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Subsequent Events

9 Months Ended

Sep. 30, 2012

17. Subsequent Events

Agreement and Plan of Merger

On October 2, 2012 (the “Closing Date”), the Company completed the Merger. KCPC was the surviving corporation in the Merger and, as a result, is now a wholly owned subsidiary of the Company. Pursuant to the terms outlined in the agreement above, each share of common stock and preferred stock of KCPC issued and outstanding was converted into the right to receive its pro rata portion of 6,161,334 shares of Company Stock in the aggregate. In addition, each share of KCPC common stock was converted into the right to receive its pro rata portion of $27,000 of total cash consideration (subject to adjustment as provided in the Merger Agreement), to be paid on the third anniversary of the Closing Date, to the extent not used to satisfy the indemnification obligations of the KCPC Stockholders that may arise under the Merger Agreement.

Pursuant to the Merger Agreement, the size of the Company Board was increased from five to eight members on the Closing Date. The three additional directors of the Company are Paul Halpern, Jonathan Ward and Gordon H. Woodward.

Due to significant limitations on access to Central information prior to the acquisition date, and the limited time since the acquisition date, the initial accounting for the business combination is incomplete at this time. As a result, the Company is unable to provide the amounts recognized as of the acquisition date for the major classes of assets acquired and liabilities assumed, pre-acquisition contingencies and goodwill. Also, the Company is unable to provide the pro forma revenues and earnings of the combined entity. This information will be included in Standard Parking’s 2012 Annual Report on Form 10-K.

Credit Agreement

In connection with the Merger, on the Closing Date, the Company entered into a Credit Agreement (the “Credit Agreement”) with Bank of America, N.A. (“Bank of America”), as administrative agent, Wells Fargo Bank, N.A. (“Wells Fargo Bank”) and JPMorgan Chase Bank, N.A. (“JPMorgan Chase Bank”), as co-syndication agents, U.S. Bank National Association, First Hawaiian Bank and General Electric Capital Corporation, as co-documentation agents, Merrill Lynch, Pierce, Fenner & Smith Inc., Wells Fargo Securities, LLC and J.P. Morgan Securities LLC, as joint lead arrangers and joint book managers, and the lenders party thereto (the “Lenders”).

Pursuant to the terms, and subject to the conditions, of the Credit Agreement, the Lenders have made available to the Company a new senior secured credit facility (the “Senior Credit Facility”) that permits aggregate borrowings of $450,000 consisting of (i) a revolving credit facility of up to $200,000 at any time outstanding, which includes a letter of credit facility that is limited to $100,000 at any time outstanding, and (ii) a term loan facility of $250,000. The Senior Credit Facility matures on October 2, 2017.

The entire amount of the term loan portion of the Senior Credit Facility was drawn by the Company on the Closing Date and is subject to scheduled quarterly amortization of principal based on the following amounts: (i) $22,500 in the first year, (ii) $22,500 in the second year, (iii) $30,000 in the third year, (iv) $30,000 in the fourth year and (v) $37,500 in the fifth year. The Company also borrowed $72,800 under the revolving credit facility on the Closing Date. The proceeds from these borrowings were used by the Company to repay outstanding indebtedness of the Company and KCPC, and will also be used to pay costs and expenses related to the Merger and the related financing and fund ongoing working capital and other general corporate purposes.

Borrowings under the Senior Credit Facility bear interest, at the Company’s option, (i) at a rate per annum based on the Company’s consolidated total debt to EBITDA ratio for the 12-month period ending as of the last day of the immediately preceding fiscal quarter, determined in accordance with the applicable pricing levels set forth in the Credit Agreement (the “Applicable Margin”) for LIBOR loans, plus the applicable LIBOR rate or (ii) the Applicable Margin for base rate loans plus the highest of (x) the federal funds rate plus 0.5%, (y) the Bank of America prime rate and (z) a daily rate equal to the applicable LIBOR rate plus 1.0%.

Under the terms of the Credit Agreement, the Company is required to maintain a maximum consolidated total debt to EBITDA ratio of not greater than 4.5:1.0 (with certain step-downs described in the Credit Agreement). In addition, the Company is required to maintain a minimum consolidated fixed charge coverage ratio of not less than 1:25:1.0 (with certain step-ups described in the Credit Agreement).

Events of default under the Credit Agreement include failure to pay principal or interest when due, failure to comply with the financial and operational covenants, the occurrence of any cross default event, non-compliance with other loan documents, the occurrence of a change of control event, and bankruptcy and other insolvency events. If an event of default occurs and is continuing, the Lenders holding a majority of the commitments and outstanding term loan under the Credit Agreement have the right, among others, to (i) terminate the commitments under the Credit Agreement, (ii) accelerate and require the Company to repay all the outstanding amounts owed under the Credit Agreement and (iii) require the Company to cash collateralize any outstanding letters of credit.

Each wholly owned domestic subsidiary of the Company (subject to certain exceptions set forth in the Credit Agreement) has guaranteed all existing and future indebtedness and liabilities of the other guarantors and the Company arising under the Credit Agreement.

In connection with and effective upon the execution and delivery of the Credit Agreement on October 2, 2012, the Company terminated its then-existing Amended and Restated Credit Agreement (the “Prior Credit Agreement”), dated as of July 15, 2008. Losses on the extinguishment of debt will be recorded in interest expense during the fourth quarter in the amounts of $428 and $534 related to the interest rate cap and debt issuance costs, respectively. There were no termination penalties incurred by the Company in connection with the termination of the Prior Credit Agreement.

Interest Rate Swap Agreements

October 25, 2012, the Company entered into interest rate swap transactions (collectively, the “Interest Rate Swaps”) with each of JPMorgan Chase Bank, Bank of America and PNC Bank, N.A. in an initial aggregate notional amount of $150,000,000 (the “Notional Amount”). The Interest Rate Swaps have an effective date of October 31, 2012 and a termination date of September 30, 2017. The Interest Rate Swaps effectively fix the interest rate on an amount of variable interest rate borrowings under the Credit Agreement, originally equal to the Notional Amount at 0.7525% per annum plus the applicable margin rate for LIBOR loans under the Credit Agreement determined based upon Standard’s consolidated total debt to EBITDA ratio. The Notional Amount is subject to scheduled quarterly amortization that coincides with quarterly prepayments of principal under the Credit Agreement.

Registration Rights Agreement

In connection with the Merger, on the Closing Date, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with Kohlberg CPC Rep, L.L.C. (“Kohlberg”), 2929 CPC HoldCo, LLC (“Lubert-Adler”), VCM STAN-CPC Holdings, LLC (“Versa”), each of which was, immediately prior to the effective time of the Merger (the “Effective Time”), a KCPC Stockholder and, as a result of the Merger, is now a stockholder of the Company. As described in the Company’s Current Report on Form 8-K filed with the SEC on February 29, 2012, pursuant to the terms of the Registration Rights Agreement, the Company is required to file with the SEC a shelf registration statement, registering for public sale by Kohlberg, Lubert-Adler and Versa the shares of Company Stock issued by the Company to such KCPC Stockholders in connection with the Merger, no later than six months following the Closing Date. Under the Registration Rights Agreement, the Company is required to maintain the effectiveness of the shelf registration statement for resales of Common Stock by such KCPC Stockholders until the earliest of (i) the date upon which the registrable securities (as defined in the Registration Rights Agreement) are able to be sold without registration under the Securities Act of 1933, (ii) the date that all registrable securities have been sold and (iii) the seventh anniversary of the effective date of the shelf registration statement. Neither Kohlberg, Lubert-Adler nor Versa is permitted to request an underwritten offering of registrable securities prior to the first anniversary of the Closing Date and, prior to the third anniversary of the Closing Date, neither Kohlberg, Lubert-Adler nor Versa may make any offers or sales of registrable securities pursuant to a shelf registration except in a firm commitment underwritten public offering.

The Registration Rights Agreement also provides Kohlberg, Lubert-Adler and Versa with piggyback registration rights for underwritten public offerings that the Company may effect for its own account or for the benefit of other selling stockholders.

The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the Registration Rights Agreement, a copy of which is attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 2, 2012.

Closing Agreements

As previously disclosed in Item 1.01 of the Company’s Current Report on Form 8-K filed with the SEC on February 29, 2012, on February 28, 2012, the Company entered into Closing Agreements with Lubert-Adler Real Estate Fund V, L.P., Lubert-Adler Real Estate Parallel Fund V, L.P., Kohlberg Investors V, L.P., Kohlberg TE Investors V, L.P., Kohlberg Partners V, L.P., Kohlberg Offshore Investors V, L.P., KOCO Investors V, L.P., Versa Capital Fund I, L.P. and Versa Capital Fund I Parallel, L.P.

In connection with the Merger, on the Closing Date, the Company entered into additional Closing Agreements (the “Additional Closing Agreements”) with the KCPC Stockholders, as well as with Sailorshell and Co., CP Klaff Equity LLC and Jumpstart Development LLC (Worldwide), each of which was, prior to the transfer of its shares in KCPC to the KCPC Stockholders, a stockholder of KCPC.

Pursuant to the terms of the Additional Closing Agreements, Kohlberg, Lubert-Adler and Versa have agreed that, for a period of three years following the Closing Date and for so long as such KCPC Stockholder owns in the aggregate (together with its affiliates, all other KCPC Stockholders and their respective affiliates and any other persons with which any of the foregoing form a “group”) beneficially or of record more than 10% of the issued and outstanding Company Stock, to cause the shares of Company Stock held by them to be counted as present at any meeting of the Company’s stockholders and to vote, in person or by proxy, all of such shares of Company Stock as follows:

For two years following the Closing Date:

· with respect to the election of directors to the Company Board, “for” any nominees recommended by the Company Board; and

· with respect to all other matters submitted for a vote of the Company’s stockholders, in accordance with the recommendation of the Company Board with respect to such matters.

For the period beginning on the day after the second anniversary of the Closing Date and ending on the third anniversary of the Closing Date:

· with respect to the election of directors to the Company Board, “for” any nominees recommended by the Company Board; and

· with respect to all other matters submitted for a vote of the Company’s stockholders, in proportion to the votes cast by all other Company stockholders.

The Additional Closing Agreements also provide that Kohlberg, Lubert-Adler and Versa will be subject to a four-year standstill period following the Closing Date, during which time, such KCPC Stockholder will not, among other things, (i) acquire or agree to acquire any additional voting securities of the Company, (ii) seek or propose a merger, acquisition, tender offer or other extraordinary transaction with or involving the Company or any of its subsidiaries or their respective securities or assets, (iii) call a meeting of the stockholders of the Company or initiate a stockholder proposal or (iv) form a “group” (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934) with any person (other than an affiliate of such KCPC Stockholder) with respect to the acquisition or voting of any voting securities of the Company.

The Additional Closing Agreements impose certain restrictive covenants on Kohlberg and Versa, including (i) confidentiality obligations with respect to confidential information of the Company and (ii) non-disparagement requirements. Lubert-Adler is subject to confidentiality obligations with respect to confidential information of the Company pursuant to the terms of its Additional Closing Agreement.

The foregoing description of the Additional Closing Agreements does not purport to be complete and is qualified in its entirety by reference to the Additional Closing Agreements, copies of which are attached as Exhibits 10.2 through 10.8 to the Company’s Current Report on Form 8-K filed with the SEC on October 2, 2012.