, minus (iv) if the DCH Acquisition has occurred during the Measurement Period ending on such date, pro forma interest expense attributable to DCH and its Subsidiaries with respect to vehicle floor plan financing, calculated as if the DCH Acquisition had occurred on the first day of such Measurement Period.
11.2 Financial Information. The Company shall provide to Agent and each Lender:
11.2.1 As soon as available and in any event within 120 days after the end of each Fiscal Year of the Company: (a) the Form 10(k) for the Company and its Subsidiaries as filed with the Securities and Exchange Commission, including financial statements certified by independent public accountants of recognized national standing which are reasonably acceptable to Agent (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit and without any other material qualification or exception) to the effect that such financial statements present fairly in all material respects the financial condition and results of operations of the Company and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; and (b) a consolidating balance sheet and income statement for the Company and its Subsidiaries for such Fiscal Year.
11.2.2 As soon as available and in any event within 45 days after the end of each of the first three fiscal quarters of each Fiscal Year of the Company, the Form 10-Q for the Company and its Subsidiaries, as filed with the Securities and Exchange Commission certified by the Company’s chief financial officer or other officer acceptable to Agent as presenting fairly in all material respects the financial condition and results of operations of the Company and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes.
11.2.3 As soon as available and in any event within 30 days after the end of each calendar month, the internally prepared consolidated balance sheet and statement of operations for the Company and its Subsidiaries for such month and for the fiscal year to date, including such detail as Agent or any Lender reasonably requires, certified by the Company’s chief financial officer or other officer acceptable to Agent as presenting fairly in all material respects the financial condition and results of operations of the Company and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes.
11.2.4 Within 10 days following delivery thereof, copies of all financial statements, proxy statements, and all material written reports and information provided to its shareholders generally, and copies of all registration statements, regular, periodic or special reports, and other documents of Company or any Subsidiary filed with the Securities and Exchange Commission (or any successor agency), any other national securities exchange, or any other governmental securities regulatory authority having jurisdiction over Company or its Subsidiaries.
11.2.5 With the financial statements required by Sections 11.2.1 and 11.2.2, and in any event within the time required for delivery of such financial statements by Sections 11.2.1 and 11.2.2, a Compliance Certificate signed by the Company’s chief financial officer or other officer acceptable to Agent.
11.2.6 Within 30 days after the end of each month (or more frequently if required by Agent or Required Lenders during the existence of a Default), a Used Vehicle Borrowing Base Certificate, prepared as of the last day of such month, showing the calculation of the Used Vehicle Borrowing Base.
11.2.7 Within 30 days after the end of each month (or more frequently if required by Agent or Required Lenders during the existence of a Default), a Revolving Loan Borrowing Base Certificate, prepared as of the last day of such month, showing the calculation of the Revolving Loan Borrowing Base.
11.2.8 Promptly following Agent’s or any Lender’s request, a projected consolidated balance sheet for the Company and its Subsidiaries and related statements of income and cash flows for the time period requested by Agent or any Lender, signed by the Company’s chief financial officer or other officer acceptable to Agent, acknowledging his or her review of such projections.
11.2.9 Within 30 days after the end of each month, a report, in a form acceptable to Agent, including the net book value of Used Vehicles owned or held for sale or lease by each Dealership for 0-180 days and over 180 days as of the last day of such month.
11.2.10 Promptly following Agent’s or any Lender’s request, copies of each financial statement delivered to a manufacturer or distributor by any Dealership, as required by its agreement with the manufacturer or distributor.
11.2.11 Promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of any Loan Party, or compliance with the terms of this Agreement, as the Agent or any Lender may reasonably request, which may include without limitation a monthly statement of cash flows.
If any information which is required to be furnished to the Lenders under this Section is required by law or regulation to be filed by any Loan Party with a government body on an earlier date, then the information required hereunder shall be furnished to the Lenders at such earlier date.
Any financial statement required to be furnished pursuant to Section 11.2.1, 11.2.2, or 11.2.4 shall be deemed to have been furnished on the date on which the Lenders receive notice that the Company has filed such financial statement with the Securities and Exchange Commission and is available on the EDGAR website on the Internet at www.sec.gov or any successor government website that is freely and readily available to Agent and the Lenders without charge; provided that the Company shall give notice of any such filing to Agent (who shall then give notice of any such filing to the Lenders). Notwithstanding the foregoing, the Company shall deliver paper copies of any such financial statement to Agent if Agent so requests, until written notice to cease delivering such paper copies is given by Agent.
ARTICLE 12
AFFIRMATIVE COVENANTS
During the term of this Agreement and until termination of the availability of Credit Extensions and payment and performance in full of all Obligations and Guarantor Obligations of each Loan Party under the Loan Documents, each Borrower agrees that, unless Required Lenders shall otherwise consent in writing:
12.1 Maintenance of Existence and Permits. Except as permitted by Sections 13.1.2 and 13.1.3, each Borrower shall, and the Company shall cause each Subsidiary to, preserve and maintain its corporate, limited liability, partnership, trust or other existence and good standing or current status in the jurisdiction of its incorporation or organization and qualify and remain qualified, as a foreign corporation, limited liability company or other entity in each jurisdiction in which such qualification is required, and to maintain all patents, trademarks, copyrights, trade names, intellectual property, franchises, licenses, and permits necessary for the conduct of its business and the transactions contemplated by the Loan Documents.
12.2 ERISA. Each Borrower shall maintain, and the Company shall cause each Subsidiary to maintain, each Plan in compliance with all material applicable requirements of ERISA and of the Code and with all applicable rulings and regulations issued under the provisions of ERISA and of the Code and will not and not permit any of the ERISA Affiliates to (a) engage in any transaction in connection with which any Loan Party or any of the ERISA Affiliates would be subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code, (b) fail to make full payment when due of all amounts which, under the provisions of any Plan, any Loan Party or any ERISA Affiliate is required to pay as contributions thereto, or (c) fail to make any payments to any Multiemployer Plan that any Loan Party or any of the ERISA Affiliates may be required to make under any agreement relating to such Multiemployer Plan or any law pertaining thereto.
12.3 Inspection. Each Borrower shall, and the Company shall cause each Subsidiary to, permit representatives of Agent and the Lenders to visit and inspect any of its properties, audit and inspect any of the Collateral and examine any of its books and records (and make copies at its expense) wherever located, including, but not limited to, all manufacturers’ statements of origin, titles, demonstrator agreements, factory invoices, purchase orders, deal jackets and papers included therein, buy-back agreements and other agreements with manufacturers, distributors or other sellers of Vehicles (excluding agreements between the Company and American Honda Motors or Toyota Motor Sales, to the extent that disclosure is specifically prohibited by the terms of such agreements), and all other instruments, documents and records at any reasonable time and as often as Agent or any Lender may reasonably desire; and each Borrower shall and the Company shall cause each other Loan Party to, assist Agent and the Lenders in so doing.
12.4 Collateral Audits. Each Borrower will, and the Company will cause each Subsidiary to, permit Agent by or through any of Agent’s representatives, third party inspectors, independent contractors, attorneys or accountants, at such intervals as may be required by Agent in its sole discretion, to conduct audits of and to verify, the Collateral. Audit reports for any month shall be provided by Agent to the Lenders in the following month. The New Vehicle Floorplan Borrowers shall pay to Agent, for Agent’s sole account, such fees as are agreed to between them for collateral audits relating to New Vehicles owned by the New Vehicle Floorplan Dealerships; provided, that, (a) prior to the occurrence of an Event of Default, (i) the New Vehicle Floorplan Borrowers shall not be required to pay such fee for more than three New Vehicle collateral audits in any period of twelve consecutive months, if the Leverage Ratio is equal to or less than 2.50 to 1.0 as of the end of each fiscal quarter during such time period, and (ii) the New Vehicle Floorplan Borrowers shall not be required to pay such fee for more than four New Vehicle collateral audits in any period of twelve consecutive months, if the Leverage Ratio is greater than 2.50 to 1.0 as of the end of any fiscal quarter during such time period; and (b) following the occurrence of an Event of Default, the New Vehicle Floorplan Borrowers shall pay the costs of all New Vehicle collateral audits required by Agent. The Company shall pay the cost of all collateral audits other than collateral audits relating to New Vehicles.
12.5 Books and Records. Each Borrower shall, and the Company shall cause each Subsidiary to, keep adequate records and books of account in which complete entries will be made reflecting all material financial transactions. The Company will prepare all financial statements, computations and information required hereunder for the Company and its Subsidiaries consolidated in accordance with GAAP.
12.6 Maintenance of Properties. Each Borrower shall, and the Company shall cause each Subsidiary to, maintain, repair, and preserve all of each Loan Party’s properties (whether owned, leased or subleased) that are used or useful in the conduct of the business of the Loan Parties, or where any Collateral is located (“Properties”) in good working order and condition, ordinary wear and tear excepted, and will from time to time make or cause to be made all necessary and proper replacements, repairs, renewals, and improvements so that the efficiency and value of its Properties and facilities shall not be materially impaired.
12.7 Taxes and Other Obligations. Each Borrower shall, and the Company shall cause each Subsidiary to, timely file complete and correct United States federal and applicable foreign, state and local tax returns required by law and to pay and discharge when due all indebtedness, taxes, and other obligations for which it is liable or to which its income or property is subject and all claims for labor and materials or supplies which, if unpaid, might become by law a lien upon its assets, unless it is contesting the indebtedness, taxes, or other obligations in good faith and provision has been made for the payment thereof through setting aside on its books appropriate reserves with respect thereto in accordance with GAAP.
12.8 Insurance.
12.8.1 Maintenance of Insurance. Each Borrower shall, and the Company shall cause each Subsidiary to, maintain policies of insurance upon all of the insurable Collateral, and on its properties and operations, carried with companies reasonably acceptable to Agent, in such form and amounts and covering such risks as Agent may reasonably require and as are required by Applicable Law. Without limiting the foregoing, each Borrower shall, and the Company shall cause each Subsidiary to, maintain with financially sound and reputable independent insurers, insurance with respect to its properties and business against loss or damage of such types and in such amounts as are customarily carried under similar circumstances by Persons engaged in the same or similar businesses.
12.8.2 Form of Policies. All policies shall be written in form, amounts, coverages and basis reasonably acceptable to Agent and shall be issued by a company or companies reasonably acceptable to Agent. Agent shall be designated as loss payee with a “Lender’s Loss Payable” endorsement on casualty policies covering the Collateral and as an additional insured on liability policies. All policies shall include a provision that such policies will not be cancelled or materially amended, which term shall include any reduction in the scope or limits of coverage, without at least thirty (30) days prior written notice to Agent. Each policy also shall include an endorsement providing that coverage in favor of Agent will not be impaired in any way by any act, omission or default of any Loan Party.
12.8.3 Delivery of Certificates. Each Borrower shall, and the Company shall cause each Subsidiary to, furnish to Agent a certificate of insurance in a form reasonably acceptable to Agent evidencing such insurance coverage. At least thirty (30) days prior to the expiration date of each policy, Agent shall be provided with a renewal certificate, together with evidence that the renewal premium has been paid.
12.9 Compliance with Laws. Each Borrower shall, and the Company shall cause each Subsidiary to, comply in all material respects with all Applicable Laws (including but not limited to all Environmental Laws, Access Laws and the FLSA) and promptly provide written notice to Agent of the receipt of any notice of violation thereof from any Governmental Body which violation, alone or together with any other such violations, could reasonably be expected to have a Material Adverse Effect.
12.10 Agreements with Sellers. Each Borrower shall, and the Company shall cause each Subsidiary to, comply with Franchise Agreements, other Seller Agreements, and all other agreements between such Person and any manufacturer or distributor of New Vehicles in all material respects and shall maintain all such agreements in full force and effect, except in accordance with the disposition of a Dealership or Subsidiary in accordance with Section 13.1.2 or 13.1.3, and except as a result of termination or cessation of business not restricted by Section 13.8.
12.11 Repurchase Agreements. Each New Vehicle Floorplan Borrower shall comply with all terms and conditions of any applicable Repurchase Agreement and shall take any actions reasonably required by Agent with respect to any Repurchase Agreement.
12.12 Management. The Company shall maintain a Chief Executive Officer, President, Executive Vice President and Chief Financial Officer with qualifications and experience at least comparable to those currently holding such positions. The Company shall cause each Subsidiary to maintain executive and management personnel with qualifications and experience at least comparable to current executive and management personnel.
12.13 Landlord’s Consents. Promptly following the Closing Date and from time to time thereafter, each Borrower shall, and the Company shall cause each present and future Subsidiary to, use commercially reasonable efforts to obtain and deliver to Agent an agreement, release and consent to the security interest of Agent and the Lenders in the Collateral, in form and substance reasonably acceptable to Agent from any present or future owner or landlord of any real property leased by a Loan Party as lessee (each a “Landlord’s Consent”).
12.14 Notification. Promptly after learning thereof, the Company will notify Agent in writing of:
12.14.1 The occurrence of any Default, and if such Default is then continuing, will deliver to Agent a certificate of the Company’s chief financial officer or other authorized officer setting forth the details thereof and the action which it is taking or proposes to take with respect thereto.
12.14.2 The occurrence of any of the following that could reasonably be expected to have a Material Adverse Effect: (i) the release of any Hazardous Substances on, under, about, from, or affecting any of the Properties, any adjacent property as a result of contamination, release or activity on the Properties, or any Collateral, (ii) or any other condition threatened or asserted with respect to any such property arising under any Environmental Laws.
12.14.3 The details of any lien, litigation, administrative proceeding or judgment involving $5,000,000.00 or more individually or in the aggregate threatened, instituted or completed against any Loan Party, any Collateral, or any assets of any Loan Party (or involving $15,000,000.00 or more in the aggregate with respect to the Loan Parties taken as a whole), including but not limited to any and all enforcement, cleanup, removal or other governmental or regulatory proceedings pursuant to any Environmental Laws.
12.14.4 Any citation, order to show cause, or other legal process or order that has or could reasonably be expected to have a Material Adverse Effect, directing any Loan Party to become a party to or to appear at any proceeding or hearing by or before any Governmental Body that has granted to it any Governmental Approval, and include with such notice a copy of any such citation, order to show cause, or other legal process or order.
12.14.5 Any (a) refusal, denial, threatened denial, or failure by any Governmental Body to grant, issue, renew, or extend any material Governmental Approval; (b) proposed or actual revocation, termination, or modification (whether favorable or adverse) of any material Governmental Approval by any Governmental Body; (c) dispute or other adverse action with regard to any material Governmental Approval by any Governmental Body; (d) notice from any Governmental Body of the imposition of any material fines or penalties or forfeitures; or (e) written threats or written notice with respect to any of the foregoing or with respect to any proceeding or hearing that might result in any of the foregoing.
12.14.6 Any dispute concerning or any threatened nonrenewal or modification of any material lease for real or personal property to which it is a party.
12.14.7 Any material change in the relationship between any Dealership and any Vehicle manufacturer or distributor including, without limitation, the loss or cancellation, or threatened loss or cancellation, of a franchise, or any notice of the existence of a default under any Franchise Agreement or other Seller Agreement.
12.14.8 Any other event or circumstance which has or could reasonably be expected to have a Material Adverse Effect.
12.14.9 The receipt of any material notices (including notices of default or acceleration) received from any holder or trustee of, under or with respect to its Subordinated Debt (if any) (which shall include copies of such notices).
12.14.10 With respect to a Plan, (i) any failure to pay all required minimum contributions and installments on or before the due dates provided under Section 430(j) of the Code or (ii) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA, of an application for a waiver of the minimum funding standard.
12.14.11 The occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, would reasonably be expected to result in material liability.
12.15 Further Assurances. From time to time, when requested by Agent or any Lender, it shall, and the Company shall cause each Subsidiary to, duly execute and deliver or cause to be duly executed and delivered to Agent such further instruments, agreements, and documents and do or cause to be done such further acts as Agent or any Lender deems reasonably necessary to carry out more effectively the provisions and purpose of this Agreement and the other Loan Documents. Without limiting the foregoing, each Borrower shall, and the Company shall cause each Subsidiary to, promptly correct any defect or error that may be discovered in any Loan Document or in the execution, acknowledgment or recordation thereof. Promptly upon request by Agent, each Borrower shall, and the Company shall cause each Subsidiary to, do, execute, acknowledge, deliver, record, re-record, file, re-file, register and reregister, any and all deeds, conveyances, mortgages, deeds of trust, trust deeds, assignments, estoppel certificates, financing statements and continuations thereof, notices of assignment, transfers, certificates, assurances and other instruments as Agent may reasonably require from time to time in order: (a) to carry out more effectively the purposes of the Loan Documents and (b) to better assure, convey, grant, assign, transfer, preserve, protect and confirm unto Agent the rights granted now or hereafter intended to be granted to Agent or the Lenders under any Loan Document or under any other instrument executed in connection with any Loan Document or that any Loan Party may be or become bound to convey, mortgage or assign to Agent in order to carry out the intention or facilitate the performance of the provisions of any Loan Document. Each Borrower shall, and the Company shall cause each Subsidiary to, furnish to Agent evidence satisfactory to Agent of every such recording, filing or registration.
12.16 Deposit Accounts. Except as consented to in writing by Agent and Required Lenders, which consent shall not be unreasonably withheld, each Borrower shall, and the Company shall cause each Subsidiary to, maintain its primary operating deposit accounts with one or more of the Lenders. Except as provided in Subsection (c) of Section 8.1.4, all deposit accounts other than trust accounts shall be subject to a control agreement (in form and content reasonably satisfactory to the Agent and the Required Lenders) between any Lender having a security interest in such account, depository bank, Agent, and the applicable Loan Parties, which control agreement shall establish a perfected priority security interest (subject only to the Permitted Liens) in favor of Agent, for the benefit of the Lenders, in all such deposit accounts.
12.17 Joinder of New Subsidiaries. Each Person (other than an Acquisition Subsidiary) which is a Permitted New Dealership or an Other New Subsidiary or which, with the consent of the Required Lenders, becomes a Subsidiary of the Company, shall execute a Guarantor Joinder Agreement (or if it is to become a New Vehicle Floorplan Borrower, a Borrower Joinder Agreement) and shall execute such other documents and satisfy such requirements as Agent reasonably requires so that such Person becomes a Guarantor and a Loan Party and, if applicable, a New Vehicle Floorplan Borrower, and grants a security interest to Agent for the benefit of the Lenders in the Collateral owned by such Person. Each new Subsidiary shall satisfy all requirements applicable to an Acquisition Subsidiary which are set forth in Section 13.13 (d), (g), (i), (j), (k) (if such Subsidiary is a Dealership), (l) and (p).
ARTICLE 13
NEGATIVE COVENANTS
During the term of this Agreement and until termination of the availability of Credit Extensions and payment and performance in full of all Obligations and Guarantor Obligations of each Loan Party under the Loan Documents, each Borrower agrees that, unless Required Lenders shall otherwise consent in writing:
13.1 Mergers, Etc.
13.1.1 (a) Each Borrower shall not, and the Company shall not permit any Subsidiary to, wind up, liquidate, dissolve or reorganize, merge into or consolidate with any other Person, permit any other Person to merge into or consolidate with it, or convey, sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any substantial part of its assets (except, with respect to sales of less than substantially all of its assets, for sales of inventory, chattel paper and equipment in the ordinary course of business) or all or any substantial part of the stock or other Equity Interests of Subsidiaries of the Company (in each case, whether now owned or hereafter acquired), or take any action to authorize winding up, dissolution, or liquidation, except that, if at the time thereof and after giving effect thereto no Default shall have occurred and be continuing (i) any Subsidiary may merge into the Company in a transaction in which the Company is the surviving corporation, (ii) any wholly owned Subsidiary may merge into another wholly-owned Subsidiary, and (iii) any wholly-owned Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the Company or to another wholly-owned Subsidiary, so long as Agent and the Lenders shall continue to have a perfected security interest in the transferred assets, subject to no Liens other than Permitted Liens existing on the date of the transfer.
(b) If any New Vehicle Floorplan Dealership is involved in a transaction described in clause (i), (ii) or (iii) of Section 13.1.1(a) or in Section 13.1.2 or will otherwise cease to be a New Vehicle Floorplan Dealership, the Subsidiary that is the transferor or will not survive the merger (“Terminating Borrower”) shall execute a Borrower Termination Agreement (or if the Dealership will also cease to be a Guarantor, a Termination Agreement), the Dealership Loan Limit for such Dealership shall be deleted, and Agent shall obtain any required amendment to any intercreditor agreement, the Related Principal Portion of all New Vehicle Loans made to finance New Vehicles for such Terminating Borrower shall be repaid, and all conditions in Section 9.3 shall be satisfied with respect to any transferee or surviving New Vehicle Floorplan Dealership.
(c) If any Subsidiary other than a New Vehicle Floorplan Dealership is involved in a transaction described in clause (i), (ii), or (iii) of Section 13.1.1(a) or in Section 13.1.2 or will otherwise cease to be a Guarantor, the Subsidiary that is the transferor or will not survive the merger shall execute a Termination Agreement and satisfy such other conditions as Agent reasonably requires to remove such Subsidiary as a Guarantor.
13.1.2 Notwithstanding the provisions of Section 13.1.1, the Company or any Subsidiary may sell all or substantially all of the assets of, or all or substantially all of the capital stock or Equity Interests in, any Dealership or other Subsidiary (or of any business unit or franchise of a Dealership or other Subsidiary) for not less than fair market value, if (a)(i) the sales price (excluding real property and Vehicle inventory) for any individual Subsidiary is not more than $20,000,000.00 and the sale price (excluding real property and Vehicle inventory) for all sales pursuant to this Section 13.1.2 does not exceed $50,000,000.00 in any period of twelve consecutive months, (ii) no Default shall exist immediately prior to or upon giving effect to any such sale, and (iii) the conditions in Section 13.1.1 are satisfied, or (b) Required Lenders have consented in writing to the sale and each Loan Party has complied with all terms and conditions of such consent.
13.1.3 Notwithstanding the provisions of Sections 13.1.1 and 13.1.2, any Subsidiary that no longer has assets (or that has assets with an aggregate book value less than $25,000) may discontinue operations and dissolve or liquidate unless such action would constitute a Material Adverse Effect or any Default shall exist immediately prior to or upon giving effect thereto.
13.2 Guaranties, Etc. Each Borrower shall not, and the Company shall not permit any Subsidiary to, enter into or permit to exist any Contingent Obligations, except Contingent Obligations permitted by Section 13.10.
13.3 Liens. Each Borrower shall not, and the Company shall not permit any Subsidiary to, grant or permit to exist a security interest in or Lien on its presently owned or hereafter acquired real or personal property except:
(a) Liens in favor of Agent for the benefit of the Lenders which secure the Obligations, Guarantor Obligations, and Permitted Swap Obligations.
(b) Liens for taxes, assessments or other government charges or levies not yet due and payable or, if due and payable, if they are being contested in good faith by appropriate proceedings and for which appropriate reserves are maintained.
(c) Liens imposed by law, such as mechanics’, materialmen’s, landlords’, warehousemen’s, and carriers’ Liens, and other similar Liens, securing obligations incurred in the ordinary course of business which are not past due for more than 30 days or which are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established.
(d) Liens under workers’ compensation, unemployment insurance, Social Security, or similar legislation (excluding, however, Liens arising under ERISA) which are not past due for more than 30 days or which are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established.
(e) Liens, deposits, or pledges to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), leases (permitted under the terms of this Agreement), public or statutory obligations, surety, stay, appeal, indemnity, performance or other similar bonds, or other similar obligations arising in the ordinary course of business which are not past due for more than 30 days or which are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established.
(f) Judgment and other similar Liens arising in connection with court proceedings, in an aggregate amount not in excess of $5,000,000.00 for any Loan Party or in excess of $15,000,000.00 in the aggregate for the Loan Parties taken as a whole; provided the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings, and the existence thereof does not constitute a Default hereunder.
(g) Easements, rights-of-way, zoning restrictions, and other similar encumbrances in existence on the date of this Agreement or which, in the aggregate, do not materially interfere with the occupation, use, and enjoyment by any Loan Party of the property or assets encumbered thereby in the normal course of its business or materially impair the value of the property subject thereto.
(h) Liens on Service Loaner Vehicles of a Dealership and proceeds thereof securing Other Floor Plan Financing permitted by Section 13.10(e), and which are, only as to liens in existence on the Closing Date, listed on the Disclosure Schedule; provided that if required by Agent, the Other Floor Plan Lender providing such financing has entered into an intercreditor agreement with Agent in form and content reasonably satisfactory to Agent and the Required Lenders.
(i) Purchase money Liens hereafter created by any Loan Party to secure the purchase price of equipment acquired after the Closing Date, so long as (i) such equipment is acquired in the ordinary course of such Person’s business, (ii) such Lien attaches to such equipment no later than 10 days after the acquisition thereof; (iii) such Lien does not extend to any property other than the equipment acquired, (iv) such Lien secures only the obligation to pay the purchase price of such equipment, and (v) the Indebtedness secured is permitted by Section 13.10(j) hereof.
(j) Liens in existence on the Closing Date securing Indebtedness permitted by Section 13.10 hereof (if such Indebtedness is permitted to be secured), which are listed on the Disclosure Schedule.
(k) Liens securing obligations in respect of Capitalized Leases provided that such Capitalized Leases are otherwise permitted under this Agreement, and such Liens attach only to the property being leased.
(l) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of setoff or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution (provided that such deposit accounts are permitted) and, if such deposit accounts are with a Lender (or with another financial institution, if required by Agent), such liens are subordinated to the Liens in favor of Agent and the Lenders under the Collateral Documents.
(m) Liens on property (excluding Collateral) acquired after the Closing Date which are in existence at the time such property is acquired, which were not incurred in contemplation of the acquisition, and which secure Indebtedness permitted by this Agreement.
(n) Liens on assets owned by any Excluded Subsidiary or any Real Estate Subsidiary (other than Collateral and Eligible Real Property) which secure Indebtedness permitted by this Agreement, and Liens on Equity Interests in Excluded Subsidiaries (other than LCDC) granted in connection with Investments described in Section 13.6(p).
(o) Liens consented to in writing by Agent and Required Lenders.
Notwithstanding the foregoing, except for Liens in favor of Agent, there shall not be any Liens on any of the capital stock or other Equity Interests of any Subsidiary.
13.4 Restricted Payments. Each Borrower shall not, and the Company shall not permit any Subsidiary to (a) declare or pay, or agree to declare or pay, or set aside funds for the payment, directly or indirectly of, any Restricted Payment, or (b) pay or agree to pay or set aside funds to pay any management fees or similar fees in the case of the Company, to any direct or indirect Affiliate thereof, or in the case of any other Loan Party, to any direct or indirect owner of its Equity Interests or any direct or indirect Affiliate thereof, except (c) (i) Subsidiaries of the Company may make Restricted Payments or payments of such fees to the Company or to any other Loan Party, and (ii) the Company may reacquire shares from eligible participants in its stock incentive plans, as required under the terms of the plans to permit cashless exercise and tender of shares to meet withholding obligations for income tax purposes. Notwithstanding the foregoing, and so long as no Default or Event of Default has occurred and is continuing or would exist after giving effect thereto, (y) the Company may pay dividends on its capital stock, and (z) the Company may repurchase shares of its capital stock.
13.5 Subordinated Debt. If any Subordinated Debt is outstanding, each Borrower shall not, and the Company shall not permit any Subsidiary to (a) make any amendment or modification to the indenture, note or other agreement evidencing or governing any Subordinated Debt; (b) make any scheduled payment of the principal of or interest on any Subordinated Debt which would be prohibited by the terms of such Subordinated Debt or any related subordination agreement; (c) directly or indirectly make any prepayment on or purchase, redeem or defease any Subordinated Debt or offer to do so (whether such prepayment, purchase or redemption, or offer with respect thereto, is voluntary or mandatory); (d) take or omit to take any action if as a result of such action or omission the subordination of such Subordinated Debt, or any part thereof, to the Obligations might be terminated, impaired or adversely affected; or (e) omit to give Agent prompt notice of any notice received from any holder of Subordinated Debt, or any trustee therefor, or of any default under any agreement or instrument relating to any Subordinated Debt by reason whereof such Subordinated Debt might become or be declared to be due or payable.
13.6 Loans and Investments. Each Borrower shall not, and the Company shall not permit any Subsidiary to (a) make or contract to make any loan or advance to any Person (other than short term trade advances in the ordinary course of business), or incur Contingent Obligations with respect to the obligations of any Person; (b) purchase or otherwise acquire, any capital stock, obligations, or other securities of, make any capital contributions to, or otherwise invest in or acquire any interest in any Person, or participate as a partner or joint venturer with any other Person (the matters described in clause (a) and (b) are collectively, “Investments”), except:
(a) Investments by the Company in any Subsidiary or Affiliate or by any Subsidiary in any of its Subsidiaries or Affiliates, in each case, which exist as of the Closing Date;
(b) In the ordinary course of business, Investments by the Company in any Subsidiary or by any Subsidiary in the Company, or by any Subsidiary in any other Subsidiary, by way of capital contributions, intercompany loans, advances or guaranties, to the extent permitted by this Agreement;
(c) Contingent Obligations permitted by Section 13.10.
(d) Cash Equivalent Investments;
(e) Bank deposits in the ordinary course of business;
(f) Investments in securities of account debtors received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such account debtors;
(g) The DCH Acquisition and Investments pursuant to a Permitted Acquisition;
(h) Investments, in an aggregate amount for the Company and its Subsidiaries not to exceed $5,000,000.00, in equity securities of companies which are not Affiliates of the Company;
(i) Investments listed on the Disclosure Schedule;
(j) Extensions of credit to customers made in the ordinary course of business and in connection with the sale or lease of inventory in the ordinary course of business;
(k) Investments by the Company not exceeding $20,000,000 in the aggregate in equity interests representing up to 49% ownership in minority owned automobile dealers in accordance with the guidelines of the National Association of Minority Automobile Dealers (each, a “Minority Dealer Affiliate”) (it being understood that any entities in which such investments are made shall not be considered Subsidiaries for the purposes of this Agreement and shall not be included as Subsidiaries in any of the financial statements of the Company and its Subsidiaries that are required under this Agreement);
(l) Such other Investments as are consented to by the Required Lenders in their sole discretion; and
(m) Extensions of credit to Persons acquiring the assets of a Dealership or another Subsidiary pursuant to a sale permitted by Section 13.1.2 (“Seller Notes”), in an aggregate principal amount, for the Company and its Subsidiaries, not to exceed $10,000,000.00 outstanding at any time;
(n) Investments in equity interests in Permitted New Dealerships;
(o) Investments not in the ordinary course of business in equity interests in Other New Subsidiaries, provided that the investment in any Other New Subsidiary shall not exceed $2,000,000.00 and the aggregate of all investments in Other New Subsidiaries shall not exceed $4,000,000.00 during the time period from the Closing Date to the Termination Date; and
(p) Investments by the Company or any Subsidiary in Community Development Entities under the Federal New Markets Tax Credit Program, provided that the aggregate amount of such Investments do not exceed $50,000,000.00;
provided that (x) any Investment which when made complies with the requirements of the definition of the term “Cash Equivalent Investment” may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements; (y) no Investment otherwise permitted by clause (c), (g), (h), or (k) shall be permitted to be made if, immediately before or after giving effect hereto, any Default or Event of Default exists; and (z) the Company shall not, and shall not permit any Subsidiary to, create or acquire, or make any Investment in any Subsidiary, not organized under the laws of a State of the United States.
13.7 Transactions with Affiliates. Other than service agreements with DiMar Holdings, LLC, and its subsidiaries, each Borrower shall not, and the Company shall not permit any Subsidiary to, enter into any transaction with any Affiliate, except a wholly-owned Subsidiary which is a Guarantor, including without limitation, the purchase, sale, or exchange of property or the rendering of any service, except in the ordinary course of business and upon fair and reasonable terms no less favorable to it than those that would prevail in a comparable arm’s-length transaction with a Person not an Affiliate.
13.8 Type of Business. Each Borrower shall not, and the Company shall not permit any Subsidiary to, make any material change in the type, character or nature of its business activities, engage in any new type of business activity unrelated to its existing business or, except as a result of transactions permitted by Sections 13.1.1 or 13.1.2, interrupt or cease to engage in, for a time deemed material by Agent, any material portion of its business activities or operations.
13.9 Structure. Each Borrower shall not, and the Company shall not permit any Subsidiary to, make any material change in its organizational structure or capital structure, or make any material modification in its Articles of Organization or Incorporation, Partnership Agreement, Operating Agreement, Bylaws, or other organizational documents.
13.10 Indebtedness. Each Borrower shall not, and the Company shall not permit any Subsidiary to, incur or permit to exist any Indebtedness to any Person except:
(a) Indebtedness (including Contingent Obligations) incurred pursuant to this Agreement and the Loan Documents.
(b) Short-term unsecured trade obligations incurred in the ordinary course of business which are not past due.
(c) Indebtedness in respect of Permitted Swap Obligations.
(d) Funded Debt of LCDC or any Real Estate Subsidiary which is secured primarily by real estate owned by LCDC or such Real Estate Subsidiary, and Funded Debt of any Excluded Subsidiary (other than LCDC).
(e) Subject to satisfaction of the requirements of Section 13.3(h) by each Other Floor Plan Lender, Funded Debt of the Dealerships with respect to Other Floor Plan Financing provided by Other Floor Plan Lenders, in an aggregate principal amount not in excess of $60,000,000.00 outstanding at any time.
(f) Unsecured guarantees by the Company of (i) Other Floorplan Financing obligations of Dealerships to Other Floorplan Lenders, (ii) debt of any Real Estate Subsidiary which is permitted under Section 13.10(d), (iii) operating leases of its Subsidiaries and Minority Dealer Affiliates, (iv) extensions of credit to a Minority Dealer Affiliate, all proceeds of which are used to purchase New Vehicles or Service Loaner Vehicles to be held by the Minority Dealer Affiliate for sale and/or lease in the ordinary course of business, and (v) obligations of Dealerships to manufacturers or distributors of New Vehicles under Seller Agreements. Notwithstanding any contrary provisions hereof, the foregoing guarantees shall be the only guarantees by the Company.
(g) Unsecured Indebtedness of the Company to any Subsidiary.
(h) Unsecured Indebtedness of any Subsidiary to the Company or another Subsidiary.
(i) Indebtedness existing on the Closing Date and set forth on the Disclosure Schedule, provided that such Indebtedness shall not be increased and that no additional collateral shall be provided for such Indebtedness.
(j) Funded Debt in an aggregate principal amount not to exceed for the Company and its Subsidiaries $5,000,000.00 at any time outstanding, provided that such indebtedness is either unsecured or is purchase money indebtedness incurred to acquire equipment which is secured only by the equipment acquired and such equipment secures only the obligation to pay the purchase price.
(k) Unsecured guaranties by a Subsidiary of the obligations of any Real Estate Subsidiary on (i) real estate leases between such Real Estate Subsidiary and an owner of real estate which has been subleased by such Real Estate Subsidiary to such Subsidiary, and (ii) Indebtedness incurred by such Real Estate Subsidiary which is permitted under Subsection 13.10(d) and which is obtained to finance real estate leased by such Real Estate Subsidiary to such Subsidiary.
(l) Additional Funded Debt, which together with all other Funded Debt permitted by this Section 13.10, excluding Indebtedness described in Section 13.10(a) and Other Floor Plan Financing permitted by Section 13.10(e) (“Excluded Funded Debt”), does not at any time for the Company and all Subsidiaries exceed an aggregate outstanding principal amount of $600,000,000.00; provided that any such Indebtedness incurred after the Closing Date, shall be unsecured, unless permitted to be secured by the terms of this Agreement. Notwithstanding any contrary provision hereof, the Funded Debt of the Company and its Subsidiaries (excluding Excluded Funded Debt, but including all other Funded Debt described in this Section 13.10) shall not at any time exceed an aggregate principal amount of $600,000,000.00.
(m) Indebtedness appearing as a claims reserve (or similar term) on the balance sheet of the Company and its Subsidiaries, which represents amounts which have been received but which will be expended to pay warranty and service claims by customers of the Dealerships.
(n) Guaranties by Lithia Financial Corporation of Permitted Swap Obligations.
13.11 Margin Stock; Speculation. Each Borrower shall not, and the Company shall not permit any Subsidiary to, use any part of the proceeds of any Loan, either directly or indirectly, for the purpose, whether immediate, incidental, or ultimate, of purchasing or carrying any margin stock (within the meaning of Regulation U) or extending credit to others for the purpose of purchasing or carrying any margin stock or for any purpose which violates any applicable provision of any regulation of the Board of Governors of the Federal Reserve System. No Loan Party shall be engaged principally or as one of its important activities in the business of extending credit for the purpose of purchasing or conveying any margin stock. No part of the proceeds of any Loan will be used for speculative investment purposes, including without limitation speculating or hedging in the commodities and/or futures market.
13.12 Restrictive Agreements. Except for Permitted Restrictions and the provisions of this Agreement and the other Loan Documents, each Borrower shall not, and the Company shall not permit any Subsidiary to (a) enter into or permit to exist any arrangement, contract, or agreement which directly or indirectly prohibits any Loan Party from or imposes any restrictions on creating, assuming or incurring any Lien upon all or any portion of its properties, revenues or assets or those of any of its Subsidiaries whether now owned or hereafter acquired, or (b) enter into or permit to exist any agreement, contract or arrangement restricting the ability of any Subsidiary to pay or make dividends or distributions in cash or kind to the Company or any other Subsidiary, to make loans, advances or other payments of whatsoever nature to the Company or any other Subsidiary, to make transfers or distributions of all or any part of its assets to the Company or any other Subsidiary, or to borrow money from the Company or any other Subsidiary, (c) enter into or permit to exist any agreement, contract or arrangement which directly or indirectly prohibits any Subsidiary from guarantying or imposes restrictions on the ability of any Subsidiary to guaranty, the Obligations, or (d) enter into or permit to exist any agreement or arrangement which would be violated by the extensions of credit contemplated hereunder or the performance by any Loan Party of its obligations under the Loan Documents.
13.13 Permitted Acquisitions. Except as otherwise permitted by Section 13.6 and except for acquisitions of real estate by a Real Estate Subsidiary, each Borrower shall not, and the Company shall not permit any Subsidiary to acquire Control of any Person or acquire all or substantially all of the assets of any Person or of any business unit or line of business of any Person (an “Acquisition”) except upon satisfaction of the following requirements:
(a) The Acquisition consists of the acquisition by the Company, directly or indirectly, of (i) 100% of the Equity Interests of a Person that following the Acquisition will be a Dealership (“New Dealership”) or, in the case of a Majority Acquisition, at least 80% of the Equity Interests, or (ii) all or substantially all of the assets of a dealership, or of a business unit or line of business of a dealership.
(b) The Company shall give Agent prior written notice of the proposed Acquisition at least 30 days prior to the closing date of such Acquisition or, if later, within 5 days after execution of the purchase agreement for such Acquisition.
(c) The Board of Directors (or other Persons exercising similar functions) of the seller have not disapproved the transaction or recommended that such transaction be disapproved.
(d) Upon consummation of the Acquisition, the Person being acquired (or the Person acquiring the assets in an asset purchase) shall be a wholly owned (or in the case of a Majority Acquisition, at least 80% owned), direct or indirect, Subsidiary of the Company (an “Acquisition Subsidiary”) or shall be merged into the Company.
(e) Each Acquisition Subsidiary (including Subsidiaries acquired in Majority Acquisitions) shall execute a Guarantor Joinder Agreement (or if the Acquisition Subsidiary is to become a New Vehicle Floorplan Borrower, a Borrower Joinder Agreement), and any other documents reasonably required by Agent or any Lender so that such Acquisition Subsidiary becomes a Guarantor of the Used Vehicle Floorplan Obligations, Revolving Loan Obligations and, if applicable, a New Vehicle Floorplan Borrower, and grants a security interest in the Collateral of such Acquisition Subsidiary.
(f) All representations and warranties in this Agreement shall be true and correct in all material respects as of the date of any Acquisition unless such representation or warranty refers to another date and except as previously disclosed to and accepted by Agent in writing, and no Default shall have occurred and be continuing or will exist after giving effect to the Acquisition. For purposes of this determination, all requirements applicable to any Guarantor, New Vehicle Floorplan Borrower (if applicable), or Subsidiary shall be deemed to apply to any Acquisition Subsidiary.
(g) Agent shall have received the organizational documents, status or good standing certificates and resolutions, or other authorizations demonstrating the due organization, valid existence, qualification to do business and (where applicable) good standing of any Acquisition Subsidiary, and the authority of the Acquisition Subsidiary to become a Loan Party, New Vehicle Floorplan Borrower (if applicable), and Guarantor.
(h) Agent shall have received copies of the purchase agreement and lease, if any, relating to that Acquisition.
(i) Agent shall have perfected security interests in the Collateral owned by the Acquisition Subsidiary as security for all of the Used Vehicle Floorplan Obligations, Revolving Loan Obligations, Guarantor Obligations, and Permitted Swap Obligations, and if applicable, the New Vehicle Floorplan Loan Obligations, subject only to Permitted Liens, and shall have received satisfactory evidence of perfection and the priority of such security interests, including without limitation such Uniform Commercial Code and other searches, signed termination statements or payoff letters and other filings as Agent or any Lender deems appropriate, which shall include evidence of the termination of, or reasonably satisfactory arrangements for the termination of, the security interests of any secured party in any of the assets acquired or of the Acquisition Subsidiary.
(j) Agent shall have conducted such audits of any Collateral being acquired or which is owned by any Acquisition Subsidiary as is desired by Agent, the results of which shall be satisfactory to Agent.
(k) The Company and/or any Acquisition Subsidiary shall have received approval of all material Seller Agreements (including without limitation Franchise Agreements), between any Acquisition Subsidiary and any manufacturer or distributor of Vehicles for which the Acquisition Subsidiary will act as a dealer as may be necessary for the Acquisition Subsidiary to conduct its intended business following the Acquisition. The Company or the Acquisition Subsidiary shall deliver to Agent copies of all such Seller Agreements promptly upon receipt, other than those disclosure of which is prohibited by the relevant manufacturer or distributor, if requested by Agent or any Lender.
(l) All insurance required under Section 12.8 shall have been obtained and Agent shall have received evidence thereof in the form of a certificate of insurance as required under Section 12.8.
(m) The Company has delivered to Agent a certificate in a form acceptable to Agent and signed by its chief financial officer or other officer acceptable to Agent, certifying that all conditions in Section 13.13(a), (c), (d), (f) and (k) have been satisfied or will be satisfied as of the date of the Acquisition.
(n) If requested by Agent or any Lender, the Company has delivered to Agent, (i) a Compliance Certificate, together with all supporting documentation reasonably required by Agent or any Lender, prepared on a pro forma basis as of the most recent date for which a Compliance Certificate was furnished to Agent, demonstrating that the Company and its Subsidiaries would have been in compliance with the requirements of Section 11.1 if the Acquisition had occurred on the first day of the period covered by the Compliance Certificate, and (ii) if requested by Agent or any Lender, copies of the seller’s financial statements.
(o) The aggregate consideration paid for the assets acquired (other than real property and Vehicles), or for the Equity Interests acquired, shall not exceed (i) $20,000,000.00 for any single Acquisition, or (ii) (A) $50,000,000.00 for all Acquisitions during any period of twelve consecutive months ending prior to April 1, 2014; (B) $75,000,000.00 for all Acquisitions during the period of twelve consecutive months beginning on April 1, 2014 and ending on March 31, 2015; and (C) $60,000,000.00 for all Acquisitions during any period of twelve consecutive months beginning after March 31, 2015.
(p) Agent has received such additional documents, approvals, consents and information and each Loan Party has satisfied such additional requirements as Agent or any Lender reasonably requests.
13.14 Accounting Changes; Fiscal Year. Each Borrower shall not, and the Company shall not permit any Subsidiary to, make any change in accounting treatment or reporting practices, except as permitted by GAAP, or change its Fiscal Year.
13.15 Excluded Subsidiaries and Real Estate Subsidiaries. Neither LCDC nor any Real Estate Subsidiary shall own any assets other than real estate, cash, and assets incidental to the operation of specific real estate; provided, however that neither LCDC nor any Real Estate Subsidiary shall in any event own any equipment (except fixtures attached to real estate) or inventory. No Excluded Subsidiary (other than LCDC) shall own any assets other than Investments permitted under Section 13.6(p).
ARTICLE 14
DEFAULT AND REMEDIES
14.1 Events of Default. The occurrence of any of the following shall constitute an Event of Default under this Agreement and each of the Loan Documents:
14.1.1 Any Loan Party shall fail to pay (a) when due, any principal owing under this Agreement, Letter of Credit, LC Agreement, or any other Loan Document, or (b) within 3 days after it is due, any interest or fee payable under this Agreement, Letter of Credit, LC Agreement, or any other Loan Document or (c) when due and uncured within 5 days after notice from Agent that such amount remains unpaid, any other amount payable under this Agreement, Letter of Credit, LC Agreement, or any other Loan Document.
14.1.2 Any default under or any failure of any Loan Party to perform or comply with any term, condition, covenant or obligation (a) set forth in Section 11.1, 12.1, 12.10 or Article 13 of this Agreement or (b) set forth in any provision of this Agreement (except an Event of Default specified in Section 14.1.1, 14.1.2(a) or elsewhere in Section 14.1), any other Loan Document or any other Agreement between Agent or any Lender and any Loan Party, and such default or failure is not cured within 30 days after the earlier of the date any Loan Party knows or reasonably should know thereof or the date on which Agent gives written notice thereof to Borrower (provided, however, that such cure period is available only if the applicable default or failure is reasonably capable of being cured).
14.1.3 Any default occurs in the payment or performance of any material provisions of any agreement or condition relating to any Indebtedness (except as described in Section 14.1.16) in an aggregate amount outstanding for such Indebtedness for all Loan Parties that, together with amounts described in Section 14.1.16, is in excess of $5,000,000.00 (other than Indebtedness owing under the Loan Documents) and the period of grace, if any, to cure such default shall have passed, and the default constitutes (a) nonpayment, or (b) any event or condition, the effect of which is to cause or permit the holder of such Indebtedness to cause such Indebtedness to become due prior to its maturity date.
14.1.4 Any default occurs under or any Loan Party fails to pay, perform or comply with any material terms, conditions or obligations in any Collateral Document or any Lien created or purported to be created by any Collateral Document shall cease to be, or shall be asserted by any Person not to be, a valid, perfected Lien with a priority that is subject only to the Permitted Liens.
14.1.5 Any Guaranty or other Loan Document ceases to be, or shall be asserted by any Borrower or any Guarantor not to be, in full force and effect, or any Guarantor shall attempt to revoke, repudiate, or limit any Guaranty.
14.1.6 Any warranty, representation, statement, or information made or furnished to Agent or any Lender by or on behalf of any Loan Party proves to have been false or misleading in any material respect when made, furnished, or certified, or when deemed made, furnished, or certified.
14.1.7 Custody or control of any substantial part of the property of any Loan Party is assumed by any Governmental Body or any Governmental Body takes any final action, the effect of which would be a Material Adverse Effect.
14.1.8 (a) Any Loan Party shall commence any case, proceeding, or other action (i) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition, or other relief with respect to it or its debts, or (ii) seeking appointment of a receiver, trustee, custodian, or other similar official for it or for all or any substantial part of its assets, or any Loan Party shall make a general assignment for the benefit of its creditors; or (b) there shall be commenced against any Loan Party any case, proceeding, or other action of a nature referred to in clause (a) above which (iii) results in the entry of an order for relief or any such adjudication or appointment or (iv) remains undismissed, undischarged, unstayed, or unbonded for a period of 30 days; or (c) there shall be commenced against any Loan Party any case, proceeding, or other action seeking issuance of a warrant of attachment, execution, distraint, or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief which shall not have been vacated, discharged, stayed, or bonded pending appeal within 30 days from the entry thereof; or (d) any Loan Party shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in any of the acts set forth in clauses (a), (b), or (c) above; (e) any Loan Party shall admit in writing its inability to pay its debts as they become due or shall, within the meaning of the United States Bankruptcy Code (11 U.S.C. §101 et seq.), generally not pay its debts as they become due; or (f) any Loan Party is not Solvent.
14.1.9 Except as permitted by Section 13.1, (a) any Loan Party which is a corporation, partnership, limited liability company or other type of entity is dissolved or liquidated or takes any action to authorize a dissolution or liquidation; or (b) any Loan Party which is a trust (or trustee acting with respect to property held in trust) is revoked, amended or terminated.
14.1.10 Any refusal or failure by any Governmental Body to issue, renew, or extend any material lease or Governmental Approval with respect to the operation of the business of any Loan Party or its Subsidiaries, or any denial, forfeiture or revocation by any Governmental Body of any Governmental Approval, that could reasonably be expected to have a Material Adverse Effect.
14.1.11 One or more judgments, writs of attachment, or similar process, in an aggregate amount in excess of $5,000,000.00 (in excess of insurance coverage) shall be entered or filed against any Loan Party or any property of any Loan Party and remains unpaid, unvacated, unbonded or unstayed for a period of 30 days or more.
14.1.12 (a) With respect to a Plan, a Loan Party or an ERISA Affiliate is subject to a lien in excess of $5,000,000.00, pursuant to Section 430(k) of the Code or Section 302(c) or ERISA or Title IV or ERISA, or (b) an ERISA Event shall have occurred that, in the opinion of the Required Lenders, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect.
14.1.13 (a) The Company or any New Vehicle Floorplan Dealership fails to pay, perform or comply with any material term, condition or obligation in any Seller Agreement, or any such agreement ceases to be, or is asserted by any Person not to be, in full force and effect, or the other party to such agreement gives notice of default to the Company or any New Vehicle Floorplan Dealership, or (b) any event specified in clause (a) occurs with respect to any Loan Party other than a New Vehicle Floorplan Borrower and the result of such failure, cessation, or notice of default has, or might be expected to have, a Material Adverse Effect.
14.1.14 Any Repurchase Agreement ceases to be, or is asserted by any manufacturer or distributor of Vehicles not to be, in full force and effect.
14.1.15 There is any Change in Control.
14.1.16 (a) Any default occurs under or any Loan Party fails to pay, perform or comply with the terms of any Swap Contract or (b) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (i) any event of default under such Swap Contract as to which the Company or any Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (ii) any Termination Event (as so defined) under such Swap Contract as to which the Company or any Subsidiary is an Affected Party (as so defined) and, in either event, the Swap Termination Value owing by the Applicable Loan Parties under all such Swap Contracts as a result thereof, together with all defaulted Indebtedness of the Loan Parties described in Section 14.1.3, is greater than $5,000,000.00.
14.2 Consequences of Default; Rights and Remedies. Time is of the essence of this Agreement.
14.2.1 Upon the occurrence or existence of any Event of Default (other than an Event of Default referred to in Section 14.1.8) and at any time thereafter during the continuance of such Event of Default, Agent shall have the right, by written notice to the Company, to: (a) terminate the availability of PR Account Advances and terminate the Commitments to make Loans and issue Letters of Credit; (b) declare all outstanding Obligations payable by the Revolving Loan Borrower, Used Vehicle Floorplan Borrower, and the New Vehicle Floorplan Borrowers to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Loan Documents to the contrary notwithstanding; (c) direct the Revolving Loan Borrower to deliver to Agent funds in an amount equal to the aggregate stated amount of the LC Obligations, such funds to be held in the LC Collateral Account, and/or (d) direct the New Vehicle Floorplan Borrowers to deliver to Agent funds in an amount which Agent estimates it or the Swing Line Lender may be required to pay pursuant to Payment Commitments which may be presented thereafter, such collateral to be held in the Payment Commitment Collateral Account. The applicable Borrowers shall immediately deliver to Agent all such funds required by Agent.
14.2.2 Upon the occurrence or existence of any Event of Default described in Section 14.1.8, immediately and without notice, (a) the Commitments and the availability of Loans and Letters of Credit shall automatically terminate, (b) all outstanding Obligations shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Loan Documents to the contrary notwithstanding, (c) the Revolving Loan Borrower shall automatically become obligated to deliver to the Agent Cash Collateral in an amount equal to the aggregate stated amount of the LC Obligations, which funds shall be held by the Agent in the LC Collateral Account, and (d) the New Vehicle Floorplan Borrowers shall automatically become obligated to deliver to Agent funds in an amount which Agent estimates it or the Swing Line Lender may be required to pay pursuant to Payment Commitments which may be presented thereafter, which funds shall be held by the Agent in the Payment Commitment Collateral Account.
14.2.3 In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, Agent and the Lenders shall have the right to exercise any right, power or remedy available under this Agreement, any of the other Loan Documents, or otherwise available at law or in equity.
14.2.4 The Agent shall promptly inform the Lenders of the occurrence of any Event of Default of which it is deemed to have knowledge or notice pursuant to Section 16.9 and will promptly provide the Lenders with copies of any and all notices that Agent has received with respect thereto. After such notification, the Lenders shall meet to determine the desired course of action and the Agent shall take such course of action, and pursue such rights and remedies under the Loan Documents, as the Required Lenders shall determine. If the Required Lenders have not agreed upon a course of action within 90 days after the date that the Lenders have received a notice from the Agent of the occurrence of an Event of Default, the Agent shall (and shall be obligated to) terminate the Commitments, accelerate all of the Obligations, apply all amounts collected from the Borrowers, any Guarantors and the Collateral as set forth herein and pursue such other rights and remedies as are prudent under the circumstances. During the time between the Agent’s giving notice of the occurrence of an Event of Default to the Lenders and the earlier of (a) the Required Lender’s agreement on a course of action or (b) the expiration of the 90 day decision period, the Agent shall take such actions on behalf of the Lenders as the Agent deems prudent. To the extent inconsistent with Section 14.2.2, this Section shall not apply to any Event of Default referred to in Section 14.1.8 and any Event of Default referred to in Section 14.1.8 shall be governed by Section 14.2.2. However, decisions as to how to handle, vote, or compromise the Agent’s claims on behalf of the Lenders in any bankruptcy or insolvency proceeding shall be governed by this Section. This Section confers no rights upon any Loan Party.
14.3 Application of Payments. If the Obligations have become due and payable in full or if at any time insufficient funds are received by and available to the Agent to fully pay all fees, costs, expenses, principal, interest and other amounts due to Agent and the Lenders under this Agreement and the other Loan Documents, such funds received by Agent shall be applied: (a) first, to the payment of fees, costs, disbursements, indemnities and other expenses (including Attorney Costs of Agent’s counsel) owing to Agent, including without limitation, if applicable, amounts incurred in realizing on Collateral or otherwise enforcing the Loan Documents; (b) second, to the payment of fees, costs, disbursements, indemnities, and other expenses owing to the Lenders (other than LC Fees, Revolving Loan Commitment Fee, Used Vehicle Floorplan Commitment Fee, and New Vehicle Floorplan Commitment Fee), including without limitation, if applicable, amounts incurred in realizing on Collateral or otherwise enforcing the Loan Documents and amounts owing pursuant to Article 7 and Section 17.1; (c) third, to the payment of LC Fees, Revolving Loan Commitment Fees, New Vehicle Floorplan Commitment Fee and Used Vehicle Floorplan Commitment Fee; (d) fourth to the payment of accrued interest on all of the Loans and other Obligations, (e) fifth to the payment to Swing Line Lender of any principal amount of the New Vehicle Swing Line Loans in excess of the New Vehicle Swing Line Commitment; (f) sixth, to the payment of the remaining principal owing to all of the Lenders on all of the Loans, LC Obligations, and other Obligations, allocated to the Lenders based upon their Pro Rata Shares; (g) seventh, to fully cash collateralize the LC Obligations and any outstanding Payment Commitments; (h) eighth, to payment of the Permitted Swap Obligations, ratably among the Lenders in proportion to the respective amounts described in this clause (h) held by them; and (i) ninth, the balance, if any, to the Borrowers or as otherwise required by law.
ARTICLE 15
HAZARDOUS SUBSTANCES
15.1 Representations and Warranties. Each Borrower represents and warrants that to its knowledge, any Properties identified as such in the Disclosure Schedule are the only Properties requiring remedial action under applicable Environmental Laws, resulting from the use, generation, manufacture, storage, treatment, disposal, release, or threatened release of any Hazardous Substances on, under, about or from any of the Properties. The performance of such remedial actions will not have a Material Adverse Effect on any Loan Party or its businesses.
15.2 Activities. Each Borrower shall, and the Company shall cause each Subsidiary to use, generate, manufacture, store, treat, release or dispose of Hazardous Substances on, under, about or from the Properties only as is reasonable and necessary in the operation of its business, and in substantial compliance with all applicable Environmental Laws.
15.3 Inspections. Each Borrower will permit and the Company will cause each other Loan Party to permit representatives of Agent and the Lenders to enter upon the Properties to make such inspections and tests as they may reasonably deem appropriate to determine compliance of the Properties with this Article. Any such inspections or tests shall be at the expense of Borrowers and for Agents’ and the Lenders’ purposes only, and shall not be construed to create any responsibility or liability on the part of Agent or any Lender to any Borrower or any other Person.
15.4 Release and Indemnity. Each Borrower hereby (a) releases and waives any future claims against Agent and each Lender for indemnity or contribution in the event the Company or any of its Subsidiaries becomes liable for cleanup or other costs under any Environmental Laws, and (b) agrees to indemnify and hold harmless Agent and each Lender and the other Indemnified Persons against any and all Claims which such Person may directly or indirectly sustain or suffer resulting from a breach of this Article by the Company or any other Borrower or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a Hazardous Substance on the Properties, except to the extent arising from the gross negligence or willful misconduct of such Indemnified Person.
15.5 Survival. The provisions of this Article, including the obligation to indemnify, shall survive the repayment of the Loans and Letters of Credit and other liabilities and Obligations of any one or more of the Borrowers under this Agreement and the other Loan Documents, and the termination or expiration of this Agreement, and, if applicable, shall not be affected by Lender’s acquisition of any interest in any of the Properties, whether by foreclosure or otherwise.
ARTICLE 16
THE AGENT
16.1 Appointment; Nature of Relationship. U.S. Bank is hereby appointed by each of the Lenders as its contractual representative (herein referred to as the “Agent”) hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes Agent to act as the contractual representative of such Lender with the rights and duties expressly set forth herein and in the other Loan Documents. Agent agrees to act as such contractual representative upon the express conditions contained in this Article 16. Notwithstanding the use of the defined term “Agent,” it is expressly understood and agreed that Agent shall not have any fiduciary responsibilities to any Lender by reason of this Agreement or any other Loan Document and that Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Lenders’ contractual representative, Agent (a) does not hereby assume any fiduciary duties to any of the Lenders, (b) is a “representative” of the Lenders within the meaning of the term “secured party” as defined in the Uniform Commercial Code and (c) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders hereby agrees to assert no claim against Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender hereby waives.
16.2 Powers. Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by Agent.
16.3 General Immunity. Neither Agent nor any of its directors, officers, agents or employees shall be liable to any Borrower or any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except to the extent such action or inaction is determined in a final non-appealable judgment by a court of competent jurisdiction to have arisen from the gross negligence or willful misconduct of such Person.
16.4 No Responsibility for Loans, Recitals, Etc. Neither Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (c) the satisfaction of any condition specified in Article 9, except receipt of items required to be delivered solely to Agent; (d) the existence or possible existence of any Default or Event of Default; (e) the validity, enforceability, effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation, perfection or priority of any Lien in any Collateral; or (g) the financial condition of any Loan Party or of any of any Loan Party’s Subsidiaries. The foregoing notwithstanding, however, Agent shall, upon a reasonable request from a Lender, provide such information as may be necessary to demonstrate to such Lender that Agent has the ability to comply, or has in fact complied, with all regulations or mandates from a governing entity that are applicable to the Loans, including without limitation, the Flood Disaster Protection Act of 1973 and the national Flood Insurance Reform Act (1994).
16.5 Action on Instructions of Lenders. Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the Required Lenders, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders. The Lenders hereby acknowledge that Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders. Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action.
16.6 Employment of Agents and Counsel. Agent may perform any of its duties as Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. Agent shall be entitled to advice of counsel concerning the contractual arrangement between Agent and the Lenders and all matters pertaining to Agent’s duties hereunder and under any other Loan Document.
16.7 Reliance on Documents; Counsel. Agent shall be entitled to rely upon any notice, consent, certificate, affidavit, letter, telegram, facsimile, telex, electronic mail message, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by Agent, which counsel may be employees of Agent. For purposes of determining compliance with the conditions specified in Article 9, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless Agent shall have received notice from such Lender prior to the applicable date specifying its objection thereto.
16.8 Reimbursement and Indemnification. The Lenders agree to reimburse and indemnify Agent ratably in proportion to their respective Commitments (or, if the Commitments have been terminated, in proportion to their Commitments immediately prior to such termination) (a) for any amounts not reimbursed by the Borrowers for which Agent is entitled to reimbursement by a Borrower or Borrowers under the Loan Documents, (b) for any other expenses incurred by Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents (including, without limitation, for any expenses incurred by Agent in connection with any dispute between Agent and any Lender or between two or more of the Lenders) and (c) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactions contemplated thereby (including, without limitation, for any such amounts incurred by or asserted against Agent in connection with any dispute between Agent and any Lender or between two or more of the Lenders), or the enforcement of any of the terms of the Loan Documents or of any such other documents, provided that (y) no Lender shall be liable for any of the foregoing to the extent any of the foregoing is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of Agent and (z) any indemnification required pursuant to Section 7.4.4 shall, notwithstanding the provisions of this Section, be paid by the relevant Lender in accordance with the provisions thereof. The obligations of the Lenders under this Section shall survive payment of the Obligations and Permitted Swap Obligations and termination of this Agreement.
16.9 Notice of Event of Default. Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder, except with respect to defaults in the payment of principal, interest and fees required to be paid to Agent, unless (i) Agent has actual knowledge of such Default or Event of Default or (ii) Agent has received written notice from a Lender or Borrower referring to this Agreement describing such Default or Event of Default and stating that such notice is a “notice of default.” In the event that Agent receives such a notice, Agent shall give prompt notice thereof to the Lenders; provided that, except as expressly set forth in the Loan Documents, Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to a Loan Party or any of its Subsidiaries that is communicated to or obtained by the bank serving as Agent or any of its Affiliates in any capacity.
16.10 Rights as a Lender. Agent shall have the same rights and powers hereunder and under any other Loan Document with respect to its Commitments and its Loans as any Lender and may exercise the same as though it were not Agent, and the term “Lender” or “Lenders” shall, at any time when Agent is a Lender, unless the context otherwise indicates, include Agent in its individual capacity. Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by this Agreement or any other Loan Document, with any Loan Party, or any of their Subsidiaries and Affiliates in which any Loan Party is not restricted hereby from engaging with any other Person.
16.11 Lender Credit Decision, Legal Representation.
(a) Each Lender acknowledges that it has, independently and without reliance upon Agent, or any other Lender and based on the financial statements prepared by the Borrowers and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the other Loan Documents. Each Lender also acknowledges that it will, independently and without reliance upon Agent, or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents. Except for any notice, report, document or other information expressly required to be furnished to the Lenders by Agent hereunder or as may be reasonably requested by a Lender from Agent, Agent shall have no duty or responsibility (either initially or on a continuing basis) to provide any Lender with any notice, report, document, credit information or other information concerning the affairs, financial condition or business of any Loan Party or any of its Affiliates that may come into the possession of Agent (whether or not in its capacity as Agent) or any of their Affiliates.
(b) Each Lender further acknowledges that it has had the opportunity to be represented by legal counsel in connection with its execution of this Agreement and the other Loan Documents, that it has made its own evaluation of all applicable laws and regulations relating to the transactions contemplated hereby, and that the counsel to Agent represents only Agent and not the Lenders in connection with this Agreement and the transactions contemplated hereby.
16.12 Successor Agent. Agent may resign at any time by giving written notice thereof to the Lenders and the Company, such resignation to be effective upon the appointment of a successor Agent or, if no successor Agent has been appointed, forty-five days after the retiring Agent gives notice of its intention to resign. Upon any such resignation, the Required Lenders shall have the right to appoint, on behalf of the Borrowers and the Lenders, a successor Agent. Unless a Default exists, such successor Agent shall be reasonably acceptable to the Company. If no successor Agent shall have been so appointed by the Required Lenders within thirty days after the resigning Agent’s giving notice of its intention to resign, then the resigning Agent may appoint, on behalf of Borrowers and the Lenders, a successor Agent. Notwithstanding the previous sentence, Agent may at any time without the consent of any Borrower or any Lender, appoint any of its Affiliates which is a commercial bank as a successor Agent hereunder. If Agent has resigned and no successor Agent has been appointed, the Lenders may perform all the duties of Agent hereunder and each Borrower shall make all payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with the Lenders. No successor Agent shall be deemed to be appointed hereunder until such successor Agent has accepted the appointment. Any such successor Agent shall be a commercial bank having capital and retained earnings of at least $3,000,000,000.00. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning Agent. Upon the effectiveness of the resignation of Agent, the resigning Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents. After the effectiveness of the resignation of an Agent, the provisions of this Article 16 shall continue in effect for the benefit of such Agent in respect of any actions taken or omitted to be taken by it while it was acting as Agent hereunder and under the other Loan Documents. In the event that there is a successor to Agent by merger, or Agent assigns its duties and obligations to an Affiliate pursuant to this Section, then the term “Prime Rate” as used in this Agreement shall mean the prime rate, base rate or other analogous rate of the new Agent.
16.13 Agent’s Fees. Each Borrower agrees to pay to Agent, for its account, the fees agreed to by such Borrower and Agent pursuant to any fee letter between them, or as otherwise agreed from time to time.
16.14 Delegation to Affiliates. Each Borrower and the Lenders agree that Agent may delegate any of its duties under this Agreement to any of its Affiliates. Any such Affiliate (and such Affiliate’s directors, officers, agents and employees) which performs duties in connection with this Agreement shall be (i) entitled to the same benefits of the indemnification, waiver and other protective provisions to which Agent is entitled under this Agreement; and (ii) subject to the same obligations of Agent hereunder.
16.15 Execution of Collateral Documents. The Lenders hereby empower and authorize Agent to execute and deliver the Collateral Documents and all related agreements, documents or instruments as shall be necessary or appropriate to effect the purposes of the Collateral Documents.
16.16 Collateral Releases. The Lenders hereby empower and authorize Agent to execute and deliver on their behalf any agreements, documents or instruments as shall be necessary or appropriate to effect any releases of Collateral which shall be permitted by the terms hereof or of any other Loan Document or which shall otherwise have been approved by the Required Lenders (or, if required by the terms of this Agreement, all of the Lenders) in writing.
16.17 No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), each Borrower acknowledges and agrees that: (a)(i) the arranging and other services regarding this Agreement provided by the Lenders are arm’s-length commercial transactions between each Borrower and its Affiliates, on the one hand, and the Lenders, on the other hand, (ii) each Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (iii) each Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (b)(i) each of the Lenders is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for any Borrower or any of its Affiliates, or any other Person and (ii) no Lender has any obligation to any Borrower or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (c) each of the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrowers and their Affiliates, and no Lender has any obligation to disclose any of such interests to any Borrower or its Affiliates. To the fullest extent permitted by law, each Borrower hereby waives and releases any claims that it may have against each of the Lenders with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.
16.18 Co-Documentation Agents, Syndication Agent, etc. Neither any Documentation Agent or the Syndication Agent shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of such Lenders shall have or be deemed to have a fiduciary relationship with any Lender. Each Lender hereby makes the same acknowledgments with respect to such Persons as it makes with respect to the Agent in Section 16.11.
ARTICLE 17
MISCELLANEOUS
17.1 Expenses; Indemnification. Each Borrower hereby agrees:
(a) to pay or reimburse Agent on demand for all reasonable costs and expenses (including reasonable Attorney Costs of Agent’s counsel) incurred in connection with the syndication, negotiation, due diligence, preparation, execution, delivery, distribution (including, without limitation, via DebtX and any other internet service selected by the Agent), review, administration and enforcement of the Loan Documents and the transactions contemplated thereby, and any amendment, supplement or modification to, the Loan Documents and any other documents prepared in connection therewith, whether or not the transactions contemplated hereby are consummated, including without limitation all recording costs, filing fees, consultants’ fees, travel expenses, costs of appraisals and reviews, environmental audits and reviews (including costs of internal review of a third party report), collateral audits (subject to Section 12.4), title insurance, lien searches, and costs of perfecting, continuing, monitoring, preserving and protecting security interests in the Collateral;
(b) to pay or reimburse Agent and each Lender for all their reasonable costs and expenses incurred in connection with, and to pay, indemnify, and hold the Indemnified Persons harmless from and against any and all claims, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, disbursements, and Attorney Costs of every kind and nature arising out of or in connection with, the collection, enforcement or protection of any rights and remedies under the Loan Documents and any other documents prepared in connection therewith (including without limitation in connection with negotiations or workout or restructuring affecting the Loan Documents or Obligations and any bankruptcy, or similar proceeding or other legal proceeding involving any Loan Party);
(c) to pay, indemnify, and to hold the Indemnified Persons harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any failure or delay in paying, stamp, excise and other taxes (other than income and gross revenue taxes), if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, any Loan Document and any such other documents including reasonable Attorney Costs of counsel to Agent and each Lender in connection with the foregoing and in connection with advising Agent with respect to its rights and responsibility under any Loan Document; and
(d) to pay, indemnify, and hold the Indemnified Persons harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature (including reasonable Attorney Costs) which may be incurred by or asserted against any Indemnified Person arising out of or in connection with the Loan Documents, the transactions contemplated by the Loan Documents, or the use of the proceeds of the Loans (including, without limitation, in connection with any investigation, litigation, or proceeding or preparation of defense in connection therewith), whether or not any of the indemnified Persons is a party thereto, or by reason of or in connection with the execution and delivery or transfer of, or payment or failure to make payments under, Letters of Credit (it being agreed that nothing in this Section 17.1 is intended to limit the Revolving Loan Borrower’s obligations pursuant to Section 5.9).
Notwithstanding the foregoing, a Borrower shall have no obligation to indemnify any Indemnified Person with respect to any costs of the matters described in subsections (a), (b), (c) and (d) of this Section 17.1 which arise from the gross negligence or willful misconduct of such Indemnified Person. The agreements in this Section 17.1 shall survive repayment of the Obligations and Permitted Swap Obligations and termination of this Agreement.
17.2 Successors and Assigns. The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrowers and the Lenders and their respective successors and assigns permitted hereby, except that (a) no Borrower shall have the right to assign its rights or obligations under the Loan Documents without the prior written consent of each Lender, (b) any assignment by any Lender must be made in compliance with Section 17.4, and (c) any transfer by participation must be made in compliance with the terms of this Agreement. Any attempted assignment or transfer by any party not made in compliance with this Section shall be null and void, unless such attempted assignment or transfer is treated as a participation in accordance with the terms of this Agreement. The parties to this Agreement acknowledge that clause (b) of this Section relates only to absolute assignments and this Section 17.2 does not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by any Lender of all or any portion of its rights under this Agreement to a Federal Reserve Bank; provided, however, that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 17.4. The Agent may treat the Person which made any Loan as the owner thereof for all purposes hereof unless and until such Person complies with Section 17.4; provided, however, that the Agent may in its discretion (but shall not be required to) follow instructions from the Person which made any Loan to direct payments relating to such Loan to another Person. Any assignee of the rights to any Loan agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Loan, shall be conclusive and binding on any subsequent holder or assignee of the rights to such Loan.
17.3 Participations.
17.3.1 Permitted Participants; Effect. Any Lender may, in accordance with Applicable Law, at any time sell to one or more banks or other entities (each, a “Participant”) participating interests in any Outstanding Credit Exposure owing to such Lender, the Commitments of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender’s obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of its Outstanding Credit Exposure for all purposes under the Loan Documents, all amounts payable by Borrowers under this Agreement shall be determined as if such Lender had not sold such participating interests, and Borrowers and Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under the Loan Documents.
17.3.2 Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents; provided, however, that any agreement pursuant to which any Lender sells a participating interest may require the Lender to obtain Participant’s consent to any amendment, modification or waiver which would require the consent of all Lenders pursuant to Section 17.9.
17.3.3 Benefit of Certain Provisions. Each Borrower agrees that each Participant shall be deemed to have the right of setoff provided in Section 17.8 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents, provided that each Lender shall retain the right of setoff provided in Section 17.8 with respect to the amount of participating interests sold to each Participant. The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 17.8, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 17.7 as if each Participant were a Lender. Each Borrower further agrees that each Participant shall be entitled to the benefits of Sections 7.1, 7.2, 7.4, and 17.1 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 17.4, provided that (a) a Participant shall not be entitled to receive any greater payment under Sections 7.1 or 7.2, or 7.4 than the Lender who sold the participating interest to such Participant would have received had it retained such interest for its own account, unless the sale of such interest to such Participant is made with the prior written consent of the Company, and (b) a Participant shall not be entitled to receive any greater payment under Section 7.4 than the Lender who sold the participating interest to such Participant would have received had it retained such interest for its own account (i) except to the extent such entitlement to receive a greater payment results from a change in treaty, law or regulation (or any change in the interpretation or administration thereof by any governmental authority) that occurs after the Participant acquired the applicable participation and (ii), in the case of any Participant that would be a Non-U.S. Lender if it were a Lender, such Participant agrees to comply with the provisions of Section 7.4 to the same extent as if it were a Lender (it being understood that the documentation required under Section 7.4.6 shall be delivered to the participating Lender). Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrowers, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in any Outstanding Credit Exposure, any Commitment or any other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Outstanding Credit Exposure, any Commitment or any other obligations under the Loan Documents) to any Person except to the extent that such disclosure is necessary to establish that such Outstanding Credit Exposure, any Commitment or any other obligations under the Loan Documents is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Agent (in its capacity as Agent) shall have no responsibility for maintaining a Participant Register.
17.4 Assignments.
17.4.1 Permitted Assignments. Any Lender may at any time sell to one or more Eligible Assignees or other financial institutions reasonably acceptable to Agent (each an “Assignee”) all or a ratable part of its Loans and participations in Swing Line Loans and Letters of Credit and other interests under this Agreement and the Loan Documents; provided, however, that (a) unless each of the Company and Agent otherwise consents, each assignment shall be in a minimum amount of $5,000,000 or if less, the entire Aggregate Lender Commitment and Outstanding Credit Exposure of such Lender; (b) after giving effect to any Assignment, the Aggregate Lender Commitment of the assigning Lender shall be at least $5,000,000.00 or shall be $0; and (c) each assignment shall be of a constant and not a varying, percentage of all of the interests of such Lender in its Outstanding Credit Exposure and all Commitments, Loans and Letters of Credit. Any assignment shall be pursuant to an Assignment Agreement in such other form reasonably acceptable to the Agent as may be agreed to by the parties thereto.
17.4.2 Consents. The consent of the Company shall be required prior to an assignment becoming effective unless the Assignee is a Lender, an Affiliate of a Lender or an Approved Fund, provided that the consent of the Company shall not be required if an Event of Default has occurred and is continuing; provided further that the Company shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Agent within five (5) Business Days after having received written notice thereof. The consent of the Agent shall be required prior to an assignment becoming effective unless the Assignee is a Lender, an Affiliate of a Lender or an Approved Fund. The consent of each of the LC Issuer and the Swing Line Lender shall be required prior to an assignment of a Commitment becoming effective unless the Assignee is a Lender with a Commitment. Any consent required under this Section 17.4.2 shall not be unreasonably withheld or delayed.
17.4.3 Effect; Effective Date. Upon (a) delivery to the Agent of an Assignment Agreement, together with any required consents, and (ii) payment of a $3,500 fee to the Agent for processing such assignment (unless such fee is waived by the Agent), such assignment shall become effective on the effective date specified in such assignment. The assignment shall contain a representation by the Assignee to the effect that none of the consideration used to make the purchase of the Commitments and Outstanding Credit Exposure under the applicable Assignment Agreement constitutes “plan assets” as defined under ERISA and that the rights and interests of the Assignee in and under the Loan Documents will not be “plan assets” under ERISA. On and after the effective date of such assignment, the Assignee shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by or on behalf of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party thereto, and the transferor Lender shall be released with respect to the Commitments and Outstanding Credit Exposure assigned to the Assignee without any further consent or action by any Borrower, the Lenders or the Agent. In the case of an assignment covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a Lender hereunder but shall continue to be entitled to the benefits of, and subject to, those provisions of this Agreement and the other Loan Documents which survive payment of the Obligations and termination of the applicable agreement. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 17.3.
17.4.4 Tax Treatment. If any interest in any Loan Document is transferred to any Assignee or Participant which is not incorporated under the laws of the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 7.4.
17.5 Register. The Agent, acting solely for this purpose as an agent of the Borrowers, shall maintain at one of its offices in the United States of America, a copy of each Assignment delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and stated interest) of the Loans owing to, each Lender, and participations of each Lender in Letters of Credit, pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive in the absence of manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by any Borrower or Lender at any reasonable time and from time to time upon reasonable prior notice.
17.6 Dissemination of Information. Each Borrower, for itself and its Subsidiaries, authorizes each Lender to disclose to any Participant or Assignee and prospective Participant or Assignee any and all financial or other information in such Lender’s possession concerning any Loan Party, subject to the confidentiality requirements of Section 17.26 of this Agreement.
17.7 Ratable Payments. If any Lender, whether by setoff or otherwise, has payment made to it upon its Outstanding Credit Exposure, Outstanding New Vehicle Floorplan Exposure, Outstanding Used Vehicle Floorplan Exposure, and/or Outstanding Revolving Loan Exposure (other than payments received pursuant to Sections 7.1, 7.2 or 7.4 or payments specifically payable only to such Lender) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Aggregate Outstanding Credit Exposure held by the other Lenders so that after such purchase each Lender will hold its Pro Rata Share of the Aggregate Outstanding Credit Exposure, Outstanding New Vehicle Floorplan Exposure, Outstanding Used Vehicle Floorplan Exposure and/or Outstanding Revolving Loan Exposure. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral or other protection ratably in proportion to their respective Pro Rata Shares. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made.
17.8 Setoff. Each Borrower hereby grants each Lender a security interest in all deposits, credits and deposit accounts (including all account balances, whether provisional or final and whether or not collected or available) of such Borrower with such Lender or any Affiliate of such Lender (the “Deposits”). In addition to, and without limitation of, any rights of the Lenders under Applicable Law, if any Borrower is not Solvent, or if any Event of Default occurs, each Borrower authorizes each Lender to offset and apply all such Deposits toward the payment of the Obligations owing to such Lender, whether or not the Obligations, or any part thereof, shall then be due and regardless of the existence or adequacy of any collateral, guaranty or any other security, right or remedy available to such Lender or the Lenders; provided, that in the event that any Defaulting Lender shall exercise such right of setoff, (a) all amounts so set off shall be paid over immediately to the Agent for further application in accordance with the provisions of Section 6.14 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Agent, the LC Issuer, and the Lenders, and (b) the Lender shall provide promptly to the Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The aforesaid rights may be exercised by Agent or such Lender against any Borrower or against any trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver or execution, judgment or attachment creditor of any Borrower or against anyone else claiming through or against any Borrower or such trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of setoff shall not have been exercised by Agent or such Lender prior to the occurrence of an Event of Default.
17.9 Amendments and Waivers.
17.9.1 Subject to the provisions of this Section 17.9, the Required Lenders (or the Agent with the consent in writing of the Required Lenders) and the Borrowers may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or Borrowers hereunder or waiving any Event of Default hereunder; provided, however, that no such supplemental agreement shall:
(a) without the consent of all Lenders, extend the final maturity of any Loan, or extend the expiry date of any Letter of Credit to a date after the Termination Date or postpone any regularly scheduled payment of principal of any Loan or forgive all or any portion of the principal amount thereof or any Reimbursement Obligation, or reduce the rate or extend the time of payment of interest or fees thereon or on Reimbursement Obligations or increase the amount of any Commitment of any Lender hereunder.
(b) without the consent of all of the Lenders, change the definition of Required Lenders or the Pro Rata Shares required to take any action hereunder.
(c) without the consent of all of the Lenders, extend the Termination Date, or permit any Borrower to assign its rights under this Agreement.
(d) without the consent of all of the Lenders, amend this Section 17.9, or any provision herein which requires consent or other action by all Lenders.
(e) without the consent of all of the Lenders, except as permitted by this Agreement, release any Guarantor or, except as provided herein or in the Collateral Documents, release all or a substantial part of the Collateral.
No amendment of any provision of this Agreement relating to the Agent shall be effective without the written consent of the Agent, and no amendment of any provision relating to the LC Issuer shall be effective without the written consent of the LC Issuer. No amendment to any provision of this Agreement relating to the Swing Line Lender or any Swing Line Loans shall be effective without the written consent of the Swing Line Lender.
17.9.2 Notwithstanding the foregoing, or the provisions of this Section 17.9, any fee or other amount payable by any Borrower or Borrowers solely to Agent, the Swing Line Lender or the LC Issuer, may be changed with the consent of only such Borrower or Borrowers and Agent and, if applicable, the affected Swing Line Lender or LC Issuer, provided that no Lender will be required to pay any such fee to which it has not agreed.
17.10 Waiver; Cumulative Remedies. No failure or delay on the part of Agent or any Lender in exercising any right, power, remedy or privilege hereunder or under any of the other Loan Documents and no course of dealing between any Loan Party and Agent or any Lender will operate as a waiver of such right, power, remedy or privilege, nor will any single or partial exercise of any right, power or privilege hereunder preclude other or further exercise thereof or the exercise of any other right, power, remedy or privilege. Waiver of any Default shall not be a waiver of any other subsequent or prior Default. No waiver of any Default (whether or not Agent or any Lender knows or should have known of such Default) shall be deemed to have occurred unless Agent (to the extent authorized under Section 14.2.4 or 17.9.2) or the Required Lenders has expressly agreed in writing specifying such waiver. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement shall in any event be effective unless the same shall be in writing and signed and delivered by Agent, the Required Lenders, or all of the Lenders, as otherwise set forth in this Agreement. Any waiver of any provision of this Agreement, and any consent to any departure by any Loan Party from the terms of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which given. No notice to or demand on any Loan Party not required hereunder shall in any event entitle any Loan Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of Agent or any Lender to any other or further action in any circumstances without notice or demand. The rights and remedies herein specified are cumulative and are not exclusive of any rights or remedies which Agent or any Lender would otherwise have at law or in equity or otherwise by agreement.
17.11 Notices.
17.11.1 Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in Section 17.11.2 below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile as follows:
(a) if to any Borrower, at its address or facsimile number set forth on the signature page hereof;
(b) if to the Agent, at its address or facsimile number set forth on the signature page hereof;
(c) if to LC Issuer, at its address or facsimile number set forth on the signature page hereof;
(d) if to a Lender, to it at its address or facsimile number set forth in its Administrative Questionnaire, a copy of which Administrative Questionnaire shall be provided to the Company.
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications to the extent provided in Section 17.11.2 below, shall be effective as provided in said Section 17.11.2. Notwithstanding any contrary provision hereof, any request for a Credit Extension shall not be effective until received by Agent.
17.11.2 Electronic Communications.
(a) Notices and other communications to the Lenders and the LC Issuer hereunder may be delivered or furnished by electronic communication (including e-mail and internet or intranet websites) pursuant to procedures approved by the Agent or as otherwise determined by the Agent, provided that the foregoing shall not apply to notices to any Lender or the LC Issuer if such Lender or the LC Issuer, as applicable, has notified the Agent that it is incapable of receiving notices by electronic communication. The Agent or any Borrower may, in its respective discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it or as it otherwise determines, provided that such determination or approval may be limited to particular notices or communications.
(b) Unless the Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not given during the normal business hours of the recipient, such notice or communication shall be deemed to have been given at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (a) of notification that such notice or communication is available and identifying the website address therefor.
17.11.3 Change of Address. Any party hereto may change its address or facsimile number for notices and other communications hereunder by notice to the other parties hereto.
17.12 Integration; Conflicting Terms. This Agreement (including the exhibits and schedules) together with the other Loan Documents embody the entire agreement of the parties on the subject matter hereof and except as otherwise specifically set forth in this Agreement or any other Loan Document, supersedes and replaces all prior agreements, oral and written, on such subject matter. If any term of any of the other Loan Documents expressly conflicts with the provisions of this Agreement, the provisions of this Agreement shall control; provided, however, that the inclusion of additional, greater or supplemental rights and remedies of Agent and Lenders or the inclusion of additional or greater obligations and responsibilities of the Loan Parties, in any of the other Loan Documents shall not be deemed a conflict with this Agreement.
17.13 Governing Law. Except to the extent that Agent or any Lender has greater rights and remedies under federal law or to the extent otherwise specifically stated in any Loan Document, this Agreement and the other Loan Documents shall be governed by and construed and enforced in accordance with the laws of the State of Oregon without regard to conflicts of law principles but giving effect to federal laws applicable to national banks, except that matters concerning the validity and perfection of security interests covered thereby shall be governed by the conflicts of law provisions of the applicable Uniform Commercial Code.
17.14 Consent To Jurisdiction. EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN OR WITH JURISDICTION OVER PORTLAND, OREGON IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE OBLIGATIONS AND THE LOAN DOCUMENTS AND EACH BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT, THE LC ISSUER OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY BORROWER AGAINST THE AGENT, THE LC ISSUER OR ANY LENDER OR ANY AFFILIATE OF THE AGENT, THE LC ISSUER OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT LOCATED IN OR WITH JURISDICTION OVER PORTLAND, OREGON.
17.15 Documents Satisfactory to Agent and Required Lenders. All information, documents and instruments required to be executed or delivered to Agent shall be in form and substance reasonably satisfactory to Agent and the Required Lenders.
17.16 Exhibits. All exhibits and schedules referred to herein are attached hereto and hereby incorporated by reference as if fully set forth herein.
17.17 Headings. Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents.
17.18 Nonliability of Lenders. The relationship between the Borrowers on the one hand and the Lenders, the LC Issuer and the Agent on the other hand shall be solely that of borrower and lender. Neither the Agent, the Arranger, the LC Issuer nor any Lender shall have any fiduciary responsibilities to any Borrower. Neither the Agent, the Arranger, the LC Issuer nor any Lender undertakes any responsibility to any Borrower to review or inform any Borrower of any matter in connection with any phase of any Borrower’s business or operations. Each Borrower agrees that neither the Agent, the Arranger, the LC Issuer nor any Lender shall have liability to any Borrower (whether sounding in tort, contract or otherwise) for losses suffered by any Borrower in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought. Neither the Agent, the Arranger, the LC Issuer nor any Lender shall have any liability with respect to, and each Borrower hereby waives, releases and agrees not to sue for, any special, indirect, consequential or punitive damages suffered by any Borrower in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby. It is agreed that the Arranger shall, in its capacity as such, have no duties or responsibilities under the Agreement or any other Loan Document. Each Lender acknowledges that it has not relied and will not rely on the Arranger in deciding to enter into the Agreement or any other Loan Document or in taking or not taking any action.
17.19 Survival of Representations. All representations and warranties of any Borrower contained in this Agreement shall survive the making of the Credit Extensions herein contemplated.
17.20 Governmental Regulation. Anything contained in this Agreement to the contrary notwithstanding, neither the LC Issuer nor any Lender shall be obligated to extend credit to the Borrowers in violation of any limitation or prohibition provided by any Applicable Law.
17.21 Counterparts. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.
17.22 Severability. Whenever possible, each provision of this Agreement and each of the other Loan Documents shall be interpreted in such a manner as to be valid and effective under Applicable Law. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable.
17.23 Construction. This Agreement and the other Loan Documents are the result of negotiations among, and have been reviewed by, each Loan Party, each Lender, Agent and their respective counsel (or, if any party has not had the Loan Documents reviewed by its counsel, such party has had the opportunity to do so and has voluntarily chosen not to do so). Accordingly, the Loan Documents shall be deemed to be the product of all parties hereto, and no ambiguity shall be construed in favor of or against any Loan Party, Agent, or any Lender.
17.24 USA Patriot Act Notification. The following notification is provided to each Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:
Each Lender that is subject to the USA Patriot Act (Title III of Pub. L. 107 56 (signed into law October 26, 2001)) (the “Act”), and Agent (for itself and not on behalf of any Lender) hereby notifies each Borrower and each other Loan Party that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies such Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender or Agent, as applicable, to identify such Loan Party in accordance with the Act.
17.25 Nonreliance. Each Lender hereby represents that it is not relying on or looking to any margin stock (as defined in Regulation U) of the Board for the repayment of the Credit Extensions provided for herein.
17.26 Confidentiality. Agent and each Lender agree to take reasonable precautions, in accordance with customary procedures, to maintain the confidentiality of all non-public information provided to it by any Loan Party under this Agreement or any other Loan Document, which is identified as confidential at the time such Person provides the information, and agrees that it shall not use any such information other than in connection with or in enforcement of this Agreement and the other Loan Documents or in connection with other business now or hereafter existing or contemplated with any Loan Party, except to the extent such information (a) was or becomes generally available to the public other than as a result of disclosure by Agent or Lender, or (b) was or becomes available on a non-confidential basis from a source other than a Loan Party, provided that such source is not bound by a confidentiality agreement with a Loan Party known to Agent or such Lender; provided, however, that Agent or any Lender may disclose such confidential information (p) at the request or pursuant to any requirement of any Governmental Body or in connection with an examination of Agent or such Lender by any such authority; (q) pursuant to subpoena or other court process; (r) when requested or required to do so in accordance with the provisions of any Applicable Law; (s) to the extent reasonably required in connection with any litigation or proceeding to which Agent, any Lender or their respective affiliates may be party; (t) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document; (u) to Agent’s or such Lender’s and its affiliates, directors, officers, employees and agents, including accountants, attorneys and other professional advisors who are subject to similar limitations; (v) to any Participant or Assignee, actual or potential, provided that such Person agrees in writing to keep such information confidential to the same extent required of the Lenders hereunder; (w) to its direct or indirect contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties, (x) to rating agencies if requested or required by such agencies in connection with a rating relating to the Obligations hereunder; (y) as to Agent or any Lender or its affiliates, as expressly permitted under the terms of any other document or agreement regarding confidentiality to which any Loan Party is party or is deemed party with Agent or such Lender or affiliate; and (z) to its affiliates; provided, that with respect to disclosures under clauses (q) and (r), such Lender shall use commercially reasonable efforts to notify the Company (unless such notification is prohibited by any Applicable Law) of the proposed disclosure before such disclosure is made to reasonably afford the Company the opportunity to seek to prevent such disclosure.
17.27 Ford Letter Agreement. Each Lender hereby agrees to the terms and conditions set forth in the letter agreement regarding Clarification of Supplemental Terms and Conditions Agreement dated April 5, 2012 and agreed to on April 10, 2012 between Ford Motor Company and the Company, a copy of which has been provided to each Lender.
17.28 Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH BORROWER, THE AGENT, THE LC ISSUER AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THE OBLIGATIONS AND THE LOAN DOCUMENTS OR THE RELATIONSHIP ESTABLISHED THEREUNDER. EACH OF THEM REPRESENTS TO THE OTHER PARTIES THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY GIVEN.
17.29 Disclosure. Under Oregon law, most agreements promises and commitments made by any Lender concerning loans and other credit extensions which are not for personal, family or household purposes or secured solely by the borrower's residence must be in writing, express consideration and be signed by the Lender to be enforceable.
[Signature pages follow]
LITHIA MOTORS, INC. |
| |
|
|
|
|
|
|
By: |
|
|
Name: | Bryan DeBoer | |
Title: |
President & CEO |
|
By: | ||
Name: | John North | |
Title: | VP Finance & Corp. Controller | |
150 N. Bartlett Medford, OR 97501 Fax: (541) 776-6402 Attn: Chief Financial Officer |
||
with a copy to: |
| |
Lane Powell PC Attention: Andrew J. Morrow, Jr. 601 SW Second Avenue, Suite 2100 Portland, OR 97204-3158 Fax: (503) 778-2200 |
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
LITHIA IMPORTS OF ANCHORAGE, INC.
LITHIA NA, INC.
LITHIA OF ANCHORAGE, INC.
LITHIA OF FAIRBANKS, INC.
LITHIA OF SOUTH CENTRAL AK, INC.
LITHIA CIMR, INC.
LITHIA FMF, INC.
LITHIA FRESNO, INC.
LITHIA JEF, INC.
LITHIA MMF, INC.
LITHIA NF, INC.
LITHIA OF EUREKA, INC.
LITHIA OF SANTA ROSA, INC.
LITHIA SEA P, INC.
LITHIA SEASIDE, INC.
LITHIA TR, INC.
LITHIA ACDM, INC.
LITHIA HDM, INC.
LITHIA MBDM, INC.
LITHIA NDM, INC.
LITHIA OF DES MOINES, INC.
LITHIA VAUDM, INC.
LITHIA CCTF, INC.
LITHIA FORD OF BOISE, INC.
LITHIA OF POCATELLO, INC.
LITHIA OF TF, INC.
LITHIA POCA-HON, INC.
LITHIA CDH, INC.
LITHIA HGF, INC.
LITHIA OF BILLINGS II, LLC
LITHIA OF BILLINGS, INC.
LITHIA OF GREAT FALLS, INC.
LITHIA OF HELENA, INC.
LITHIA OF MISSOULA, INC.
LITHIA ND ACQUISITION CORP. #1
LITHIA ND ACQUISITION CORP. #3
LITHIA ND ACQUISITION CORP. #4
LITHIA CJDSF, INC.
LDLC, LLC
LITHIA RENO SUB-HYUN, INC.
LITHIA SALMIR, INC.
HUTCHINS EUGENE NISSAN, INC.
HUTCHINS IMPORTED MOTORS, INC.
LGPAC, INC.
LITHIA DE, INC.
LITHIA DM, INC.
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
LITHIA KLAMATH, INC.
LITHIA MEDFORD HON, INC.
LITHIA MTLM, INC.
LITHIA OF BEND #1, LLC
LITHIA OF BEND #2, LLC
LITHIA OF ROSEBURG, INC.
LITHIA ROSE-FT, INC.
LITHIA SOC, INC.
LBMP, LLC
LFKF, LLC
LMBP, LLC
LMBW, INC.
LITHIA BRYAN TEXAS, INC.
LITHIA CJDO, INC.
LITHIA CJDSA, INC.
LITHIA CM, INC.
LITHIA CO, INC.
LITHIA CSA, INC.
LITHIA DMID, INC.
LITHIA HMID, INC.
LITHIA NSA, INC.
LITHIA OF ABILENE, INC.
LITHIA OF CORPUS CHRISTI, INC.
LITHIA OF MIDLAND, INC.
LITHIA TA, INC.
LITHIA TO, INC.
CAMP AUTOMOTIVE, INC.
LITHIA DODGE OF TRI-CITIES, INC.
LITHIA OF BELLINGHAM, LLC
LITHIA OF SEATTLE, INC.
LITHIA OF SPOKANE, INC.
LITHIA OF EUGENE, LLC
LITHIA OF KILLEEN, LLC
LMBB, LLC
LITHIA OF MISSOULA IT, LLC
LMOP, LLC
SALEM-V, LLC
SALEM-B, LLC
SALEM-H, LLC
LITHIA FBCS, LLC
LITHIA OF STOCKTON, INC.
LITHIA VF, INC.
LITHIA OF CLEAR LAKE, LLC
LITHIA OF WASILLA, LLC
LITHIA OF LODI, INC.
LITHIA OF WALNUT CREEK, INC.
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
LITHIA OF MAUI-H, LLC
LITHIA OF STOCKTON-V, INC.
LITHIA OF HONOLULU-V, LLC
LITHIA OF HONOLULU-BGMCC, LLC
LITHIA FLCC, LLC
LITHIA NC, INC.
LITHIA OF PORTLAND, LLC
CADILLAC OF PORTLAND LLOYD CENTER, LLC
DARON MOTORS LLC
DCH (OXNARD) INC.
DCH BLOOMFIELD LLC
DCH CA, LLC
DCH CALIFORNIA MOTORS INC.
DCH DEL NORTE, INC.
DCH-MILLBURN INC.
DCH FREEHOLD LLC
DCH KOREAN IMPORTS LLC
DCH MAMARONECK LLC
DCH MISSION VALLEY LLC
DCH MONMOUTH LLC
DCH MONTCLAIR LLC
DCH MOTORS LLC
DCH NANUET LLC
DCH NY MOTORS LLC
DCH OXNARD 1521 IMPORTS INC.
DCH SIMI VALLEY INC.
DCH TEMECULA IMPORTS LLC
DCH TEMECULA MOTORS LLC
DCH TORRANCE IMPORTS INC.
FREEHOLD NISSAN LLC
LLL SALES CO LLC
PARAMUS WORLD MOTORS LLC
SHARLENE REALTY LLC
TUSTIN MOTORS INC.
DCH FINANCIAL NJ, INC.
DCH DMS NJ, INC.
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
By: |
|
|
Name: | Bryan DeBoer | |
Title: |
Authorized Agent |
|
By: | ||
Name: | John North | |
Title: | Authorized Agent | |
150 N. Bartlett Medford, OR 97501 Fax: (541) 776-6402 |
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
U.S. BANK NATIONAL ASSOCIATION, as Agent, Lender, Swing Line Lender, and LC Issuer |
||
By: |
|
|
Name: | Gilmore Hector | |
Title: |
Vice President |
|
Notice Address: 13010 SW 68th Parkway |
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
JPMORGAN CHASE BANK, N.A. as Lender |
||
By: |
|
|
Name: | JEFFREY G. CALDER | |
Title: |
VICE PRESIDENT |
|
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
MERCEDES-BENZ FINANCIAL SERVICES USA LLC, as Lender |
||
By: |
|
|
Name: | ||
Title: |
| |
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
TOYOTA MOTOR CREDIT CORPORATION, as Lender |
||
By: |
|
|
Name: | ||
Title: |
| |
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
BMW FINANCIAL SERVICES NA, LLC, as Lender |
||
By: |
|
|
Name: | ||
Title: |
| |
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
BANK OF AMERICA, NA, as Lender |
||
By: |
|
|
Name: | Kenneth W. Winston, III | |
Title: |
Senior Vice President |
|
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
BANK OF THE WEST, as Lender |
||
By: |
|
|
Name: | ||
Title: |
| |
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
KEYBANK NATIONAL ASSOCIATION, as Lender |
||
By: |
|
|
Name: | ||
Title: |
| |
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
NISSAN MOTOR ACCEPTANCE CORPORATION, as Lender |
||
By: |
|
|
Name: | ||
Title: |
| |
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
AMERICAN HONDA FINANCE CORPORATION, as Lender |
||
By: |
|
|
Name: | ||
Title: |
| |
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
TD BANK, N.A., as Lender | ||
By: |
|
|
Name: | ||
Title: |
| |
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
ALLY BANK, as Lender | ||
By: |
|
|
Name: | ||
Title: |
| |
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
SANTANDER BANK, N.A., as Lender | ||
By: |
|
|
Name: | ||
Title: |
| |
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
VW CREDIT, INC., as Lender | ||
By: |
|
|
Name: | ||
Title: |
| |
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
HYUNDAI CAPITAL AMERICA, as Lender | ||
By: |
|
|
Name: | ||
Title: |
| |
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
CAPITAL ONE, N.A., as Lender | ||
By: |
|
|
Name: | ||
Title: |
| |
[LITHIA MOTORS – AMENDED AND RESTATED LOAN AGREEMENT]
SCHEDULE 1
Name of Financial |
Pro Rata Share |
New Vehicle |
Used Vehicle |
Revolving Commitment |
U.S. Bank National Association |
12.647058824% |
$158,088,235.29 |
$18,970,588.24 |
$37,941,176.47 |
J.P. Morgan Chase Bank, N.A. |
12.647058824% |
$158,088,235.29 |
$18,970,588.24 |
$37,941,176.47 |
Toyota Motor Credit Corporation |
12.647058824% |
$58,088,235.29 |
$18,970,588.24 |
$37,941,176.47 |
American Honda Finance Corporation |
7.352941176% |
$91,911,764.71 |
$11,029,411.76 |
$22,058,823.53 |
Mercedes-Benz Financial Services USA LLC |
7.352941176% |
$91,911,764.71 |
$11,029,411.76 |
$22,058,823.53 |
TD Bank, N.A. |
7.352941176% |
$91,911,764.71 |
$11,029,411.76 |
$22,058,823.53 |
BMW Financial Services NA, LLC |
6.470588235% |
$80,882,352.94 |
$9,705,882.35 |
$19,411,764.71 |
Bank of America, N.A. |
5.882352941% |
$73,529,411.76 |
$8,823,529.41 |
$17,647,058.82 |
Capital One, N.A. |
5.882352941% |
$73,529,411.76 |
$8,823,529.41 |
$17,647,058.82 |
Bank of the West |
4.411764706% |
$55,147,058.82 |
$6,617,647.06 |
$13,235,294.12 |
KeyBank National Association |
4.411764706% |
$55,147,058.82 |
$6,617,647.06 |
$13,235,294.12 |
Ally Bank |
2.941176471% |
$36,764,705.88 |
$4,411,764.71 |
$8,823,529.41 |
Santander Bank, N.A. |
2.941176471% |
$36,764,705.88 |
$4,411,764.71 |
$8,823,529.41 |
VW Credit, Inc. |
2.941176471% |
$36,764,705.88 |
$4,411,764.71 |
$8,823,529.41 |
Nissan Motor Acceptance Corporation |
2.352941176% |
$29,411,764.71 |
$3,529,411.76 |
$7,058,823.53 |
Hyundai Capital America |
1.764705882% |
$22,058,823.53 |
$2,647,058.82 |
$5,294,117.65 |
Total |
100.00% |
$1,250,000,000.00 |
$150,000,000.00 |
$300,000,000.00 |
PRICING SCHEDULE
In addition to the terms defined elsewhere in this Agreement, for purposes of determining the applicable interest rates and fees, the following terms shall have the meanings set forth in this Pricing Schedule:
“Alternate Base Rate Margin (New Vehicle)” means a percentage rate per annum equal to .50%.
“Alternate Base Rate Margin (Revolving)” means, as of any date of determination, a percentage rate per annum equal to 1.0% less than the Revolving Loan Margin which is in effect at such time.
“Alternate Base Rate Margin (Used Vehicle)” means a percentage rate per annum equal to .75%.
“LC Fee Percentage” means a percentage rate per annum equal to 1.50%.
“New Vehicle Floorplan Commitment Fee Rate” means a percentage rate per annum equal to .15%.
“New Vehicle Floorplan Margin” means a percentage rate per annum equal to 1.25%.
“Revolving Loan Margin” and “Revolving Loan Commitment Fee Rate” mean the applicable percentage rates per annum set forth below opposite the applicable Leverage Ratio, as adjusted from time to time.
Leverage Ratio |
Revolving |
Revolving Loan |
Greater than 4.50 to 1.00 |
2.50% |
0.40% |
Greater than 4.00 to 1.00 but less |
2.25% |
0.30% |
Greater than 2.00 to 1.00 but less |
2.00% |
0.25% |
Greater than 1.75 to 1.00 but less |
1.75% |
0.20% |
Greater than 1.50 to 1.0 but less |
1.50% |
.15% |
Less than or equal to 1.50 to 1.0 |
1.25% |
.15% |
The Revolving Loan Margin (“Applicable Margin”) and Revolving Loan Commitment Fee Rate (“Applicable Fee Rate”) shall be determined by Agent from time to time based upon the information set forth in Borrower’s financial statements and Compliance Certificate furnished to Agent pursuant to this Agreement as of the end of each fiscal quarter and shall be based upon the Leverage Ratio as of such date.
Any change in the Applicable Margin or Applicable Fee Rate shall take effect on the first Business Day of the month following the date of delivery to Agent of the applicable financial statements and Compliance Certificate, and the Applicable Margin and Applicable Fee Rate, as so determined, shall remain in effect until the earlier of:
a. the first Business Day of the month following the delivery to Agent of a subsequent financial statement and Compliance Certificate indicating a Leverage Ratio requiring a change in the Applicable Margin or Applicable Fee Rate, or
b. the day upon which the Company fails to deliver to Agent the applicable financial statements and Compliance Certificate within the time provided under this Agreement. Upon any failure of the Company to deliver to Agent the applicable financial statements and Compliance Certificate within the time required by this Agreement, the Applicable Margin and Applicable Fee Rate shall be the highest Applicable Margin and Applicable Fee Rate set forth in the foregoing table, which shall remain in effect until five Business Days following the date of delivery to Agent of financial statements and Compliance Certificate reflecting a Leverage Ratio for which a lower Applicable Margin and Applicable Fee Rate would be applicable.
Notwithstanding the foregoing, the Revolving Loan Margin shall be 2.00% and the Revolving Loan Commitment Fee Rate shall be 0.25% from the Closing Date until the earlier of (a) the first Business Day of the month following the delivery to Agent of a financial statement and Compliance Certificate indicating a Leverage Ratio requiring a change in the Applicable Margin or Applicable Fee Rate, or (b) the day upon which the Company fails to deliver to Agent the applicable financial statements and Compliance Certificate within the time provided under this Agreement.
If, as a result of any restatement of or other adjustment to the financial statements of the Company and its Subsidiaries or for any other reason, the Agent determines that the calculation of the Leverage Ratio by the Company as of the last day of any fiscal quarter was inaccurate and a correct calculation of the Leverage Ratio would have resulted in a higher Applicable Margin and Applicable Fee Rate, the Applicable Margin and Applicable Fee Rate shall be retroactively adjusted to the rate that would have been applicable if the Leverage Ratio had been correctly calculated. Promptly upon demand by the Agent, the Revolving Loan Borrower shall pay to the Agent for the account of the Lenders the additional interest and fees that would have been payable based upon the correct calculation of the Leverage Ratio. Nothing set forth herein shall limit the Required Lenders’ right to increase the interest rate upon the occurrence of an Event of Default.
“Used Vehicle Floorplan Commitment Fee Rate” means a percentage rate per annum equal to .15%.
“Used Vehicle Floorplan Margin” means a percentage rate per annum equal to 1.50%.
Exhibit 99.1
LITHIA MOTORS AND DCH AUTO GROUP USA COMPLETE COMBINATION TO FORM NATIONAL GROUP
MEDFORD, OREGON, October 1, 2014 – Lithia Motors, Inc. (NYSE: LAD) today announced it has completed the purchase of DCH Auto Group Inc., one of the 10 largest dealer groups in the country. DCH’s 27 stores, located in Southern California, New Jersey and New York, will be combined with Lithia’s 101 stores in the Western United States.
The DCH stores are estimated to generate approximately $2.3 billion in annualized revenue, and are expected to increase 2014 earnings per share by approximately $0.12 to $0.14, excluding acquisition costs. Lithia expects to incur pre-tax costs associated with the transaction of approximately $0.06 to $0.08 per share in 2014.
The combined organization will pursue two growth opportunities: the exclusive franchise, small- to medium-size market strategy that is Lithia’s hallmark and the large metropolitan market strategy the DCH management team has honed since the 1970s. Together, we anticipate this will more than double the potential acquisition opportunities.
The transaction was funded by approximately $364 million in cash, the issuance of 268,770 shares of Lithia common stock, incurring $230 million of vehicle floorplan debt financing, and the assumption of non-floorplan debt of $53 million. In conjunction with the transaction, Lithia increased its syndicated credit facility by $700 million and will increase outstanding mortgage debt by $100 million. After the transaction, Lithia will have approximately $190 million of remaining liquidity.
The combined organization’s brand mix is more diversified with approximately 26% Honda, 21% Toyota, 18% Chrysler, 9% General Motors, 7% BMW, 5% Subaru, 3% Ford, 3% Volkswagen, 3%, Nissan, 2% Mercedes Benz, and 3% other brands. The DCH stores will continue to be led by the current management team, with George Liang, DCH’s President, reporting directly to Bryan DeBoer, Lithia’s President and Chief Executive Officer. It is expected that Shau-wai Lam, founder and DCH Chairman Emeritus, will join the Lithia Board of Directors in April 2015.
Bryan DeBoer commented, “Since the announcement of our combination in June of this year, we have visited each of the DCH stores with their management team and believe our similar cultures and values, along with empowered store leadership, will position us for success now and in the future. We also look forward to welcoming Shau-wai Lam to our board of directors. His depth of industry experience and manufacturer knowledge will be invaluable in the years to come.”
About Lithia
Lithia Motors, Inc. is the eighth largest automotive retailer in the United States. Lithia sells 30 brands of new vehicles and all brands of used vehicles at 128 stores in 14 states. Lithia also arranges finance, warranty, and credit insurance contracts; and provides vehicle parts, maintenance, and repair services at all of its locations.
Sites
www.lithia.com
www.lithiainvestorrelations.com
www.lithiacareers.com
www.assuredservice.com
Lithia Motors on Facebook
http://www.facebook.com/LithiaMotors
Lithia Motors on Twitter
http://twitter.com/lithiamotors
Contact:
John North
VP Finance and Controller
(541) 618-5748
Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements include statements regarding our goals, plans, projections and guidance regarding our financial position, results of operations, market position, pending and potential future acquisitions and business strategy, and often contain words such as “project,” “outlook,” "expect," "anticipate," "intend," "plan," "believe," “estimate,” “may,” "seek," “would,” “should,” “likely,” or "will" and similar references to future periods. Examples of forward-looking statements in this press release include our outlook of revenues and earnings per share results and the assumptions that underlie them and our potential acquisition opportunities as a combined company.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events that depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance, and our actual results of operations, financial condition and liquidity and development of the industries in which we operate may differ materially from those made in or suggested by the forward-looking statements in this press release. The risks and uncertainties that could cause actual results to differ materially from estimated or projected results include without limitation, future economic and financial conditions (both nationally and locally), changes in customer demand, our relationship with, and the financial and operational stability of, vehicle manufacturers and other suppliers, risks associated with our indebtedness (including available borrowing capacity, compliance with financial covenants and ability to refinance or repay indebtedness on favorable terms), government regulations, legislation and others set forth from time to time in our filings with the SEC. We urge you to carefully consider this information and not place undue reliance on forward-looking statements. We undertake no duty to update our forward-looking statements, including our earnings outlook, which are made as of the date of this release.