As filed with the Securities and Exchange Commission on July 27, 2001
Registration No. 333-
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ASBURY AUTOMOTIVE GROUP, INC.*
(Exact name of registrant as specified in its charter)
DELAWARE 5511 58-2241119
State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Classification Identification No.)
organization) Code Number)
3 LANDMARK SQUARE
SUITE 500
STAMFORD, CONNECTICUT 06901
(203) 356-4400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
BRIAN E. KENDRICK
CHIEF EXECUTIVE OFFICER
ASBURY AUTOMOTIVE GROUP, INC.
3 LANDMARK SQUARE
SUITE 500
STAMFORD, CONNECTICUT 06901
(203) 356-4400
(Name and address, including zip code, and telephone number, including area
code, of agent for service)
Copies to:
ROBERT ROSENMAN, ESQ. ANDREW D. SOUSSLOFF, ESQ.
CRAVATH, SWAINE & MOORE SULLIVAN & CROMWELL
WORLDWIDE PLAZA 125 BROAD STREET
825 EIGHTH AVENUE NEW YORK, NEW YORK 10004
NEW YORK, NEW YORK 10019 (212) 558-4000
(212) 474-1000 FAX: (212) 558-3588
FAX: (212) 474-3700
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [_]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
Title of Each Class of Proposed
Maximum Amount of
Securities to be Registered Aggregate Registration Fee
Offering Price (1)(2)
Common Stock; par value
$.01 per share $150,000,000 $37,500
(1) Includes shares to be sold upon exercise of the underwriters'
over-allotment option. See "Underwriting."
(2) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457 of Regulation C under the Securities Act of 1933, as
amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
* Currently a Delaware limited liability company named Asbury Automotive Group
L.L.C., which on or prior to the effective date of this registration statement
will be converted into a Delaware corporation through either a conversion into
a corporation or by a merger with an entity or a subsidiary of an entity that
has no other business.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ The information in this preliminary prospectus is not complete and may be +
+ changed. These securities may not be sold until the registration statement +
+ filed with the Securities and Exchange Commission is effective. This +
+ preliminary prospectus is not an offer to sell nor does it seek an offer to +
+ buy these securities in any jurisdiction where the offer or sale is not +
+ permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion. Dated July 27, 2001.
[ ] Shares
ASBURY AUTOMOTIVE GROUP, INC.
Common Stock
----------------------
This is an initial public offering of shares of common stock of Asbury
Automotive Group, Inc.
Asbury is offering [ ] of the shares to be sold in the offering. The
selling stockholders identified in this prospectus are offering an additional
[ ] shares. Asbury will not receive any of the proceeds from the sale of the
shares being sold by the selling stockholders.
Prior to this offering, there has been no public market for the common
stock. It is currently estimated that the initial public offering price per
share will be between $ [ ] and $ [ ]. Asbury intends to list the common stock
on the New York Stock Exchange under the symbol "[ ]."
See "Risk Factors" on page 7 to read about factors you should consider
before buying shares of the common stock.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
----------------------
Per Share Total
Initial public offering price $ $
Underwriting discount $ $
Proceeds, before expenses, to Asbury $ $
Proceeds, before expenses, to the selling stockholders $ $
To the extent that the underwriters sell more than [ ] shares of common
stock, the underwriters have the option to purchase up to an additional [ ]
shares from Asbury and [ ] shares from the selling stockholders at the initial
public offering price less the underwriting discount.
----------------------
The underwriters expect to deliver the shares against payment in New York, New
York on [ ], 2001.
GOLDMAN, SACHS & CO. MERRILL LYNCH & CO.
SALOMON SMITH BARNEY
----------------------
Prospectus dated [ ], 2001.
[MAP OF THE U.S. WITH ASBURY STORES]
[PHOTOS OF CERTAIN ASBURY STORES]
[LOGOS OF PLATFORMS]
No manufacturer or distributor has been involved, directly or indirectly, in
the preparation of this prospectus or in the offering being made hereby. No
manufacturer or distributor has been authorized to make any statements or
representations in connection with the offering, and no manufacturer or
distributor has any responsibility for the accuracy or completeness of this
prospectus or for the offering.
PROSPECTUS SUMMARY
The following is a summary of some of the information contained in this
prospectus. It may not contain all the information that is important to you.
To understand this offering fully, you should read carefully the entire
prospectus, including the risk factors and the financial statements.
In this prospectus the terms "Asbury," "we," "us" and "our" refer to
Asbury Automotive Group, Inc., unless the context otherwise requires, and its
subsidiaries and their respective predecessors in interest. This prospectus
assumes the conversion of Asbury Automotive Group L.L.C. from a limited
liability company into a corporation named Asbury Automotive Group, Inc.
immediately prior to the offering by either a conversion in accordance with
Delaware General Corporation Law or through a merger with an entity or a
subsidiary of an entity that has no other business. Per share numbers assume
that membership interests in the limited liability company outstanding
immediately prior to the conversion or merger offering will be exchanged for
shares of common stock in the new corporation on the basis of [ ] membership
interests for each share of common stock.
This prospectus includes statistical data regarding the automotive
retailing industry. Unless otherwise indicated, such data is taken or derived
from information published by:
o The Industry Analysis Division of the National Automobile Dealers
Association, also known as "NADA," NADA Data 2000.
o Automotive News 2001 Market Data Book.
o Automotive News Data Center.
o CNW Marketing/Research.
o Sales & Marketing Management 2000 Survey of Buying Power and Media
Markets.
BUSINESS
OUR COMPANY
We are one of the largest automotive retailers in the United States,
currently operating 126 franchises at 86 dealership locations in nine states.
We offer our customers an extensive range of automotive products and services,
including new and used vehicle sales and related financing and insurance,
vehicle maintenance and repair services, replacement parts and service
contracts. Our franchises include a diverse portfolio of 36 American, European
and Asian brands, and a majority of our dealerships are either luxury
franchises (such as BMW, Lexus and Mercedes-Benz) or mid-line import brands
(such as Honda, Toyota and Nissan). We have grown rapidly in recent years,
primarily through acquisition, with annual sales of $3.0 billion in 1999 and
$4.0 billion in 2000, which represented a 34% increase in annual sales from
1999. We sold a total of 154,422 new and used retail units in 2000, which
represented a 32% increase over the 116,790 retail units sold in 1999. In
addition, our 2000 results included over $434 million in parts, service and
collision repair revenues.
Our retail network is organized into nine regional dealership groups,
which we refer to as "platforms," located in 15 market areas that we believe
represent attractive opportunities, generally due to their high rates of
population and income growth. Each platform originally operated as an
independent business before being integrated into our operations, and each
continues to enjoy strong local brand name recognition. We believe that many
of our platforms rank first or second in market share in their local markets.
We compete in a large and highly fragmented industry comprised of
approximately 22,000 franchised dealerships. The U.S. automotive retailing
industry is estimated to have annual sales of approximately $1 trillion, with
the 100 largest dealer groups generating less than 10% of total sales revenue.
OUR STRENGTHS
We believe our strengths are as follows:
o EXPERIENCED AND INCENTIVIZED MANAGEMENT. We have a highly experienced
management team. After joining us, the former principal owners of our
nine platforms, who have an average of 36 years of
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experience in the automotive retailing industry, continued to manage
our operations at the platform level and played a significant role in
implementing our operating and acquisition strategies. The former
owners and their management teams collectively own approximately 40%
of our outstanding equity and will continue to own approximately [ ]%
of our outstanding equity after the offering. In addition, each of our
top three corporate executives has more than 20 years of experience in
either retail sales or the automotive retailing industry.
o ADVANTAGEOUS BRAND MIX. Our current brand mix includes a higher
proportion of luxury and mid-line import franchises to total franchises
than most public automotive retailers. Luxury and mid-line imports
together accounted for approximately 63% of our 2000 new retail vehicle
revenues and comprise over half of our total franchises. Luxury and
mid-line imports generate above average gross margins on new vehicles,
parts, service and collision repair and have greater customer loyalty
and repeat purchases than mid-line domestic and value automobiles. We
also believe luxury vehicle sales are less susceptible to
economic cycles.
o MARKET LEADERSHIP AND STRONG BRANDING OF OUR PLATFORMS. Each of our
platforms is comprised of between eight and 22 franchises and
generated average pro forma revenues of approximately $500 million in
2000. We believe that we are among the top three market share leaders
in 11 of our markets, including five in which we rank first. Our
regional market share and strong brand recognition allow our platforms
to realize significant regional economies of scale.
o DIVERSIFIED REVENUE STREAMS/VARIABLE COST STRUCTURE. We have a
diversified revenue base that we believe mitigates the impact of
slower new vehicle sales. Used vehicle sales and parts, service and
collision repair, which represented 37% of our total 2000 revenue,
generate higher profit margins than new vehicle sales and tend to
fluctuate less with economic cycles. In addition, our variable cost
structure helps us manage expenses in an economic downturn, as a large
part of our operating expenses consists of incentive-based
compensation, vehicle carrying costs and advertising.
OUR STRATEGY
Our objective is to be the most profitable automotive retailer in select
markets in the United States. To achieve this objective, we intend to follow
the outlined strategy:
o CONTINUED GROWTH THROUGH TARGETED ACQUISITIONS. We will seek to
establish platforms in new markets through acquisitions of large,
profitable and well-managed dealership groups. In addition, we will
pursue additional dealerships within our established markets, which we
refer to as "tuck-in acquisitions," to complement the related platform
by increasing brand diversity, market coverage and services.
o FOCUS ON HIGHER MARGIN PRODUCTS AND SERVICES. While new vehicle sales
are critical to drawing customers to our dealerships, used vehicle
retail sales, finance and insurance and parts, service and collision
repair provide significantly higher margin revenue streams. We
currently derive in excess of 68% of our total gross profit from these
areas. In addition, we have discipline-specific executives at both the
corporate and platform level who focus on both increasing the
penetration of current services and expanding the breadth of our
offerings to customers.
o DECENTRALIZED DEALERSHIP OPERATIONS. We believe that decentralized
dealership operations on a platform basis empower our retail network
to provide timely market-specific responses to sales, service,
marketing and inventory requirements. These operations are
complemented by centralized technology and financial controls as well
as sharing of best practices and market intelligence throughout the
organization.
o CUSTOMER RELATIONSHIP MANAGEMENT. We have begun to implement a CRM
initiative to increase customer loyalty and satisfaction and reduce
marketing costs by redirecting expenditures from mass media to
targeted communications. We expect to create a differentiated customer
experience, allowing us to capture a greater percentage of our targeted
households' automotive spending.
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3
Our principal executive offices are located at 3 Landmark Square,
Stamford, Connecticut 06901. Our telephone number is (203) 356-4400. Our World
Wide Web site address is http://www.asburyauto.com. Information contained on
our website or that can be accessed through our website is not incorporated by
reference in this prospectus. You should not consider information contained on
our website or that can be accessed through our website to be part of this
prospectus.
THE OFFERING
Common stock offered by us ___ shares (1)
Common stock offered by selling stockholders ___ shares (1)
Total common stock offered ___ shares (1)
Common stock outstanding after the offering ___ shares (2)
Use of Proceeds We intend to use the net proceeds from the sale of the common stock
offered by us for repayment of outstanding indebtedness and general corporate
purposes, including working capital and possible acquisitions. We will not
receive any proceeds from the sale of shares by the selling stockholders.
Proposed NYSE Symbol [ ].
Risk Factors See "Risk Factors" beginning on page 7 of this prospectus for a discussion of
factors that you should carefully consider before deciding to invest in shares
of our common stock.
- ---------------
(1) Does not include shares of common stock that may be sold by us and shares
of common stock that may be sold by the selling stockholders if the
underwriters choose to exercise their over-allotment option.
(2) Does not include (a) options issued under our 1999 Option Plan for [ ]
shares of common stock with a weighted average exercise price of $[ ] per
share, and (b) [ ] shares of common stock reserved for issuance under our
2001 Stock Option Plan, under which options for [ ] shares of common
stock will be issued on the date of this prospectus at the offering price
set forth on the cover page.
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The summary below presents our consolidated financial information and
should be read in conjunction with the consolidated financial statements and
related notes appearing elsewhere in this prospectus. The pro forma as
adjusted columns reflect our recently completed and probable acquisitions, our
change in tax status and the method of valuing certain of our inventories that
will occur simultaneously with our becoming a corporation, the conversion of
certain executives' carried interests (that is, interests in an increase in
our value) into options for our common stock, and this offering of our common
stock and our use of a portion of the proceeds to us to pay down debt.
4
Year Ended Three Months Ended
December 31, March 31,
-------------------------------------------- --------------------------------
2000 2001
---------------------- ---------------------
Pro Forma Pro Forma
1998 1999 Actual As Adjusted 2000 Actual As Adjusted
--------- ---------- ---------- ---------- -------- --------- ----------
($ in thousands, except per share data)
Income statement data:
Revenues:
New vehicles $687,850 $1,820,393 $2,439,729 $2,786,916 $562,490 $579,115 $624,487
Used vehicles 221,828 787,029 1,064,102 1,223,054 243,070 285,954 308,987
Parts, service and collision repair 156,037 341,506 434,478 482,124 98,746 118,243 125,471
Finance and insurance, net 19,149 63,206 89,481 97,093 19,732 23,554 24,373
--------- ---------- ---------- ---------- -------- --------- ---------
Total revenues 1,084,864 3,012,134 4,027,790 4,589,187 924,038 1,006,866 1,083,318
Gross profit 155,291 441,168 597,539 670,152 136,780 156,540 165,963
Income from operations 21,236 81,564 121,885 143,361 29,493 30,231 33,145
Income before minority interest and
extraordinary loss 18,118 37,420 37,954 32,994 11,101 7,615 6,422
Net income 3,081 16,148 28,927 32,994 3,896 6,182 5,562
Income (loss) per common share- n/a n/a n/a n/a n/a
basic
Other data:
Gross profit margin 14.3% 14.6% 14.8% 14.6% 14.8% 15.5% 15.3%
Operating income margin 2.0% 2.7% 3.0% 3.1% 3.2% 3.0% 3.1%
New vehicle retail units sold 27,734 71,604 96,614 108,142 21,679 21,854 23,234
Used vehicle retail units sold 15,205 45,186 57,808 65,956 13,676 14,963 16,200
As of March 31, 2001
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Pro Forma
-----------
Actual As Adjusted
---------- -----------
($ in thousands)
Balance sheet data:
Inventories $532,319 $577,143
Total current assets 762,815 837,818
Property and equipment, net 220,329 226,805
Total assets 1,408,378 1,527,220
Floor plan notes payable 486,223 518,443
Total current liabilities 606,315 639,429
Total long-term debt, including current portion 469,268 440,727
Total equity 326,261 427,226
5
RISK FACTORS
You should carefully consider the following risks and other information
in this prospectus before deciding to invest in shares of our common stock. If
any of the following risks and uncertainties actually occur, our business'
financial condition or operating results could be materially and adversely
affected. In this event, the trading price of our common stock could decline,
and you could lose part or all of your investment.
RISKS RELATED TO OUR DEPENDENCE ON VEHICLE MANUFACTURERS
IF WE FAIL TO OBTAIN RENEWALS OF ONE OR MORE OF OUR FRANCHISE AGREEMENTS FROM
VEHICLE MANUFACTURERS ON FAVORABLE TERMS, OR IF ONE OR MORE OF OUR FRANCHISE
AGREEMENTS ARE TERMINATED, OUR OPERATIONS COULD BE SIGNIFICANTLY COMPROMISED.
Each of our dealerships operates under the terms of a franchise agreement
with the manufacturer (or manufacturer-authorized distributor) of each of its
vehicle brands. Our dealerships may obtain new vehicles from manufacturers,
sell new vehicles and display vehicle manufacturers' trademarks only to the
extent permitted under franchise agreements. As a result of our dependence on
these franchise rights, manufacturers exercise a great deal of control over
our day-to-day operations, and the terms of our franchise agreements implicate
key aspects of our operations, acquisition strategy and capital spending.
Each of our franchise agreements provides the manufacturer with the right
to terminate the agreement or refuse to renew it after the expiration of the
term of the agreement under specified circumstances. We cannot assure you we
will be able to renew any of our existing franchise agreements or that we will
be able to obtain renewals on favorable terms. Specifically, many of our
franchise agreements provide that the manufacturer may terminate the
agreement, or direct us to divest the subject dealerships, if the dealership
undergoes a change of control. Provisions such as these may provide
manufacturers with superior bargaining positions in the event that they seek
to terminate our franchise agreements or renegotiate the agreements on terms
that are disadvantageous to us. Some of our franchise agreements also provide
the manufacturer with the right to purchase from us any franchise we seek to
sell. Our results of operations could be materially and adversely affected to
the extent that our franchise rights become compromised or our operations
restricted due to the terms of our franchise agreements.
MANUFACTURERS' STOCK OWNERSHIP RESTRICTIONS LIMIT OUR ABILITY TO ISSUE
ADDITIONAL EQUITY, WHICH COULD HAMPER OUR ABILITY TO MEET OUR FINANCING NEEDS.
Some of our automobile franchise agreements prohibit transfers of any
ownership interests of a dealership or, in some cases, its parent. The most
prohibitive restriction, which has been imposed by various manufacturers,
provides that, under certain circumstances, we may lose a franchise if a
person or entity acquires an ownership interest in us above a specified level
(ranging from 20% to 50% depending on the particular manufacturer's
restrictions) without the approval of the applicable manufacturer. This
trigger level can fall to as low as 5% if another vehicle manufacturer is the
entity acquiring the ownership interest.
Violations by our stockholders or prospective stockholders (including
vehicle manufacturers) of these restrictions are generally outside of our
control and may result in the termination or non-renewal of one or more
franchises, which could have a material adverse effect on us. We cannot assure
you that manufacturers will grant the approvals required for such
acquisitions. Moreover, if we are unable to obtain the requisite approval in a
timely manner we may not be able to issue additional equity in the time
necessary to take advantage of a market opportunity dependent on ready
financing or an equity issuance. These restrictions may also prevent or deter
prospective acquirers from acquiring control of us and, therefore, may
adversely impact the value of our common stock.
MANUFACTURERS' RESTRICTIONS ON ACQUISITIONS COULD LIMIT OUR FUTURE GROWTH.
We are required to obtain the consent of the applicable manufacturer
before we can acquire any additional dealership franchises. We cannot assure
you that manufacturers will consent to future acquisitions which could deter
us from being able to take advantage of a market opportunity. Obtaining
manufacturer consent for acquisitions could also take a significant amount of
time which could negatively affect our ability to acquire as attractive
target. In addition, under an applicable franchise
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agreement or under state law, a manufacturer may have a right of first refusal
to acquire a dealership that we seek to acquire.
Many vehicle manufacturers place limits on the total number of franchises
that any group of affiliated dealerships may obtain. A manufacturer may place
generic limits on the number of franchises or share of total franchises or
vehicle sales maintained by an affiliated dealership group on a national,
regional or local basis. Manufacturers may also tailor these types of
restrictions to particular dealership groups. Our current franchise mix has
caused us to reach the present franchise ceiling, set by agreement or
corporate policy, with Acura, and we are close to our franchise ceiling with
Toyota and Jaguar. We may have difficulty, or it may be impossible, for us to
obtain additional franchises from manufacturers once we reach their franchise
ceilings.
As a condition to granting their consent to our acquisitions, a number of
manufacturers may impose additional restrictions on us. Manufacturers'
restrictions typically prohibit:
o material changes in our company or extraordinary corporate
transactions such as a merger, sale of a substantial amount of assets
or any change in our board of directors or management that could have a
material adverse effect on the manufacturer's image or reputation or
could be materially incompatible with the manufacturer's interests;
o the removal of a dealership general manager without the consent of the
manufacturer; and
o the use of dealership facilities to sell or service new vehicles of
other manufacturers.
THE RESULTS OF OUR NEW VEHICLE SALES OPERATIONS ARE RELIANT ON THE OVERALL
PERFORMANCE OF MANUFACTURERS' PRODUCTS.
The success of our dealerships depends in large part on the overall
success of the vehicle lines they carry. New vehicle sales generate the
majority of our gross revenue and lead to sales of higher-margin products and
services such as finance and insurance products and repair and maintenance
services. Although we have sought to limit our dependence on any one vehicle
brand, we have focused our new vehicle sales operations in mid-line import and
luxury brands. Further, in 2000, Honda, Ford, Toyota and Nissan accounted for
17%, 13%, 10% and 8% of our revenues from new vehicle sales, respectively. No
other franchise accounted for more than 5% of our total new vehicle retail
sales revenue in 2000. If one or more vehicle lines that separately or
collectively account for a significant percentage of our new vehicle sales
suffer from decreasing consumer demand, our results of operations could be
materially and adversely affected.
IF WE FAIL TO OBTAIN A DESIRABLE MIX OF POPULAR NEW VEHICLES FROM
MANUFACTURERS, OUR PROFITABILITY WILL BE NEGATIVELY IMPACTED.
We depend on manufacturers to provide us with a desirable mix of popular
new vehicles. Typically, popular vehicles produce the highest profit margins
but tend to be the most difficult to obtain from manufacturers. Manufacturers
generally allocate their vehicles among their franchised dealerships based on
the sales history of each dealership.
IF AUTOMOBILE MANUFACTURERS DISCONTINUE INCENTIVE PROGRAMS, OUR SALES VOLUME
AND/OR PROFIT MARGIN ON EACH SALE MAY BE MATERIALLY AND ADVERSELY AFFECTED.
Our dealerships depend on manufacturers for certain sales incentives,
warranties and other programs that are intended to promote and support new
vehicle sales. Manufacturers often make many changes to their incentive
programs during each year. Some key incentive programs include:
o customer rebates on new vehicles;
o dealer incentives on new vehicles;
o special financing or leasing terms;
o warranties on new and used vehicles; and
7
o sponsorship of used vehicle sales by authorized new vehicle dealers.
A reduction or discontinuation of key manufacturers' incentive programs
may materially and adversely affect our profitability.
ADVERSE CONDITIONS AFFECTING ONE OR MORE MANUFACTURERS MAY NEGATIVELY IMPACT
OUR PROFITABILITY.
The success of each of our dealerships depends to a great extent on
vehicle manufacturers':
o financial condition;
o marketing efforts;
o vehicle design;
o production capabilities;
o reputation;
o management; and
o labor relations.
Adverse conditions affecting these and other important aspects of
manufacturers' operations and public relations could materially and adversely
effect our results of operations.
OUR FAILURE TO MEET A MANUFACTURER'S CONSUMER SATISFACTION AND FINANCIAL AND
SALES PERFORMANCE REQUIREMENTS MAY ADVERSELY AFFECT OUR ABILITY TO ACQUIRE NEW
DEALERSHIPS AND OUR PROFITABILITY.
Many manufacturers attempt to measure customers' satisfaction with their
sales and warranty service experiences through rating systems which are
generally known as consumer satisfaction indexes, or CSI, which augment
manufacturers' monitoring of dealerships' financial and sales performance.
Manufacturers may use these performance indicators as a factor in evaluating
applications for additional acquisitions. The components of these performance
indicators have been modified by various manufacturers from time to time in
the past, and we cannot assure you that these components will not be further
modified or replaced by different systems in the future. Some of our
dealerships have had difficulty from time to time meeting these standards. We
cannot assure you that we will be able to comply with these standards in the
future. A manufacturer may refuse to consent to an acquisition of one of its
franchises if it determines our dealerships do not comply with the
manufacturer's performance standards. This could materially and adversely
affect our acquisition strategy. In addition, we receive payments from the
manufacturers based, in part, on CSI scores, and future payments could be
materially reduced or eliminated if our CSI scores decline.
IF STATE DEALER LAWS ARE REPEALED OR WEAKENED, OUR DEALERSHIPS WILL BE MORE
SUSCEPTIBLE TO TERMINATION, NON-RENEWAL OR RE-NEGOTIATION OF THEIR FRANCHISE
AGREEMENTS.
Manufacturers' lobbying efforts may lead to the repeal or revision of
state dealer laws to our detriment. If dealer laws are repealed in
the states in which we operate, manufacturers may be able to terminate our
franchises without providing advance notice, an opportunity to cure or a
showing of good cause. Without the protection of state dealer laws, it may
also be more difficult for our dealerships to renew their franchise agreements
upon expiration.
RISKS RELATED TO OUR ACQUISITION STRATEGY
RISKS ASSOCIATED WITH ACQUISITIONS MAY HINDER OUR ABILITY TO INCREASE REVENUES
AND EARNINGS.
The automobile retailing industry is considered a mature industry in
which minimal growth is expected in industry unit sales. Accordingly, our
future growth depends in large part on our ability to acquire additional
dealerships, as well as on our ability to manage expansion, control costs in
our operations and consolidate both completed and anticipated tuck-in
acquisitions into existing operations. In pursing a
8
strategy of acquiring other dealerships, we face risks commonly encountered
with growth through acquisitions. These risks include, but are not limited to:
o incurring significantly higher capital expenditures and operating
expenses;
o failing to integrate the operations and personnel of the acquired
dealerships;
o entering new markets with which we are unfamiliar;
o incurring undiscovered liabilities at acquired dealerships;
o disrupting our ongoing business;
o diverting our management resources;
o failing to maintain uniform standards controls and policies;
o impairing relationships with employees, manufacturers and customers as
a result of changes in management;
o causing increased expenses for accounting and computer systems;
o failing to obtain manufacturers' consents to acquisitions of
additional franchises; and
o incorrectly valuing acquired entities.
We may not adequately anticipate all the demands that our growth will
impose on our systems, procedures and structures, including our financial and
reporting control systems, data processing systems and management structure.
Moreover, our failure to retain qualified management personnel at any acquired
dealership may increase the risk associated with integrating the acquired
dealership. If we cannot adequately anticipate and respond to these demands,
our business could be materially and adversely affected.
THERE ARE LIMITATIONS ON OUR FINANCIAL RESOURCES AVAILABLE FOR ACQUISITIONS.
We intend to finance our acquisitions by issuing shares of common stock
as full or partial consideration for acquired dealerships. The extent to which
we will be able or willing to issue common stock for acquisitions will depend
on the market value of the common stock from time to time and the willingness
of potential acquisition candidates to accept common stock as part of the
consideration for the sale of their businesses. Since we may focus on large
platform acquisitions, it is possible that we will issue a significant number
of additional shares of common stock in connection with such acquisitions in
the near future. The additional shares of common stock could be as much as, or
more than, the number of outstanding shares of common stock available
immediately after the offering. Moreover, manufacturer consent is required
before we can acquire additional dealerships and, in some cases, to issue
additional equity. See "Risk Factors -- Manufacturers' restrictions on
acquisitions could limit our future growth," and "Risk Factors -- Manufacturers'
stock ownership restrictions limit our ability to issue additional equity,
which could hamper our ability to meet our financing needs." We may be
required to use available cash or other sources of debt or equity financing.
We cannot assure you that we will be able to obtain additional financing by
issuing stock or debt securities, and using cash to complete acquisitions
could substantially limit our operating or financial flexibility. If we are
unable to obtain financing on acceptable terms, we may be required to reduce
the scope of our presently anticipated expansion, which could materially and
adversely affect our growth strategy.
We are dependent to a significant extent on our ability to finance our
inventory. Automotive retail inventory financing involves borrowing
significant sums of money in the form of "floor plan" financing. Floor plan
financing is how a dealership finances its purchase of new vehicles from a
manufacturer. The dealership borrows money to buy a particular vehicle from
the manufacturer and pays off the loan when it sells that particular vehicle,
paying interest during the interim period. We must obtain new floor plan
financing or obtain consents to assume such financing in connection with our
acquisition of dealerships. Our pledging of substantially all our inventory
and other assets to obtain this financing could impede our ability to borrow
from other sources.
9
OUR SUBSTANTIAL INDEBTEDNESS COULD LIMIT OUR ABILITY TO OBTAIN FINANCING FOR
ACQUISITIONS AND WILL REQUIRE THAT A SIGNIFICANT PORTION OF OUR CASH FLOW BE
USED FOR DEBT SERVICE.
We have substantial indebtedness and, as a result, significant debt
service obligations. As of March 31, 2001, we had approximately $969.6 million
of total indebtedness outstanding. Of this amount, $486.2 represents floor
plan financing. Our total indebtedness outstanding (excluding floor plan
financing) is equal to approximately 60% of our total capitalization plus
short-term debt. As of March 31, 2001, after giving pro forma effect to this
offering and the application of the net proceeds to us, our total indebtedness
would have been approximately [ ] million ([ ] million, excluding floor plan
financing), representing approximately [ ]% of total capitalization. We could
incur substantial additional indebtedness in the future. We will have
substantial debt service obligations, consisting of cash payments of principal
and interest for the foreseeable future.
The terms of our borrowing facilities also place restrictions on our
ability to engage in specific corporate transactions. In particular, the
facilities prohibit us from paying dividends, undergoing a change of control
and disposing of significant assets or subsidiaries.
The degree of our financial leverage and, as a result, significant debt
service obligations, could have a significant impact on our financial results
and operations, including:
o limiting our ability to obtain additional financing to fund our growth
strategy, working capital requirements, capital expenditures,
acquisitions, debt service requirements or other general corporate
requirements;
o limiting our ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of those funds
to fund debt service obligations; and
o increasing our vulnerability to adverse economic and industry
conditions.
OUR ACQUISITION STRATEGY MAY BE MATERIALLY AND ADVERSELY IMPACTED BY
ESCALATING ACQUISITION COSTS.
We believe that the U.S. automotive retailing market is fragmented and
offers many potential acquisition candidates that meet our targeting criteria.
However, we compete with several other national dealer groups, some of which
may have greater financial and other resources, and competition with existing
dealer groups and dealer groups formed in the future for attractive
acquisition targets could result in fewer acquisition opportunities and
increased acquisition costs. We will have to forego acquisition opportunities
to the extent that we cannot negotiate acquisitions on acceptable terms.
RISKS RELATED TO COMPETITION
THE LOSS OF KEY PERSONNEL AND LIMITED MANAGEMENT AND PERSONNEL RESOURCES COULD
ADVERSELY AFFECT OUR OPERATIONS AND GROWTH.
Our success depends to a significant degree upon the continued
contributions of our management team, particularly our senior management, and
service and sales personnel. Additionally, manufacturer franchise agreements
may require the prior approval of the applicable manufacturer before any
change is made in dealership general managers. We do not have employment
agreements with most of our dealership managers and other key dealership
personnel. Consequently, the loss of the services of one or more of these key
employees could materially and adversely affect our results of operations.
In addition, we may need to hire additional managers as we expand. The
market for qualified employees in the industry and in the regions in which we
operate, particularly for general managers and sales and service personnel, is
highly competitive and may subject us to increased labor costs during periods
of low unemployment. The loss of the services of key employees or the
inability to attract additional qualified managers could materially and
adversely affect our results of operations.
SUBSTANTIAL COMPETITION IN AUTOMOBILE SALES MAY ADVERSELY AFFECT OUR
PROFITABILITY.
10
The automotive retailing and servicing industry is highly competitive
with respect to price, service, location and selection. Our competition
includes:
o franchised automobile dealerships selling the same or similar new and
used vehicles that we offer in our markets;
o other national or regional affiliated groups of franchised
dealerships;
o privately negotiated sales of used vehicles;
o service center chain stores; and
o independent service and repair shops.
We do not have any cost advantage in purchasing new vehicles from
manufacturers. We typically rely on advertising, merchandising, sales
expertise, service reputation and dealership location to sell new and used
vehicles. Our franchise agreements do not grant us the exclusive right to sell
a manufacturer's product within a given geographic area. Our revenues or
profitability could be materially and adversely affected if any of the
manufacturers that supply vehicles to our dealerships award franchises to
competing dealerships in the same markets where we operate. A similar adverse
effect could occur if existing competing franchised dealers increase their
market share in our markets. Our gross margins may decline over time as we
expand into markets where we do not have a leading position. These and other
competitive pressures could materially and adversely affect the results of our
operations.
RISKS RELATED TO THE AUTOMOTIVE INDUSTRY
THE CYCLICAL AND LOCAL NATURE OF VEHICLE SALES MAY ADVERSELY AFFECT OUR
PROFITABILITY.
Retail vehicle sales are cyclical and historically have experienced
periodic downturns characterized by oversupply and weak demand. Many factors
affect the industry, including general economic conditions and consumer
confidence, the level of discretionary personal income and credit
availability. Future recessions may have a material adverse effect on our
business, particularly sales of new and used automobiles, sales of trucks and
bulk sales of vehicles to corporate customers. Furthermore, higher gasoline
prices may lead to a reduction in automobile purchases or a shift in buying
patterns from luxury/SUV models (which typically provide high profit margins
to retailers) to smaller, more economical vehicles (which typically have lower
margins).
Our performance is also subject to local economic, competitive and other
conditions prevailing in our platforms' particular geographic areas. Our
dealerships currently are located primarily in the Atlanta, Austin, Chapel
Hill, Dallas-Fort Worth, Greensboro, Houston, Jackson, Jacksonville, Little
Rock, Orlando, Raleigh, Richmond, Portland, St. Louis and Tampa markets.
Although we intend to pursue acquisitions outside of these markets, our
current operations are based in these areas. As a consequence, our results of
operations depend substantially on general economic conditions and consumer
spending levels in the Southeast and Texas, and to a lesser extent in the
Northwest and Midwest.
THE SEASONALITY OF THE AUTOMOBILE RETAIL BUSINESS GENERALLY REDUCES OUR FIRST
AND FOURTH QUARTER REVENUES.
The automobile industry is subject to seasonal variations in revenues.
Demand for automobiles is generally lower during the first and fourth quarters
of each year. Accordingly, we expect our revenues and operating results
generally to be lower in our first and fourth quarters than in our second and
third quarters.
IMPORT PRODUCT RESTRICTIONS AND FOREIGN TRADE RISKS MAY IMPAIR OUR ABILITY TO
SELL FOREIGN VEHICLES PROFITABLY.
A significant portion of our new vehicle business will involve the sale
of vehicles, parts or vehicles composed of parts that are manufactured outside
the United States. As a result, our operations will be
11
subject to customary risks of importing merchandise, including fluctuations in
the relative values of currencies, import duties, exchange controls, trade
restrictions, work stoppages and general political and socio-economic
conditions in foreign countries. The United States or the countries from which
our products are imported may, from time to time, impose new quotas, duties,
tariffs or other restrictions, or adjust presently prevailing quotas, duties
or tariffs, which could affect our operations and our ability to purchase
imported vehicles and/or parts.
OUR CAPITAL COSTS AND RESULT OF OPERATIONS MAY BE MATERIALLY AND ADVERSELY
AFFECTED BY A RISING INTEREST RATE ENVIRONMENT.
We finance our purchases of new and, to a lesser extent, used vehicle
inventory under a floor plan borrowing arrangement under which we are charged
interest at floating rates. We obtain capital for acquisitions and for some
working capital purposes under a similar arrangement. As a result, our debt
service expenses could rise with increases in interest rates. Rising interest
rates may also have the effect of depressing demand in the interest rate
sensitive aspects of our business, particularly new and used vehicle sales,
because many of our customers finance their vehicle purchases. As a result,
rising interest rates could have the effect of simultaneously increasing our
costs and reducing our revenues.
GENERAL RISKS RELATED TO INVESTING IN OUR STOCK
WE WILL BE CONTROLLED BY RIPPLEWOOD HOLDINGS L.L.C., WHICH MAY HAVE INTERESTS
DIFFERENT FROM YOUR INTERESTS.
After the completion of the offering, Asbury Automotive Holdings L.L.C.,
a controlled affiliate of Ripplewood Holdings L.L.C., will own [ ]% of our
common stock, and certain platform principals, consisting of the former owners
of our platforms and members of their management teams, will collectively own
[ ]% of our common stock, assuming no exercise of the underwriters'
over-allotment option. We do not know Asbury Automotive Holdings' future plans
as to its holdings of our common stock and cannot give you any assurances that
its actions will not negatively affect our common stock in the future. For
example, Asbury Automotive Holdings has from time to time had discussions with
competitors regarding potential business combinations.
Pursuant to a stockholders agreement among us, Asbury Automotive Holdings
and the platform principals, the platform principals are required to vote their
shares in accordance with Asbury Automotive Holdings' instructions with respect
to:
o persons nominated by Asbury Automotive Holdings to our board of
directors (and persons nominated against Asbury Automotive Holdings'
nominees); and
o any matter to be voted on by the holders of our common stock, whether
or not the matter was initiated by Asbury Automotive Holdings.
Asbury Automotive Holdings' level ownership of our stock could negatively
affect our stock price due to the perception of "market overhang," that is,
the perception that large blocks of shares are available for prompt disposal,
or in the event that it disposes of all or a substantial portion of its common
stock at any time or from time to time.
CONCENTRATION OF VOTING POWER AND ANTI-TAKEOVER PROVISIONS OF OUR CHARTER,
BYLAWS, DELAWARE LAW AND OUR FRANCHISE AGREEMENTS MAY REDUCE THE LIKELIHOOD OF
ANY POTENTIAL CHANGE OF CONTROL.
When this offering is completed, Ripplewood, through its control of
Asbury Automotive Holdings, will control [ ]% of our common stock.
Further, under the stockholders agreement, Ripplewood will have the power to
cause the platform principals (who, together with Ripplewood will collectively
hold [ ]% of our common stock after this offering is completed, assuming no
exercise of the underwriters' over-allotment option) in favor of Ripplewood's
nominees to our board of directors.
Provisions of our charter and bylaws may have the effect of discouraging,
delaying or preventing a change in control of us or unsolicited acquisition
proposals that a stockholder might consider favorable. These include
provisions:
o permitting the removal of a director from office only for cause;
o vesting the board of directors with sole power to set the number of
directors;
12
o limiting the persons who may call special stockholders' meetings;
o limiting stockholder action by written consent; and
o requiring formal advance notice for nominations for election to our
board of directors or for proposing matters that can be acted upon at
stockholders' meetings.
In addition, Delaware law makes it difficult for stockholders who have
recently acquired a large interest in a corporation to cause the merger or
acquisition of the corporation against the directors' wishes. Furthermore, our
board of directors has the authority to issue shares of preferred stock in one
or more series and to fix the rights and preferences of the shares of any such
series without stockholder approval. Any series of preferred stock is likely
to be senior to the common stock with respect to dividends, liquidation rights
and, possibly, voting rights. Our board's ability to issue preferred stock
could also have the effect of discouraging unsolicited acquisition proposals,
thus adversely affecting the market price of the common stock. Finally,
restrictions imposed by some of our dealer agreements may impede or prevent
any potential takeover bid.
Under the terms of the options granted under our 2001 option plan, many
option grants will fully vest and become immediately exercisable upon a change
in control of us, which, together with severance arrangements and other change
of control provisions contained in several of our employment agreements with
our executives, may further deter a potential acquisition bid.
GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL REGULATION COMPLIANCE COSTS MAY
ADVERSELY AFFECT OUR PROFITABILITY.
We are subject to a wide range of federal, state and local laws and
regulations, such as local licensing requirements, consumer protection laws
and environmental requirements governing, among other things, discharges into
the air and water, above ground and underground storage of petroleum
substances and chemicals, handling and disposal of wastes, and remediation of
contamination arising from spills and releases. If we or our properties
violate these laws and regulations, we could be subject to civil and criminal
penalties, or a cease and desist order may be issued against our operations
that are not in compliance. Our future acquisitions may also be subject to
governmental regulation, including antitrust reviews. We believe that all of
our platforms, the first of which we acquired in 1996, comply in all material
respects with all applicable laws and regulations relating to our business,
but future laws and regulations may be more stringent and require us to incur
significant additional costs.
SHARES ELIGIBLE FOR FUTURE SALE MAY CAUSE THE MARKET PRICE OF OUR COMMON STOCK
TO DROP SIGNIFICANTLY, EVEN IF OUR BUSINESS IS DOING WELL.
Sales of substantial amounts of common stock in the public market
subsequent to the offering could adversely affect the market price of the
common stock. After the offering is concluded, we will have [ ] shares of
common stock outstanding ([ ] shares if the underwriters' over-allotment
option is exercised in full). Of these shares, the [ ] shares of common stock
offered hereby ([ ] shares if the underwriters' over-allotment option is
exercised in full) will be freely tradable without restriction or further
registration under the Securities Act, except for shares held by persons
deemed to be "affiliates" of us or acting as "underwriters," as those terms
are defined in the Securities Act and related rules. The remaining [ ] shares
of common stock outstanding will be "restricted securities" within the meaning
of Rule 144 under the Securities Act and will be eligible for resale subject
to the volume, manner of sale, holding period and other limitations of Rule
144. Currently, [ ] shares of our common stock are issuable under existing
stock options granted to certain executive officers and employees. An
additional [ ] shares of common stock are reserved for issuance to employees
under our 2001 Stock Option Plan, and options for [ ] shares of common stock
will be granted pursuant to that plan at the time of the offering. See "Shares
Eligible for Future Sale."
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are based on
current expectations, estimates, forecasts and projections about the industry
in which we operate, management's beliefs and assumptions made by management.
Such statements include, in particular, statements about our plans, strategies
and prospects under the headings "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," "Shares Eligible for Future Sale" and "Underwriting."
Words such as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "estimates," variations of such words and similar expressions are
intended to identify such forward looking statements. These statements are not
guarantees of future performance and involve risks, uncertainties and
assumptions which are difficult to predict. Therefore, actual outcomes and
results
13
may differ materially from what is expressed or forecasted in such
forward-looking statements. Except as required under the federal securities
laws and the rules and regulations of the Securities and Exchange Commission,
we do not have any intention or obligation to update publicly any
forward-looking statements after we distribute this prospectus, whether as a
result of new information, future events or otherwise.
USE OF PROCEEDS
We estimate that our proceeds from the sale of [ ] shares of common stock
in this offering (at an assumed offering price of $[ ] per share), after
deducting underwriting discounts and commissions and estimated offering
expenses payable by us, will be approximately $[ ] million, or $[ ] million if
the underwriters exercise their over-allotment option in full. We will not
receive any proceeds from the sale of [ ] shares of common stock by the
selling stockholders ([ ] shares if the underwriters exercise their
over-allotment option in full). We are required to apply a minimum of 80% of
the net proceeds to us to repay part of the debt we incurred under our $550
million credit facility, which we use to fund acquisitions, from Ford Motor
Credit Company, Chrysler Financial Company, L.L.C. and General Motors
Acceptance Corporation, in accordance with the terms of that facility. Upon
repayment of the credit facility, additional funds will be available for
re-borrowing in accordance with the terms of the credit facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Credit Facilities" on page 29. We will use the remaining net
proceeds to us for working capital, possible acquisitions and general
corporate purposes.
DIVIDEND POLICY
We intend to retain all our earnings to finance the growth and
development of our business, including future acquisitions. Our acquisition
financing credit facility prohibits us from declaring or paying cash dividends
or other distributions to our stockholders. We do not anticipate paying any
cash dividends on our common stock in the foreseeable future. Any future
change in our dividend policy will be made at the discretion of our board of
directors and will depend on the then applicable contractual restrictions on
us contained in our financing credit facilities and other agreements, our
results of operations, earnings, capital requirements and other factors
considered relevant by our board of directors.
DILUTION
Our pro forma net tangible book value as of March 31, 2001, was $[ ]
per share of common stock. Pro forma net tangible book value per share
represents our pro forma tangible net worth (pro forma tangible assets less
pro forma total liabilities), divided by the total number of shares of our
common stock outstanding.
Dilution in net tangible book value per share represents the difference
between the amount per share paid by purchasers of shares of common stock in
this offering and the net tangible book value per share of common stock
immediately after the completion of this offering. After giving effect to the
sale by us of [ ] shares of common stock at an assumed initial public offering
price of $[ ] per share, and after deducting the underwriting discounts and
estimated offering expenses payable by us, our pro forma net tangible book
value as of March 31, 2001, as adjusted would have been approximately $[ ], or
$[ ] per share of common stock. This represents an immediate increase in pro
forma net tangible book value of $[ ] per share to existing stockholders and
immediate dilution of $[ ] per share to new investors purchasing common stock
in this offering. If all outstanding stock options were exercised, pro forma
tangible net book value would be further diluted by $[ ] per share to $[ ] per
share.
The following table illustrates the pro forma per share dilution:
Assumed initial public offering price per share $-
Pro forma net tangible book value per share before giving effect to the $-
offering and the related expenses
Increase in pro forma net tangible book value per share attributable to $-
new investors
Pro forma net tangible book value per share after giving effect to the $-
offering
Dilution per share to new investors $-
14
The following table summarizes as of March 31, 2001 on a pro forma basis, the
following:
o the number of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid to us by
existing stockholders; and
o the number of shares to be purchased and the total consideration to be
paid by new investors purchasing shares of common stock from us in
this offering (before deducting estimated underwriting discounts and
offering expenses).
Shares Purchased Total Consideration Average
--------------------- ------------------- Price
Number Percent Amount Percent Per Share
- -------------------------------------------------------------------------------------------------------------------
Existing stockholders _____ _____% $_____ _____% $_____
New investors _____ _____% _____ _____% _____
Total $ 100.0% $ 100.0% $
===== ===== ===== =====
The preceding table assumes that the underwriters will not exercise their
over-allotment option and does not reflect (a) options issued under our 1999
Option Plan for [ ] shares of common stock with a weighted average exercise
price of [ ] per share and (b) [ ] shares of common stock reserved for
issuance under our 2001 Stock Option Plan, under which options for [ ] shares
of common stock will be issued on the date hereof at the offering price set
forth on the cover page hereof.
CAPITALIZATION
The following table sets forth, as of March 31, 2001, (a) our historical
capitalization as a limited liability company, (b) our pro forma
capitalization which gives effect to our completed and currently probable
acquisitions after March 31, 2001, (c) our pro forma as adjusted
capitalization which gives effect to our conversion to a corporation and our
issuance and sale of [ ] shares of common stock offered hereby (at an
assumed initial public offering price of $[ ] per share, the midpoint of
the range of the initial public offering price set forth on the cover page of
this prospectus, and after deducting the underwriting discount and estimated
expenses of the offering) and (d) the application of the net proceeds of this
offering as described under the heading "Use of Proceeds."
As of March 31, 2001
-----------------------------------------------------
Pro Forma As
Historical Pro Forma Adjusted
----------------- ----------------- -----------------
($ in thousands)
Short-term debt (including current portion of long-term debt)
(1) $29,342 $29,342 $29,342
======== ======== ========
Long-term debt $454,081 $500,540 $425,540
Equity
Contributed capital 303,245 308,245 -
15
Preferred stock, par value $.01 per share, [ ]
shares authorized; no shares issued or outstanding -- -- --
Common stock, par value $.01 per share, [ ]
shares authorized; [ ] shares issued and
outstanding, pro forma; [ ] shares issued and
outstanding, pro forma as adjusted (2) -- -- [ ]
Additional paid-in capital -- -- [ ]
Retained earnings 23,016 23,016 28,981
-------- -------- -------
Total equity 326,261 331,261 [ ]
-------- -------- -------
Total capitalization $780,342 $831,801 $ [ ]
======== ======== ========
- ---------------------
(1) Does not include floor plan notes payable of $486,223, $518,443 and
$518,443, respectively, relating to inventory financing.
(2) Does not include (a) options issued under our 1999 Option Plan for [ ]
shares of common stock with a weighted average exercise price of [ ] per
share, and (b) [ ] shares of common stock reserved for issuance under our
2001 Stock Option Plan, under which options for [ ] shares of common stock
will be issued on the date hereof at the offering price set forth on the
cover page hereof.
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth our historical selected consolidated data
for the periods indicated. The data from the years ended December 31, 1997,
1998, 1999 and 2000 are derived from our audited financial statements, some of
which are included elsewhere in this prospectus. The financial statements for
the years ended 1997, 1998, 1999 and 2000 were audited by Arthur Andersen LLP,
independent public accountants. The data for the three months ended March 31,
2000, and 2001 are derived from unaudited financial statements included
elsewhere in this prospectus, which in management's opinion, include all
adjustments, consisting of only normally recurring adjustments, necessary for
a fair presentation.
We consider the Nalley (Atlanta) platform, our first platform, which we
acquired on February 20, 1997, to be our predecessor. The results of the
Nalley franchise for the period between January 1, 1996, to February 20, 1997,
are set forth in footnote 1 and were audited by Dixon Odom P.L.L.C. The
historical selected financial information may not be indicative of our future
performance. The information should be read in conjunction with, and is
qualified in its entirety by reference to, our consolidated financial
statements, the unaudited interim consolidated financial statements and the
related notes included elsewhere in this prospectus.
Three Months Ended
Year Ended December 31, March 31,
Income Statement Data: 1997(1) 1998 1999 2000 2000 2001
------- ---- ---- ---- ---- ----
Revenues:
New vehicles $298,967 $687,850 $1,820,393 $2,439,729 $562,490 $579,115
Used vehicles 91,933 221,828 787,029 1,064,102 243,070 285,954
Parts, service and collision
repair 69,425 156,037 341,506 434,478 98,746 118,243
Finance and insurance, net 4,304 19,149 63,206 89,481 19,732 23,554
-------- --------- ---------- ---------- -------- ---------
Total revenues 464,629 1,084,864 3,012,134 4,027,790 924,038 1,006,866
Cost of sales (2)
411,739 929,573 2,570,966 3,430,251 787,258 850,326
-------- --------- ---------- ---------- -------- ---------
Gross profit 52,890 155,291 441,168 597,539 136,780 156,540
16
Depreciation and amortization 1,118 6,303 16,161 24,249 4,967 7,007
Selling, general and
administrative expenses 45,432 127,752 343,443 451,405 102,320 119,302
-------- --------- ---------- ---------- -------- ---------
Income from operations 6,340 21,236 81,564 121,885 29,493 30,231
-------- --------- ---------- ---------- -------- ---------
Floor plan interest expense (4,160) (7,730) (22,982) (36,968) (7,678) (9,489)
Other interest expense (698) (7,104) (24,703) (42,009) (7,817) (12,489)
Equity investment losses, net -- -- (616) (6,066) (3,587) (1,000)
Gain (loss) on sale of assets 54 9,307 2,365 (1,533) 7 16
Other income, net 787 2,409 3,571 6,156 1,704 1,514
-------- --------- ---------- ---------- -------- ---------
Total other expense, net (4,017) (3,118) (42,365) (80,420) (17,371) (21,448)
-------- --------- ---------- ---------- -------- ---------
Income before income taxes,
minority interest and
extraordinary loss 2,323 18,118 39,199 41,465 12,122 8,783
Income taxes (3) -- -- 1,779 3,511 1,021 1,168
Minority interest in subsidiary
earnings (4) 801 14,303 20,520 9,027 7,205 --
-------- --------- ---------- ---------- -------- ---------
Income before extraordinary loss 1,522 3,815 16,900 28,927 3,896 7,615
Extraordinary loss on early
extinguishment of debt -- (734) (752) -- -- (1,433)
-------- --------- ---------- ---------- -------- ---------
Net income $1,522 $3,081 $16,148 $28,927 $3,896 $6,182
======== ========= ========== ========== ======== =========
As of March
As of December 31,
Balance Sheet Data: 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
($ in thousands)
Inventories (2) $6,428 $73,303 $255,878 $434,234 $554,141 $532,319
Total current assets 11,285 108,494 391,151 616,060 776,943 762,815
Property and equipment, net 436 29,907 125,410 141,786 215,149 220,329
Total assets 17,988 162,835 709,457 1,034,606 1,404,200 1,408,378
Floor plan notes payable 7,263 66,305 232,297 385,263 499,332 486,223
Total current liabilities 8,972 85,503 323,061 497,376 625,574 606,315
Total long-term debt, including
current portion 1,568 22,798 223,523 307,648 455,374 469,268
Total equity 7,448 36,957 127,380 198,113 321,882 326,261
(1) Selected financial data for the Nalley platform predecessor, exclusive of
the results from October 1, 1996, of a single Nalley Jeep dealership we
acquired on September 30, 1996, is as follows:
Period from
Year Ended January 1, 1997
December 31, 1996 February 20, 1997
Total revenues $343,333 $43,092
Income from operations 5,801 1,138
Total assets 79,708
Long-term debt 11,443
(2) When we convert from a limited liability company to a corporation, we
will change our method of valuation of certain of our inventories from
"last-in, first-out," or LIFO, to "first-in, first-out," or FIFO.
(3) Prior to this offering, we consisted primarily of a group of limited
liability companies and partnerships (with Asbury Automotive Group L.L.C.
as the parent) which were treated as one partnership for tax purposes.
Under this structure, such companies and partnerships were not subject to
income taxes, but instead, our owners were taxed on their respective
distributive shares of Asbury Automotive Group L.L.C.'s taxable income.
Therefore, no provision for federal or state income taxes has been
included in the historical financial statements of the limited liability
companies and partnerships. Immediately prior to the offering, we changed
our tax status to corporation status, and now provide for income taxes in
accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
(4) On April 30, 2000, the then parent company and the minority owners of our
subsidiaries reached an agreement whereby their respective equity
interests were transferred into escrow and subsequently into Asbury
Automotive Oregon L.L.C. in exchange for equity interests in Asbury
Automotive Oregon, which we refer to as the "minority member
transaction." Following the minority member transaction, the then parent
company changed its name to Asbury Automotive Holdings L.L.C. and Asbury
Automotive Oregon L.L.C. changed its name to Asbury Automotive Group
L.L.C. Substantially all minority interests were eliminated effective
April 30, 2000, in connection with the minority member transaction.
17
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information gives effect to
(a) our acquisition of the Hutchinson Automotive Group as if it was
completed on January 1, 2000, (b) the minority member transaction (as
described in Note 3 of our Notes to Consolidated Financial Statements) as if
it was consummated as of January 1, 2000, (c) all of our individually
insignificant 2000 and 2001 acquisitions including all currently probable
acquisitions, all as if they were consummated on January 1, 2000, (d) the
change in our valuation of certain of our inventories from "last-in,
first-out" or LIFO to "first-in, first-out" or FIFO, upon conversion to a
corporation, (e) the change in our tax status resulting from our conversion to
a corporation, (f) the conversion of certain executives' carried interests
into options for our common stock and (g) the offering, including the use of a
portion of the net proceeds to us (assuming net proceeds to us of $90 million)
to reduce debt outstanding as required by our acquisition financing credit
facility, which is used to fund acquisitions, in accordance with the terms of
that facility. The information, other than the individually insignificant
acquisitions, is based upon our historical financial statements and should be
read in conjunction with our historical financial statements, the historical
financial statements of Hutchinson Automotive Group, the related notes, and
other information contained elsewhere in this prospectus.
The unaudited pro forma financial information is not necessarily
indicative of what our actual financial position or results of operations
would have been had all of the previously mentioned acquisitions and this
offering occurred on the dates previously mentioned, nor does it give effect
to (a) any pending transactions other than the previously mentioned
acquisitions or this offering and (b) our results of operations since March
31, 2001, or (c) the results of final valuations of all assets and liabilities
of the aforementioned acquisitions and the minority member transaction. We may
revise the allocation of the purchase price of these acquisitions when
additional information becomes available in accordance with Accounting
Principles Board Opinion No. 16. Accordingly, the pro forma financial
information is not intended to be indicative of the financial position or
results of operations as of today's date, as of the offering, or any period
ending at the offering, or as of or for any other future date or period.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 2001
($ IN THOUSANDS)
2001
Individually
Insignificant Pro Forma Other Pro
Acquisitions Adjustments Pro Forma Forma Pro Forma As
Asbury (1) (2) Combined Adjustments Adjusted
---------- ------------- ----------- ---------- ----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $122,347 $1,125 $1,009 $124,481 $15,000 (3) $139,481
Accounts receivable 86,943 2,788 89,731 89,731
Inventories 532,319 36,313 568,632 8,511 (4) 577,143
Prepaid and other current assets 21,206 200 21,406 10,057 (5) 31,463
---------- ------- -------- ---------- ------- ----------
Total current assets 762,815 40,226 1,209 804,250 33,568 837,818
PROPERTY AND EQUIPMENT, net 220,329 6,476 226,805 226,805
GOODWILL, net 362,799 36,956 399,755 399,755
OTHER ASSETS 62,435 127 280 62,842 62,842
---------- ------- -------- ---------- ------- ----------
Total assets $1,408,378 $46,829 $38,445 $1,493,652 $33,568 $1,527,220
========== ======= ======== ========== ======= ==========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Floor plan notes payable $486,223 $33,213 $(993) $518,443 $518,443
Short-term debt 14,155 14,155 14,155
Current maturities long-term 15,187 15,187 15,187
debt
Accounts payable 41,309 133 41,442 41,442
Accrued liabilities 49,441 761 50,202 50,202
---------- ------- ------- ------- ----------
Total current liabilities 606,315 34,107 (993) 639,429 639,429
LONG-TERM DEBT 454,081 46,459 500,540 $(75,000)(3) 425,540
OTHER LIABILITIES 21,721 701 22,422 12,603 (5) 35,025
EQUITY
Contributed capital 303,245 12,021 (7,021) 308,245 (308,245)(6) -
Common Stock
18
Additional paid-in capital 90,000 (3) 398,245
308,245 (6)
Retained earnings 23,016 23,016 8,511 (4) 28,981
(2,546)(5)
---------- ----------- -------- ---------- ------- ----------
Total equity 326,261 12,021 (7,021) 331,261 95,965 427,226
---------- ----------- -------- ---------- ------- ----------
Total liabilities and equity $1,408,378 $46,829 $38,445 $1,493,652 $33,568 $1,527,220
========== =========== ======== ========== ======= ==========
UNAUDITED PRO FORMA FINANCIAL STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2000
($ IN THOUSANDS EXCEPT PER SHARE DATA)
2000 and
2001
Individually Pro
Hutchinson Insignificant Forma Pro Other Pro
Automotive Acquisitions Adjustments Forma Forma Pro Forma
Asbury Group (7) (8) Combined Adjustments As Adjusted
---------- ---------- ------------- ------------ ---------- ----------- -------------
REVENUES
New vehicles $2,439,729 $58,061 $289,126 $2,786,916 $2,786,916
Used vehicles 1,064,102 35,903 123,049 1,223,054 1,223,054
Parts, services and 434,478 8,285 39,361 482,124 482,124
collision repair
Finance and insurance,
net 89,481 1,713 5,899 97,093 97,093
---------- ------- -------- ------- ---------- -------- ----------
Total revenues 4,027,790 103,962 457,435 4,589,187 4,589,187
COST OF SALES 3,430,251 89,362 401,522 3,921,135 $ (2,100)(4) 3,919,035
---------- ------- -------- ------- ---------- -------- ----------
Gross profit 597,539 14,600 55,913 668,052 2,100 670,152
OPERATING EXPENSES:
Selling, general and 451,405 10,705 37,526 499,636 499,636
administrative
Depreciation and 24,249 260 699 $ 1,947 27,155 27,155
amortization ---------- ------- -------- ------- ---------- -------- ----------
Income from operations 121,885 3,635 17,688 (1,947) 141,261 2,100 143,361
OTHER INCOME (EXPENSE):
Floor plan interest (36,968) (635) (5,215) (42,818) (42,818)
expense
Other interest expense (42,009) (177) (7,941) (50,127) 7,500 (3) (42,627)
Equity investment losses, net (6,066) (6,066) (6,066)
Gain (loss) on sale of (1,533) 8 (1,525) (1,525)
assets
Other income, net 6,156 58 280 6,494 6,494
---------- ------- -------- ------- ---------- -------- ----------
Total other expense, (80,420) (577) (5,104) (7,941) (94,042) 7,500 (86,542)
net ---------- ------- -------- ------- ---------- -------- ----------
Income before income 41,465 3,058 12,584 (9,888) 47,219 9,600 56,819
taxes and minority
interest
INCOME TAX EXPENSE 3,511 45 3,556 20,269 (5) 23,825
MINORITY INTEREST IN
SUBSIDIARY EARNINGS 9,027 (9,027) (9) --
---------- ------- -------- ------ ---------- -------- ----------
Net income $28,927 $3,058 $ 12,539 $ (861) $ 43,663 $(10,669) $ 32,994
========== ======= ======== ====== ========== ======== ==========
Earnings per common share -
Basic:
Weighted average shares
outstanding
Net income
UNAUDITED PRO FORMA FINANCIAL STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2001
($ IN THOUSANDS EXCEPT PER SHARE DATA)
2001
Individually
Insignificant Pro Forma Other Pro
Acquisitions Adjustments Pro Forma Forma Pro Forma
Asbury (1) (2) Combined Adjustments As Adjusted
---------- -------------- ----------- --------- ------------ -----------
REVENUES
New vehicles $579,115 $45,372 $624,487 $624,487
19
Used vehicles 285,954 23,033 308,987 308,987
Parts, services and collision 118,243 7,228 125,471 125,471
repair
Finance and insurance, net 23,554 819 24,373 24,373
---------- ------- ---------- ----------
Total revenues 1,006,866 76,452 1,083,318 1,083,318
COST OF SALES 850,326 67,529 917,855 $ (500) (4) 917,355
---------- ------- ---------- ------- ----------
Gross profit 156,540 8,923 165,463 500 165,963
OPERATING EXPENSES:
Selling, general and 119,302 6,206 125,508 (10) 125,508
administrative
Depreciation and amortization 7,007 84 $219 7,310 7,310
---------- ------- ------- ---------- ------- ----------
Income from operations 30,231 2,633 (219) 32,645 500 33,145
OTHER INCOME (EXPENSE):
Floor plan interest expense (9,489) (919) (10,408) (10,408)
Other interest expense (12,489) (19) (1,191) (13,699) 1,875 (13) (11,824)
Equity investment losses (1,000) (1,000) (1,000)
Gain (loss) on sale of assets 16 16 16
Other income, net 1,514 7 1,521 1,521
---------- ------- ------- ---------- ------- ----------
Total other expense, net (21,448) (931) (1,191) (23,570) 1,875 (21,695)
---------- ------- ------- ---------- ------- ----------
Income before income taxes
and extraordinary loss 8,783 1,702 (1,410) 9,075 2,375 11,450
INCOME TAX EXPENSE 1,168 -- -- 1,168 3,860 (5) 5,028
---------- ------- ------- ---------- ------- ----------
Income before extraordinary loss 7,615 1,702 (1,410) 7,907 (1,485) 6,422
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT, NET OF
TAX BENEFIT (1,433) -- -- (1,433) 573 (5) (860)
---------- ------- ------- ---------- ------- ----------
Net Income $6,182 $1,702 $(1,410) $6,474 $(912) $5,562
========== ======= ======= ========== ======= ==========
Earnings per common share - Basic:
Weighted average shares outstanding
Net income
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(1) Reflects the impact of all acquisitions currently probable after April 1,
2001, as if these acquisitions were consummated on January 1, 2001 or as
of March 31, 2001.
(2) Reflects the fair value adjustments to the 2001 individually
insignificant acquisitions. The results of final valuations of all assets
and liabilities of these acquisitions have not yet been completed. We may
revise the allocation of the purchase price when additional information
becomes available.
(3) Adjustment to reflect the proceeds received by us from this offering (net
of estimated fees and expenses of $10 million). Assumes a portion of our
estimated net proceeds are used to reduce a portion of our borrowings as
contractually required under our acquisition financing credit facility.
(4) Reflects adjustment to change the company's method of valuation of
certain of its inventories from the "last-in, first-out", or LIFO
method to the "first-in, first-out", or FIFO method upon conversion
from a limited liability company to a corporation.
(5) Reflects an adjustment to change our tax status to corporation status and,
accordingly provides for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes". We currently consist primarily of a group of limited liability
companies and partnerships (with us as parent), which are treated as one
partnership for tax purposes. Under this structure, such companies and
partnerships are not subject to income taxes but instead our members are
taxed on their respective distributive shares of our taxable income.
(6) Reflects an adjustment to reclassify members' equity to common stock and
additional paid-in capital due to the conversion from a limited liability
company to a corporation.
(7) Reflects the impact of all acquisitions closed after January 1, 2000 and
all acquisitions currently probable, other than the Hutchinson Automotive
Group, as if all these acquisitions were completed on January 1, 2000.
(8) Reflects the fair value adjustments (a) to the historical financial
statements of the Hutchinson Automotive Group and the 2000 and 2001
individually insignificant acquisitions and (b) for the minority member
transaction. The results of final valuations of all assets and
liabilities of the aforementioned acquisitions and the minority member
transaction have not yet been completed. We may revise the allocation of
the purchase price when additional information becomes available.
20
(9) Represents the elimination of minority interest effective January 1,
2000, in connection with the minority member transaction (see Note 3 of
the Company's Notes to Consolidated Financial Statements).
(10) The pro forma consolidated statements of income include a non-recurring
charge for compensation of $[ ] related to an arrangement whereby due to
the offering, some of our senior executives participate in the increase
in our value. See "Management--Employment Agreements" on page 50.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This management's discussion and analysis of financial condition and
results of operations contains forward-looking statements that involve risks
and uncertainties. Our actual results may differ materially from those
discussed in the forward-looking statements as a result of various factors,
including but not limited to those described under "Risk Factors" beginning on
page 7, and included in other portions of this prospectus.
OVERVIEW
We are a national automotive retailer, currently operating 126 franchises
at 86 dealership locations in nine states and 15 markets in the U.S. We also
operate 23 collision repair centers that serve our markets.
Our revenues are derived from sales of new and used cars, light trucks
and replacement parts, providing vehicle maintenance, warranty, paint and
repair services and arranging vehicle finance, insurance and service contracts
for our automotive customers and the sale of heavy trucks.
Since inception, we have grown through the acquisition of nine large
platforms and additional tuck-in acquisitions. All acquisitions were accounted
for using the purchase method of accounting and as a result, the operations of
the acquired dealerships are included in the consolidated statements of income
commencing on the date acquired.
Prior to the completion of this offering, we consisted primarily of a
group of limited liability companies and partnerships (with us as the parent),
which were treated as one partnership for our tax purposes. Under this
structure, our owners were taxed on their respective distributive shares of
taxable income; however, neither we nor our limited liability companies and
partnership subsidiaries were subject to income tax. The balance of our
subsidiaries were "C" corporations under the provisions of the Internal
Revenue Code and, accordingly provided for income taxes in accordance with
Statement of Financial Accounting Standard No. 109, "Accounting for Income
Taxes." Under the provisions of our limited liability company agreement, we
had distributed cash to each owner equal to 50% of the owner's respective
distributive share of taxable income to cover the owner's tax liabilities.
Immediately prior to the offering, we changed our tax status to corporation
status and will provide for federal and state income taxes for the entire
company going forward. As a result of this change in our tax status, Asbury
Automotive Group, Inc. will succeed to the historic tax basis of the assets
held by Asbury Automotive Group L.L.C. (except as increased to reflect any
gain recognized by our owners), but this basis will be substantially less than
the fair market value of our assets.
Sales of motor vehicles (particularly new vehicles) have historically
fluctuated with general macroeconomic conditions such as general business
cycles, consumer confidence, availability of consumer credit, fuel prices and
interest rates. Although these factors may impact our business, we believe
that any future negative trends due to the above factors may be mitigated by
revenues from our parts, service and collision repair operations, variable
cost structure, regional diversity and advantageous franchise mix.
21
Our operations are subject to modest seasonal variations that are
somewhat offset by our regional diversity. We typically generate more revenue
and operating income in the second and third quarters than in the first and
fourth quarters. Seasonality is based upon, among other things, weather
conditions, manufacturer incentive programs, model changeovers and consumer
buying patterns.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2001, COMPARED TO MARCH 31, 2000
REVENUES - Our revenues for the first quarter of 2001 increased $82.8
million or 9.0% over the first quarter of 2000. The increase was primarily due
to $161.7 million of revenues from tuck-in acquisitions completed after
January 1, 2000, partially offset by a decrease in revenues at dealerships
owned prior to January 1, 2000 (same store), of $78.9 million or 9.1%. Same
store revenue increases at three of our platforms (Texas, St. Louis and
Jacksonville) were offset by significant same store decreases at (a) our
Oregon platform (down $44.5 million) primarily due to changes in our business
practices and restrictions in our sales policies, declining Ford sales related
to the Firestone tire recall and the effect on employment and consumer
spending in the Pacific Northwest from the technology downturn, (b) our
Arkansas platform (down $14.4 million) due to declining demand in the local
market, increased competition, and declining Ford sales related to the Firestone
recall and (c) the Atlanta platform's heavy truck business (down $17.1
million) due to a cyclical downturn resulting from macroeconomic factors such
as higher interest rates and fuel prices.
Same store revenues from vehicle sales were off 10.7% primarily due to
the conditions noted above in Oregon, Arkansas and Atlanta. Overall, sales
were impacted by declining demand in the automotive industry as the average
seasonally adjusted annual rate of new vehicles sold in the U.S. declined from
18.3 million units in the first three months of 2000 to 17.2 million units for
the comparable period in 2001. Despite this national decline, our Texas
platform continued its strong performance with an $8.7 million or 9.9%
increase in vehicle sales revenues over the prior year quarter. Finance and
insurance revenues per vehicle retailed were $599 for the three months ended
March 31, 2001, a 17% increase over the three months ended March 31, 2000.
Parts, service and collision repair revenues on a same store basis were
up 4.6% in the first quarter of 2001 over the first quarter of 2000 due to a
continued emphasis on those products. Seven of the eight platforms in our
organization in 2000 generated an increase in the current quarter over the
same quarter last year.
GROSS PROFIT - Total gross profit as a percentage of revenues for the
three months ended March 31, 2001 was 15.5% as compared to 14.8% for the three
months ended March 31, 2000. This increase is primarily attributable to a
shift in product mix to higher margin parts, service and collision repair
services and finance and insurance.
OPERATING EXPENSES - Selling, general and administrative expenses, or
SG&A, as a percentage of revenues increased to 11.8% of revenues in the first
quarter of 2001, from 11.1% in the first quarter of 2000. Contributing to this
increase were increased variable compensation costs related to higher gross
profit, higher advertising and insurance costs, and expense control
initiatives in Oregon lagging behind revenue declines. The increase in
depreciation and amortization is principally attributable to acquisitions
completed after January 1, 2000.
OTHER INCOME (EXPENSE) - Floor plan interest expense increased to $9.5
million for the three months ended March 31, 2001, from $7.7 million for the
three months ended March 31, 2000, primarily due to acquisitions completed
after January 1, 2000, and a greater number of vehicles in inventory,
partially offset by a slight decline in interest rates. Other interest expense
increased by $4.7 million over the prior quarter principally due to increased
borrowings used to fund acquisitions completed after January 1, 2000. Equity
investment losses in the three months ended March 31, 2001, represent our
share of losses in an automotive finance company while losses in the three
months ended March 31, 2000, primarily reflect our share of losses in our
investment in Greenlight.com, which was fully written off as of December 31,
2000. Other income, net primarily comprised of interest income was $1.5
million for the quarter ended March 31, 2001, as compared to $1.7 million for
the quarter ended March 31, 2000.
YEAR ENDED DECEMBER 31, 2000, COMPARED TO YEAR ENDED DECEMBER 31, 1999
22
REVENUES - Our revenues for the year ended December 31, 2000, increased
$1.02 billion or 33.7% over the year ended December 31, 1999. The increase was
primarily due to $982.6 million of revenues generated by our Arkansas
platform, which we acquired in February 1999, tuck-in acquisitions made
subsequent to January 1, 1999 and an increase in revenues at dealerships
owned prior to January 1, 1999 (same store), of $33.1 million or 1.4%.
Same store revenues from vehicle sales increased $21.1 million, or 1.0%,
as strong year-over-year increases at five of our platforms were offset by
declines in our Oregon platform (down $86.9 million), primarily due to changes
in our business practices and restrictions in our sales policies, declining
demand in the local market, declining Ford sales related to the Firestone tire
recall and reduced sales in Atlanta's heavy truck franchises (down $11.6
million). Finance and insurance revenues per vehicle sold were $540 for the
twelve months ended December 31, 2000, a 10.8% increase over the twelve months
ended December 31, 1999.
Parts, service and collision repair revenues on a same store basis, were
up 4.3% in fiscal 2000 versus fiscal 1999 principally due to a focus on this
high margin product line. Six of our seven platforms posted year over year
revenue increases.
GROSS PROFIT - Total gross profit as a percentage of revenues for the
year ended December 31, 2000, was 14.8% as compared to 14.6% for the year
ended December 31, 1999. This increase was primarily attributable to increased
finance and insurance revenues per vehicle sold, improved margins on new
vehicles due to a shift away from lower margin fleet sales, and increased
margins on used vehicles due to lower wholesale losses.
OPERATING EXPENSES - SG&A expenses as a percentage of revenues decreased
to 11.2% in 2000 from 11.4% in 1999 principally due to containment of variable
and fixed compensation costs. Depreciation and amortization increased $8.1
million to $24.2 million principally due to a significant number of
acquisitions completed after January 1, 1999.
23
OTHER INCOME (EXPENSE) - Floor plan interest expense increased to $37.0
million for the year ended December 31, 2000, from $23.0 million for the year
ended December 31, 1999, primarily due to acquisitions completed after January
1, 1999, higher interest rates throughout 2000 as compared to 1999, and a
greater number of vehicles in inventory. Other interest expense increased by
$17.3 million over the prior year principally due to increased borrowings used
to fund acquisitions completed after January 1, 1999, and to a lesser extent
higher interest rates. Equity investment losses for the years ended December
31, 2000, and December 31, 1999, primarily reflect our share of losses in our
investment in Greenlight.com of $6.9 million and $0.8 million, respectively.
The increase in other income, net of $2.6 million as compared to the prior
year, principally comprises higher interest income.
YEAR ENDED DECEMBER 31, 1999, COMPARED TO YEAR ENDED DECEMBER 31, 1998
REVENUES - Our revenues for the year ended December 31, 1999, increased
$1.93 billion or 177.7% over the year ended December 31, 1998. The increase
was primarily due to $1.87 billion of revenue from six platform acquisitions
made subsequent to January 1, 1998, along with an increase in revenues at
platforms owned prior to January 1, 1998 (Atlanta and St. Louis) (same store),
of $53.6 million or 7.8%. Same store revenues from vehicle sales increased
$44.4 million or 7.7% in 1999 as compared to 1998 due to a strong year over
year increase at our St. Louis platform. Parts, service and collision repair
center revenues on a same store basis, increased 8.5% in fiscal 1999 from
fiscal 1998 as the Atlanta and St. Louis platforms both posted significant year
over year increases in these services.
GROSS PROFIT - Total gross profit as a percentage of revenues for the
year ended December 31, 1999, was 14.6% as compared to 14.3% for the year
ended December 31, 1998. This increase is primarily attributable to a slight
shift in product mix to finance and insurance revenue.
OPERATING EXPENSES - SG&A expenses as a percentage of sales declined to
11.4% during the year ended 1999 from 11.8% during the year ended 1998 mostly
due to containment of fixed operating expenses. Depreciation and amortization
increased $9.9 million to $16.2 million principally due to a significant
number of acquisitions completed after January 1, 1998.
OTHER INCOME (EXPENSE) - Floor plan interest expense increased $15.3
million for the year ended December 31, 1999, from $7.7 million for the year
ended December 31, 1998, primarily due to acquisitions completed after January
1, 1998. Other interest expense increased by $17.6 million over the prior year
principally due to increased borrowings used to fund acquisitions completed
after January 1, 1998. The increase in other income, net of $1.2 million as
compared to the prior year, is primarily due to higher interest income.
LIQUIDITY AND CAPITAL RESOURCES
We require cash to fund working capital needs, finance acquisitions of
new dealerships and fund capital expenditures. These requirements are met
principally from cash flow from operations, borrowings under our credit
facilities and floor plan financing below, mortgage notes and issuances of
equity interests. As of March 31, 2001, we had cash and cash equivalents of
$122.3 million, including contracts-in-transit of $72.3 million.
CREDIT FACILITIES
On January 17, 2001, we entered into two financing agreements with Ford
Motor Credit Company, Chrysler Financial Company, L.L.C. and General Motors
Acceptance Corporation establishing an aggregate line of credit totaling $1.3
billion. One facility provides for $550 million in committed acquisition
financing and general corporate purpose loans and the other facility
establishes a framework for obtaining up to $750 million in floor plan
financing.
At the date of the closing, we borrowed $330.6 million under the
acquisition financing credit facility to repay certain existing term notes and
pay certain fees and expenses of the closing. In addition, we refinanced
substantially all of our existing floor plan debt under the floor plan
financing facility.
Borrowings under the acquisition credit facility bear interest at LIBOR
plus a specified percentage (4% as of March 31, 2001) depending on our
attainment of certain leverage ratios and the outstanding balance under this
credit facility. This credit facility is guaranteed by substantially all of
our subsidiaries and contains covenants that, among other things, place
restrictions on our ability to incur additional debt, encumber our property
and other assets, repay other debt, dispose of assets, invest capital and to
permit our subsidiaries to issue equity securities. This credit facility also
imposes minimum requirements which the terms of transactions to acquire
prospective targets much meet before we can borrow funds to finance the
transactions. In addition, we are required on an ongoing basis to meet certain
financial ratios, including a current ratio, a fixed charge coverage ratio and
a leverage ratio. This credit facility also contains provisions for default
upon, among other things, a change of control, a material adverse change and
the non-payment of obligations. Substantially all of our assets not subject to
security interests granted to floor plan lenders are subject to security
interests to lenders under the floor plan financing and acquisition credit
facilities. The acquisition credit facility provides for an indefinite series
of one-year extensions at our request if approved by the lenders and the floor
plan financing credit facility has an indefinite duration. Conversely, we can
terminate the acquisition financing credit facility by repaying all of the
outstanding balances under the acquisition line plus a termination fee. The
fee, currently equal to 3% of $550 million, the amount committed under the
acquisition credit facility, declines one percentage point on each of the
first, second and third anniversaries of the facility. As of March 31, 2001,
$219.4 million remained available to us for additional borrowings under the
acquisition financing facility.
In addition, we have $25 million available through other revolving credit
facilities, which are secured by certain notes receivable for finance
contracts. The borrowings are repayable on the lenders' demand, and accrue
interest at variable rates. These facilities are subject to certain financial
and other covenants. As of March 31, 2001, we had $14.2 million outstanding
under these facilities.
FLOOR PLAN FINANCING
We finance substantially all of our new vehicle inventory and a portion
of our used vehicle inventory under the floor plan financing credit facility,
but also use other revolving floor plan arrangements. We are required to make
monthly interest payments on the amount financed, but are not required to
repay the principal prior to the sale of the vehicle. These floor plan
arrangements grant a security interest in the financed vehicles as well as the
related sales proceeds. Amounts financed under the floor plan financing
24
bear interest at variable rates, which are typically tied to LIBOR or a prime
rate. As of March 31, 2001, we had $486.2 million outstanding under all of our
floor plan financing agreements.
CASH FLOW
Cash flow from operations totaled $16.5 million for the three months
ended March 31, 2001, as a reduction in inventories of $24.3 million more than
offset a reduction in floor plan notes payable of $13.1 million due to our
decision to finance a greater percentage of our vehicles. Net cash flow used
in investing activities was $13.3 million, principally related to capital
expenditures of $10.3 million, additional funds for prior year acquisitions of
$2.2 million, and a strategic investment in CarsDirect.com of $1.2 million.
Net cash flow used in financing activities was $4.7 million due to a net
reduction in borrowings of $2.9 million and $1.8 million to pay member
distributions. In addition, new borrowings under the acquisition line of
$330.6 million were used to repay existing debt and finance certain fees and
expenses of the closing of the credit facilities.
Cash flow from operations was $82.6 million for the year ended December
31, 2000, an increase of $33.5 million over the prior year. This was primarily
due to an increase in net income plus non-cash items of $17.7 million and an
increase in floor plan notes payable of $38.2 million which more than offset
an increase in inventories of $22.9 million due to our decision to finance a
greater percentage of vehicles. Cash flow was used in investing activities to
fund acquisitions of $179.5 million and capital expenditures $36.1 million,
offset by the proceeds from the sale of certain dealerships of $6.1 million.
Cash flow from financing was comprised of $159.4 million of proceeds from new
borrowings and $20.7 million of member contributions, principally to fund
acquisitions, offset by repayment of existing debt of $14.6 million and member
distributions of $13.4 million.
CAPITAL EXPENDITURES
Capital spending for the three months ended March 31, 2001, and for the
year ended December 31, 2000, was $10.3 million and $36.1 million,
respectively. Capital spending other than from acquisitions is estimated to be
approximately $60 million for the year ended December 31, 2001, primarily
related to an increase in manufacturer-required spending related to the
upgrade of existing dealership facilities.
Subsequent to March 31, 2000, we acquired four dealerships (operating
seven franchises) for consideration in the form of cash and equity in us equal
to $39.0 million. The cash component of the consideration we paid for the
acquisitions was funded through the proceeds of borrowings on our acquisition
financing credit facility.
Our future growth is dependent on our ability to acquire additional
dealerships and successfully operate existing dealerships. We believe that
cash flow generated from operations, working capital availability under the
acquisition line, availability under our floor plan arrangements as well as
mortgage financings, will be sufficient to fund debt service, working capital
requirements and capital spending. Future acquisitions will be funded from
cash flow from operations, capital available under our acquisition financing
credit facility and through the public or private issuance of equity or debt
securities.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities and measure those instruments
at fair value. If certain conditions are met, a derivative instrument may be
specifically designated as (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm commitment,
(b) a hedge of the exposure to variable cash flows of a forecasted transaction
or (c) a hedge of the foreign currency exposure of a net investment in a
foreign operation, an unrecognized firm commitment, an available-for-sale
security or a foreign currency-denominated forecasted transaction. The
accounting for changes in the fair value of a derivative (gains or losses)
depends on the intended use of the derivative and the resulting designation.
SFAS No. 137 amended the effective date to all fiscal quarters of fiscal years
beginning after June 15, 2000. SFAS No. 138, issued in June 2000, addressed a
limited number of issues that were causing implementation difficulties for
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numerous entities applying SFAS No. 133. We have determined that the adoption
of SFAS No. 133 will not have a material impact on our results of operations,
financial position, liquidity or cash flows.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition". SAB 101 was effective for
years beginning after December 31, 1999, and provides clarification related to
recognizing revenue in certain circumstances. The adoption of SAB 101 did not
have a material impact on the Company's revenue recognition policies.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK - We are exposed to market risk from changes in
interest rates on substantially all outstanding indebtedness. Outstanding
balances under the acquisition line bear interest at a variable rate based on
a margin over the benchmark LIBOR rate. Given amounts outstanding at March 31,
2001, a 1% change in interest rate would result in a change of approximately
$4.7 million to our annual non-floor plan interest expense. Similarly, amounts
outstanding under floor plan financing arrangements (including the floor plan
line) bear interest at variable rates based on a margin over LIBOR or prime.
Based on floor plan amounts outstanding at March 31, 2001, a 1% change in
interest rates would result in a $4.9 million change to annual floor plan
interest expense.
INTEREST RATE SWAPS - During 1998, we caused a subsidiary to enter into
swap arrangements with a bank in an aggregate initial notional principal
amount of $31 million in order to fix a portion of our interest expense and
reduce our exposure to floating interest rates. These swaps required the
subsidiary to pay fixed rates ranging from 4.7% to 5.2% on the notional
principal amounts, and receive in return payments calculated at LIBOR. In
December 2000, we terminated our swap arrangements resulting in a gain of $0.4
million which was recognized in the quarter ended March 31, 2001, in
connection with our refinancing of certain existing debt utilizing our credit
facilities. Management continually monitors interest rates and trends in rates
and will from time to time reevaluate the advisability of entering into
derivative transactions to hedge our interest rate risk, and may consider
restructuring our debt from floating to fixed rate.
FOREIGN CURRENCY EXCHANGE RISK - All our business is conducted in the
U.S. where all of our revenues and expenses are conducted in U.S. dollars. As
a result, our operations are not subject to foreign exchange risk.
BUSINESS
COMPANY
We are one of the largest automotive retailers in the United States,
currently operating 126 franchises at 86 dealership locations in nine states.
We offer our customers an extensive range of automotive products and services,
including new and used vehicle sales and related financing and insurance,
vehicle maintenance and repair services, replacement parts and service
contracts. Our franchises include a diverse portfolio of 36 American, European
and Asian brands, and a majority of our dealerships are either luxury
franchises (such as BMW, Lexus and Mercedes-Benz) or mid-line import brands
(such as Honda, Toyota and Nissan). We have grown rapidly in recent years,
primarily through acquisition, with annual sales of $3.0 billion in 1999 and
$4.0 billion in 2000, which represented a 34% increase in annual sales from
1999. We sold an aggregate of 154,422 new and used retail units in 2000, which
represented a 32% increase over the 116,790 retail units sold in 1999. In
addition, our 2000 results included over $434 million in parts, service and
collision repair revenues in 2000.
Our retail network is organized into nine regional dealership groups, or
"platforms," which are groups of dealerships operating under a distinct brand.
Our platforms are located in markets or clusters of markets that we believe
represent attractive opportunities, generally due to the presence of
relatively few dealerships and high rates of population and income growth. The
following is a detailed breakdown of our existing platforms:
Platform-Regional Date of Initial
Brands Acquisition Platform Markets Franchises
Atlanta September 1996 Atlanta Acura, Audi, Chevrolet, Dodge, Hino, Honda,
Nalley Automotive Group Infiniti, Isuzu, Jaguar, Jeep, Lexus (2),
Navistar, Peterbilt
St. Louis December 1997 St. Louis Audi, BMW, Cadillac, Infiniti,
Plaza Motor Company Land Rover (a), Lexus, Mercedes-Benz, Porsche
Texas April 1998 Dallas/Fort Worth Acura, Buick, GMC, Honda, Lincoln, Mercury,
26
David McDavid Automotive Pontiac, Suzuki
Group Houston Honda, Kia, Nissan
Austin Acura
Tampa September 1998 Tampa Chrysler, GMC, Hyundai, Infiniti, Isuzu, Jeep,
Courtesy Dealership Group Kia, Lincoln, Mazda (2), Mercedes-Benz, Mercury,
Mitsubishi, Nissan, Pontiac, Toyota
Jacksonville October 1998 Jacksonville Chevrolet, GMC, Honda (2), Kia, Mazda,
Coggin Automotive Group Nissan (2), Pontiac, Toyota
Orlando Buick, Chevrolet, GMC, Ford, Honda(2), Lincoln,
Mercury, Pontiac
Fort Pierce BMW, Honda, Mercedes-Benz
Oregon December 1998 Portland Ford (2), Honda, Hyundai (2),
Thomason Auto Group Mazda, Nissan, Subaru, Suzuki, Toyota
North Carolina December 1998 Greensboro Acura, Audi, BMW, Dodge, GMC, Honda, Kia,
Crown Automotive Company Mitsubishi, Nissan, Pontiac, Volvo
Chapel Hill/Raleigh GMC, Honda, Isuzu, Pontiac, Volvo
Fayetteville Ford
Richmond, VA Acura, BMW, BMW (b), Porsche (b)
Arkansas February 1999 Little Rock BMW, Ford, Lincoln (2), Mazda, Mercury (2),
North Point Nissan, Toyota, Volkswagen, Volvo
(previously known as Hope Ford
McLarty Companies) Texarkana, TX Chrysler, Dodge, Ford
Mississippi April 2000 Jackson Chrysler (b), Daewoo, Ford, Hyundai, Isuzu,
Gray-Daniels Jeep (b), Lincoln (b), Mazda, Mercury (b),
Mitsubishi, Nissan (2), Suzuki, Toyota
(a) Minority owned and operated by us. See "Related Party Transactions"
on page 56 for a description of our ownership interest in this
franchise.
(b) Pending acquisitions.
Each platform originally operated as an independent business before being
acquired and integrated into our operations, and each continues to enjoy high
local brand name recognition and market share. We believe that many of our
platforms are ranked first or second in market share in their local markets.
COMPANY HISTORY
We were formed in 1995 by management and Ripplewood Holdings L.L.C. In
1997 Freeman Spogli & Co. acquired a significant interest in us. The group
identified an opportunity to aggregate a number of the nation's top retail
automotive dealers into one cohesive organization. We acquired eight of our
platforms between 1997 and 1999, and combined them on February 1, 2000. In the
consolidation, dealers holding ownership interests in their respective
platforms transferred their interests to the Oregon platform in exchange for
ownership interests in the Oregon platform. Dealers who held interests in the
Oregon platform did not exchange their interests, but had their holdings
adjusted to reflect their overall ownership interest in the consolidated
company. The Oregon platform then changed its name to Asbury Automotive Group
L.L.C. and became the parent company to our platforms and other companies.
Since the consolidation of the eight platforms as of February 1, 2000, a ninth
platform, the Mississippi platform, was formed on July 2, 2001, following our
acquisition of five franchises in the Jackson market, which we added to five
franchises that we previously acquired in this market.
OUR STRENGTHS
We believe our competitive strengths are as follows:
EXPERIENCED AND INCENTIVIZED MANAGEMENT
o RETAIL MANAGEMENT EXPERIENCE. We have a management team with extensive
experience and expertise in the retail sector. Brian E. Kendrick, our
president and chief executive officer, has over 20 years of experience
in the retailing industry, having served in various senior management
capacities, including vice chairman and chief operating officer of
Saks Holdings, Inc., the holding company of the Saks Fifth Avenue
luxury retail chain. Thomas R. Gibson, our co-founder and chairman of
our board of directors, spent most of his 28-year automotive career
working with automobile retail dealers throughout the U.S., including
serving as president and chief operating officer of Subaru of America.
Thomas F. Gilman, our vice president and chief financial officer,
27
served for 25 years at DaimlerChrysler where his knowledge of the
dealer network allowed him to play a key role assisting Daimler
Chrysler dealerships during the recession of the automotive industry
in the early 1990s. See "Management." In addition, after joining us,
the CEOs of our nine platforms, who have an average of 36 years of
experience in the automotive retailing industry, continued to manage
many of our operations at the platform level and played a significant
role in implementing our operating and acquisition strategies.
o INCENTIVIZATION AT EVERY LEVEL. We tie compensation to performance by
relying upon an incentive based pay system at both the platform and
dealership levels. At the platform level all our senior management are
compensated on an incentive-based pay system while 71% of the senior
management at our nine platforms have a stake in our performance based
upon their ownership of approximately 40% of our outstanding common
stock, and will continue to own [ ]% after giving effect to this
offering. We also create incentives at the dealership level. Each
dealership is managed as a separate profit center by a trained and
experienced general manager who has primary responsibility for
decisions relating to inventory, advertising, pricing and personnel.
We compensate our general managers based on dealership profitability,
and the compensation of department managers is similarly based upon
departmental profitability. Approximately 80% of compensation earned
by our dealerships' general managers and sales forces in 2000 was
earned through commissions and performance-based bonuses.
ADVANTAGEOUS BRAND MIX
We classify our primary franchise sales lines into luxury, mid-line
import, mid-line domestic and value. Our current brand mix includes a
higher proportion of luxury and mid-line import franchises to total
franchises than most public automotive retailers. Luxury and mid-line
imports together accounted for approximately 63% of our year 2000 new
retail vehicle revenues and comprise over half of our total franchises.
Luxury and mid-line imports generate above average gross margins on
sales, parts, service and collision repair, and have greater customer
loyalty and repeat purchases than mid-line domestic and value
automobiles. We also believe luxury vehicle sales are less susceptible to
economic cycles.
The following is a list of franchises currently owned and franchises
expected to be acquired through pending acquisitions:
% of Total % of 2000 New
Class/Franchise Current Pending Franchises Vehicle Retail
- --------------- ------- ------- ---------- ---------------
Luxury
Acura 5
Audi 3
BMW 5 1
Cadillac 1
Infiniti 3
Jaguar 1
Land Rover (a) 1
Lexus 3
Lincoln 5 1
Mercedes Benz 3
Porsche 1 1
Volvo 3
--- ---
Total Luxury 34 3 28% 25%
Mid-line Import
Honda 11
Mazda 6
Mitsubishi 3
Nissan 9
Subaru 1
Toyota 5
Volkswagen 1
---
Total Mid-line Import 36 27% 38%
28
Mid-line Domestic
Buick 2
Chevrolet 3
Chrysler 2 1
Dodge 3
Ford 8
GMC 6
Jeep 2 1
Mercury 5 1
Pontiac 6
---
Total Mid-line Domestic 37 3 38% 28%
Value
Daewoo 1
Hyundai 4
Isuzu 3
Kia 4
Suzuki 3
---
Total Value 15 11% 4%
Heavy Trucks
Hino 1
Isuzu 1
Navistar 1
Peterbilt 1
---
Total Heavy Trucks 4 3% 5%
--- --- ---
Total 126 6 100% 100%
=== === === ===
(a) Minority owned and operated by us. See "Related Party Transactions" on
page 54 for a description of our ownership interest in this franchise.
MARKET LEADERSHIP AND STRONG BRANDING OF OUR PLATFORMS
o MARKET LEADERSHIP. Each of our platforms is comprised of between eight
and 22 franchises and generated average pro forma annual revenues of
approximately $500 million in 2000. We believe that we
are among the top three market share leaders in 11 of our markets,
including five in which we rank first, based on the assessment of our
platforms' CEOs (who have an average of 30 years experience in
automotive retailing within their local markets). Our regional market
share and strong brand recognition allow our platforms to realize
significant regional economies of scale.
o BRANDING. Each of our platforms maintains a strong regional brand. We
believe that our cultivation of strong regional brands can be
beneficial because:
o platforms enjoy strong local brand recognition from their long
presence and regional advertising;
o consumers may prefer to interact with a locally recognized brand;
o placing our franchises in one region under a single brand allows us
to generate significant advertising savings;
o our platforms can retain customers even as they purchase and service
different automobile brands.
DIVERSIFIED REVENUE STREAMS/VARIABLE COST STRUCTURE
Our operations provide a diversified revenue base that we believe
mitigates the impact of slower new car sales volumes. Used car sales and
parts, service and collision repair, which represented 37% of our total
2000 revenue, generate higher profit margins than new car sales and tend
to fluctuate less with economic cycles. In addition, our variable cost
structure helps us manage expenses in an economic downturn, as a large
part of our operating expenses consist of incentive-based compensation,
vehicle carrying costs and advertising.
29
o NEW VEHICLES. Our franchises include a diverse portfolio of 36
American, European and Asian brands. We believe that our diverse
brand, product and price mix enables us to reduce our exposure to
specific product supply shortages and changing customer preferences.
New vehicle sales were approximately 61% of our total revenues and 32%
of total gross profit in 2000.
o USED VEHICLES. We sell used vehicles at virtually all our franchised
dealerships. Retail sales of used vehicles has become an increasingly
significant source of profit for us, making up approximately 26% of
our total revenues and 16% of total gross profit in 2000. We obtain
used vehicles through customer trade-ins, auctions restricted to new
vehicle dealers (offering off-lease, rental and fleet vehicles) and
"open" auctions which offer repossessed vehicles and vehicles sold by
other dealers. We sell our used vehicles to retail customers when
possible. We dispose of used vehicles that are not purchased by retail
customers through sales to other dealers and at auction.
o FINANCE AND INSURANCE. We arranged customer financing on over 70% of
the vehicles we sold in 2000. These transactions result in commissions
being paid to us by the indirect lenders, including
manufacturer-captive finance arms. In addition to the finance
commissions, each of these transactions creates other highly
profitable sales opportunities, including extended service contracts
and various insurance-related products for the consumer. Our size and
sales volume motivate vendors to provide these products to us at
substantially reduced fees compared to industry norms which result in
competitive advantages as well as acquisition synergies. Furthermore,
many of the insurance products we sell result in additional
underwriting profits and investment income yields based on portfolio
performances. Profits from finance and insurance generated approximately
2% of our total revenues and 15% of our total gross profit in 2000.
o PARTS, SERVICE AND COLLISION REPAIR. We sell parts and provide
maintenance and repair service at all our franchised dealerships. In
addition, we have 23 free-standing collision repair centers in close
proximity to dealerships in substantially all our platforms. Our
dealerships and collision repair centers collectively operate
approximately 1,600 service bays. Profits from parts, service and
collision repair centers were approximately 11% of our total
revenues and 37% of our total gross profit in 2000.
OUR STRATEGY
Our objective is to be the most profitable automotive retailer in select
markets in the United States. To achieve this objective, we intend to grow
through targeted acquisitions, expand our higher margin businesses, emphasize
decentralized dealership operations and enhance our customer relationship
management.
CONTINUED GROWTH THROUGH TARGETED ACQUISITIONS
We intend to continue to grow through acquisitions. We will seek to
establish platforms in new markets through acquisitions of large,
profitable and well-managed dealership groups. In addition, we will pursue
tuck-in acquisitions to complement the related platform by increasing
brand diversity, market coverage and services.
o PLATFORM ACQUISITIONS. We will seek to establish platforms in new
geographic markets through acquisitions of large, profitable and
well-managed dealership groups in metropolitan and high-growth suburban
markets in which we are not currently present. We will target those
platforms with superior operational and financial management
personnel. We believe that the retention of existing high quality
management who understand the local market will enable acquired
platforms to continue to operate efficiently, while allowing us to
source future acquisitions more effectively and expand our operations
without having to employ and train untested new personnel. Moreover,
we believe we are well-positioned to pursue larger, established
acquisition candidates as a result of the reputation of the original
owners of our nine platforms as leaders in the automotive retailing
industry.
30
o TUCK-IN ACQUISITIONS. One of our goals is to become the market leader
in every region in which we operate a platform. We plan to acquire
additional dealerships in each of the markets in which we operate,
including acquisitions that increase the brands, products and services
offered in that market. Since 1995 we have made 14 tuck-in
acquisitions to add additional strength and brand diversity to our
platforms. We believe that these acquisitions in the past and in the
future will facilitate our regional operating efficiencies and cost
savings in areas such as advertising and facility and personnel
utilization. We have recently entered into definitive agreements to
acquire six franchises consisting of BMW, Chrysler, Jeep, Lincoln,
Mercury and Porsche franchises in Jackson, Mississippi and Richmond,
Virginia for a total cash consideration of $11.8 million.
o FOCUS ON ACQUISITIONS PROVIDING GEOGRAPHIC AND BRAND DIVERSITY. By
focusing on geographic and brand diversity, we seek to manage economic
risk and drive growth and profitability. By having a presence in all
major brands and by avoiding concentration with one manufacturer, we
are well positioned to reduce our exposure to specific product supply
shortages and changing customer preferences. At the same time, we will
seek to continue to increase the proportion of our dealerships that
are in markets with favorable demographic characteristics or that are
franchises of fast-growing, high margin brands. In particular, we will
focus on luxury dealerships (such as BMW, Lexus and Mercedes-Benz) and
mid-line import dealerships (such as Honda, Toyota and Nissan). On an
ongoing basis we will continue to evaluate the performance of our
dealerships to determine if the sale of a particular dealership is
advisable.
FOCUS ON HIGHER MARGIN PRODUCTS AND SERVICES
While new vehicle sales are critical to drawing customers to our
dealerships, used vehicle retail sales, parts, service and collision
repair and finance and insurance provide significantly higher margin
revenue streams. We currently derive in excess of 68% of our total gross
profit from these areas. In addition, we have discipline-specific
executives at both the corporate and platform level who focus on both
increasing the penetration of current services and expanding the breadth
of our offerings to customers. While each of our platforms operates
independently in a manner consistent with its specific market's
characteristics, each platform will pursue an integrated strategy to grow
these higher margin businesses to enhance profitability and stimulate
internal growth.
o FINANCE AND INSURANCE. We intend to continue to bolster our finance
and insurance revenues by offering a broad range of conventional
finance and lease alternatives to fund the purchase of new and used
vehicles. In addition to financing vehicle sales, we intend to expand
our already broad offering of customer products like credit insurance,
extended service contracts, maintenance programs and a host of other
niche products to meet all of our customer needs on a "one stop"
shopping basis. Furthermore, based on size and scale, we believe we
will be able to continue negotiating with lending institutions and
product providers to increase commissions on each of the products and
services we sell. Moreover, continued in-depth sales training efforts
and innovative computer technologies will serve as important tools in
enhancing our finance and insurance profitability.
o PARTS, SERVICE AND COLLISION REPAIR. Each of our platforms offers
parts and performs vehicle service work and substantially all of our
platforms operate collision repair centers, all of which provide an
important source of recurring higher margin revenues. Currently, gross
profit generated from these businesses absorbs 60% of our operating
expenses, excluding salespersons' compensation. Expanding this
absorption rate through focused marketing and customer relationship
management represents a major opportunity for growth.
DECENTRALIZED DEALERSHIP OPERATIONS
We believe that decentralized dealership operations on a platform
basis empower our retail network to provide market-specific responses to
sales, service, marketing and inventory requirements. These operations are
complemented by centralized technology and financial controls, as well as
sharing of best practices and market intelligence throughout the
organization.
While our administrative headquarters is located in Stamford,
Connecticut, the day-to-day responsibility for the dealerships rests with
each regional management team. Each of our platforms has a management
structure that is intended to promote and reward entrepreneurial spirit
and the achievement of team goals.
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The chart below depicts our typical platform management structure:
AVERAGE EXPERIENCE OF PLATFORM MANAGEMENT
PLATFORM CEO/COO
36 YEARS IN AUTOMOTIVE INDUSTRY
30 YEARS IN THE LOCAL MARKET
PLATFORM CFO DIRECTOR OF DIRECTOR OF
13 years in automotive NEW & USED VEHICLE SALES PARTS, SERVICE AND COLLISION
industry 21 years in automotive REPAIR
12 years in the local industry 30 years in automotive
market 12 years in the local industry
market 17 years in the local market
DIRECTOR OF DIRECTOR OF
INTERNET SALES FINANCE AND INSURANCE
Each of our dealerships is managed by a general manager who has
authority over day-to-day operations. The general manager of each
dealership is supported by a management team consisting, in most
circumstances, of a new vehicle sales manager, a used vehicle sales
manager, a finance and insurance manager and parts and service managers.
Our dealerships are operated as distinct profit centers, in which the
general managers are given significant autonomy. The general managers are
responsible for the operations, personnel and financial performance of
their dealerships.
We employ professional management practices in all aspects of our
operations, including information technology and employee training. A peer
review process is also in place, in which the platform managers address
best practices, operational challenges and successes, and formulate goals
for other platforms. Platforms utilize computer-based management
information systems to monitor each dealership's sales, profitability and
inventory on a daily basis. We believe the application of professional
management practices provides us with a competitive advantage over many
dealerships. In addition, platform management teams' thorough
understanding of the local market enables them to effectively run
day-to-day operations, recruit new employees and gauge acquisition
opportunities in their market area.
CUSTOMER RELATIONSHIP MANAGEMENT
We are implementing a CRM initiative to increase customer loyalty and
satisfaction and reduce marketing costs by redirecting expenditures from
mass media to targeted communications. We expect to create a
differentiated customer experience, allowing us to capture a greater
percentage of our targeted households' automotive spending. Our CRM
initiative includes engaging McKinsey & Company, a leading management
consulting firm, to help develop the program and pilot it in Little Rock
and St. Louis. We are also investing in a CRM software solution to provide
the necessary technological tools.
We believe the retail auto industry is ripe for CRM given high
customer (household) lifetime value, coupled with the industry's historic
focus on short-term transactions as opposed to long-term customer
retention. In addition to driving incremental new and used purchases over
a multi-year
32
period for a given household, we can benefit from incremental finance and
insurance purchases and greater service expenditures, particularly post
warranty. We also know that profitability varies dramatically by customer
segment, as it does in most retail sectors; thus, we expect to benefit
from initiatives that successfully target high value segments.
SALES AND MARKETING
NEW VEHICLE SALES. Our new vehicle retail sales include new vehicle
retail lease transactions and other similar agreements, which are arranged
by our individual dealerships. New vehicle leases generally have short
terms, which cause customers to return to the dealership more frequently
than in the case of financed purchases. In addition, leases provide us
with a steady source of late-model, off-lease vehicles for our used
vehicle inventory. Generally, leased vehicles remain under factory
warranty for the term of the lease, allowing dealerships to provide repair
service to the lessee throughout the lease term. Approximately 1.8% of our
new vehicle sales revenue is derived from fleet sales, which are generally
conducted on a commission basis.
We design our dealership service to meet the needs of our customers
and establish relationships that will result in both repeat business and
additional business through customer referrals. Our dealerships employ
varying sales techniques to address changes in consumer preference.
We incentivize our dealership managers to employ more efficient
selling approaches, engage in extensive follow-up to develop long-term
relationships with customers and extensively train sales staffs to be able
to meet customer needs. We continually evaluate innovative ways to improve
the buying experience for our customers and believe that our ability to
share best practices across our dealerships gives us an advantage over
other dealerships.
We acquire substantially all our new vehicle inventory from
manufacturers. Manufacturers allocate limited inventory among their
franchised dealers based primarily on sales volume and input from dealers.
We finance our inventory purchases through revolving credit arrangements
known in the industry as floor plan facilities.
USED VEHICLE SALES. Used vehicle sales typically generate higher gross
margins than new vehicle sales. We intend to grow our used vehicle sales
by maintaining a high quality inventory, providing competitive prices and
extended service contracts and continuing to enhance our marketing
initiatives.
Profits from sales of used vehicles are dependent primarily on the
ability of our dealerships to obtain a high quality supply of used
vehicles and effectively manage inventory. New vehicle operations provide
our used vehicle operations with a large supply of high quality trade-ins
and off-lease vehicles, which we believe are the best sources of
attractive used vehicle inventory. We supplement our used inventory with
vehicles purchased at auctions.
Used vehicles are generally offered at our dealerships for 45 to 60
days on average, after which, if they have not been sold to a retail
buyer, they are either sold to an outside dealer or offered at auction.
During 2000, approximately 77% of used vehicles sales were made to retail
buyers. We may transfer used vehicles among dealerships to provide
balanced inventories of used vehicles at each of our dealerships. We
believe that acquisitions of additional dealerships will expand the
internal market for transfer of used vehicles among our dealerships and,
therefore, increase the ability of each dealership to offer a balanced mix
of used vehicles. We developed integrated computer inventory systems
allowing us to coordinate vehicle transfers among our dealerships,
primarily on a regional basis.
Several steps have been taken towards building client confidence in
our used vehicle inventory, one of which includes participation in the
manufacturers' certification processes which are available only to new
vehicle franchises. This process makes certain used vehicles eligible for
new vehicle benefits such as new vehicle finance rates and extended
manufacturer warranties. In addition, each dealership offers extended
warranties on our used car sales.
FINANCE AND INSURANCE. We arranged customer financing on over 70% of
the vehicles we sold in 2000, approximately 99% of which was
non-recourse to us. These transactions generate commission revenue from
indirect lenders, including manufacturer captive finance arms. In addition
to finance commissions, each of these transactions creates other
opportunities for more profitable sales, such as extended service
contracts and various insurance-related products for the consumer. Our
size and volume capabilities
33
motivate vendors to provide these products at substantially reduced fees
compared to the industry average which result in competitive advantages as
well as acquisition synergies. Furthermore, many of the insurance products
we sell result in additional underwriting profits and investment income
yields based on portfolio performances.
PARTS, SERVICE AND COLLISION REPAIR. Historically, the automotive
repair industry has been highly fragmented. However, we believe that the
increased use of advanced technology in vehicles has made it difficult for
independent repair shops to achieve the expertise required to perform
major or technical repairs. Additionally, manufacturers permit warranty
work to be performed only at franchised dealerships. As a result, unlike
independent service stations or independent and superstore used car
dealerships with service operations, our franchised dealerships are
qualified to perform work covered by manufacturer warranties. Given the
increasing technological complexity of motor vehicles and the trend toward
extended manufacturer and dealer warranty periods for new vehicles, we
believe that an increasing percentage of repair work will be performed at
franchised dealerships.
Our profitability in parts and service can be attributed to our
comprehensive management system, including the use of variable rate
pricing structures, cultivation of strong client relationships through an
emphasis on preventive maintenance and the efficient management of parts
inventory.
We use variable rate structures designed to reflect the difficulty and
sophistication of different types of repairs to compensate employees
working in parts and service. The percentage mark-ups on parts are
also variably priced based on market conditions for different parts. We
believe that variable rate pricing helps us to achieve overall gross
margins in parts and service superior to those of certain competitors who
rely on fixed labor rates and percentage markups.
One of our major goals is to retain each vehicle purchaser as a
long-term customer of our parts and service department. Currently, only
30% of customers return to our dealerships for other services after the
vehicle warranty expires. Significant opportunity for growth exists in the
auxiliary services part of our business. Each dealership has systems in
place to track customer maintenance records and notify owners of vehicles
purchased at the dealerships when their vehicles are due for periodic
services. Service and repair activities are an integral part of our
overall approach to customer service.
ADVERTISING. Our largest advertising medium is local newspapers,
followed by radio, television, direct mail and the yellow pages. The
retail automotive industry has traditionally used locally produced,
largely unprofessional materials, often developed under the direction of
each dealership's general manager. Each of our platforms has created
common marketing materials for their dealerships using professional
advertising agencies. Our corporate chief marketing officer helps oversee
and share creative materials and general marketing best practices across
platforms. Our total company marketing expense for 2000 was $42.2 million
which translates into an average of $273 per retail vehicle. Historically,
approximately 75% of the total amount spent on new car advertising in our
markets has been paid by manufacturers.
COMMITMENT TO CUSTOMER SERVICE. We are focused on providing a high level
of customer service to meet the needs of an increasingly sophisticated and
demanding automotive consumer. We strive to cultivate lasting
relationships with our customers, which we believe enhances the
opportunity for significant repeat and referral business. For example, our
platforms regard service and repair activities as an integral part of the
overall approach to customer service, providing an opportunity to foster
ongoing relationships with customers and deepen loyalty.
INTERNET AND E-COMMERCE. We believe that the growth of the Internet and
e-commerce represents a new opportunity to build our platforms' brands and
expand the geographic borders of their markets. We are applying e-commerce
to our strategy of executing professionally developed best practices under
the supervision of discipline-specific central management throughout our
autonomous platforms. We believe that our e-commerce strategy constitutes
a coherent, cost-effective and sustainable approach to the growth of the
Internet that favorably compares to the limited efforts undertaken to date
by many independent dealerships.
At the corporate level, information technology-e-commerce executives
set the parameters of our overall e-commerce strategy. Our strategy
mandates that each platform establish a website that incorporates a
professional design to reinforce the platform's unique brand and advanced
functionalities to ensure that the website can hold the attention of
customers and perform the informational and interactive functions for
which the Internet is uniquely suited. We have a
34
relationship with CarsDirect that provides us with an important source of
Internet sales referrals and, to a lesser extent, prepackaged retail
transactions, reducing our need to rely on referrals from less reliable or
more costly sources. Manufacturer website links also provide our platforms
with key sources of referrals.
Our commitment to e-commerce flows through to the platform level. Each
platform maintains an e-commerce department, staffed with dedicated
personnel, to promote the platform's brand over the World Wide Web and
capitalize on Internet-originated sales leads. Many platforms use the
Internet to communicate with customers both prior to vehicle purchase and
after purchase to coordinate and market maintenance and repair services.
Finally, each platform utilizes the Internet as an integral part of its
overall branding and advertising efforts by ensuring that its website is
aggressively promoted and periodically upgraded.
MANAGEMENT INFORMATION SYSTEM. We consolidate financial, accounting and
operational data received from our dealers nationwide through an exclusive
private communication network.
The data from the dealers is gathered and processed through their
individual dealer management system. All our dealers use software from
ADP, Inc., Reynolds & Reynolds, Co. or UCS, Inc. as their dealer
management system. Our systems strategy allows for our platforms to choose
the dealer management system that best fits their daily operational needs.
We aggregate the information from the three disparate systems at our
corporate headquarters to create one single view of the business, using
the Hyperion financial systems.
Our information technology allows us to quickly integrate and
aggregate the information from a new acquisition. By creating a connection
over our private network between the dealer management system and
corporate Hyperion financial systems, corporate management can quickly
view the financial, accounting and operational data of the newly acquired
dealer. In that way we can efficiently integrate the acquired dealer into
our operational strategy.
COMPETITION
In new vehicle sales, our platforms compete with other franchised
dealerships in their regions. We do not have any cost advantage in purchasing
new vehicles from the manufacturers. Instead, we rely on advertising and
merchandising, sales expertise, service reputation and location of our
dealerships to sell new vehicles. In recent years, automobile dealers have
also faced increased competition in the sale or lease of new vehicles from
independent leasing companies, on-line purchasing services and warehouse
clubs. Our used vehicle operations compete with other franchised dealers,
independent used car dealers, automobile rental agencies and private parties
for supply and resale of used vehicles. See "Risk Factors -- Substantial
competition in automobile sales may adversely affect our profitability."
In our vehicle financing business, we compete with direct consumer
lending institutions such as local banks, savings and loans and credit unions,
including through the internet. Our ability to offer manufacturer-subsidized
financing terms as part of an incentive-based sales strategy can place us at a
competitive advantage relative to independent financing companies. We also
compete in this area based on:
o interest rates; and
o convenience of "one stop shopping," which we offer by arranging vehicle
financing at the point of purchase.
We seek to reduce our cost of funds, and as a result, the interest rates we
charge, through leveraging our volume of business to obtain discounted terms.
We compete against other franchised dealers to perform warranty repairs
and against other automobile dealers, franchised and independent service
centers for non-warranty repair and routine maintenance business. We compete
with other automobile dealers, service stores and auto parts retailers in our
parts operations. We believe that the principal competitive factors in parts
and service sales are the use of factory-approved replacement parts, price,
the familiarity with a manufacturer's brands and models and the quality of
customer service. A number of regional and national chains offer selected parts
and services at prices that may be lower than our prices.
FACILITIES
We have 126 franchises situated in 86 dealership locations throughout
nine states. We lease 49 of these locations and own the remainder. In
addition, we operate 23 collision repair centers.
Dealerships Collision Repair Centers
Owned Leased Owned Leased
Arkansas 0 6 1 1
Atlanta 7 4 1 3
Jacksonville 13 2 5 1
Mississippi 5 2 0 0
North Carolina 7 4 1 0
35
Oregon 0 10 0 2
St. Louis 5 0 1 0
Tampa 0 12 0 2
Texas 0 9 0 5
-- -- -- --
Total 37 49 9 14
== == == ==
We lease our corporate headquarters, which is located at 3 Landmark
Square, Suite 500 in Stamford, Connecticut.
FRANCHISE AGREEMENTS
Each of our dealerships operates pursuant to franchise agreements between
the applicable manufacturer and the dealership. The typical automotive
franchise agreement specifies the locations at which the dealer has the right
and obligation to sell the manufacturer's automobiles and related parts and
products and to perform certain approved services. The franchise agreement
grants the dealer the non-exclusive right to use and display the
manufacturer's trademarks, service marks and designs in the form and manner
approved by the manufacturer.
The allocation of new vehicles among dealerships is subject to the
discretion of the manufacturer, which generally does not guarantee
exclusivity. A franchise agreement may impose requirements on the dealer
concerning such matters as the showrooms, the facilities and equipment for
servicing vehicles, the maintenance of inventories of vehicles and parts, the
maintenance of minimum net working capital, achieving certain minimum
standards on customer service and satisfaction surveys, and the training of
personnel. Compliance with these requirements is closely monitored by the
manufacturer. In addition, many manufacturers require each dealership to
submit monthly and annual financial statements.
We are subject to additional provisions contained in supplemental
agreements, framework agreements or franchise addenda, which we collectively
refer to as "franchise framework agreements." Many of our dealerships are also
subject to these agreements. Franchise framework agreements impose
requirements similar to those discussed above, as well as limitations on
changes in our ownership or management and limitations on the number of a
particular manufacturer's franchises we may own. In addition, we are party
to an agreement with General Motors Corporation under which we have divested
ourselves of and agreed not to acquire Saturn franchises.
PROVISIONS FOR TERMINATION OR NON-RENEWAL OF FRANCHISE AGREEMENTS. Most
franchise agreements expire after a specified period of time, ranging
from one to five years, and we expect to renew expiring agreements in the
ordinary course of business. Typical franchise agreements provide for
termination or non-renewal by the manufacturer under certain
circumstances, including insolvency or bankruptcy of the dealership,
failure to adequately operate the dealership, failure to maintain any
license, permit or authorization required for the conduct of business, or
material breach of other provisions of the franchise agreement. Some of
our franchise agreements and franchise framework agreements provide that
the manufacturer may acquire our dealerships or terminate the franchise
agreement if a person or entity acquires an equity interest above a
specified level (ranging from 20% to 50% depending on the particular
manufacturer's restriction) in us without the approval of the applicable
manufacturer. This trigger can fall to as low as 5% if the entity
acquiring the equity interest in us is another automobile manufacturer or
a felon whose conviction stems from fraudulent sales practices or
violations of state or federal consumer protection laws. Some
manufacturers also restrict changes in the membership of our board of
directors. Although our franchise agreements may not be renewed or may be
terminated prior to the conclusion of their terms, manufacturers have
rarely chosen to take such action. Further, as discussed below, state
dealer laws substantially limit the ability of manufacturers to terminate
or fail to renew franchise agreements. See "Risk Factors -- If we fail to
obtain renewals of one or more of our franchise agreements from vehicle
manufacturers on favorable terms, or if one or more of our franchise
agreements are terminated, our operations could be significantly
compromised."
MANUFACTURERS' LIMITATIONS ON ACQUISITIONS. We are required to obtain the
consent of the applicable manufacturer before we can acquire any
additional dealership franchises. Six of our manufacturers impose limits
on the number of dealerships we are permitted to own at the metropolitan,
regional and national levels. These limits vary according to the
agreements we have with each of the manufacturers but
36
are generally based on fixed numerical limits or on a fixed percentage of
the aggregate sales of the manufacturer. We currently own the maximum
number of dealerships allowed under our franchise agreement with Acura
and have only one more dealership available for Jaguar. We are also
approaching the ownership limits allocated under our framework
franchise agreement with Toyota. Unless we renegotiate these franchise
agreements or receive the consent of the manufacturers, we may be
prevented from making further acquisitions upon reaching the limits
provided for in these framework franchise agreements.
STATE DEALER LAWS. We operate in states that have state dealer laws
limiting manufacturers' ability to terminate dealer franchise agreements.
We are basing the following discussion of state dealer laws on our
understanding of these laws and therefore, the description may not be
accurate. State dealer laws generally provide that it is a violation for
manufacturers to terminate or refuse to renew franchise agreements unless
they provide written notice to the dealers setting forth good cause and
stating the grounds for termination or nonrenewal. State dealer laws
typically require 60 to 90 days advance notice to dealers prior to
termination or nonrenewal of a franchise agreement. Some state dealer
laws allow dealers to file protests or petitions within the notice period
and allow dealers an opportunity to comply with the manufacturers'
criteria. These statutes also provide that manufacturers are prohibited
from unreasonably withholding approval for a proposed change in ownership
of the dealership. Acceptable grounds for disapproval include material
reasons relating to the character, financial ability or business
experience of the proposed transferee. See "Risk Factors -- If state
dealer laws are repealed or weakened, our dealerships will be more
susceptible to termination, non-renewal or re-negotiation of their
franchise agreements."
GOVERNMENTAL REGULATIONS
A number of federal, state and local regulations affect our marketing,
selling, financing and servicing of automobiles. The nine platforms also are
subject to state laws and regulations relating to business corporations
generally.
Under various state laws, each of our dealerships must obtain a license
in order to establish, operate or relocate a dealership or provide certain
automotive repair services. These laws also regulate conduct of our
businesses, including advertising and sales practices. Other states into which
we may expand our operations in the future are likely to have similar
requirements.
Our financing activities with our customers are subject to federal truth-
in-lending, consumer leasing and equal credit opportunity regulations as well
as state and local motor vehicle finance laws, installment finance laws,
insurance laws, usury laws and other installment sales laws. Some states
regulate finance fees that may be paid as a result of vehicle sales. Penalties
for violation of any of these laws or regulations may include revocation of
necessary licenses, assessment of criminal and civil fines and penalties, and
in certain instances, create a private cause of action for individuals. We
believe that we comply substantially with all laws and regulations affecting
our business and do not have any material liabilities under such laws and
regulations and that compliance with all such laws and regulations will not,
individually or in the aggregate, have a material adverse effect on our
capital expenditures, earnings, or competitive position, and we do not
anticipate that such compliance will have a material effect on us in the
future. See "Risk factors -- Governmental regulations and environmental
regulation compliance costs may adversely affect our profitability."
ENVIRONMENTAL MATTERS
We are subject to a wide range of environmental laws and regulations,
including those governing discharges into the air and water, the storage of
petroleum substances and chemicals, the handling and disposal of wastes and
the remediation of contamination. As with automobile dealerships generally,
and service and parts and collision repair center operations in particular,
our business involves the generation, use, handling and disposal of hazardous
or toxic substances and wastes. Operations involving the management of wastes
are subject to requirements of the Federal Resource Conservation and Recovery
Act and comparable state statutes. Pursuant to these laws, federal and state
environmental agencies have established approved methods for handling,
storage, treatment, transportation and disposal of regulated substances and
wastes with which we must comply.
Our business also involves the use of above ground and underground
storage tanks. Under applicable laws and regulations, we are responsible for
the proper use, maintenance and abandonment of our regulated storage tanks and
for remediation of subsurface soils and groundwater impacted by releases
37
from existing or abandoned storage tanks. In addition to these regulated
tanks, we own, operate, or have otherwise closed in place other underground
and above ground devices or containers (such as automotive lifts and service
pits) that may not be classified as regulated tanks, but which could or may
have released stored materials into the environment, thereby potentially
obligating us to clean up any soils or groundwater resulting from such
releases.
We are also subject to laws and regulations governing remediation of
contamination at or from our facilities or to which we send hazardous or toxic
substances or wastes for treatment, recycling or disposal. The Comprehensive
Environmental Response, Compensation and Liability Act, or CERCLA, also known
as the "Superfund" law, imposes liability, without regard to fault or the
legality of the original conduct, on those that are considered to have
contributed to the release of a "hazardous substance". Responsible parties
include the owner or operator of the site or sites where the release occurred
and companies that disposed or arranged for the disposal of the hazardous
substances released at such sites. These responsible parties may be subject to
joint and several liability for the costs of cleaning up the hazardous
substances that have been released into the environment and for damages to
natural resources. It is not uncommon for neighboring landowners and other
third parties to file claims for personal injury and property damage allegedly
caused by the release of hazardous substances.
Further, the Federal Clean Water Act, and comparable state statutes
prohibit discharges of pollutants into regulated waters without the necessary
permits, require containment of potential discharges of oil or hazardous
substances and require preparation of spill contingency plans. We believe that
we are in material compliance with those wastewater discharge requirements as
well as requirements for the containment of potential discharges and spill
contingency planning.
Environmental laws and regulations are very complex and it has become
difficult for businesses that routinely handle hazardous and non-hazardous
wastes to achieve and maintain full compliance with all applicable
environmental laws. From time to time we experience incidents and encounter
conditions that will not be in compliance with environmental laws and
regulations. However, none of our dealerships have been subject to any
material environmental liabilities in the past and we do not anticipate that
any material environmental liabilities will be incurred in the future.
Nevertheless, environmental laws and regulations and their interpretation and
enforcement are changed frequently and we believe that the trend of more
expansive and stricter environmental legislation and regulations is likely to
continue. Hence, there can be no assurance that compliance with environmental
laws or regulations or the future discovery of unknown environmental
conditions will not require additional expenditures by us, or that such
expenditures would not be material. See "Risk Factors -- Governmental
regulations and environmental regulation compliance costs may adversely affect
our profitability."
EMPLOYEES
As of June 30, 2001, we employed approximately 7,030 people, of whom
approximately 590 were employed in managerial positions, approximately 1,800
were employed in non-managerial sales positions, approximately 3,800 were
employed in non-managerial parts and service positions, approximately 650 were
employed in administrative support positions and approximately 200 were
employed in non-managerial finance and insurance positions. We intend, upon
completion of the offering, to provide certain executive officers and managers
with options to purchase common stock and believe this equity incentive will
be attractive to our existing and prospective employees. See "Management --
2001 Stock Option Plan".
We believe our relationship with our employees is favorable. None of our
employees are represented by a labor union. Because of our dependence on
vehicle manufacturers, however, we may be affected by labor strikes, work
slowdowns and walkouts at vehicle manufacturers' production facilities.
LEGAL PROCEEDINGS AND INSURANCE
From time to time, we and our nine platforms are named in claims
involving the manufacture of automobiles, contractual disputes and other
matters arising in the ordinary course of our business. Currently, no legal
proceedings are pending against us or the nine platforms that, in management's
opinion, could be expected to have a material adverse effect on our business,
financial condition or results of operations.
38
Because of their vehicle inventory and nature of business, automobile
retail dealerships generally require significant levels of insurance covering
a broad variety of risks. Our insurance program includes two umbrella policies
with a total per occurrence and aggregate limit of $100 million. We also have
insurance on our real property, comprehensive coverage for our vehicle
inventory, garage liability and general liability insurance, employee
dishonesty insurance and errors and omissions insurance in connection with our
vehicle sales and financing activities.
INDUSTRY OVERVIEW
Automotive retailing, with 2000 industry sales of approximately $1
trillion, is the largest consumer retail market in the U.S., representing
approximately 9% of gross domestic product according to figures provided by
the Bureau of Economic Analysis. Since 1996, retail new vehicle unit sales
have grown at a 3.5% compound annual rate. Over the same period, retail used
vehicle units have grown at a 1.4% compound annual rate. Retail sales of new
vehicles, which are conducted exclusively through new vehicle dealers, were
approximately $386 billion in 2000. In addition, used vehicle sales in 2000
were estimated at $367 billion, with approximately $306 billion in sales by
franchised and independent dealers and the balance in privately negotiated
transactions.
Of the approximately 17.4 million new vehicles sold in the United States
in 2000, approximately 28.3% were manufactured by General Motors Corporation,
24.1% by Ford Motor Company, 15.7% by Daimler Chrysler Corporation, 9.3% by
Toyota Motor Corp., 6.7% by Honda Motor Co., Ltd., 4.3% by Nissan Motor Co.,
Ltd. and 11.6% by other manufacturers. Sales of used vehicles have increased
over the past five years, primarily as a result of the greater availability of
newer used vehicles due to the increased popularity of short-term leases.
Approximately 44 million used vehicles were sold in 2000. Franchised dealers
accounted for 16.2 million, or 37% of all used vehicle units sold. Independent
lots accounted for 31% with the balance accounted for in privately negotiated
transactions.
INDUSTRY CONSOLIDATION. Franchised dealerships were originally
established by automobile manufacturers for the distribution of new
vehicles. In return for granting dealers exclusive distribution rights
within specified territories, manufacturers exerted significant influence
over their dealers by limiting the transferability of ownership in
dealerships, designating the dealership's location, and managing the
supply and composition of the dealership's inventory. These arrangements
resulted in the proliferation of small, single-owner operations that, at
their peak in the late 1940's, totaled almost 50,000. As a result of
competitive, economic and political pressures during the 1970's and
1980's, significant changes and consolidation occurred in the automotive
retail industry. One of the most significant changes was the increased
penetration by foreign manufacturers and the resulting loss of market
share by domestic manufacturers, which forced many dealerships to
close or sell to better capitalized dealership groups. According to
industry data, the number of franchised dealerships has declined from
approximately 28,750 in 1978 to approximately 22,000 in 2000. Although
significant consolidation has taken place since the automotive retailing
industry's inception, the industry today remains highly fragmented, with
the largest 100 dealer groups generating less than 10% of total sales
revenues and controlling less than 8% of all franchised dealerships.
We believe that further consolidation is likely due to increased
capital requirements of dealerships, the limited number of viable
alternative exit strategies for dealership owners, and the desire of
certain manufacturers to strengthen their brand identity by consolidating
their franchised dealerships. We also believe that an opportunity exists
for dealership groups with significant equity capital and experience in
identifying, acquiring and professionally managing dealerships, to
acquire additional dealerships for cash, stock, debt or a combination
thereof. Publicly-owned dealer groups, such as ours, are able to offer
prospective sellers tax advantaged transactions through the use of
publicly traded stock which may, in certain circumstances, make them more
attractive to prospective sellers.
INDUSTRY OPPORTUNITIES. In addition to new and used vehicles, dealerships
offer a wide range of other products and services, including repair and
warranty work, replacement parts, extended warranty coverage, financing
and insurance. In 2000, the typical dealership's revenue consisted of 60%
new vehicle sales, 29% used vehicle sales, and 11% parts and services.
Sales of used vehicles by franchised dealers have increased over the past
five years, primarily as a result of the substantial increase in new
vehicle prices and the greater availability of newer used vehicles due to
the increased popularity of short-term leases. Franchised dealers
retailed 16.2 million used vehicles in 2000, amounting to only 37% of all
used vehicles sold in the U.S. Independent used vehicle dealers and private
transactions accounted for the rest of the 43.9 million used vehicles
sold in 2000.
39
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below are the names of our executive officers and directors,
together with their ages and positions.
Name Age Position
Thomas R. Gibson 58 Chairman of the Board
Brian E. Kendrick 47 President and Chief Executive Officer
Thomas F. "Mack" McLarty, III 55 Vice Chairman of the Company
Thomas F. Gilman 50 Vice President and Chief Financial Officer
Thomas G. McCollum 45 Vice President - Finance and Insurance
Phillip R. Johnson 52 Vice President - Human Resources
Donna M. Colorito 49 Vice President - I.T. and E-Commerce
Allen T. Levenson 38 Vice President - Marketing and Customer Experience
Timothy C. Collins 44 Director
Ian K. Snow 32 Director
John M. Roth 43 Director
C.V. "Jim" Nalley 58 Director
B. David McDavid 59 Director
Charles B. Tomm 55 Director
Set forth below is a brief description of our directors' and executive
officers' business experience.
THOMAS R. GIBSON is the chairman of our board of directors. He is one of
our founders and has served as chairman of our board since the board's
creation in 1995. Mr. Gibson has over 30 years experience in the automotive
retailing industry. Prior to joining us, he served as president and chief
operating officer of Subaru of America. Mr. Gibson was part of Lee Iacocca's
management team at Chrysler from 1980 to 1982, where he served as director of
marketing operations and general manager of import operations. He began his
career in 1967 with the Ford Motor Company and held key marketing and field
management positions in both the Lincoln-Mercury and Ford divisions. Mr.
Gibson is a graduate of DePauw University and holds a master's in business
administration from Harvard University.
BRIAN E. KENDRICK is our president and chief executive officer, and has
served in this capacity since February 2000. Before he joined us, Mr. Kendrick
served as president and chief executive officer of DFS Limited, a San
Francisco-based leading distributor of luxury goods, which is majority owned
by LMH Moet Hennessy Louis Vuitton. From 1991 to 1998, Mr. Kendrick served as
vice chairman and chief operating officer of Saks Holdings, Inc., the holding
company of the Saks Fifth Avenue luxury retail chain. For 12 years, Mr.
Kendrick served as chief financial officer in the large regional department
store chain, Maison Blanche. He also served as the Commissioner of
Administration (chief operating officer) of the State of Louisiana in 1986 and
1987. Mr. Kendrick graduated from Louisiana State University and is a
certified public accountant.
THOMAS F. "MACK" McLARTY, III has served as our vice chairman since May
2000. Mr. McLarty is also the president and chief executive officer of our
Arkansas platform. Mr. McLarty began his 32-year career in the automotive
retailing industry by building McLarty Leasing Systems, the platform his
grandfather founded, into one of America's largest transportation companies.
Mr. McLarty also serves as vice chairman of Kissinger McLarty & Associates, an
international consulting firm formed in 1999 by the merger of Mr. McLarty's
and Dr. Henry Kissinger's consulting operations. Mr. McLarty joined Arkla Gas
Company's board of directors in 1976, and from 1983 to 1992 he was Arkla
Inc.'s chairman and chief executive officer. Between 1992 and 1998, Mr. McLarty
served as White House Chief of Staff, Special Envoy of the Americas and
Counselor to President Bill Clinton. He also was appointed to the National
Petroleum Council by President George H. W. Bush and served on the St. Louis
Federal Reserve Board from 1989 until joining the White House in 1992.
Mr. McLarty graduated summa cum laude from the University of Arkansas.
THOMAS F. GILMAN has served as our vice president and chief financial
officer since April 2001. Prior to joining us, Mr. Gilman spent 25 years with
Chrysler Corporation in various positions where he accumulated broad finance
experience in all areas of the company. From 1990 to 1994, he was responsible
for Chrysler Corporation's credit operations, extending financial assistance
to automotive retail dealers and distributors worldwide. In 1995, Mr. Gilman
headed the finance organization at Chrysler Financial Company, L.L.C. where he
became chief financial officer of the captive finance company. Mr. Gilman
graduated from Villanova University with a bachelor's degree in finance.
40
THOMAS G. McCOLLUM has been our vice president of finance and insurance
since April of 2001. Mr. McCollum has over 25 years of experience in finance
and insurance. Before he joined us, Mr. McCollum served nine years as
executive vice president for Aon's Resource Group (formally Pat Ryan &
Associates). He joined Aon in 1981 where he employed innovative, customer
focused finance and insurance programs to improve same store results. Mr.
McCollum holds a bachelor's degree in business from Sam Houston University.
PHILLIP R. JOHNSON has been our vice president of human resources since
June of 2000. Mr. Johnson has held top human resources positions in large
national and regional retail companies for the past 22 years. From 1994 to
1998 he served as senior vice president of human resources at Entex
Information Services, a national personal computer systems integrator. Mr.
Johnson served as executive vice president of human resources at Macy's East
from 1993 to 1994, and as senior vice president of human resources at Saks
Fifth Avenue from 1991 to 1993. He has also held senior human resources
positions at Marshall Fields and Gimbels. Mr. Johnson holds a bachelor's
degree and master's in business administration from the University of Florida.
DONNA M. COLORITO has served as our vice president of information
technology and e-commerce since June of 2000. Ms. Colorito has 16 years
experience in the automotive retailing industry. Ms. Colorito joined Volvo
Cars of North America in 1985, where she served in various capacities. From
1997 to 2000, she served as Volvo's dealer systems and e-commerce manager,
where she was responsible for implementing Volvo's proprietary dealer system
in all of its 400 North American dealerships. Ms. Colorito began her career in
1982 at Lederle Laboratories as a systems analyst. Ms. Colorito holds a
master's of business administration in information systems from Pace
University and a bachelor's degree from the State University of New York at
Albany.
ALLEN T. LEVENSON has served as vice president of customer experience and
chief marketing officer for Asbury Automotive Group since March 2001. In 1999,
Mr. Levenson co-founded a business-to-consumer E-commerce company,
Gazelle.com. From 1998 to 1999, he served as Vice President of Marketing for
United Rentals, the market leader and consolidator in the equipment rental
industry. From 1996 to 1998, he served as vice president of sales and
marketing for Petroleum Heat & Power, and he also served as Vice President of
Marketing for The Great Atlantic & Pacific Tea Company from 1993 to 1996. Mr.
Levenson began his career in 1985 with two leading strategy consulting firms,
McKinsey & Company and Bain & Company. He received his undergraduate degree
from Tufts University and a master's in business administration from the
Wharton School at the University of Pennsylvania.
TIMOTHY C. COLLINS has served as a member of our board of directors since
1996. Mr. Collins founded Ripplewood Holdings L.L.C. in 1995 and currently
serves as its Chief Executive Officer. In addition, he is co-head of RHJ
Industrial Partners, an affiliate of Ripplewood Holdings L.L.C.. From 1991 to
1995, Mr. Collins managed the New York office of Onex Corporation, a leveraged
buy-out group headquartered in Canada. Previously, Mr. Collins was a vice
president at Lazard Freres & Company and held various positions at Booz, Allen
& Hamilton and Cummins Engine Company. He also currently serves on the board
of directors of Ripplewood Holdings L.L.C., The Strong Schafer Value Fund,
Shinsei Bank, Ltd. (formerly The Long-Term Credit Bank of Japan, Limited),
Western Multiplex Corporation, Kraton Polymers L.L.C. and various other
privately held Ripplewood portfolio companies. Mr. Collins received a master's
in business administration from Yale University's School of Organization and
Management and a bachelor's degree in philosophy from DePauw University.
IAN K. SNOW has served as a member of our board of directors since 1996,
and a member of our compensation committee since 1996. He is a managing
director at Ripplewood Holdings L.L.C.. Prior to joining Ripplewood in 1995,
Mr. Snow was a financial analyst in the Media Group at Salomon Brothers Inc.,
where he focused on strategic advisory and capital raising assignments for
clients in the media
41
industry. He also currently serves on the board of directors of Kraton
Polymers L.L.C., a privately held Ripplewood portfolio company. Mr. Snow
received a bachelor's degree in history from Georgetown University.
JOHN M. ROTH has been a member of our board of directors since our board
was established in 1996. Mr. Roth joined Freeman Spogli in 1988, and became a
general partner in 1993. Mr. Roth served in Kidder, Peabody & Company, Inc.'s
mergers and acquisitions group from 1984 to 1988. He is also a member of the
board of directors of Advance Stores Incorporated, AFC Enterprises, Inc.,
Galyan's Trading Company, Inc. and a number of privately held corporations.
Mr. Roth holds a bachelor's degree and master's in business administration from
the Wharton School at the University of Pennsylvania.
CLARENCE V. "JIM" NALLEY has served as a director since 2000. He is the
president and chief executive officer of our Atlanta platform. Mr. Nalley has
over 30 years of automotive retailing experience. His platform consisted of
nine franchises when he joined us. He formerly served as the President of the
Metro Atlanta Chevrolet Dealers Association and as Chairman of the PACCAR
National Distributors Council. Mr. Nalley holds a bachelor's degree from the
University of Georgia.
B. DAVID McDAVID has been a member of our board of directors since 2000.
He is the president and chief executive officer of our Texas platform. Mr.
McDavid has operated domestic auto dealerships for 38 years and import
dealerships for 29 years. He established his first dealership, a General
Motors dealership in Weatherford, Texas, in 1962, and owned 12 franchises in
four Texas markets before joining us. He graduated from the General Motors
Institute Dealership Management Program in Flint, Michigan. Mr. McDavid has
served on numerous dealer advisory councils for Acura, Honda and General
Motors franchises.
CHARLES B. TOMM has been a member of our board of directors since 2000.
Mr. Tomm is president and chief operating officer of our Jacksonville
platform. Mr. Tomm joined the platform in 1994, before it was acquired by us,
as its vice president, chief financial officer and general counsel. He became
our executive vice president in January of 1996, and assumed his present
responsibilities in 1997. Mr. Tomm has a broad and varied business background.
He has held executive positions with publicly-held companies including
Schlumberger Ltd. and Arkansas Best Corporation. Mr. Tomm is a member of the
board of trustees of Washington & Lee University and Jacksonville's Museum of
Science and History. Mr. Tomm holds a bachelor's degree and law degree from
Washington & Lee University and an L.L.M. in taxation from New York
University. He is admitted to practice law in Florida, Georgia, New York and
North Carolina.
BOARD OF DIRECTORS
Our board of directors currently consists of Messrs. Timothy C. Collins,
Ian K. Snow, John M. Roth, C.V. Nalley, Thomas R. Gibson, B. David McDavid,
Brian E. Kendrick and Charles B. Tomm. We will appoint three independent
directors to serve on our board in addition to these directors within 90 days
after this offering.
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE. We have an audit committee consisting of Messrs. Ian K.
Snow and John M. Roth. The audit committee has responsibility for, among
other things:
o recommending to the board of directors the selection of our
independent auditors,
o reviewing and approving the scope of the independent auditors'
audit activity and extent of non-audit services,
o reviewing with management and the independent accountants the adequacy
of our basic accounting systems and the effectiveness of our internal
audit plan and activities,
o reviewing with management and the independent accountants our
financial statements and exercising general oversight of our financial
reporting process and
o reviewing litigation and other legal matters that may affect our
financial condition and monitoring compliance with our business ethics
and other policies.
The current members of our audit committee will be replaced by the three
independent directors we will appoint within 90 days after this offering.
42
COMPENSATION COMMITTEE. The compensation committee consists of Messrs.
Timothy C. Collins, Ian K. Snow and John M. Roth. This committee has
general supervisory power over, and the power to grant awards under, the
1999 option plan and the 2001 stock option plan. The compensation
committee has responsibility for, among other things, reviewing the
recommendations of the chief executive officer as to the appropriate
compensation of our principal executive officers and certain other key
personnel, periodically examining the general compensation structure and
supervising our welfare, pension and compensation plans.
DIRECTORS' COMPENSATION
Directors who are full-time employees of ours will not receive a retainer
or fees for service on our board of directors or on committees of our board.
Members of the board of directors who are not our full-time employees will
receive annual fees for attendance at each meeting of the board of directors.
Directors also receive the use of one demonstrator vehicle or the economic
equivalent.
EXECUTIVE COMPENSATION, EMPLOYMENT AGREEMENTS
The following table sets forth certain summary information concerning the
compensation provided by us in 2000 to our executive management team.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
Common Stock
Underlying Other Annual
Name and Position Year Salary Bonus Options Compensation
----------------- ---- ------ ----- ------- ------------
Brian E. Kendrick, President & Chief Executive 2000 $750,000 $750,000 [ ] $ 99,061 (1)
Officer
Thomas R. Gibson, Chairman 2000 525,000 0 [ ] 109,192 (2)
Thomas F. "Mack" McLarty, III, Vice Chairman 2000 300,000 0 [ ]
Phillip R. Johnson, Vice President-Human 2000 133,846 56,000 [ ] 5,457 (3)
Resources
Donna M. Colorito, Vice President I.T. and 2000 94,231 30,000 [ ] 5,240 (4)
E-Commerce
(1) $38,146 represents a tax gross-up of income.
(2) $47,805 represents a tax gross-up of income.
(3) $5,365 represents payments for automobile use.
(4) $5,180 represents payments for automobile use.
EMPLOYMENT AGREEMENTS
Several of our executive officers are entitled to compensation under
the terms of employment agreements with us and under the terms of our
Third Amended and Restated Limited Liability Company Agreement, dated
February 1, 2000, which we refer to in this section of the prospectus as
our "L.L.C. agreement". Both our L.L.C. agreement and the employment
agreements described below are included as exhibits to the registration
statement of which this prospectus forms a part, and the following summary
of these agreements is qualified in its entirety by reference to these
exhibits.
BRIAN E. KENDRICK. Mr. Kendrick has an employment agreement with us to
serve as President and Chief Executive Officer. The agreement is for a
term starting December, 2000, and ending on December 31, 2002. Prior
to beginning his employment with us, Mr. Kendrick received a signing bonus
in November 1999 for $1,500,000. His agreement provides for an annual base
salary of $750,000 and incentive compensation of up to two times the base
salary based upon objectives set by the board of directors. Mr. Kendrick
has the option to receive compensation in the form of equity interests
in us.
43
Under our L.L.C. agreement, we issued to Mr. Kendrick carried
interests in us. These carried interests, which are interests in an increase
in our value, will be converted into options for the purchase of our
common stock upon the completion of this offering.
In addition to the of options Mr. Kendrick received in exchange for his
carried interest, he will receive a combination of cash and options equal
to 2% of our shares of common stock outstanding after the completion of
this offering. The strike price of these options will be the sum of (i) two
times our book value as of January 1, 2000, plus (ii) any increase in our
net book value after January 1, 2000 through the date of this prospectus,
divided by the number of shares of our common stock outstanding
immediately after the completion of this offering.
If Mr. Kendrick's employment is terminated for any reason other than
voluntary resignation, cause, death or disability, he is entitled to two
times the present value of his base salary and target bonus. The target
bonus for 2001 will be equal to $750,000, and the target bonus for 2002
will be equal to the average of Mr. Kendrick's 2001 bonus and $750,000.
During Mr. Kendrick's employment term and for the next two years, he is
subject to non-compete and non-solicitation provisions.
THOMAS R. GIBSON. Mr. Gibson has an employment agreement with us to
serve as chairman of our board of directors for a term that may be
extended by us. During the term of his agreement, Mr. Gibson will receive
an annual salary as follows: (i) for the period January 1, 2001, through
March 16, 2001, a prorated salary based upon the rate of $525,000 per year
and (ii) for the period beginning March 17, 2001 to the termination of his
employment with us, a prorated salary based upon the rate of $250,000 per
year. In April 2001, we paid Mr. Gibson $2,250,000 in cash in exchange for
his carried interest. Mr. Gibson was issued the carried interest under our
L.L.C. agreement.
If we terminate Mr. Gibson without cause or if he leaves for good
reason, we will pay him his base salary for the balance of his employment
term under the contract. During the term of Mr. Gibson's employment and for
one year after the termination of his contract, he is subject to a
non-compete provision. During the term of Mr. Gibson's employment and for
three years after the termination of his contract, he is subject to a
non-solicitation provision.
THOMAS F. "MACK" MCLARTY. Mr. McLarty entered into an employment
agreement with us to provide management and consulting services for a term
of three years beginning February 23, 1999. Under this employment
agreement Mr. McLarty received an annual base salary of $175,000 and was
entitled to a discretionary performance-based bonus. On May
15, 2000, Mr. McLarty's employment contract was amended upon his
appointment to our vice chairmanships. Under his amended employment
contract his compensation increased to an annual rate of $375,000 and
provides for a discretionary performance-based bonus.
If Mr. McLarty terminates his contract for good reason or is
terminated by us without cause, he will receive the present value of the
remaining payments due on his employment agreement. During the term of Mr.
McLarty's employment, he is subject to a non-compete provision. During the
term of Mr. McLarty's employment and through the later of February 23,
2004, or two years after the termination of his contract, he is subject to
a non-solicitation provision.
PHILLIP R. JOHNSON. Mr. Johnson entered into an employment agreement
with us beginning April 3, 2001, providing for one year of base salary and
benefits continuation if he is terminated. These benefits will not be
extended in the event of death, disability, retirement, voluntary
resignation, or cause. Mr. Johnson may trigger severance payments if his
office is relocated by more than 50 miles, reduction of base salary, or
diminution of duties. Mr. Johnson is restricted by non-solicitation and
non-compete restrictions for one year following termination.
1999 OPTION PLAN
In January 1999, we adopted a non-qualified option plan for the issuance
of options granting the right to purchase from us limited liability company
interests in us. Under our 1999 option plan, we granted options to certain of
our directors, officers, employees and consultants for terms and at exercise
prices and vesting schedules set by the compensation committee of our board of
directors. The options granted under our 1999 plan that have not vested prior
to a change in control of us will vest and become exercisable upon a change of
control. We are no longer issuing options under our 1999 option plan.
The following table provides certain information regarding options
granted during 2000 under our 1999 option plan:
44
Option Grants in Last Fiscal Year
Potential
Realizable Value at
Assumed Annual
Percent of Rates of Stock
Number of Total Options Price Appreciation
Securities Granted to for Option Term (1)
Underlying Employees in Exercise or Base Option Term (1)
Name Options Granted Fiscal Year Price ($/SH) Expiration Date 5% ($) 10% ($)
- ---- --------------- ----------- ------------ --------------- ------- -------
Phillip R. Johnson
Donna M. Colorito
- ----------------
(1) Amounts represent hypothetical values that could be achieved for the
respective options if exercised at the end of the option term. These
values are based on assumed rates of stock price appreciation of 5% and
10% compounded annually from the date the respective options were granted
to their expiration date based on the market price of the underlying
securities on the date of the grant. These assumptions are not intended
to forecast future appreciation of our stock price. The potential
realizable value computation does not take into account federal or state
income tax consequences of option exercises or sales of appreciated
stock.
The options vest annually with respect to 33.33% of the shares covered by the
options.
2001 STOCK OPTION PLAN
In connection with this offering, we intend to provide certain senior
employees a grant of options, under the 2001 stock option plan, to purchase
shares of common stock with respect to an aggregate of [ ] shares. A primary
purpose of the 2001 stock option plan is to attract and retain exceptional
officers and other key employees.
The following is a description of the material terms of the 2001 stock
option plan. You should, however, refer to the exhibits that are a part of the
registration statement, of which this prospectus forms a part, for a copy of
the stock option plan. See "Where You Can Find More Information".
TYPE OF AWARDS. The 2001 stock option plan provides for grants of
nonqualified stock options.
SHARES SUBJECT TO THE STOCK OPTION PLAN; OTHER LIMITATIONS ON AWARDS.
Subject to adjustment as described below, the maximum number of our shares
of common stock that may be issued under our 2001 stock option plan may
not exceed [ ], and the total number of shares that may be granted to any
participant in any fiscal year may not exceed [ ]. These shares may be
authorized but unissued common stock or authorized and issued common stock
held in our treasury. If any option is forfeited, expires or is otherwise
terminated or canceled, other than by reason of exercise or vesting, then
the shares covered by that option will again become available under the
2001 stock option plan.
Our compensation committee has the authority to adjust the terms and
conditions of, and the criteria included in, any outstanding options in
order to prevent dilution or enlargement of the benefits intended to be
made available under the plan as a result of any unusual or nonrecurring
events (including any dividend or other distribution, whether in the form
of cash, shares of our common stock, other securities or other property,
recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase,
exchange of shares of our common stock or our other securities or other
similar corporate transaction or event) affecting us, our affiliates, our
financial statements or the financial statements of any of our affiliates,
or any changes in applicable laws, regulations or accounting principles.
In such events, the compensation committee may provide for a cash payment
to the option holder in return for the cancelation of the option in an
amount equal to the excess, if any, of the fair market value of our shares
of common stock over the aggregate exercise price of the option.
ELIGIBILITY. Awards may be made to any officer or other key employee
of us or any of our subsidiaries, including any prospective officer or
key employee, selected by the compensation committee.
ADMINISTRATION. The compensation committee administers the 2001 stock
option plan. The compensation committee has the authority to construe,
interpret and implement the 2001 stock option plan, and prescribe, amend
and rescind rules and regulations relating to the plan. The determination
of
45
the compensation committee on all matters relating to the 2001 stock
option plan or any award agreement is final and binding.
STOCK OPTIONS. The compensation committee may grant nonqualified stock
options to purchase shares of common stock from us (at the price set forth
in the award agreement), subject to such terms and conditions as the
compensation committee may determine. Payment of the option's exercise
price may be made in cash, with other shares of our common stock, by
irrevocable instructions for sales by a broker, by promissory note (with
the consent of the compensation committee) or by a combination of those
methods. No grantee of an option will have any of the rights of one of our
stockholders with respect to shares subject to their award until the
issuance of the shares.
Except as the compensation committee may otherwise establish in an
option agreement at the time of grant, the exercise price of each option
granted under the 2001 stock option plan prior to the initial public
offering of shares of our common stock will be the initial public offering
price per share of our common stock and the exercise price of each option
granted under the plan after the initial public offering will be equal to
the fair market value of a share of our common stock on the date of grant.
Except as the compensation committee may otherwise establish in an
option agreement, options that are granted under the 2001 stock option
plan effective as of the initial public offering of shares of Asbury
common stock will become vested and exercisable with respect to 50% of the
shares subject to those options on each of the first two anniversaries of
the date of grant, and the other 50% of the shares subject to those
options will become vested and exercisable with respect to one-third of
such shares on each of the first three anniversaries of the date of grant.
Except as the compensation committee may otherwise establish in an option
agreement, options granted after this offering will become vested and
exercisable with respect to one-third of the shares subject to those
options on each of the first three anniversaries of the date of grant.
Except as the compensation committee may otherwise establish in an
option agreement, options granted under the 2001 stock option plan will
expire without any payment upon the earlier of the tenth anniversary of
the option's date of grant and the date the optionee ceases to be employed
by us or one of our subsidiaries.
CHANGE OF CONTROL. In the event of a change in control of us, options that
are outstanding and unexercisable or unvested at the time of the change of
control will vest and become exercisable immediately prior to
the change of control.
NONASSIGNABILITY. Except to the extent otherwise provided in the option
agreement, no option granted to any person under the 2001 stock option
plan is assignable or transferable other than by will or by the laws of
descent and distribution, and all options are exercisable during the life
of the grantee only by the grantee or the grantee's legal representative.
AMENDMENT AND TERMINATION. The 2001 stock option plan is scheduled to
terminate December 31, 2011. Our board of directors may at any time amend,
alter, suspend, discontinue or terminate the 2001 stock option plan and,
unless otherwise expressly provided in an option agreement, the
compensation committee may waive any conditions under, or amend the terms
of, any outstanding option. However, stockholder approval of any of those
actions must be obtained if such approval is necessary to comply with any
tax or regulatory requirement applicable to the 2001 stock option plan,
and any of those actions that would impair the rights of any option holder
with respect to options granted prior to those actions will not be
effective without the consent of the affected option holder.
EMPLOYEE STOCK PURCHASE PLAN
The following is a description of the material terms of our employee
stock purchase plan, pursuant to which shares of our common stock will be made
available, beginning in 2002, for purchase by our eligible employees.
GENERAL. The purpose of the plan is to promote our success and enhance our
value by providing our eligible employees with the opportunity to purchase
our common stock, in order to increase
46
employee interest in our success and encourage them to remain in our
employ. The plan is intended to qualify as an employee stock purchase plan
under section 423 of the Internal Revenue Code.
The plan authorizes the purchase of up to [ ] shares of our common
stock by eligible employees. However, the number of shares available for
purchase under the plan will be adjusted for stock dividends, stock
splits, reclassifications and other changes affecting such shares. The
shares available for purchase under the plan may, in the discretion of our
board of directors, be authorized but unissued shares of common stock,
shares purchased on the open market, or shares from any other proper
source.
ADMINISTRATION. The plan will be administered by our board of directors or
a committee appointed by the board of directors. Subject to the terms of
the plan, the administrator has authority to interpret the plan, make,
amend and rescind all rules and regulations for the operation of the plan,
take any other actions and make all other determinations necessary or
desirable to administer and operate the plan.
ELIGIBILITY TO PARTICIPATE. All our employees are eligible to participate
in the plan, subject to such further eligibility requirements as may be
specified by the administrator consistent with section 423 of the Code.
However, any employee that owns, directly or indirectly, 5% or more of the
total combined voting power or value of our stock is not eligible.
PURCHASES OF COMMON STOCK UNDER THE PLAN. Eligible employees receive
options to purchase our common stock pursuant to the plan. The options are
to be granted to each eligible employee on the first day of each calendar
year in which the New York Stock Exchange is open for trading, or any
other date specified by the administrator. Options remain outstanding for
a period determined by the administrator not to exceed 27 months. Unless
the administrator determines otherwise, consecutive option periods of
equal duration will be established.
An individual must be employed as an eligible employee by us on the
first trading day of an option period in order to be granted an option for
that option period. In the case of an individual who first becomes an
eligible employee after the first trading day of an option period, the
administrator may designate a subsequent day within the option period upon
which the employee will be granted an option that will have a duration
equal to the balance of that option period.
Each option provides the employee the right to purchase, on the last
day of the option period or on one or more trading days within the option
period designated by the administrator, up to a maximum number of shares
of common stock specified by the administrator. However, no employee may
purchase in one calendar year shares of common stock having an aggregate
fair market value in excess of $25,000. The purchase price for each share
of common stock under an option will be determined by the administrator,
in its discretion, prior to the beginning of the applicable option period.
However, the purchase price will never be less than 85% of the fair market
value of the common stock on the first day of the option period or the day
of purchase, whichever is lower, and will never be less than the par value
of the common stock. All eligible employees granted options under the plan
for an option period will have the same rights and privileges with respect
to such options.
To facilitate payment of the purchase price of options, the
administrator, in its discretion, may permit eligible employees to
authorize payroll deductions to be made on each payday during an option
period, in addition to contributions of cash or cash-equivalents to us, up
to a maximum amount determined by the administrator. We will maintain
bookkeeping accounts for all employees who authorize payroll deduction or
make cash contributions. Interest will not be paid on any employee
accounts, unless the administrator determines otherwise. The administrator
will establish rules and procedures regarding elections to authorize
payroll deductions, changes in such elections, timing and manner of cash
contributions, and withdrawals from employee accounts.
Amounts credited to employee accounts on the last trading day of an
option period or on one or more trading days within the option period
designated by the administrator will be applied to the payment of the
purchase price of outstanding options. Options will be exercised on the
close of business on the last trading day of an option period or on one or
more trading days within the option period designated by the
administrator, however, options of any participant who terminates
employment for any reason before
47
such date, or who is no longer an eligible employee on such date, will
terminate unexercised. Options will be exercised only to the extent the
purchase price is paid with respect to whole shares of common stock. Any
balance remaining in an employee's account at the end of an option period
will be carried forward automatically for the next option period. If an
employee is not an eligible employee with respect to the next option
period, any remaining balance will be promptly refunded without interest.
No purchases will be made under the plan prior to approval of the plan by
the stockholders.
AMENDMENT AND TERMINATION. The board of directors may amend the plan at
any time for any reason, except that (1) if the approval of any such
amendment by our stockholders is required by section 423 of the Internal
Revenue Code, such amendment will not be effected without such approval,
and (2) no amendment may be made that would cause the plan to fail to
comply with section 423 of the Internal Revenue Code unless expressly so
provided by the board of directors.
The board of directors, in its sole discretion, may terminate the plan
at any time and for any reason. In the event the plan is terminated, all
outstanding options shall immediately terminate and all amounts in an
eligible employee's account under the plan shall be promptly refunded
without interest.
CERTAIN TRANSACTIONS
RELATED PARTY TRANSACTIONS
Certain of our directors, beneficial owners and their affiliates, have
engaged in transaction with us. Transactions with three of our directors, Mr.
Thomas F. McLarty, Mr. David McDavid, Sr. and Mr. C.V. Nalley and one of our
beneficial owners, Mr. Luther Coggin, are described below. We believe these
transactions involve terms comparable to, or more favorable to us than, terms
that would be obtained from an unaffiliated third party.
We lease the following properties used by the Arkansas platform for
dealership lots and offices from Mr. McLarty, his immediate family members and
his affiliates:
o property leased from NPF Holdings L.L.C., a limited liability company
in which Mr. McLarty has a 58.5% ownership interest for a monthly
rental fee of $61,926;
o property leased from MHC Properties G.P., a partnership in which Mr.
McLarty has an 85.5% ownership interest, for a monthly rental fee of
$13,801;
o property leased from Prestige Properties, GP, a partnership in which
MHC Properties GP, of which Mr. McLarty owns 85.5%, holds a 68%
ownership interest, for a monthly rental fee of $38,572;
o property leased from Hope Auto Company, corporation in which Mr.
McLarty has an 86% ownership interest, for a monthly rental fee of
$118,300;
o property leased from Summerhill Partnership, L.P., a limited
partnership in which Mr. McLarty has a 49.88% ownership interest, for
a monthly rental fee of $30,000; and
We lease the following properties used by the Texas platform for
dealership lots and offices from Mr. McDavid, his immediate family members and
his affiliates:
o properties leased from Mr. McDavid with an aggregate monthly rental
fee of $189,000;
o properties leased from David McDavid Family Properties, a partnership
in which Mr. McDavid and his immediate family have a 100% ownership
interest, for aggregate monthly rental fees of $90,000;
o property leased from BroMac Inc., an S-corporation in which Mr.
McDavid and his immediate family have a 100% ownership interest, for a
monthly rental fee of $1,500;
o properties leased from Sterling Real Estate Partnership, a partnership
in which Mr. McDavid and his immediate family have a 100% ownership
interest, for aggregate monthly rental fees of $70,000;
48
o property leased from Texas Coastal Properties, a partnership in which
Mr. McDavid and his immediate family have a 100% ownership interest,
for a monthly rental fee of $4,000;
o property leased from McCreek Partners L.L.C., a limited liability
corporation which is wholly owned by McCreek, Ltd., a partnership in
which Mr. McDavid and his immediate family hold a 100% ownership
interest, for a monthly rental fee of $4,900; and
o property leased from D.Q. Automobiles Inc., a corporation in which Mr.
McDavid has a 100% ownership interest, for a monthly rental fee of
$14,700.
In the near future, we expect to enter into agreements to purchase or
lease certain additional properties from Mr. McDavid or his affiliates for use
by the Texas platform with the following general business terms:
o purchase approximately four acres of land in Plano, Texas for the
construction of a new body shop. Purchase price is the appraised value
of $1,700,000.
o lease approximately four acres of land in Frisco, Texas, and a
1,000-space parking structure which Mr. McDavid will build on the land
at his cost, for total rent of $50,000 per month. Mr. McDavid further
will construct a new dealership facility at his expense, at which time
we will increase monthly rent by 1% of the construction cost,
representing a 12% annual capitalization rate.
o purchase two acres of land adjacent to our Honda dealership facility
in Houston, Texas for $2,000,000. The existing Honda facility will
become the new home for our Nissan dealership, and we will construct
an additional facility on it for Nissan dealership expansion. The
purchase price for the land is approximately $800,000 more than the
appraised value, which will be offset by the "free rent" in the
following transaction.
o lease ten acres of land adjacent to our current Nissan dealership in
Houston, Texas for four years, rent-free. We will renovate the
facility and it will become the new home for our Honda dealership. We
estimate fair market rent over the four-year term (i.e., our savings
to offset the above-market purchase price above) to be $814,000.
We lease property used by the Atlanta platform for dealership lots and
offices from Mr. Nalley, his immediate family and his affiliates:
o properties owned by C.V. Nalley for an aggregate monthly rental fee of
$50,500;
o properties owned by Chevrolet Metro Realty, Inc., a corporation in
which Mr. Nalley has a 100% ownership interest, for aggregate monthly
rental fees of $45,900;
o property owned by Heavy Duty Trucks Realty, Inc., a corporation in
which Mr. Nalley has a 100% ownership interest, for a monthly rental
fee of $36,000;
o property owned by Union City Honda Auto Realty, Inc., a corporation in
which Mr. Nalley has a 100% ownership interest, for a monthly rental
fee of $45,000; and
o property owned by Marietta Lexus Auto Realty, Inc., a corporation in
which Mr. Nalley has a 100% ownership interest, for a monthly rental
fee of $45,100.
We lease property used by the Jacksonville platform for dealership lots
and offices from Coggin Management Company, a corporation in which Mr. Coggin
has a 100% ownership interest, for a monthly rental fee of $10,500.
OTHER RELATED PARTY TRANSACTIONS
Loomis Advertising, a corporation in which Mr. McDavid and his immediate
family hold a 21% ownership interest, has entered into various agreements to
provide advertising services to the Texas
49
platform for an aggregate value of $700,000 since January 1, 2000. Loomis
Advertising also provides advertising services to the Jacksonville platform
for a fee of $52,000 a month.
Mr. Nalley leased his private aircraft to us during part of 2000, and
currently charges us for employees who use the aircraft to fly on business
trips. The total amount paid to Mr. Nalley since January 1, 2000, for use of
his private jet is $106,000.
Currently, we own a 10% interest in a Land Rover franchise operated under
the St. Louis platform, Asbury Automotive Holdings L.L.C. owns a 40% interest
in this franchise and John R. Capps owns the remaining 50% interest. We have
entered into a binding assignment and assumption agreement whereby Mr. Capps
has agreed to sell his 50% interest to us. This agreement is held in escrow at
the Bank of New York pending manufacturer consent to the transaction.
In February 2001, Mr. McLarty purchased a number of used vehicles from us
after fire damage to our Hope, Arkansas dealership. The total purchase price
paid by Mr. McLarty to us was $378,000.
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL
Our authorized capital stock consists of [________] shares of common
stock, par value $.01 per share, and [ ] shares of preferred stock, par value
$.01 per share. After giving effect to the offering, we will have outstanding
[______] shares of common stock and no shares of preferred stock. Upon
completion of the offering, we will have outstanding [______] shares of common
stock ([________] shares if the underwriters' over-allotment option is
exercised in full) and no shares of preferred stock.
COMMON STOCK
Subject to the rights of any then outstanding shares of preferred stock,
the holders of the common stock are entitled to such dividends as may be
declared in the discretion of our board of directors out of funds legally
available therefor. Holders of common stock are entitled to share ratably in
our net assets upon liquidation after payment or provision for all liabilities
and any preferential liquidation rights of any preferred stock then
outstanding. The holders of common stock have no preemptive rights to purchase
shares of our stock. Shares of our common stock are not subject to any
redemption provisions and are not convertible into any other of our
securities. All outstanding shares of common stock are, and the shares of
common stock to be issued pursuant to the offering will be upon payment
therefor, fully paid and non-assessable.
PREFERRED STOCK
Preferred stock may be issued from time to time by the board of directors
in one or more series. Subject to the provisions of our charter and
limitations prescribed by law, the board of directors is expressly authorized
to adopt resolutions to issue the shares, to fix the number of shares and to
change the number of shares constituting any series and to provide for or
change the voting powers, designations, preferences and relative
participating, optional or other special rights, qualifications, limitations
or restrictions thereof, including dividend rights (including whether
dividends are cumulative), dividend rates, terms of redemption (including
sinking fund provisions), redemption prices, conversion rights and liquidation
preferences of the shares constituting any series of the preferred stock, in
each case without any further action or vote by the stockholders. One of the
effects of undesignated preferred stock may be to enable the board of
directors to render more difficult or to discourage an attempt to obtain
control of us by means of a tender offer, proxy contest, merger or otherwise,
and thereby to protect the continuity of our management. The issuance of
shares of the preferred stock pursuant to the board of directors' authority
described above may adversely affect the rights of the holders of common
stock. For example, preferred stock issued by us may rank prior to the common
stock as to dividend rights, liquidation preference or both, may have full or
limited voting rights and may be convertible into shares of common stock.
Accordingly, the issuance of shares of preferred stock may discourage bids for
the common stock or may otherwise adversely affect the market price of the
common stock.
50
CERTAIN ANTI-TAKEOVER AND OTHER PROVISIONS OF THE CHARTER AND BYLAWS
LIMITATIONS ON REMOVAL OF DIRECTORS
Stockholders may remove a director only for cause upon the affirmative
vote of holders of at least 80% of the voting power of the outstanding shares
of common stock. In general, the board of directors, and not our stockholders,
will have the right to appoint persons to fill vacancies on our board of
directors.
OUR STOCKHOLDERS MAY NOT ACT BY WRITTEN CONSENT
Our corporate charter provides that any action required or permitted to
be taken by our stockholders must be taken at a duly called annual or special
stockholders' meeting. In addition, special meetings of the stockholders may
be called only by our board of directors.
BUSINESS COMBINATIONS UNDER DELAWARE LAW
We are a Delaware corporation and are subject to section 203 of the
Delaware General Corporation Law. In general, section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of
our outstanding voting stock) from engaging in a merger, acquisition or other
"business combination" (as defined in section 203) with us for three years
following the date that person becomes an interested stockholder unless:
o before that person became an interested stockholder, our board of
directors approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination;
o upon completion of the transaction that resulted in the interested
stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the voting stock outstanding at the
time the transaction commenced (excluding stock held by our directors
who are also officers and by employee stock plans that do not provide
employees with the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange
offer); or
o following the transaction in which that person became an interested
stockholder, the business combination is approved by our board of
directors and authorized at a meeting of stockholders by the
affirmative vote of the holders of at least two-thirds of the
outstanding voting stock not owned by the interested stockholder.
Under section 203, these restrictions also do not apply to specified
types of business combinations proposed by an interested stockholder if:
o the proposal follows the announcement or notification of one of
certain extraordinary transactions involving us and a person who was
not an interested stockholder during the previous three years or who
became an interested stockholder with the approval of a majority of
our directors; and
o the extraordinary transaction is approved or not opposed by a majority
of the directors who were directors before any person became an
interested stockholder in the previous three years or who were
recommended for election or elected to succeed such directors by a
majority of such directors then in office.
STOCKHOLDERS AGREEMENT
We entered into a stockholders agreement with Asbury Automotive Holdings
L.L.C. and certain platform prinicpals, consisting of the former owners of our
platforms and members of their management teams. After the completion of this
offering, Asbury Automotive Holdings will own [ ]% of our common stock ([ ]%
if the underwriters exercise their over-allotment option in full), and the
platform principals will collectively own [ ]% of our common stock ([ ]% if
the underwriters exercise their over-allotment option in full). Under the
stockholders agreement, the platform principals are required to vote their
shares in accordance with Asbury Automotive Holdings' instructions with
respect to:
o persons nominated by Asbury Automotive Holdings to our board of
directors (and persons nominated against Asbury Automotive Holdings'
nominees); and
o any matter to be voted on by the holders of our common stock,
whether or not the matter was initiated by Asbury Automotive Holdings.
51
The platform principals have the right to cause Asbury Automotive
Holdings to vote for at least one platform principal nominee to the board of
directors if the total number of directors (excluding directors that are our
employees) on the board of directors is six or less and at least two platform
principal nominees if such number of directors is more than six.
The stockholders agreement will terminate on the first to occur of:
o the fifth anniversary of the date of this offering;
o two years after the first date on which Asbury Automotive Holdings'
share of the ownership of our outstanding common stock falls below
20%; and
o the first date on which Asbury Automotive Holdings' share of the
ownership of our outstanding common stock falls below 5%.
LIMITATION OF LIABILITY OF OFFICERS AND DIRECTORS -- INDEMNIFICATION
Delaware law authorizes corporations to limit or eliminate the personal
liability of officers and directors to corporations and their stockholders for
monetary damages for breach of officers' and directors' fiduciary duties of
care. The duty of care requires that, when acting on behalf of the
corporation, officers and directors must exercise an informed business
judgment based on all material information reasonably available to them.
Absent the limitations authorized by Delaware law, officers and directors are
accountable to corporations and their stockholders for monetary damages for
conduct constituting gross negligence in the exercise of their duty of care.
Delaware law enables corporations to limit available relief to equitable
remedies such as injunction or rescission. The charter limits the liability of
our officers and directors to us or our stockholders to the fullest extent
permitted by Delaware law. Specifically, our officers and directors will not
be personally liable for monetary damages for breach of an officer's or
director's fiduciary duty in such capacity, except for liability (i) for any
breach of the officer's or director's duty of loyalty to us or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the officer and director derived an improper personal
benefit.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar of the common stock is [ ].
SECURITY OWNERSHIP OF BENEFICIAL OWNERS,
MANAGEMENT AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of [ ], 2001, as adjusted to
reflect the sale of shares in this offering by us and by the selling
stockholders (without giving effect to the underwriters' over-allotment
option), by our directors, executive officers, and directors and officers as a
group and each person known by us to beneficially own more than 5% of our
outstanding voting securities. Percentages are based on total amounts of
common stock outstanding on [ ] 2001.
Common Stock(1)
Percentage of Voting Power
Percent of Class Outstanding
Number of Before the After the After
Name Shares Offering Offering Before Offering Offering
- ------------------------------------------------
Ripplewood Holdings L.L.C. (2)
One Rockefeller Plaza
32nd Floor
New York, NY 10020
52
Freeman Spogli & Co.(3).........................
Luther Coggin...................................
CURRENT DIRECTORS
Timothy C. Collins(4)...........................
Ian K. Snow (4).................................
John M. Roth(5).................................
C.V. Nalley.....................................
Thomas R. Gibson................................
B. David McDavid................................
Brian E. Kendrick...............................
Charles B. Tomm.................................
NAMED OFFICERS WHO ARE NOT DIRECTORS
Thomas F. McLarty, III .........................
Thomas F. Gilman................................
Phillip R. Johnson..............................
Donna M. Colorito...............................
Allen T. Levenson...............................
Thomas G. McCollum..............................
Directors and executive officers of Asbury as a
group (14 persons).........................
SELLING STOCKHOLDERS WHO ARE NOT DIRECTORS AND NOT 5% HOLDERS OF OUR VOTING
SECURITIES
Royce Reynolds..................................
* Less than 1%.
(1) Unless otherwise indicated, each beneficial owner listed above has
represented that he, she or it possesses sole voting and sole investment power
with respect to the shares beneficially owned by such person, entity or group
and includes all options currently exercisable or exercisable within 60 days
of [ ], 2001. The percentages of beneficial ownership as to each person,
entity or group assume the exercise or conversion of all options held by such
person, entity or group.
(2) Represents shares owned by Asbury Automotive Holdings L.L.C. Ripplewood
Holdings L.L.C. is the owner of approximately 51% of the membership interests
of Asbury Automotive Holdings and is deemed to be a member of a group that
owns the shares of Asbury Automotive Holdings.
(3) Represents shares owned by Asbury Automotive Holdings L.L.C. FS Equity
Partners III, L.P., FS Equity Partners International L.P. and FS Equity
Partners IV, L.P are collectively the owners of approximately 49% of the
membership interests of Asbury Automotive Holdings and are deemed to be
members of a group that own the shares of Asbury Automotive Holdings. The
business address of Freeman Spogli & Co., FS Equity Partners III, FS Equity
Partners IV is 11100 Santa Monica Boulevard, Suite 1900, Los Angeles,
California 90025. The business address of FS Equity Partners International
L.P. is c/o Paget-Brown & Company, Ltd., West Winds Building, Third Floor,
Grand Cayman, Cayman Islands, British West Indies.
(4) Does not include [ ] shares of common stock hold of record by Abury
Automotive Holdings L.L.C. an entity in which Ripplewood Holdings L.L.C. holds
approximately a 51% ownership interest. Mr. Collins and Mr. Snow are directors
and executive officers of Ripplewood Holdings. Both Mr. Collins and Mr. Snow
expressly disclaim beneficial ownership of any shares held by Ripplewood
Holdings L.L.C. except to the extent of their pecuniary interests in them.
(5) Does not include [ ] shares of common stock held of record by Asbury
Automotive Holdings L.L.C., an entity in which investment funds affiliated
with Freeman Spogli, as described in footnote three, hold approximately a 49%
ownership interest. Mr. Roth is a director, member, partner or executive
officer of each of these investment funds. Mr. Roth expressly disclaims
beneficial ownership of any shares held by such investment funds except to the
extent of his pecuniary interest in them.
53
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock. We
cannot predict the effect, if any, that market sales of shares of our common
stock or the availability of shares or our common stock for sale will have on
the market price of our common stock prevailing from time to time.
Nevertheless, sales of substantial amounts of our common stock in the public
market could adversely affect the market price of our common stock and impair
our future ability to raise capital through the sale of our equity securities.
Upon completion of this offering, we will have [ ] shares of
common stock outstanding, assuming no exercise of the underwriters'
over-allotment option, and [ ] shares if the underwriters'
over-allotment option is exercised in full. We have reserved [ ] shares of
common stock for issuance upon exercise of options granted or to be granted
under our 1999 Option Plan, 2001 Stock Option Plan and Employee Stock Purchase
Plan, of which [ ] options are currently outstanding and [up to [ ] additional
options are expected to be granted simultaneously with this offering. All of
the [ ] shares sold in this offering] ([ ] shares if the underwriters'
over-allotment option is exercised in full) will be freely tradable without
restriction or further registration under the Securities Act unless the shares
are purchased by our "affiliates", as that term is defined in Rule 144 under
the Securities Act. None of the remaining [ ] outstanding shares of our
common stock have been registered under the Securities Act, which means that
they are "restricted securities" under the Securities Act, and may be resold
publicly only upon registration under the Securities Act or in compliance with
an exemption from the registration requirements of the Securities Act,
including the exemption provided by Rule 144 under the Securities Act.
We summarize Rule 144, as it relates to sales of our shares, below.
RULE 144
Under Rule 144, [ ] shares of common stock will be tradable 90 days after
the effective date of the registration statement of which this prospectus
forms a part, subject to the restrictions described below. Sales of some of
these shares will be subject to the restrictions included in lock-up
agreements between certain of our stockholders and the underwriters, as
described under "Lock-Up Agreements" below. In general, under Rule 144,
beginning 90 days after the date on which the registration statement of which
this prospectus is a part becomes effective, a person who has owned shares of
our common stock for at least one year would be entitled to sell within any
three month period a number of shares that does not exceed the greater of:
o 1% of the number of shares of our common stock then outstanding, which
will equal approximately [ ] shares immediately after the completion
of this offering ([ ] shares if the underwriters' over-allotment
option is exercised in full); or
o the average weekly trading volume of the common stock on the New York
Stock Exchange during the four calendar weeks preceding the filing of
a notice on Form 144 providing notification of the sale.
Sales under Rule 144 are also governed by manner of sale requirements and
may only be made if current public information about us is available.
54
REGISTRATION RIGHTS
Under a stockholders agreement between us and certain of our stockholders
entered into simultaneously with or prior to this offering, we have granted
Asbury Automotive Holdings L.L.C. and certain other of our stockholders the
right to require us to register sales of their shares of our common stock
under the Securities Act. These stockholders collectively, own [ ] shares of
our common stock as of the date of this offering, representing [ ]% of our
total common shares outstanding ([ ]% if the underwriters exercise their
over-allotment option in full). Under the stockholders agreement, at any time
following the completion of this offering, Asbury Automotive Holdings or
stockholders holding among them a majority of the total number of shares held
by the stockholders, other than Asbury Automotive Holdings, that are parties
to the stockholders agreement, may demand that we file a registration
statement with the Securities and Exchange Commission registering the sale of
all or part of their stockholdings within 45 days, subject to our ability to
defer a registration demand for 15 to 45 days under specified circumstances.
Our obligation to effect registrations is subject to the following volume
restrictions:
o Any proposed offering must be for at least 1% of the total number of
our shares of common stock then outstanding;
o In the case of the first registration demand, we are not required to
register the sale of more than 50% of the total holdings of any
stockholder, other than Asbury Automotive Holdings; and
o In the case of the first registration demand of the stockholders,
other than Asbury Automotive Holdings, we are not required to register
for sale a number of shares greater than 20% of the total holdings of
the stockholders who are parties to the stockholders agreement.
Under the stockholders agreement, Asbury Automotive Holdings has been
granted five registration demands, and the remaining stockholders have been
granted, collectively, two registration demands. We are not required to
register the sale of any shares during the period that such shares are subject
to a lock-up agreement. In addition, other than in the case of a request made
by Asbury Automotive Holdings, we are not required to register more than one
sale of shares during any one year period in response to a registration
demand.
We have also granted Asbury Automotive Holdings and the other
stockholders who are parties to the stockholders agreement "piggy-back"
registration rights, meaning that we have agreed to notify the parties to the
stockholders agreement in the event that we undertake to register a sale of
our shares (whether in response to a registration demand or otherwise) and
will permit those stockholders who request to join in the registered offering.
All registration rights granted under the stockholders agreement are
subject to the right of the managing underwriter of the registered offering to
reduce the number of shares included in the registration statement if the
underwriter determines that the success of the offering would be materially
adversely affected by the size of the registered offering. In general, we are
responsible for paying the expenses of registration (other than underwriting
discounts and commissions on the sale of shares), including the fees and
expenses of counsel to the selling stockholders.
LOCK-UP AGREEMENTS
As of the date of this prospectus, the following groups of persons, who
collectively hold [ ] shares of our common stock, have entered into lock-up
agreements with the underwriters:
o Asbury Automotive Holdings L.L.C.;
o our officers and directors; and
o those of our platform chief executive officers, chief operating
financial officers and dealership general managers who received equity
in us in connection with our acquisition of the related platforms.
The lock-up agreements provide that these persons will not offer, sell,
contract to sell, grant any option to purchase, hedge or otherwise dispose of
shares of our common stock or any securities that are convertible into or
exercisable for our common stock for a period of 180 days after the date of
this
55
prospectus (or two years in the case of those platform and dealership
officials, other than certain of the selling stockholders, who received equity
in us in connection with our acquisitions of the related platform) without the
prior written consent of Goldman, Sachs & Co. Goldman, Sachs & Co. has advised
us that it has no present intention to release any of the shares subject to
the lock-up agreements prior to the expiration of the applicable lock-up
period.
SHARES HELD BY RIPPLEWOOD HOLDINGS L.L.C.
After completion of the offering, Ripplewood Holdings L.L.C. will
continue to own [_]% of our outstanding common stock ([ ]% if the underwriters
exercise their over-allotment option in full) through Asbury Automotive
Holdings L.L.C., a controlled affiliate of Ripplewood. Ripplewood's ownership
of our stock could negatively affect our stock price:
o Due to the perception of "market overhang", that is that large blocks
of shares are readily available for sale, or
o In the event that Ripplewood disposed of all or a substantial portion
of this common stock at any one time or from time to time.
In addition, if Ripplewood continues to retain a substantial portion of
our common shares, the liquidity of our common stock could be adversely
affected.
We do not know Ripplewood's future plans as to its holdings of our common
stock, and Ripplewood is not under any obligation to inform us of its
intentions as to our common stock. We can not give you any assurances that
Ripplewood's actions will not negatively affect the price or liquidity of our
common stock in the future. See "Risk Factors -- We will be controlled by
Ripplewood Holdings L.L.C., which may have interests different from your
interests."
UNDERWRITING
Asbury, the selling stockholders and the underwriters for the offering
named below have entered into an underwriting agreement with respect to the
shares being offered. Goldman, Sachs & Co., Merrill, Lynch, Pierce, Fenner &
Smith Incorporated and Salomon Smith Barney Inc. are the representatives of
the underwriters. Subject to conditions set forth in the underwriting
agreement, each underwriter has severally agreed to purchase the number of
shares indicated in the following table.
Underwriters Number of Shares
- ------------ ----------------
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
Salomon Smith Barney Inc.
----------------
Total
If the underwriters sell more shares than the total number set forth in
the table above, the underwriters have an option to buy up to an additional
[ ] shares from Asbury and [ ] shares from the selling stockholders
to cover such sales. They may exercise that option for 30 days. If any shares
are purchased pursuant to this option, the underwriters will severally purchase
shares in approximately the same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts
and commissions Asbury will pay to the underwriters. The amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
Paid by Asbury Paid by the Selling Stockholders
No Exercise Full Exercise No Exercise Full Exercise
Per Share $ $ $ $
56
Total
Shares sold by the underwriters to the public will initially be offered
at the initial public offering price set forth on the cover of this
prospectus. Any shares sold by the underwriters to securities dealers may be
sold at a discount of up to $[ ] per share from the initial public offering
price. Any such securities dealers may resell any shares purchased from the
underwriters to certain other brokers or dealers at a discount of up to $[ ]
per share from the initial public offering price. If all the shares are not
sold at the initial offering price, the representatives may change the
offering price and the other selling terms.
Asbury, its directors and executive officers, Asbury Automotive Holdings
L.L.C. and certain of the selling stockholders have agreed with the
underwriters not to dispose of or hedge any of their common stock or
securities convertible into or exchangeable for shares of common stock during
the period from the date of this prospectus continuing through the date 180
days after the date of this prospectus, except with the prior written consent
of the representatives. In addition, the former owners of our platforms (other
than certain of the selling stockholders) and those platform chief executive
officers, chief operating officers, chief financial officers and those
dealership general managers who received equity in Asbury in connection with
the acquisition by Asbury of the related platforms have agreed to such
restrictions on disposal and hedging of their common stock for a period of two
years after the date of this prospectus. These agreements do not apply to any
grants under existing employee benefit plans. See "Shares Available for Future
Sale" for a discussion of transfer restrictions.
Prior to this offering, there has been no public market for the shares.
The initial public offering price will be negotiated among Asbury and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be Asbury's historical performance, estimates of Asbury's
business potential and earnings prospects of Asbury, an assessment of Asbury's
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.
Asbury's common stock will be listed on the New York Stock Exchange under
the symbol "[ ]". In order to meet one of the requirements for listing the
common stock on the New York Stock Exchange, the underwriters have undertaken
to sell lots of 100 or more shares to a minimum of 2,000 beneficial holders.
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include
short sales, stabilizing transactions and purchases to cover positions created
by short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. "Covered"
short sales are sales made in an amount not greater than the underwriters'
option to purchase additional shares from Asbury or the selling stockholder in
the offering. The underwriters may close out any covered short position by
either exercising their option to purchase additional shares or purchasing
shares in the open market. In determining the source of shares to close out
the covered short position, the underwriters will consider, among other
things, the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through the
overallotment option. "Naked" short sales are any sales in excess of such
option. The underwriters must close out any naked short position by purchasing
shares in the open market. A naked short position is more likely to be created
if the underwriters are concerned that there may be downward pressure on the
price of the common stock in the open market after pricing that could
adversely affect investors who purchase in the offering. Stabilizing
transactions consist of various bids for or purchases of common stock made by
the underwriters in the open market prior to the completion of the offering.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the
underwriting discount received by it because the representatives have
repurchased shares sold by or for the account of the underwriter in
stabilizing or short covering transactions.
Purchases to cover a short position and stabilizing transactions may have
the effect of preventing or retarding a decline in the market price of the
common stock, and together with the imposition of the penalty bid, may
stabilize, maintain or otherwise affect the market price of the common stock.
As a result, the price of the common stock may be higher than the price that
otherwise might exist in the open market. If these activities are commenced,
they may be discontinued by the underwriters at any time. These
57
transactions may be effected on the New York Stock Exchange, in the
over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
Asbury and the selling stockholders estimate that their shares of the
total expenses of the offering, excluding underwriting discounts and
commissions, will be approximately $[ ] and $[ ], respectively.
Asbury and the selling stockholders have agreed to indemnify the
underwriters identified in the table above against specific liabilities,
including liabilities under the Securities Act.
VALIDITY OF SHARES
The validity of the shares of our common stock offered hereby will be
passed upon for us by Cravath, Swaine & Moore, New York, New York, and for the
underwriters by Sullivan & Cromwell, New York, New York.
EXPERTS
Our financial statements included in this prospectus and elsewhere in the
registration statement to the extent and for the periods indicated in their
report have been audited by Arthur Andersen LLP and Dixon Odom P.L.L.C, each
of which are independent public accountants, as indicated in their respective
reports with respect thereto, and are included in the prospectus in reliance
upon the authority of these firms as experts in giving these reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to this offering of our common stock. This
prospectus does not contain all the information contained in the registration
statement and the exhibits and schedules to the registration statement. For
further information with respect to us and our common stock, we refer you to
the registration statement and the exhibits and schedules filed as part of the
registration statement. Each statement in this prospectus relating to a
contract or document filed as an exhibit is qualified in all respects by the
filed exhibit. You may read and copy any document we file at the SEC's public
reference room in Washington, D.C. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room. The SEC maintains a web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC at
http://www.sec.gov.
Upon completion of this offering, we will become subject to the
information and periodic reporting requirements of the Securities and Exchange
Act and will file periodic reports and other information, including proxy
statements, with the SEC. These periodic reports and other information will be
available for inspection and copying at the SEC's public reference room and
the web site of the SEC referred to above.
58
======================================================== ========================================================
[ ] Shares
No dealer, salesperson or other person is authorized
to give any information or to represent anything not ASBURY AUTOMOTIVE GROUP, INC.
contained in this prospectus. You must not rely on any
unauthorized information or representations. This COMMON STOCK
prospectus is an offer to sell only the shares offered
hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. ---------------------------
TABLE OF CONTENTS [LOGO]
Page
Prospectus Summary.............................. 2 ---------------------------
The Offering.................................... 5
Summary Historical And Pro Forma Consolidated
Financial Data................................ 6
Risk Factors.................................... 7
Forward-Looking Statements...................... 15 GOLDMAN, SACHS & Co.
Use Of Proceeds................................. 16
Dividend Policy................................. 16 MERRILL LYNCH & Co.
Dilution........................................ 16
Capitalization.................................. 18 SALOMON SMITH BARNEY INC.
Selected Consolidated Financial Data............ 19
Unaudited Pro Forma Financial Information....... 21
Management's Discussion And Analysis
Of Financial Condition And Results Representatives of the Underwriters
Of Operations................................. 26
Business........................................ 32
Management...................................... 47
Certain Transactions............................ 56
Description Of Capital Stock.................... 58
Security Ownership Of The Beneficial
Owners, Management And Selling
Stockholders.................................. 61
Shares Eligible For Future Sale................. 63
Underwriting.................................... 66
Validity Of Shares.............................. 67
Experts......................................... 67
Where You Can Find More Information............. 68
Index To Financial Statements................... F-1
Through and including [ ] , 2001 (the 25th day
after the date of this prospectus), all dealers effecting
transactions in these securities, whether or not
participating in this offering, may be required to
deliver a prospectus. This is in addition to a
dealer's obligation to deliver a prospectus
when acting as an underwriter and with respect
to an unsold allotment or subscription.
======================================================== ========================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses (other than underwriting
compensation expected to be incurred) in connection with this offering. All
such amounts (except the SEC registration fee and the NASD filing fee) are
estimated.
SEC registration fee $37,500
NYSE listing fee *
NASD filing fee *
Blue Sky fees and expenses *
Printing and engraving costs *
Legal fees and expenses *
Accounting fees and expenses *
Transfer Agent and Registrar fees and expenses *
Miscellaneous *
Total $ *
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our By-Laws provide that we shall, subject to the limitations contained
in the Delaware General Corporation Law, as amended from time to time,
indemnify all persons whom it may indemnify pursuant thereto.
Section [ ] of the Underwriting Agreement, to be filed as Exhibit 1.1,
provides that the Underwriters named therein will indemnify us and hold us
harmless and each of our directors, officers or controlling persons from and
against certain liabilities, including liabilities under the Securities Act.
Section [ ] of the Underwriting Agreement also provides that such Underwriters
will contribute to certain liabilities of such persons under the Securities
Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
No shares of our common stock have been issued prior to this offering.
The only membership interests issued by us in the last three years have been
made under the exemption provided in Section 4(2) of the Securities Act of
1933, in connection with our acquisitions of dealerships.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
Exhibit
Number Description
------- -----------
1.1 Form of Underwriting Agreement*
3.1 Form of Certificate of Incorporation of Asbury
Automotive Group, Inc.*
3.3 Form of By-laws of Asbury Automotive Group, Inc.*
- --------------------
* To be filed by amendment.
II-1
5.1 Form of Opinion of Cravath, Swaine & Moore
10.1 1999 Option Plan
10.2 Form of 2001 Stock Option Plan*
10.3 Form of Employee Stock Purchase Plan*
10.4 Third Amended and Restated Limited Liability Company
Agreement of Asbury Automotive Group L.L.C.
10.5 Employment Agreement of Thomas R. Gibson*
10.6 Amended and Restated Employment Agreement of Brian E.
Kendrick*
10.7 Amended and Restated Employment Agreement of Thomas F.
McLarty*
10.8 Severance Pay Agreement of Phillip R. Johnson
10.9 Credit Agreement, dated as of January 17, 2001,
between Asbury Automotive Group L.L.C. and Ford Motor
Credit Company, Chrysler Financial Company,
L.L.C., and General Motors Acceptance Corporation. +
10.10 Form of Stockholders Agreement dated [ ]
between Asbury Automotive Holdings and Stockholders
named therein.*
10.11 Ford Dealer Agreement*
10.12 General Motors Dealer Agreement*
10.13 Honda Dealer Agreement*
10.14 Mercedes Dealer Agreement*
10.15 Nissan Dealer Agreement*
10.16 Toyota Dealer Agreement*
10.17 Acura Dealer Agreement*
10.18 Lexus Dealer Agreement*
10.19 Chrysler Dealer Agreement*
21.1 List of subsidiaries of Asbury Automotive Group, Inc.*
23.1 Consent of Arthur Andersen LLP*
23.2 Consent of Dixon Odom P.L.L.C.*
23.3 Consent of Cravath, Swaine & Moore (contained in
Exhibit 5)
24.1 Power of Attorney
--------------------
* To be filed by amendment.
+ Confidential treatment has been requested with respect to certain
portions of this document and has been filed separately with the
Securities and Exchange Commission.
(b) Financial Statement Schedules
II-2
The financial statement schedules are omitted because they are
inapplicable or the requested information is shown in the consolidated
financial statements of Asbury Automotive Group or related notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows:
(1) The undersigned will provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.
(2) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus
filed as part of this registration statement in reliance on Rule
430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the
time it is declared effective.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14 or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
the State of New York, on the 27th day of July, 2001.
Asbury Automotive Group L.L.C.
By:
-----------------------------------
Name: Brian E. Kendrick
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date
Brian E. Kendrick President and Chief Executive July 27, 2001
Officer
Thomas F. Gilman Vice President and Chief July 27, 2001
Financial Officer
Thomas R. Gibson Chairman July 27, 2001
Michael C. Paul Controller July 27, 2001
Timothy C. Collins Director July 27, 2001
Ian K. Snow Director July 27, 2001
John M. Roth Director July 27, 2001
C.V. Nalley Director July 27, 2001
B. David McDavid Director July 27, 2001
Charles B. Tomm Director July 27, 2001
- ----------------------
*** Asbury Automotive Group L.L.C., a Delaware limited liability company,
which on or prior to the effective date of this registration statement will be
converted into a Delaware corporation, named Asbury Automotive Group, Inc.
through either a conversion into a corporation or by a merger with an entity or
a subsidiary of an entity which has no other business.
II-4
Exhibit 5.1
[FORM OF OPINION]
[Letterhead of]
CRAVATH, SWAINE & MOORE
[New York Office]
(212) 474-1000
[ ], 2001
Asbury Automotive Group, Inc.
-----------------------------
Dear Ladies and Gentlemen:
We have acted as counsel for Asbury Automotive Group, Inc., a Delaware
corporation (the "Company"), in connection with the Registration Statement on
Form S-1 (No. 333-[ ]) (the "Registration Statement") filed by the Company with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933 (the "Securities Act"), of the offering and sale by the Company of
up to [ ] shares (the "Company Shares") of the Company's common stock, par value
$.01 per share ("Common Stock") and the offering and sale by the selling
stockholders listed in the Registration Statement (the "Selling Stockholders")
of up to [ ] shares of Common Stock sold pursuant to the terms of the
underwriting agreement to be executed by the Company, Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon Smith Barney Inc.
(the "Underwriters") (the "Underwriting Agreement").
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary or appropriate for the
purposes of our opinion, including: (a) the Certificate of Incorporation of the
Company; (b) the By-laws of the Company; and (c) certain resolutions adopted by
the Board of Directors of the Company.
Based on the foregoing and subject to the qualifications set forth
herein, we are of the opinion that:
2
1. The Company is a corporation validly existing and in good standing
under the laws of the State of Delaware; and
2. The Company Shares have been duly and validly authorized and when
issued and delivered by the Company and paid for by the Underwriters in
accordance with the terms of the Underwriting Agreement referred to in the
Registration Statement, will be validly issued, fully paid and nonassessable.
The opinion set forth in paragraph 2 is qualified to the extent we
have assumed the due execution and delivery of the Underwriting Agreement.
We are aware that we are referred to under the heading "Validity of
Shares" in the prospectus forming a part of the Registration Statement, and we
hereby consent to such use of our name therein and the filing of this opinion as
Exhibit 5 to the Registration Statement. In giving this consent, we do not
thereby admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act or the Rules and Regulations of
the Commission promulgated thereunder.
Very truly yours,
Cravath, Swaine & Moore
Ashbury Automotive Group, Inc.
Three Landmark Square
Suite 500
Stanford, CT 06901
EXHIBIT 10.1
ASBURY AUTOMOTIVE GROUP L.L.C.
OPTION PLAN
The purpose of the Asbury Automotive Group L.L.C. Option Plan (the
"Plan") is to provide designated officers and other key employees of Asbury
Automotive Group L.L.C., a Delaware limited liability company (the
"Company") and its subsidiaries with the opportunity to receive grants of
options to purchase equity interests in the Company. The Company believes
that the Plan will encourage the participants to contribute materially to
the growth of the Company, attract talented management personnel and align
the economic interests of the participants with those of the owners.
Capitalized terms used herein without definition shall have the meanings
assigned thereto in the Second Amended and Restated Limited Liability
Company Agreement of the Company, dated December 31, 1998, as amended from
time to time (the "LLC Agreement").
1. Administration
(a) Committee. The Plan shall be administered and interpreted by a
committee of (the "Board"); however, the Board itself may ratify or approve
any grants as the Board deems appropriate.
(b) Committee Authority. The Committee shall have the sole authority
to (i) determine the individuals to whom grants shall be made under the
Plan, (ii) determine the type, size and terms of the grants to be made to
each such individual, (iii) determine the time when the grants will be made
and the duration of any applicable exercise or restriction period,
including the criteria for exercisability and the acceleration of
exercisability, (iv) amend the terms of any previously issued grant, (v)
determine the initial Membership Account of any Membership Interest (as
defined below) issued pursuant to an Option and (vi) deal with any other
matters arising under the Plan.
(c) Committee Determination. The Committee shall have full power and
authority to administer and interpret the Plan, to make factual
determinations and to adopt or amend such rules, regulations, agreements
and instruments for implementing the Plan and for the conduct of its
business as it deems necessary or advisable, in its sole discretion. The
Committee's interpretations of the Plan and all determinations made by the
Committee pursuant to the powers vested in it hereunder shall be conclusive
and binding on all persons having any interest in the Plan or in any grants
awarded hereunder. All powers of the Committee shall be executed in its
sole discretion, in the best interest of the Company, not as a fiduciary,
and in keeping with the objectives of the Plan and need not be uniform as
to similarly situated individuals.
2. Grants
Awards under the Plan shall consist of grants (each, a "Grant") of
nonqualified options (the" Options"), as described in Section 5. All Grants
shall be subject to the terms and conditions set forth herein and to such
other terms and conditions consistent with this Plan as the Committee deems
appropriate and as are specified in writing by the Committee to the
individual in a grant instrument or an amendment to the grant instrument
(the "Grant Instrument"). The Committee shall approve the form and
provisions of each Grant Instrument. Grants need not be uniform as among
the Grantees (as defined below).
3. Membership Interests Subject to the Plan
(a) Nature of Options Granted. Each Option granted under the Plan
shall provide the Grantee solely the right to acquire a limited liability
company interest in the Company (a "Membership Interest") in exchange for a
dollar amount (the "Exercise Price") specified in such Option.
(b) Amendments and Adjustments. Notwithstanding anything herein to the
contrary, the Company or an Affiliate thereof or (ii) that the Company
desires to cause (x) a transfer of all or a substantial portion of (A) the
assets of the Company or (B) the equity interests in the Company to a stock
corporation or other business entity ("Newco"), (X) a merger or
consolidation of the Company into or with a Newco or (z) any restructuring
of all or substantially all of the assets or equity interests of the
Company into a Newco, in any case as part of a "roll-up" into a Newco of
all or at least a majority of the motor vehicle dealerships and related
businesses owned directly or indirectly by the Company and its Affiliates
(a "Roll-pp"), this Plan, all Grant Instruments, all Options and all
Membership Interests received upon exercise of an Option shall be amended
to provide for each Grantee or holder of such a Membership Interest
benefits comparable, in the sole discretion of the Committee, to the
benefits intended to be provided hereunder and each Grantee and holder of
such a Membership Interest shall take such steps to effect such transfer,
merger, consolidation or other restructuring as may be requested by the
Company, including, without limitation, consenting to the amendment of the
Plan, the relevant Grant Document and of the LLC Agreement, transferring or
tendering his or her Membership Interest to Newco in exchange or
consideration for shares of capital stock or other equity interests of
Newco, and re-transferring, tendering or exchanging such interests for
different interests.
4. Eligibility for Participation
(a) Eligible Persons. All officers and other key employees of the
Company and its Subsidiaries ("Employees") shall be eligible to participate
in the Plan.
(b) Selection of Grantees. The Committee shall select the Employees
who receive Grants under this Plan (the "Grantees").
2
5. Granting of Options
(a) Amount of Exercise Price. The Committee shall determine the
Exercise Price with respect to each Option at the time of grant which shall
not be less than the Fair Market Value (as defined below) of the Membership
Interest in respect of which the Option is granted. The Exercise Prices of
all Options issued under this Plan shall not, in the aggregate, exceed $2.0
million.
(b) Type of Option.
Grants shall be "nonqualified options" that are not intended to
satisfy the provisions of Section 422 of the Code and shall be made in
accordance with the terms and conditions set forth herein.
(c) Option Term. The Committee shall determine the term of each
Option. The term of any Option shall not exceed ten years from the date of
Grant.
(d) Exercisability of Options; Conditions. Options shall become
exercisable in the Committee and specified in the Grant Instrument. The
Committee may accelerate the ! exercisability of any or all outstanding
Options at any time for any reason. Unless the Committee provides otherwise
in the Grant Instrument, only Options that are vested may be exercised and
Options shall vest, subject to the continuous employment of the Grantee by
the Company, at the rate of 33 and 1/3% for each year the Grantee is
employed by, or rendering service to, the Company following the date of
Grant; provided that, no Option shall vest until the Grantee has been
employed by, or rendering service to, the Company for a period of one year
following the date of Grant. Notwithstanding any other provision herein,
the Board may accelerate the vesting or exercisability of any Option or all
Options, at any time and from time to time. On or before the date upon
which any Grantee will exercise any exercisable Option, such Grantee shall,
at the request of the Committee, execute the LLC Agreement, as amended to
reflect, inter alia, the qualifications set forth in Section 6 hereof, with
respect to the Membership Interest to be acquired by such Grantee upon
exercise of such Option.
(e) Termination of Employment, Disability or Death.
(i) Except as provided below, an Option may only be exercised while
the Grantee is employed by, or providing service to, the Company as an
Employee, consultant or member of the Board. In the event that a Grantee
ceases to be employed by, or provide service to, the Company for any reason
other than resignation (except resignation in connection with retirement)
or termination for Cause (as defined below), any Option which is otherwise
vested and exercisable by the Grantee shall terminate unless exercised
within 90 days after the date on which the Grantee ceases to be employed
by, or provide service to, the Company (or within such other period of time
as may be specified by the Committee), but in any event no later than the
date of expiration of the Option term. Except as otherwise provided by the
Committee, any of the
3
Grantee's Options that are not otherwise vested and exercisable as of
the date on which the Grantee ceases to be employed by, or provide service
to, the Company shall terminate as of such date.
(ii) In the event that the Grantee ceases to be employed by, or
provide service to, the Company on account of a resignation (except
resignation in connection with retirement) or a termination for Cause by
the Company, any Option held by the Grantee (whether or not then vested and
exercisable) shall terminate and be canceled as of the date the Grantee
ceases to be employed by, or provide service to, the Company. Except as
otherwise provided by the Committee, any of the Grantee's Options that are
not otherwise vested and exercisable as of the date on which the Grantee
ceases to be employed by, or provide service to, the Company shall
terminate as of such date.
(iii) For purposes of this Section 5(e) and Section 7:
(A) The term "Company" shall mean the Company and its Affiliates.
(B) "Employed by, or provide service to, the Company" shall mean
employment or service considered to have terminated employment or
service until the Grantee ceases to be an employee or consultant),
unless the Committee determines otherwise.
(C) "Cause" shall mean, except to the extent specified otherwise by
the Committee, a finding by the Committee that the Grantee (i) has
breached his or her employment or service contract with the Company,
(ii) has engaged in disloyalty to the Company, including, without
limitation, fraud, embezzlement, theft, commission of a felony or proven
dishonesty in the course of his or her employment or service, (iii) has
disclosed trade secrets or confidential information of the Company to
persons not entitled to receive such information or (iv) has engaged in
such other behavior detrimental to the interests of the Company as the
Committee determines.
(f) Exercise of Options. A Grantee may exercise an Option that has
become vested and exercisable, in whole or in part, by delivering a notice
of exercise to the Company with payment of the Exercise Price (plus the
amount of any withholding tax due at the time of exercise after the
application of Section 7 hereof) and (i) executing the LLC Agreement, as
amended to reflect, inter alia, the qualifications set forth in Section 6
hereof, thereby becoming a Member of the Company or (ii) taking such other
action as the Committee may approve. Upon exercise of an Option, such
Grantee shall have a Membership Account (and other economic rights) equal
to the Membership Account (and other economic rights) such Grantee would
have had if, on the date such Option was granted, the Grantee had made a
Capital Contribution to the Company in an amount equal to the Exercise
Price paid upon the exercise of such Option.
4
6. Rights and Obligations of Grantees Who Acquire Membership Interests
(a) In General. Subject to the other provisions of this Section 6, a
Grantee who acquires a Membership Interest upon the exercise of any Option
shall have the same rights and obligations under the LLC Agreement as
Gibson FP, provided that (i) such Grantee shall not have the rights and
obligations of Gibson FP relating to the Gibson FP Carried Interest Amount
and (ii) the consent of such Grantee to any amendment, supplement, waiver
or consent of or with regard to the LLC Agreement shall not be required so
long as such amendment, supplement, waiver or consent does not affect such
Grantee, in the sole discretion of the Committee, in any way differently
than it affects Gibson FP.
(b) Company's Right to Repurchase Membership Interests. In the event
that a Grantee terminates employment from, or ceases to render services to,
the Company, the Company shall have the right to purchase all Membership
Interests then owned by such Grantee, or such Grantee's successor, that
were acquired upon the exercise of an Option (which right or obligation may
be assigned to the members of the Company on a pro-rata basis among the
purchasing members, if any), at any time after such termination, but not
prior to the six-month anniversary of the date of such exercise, at a price
equal to the Fair Market Value of the defined in a Grant Instrument, as of
any date, the fair market value on such date of a Membership Interest as
determined in good faith by the Committee.
(c) If any transfer of all or any portion of an Option or Membership
Interest acquired upon the exercise of an Option, or of any beneficial
interest therein, upon default, foreclosure, forfeit, bankruptcy (voluntary
or involuntary), court order, levy of attachment, execution or otherwise
than voluntarily (an "Involuntary Transfer") or a transfer in violation of
this Plan, the applicable Grant Instrument or the LLC Agreement has
occurred and not been cured within 30 days after written notice has been
given to the person transferring such Option or Membership Interest (the
"Transferor") or to the person to whom or to which such Option or
Membership Interest is transferred (the "Transferee"), the Company shall
have the right, in the case of an Option, to terminate such Option without
consideration, or, in the case of a Membership Interest, to purchase all of
such Membership Interest at a purchase price equal to the Fair Market Value
thereof as of the date of such event. The closing date of any purchase
described in this Section 6(c) shall be on the 30th day after a
determination of the Fair Market Value of the Membership Interest to be
purchased is made.
7. Withholding of Taxes. Each Grant (and each issuance of a Membership
Interest pursuant to the exercise of any Option) shall be subject to
applicable federal (including FICA), state and local tax withholding
requirements. The Company shall have the right to deduct from other wages
paid to the Grantee any federal, state or local taxes required by law to be
withheld with respect to such Grants, or the exercise thereof, or require
that the Grantee or other person receiving or exercising Grants pay to the
Company the amount of any federal, state or local taxes that the Company is
required to withhold with respect to such Grants or exercise and the
Company may defer issuance of the Membership Interest until such
requirements are satisfied.
5
8. Nontransferability of Grants
Except as provided below, only the Grantee may exercise rights under a
Grant during the Grantee's lifetime. A Grantee may not transfer those
rights except by will or by the laws of descent and distribution. When a
Grantee dies, the personal representative or other person entitled to
succeed to the rights of the Grantee ("Successor Grantee") may exercise
such rights. A Successor Grantee must furnish proof satisfactory to the
Company of his or her right to receive the Grant under the Grantee's will
or under the applicable laws of descent and distribution.
9. Requirements for Issuance of Membership Interest
No Membership Interest shall be issued in connection with any Grant
hereunder unless and until (i) if the Company so requests, the Grantee
executes the LLC Agreement, as amended to reflect, inter alia, the
qualifications set forth in Section 6 hereof, thereby becomes a Member of
the Company and (ii) all legal requirements applicable to the issuance of
such Membership Interest have been complied with to the satisfaction of the
Committee. The Committee shall have the right to condition any Grant made
to any Grantee hereunder on such Grantee's undertaking in writing to comply
with such restrictions on his or her subsequent disposition of
certificates, if any, representing such Membership Interest may be legended
to reflect any such restrictions.
10. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred
if Ripplewood Holdings L.L.C., or its affiliates, cease to control the
Company or its business.
(a) Notice and Acceleration. Upon a Change of Control, (i) the Company
shall provide each Grantee with outstanding Grants written notice of such
Change of Control and (ii) all outstanding Options shall automatically
accelerate and become fully exercisable unless otherwise determined by the
Committee.
(b) Assumption of Grants. Upon a Change of Control where the Company
is not the surviving entity (or survives only as a subsidiary of another
entity), unless the Committee determines otherwise, all outstanding Options
that are not exercised shall be assumed by, or replaced with comparable
options or rights by, the surviving entity, and other outstanding Grants
shall be converted to similar grants of the surviving entity.
11. Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at any time.
6
(b) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date, unless
the Plan is terminated earlier by the Board or is extended by the Board.
(c) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant is made shall not
materially impair the rights of a Grantee unless the Grantee consents. The
termination of the Plan shall not impair the power and authority of the
Committee with respect to an outstanding Grant. Whether or not the Plan has
terminated, an outstanding Grant may be terminated or amended (i) by the
Company as provided hereunder or (ii) by agreement of the Company and the
Grantee consistent with the Plan.
(d) Governing Document. This Plan shall be the controlling document.
No other statements, representations, explanatory materials or examples,
oral or written, may amend this Plan in any manner, except for termination
or amendment pursuant to Section 11 (c) hereof. This Plan shall be binding
upon and enforceable against the Company and its successors and assigns.
12. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the payment of any Grants under this Plan. In no event
shall interest be paid or accrued on any Grant, including unpaid
installments of Grants.
13. Rights of Participants
Nothing in this Plan shall entitle any Employee or other person to any
claim or right to be granted a Grant under this Plan. Neither this Plan nor
any action taken hereunder shall be construed as giving any individual any
rights to be retained by or in the employ of the Company or any other
employment rights.
14. Headings
Section headings are for reference only. In the event of a conflict
between a heading and the content of a Section, the content of the Section
shall control.
15. Effective Date of the Plan.
Subject to approval by the Company's members, the Plan shall be
effective as of January 1, 1999.
7
16. Miscellaneous
(a) Compliance with Law. The Plan, the exercise of Options and the
obligations of the Company to issue Membership Interests under Grants shall
be subject to all applicable laws and to approvals by any governmental or
regulatory agency as may be required, including national or foreign
securities exchanges. The Committee may revoke any Grant if it is contrary
to law, including the federal securities laws and any applicable state or
foreign securities laws or modify a Grant to bring it into compliance with
any valid and mandatory government regulation. The Committee may also adopt
rules regarding the withholding of taxes on payments to Grantees. The
Committee may, in its sole discretion, agree to limit its authority under
this Section.
(b) GOVERNING LAW. THE VALIDITY, CONSTRUCTION, INTERPRETATION AND
EFFECT OF THE PLAN AND GRANT INSTRUMENTS ISSUED UNDER THE PLAN SHALL BE
GOVERNED AND CONSTRUED BY AND DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
THEREOF.
(c) Indemnification. Each person who is or shall have been a member of
the Board or the Committee shall be indemnified and held harmless by the
Company to the fullest extent permitted by law against and from any loss,
cost, liability or expense (including any related attorney's fees and advances
thereof) in connection with, based upon or arising or resulting from any
claim, action, suit or proceeding to which such person may be made a party or
in which such person may be involved by reason of any action taken or failure
to act under or in connection with the Plan or any Grant Instrument and from
and against any and all amounts paid by such person in settlement thereof,
with the Company's approval, or paid by such person in satisfaction of any
judgment in any such action, suit or proceeding against such person, provided
that he or she shall give the Company an opportunity, at its own expense, to
handle and defend the same before he or she undertakes to handle and defend it
on his or her own behalf. The foregoing right of indemnification shall not be
exclusive and shall be independent of any other rights of indemnification to
which such persons may be entitled under the LLC Agreement, by contract, as a
matter of law or otherwise.
(d) No Limitation on Compensation . Nothing in the Plan shall be
construed to limit the right of the Company to establish other plans or to
pay compensation to its employees in cash or property, in a manner which is
not expressly authorized under the Plan.
(e) No Impact on Benefits. Options granted under the Plan are not
compensation for purposes of calculating an employee's rights under any
employee benefit plan, except to the extent provided in any such plan.
8
(f) Freedom of Action. Subject to Section 11, nothing in the Plan or
any Grant Instrument shall be construed as limiting or preventing the
Company or any of its Affiliates from taking any action with respect to the
operation or conduct of its or their business that it deems appropriate or
in its best interest.
(g) No Right to Particular Assets. Nothing contained in this Plan and
no action taken pursuant to this Plan shall create or be construed to
create a trust of any kind or any fiduciary relationship between the
Company and its Affiliates, on the one hand, and any Grantee or executor,
administrator or other personal representative or designated beneficiary of
such Grantee, on the other hand, or any other persons. Any reserves that
may be established by the Company or its Affiliates in connection with this
Plan shall continue to be held as part of the general funds of the Company
or such Affiliate, and no individual or entity other than the Company or
such Affiliate shall have any interest in such funds until paid to a
Grantee. To the extent that any Grantee or such Grantee's executor,
administrator or other personal representative, as the case may be,
acquires a right to receive any payment from the Company or any of its
Affiliates pursuant to this Plan, such right shall be no greater than the
right of an unsecured general creditor of the Company or such Affiliate.
(h) Notices. Each Grantee shall be responsible for furnishing the
Committee with his or her current and proper address for the mailing of
notices and delivery of agreements. Any notices required or permitted to be
given shall be deemed given if directed to the person to whom addressed at
such address and mailed by regular United States mail, first-class and
prepaid. If any item mailed to such address is returned as undeliverable to
the addressee, mailing will be suspended until the Grantee furnishes the
proper address.
(i) Severability of Provisions . If any provision of this Plan shall
be held invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provisions hereof, and this Plan shall be construed
and enforced as if such provision had not been included.
(j) Incapacity . Any benefit payable to or for the benefit of a minor,
an incompetent person or other person incapable of receiving such benefit
shall be deemed paid when paid to such person's guardian or to the party
providing or reasonably appearing to provide for the care of such person,
and such payment shall fully discharge the Board, the Committee, the
Company, its Affiliates and other parties with respect thereto.
9
EXECUTION COPY
Exhibit 10.4
================================================================================
THIRD AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
ASBURY AUTOMOTIVE GROUP L.L.C.
(Formerly known as Asbury Automotive
Oregon L.L.C.)
--------------------
Dated as of February 1, 2000
--------------------
================================================================================
TABLE OF CONTENTS
ARTICLE I
Definitions and Usage
---------------------
SECTION 1.01. Defined Terms..................................................2
SECTION 1.02. Other Definition Provisions...................................10
ARTICLE II
Formation and Business of the Company
-------------------------------------
SECTION 2.01. Admission of New Members; Formation and Continuation..........11
SECTION 2.02. Company Name..................................................11
SECTION 2.03. Purpose and Powers............................................11
SECTION 2.04. Registered Agent and Office; Other Offices....................12
SECTION 2.05. Principal Place of Business...................................12
SECTION 2.06. Authorized Persons............................................12
SECTION 2.07. Representations and Warranties................................13
SECTION 2.08. Effectiveness.................................................13
ARTICLE III
Management of the Company
-------------------------
SECTION 3.01. Board of Directors............................................14
SECTION 3.02. Powers and Procedures of the Board of Directors...............14
SECTION 3.03. Actions Requiring Board Approval; Day-to-Day Authority
of the President and Chief Executive Officer;
Ratified Actions.........................................16
SECTION 3.04. Officers......................................................17
SECTION 3.05. Reliance on Certificates......................................19
ARTICLE IV
Capital Accounts; Additional Capital
Contributions; Withdrawal of Capital;
Percentage Interest Adjustment
------------------------------
SECTION 4.01. Capital Accounts..............................................20
SECTION 4.02. Additional Capital Contributions..............................21
SECTION 4.03. Withdrawal of Capital; Limitation on
Distributions; Resignation...............................23
SECTION 4.04. Percentage Interest Adjustment................................23
SECTION 4.05. Statements of Percentage Interest.............................24
SECTION 4.06. Issuance of Additional Interests..............................25
SECTION 4.07. Determination of Book Value of Company Assets.................26
ARTICLE V
Allocations
-----------
SECTION 5.01. Allocation of Net Profits and
Net Losses...............................................26
SECTION 5.02. Code Section 704(b) Allocations...............................27
SECTION 5.03. Tax Allocations...............................................28
SECTION 5.04. Partial Year Allocations......................................29
ARTICLE VI
Distributions
-------------
SECTION 6.01. Distributions..................................................29
SECTION 6.02. Repayment of Funds.............................................31
SECTION 6.03. Withholding....................................................31
ARTICLE VII
Transfers of Interests; Tag-Along/
Drag-Along Rights; Purchase of Interests
Upon Termination of Employment;
Options to Purchase Interests
-----------------------------
SECTION 7.01. Transfers of Interests in the Company.........................32
SECTION 7.02. Tag-Along Rights..............................................37
SECTION 7.03. Drag-Along Rights.............................................37
SECTION 7.04. Purchase of Interests Upon Termination of Employment..........38
SECTION 7.05. Options to Purchase Interests.................................42
SECTION 7.06. Fair Market Value.............................................42
SECTION 7.07. Estate Taxes..................................................44
ARTICLE VIII
Initial Public Offering
-----------------------
SECTION 8.01. AAH's Right to Cause an IPO...................................45
SECTION 8.02. Exchange of Interests.........................................46
SECTION 8.03. Shareholders Agreement........................................47
SECTION 8.04. Other Conversion to a Newco...................................47
SECTION 8.05. Power of Attorney and Proxy...................................47
ARTICLE IX
Certificates, Etc.
------------------
SECTION 9.01. Right to Issue Certificates...................................48
SECTION 9.02. Form of Certificates .........................................48
-ii-
SECTION 9.03. Register......................................................48
SECTION 9.04. Issuance......................................................48
SECTION 9.05. Transfer......................................................49
SECTION 9.06. Record Holder.................................................49
SECTION 9.07. Lost, Destroyed or Mutilate Certificates......................49
ARTICLE X
Accounting and Tax Matters;
Transactions with Members
-------------------------
SECTION 10.01. Fiscal Year..................................................49
SECTION 10.02. Books and Records and Capital Accounts.......................49
SECTION 10.03. Bank Accounts................................................50
SECTION 10.04. Auditors.....................................................50
SECTION 10.05. Tax Matters..................................................50
SECTION 10.06. Business Transactions of a Member with
the Company..............................................51
SECTION 10.07. Liability to Third Parties; Capital
Account Deficits.........................................51
ARTICLE XI
Indemnification of Officers,
Directors and Other Authorized Representatives
----------------------------------------------
SECTION 11.01. Scope of Indemnification.....................................52
SECTION 11.02. Advancing Expenses...........................................53
SECTION 11.03. Securing of Indemnification Obligations......................53
SECTION 11.04. Scope of Article.............................................54
SECTION 11.05. Assumption by Newco..........................................54
ARTICLE XII
Dissolution and Winding-Up
--------------------------
SECTION 12.01. Dissolution..................................................54
SECTION 12.02. Winding-Up Affairs and Distribution of Assets................54
ARTICLE XIII
Miscellaneous Provisions
------------------------
SECTION 13.01. Entire Agreement.............................................55
SECTION 13.02. Amendments and Modifications.................................55
SECTION 13.03. Severability.................................................56
SECTION 13.04. GOVERNING LAW................................................56
SECTION 13.05. No Waiver of Rights..........................................56
SECTION 13.06. SUBMISSION TO JURISDICTION...................................56
-iii-
SECTION 13.07. Specific Performance.........................................57
SECTION 13.08. Counterparts.................................................57
SECTION 13.09. Headings.....................................................57
SECTION 13.10. Binding Agreement .........................................57
SECTION 13.11. Notices......................................................57
SECTION 13.12. Waiver of Partition; Classes or Group of Members.............58
SECTION 13.13. Proxy........................................................58
SCHEDULES
Schedule I Current Members of the Company
Schedule II Members of the Company, Initial Capital
Accounts and Percentage Interests Upon
Effectiveness of Third Amended and
Restated Limited Liability Company
Agreement
Schedule III Percentage Interest Adjustment Formula
Schedule IV Options to Purchase Interests
Schedule V Dealer Principals
Schedule VI Names of Acceptable Designees as Dealer
Directors
EXHIBITS
Exhibit A Form of Shareholders Agreement
-iv-
THIRD AMENDED AND RESTATED LIMITED
LIABILITY COMPANY AGREEMENT, dated as of February
1, 2000, of ASBURY AUTOMOTIVE GROUP L.L.C., a
Delaware limited liability company (the "Company").
Capitalized terms used herein have their respective
meanings as set forth in Section 1.01.
WHEREAS, Asbury Villanova IV L.L.C., a Delaware limited liability
company, caused the Company to be formed under the Delaware Limited Liability
Company Act (6 Del. C. ss. 18-101, et seq., as amended from time to time (the
"Act")) by filing with the Secretary of State of the State of Delaware (the
"Secretary of State") on May 15, 1998, the certificate of formation of the
Company (the "Certificate of Formation") and by entering into the original
limited liability company agreement, dated as of May 15, 1998, of the Company,
which agreement was amended and restated in its entirety pursuant to the First
Amended and Restated Limited Liability Company Agreement dated as of December 4,
1998, and the Second Amended and Restated Limited Liability Company Agreement
dated as of March 18, 1999 (the "Prior LLC Agreement");
WHEREAS, in order to consummate the transactions (collectively, the
"Roll-Up Transaction") contemplated by the Transfer and Exchange Agreement dated
as of February 1, 2000 (the "Transfer and Exchange Agreement"), by and among the
Company, Asbury Automotive Holdings L.L.C., a Delaware limited liability company
(formerly known as Asbury Automotive Group L.L.C., "AAH"), the individuals and
entities listed on Schedule I thereto (collectively, the "Dealers") and the
individuals and entities listed on Schedule II thereto (collectively, the
"Managers"), the Current Members desire to admit AAH, each Dealer that is not a
Current Member (collectively, the "Non-Asbury Oregon Dealers") and each Manager
as a Member of the Company and to amend and restate in its entirety the Prior
LLC Agreement with respect to the conduct of the affairs of the Company and the
Members' respective rights and obligations with regard to their Interests in the
Company;
WHEREAS, AAH, the Dealers and the Managers have entered into the
Transfer and Exchange Agreement and the Escrow Agreement (as defined in the
Transfer and Exchange Agreement) and desire to give full economic effect to the
transactions contemplated thereby, including the Roll-Up Transaction, as of
February 1, 2000 (the "Roll-Up Date"), subject to the occurrence of the Escrow
Release (as defined in the Transfer and Exchange Agreement);
2
WHEREAS, the parties are entering into the Roll-Up Transaction for the
purpose, among others, of enhancing the Platform Groups' ability to obtain
financing and make purchases on more attractive terms; and
WHEREAS, the name of the Company as reflected in the Certificate of
Formation is "Asbury Automotive Oregon L.L.C." and, in connection with the
Roll-Up Transaction, the Members of the Company desire to change the name of the
Company to "Asbury Automotive Group L.L.C." by filing a certificate of amendment
to the Certificate of Formation with the Secretary of State (the "Certificate of
Amendment").
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereby agree as follows:
ARTICLE I
Definitions and Usage
---------------------
SECTION 1.01. Defined Terms. The following terms as used in this
Agreement shall have the following meanings:
"AAH" has the meaning set forth in the second recital to this
Agreement.
"AAH LLC Agreement" means the Second Amended and Restated Limited
Liability Company Agreement, dated as of December 31, 1998, of AAH.
"Act" has the meaning set forth in the first recital to this
Agreement.
"Additional Offer" has the meaning set forth in Section 4.02.
"Affiliate" means, with respect to any person, any other person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person. For purposes
of this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such person, whether
through the ownership of voting
3
securities, by contract or credit arrangement, as trustee or
executor, or otherwise.
"Agreement" means this Agreement, as amended or supplemented from time
to time.
"Bankruptcy" means, with respect to any Member, any event that causes
such Member to cease to be a member of the Company as provided in ss. 18-304 of
the Act.
"Board of Directors" means the managing body of the Company described
in Article III.
"Book Value" has the meaning set forth in Section 4.07.
"Business Day" means any day, other than a Saturday or Sunday, on
which banks located in New York City are not required or authorized by law to
remain closed.
"Callable Interest" has the meaning set forth in Section 7.04(a).
"Capital Account" has the meaning set forth in Section 4.01.
"Capital Contribution" means a contribution by a Member to the capital
of the Company pursuant to this Agreement.
"Carried Interests" means the economic interests of the Managers
represented by their entitlement to distributions pursuant to Section
6.01(b)(ii)(B).
"Certificate of Amendment" has the meaning set forth in the fifth
recital to this Agreement.
"Certificate of Formation" has the meaning set forth in the first
recital to this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preamble to this Agreement.
"Current Member" means each person who is a Member of the Company
immediately prior to the effectiveness of this Agreement, which persons are
listed on Schedule I.
4
"Dealer Director" means a Director designated by the Dealer Members.
"Dealer Members" means (i) all persons that are Members of the Company
on the date of this Agreement, other than AAH and the Managers, (ii) any person
that is issued new Interests and admitted as a new Member pursuant to Section
4.06(a) other than a Third Party Investor and (iii) any Member that is a
Transferee of a Member described in clause (i) or (ii), other than AAH, any
Affiliate of AAH, the Managers, any senior management employee of the Company or
any Third Party Investor.
"Dealers" has the meaning set forth in the second recital to this
Agreement.
"DGCL" means the General Corporation Law of the State of Delaware (8
Del. C.ss. 101, et seq.), as amended from time to time and any successor statute
thereto.
"Director" has the meaning set forth in Section 3.01(a).
"Drag-Along Notice" has the meaning set forth in Section 7.03.
"Fair Market Value" means the fair market value of an Interest,
determined in accordance with Section 7.06.
"Financing Document" has the meaning set forth in Section 7.04(b)(i).
"Fiscal Year" has the meaning set forth in Section 10.01.
"Gibson FP" means the Gibson Family Partnership, L.P., a Delaware
limited partnership.
"Gibson Percentage" means 2.89%.
"Initial Offer" has the meaning set forth in Section 4.02.
"Interest" means a Member's limited liability company interest in the
Company and such Member's rights and obligations with respect to the Company
pursuant to this Agreement and applicable law.
"Involuntary Transfer" means any Transfer by any Member of Interests,
or of any beneficial interest therein, upon default, foreclosure, forfeit,
bankruptcy (voluntary or
5
involuntary), court order, levy of attachment, execution, in connection with
divorce or separation proceedings or otherwise than voluntarily by the
Transferor; provided, however, that a Transfer required pursuant to Section
7.03 shall not be deemed an Involuntary Transfer and provided further,
however, that with respect to a Member that is a natural person, any Transfer
upon the death of such Member shall not be deemed an Involuntary Transfer.
"IPO" has the meaning set forth in Section 8.01.
"IPO Value Distribution Interest" means, with respect to any Member as
of the time of an exchange described in Section 8.02, the percentage described
by:
(A) the amount that hypothetically would be distributable to such
Member pursuant to Section 6.01(b) if the Company were to distribute
an amount of cash equal to the product of (i) the per share price of
the Newco common stock in the IPO and (ii) the number of shares of
Newco outstanding immediately prior to the IPO;
divided by
(B) the product of (i) and (ii) in clause (A) above.
"Kendrick" means Brian Kendrick, an individual.
"Kendrick Percentage" means 1.15%, subject to the vesting of the
Kendrick Percentage pursuant to Section 9 of the Agreement dated February 1,
2000, between the Company and Kendrick.
"Liquidating Member" has the meaning set forth in Section 12.02(a).
"Look-Back Threshold" has the meaning set forth in Section
7.04(c)(i)(C).
"Majority in Interest" means, with respect to any group of Members,
the Members who, at the time in question, have Percentage Interests aggregating
more than 50% of all Percentage Interests of such group.
"Management Employee" means any employee of the Company or any
subsidiary of the Company who owns an Interest, whether directly or indirectly,
in the Company.
6
"Managers" has the meaning set forth in the second recital to this
Agreement.
"Member" means any person or persons who, from time to time, shall
have acquired an Interest pursuant to and in compliance with the terms of this
Agreement and who shall have been admitted as a Member in accordance with this
Agreement, and shall not have ceased to be a Member under the terms of this
Agreement or any applicable laws.
"Member Nonrecourse Debt" means "partner nonrecourse debt" as defined
in ss. 1.704-2(b)(4) of the Treasury Regulations.
"Merger Conversion" has the meaning set forth in Section 8.04.
"MG Capital Account" of any Member as of the end of any Fiscal Year
(or portion thereof), means such Member's Capital Account balance (whether
positive or negative) as of the end of such Fiscal Year (or portion thereof)
(after all distributions with respect to such year other than any liquidating
distributions, but before any allocations of tax items for such year), increased
by such Member's share of any Minimum Gain of the Company as of the end of such
Fiscal Year (or portion thereof).
"Minimum Gain" has the meaning prescribed by Treasury Regulation
ss.ss. 1.704-2(d) and 1.704-2(i)(3).
"Net Profits" and "Net Losses" means, with respect to any Fiscal Year
(or portion thereof), the net income and net loss of the Company for such Fiscal
Year (or portion thereof) as determined in accordance with the accounting
methods followed by the Company for Federal income tax purposes, including as
income any income that is exempt from tax and described in Section 705(a)(1)(B)
of the Code, treating as deductions items of expenditure described in Section
705(a)(2)(B) of the Code and treating as an item of gain (or loss) the excess
(deficit), if any, of the fair market value of property distributed in such
period over (under) such property's Book Value. Depreciation, depletion,
amortization, income and gain (or loss) with respect to the Company assets shall
be computed with reference to their initial Book Value, as adjusted pursuant to
this Agreement in accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(g).
"Newco" has the meaning set forth in Section 8.01.
7
"Non-Asbury Oregon Dealers" has the meaning set forth in the second
recital to this Agreement.
"Nonrecourse Deductions" has the meaning set forth in ss.
1.704-2(b)(1) of the Treasury Regulations and shall be determined in accordance
with ss. 1.704-2(c) of the Treasury Regulations.
"Offer Date" has the meaning set forth in Section 7.01(c)(iii)(D).
"Option Period" has the meaning set forth in Section 7.04(a)(i).
"Percentage Interest" means, with respect to any Member at any time,
the percentage set forth opposite such Member's name on Schedule II hereto under
the heading "Percentage Interest", as such Schedule may be amended by the Board
of Directors from time to time to reflect (i) any adjustments in Percentage
Interests made pursuant to Section 4.04, (ii) any additional Capital
Contributions made pursuant to Section 4.02 unless made by each Member in
proportion to its Percentage Interest, (iii) any repurchase of Interests by the
Company pursuant to Section 7.04 (or otherwise), (iv) the exercise of any option
to purchase Interests pursuant to Section 7.05, (v) any issuance of new
Interests pursuant to Section 4.02(a) or Section 4.06 or (vi) the Transfer of
any Interest, or portion thereof, in accordance with the provisions of this
Agreement if the Transferee of such Interest (or portion thereof) is admitted as
a Member in accordance with Section 7.01(a)(iii).
"Permitted Transferee" means, (i) with respect to AAH, an Affiliate of
AAH, (ii) with respect to a natural person, any (A) corporation, partnership,
limited liability company or other entity controlled solely by such natural
person solely for the benefit of such natural person, his or her spouse, his or
her parents, members of his or her immediate family, or his or her lineal
descendants or ancestors and (B) any trust revocable solely by such natural
person during his lifetime or any irrevocable trust, in either case solely for
the benefit of such natural person, his or her spouse, his or her parents,
members of his or her immediate family, his or her lineal descendants or
ancestors or charity, provided such trust is controlled solely by such natural
person, (iii) with respect to a Dealer that is not a natural person, the natural
person listed on Schedule V that ultimately controls such Dealer or one or more
corporations, partnerships, limited liability companies or other entities each
of which (A) is controlled solely by such Dealer or the natural person listed on
Schedule V that ultimately controls
8
such Dealer and (B) wholly owns such Dealer or is wholly owned by such Dealer
or direct or indirect shareholders, members or partners of such Dealer,
provided that in the case of each Transfer pursuant to this clause (iii) the
natural persons that are the ultimate beneficial owners of the Interest owned
by such Dealer prior to such Transfer also are the ultimate beneficial owners,
in the same proportion of ownership, of such Interest following such Transfer
(except to the extent that the Transfer of a natural person's beneficial
ownership in such Interest is permitted by the foregoing clause (ii)) and (iv)
with respect to a Dealer or a natural person that beneficially owns an
interest in a Dealer, to a Dealer listed on (or controlled by an individual
listed on) Schedule V in an arm's-length transaction provided that (A) if the
transferring Dealer or such natural person is (or is controlled directly or
indirectly by) an individual that is an employee of the Company or of an
Affiliate of the Company, such individual first ceases to be employed by the
Company and/or such Affiliate of the Company and (B) such Dealer transfers its
entire Interest to such other Dealer.
"person" means any individual, corporation, partnership, trust,
association, limited liability company, joint venture, joint-stock company or
any other entity or organization, including a government or governmental agency.
"Platform Groups" means (i) Asbury Automotive Arkansas L.L.C., a
Delaware limited liability company, (ii) Asbury Automotive Atlanta L.L.C., a
Delaware limited liability company, (iii) Asbury Automotive Jacksonville, L.P.,
a Delaware limited partnership, (iv) Asbury Automotive North Carolina L.L.C., a
Delaware limited liability company, Asbury Automotive North Carolina Real Estate
Holdings L.L.C., a Delaware limited liability company, and Camco Finance L.L.C.,
a Delaware limited liability company, (v) Asbury Automotive St. Louis, L.L.C., a
Delaware limited liability company, Asbury Automotive St. Louis Gen. L.L.C., a
Delaware limited liability company, and Asbury Automotive St. Louis LR L.L.C., a
Delaware limited liability company, (vi) Asbury Automotive Tampa, L.P., a
Delaware limited partnership, (vii) Asbury Automotive Texas L.L.C., a Delaware
limited liability company and (viii) (A) prior to the consummation of the
transactions contemplated by this Agreement and the Transfer and Exchange
Agreement, the Company and (B) after the consummation of such transactions, the
subsidiary, division or operating unit of the Company comprising the business
operations conducted by the Company prior to the consummation of such
transactions.
9
"Prime Rate" means, at any time, an annual rate of interest equal to
the prime rate announced by Citibank N.A. in New York, New York at such time.
"Prior LLC Agreement" has the meaning set forth in the first recital
to this Agreement.
"Residual Percentage" means 100%, less the Gibson Percentage and the
Kendrick Percentage.
"Return Target" means cumulative distributions to Members pursuant to
Section 6.01(b)(i) in an amount equal to $376,291,000 plus an 8% per annum
cumulative, compounded return thereon.
"Roll-Up Date" has the meaning set forth in the third recital of this
Agreement.
"Roll-Up Transaction" has the meaning set forth in the second recital
to this Agreement.
"Scheduled Closing Date" has the meaning set forth in Section
7.01(c)(iii)(E).
"Secretary of State" has the meaning set forth in the first recital to
this Agreement.
"Securities Act" means the Securities Act of 1933 and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
"Shareholders Agreement" has the meaning set forth in Section 8.01.
"Tag-Along Notice" has the meaning set forth in Section 7.02.
"Target Amount" means, with respect to any Member as of the end of any
Fiscal Year (or portion thereof), the amount that hypothetically would be
distributable to such Member as of the end of such year if the Company were to
(i) sell each of its noncash assets on hand as of the end of such year for an
amount of cash equal to its adjusted Book Value in such asset (as determined
under the principles for the computation of Net Profits and Net Losses), (ii)
pay off all liabilities of the Company and (iii) liquidate, distributing the
proceeds from such sale and all its other assets pursuant to Section 6.01(b)
(taking into account any distributions previously made with respect to such
year); provided, however, that (1) for purposes of computing the aggregate
hypothetical distribution described in clause
10
(iii) above the cash assets of the Company shall be deemed to be increased by
the aggregate amount of distributions to Members pursuant to Section
6.01(c)(iv)(A) and shall be deemed to be decreased by the aggregate amount of
gain specially allocated to Members pursuant to Section 5.02(b)(i); and (2)
the Target Amount for any Member that receives any distribution pursuant to
Section 6.01(c)(iv) shall be decreased by the amount of such distribution and
increased by the amount of any gain specially allocated to such Member
pursuant to Section 5.02(b).
"Tax Return" refers to any report, return, information return or other
information required to be supplied to a taxing authority in connection with
Taxes.
"Tax Matters Partner" has the meaning set forth in Section 10.05(d).
"Taxes" refers to all Federal, state, local and foreign taxes,
charges, fees, levies, imposts, duties or other assessments of any kind
whatsoever, imposed or required to be withheld by any Federal, state, local,
foreign, or other governmental authority, including any interest, penalties or
additions thereto, whether disputed or not.
"Third Party Investor" has the meaning set forth in Section 4.06(a).
"Third Party Purchaser" means, with respect to any proposed sale of an
Interest (or portion thereof) by a Member, a person, other than an Affiliate of
such Member, who offers to purchase from such Member such Interest (or such
portion) pursuant to a bona fide, arm's-length written offer.
"Transfer and Exchange Agreement" has the meaning set forth in the
second recital to this Agreement.
"Transfer" means any direct or indirect transfer, sale, conveyance,
assignment, gift, hypothecation, pledge or other disposition, whether voluntary
or by operation of law, of an Interest.
"Transferee" means the transferee of a Transfer.
"Transferor" means the transferor of a Transfer.
"Treasury Regulations" means the Federal income tax regulations
promulgated by the United States Department of the Treasury interpreting the
provisions of the Code.
11
SECTION 1.02. Other Definition Provisions. Wherever required by the
context of this Agreement, the singular shall include the plural, and vice
versa, and the masculine gender shall include the feminine and neuter genders,
and vice versa, and references to any agreement, document or instrument shall be
deemed to refer to such agreement, document or instrument as amended,
supplemented or modified from time to time. When used herein, the words
"including", "includes", "included" and "include" are deemed to be followed by
the words "without limitation".
ARTICLE II
Formation and Business of the Company
-------------------------------------
SECTION 2.01. Admission of New Members; Formation and Continuation.
The Current Members hereby admit AAH, each Non-Asbury Oregon Dealer and each
Manager as a Member of the Company and, together with AAH, each Non-Asbury
Oregon Dealer and each Manager, hereby amend and restate the Prior LLC Agreement
in its entirety and enter into this Agreement. Each of the Current Members
(other than Asbury Villanova IV L.L.C., which, having obtained the requisite
consent of the Board of Directors pursuant to Section 4.2 of the Prior LLC
Agreement, is withdrawing from the Company effective upon the effectiveness of
this Agreement and agrees that it is entitled to no distribution from the
Company in respect of such withdrawal) shall continue to be a Member of the
Company. Without the need for the consent of any person, upon the effectiveness
of this Agreement, the Members of the Company shall be those persons listed on
Schedule II and their respective initial Capital Accounts and Percentage
Interests shall be as set forth on Schedule II. The Members hereby ratify the
formation of the Company as a limited liability company under the Act and agree
that the rights, duties and liabilities of the Members of the Company shall be
as provided in the Act, except as otherwise provided herein.
SECTION 2.02. Company Name. The name of the Company as reflected in
the Certificate of Formation is "Asbury Automotive Oregon L.L.C.". Upon the
filing of the Certificate of Amendment with the Secretary of State (which the
Board of Directors shall promptly cause to occur), the name of the Company shall
be "Asbury Automotive Group L.L.C.".
SECTION 2.03. Purpose and Powers. (a) The Company has been formed for
the object and purpose of, and the nature of the business to be conducted by the
Company
12
is, engaging in any lawful act or activity for which limited liability
companies may be formed under the Act, and engaging in any and all activities
necessary or incidental to the foregoing. The Company shall possess and may
exercise all the powers and privileges granted by the Act or by any other law,
together with any powers incidental thereto, that are necessary or convenient
to the conduct, promotion or attainment of the business, purposes or
activities of the Company. The Company shall be deemed to have for all
purposes, without limitation, any and all of the powers that may be exercised
on behalf of the Company by the persons so authorized pursuant to this
Agreement.
(b) Without limiting the powers and privileges possessed by the
Company as described in paragraph (a) of this Section 2.03, the Company is
authorized to engage in the business of evaluating, acquiring, owning, managing,
operating, financing and disposing of retail automobile and truck dealerships
and of businesses related thereto.
SECTION 2.04. Registered Agent and Office; Other Offices. The
registered agent for service of process is, and the mailing address for the
registered office of the Company in the State of Delaware is in care of, The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801. The Company shall also maintain
such registered agents and registered offices as may be required under
applicable law in the State of Oregon and in any other jurisdictions in which
the Company conducts business. The Company may also have offices at such other
places within or without the State of Delaware as the Board of Directors may
from time to time designate or the business of the Company may require.
SECTION 2.05. Principal Place of Business. The principal place of
business of the Company shall be located at 1050 Westlakes Drive, Suite 300,
Berwyn, PA 19312. At any time, the Company may change the location of the
Company's principal place of business; provided, however, that prompt notice of
any such change shall be given to each Member.
SECTION 2.06. Authorized Persons. Each officer of the Company (and any
agent as may from time to time be designated by any officer of the Company for
such purpose) is hereby designated as an authorized person, within the meaning
of the Act, to act individually or collectively solely in connection with
executing, delivering and causing to be filed the Certificate of Amendment (and,
when approved by the Board of Directors, any other amendments to, and/or
13
restatements of, the Certificate of Formation adopted in accordance with the
terms hereof) and, when approved by the Board of Directors, any other
certificates (and any amendments and/or restatements thereof) necessary for
the Company to qualify to do business in any jurisdiction in which the Company
may wish to conduct business. The execution and filing of the Certificate of
Formation with the Secretary of State by Marc A. Kushner on or about May 15,
1998 is hereby specifically ratified, adopted and confirmed.
SECTION 2.07. Representations and Warranties. (a) Entities. Each
Member that is a corporation, partnership, limited liability company, trust or
other entity represents and warrants to the Company and to each other Member
that (i) such Member is duly formed or organized, validly existing and in good
standing under the laws of the jurisdiction in which such Member was formed or
organized; (ii) such Member has the full legal right, power and authority
required to enter into, execute and deliver this Agreement and to perform fully
its obligations hereunder; (iii) this Agreement has been duly authorized,
executed and delivered by such Member and is a legal, valid and binding
obligation of such Member enforceable against such Member in accordance with its
terms; and (iv) such Member's authorization, execution, delivery and performance
of this Agreement does not and will not conflict with (A) any law, rule or court
order applicable to such Member, (B) such Member's organizational documents or
(C) any other agreement or arrangement to which such Member is a party or by
which it or its properties are bound.
(b) Natural Persons. Each Member that is a natural person represents
and warrants to the Company and to each other Member that (i) such Member is of
sound mind and has full legal capacity to enter into, execute and deliver this
Agreement and perform fully his or her obligations hereunder; (ii) this
Agreement has been duly executed and delivered by such Member and is a legal,
valid and binding obligation of such Member enforceable against such Member in
accordance with its terms; and (iii) such Member's execution, delivery and
performance of this Agreement does not and will not conflict with (A) any law,
rule or court order applicable to such Member or (B) any other agreement or
arrangement to which such Member is a party or by which such Member or his or
her properties are bound.
SECTION 2.08. Effectiveness. Subject to the occurrence of the Escrow
Release (as defined in the Transfer and Exchange Agreement) this Agreement shall
be effective as of the Roll-Up Date. If the Escrow Release does not occur
14
prior to the Outside Date (as defined in the Transfer and Exchange Agreement),
then this Agreement shall be void without ever becoming effective.
ARTICLE III
Management of the Company
-------------------------
SECTION 3.01. Board of Directors. (a) Appointment. The Company shall
have a Board of Directors. The Board of Directors shall consist of eight
individuals (each, a "Director"), one of whom shall serve as the Chairman of the
Board. Five members of the Board of Directors (including the Chairman of the
Board) shall be designated and may be removed at any time and from time to time
by AAH in its sole discretion. Three members of the Board of Directors shall be
designated and may be removed at any time and from time to time by a Majority in
Interest of the Dealer Members, voting together as a single class, subject in
the case of designation to the consent of AAH (which consent shall not be
unreasonably withheld). AAH agrees that each of the individuals set forth on
Schedule VI is an acceptable designee as a Dealer Director so long as such
individual continues to be employed by the Company or an Affiliate of the
Company. The initial members of the Board of Directors of the Company designated
by AAH shall be Timothy Collins, Ian K. Snow, John Roth, Brian Kendrick and
Thomas Gibson. The initial members of the Board of Directors designated by the
Dealer Members shall be C.V. Nalley, III, Ben David McDavid, Sr. and Charlie
(C.B.) Tomm.
(b) Management and Control. The property, business and affairs of the
Company shall be managed and conducted by the Board of Directors. None of the
Members, acting individually, and none of the Directors, acting individually,
shall have any right or authority to take any action on behalf of the Company
with respect to third parties or to bind the Company. The Directors and officers
of the Company shall be "managers" of the Company as such term is used in the
Act. The Company may only act and bind itself (i) through the collective action
of five or more Directors or (ii) through the action of the officers, employees,
agent or attorneys-in-fact of the Company if and to the extent authorized by
this Agreement or by the Board of Directors in accordance with the provisions of
this Agreement.
SECTION 3.02. Powers and Procedures of the Board of Directors. (a)
General Procedures. The Board of Directors, on behalf of the Members, shall have
the power
15
(i) to do any and all acts necessary or convenient to or for the furtherance
of the purposes of the Company, (ii) to act on behalf of and bind the Company
and (iii) to appoint persons, with such titles as are set forth in this
Agreement or as the Board of Directors may otherwise select, as officers,
employees, agents or attorneys-in-fact of the Company to act on behalf of and
bind the Company, with such power and authority as is set forth in this
Agreement (with respect to officers of the Company) or as the Board of
Directors may delegate from time to time to any such person; provided,
however, that the Board of Directors shall not delegate its responsibility for
the overall management and supervision of the Company. Any action requiring
the approval of the Board of Directors must be approved by five or more
Directors. Directors may act without a meeting by written consent if at least
five Directors (with at least one of such five Directors being a Dealer
Director) execute a consent in writing to the taking of such action and such
writing or writings are filed with the minutes of the proceedings of the Board
of Directors, or at a meeting (or meetings) of five or more Directors
(attended in person, by proxy or by telephonic or other electronic device;
provided, however, that in lieu of participating in a meeting, a Director can
indicate his or her approval or disapproval in writing (before or after the
meeting) of matters presented at the meeting with the same effect as if he or
she participated in the meeting and took such action in person at the
meeting). Any Director may call a meeting of Directors or propose that the
Board of Directors take action by written consent. At least three Business
Days prior written notice of a proposed meeting or the proposed action by
written consent, as the case may be (or such other notice period as the Board
of Directors may from time to time establish by the approval of at least five
Directors (with at least one of such five Directors being a Dealer Director)),
shall be given to all other Directors by the Director calling the meeting or
proposing the action by written consent, as the case may be, unless such
notice requirement is waived by a written waiver executed by a Director or by
the attendance or participation of such Director in a meeting without
protesting, prior thereto or at the commencement thereof, the lack of adequate
notice. Actions adopted or taken by Directors at a meeting shall be deemed
adopted or taken only by those Directors present at such meeting (in person,
by proxy or by telephonic or other device) who expressly approve of such
actions so adopted or taken (or those who approve of such actions in writing).
Except as expressly provided in this Section 3.02, the Board of Directors
shall otherwise conduct its business in such manner and by such procedures as
a majority of the members of the Board of Directors deem appropriate.
16
(b) Special Procedures. Notwithstanding the foregoing, the approval of
at least five Directors (with at least two of such five Directors being Dealer
Directors) shall be required for the Company directly or indirectly (i) to
engage in or acquire any business other than the businesses of evaluating,
acquiring, owning, managing, operating, financing and disposing of motor vehicle
dealerships and any businesses related or incidental thereto, (ii) to enter into
any material agreement or engage in any material transaction with AAH or any
Affiliate of AAH or (iii) to merge, consolidate, reorganize or convert, other
than as contemplated by Article VIII of this Agreement, unless appropriate
provision is made for the Company or its successor following such merger,
consolidation, reorganization or conversion to be bound by the terms and
conditions of this Agreement or a substitute agreement among the Company or its
successor and the Members that provides the Members with substantially the same
rights as under this Agreement, provided that the Members' Percentage Interests
may be diluted pro rata and their other rights may be adversely affected in such
merger, consolidation, reorganization or conversion, but only to the extent such
dilution or adverse change in such rights would be permitted in connection with
the issuance of additional Interests by the Company in accordance with Section
4.06(a).
SECTION 3.03. Actions Requiring Board Approval; Day-to-Day Authority
of the President and Chief Executive Officer; Ratified Actions. (a) Board
Approval Required. All actions outside the ordinary course of business of the
Company, to be taken by or on behalf of the Company, shall require the approval
of five or more Directors (acting in accordance with the procedures for actions
of the Board of Directors set forth in Section 3.02), and shall not require the
consent or approval of any Member or any other person, except as otherwise
provided in Section 13.02.
(b) President and Chief Executive Officer. The President and Chief
Executive Officer of the Company shall have the power and authority to take (or
authorize other officers, employees or agents of the Company to take) all
actions on behalf of the Company (without the need for the consent or approval
of any Member or any other person) that are within the ordinary course of
business of the Company unless the Board of Directors shall have previously
restricted (specifically or generally) such power and authority of the President
and Chief Executive Officer of the Company.
(c) Certain Ratified and Approved Actions. Without in any way limiting
the generality of the foregoing
17
or anything else contained herein or in any other document, the execution,
delivery and performance by the Company of the Transfer and Exchange Agreement
and the agreements and actions contemplated thereby is specifically approved
and ratified in all respects.
SECTION 3.04. Officers. (a) Appointment and Term of Office. The
officers of the Company shall include a President and Chief Executive Officer
and a Secretary. The Board of Directors may appoint such other officers as it
deems appropriate, including a Chief Operating Officer, one or more Vice
Presidents, a Chief Financial Officer, a Controller, Assistant Controllers and
Assistant Secretaries. Officers shall be appointed from time to time by the
Board of Directors and each officer shall hold office until his or her successor
is appointed or until his or her earlier death or until his or her earlier
resignation or removal in the manner hereinafter provided. Each officer shall
have such authority and shall perform such duties as may be provided in this
Agreement, as the Board of Directors may from time to time prescribe or as set
forth in any employment agreement approved by the Board of Directors between the
Company and any such officer. Any two or more offices may be held by the same
person except for the offices of President and Chief Executive Officer and of
Secretary. With respect to the appointment by the Board of Directors of the
President and Chief Executive Officer, the Chief Operating Officer or the Chief
Financial Officer, the Board of Directors shall give the Dealer Members three
Business Days' prior notice of such proposed appointment, and the Dealer Members
shall have the right to express to the Board of Directors their approval or
disapproval of the individuals to be appointed to such offices, provided that
such approval or disapproval shall in no way be binding upon the Board of
Directors.
(b) Resignation and Removal. Any officer may resign at any time by
giving written notice to the President and Chief Executive Officer or the
Secretary of the Company, and such resignation shall take effect after the
giving of such notice at the time specified therein or, if the time when it
shall become effective is not specified therein, when accepted by action of the
Board of Directors. Except as aforesaid, the acceptance of any such resignation
by action of the Board of Directors shall not be necessary to make it effective.
All officers and agents elected or appointed by the Board of Directors
(including the President and Chief Executive Officer and the Secretary) shall be
subject to removal at any time by the Board of Directors, with or without cause,
subject to the terms of any
18
employment or other agreement approved by the Board of Directors between the
Company and such officer or agent.
(c) Chairman of the Board. The Chairman of the Board shall be a member
of the Board of Directors and shall preside at all meetings of the Board of
Directors and of the Members at which he or she shall be present and shall
perform such duties and exercise such powers as are incident to the office of
chairman of the board of a corporation organized under the DGCL, and shall
perform such other duties and exercise such other powers as may from time to
time be prescribed by the Board of Directors. Initially, Thomas R. Gibson shall
be the Chairman of the Board.
(d) President and Chief Executive Officer. Subject to Section 3.03(b),
the President and Chief Executive Officer shall perform such duties and exercise
such powers as are incident to the office of the president and chief executive
officer of a corporation organized under the DGCL, and shall perform such other
duties and exercise such other powers as may from time to time be prescribed by
the Board of Directors. The President and Chief Executive Officer shall perform
the duties of the Chairman of the Board in the absence of the Chairman of the
Board and shall have the power and authority to conduct the day-to-day
activities of the Company and to take all actions to be taken by or on behalf of
the Company that are contemplated by Section 3.03(b). Initially, Brian Kendrick
shall be the President and Chief Executive Officer of the Company.
(e) Chief Operating Officer. The Chief Operating Officer, if any,
shall perform such duties and exercise such powers as are incident to the office
of chief operating officer of a corporation organized under the DGCL, and shall
perform such other duties and exercise such other powers as may from time to
time be prescribed by the Board of Directors.
(f) Chief Financial Officer. The Chief Financial Officer, if any,
shall have charge and custody of, and be responsible for, all funds and
securities of the Company and shall deposit all such funds to the credit of the
Company in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of this Agreement; he or she shall
disburse the funds of the Company as may be ordered by the Board of Directors,
making proper vouchers for such disbursements; and, in general, he or she shall
perform all the duties incident to the office of the chief financial officer of
a corporation organized under the DGCL and such other duties as from time to
time may be assigned to him or her by the Board of Directors or the
19
President and Chief Executive Officer. The duties of the Chief Financial
Officer may be performed by one or more employees or agents of the Company, to
be appointed by the Board of Directors.
(g) Vice President. Each Vice President, if any, shall perform such
duties and exercise such powers as are incident to the office of vice president
of a corporation organized under the DGCL, and shall perform such other duties
and exercise such other powers as may from time to time be prescribed by the
Board of Directors.
(h) Secretary. The Secretary shall keep the records of all meetings
and written actions of Members and of the Board of Directors and shall be the
custodian of all contracts, deeds, documents and all other indicia of title to
properties owned by the Company and of its other records and in general shall
perform all duties and have all powers incident to the office of the secretary
of a corporation organized under the DGCL and shall perform such other duties
and exercise such other powers as may from time to time be prescribed by the
Board of Directors. The duties of the Secretary may be performed by one or more
employees or agents of the Company, to be appointed by the Board of Directors or
the Secretary. Initially, Ian K. Snow shall be the Secretary of the Company.
SECTION 3.05. Reliance on Certificates. Any person dealing with the
Company may rely on a certificate signed by the Secretary or any other officer
of the Company:
(i) as to who the Members hereunder are;
(ii) as to the existence or nonexistence of any fact or facts
which constitute conditions precedent to acts by the Members or in any
other manner germane to the affairs of the Company;
(iii) as to who is authorized to execute and deliver any
instrument or document on behalf of the Company;
(iv) as to the authenticity of any copy of this Agreement and
amendments hereto;
(v) as to any act or failure to act by the Company or as to any
other matter whatsoever involving the Company or any Member (solely
with respect to the activities of the Company); or
20
(vi) as to the authority of the Board of Directors, any officer
of the Company or the Tax Matters Partner to act.
ARTICLE IV
Capital Accounts; Additional Capital
Contributions; Withdrawal of Capital;
Percentage Interest Adjustment
------------------------------
SECTION 4.01. Capital Accounts. (a) A separate capital account (a
"Capital Account") shall be established and maintained for each Member. The
Capital Account of each Member as of the date hereof, after giving effect to the
Roll-Up Transaction and the adjustments referred to in Section 4.01(b), shall
equal the dollar amount set forth opposite such Member's name on Schedule II
under the column captioned "Initial Capital Account". Each Member's Capital
Account shall be increased by: (i) the amount of any cash or the fair market
value of any property (net of any liabilities of the Member assumed by the
Company or secured by such property that the Company is considered to assume or
take subject to under Section 752 of the Code) contributed by the Member to the
Company in accordance with this Article IV and (ii) the amount of Net Profits
(or items thereof) allocated to the Member in accordance with Article V; and
shall be decreased by: (i) the amount of any cash or the fair market value of
any property (net of any liabilities of the Company assumed by the Member or
secured by such property that the Member is considered to assume or take subject
to under Section 752 of the Code) distributed to the Member by the Company and
(ii) the amount of Net Losses (or items thereof) allocated to the Member in
accordance with Article V.
(b) The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with the Treasury Regulations under ss. 704(b) of the Code and shall be
interpreted and applied in a manner consistent with such Treasury Regulations.
Upon the occurrence of any event specified in Treasury Regulations ss.
1.704-1(b)(2)(iv)(f), the Board of Directors may cause the Capital Accounts of
the Members to be adjusted to reflect the fair market value of the Company
assets as provided in such Regulation; provided, however, that the Board of
Directors shall cause the Capital Accounts to be so adjusted (i) in connection
with the Roll-Up Transaction such that, as of the Roll-Up Date, the Members'
Capital Accounts equal the initial capital accounts set forth on Schedule II, as
adjusted by the Board of
21
Directors to reflect any adjustments described in Sections 2.04(b), 2.04(c) or
2.04(d) or as amended pursuant to Section 7.03 of the Transfer and Exchange
Agreement, and (ii) immediately prior to the IPO or Merger Conversion based
upon the valuation of the Company performed by the managing underwriter for
the IPO or the financial advisor retained by the Company in connection with
the Merger Conversion, as the case may be.
SECTION 4.02. Additional Capital Contributions. (a) General. Subject
to Section 4.06, at any time that the Board of Directors determines that the
Company needs additional capital, the Board of Directors may cause the Company
to offer (each, an "Initial Offer") all Members (and if such offer is made to
any Member, it shall be offered to all Members) the opportunity to make
additional Capital Contributions, in proportion to their Percentage Interests,
providing each Member until 5:00 p.m., Eastern Time, on the 10th Business Day
following the day on which such Initial Offer is given to accept or decline in
writing such Initial Offer. The Initial Offer shall set forth the terms of the
additional Capital Contributions, including the total amount of capital to be
raised, the date on which such Capital Contributions will be payable and the
proposed uses of the proceeds. Upon the expiration of such ten Business Day
period, the Company shall offer (each, a "First Additional Offer") to each
Member who has properly given notice of its acceptance of the immediately
preceding Initial Offer, the opportunity to make further additional Capital
Contributions, in proportion to their respective Percentage Interests, in
respect of any Member or Members who failed to timely accept in writing such
Initial Offer. Each such Member shall have until 5:00 p.m., Eastern Time, on the
second Business Day following the day on which such First Additional Offer is
given to accept or decline in writing such First Additional Offer. Upon
expiration of such two Business Day Period, the Company shall offer (each, a
"Second Additional Offer") to each Member who has properly given notice of its
acceptance of the immediately preceding First Additional Offer, the opportunity
to make further additional Capital Contributions, in proportion to their
respective Percentage Interests, in respect of any Member or Members who failed
to timely accept in writing such First Additional Offer made to it. Each Member
receiving a Second Additional Offer shall have until 5:00 p.m., Eastern Time, on
the second Business Day following the day on which such Second Additional Offer
is given to accept or decline in writing such Second Additional Offer. AAH shall
have the right to make Capital Contributions in respect of any Member who failed
timely to accept in writing any Initial Offer, unless and except to the extent
that such Capital
22
Contributions are made by any other Member that shall have accepted a First
Additional Offer or Second Additional Offer. To the extent, if any, that AAH
does not fully exercise the right referred to in the immediately preceding
sentence, the Board of Directors may, in its sole discretion, offer any third
party the right to contribute capital to the Company in an amount not greater
than the difference between (i) the amount of capital that was the subject of
the applicable Initial Offer and (ii) the amount of capital that all Members
agreed to contribute to the Company in respect of such Initial Offer
(including pursuant to any First Additional Offer or Second Additional Offer,
AAH's exercise of all its rights to make Capital Contributions).
(b) Adjustment of Percentage Interests; Rules of Application. In the
event that any additional Capital Contribution is not made in proportion to each
Member's Percentage Interest in the Company, the Members' Percentage Interests
in the Company will be adjusted proportionally by the Board of Directors so as
to reflect such additional Capital Contributions, all prior Capital
Contributions made by the Members, all prior distributions made to the Members
(other than pursuant to Section 6.01(c)(iv)), the Members' initial Capital
Accounts and any other relevant factors (but after giving effect to any other
adjustments to the Members' Percentage Interests made pursuant to this
Agreement), and Schedule II hereof will be amended to reflect the Percentage
Interests of the Members, as determined after giving effect to such factors. If
a Dealer makes any additional Capital Contributions pursuant to this Section
4.02, the portion of such Dealer's Percentage Interest related to such
additional Capital Contributions will not be subject to adjustment under Section
4.04 below. In the event additional Capital Contributions are made by the
Members pursuant to this Section 4.02, the Board of Directors shall amend this
Agreement so that Carried Interests and any other comparable interests in the
Company's profits held by and intended to provide incentives for the Company's
management are not applied to distributions in respect of such additional
Capital Contributions until such time as the Members shall have received
cumulative distributions pursuant to Section 6.01(b)(i) in respect of such
additional Capital Contributions in an amount equal to the amount of such
additional Capital Contributions plus an 8% per annum cumulative, compounded
return thereon. All such additional Capital Contributions shall be payable in
cash on such date as set forth in the notice of the applicable Initial Offer. No
Member shall have any right to contribute capital to the Company except as set
forth in this Section 4.02.
23
SECTION 4.03. Withdrawal of Capital; Limitation on Distributions;
Resignation. No Member shall be entitled to withdraw any part of such Member's
Capital Account or, except as provided in Sections 6.01 and 12.02, to receive
any other distributions from the Company, and no Member shall be entitled to
demand or receive (i) interest on such Member's Capital Account or (ii) any
property from the Company other than cash. No Member may withdraw from the
Company without the prior written consent of the Board of Directors.
SECTION 4.04. Percentage Interest Adjustment. (a) General. In order to
provide an economic incentive to the Dealers to maximize the performance of
their respective affiliated Platform Groups after the Roll-Up Date, (i) as soon
as practicable after (A) the date on which audited Fiscal Year-end financial
statements of the Company for the 2000 Fiscal Year are available and (B) the
date on which audited Fiscal Year-end financial statements of the Company for
each subsequent Fiscal Year are available and (ii) if the IPO is not consummated
in the 2000 Fiscal Year, immediately prior to the consummation of any IPO,
except as otherwise provided in Section 4.02(b) with respect to additional
Capital Contributions, the Percentage Interest of each Dealer will be subject to
upwards or downwards adjustment as appropriate to reflect the relative
performance of such Dealer's affiliated Platform Group as compared to the
performance of the Platform Groups as a whole for the period beginning on
October 1, 1999 (or, with respect to the second adjustment hereunder and any
subsequent adjustments hereunder, from the effective date of the most recent
adjustment) to the adjustment date. Such adjustments will be determined pursuant
to the formula set forth on Schedule III. Each adjustment of Percentage
Interests pursuant to this Section 4.04 will be effective (i) with respect to
annual adjustments, as of the day after the last date covered by the most recent
audited Fiscal Year-end financial statements and (ii) with respect to an
adjustment in connection with any IPO, as of the last day of the month preceding
the date of the preliminary prospectus distributed to prospective investors for
the IPO. Adjustments shall be determined with respect to each Dealer for each
Applicable Period (as defined in Schedule III), including any Applicable Periods
beginning after the date on which a Dealer Transfers all or a portion of its
Interest. The initial Applicable Period shall start on October 1, 1999 and shall
be comprised of the 15 month period ending December 31, 2000; provided that if
the IPO is consummated during the 2000 Fiscal Year, there shall be no adjustment
pursuant to this Section 4.04(a). Upon each adjustment of Percentage Interests
pursuant to this Section 4.04, the
24
Board of Directors shall cause Schedule II hereof to be amended to reflect
each Member's Percentage Interest, as determined after giving effect to such
adjustment.
(b) Record of Percentage Interests; Notification of Adjustment. The
Company shall at all times maintain a written record of each Member's current
Percentage Interest, and shall provide a written notification to each Dealer of
such Dealer's then-current Percentage Interest and a detailed calculation
showing the manner in which such Percentage Interest was calculated within five
Business Days of any Percentage Interest adjustment pursuant to Section 4.04(a).
Any such written notification shall be treated in all respects like a written
statement of Percentage Interests in accordance with the provisions of Section
4.05. The Percentage Interest of each Dealer as determined pursuant to Section
4.04(a) shall be binding and conclusive upon all parties hereto in the absence
of fraud or manifest error.
SECTION 4.05. Statements of Percentage Interest. Within five Business
Days after the written request of any Member, the Company shall provide to such
Member a written statement of such Member's Percentage Interest as of the time
the Company makes such written statement. Pursuant to the Act, no such written
statement shall be deemed to be a certificated security, a negotiable
instrument, a bond or a stock, and no such written statement shall be a vehicle
by which any transfer of any Member's Interest may be effected.
SECTION 4.06. Issuance of Additional Interests. (a) Issuances in
Connection with Acquisitions. The Board of Directors may, in connection with any
acquisition of any retail automobile or truck dealership or any other asset to
be used in the Company's business, cause the Company to issue Interests to the
seller or sellers thereof, or to a third party or parties financing such
acquisition (each, a "Third Party Investor"), and such seller or sellers or
Third Party Investor or Third Party Investors shall thereupon be admitted as
Members of the Company, in each case without the consent of any Member.
(b) Issuances to Senior Management Employees. The Board of Directors
may, in connection with the hiring or compensation of any senior management
employee of the Company (or any subsidiary of the Company), cause the Company to
issue Interests (or options to acquire Interests) to any such employee, and,
upon the acquisition of such Interest, such employee shall be admitted as a
Member of the Company, in each case without the consent of any Member. The
Members anticipate that Interests (or options to acquire
25
Interests) will be issued to senior management employees of the Platform
Groups in such amounts and on such other terms as are reasonable and intended
to provide such employees with incentives to maximize the Company's profits.
(c) Terms of Issuances Pursuant to This Section 4.06. Any issuance of
Interests pursuant to paragraphs (a) or (b) of this Section 4.06 may be on such
terms and conditions as the Board of Directors in its sole discretion
determines, including the Percentage Interest associated with such Interests and
the entitlement of the person to whom such Interests are issued to distributions
under Section 6.01(b)(ii); provided, however, that any such issuance of
Interests shall have the same relative effect on all the then existing Members
(including AAH), (x) except for such differences as are necessary to reflect,
pro rata, the differences in such then existing Members' Percentage Interests
and (y) except for the effect on the Carried Interests of Members entitled to
Carried Interests. In connection with any such issuance of Interests, the
Members' Percentage Interests in the Company will be adjusted so as to reflect
such issuance, and Schedule II hereof will be amended to reflect the Percentage
Interests of the Members and the "Initial Capital Accounts" of any new
"Members". No issuance of Interests pursuant to Section 4.06(a) shall adversely
affect the rights and obligations of the then existing Members with respect to
the Carried Interests and any other comparable interests in the Company's
profits held by and intended to provide incentives for the Company's management.
SECTION 4.07. Determination of Book Value of Company Assets. (a) Book
Value. The initial "Book Value" of any Company asset as of the Roll-Up Date
(taking into account the adjustment in connection with the Roll-Up Transaction
described in Section 4.01(b)) shall be its fair market value on the Roll-Up Date
as determined in good faith by the Board of Directors; provided, however, that
in the case of the assets included within any Platform Group appraised by
Houlihan, Lokey, Howard & Zukin pursuant to Section 2.04 of the Transfer and
Exchange Agreement, the initial Book Values of such assets shall be consistent
with the value of such Platform Group set forth in such appraisal, as adjusted
by the Board of Directors to reflect any adjustments described in Sections
2.04(b), 2.04(c), or 2.04(d) and as amended pursuant to Section 7.03 of the
Transfer and Exchange Agreement.
(b) Adjustment. The Book Values of all of the Company's assets shall
be adjusted by the Company to equal their respective fair market values, as
determined in good
26
faith by the Board of Directors (taking into account, if applicable, the
valuation referred to in clause (ii) of the proviso in Section 4.01(b)), upon
the occurrence of any adjustment of the Capital Accounts of Members pursuant
to Section 4.01(b).
(c) Depreciation and Amortization. The Book Values of the Company's
Assets shall be adjusted as appropriate to reflect any depreciation and
amortization in accordance with the principles for determining the Net Profits
and the Net Losses of the Company.
ARTICLE V
Allocations
-----------
SECTION 5.01. Allocation of Net Profits and Net Losses. (a) Net
Profits. Subject to Section 5.02, the Net Profits of the Company for each Fiscal
Year (or portion thereof) shall, after giving effect to all Capital Account
adjustments attributable to contributions and distributions (other than any
liquidating distributions) made with respect to such year, be allocated among
the Members as follows:
(i) first, to the Members, if any, with negative MG Capital
Account balances in an amount up to such Members' aggregate negative
MG Capital Account balances, in proportion to their respective
negative MG Capital Account balances;
(ii) second, to the Members in the amounts and proportions
necessary to cause their respective MG Capital Account balances (as
adjusted to reflect any allocations for such year pursuant to Section
5.02) to equal their respective Target Amounts as of the end of such
year; and
(iii) third, to the Members in accordance with their respective
Percentage Interests.
(b) Net Losses. Subject to Section 5.02, the Net Losses of the Company
for each Fiscal Year (or portion thereof) shall, after giving effect to all
Capital Account adjustments attributable to contributions and distributions
(other than any liquidating distributions) made with respect to such year, be
allocated among the Members as follows:
(i) first, to the Members with MG Capital Account balances (as
adjusted to reflect any allocations for such year pursuant to Section
5.02) in excess of their
27
respective Target Amounts, to the extent of and in
proportion to such excess amounts;
(ii) second, to the Members with positive MG Capital Account
balances (as adjusted to reflect any allocations for such year
pursuant to Section 5.02) pro rata to the extent of their respective
MG Capital Account balances; and
(iii) third, to the Members in accordance with their respective
Percentage Interests.
SECTION 5.02. (a) Code Section 704(b) Allocations. Notwithstanding any
other provisions of this Agreement, special allocations of Net Income, Net Loss
or specific items of income, gain, loss or deduction may be required for any
Fiscal Year (or portion thereof) as follows:
(i) Minimum Gain Chargeback. The Company shall allocate items of
Company income and gain among the Members at such times and in such amounts as
necessary to satisfy the minimum gain chargeback requirements of Treasury
Regulation Sections 1.704-2(f) and 1.704-2(i)(4).
(ii) Allocation of Deductions Attributable to Member Nonrecourse
Liabilities. Any Nonrecourse Deductions attributable to a Member Nonrecourse
Debt shall be allocated among the Members that bear the economic risk of loss
for such Member Nonrecourse Debt in accordance with the ratios in which such
Members share such economic risk of loss and in a manner consistent with the
requirements of Treasury Regulation Sections 1.704-2(c), 1.704-2(i)(2) and
1.704-2(j)(1).
(iii) Qualified Income Offset. The Company shall specially allocate
Net Loss and items of income and gain when and to the extent required to satisfy
the "qualified income offset" requirement within the meaning of Treasury
Regulation Section 1.704-1(b)(2)(ii)(d).
(b) Special Allocation upon Disposition of Assets. If any Member has
received any distribution pursuant to Section 6.01(c)(iv) hereof, then upon the
occurrence of any event described in Sections 8.01, 8.02 or 8.04 or any other
disposition of all or substantially all of the Company's assets, then
notwithstanding Section 5.01 hereof, the gain, if any, arising from such event
or disposition shall be allocated (i) first, to each such Member to the extent
of the product of (x) the total distributions received by such Member pursuant
to Section
28
6.01(c)(iv) hereof and (y) 5/9 ths and (ii) second, in accordance with Section
5.01 hereof.
SECTION 5.03. Tax Allocations. (a) The income, gains, losses and
deductions recognized by the Company shall be allocated among the Members, for
United States Federal income tax purposes, to the extent permitted under the
Code and the Treasury Regulations, in the same manner that the corresponding
items are allocated to the Members pursuant to Section 5.01 and 5.02. Except as
otherwise provided below, when the Book Value of a Company asset (including the
assets of the Platform Groups that were indirectly contributed) differs from its
basis for Federal or other income tax purposes, solely for purposes of the
relevant Tax and not for purposes of computing Capital Account balances, income,
gain, loss, deduction and credit shall be allocated among the Members in
accordance with Section 704(c) of the Code and the Treasury Regulations
promulgated thereunder, using the method selected by the Tax Matters Partner.
(b) Notwithstanding the foregoing, any Company asset with respect to
which the items of income, gain, loss, deduction and credit were required
pursuant to the organizational document which governed the Platform Group from
which such asset was acquired (or, in the case of any asset owned by the Company
prior to the Roll-Up Date, pursuant to the Prior LLC Agreement) to be allocated
for Tax purposes in accordance with the method set forth in Section 1.704-3(b)
or 3(c) of the Treasury Regulations shall continue to be subject to allocations
for Tax purposes in accordance with such method in respect of the difference, if
any, between the book value of the Company asset in the hands of such Platform
Group immediately before the Roll-Up Date and its basis for Federal income tax
purposes at such time.
SECTION 5.04. Partial Year Allocations. For purposes of determining
the Net Profits, Net Losses and the items of income, gain, loss and deduction
allocable to each Member:
(a) With respect to the Fiscal Year in which the Roll-Up Transaction
occurs, allocations for the portions of such Fiscal Year occurring before and
after the Roll-Up Transaction shall be determined on the basis of an interim
closing of the Company's books.
(b) If the Percentage Interest of any Member is adjusted pursuant to
Section 4.04 hereof during any Fiscal Year, then allocations for the portions of
such Fiscal Year occurring before and after such adjustment shall be
29
determined on the basis of an interim closing of the Company's books.
(c) Any other partial year Tax allocations shall be made on the basis
of an interim closing of the Company's books or a daily proration, as determined
by the Tax Matters Partner, when required by a short Fiscal Year of the Company,
the entry or withdrawal of a Member, the Transfer of any Interests by or to a
Member or for any other reason determined by the Tax Matters Partner.
ARTICLE VI
Distributions
-------------
SECTION 6.01. Distributions. (a) Generally. Except as set forth in
Section 6.01(c) or (d), distributions shall be made at such time and in such
amounts as determined by the Board of Directors and shall be made among the
Members in cash or other property in amounts determined by the procedures set
forth in Section 6.01(b).
Notwithstanding any provision to the contrary contained in this Agreement, (i)
the Company shall not make a distribution to any Member on account of its
Interest if such distribution would violate the Act or other applicable law
and (ii) the Company shall not be required to distribute any amount to the
extent that the Company could be subject to any liability to refund or repay
such amount or any liability arising out of the event giving rise to such
amount except to Members who have agreed to assume such liability to the
extent of the amount to be distributed in connection with such event.
(b) Distribution Amounts. Subject to Section 6.01(c), any amounts to
be distributed to Members pursuant to Section 6.01(a) shall be distributed among
the Members in accordance with the following order of priority:
(i) first, such distribution shall be apportioned and distributed
to each Member in accordance with its respective Percentage Interest
until the cumulative distributions pursuant to this Section 6.01(b)(i)
are equal to the Return Target; and
(ii) second, the balance of such distribution shall be
apportioned to each Member in accordance with their respective
Percentage Interests and:
(A) the amount so apportioned to Gibson FP shall be
distributed to Gibson FP and the amount
30
so apportioned to Kendrick shall be distributed to
Kendrick; and
(B) the amount so apportioned to any Member other than
Gibson FP and Kendrick shall be distributed to Gibson FP in
accordance with the Gibson Percentage, to Kendrick in accordance
with the Kendrick Percentage and to such Member in accordance
with the Residual Percentage.
(c) Tax Distributions. (i) Notwithstanding Section 6.01(a), the
Company shall, as soon as practicable after the close of each Fiscal Year, make
pro rata cash distributions to all Members, regardless of their tax status, in
accordance with their respective Percentage Interests, in amounts intended to
enable each Member (or, in the case of a Member that is a flow-through entity,
the direct or indirect owners of such Member) to discharge its aggregate
federal, state and local income Tax liability arising from the allocations of
taxable income made to them pursuant to Article V for such Fiscal Year (other
than any Atlanta Recapture Taxes (as defined in Section 6.01(c)(iv))). The
amount distributable pursuant to this Section 6.01(c)(i) shall be determined by
the Board of Directors in its reasonable discretion, using a uniform Tax rate
for each Member equal to the maximum combined effective federal, state and local
tax rate for an individual resident in California, Connecticut, New York
State/New York City or Pennsylvania (whichever is highest) for each applicable
type of income and otherwise taking into account such other relevant factors and
simplifying assumptions (other than with respect to the amount of taxable income
allocable by the Company to the Members) as the Board of Directors reasonably
determines to be appropriate for purposes of estimating the Tax liabilities of
the Members. Notwithstanding the foregoing, to the extent, if any, that the
Board of Directors reasonably determines that the distributions pursuant to this
Section 6.01(c), if made, would cause the Company to be or remain in default
under any agreements with lenders or motor vehicle manufacturers (despite
commercially reasonable efforts by the Company to obtain consents or amendments
necessary to permit such Tax distributions), the Company shall be relieved of
its obligations to make such distributions while and to the extent that such
conditions continue to exist.
(ii) The Board of Directors shall make quarterly advances of
distributions described in Section 6.01(c)(i) in order to facilitate payment of
estimated Taxes by the Members for each Fiscal Year. If the aggregate amount so
advanced to a Member in respect of a Fiscal Year is greater
31
than the distribution to which such Member is entitled under Section
6.01(c)(i) in respect of such Fiscal Year, then such Member shall repay to the
Company the amount of such excess distribution within 60 days after the Board
of Directors determines the amount thereof. Alternatively, the Board of
Directors may, at any time, cause the Company to reduce the amount of
distributions otherwise payable to such Member under Section 6.01(a) by the
amount of such excess distribution.
(iii) Notwithstanding the foregoing, no Member shall be entitled to
receive any distribution pursuant to Sections 6.01(c)(i) or 6.01(c)(ii) with
respect to any Fiscal Year to the extent, if any, that such Member has
previously received distributions pursuant to Section 6.01(a) with respect to
such Fiscal Year. Any distribution made to a Member pursuant to Sections
6.01(c)(i) or 6.01(c)(ii) will for all purposes of this Agreement be treated as
an advance against, and shall reduce, any future distribution which such Member
would otherwise be entitled to receive under Section 6.01(b), 6.01(d), 8.02 or
8.04.
(iv) If, in preparation for an IPO, the Company elects to change the
method of inventory accounting for tax purposes used with respect to the
business of Asbury Automotive Atlanta, L.L.C. ("Atlanta") or takes any action in
connection with any IPO or Merger Conversion or takes any action in violation of
Section 10.04(c) hereof which action results in the Company being required to
change such method, and, as a result, any person that was a direct or indirect
member of Atlanta prior to the Roll-Up Date (other than AAH or any Affiliate
thereof) (an "Atlanta Dealer") is or will be required to pay any additional
Taxes that such person would not have been required to pay but for such change
in method of inventory accounting (the amount of which additional Taxes being
determined in accordance with the principles set forth in the second sentence of
Section 6.01(c)(i) but applying tax rates in effect with respect to residents of
Atlanta, Georgia for the taxable period) (such additional Taxes, "Atlanta
Recapture Taxes"):
(A) the Company shall, at the time contemplated by Section 6.01(c)(i)
but subject to the limitations contained in the last sentence of Section
6.01(c)(i), make a cash distribution to each Atlanta Dealer (or if such Atlanta
Dealer is an indirect member of the Company, to the Member or Members of the
Company with respect to which such Atlanta Dealer's Atlanta Recapture Taxes
arise) in an amount equal to the Atlanta Recapture Taxes incurred by such
Atlanta Dealer; provided, however, that the aggregate amount distributable
directly or indirectly to all Atlanta Dealers
32
pursuant to this Section 6.01(c)(iv) shall not exceed $4.5 million; and
(B) upon the occurrence of any transaction described in Section 8.01,
8.02 or 8.04, the number of shares of Newco stock otherwise distributable
directly or indirectly to each Atlanta Dealer shall be ratably reduced by a
number of shares equal to (1) the product of (x) the amount of cash that was
directly or indirectly distributed by the Company to such Atlanta Dealer
pursuant to this Section 6.01(c)(iv) and (y) 4/9 ths divided by (2) the per
share price of the Newco common stock in the IPO; and the aggregate number of
shares determined pursuant to the preceding formula with respect to all Atlanta
Dealers shall be distributed to other Members of the Company in proportion to
the number of shares otherwise distributable to such other Members so that no
such shares will be received, directly or indirectly, by Atlanta Dealers (in
addition to the number of shares that such Members who are not Atlanta Dealers
(or owned directly or indirectly thereby) would otherwise have been entitled to
receive pursuant to Section 8.02 or 8.04); provided, however, that solely for
purposes of Section 8.02, the Capital Account of each Member that received
distributions pursuant to Section 6.01(c)(iv)(A) shall be increased
proportionately by the product, if any, of (x) and (y), above, determined with
respect to such Member (or the direct or indirect owners thereof).
(C) In the event that a transaction described in Section 8.01, 8.02 or
8.04 does not occur, then, notwithstanding any provision in this Agreement to
the contrary and in recognition of the reduction in the Atlanta Dealers'
respective Capital Accounts as a result of distributions pursuant to Section
6.01(c)(iv)(A), the Members acknowledge and agree that the amount otherwise
directly or indirectly distributable to the Atlanta Dealers pursuant to Section
6.01(d) shall be reduced by the product described in clause (1) of Section
6.01(c)(iv)(B) and the allocations pursuant to Article V shall be adjusted as
determined by the Board of Directors to be appropriate to effectuate such
result.
(d) Notwithstanding any other provision of this Agreement (other than
Sections 6.01(c)(iv)(C), 8.02 and 8.04), all amounts distributed in connection
with the sale or other disposition of all or substantially all the assets of the
Company or the dissolution, winding-up or liquidation of the Company shall be
distributed to Members in accordance with their respective Capital Account
balances, as adjusted for all Company operations up to and including the date of
such distribution, pursuant to Section 12.02(b).
33
SECTION 6.02. Repayment of Funds. Except as otherwise may be provided
by law, Section 6.01(a)(ii), Section 6.01(c)(ii) or 6.03, no Member shall be
required to repay to the Company any funds distributed to it pursuant to this
Agreement.
SECTION 6.03. Withholding. Notwithstanding any other provision of this
Agreement, the Company is authorized to take any and all actions that are
determined by it to be necessary or appropriate to insure that the Company
satisfies any and all withholding and Tax payment obligations under the Code or
other applicable law. Without limiting the generality of the foregoing, the
Company may withhold any amount that it determines is required to be withheld
from any amount distributable to any Member pursuant to this Article VI;
provided, however, that such amount shall be deemed to have been distributed to
such Member for all purposes of this Agreement. In the event that the Company
withholds or pays Tax in respect of any Member for any period in excess of the
amount of cash otherwise distributable to such Member for such period pursuant
to this Agreement (or there is a determination by any taxing authority that the
Company should have withheld or paid any Tax for any period in excess of the
Tax, if any, that it actually withheld or paid for such period) and the Company
pays the amount of such additional Tax, such excess amount (or such additional
amount) shall be treated as a recourse loan to such Member that shall bear
interest at the Prime Rate plus 5% (but in no event more than the highest lawful
rate).
ARTICLE VII
Transfers of Interests; Tag-Along/
Drag-Along Rights; Purchase of Interests
Upon Termination of Employment;
Options to Purchase Interests
-----------------------------
SECTION 7.01. Transfers of Interests in the Company. (a) Generally.
(i) No Member may Transfer all or any portion of its Interest (or any beneficial
interest therein) unless (A) such Transfer is in accordance with this Article
VII or Article VIII, (B) the Transferor gives the Company not less than 10
Business Days prior written notice of such Transfer (unless greater prior notice
is required by this Agreement, in which case the Transferor shall give such
greater notice), (C) all required consents of motor vehicle manufacturers, as
shall be determined by the Board of Directors, have been obtained and (D) except
for a Transfer in accordance with the first sentence of Section 7.01(c)(iv)
34
or Article VIII, the Transferee executes and delivers a counterpart of the
signature page of this Agreement (or other appropriate assumption agreement)
and any other agreements, documents or instruments as the Company may
reasonably require. The parties will cooperate to obtain any motor vehicle
manufacturer consents that may be required for any Transfer pursuant to this
Article VII. Any Transfer made in violation of this Section 7.01(a) shall be
null and void and shall be subject to paragraph (d) of this Section 7.01.
(ii) Whenever a Transfer or purchase (other than any Transfer or
purchase pursuant to Section 7.01(c)(i) or (iv)) is to be consummated by any
person on a specified date under this Article VII, such Transfer or purchase
shall take place at 10:00 a.m. on such date (or, if such date is not a Business
Day, the next following Business Day) at the New York offices of Cravath, Swaine
& Moore or at such other time, date and place as the Company and the parties to
the transaction may agree. The consideration for such Transfer or purchase shall
be paid by delivery to the Transferor of a certified or bank check made payable
to such Transferor or by wire transfer in immediately available funds to a bank
account designated by such Transferor, as the parties to such transaction may
agree, against due execution and delivery of the agreements, documents and
instruments specified in Section 7.01(a)(i)(C) and of such other agreements,
documents and instruments as the Board of Directors or the parties to such
transaction may reasonably require.
(iii) Upon compliance with the requirements of Section 7.01(a), each
Transferee of an Interest shall have all of the economic rights, and shall be
subject to the restrictions and obligations, of its Transferor hereunder to the
extent specified in the agreements or instruments between the parties, and shall
succeed to the portion of the Transferor's Percentage Interest (including any
adjustment thereto pursuant to Section 4.04(a) effected after the date of such
Transfer), Capital Account and the portion of such Transferor's Minimum Gain
attributable thereto. Such Transferee shall be admitted as a Member only with
the prior written consent of the Board of Directors in its sole discretion;
provided, however, that any Transferee pursuant to Sections 7.01(b), 7.01(c)(i),
7.01(c)(iii), 7.02 or 7.03 shall, upon request to the Company of the applicable
Transferor or Transferee, be admitted as Member without the prior consent of any
person. If a Transferor has Transferred its entire Interest in the Company
pursuant to this Article VII and the Transferee is admitted as a Member,
35
immediately following such admission, such Transferor shall
cease to be a Member.
(b) Transfers by AAH. Subject to Section 7.01(a) and, with respect to
a Transfer to any person other than a Permitted Transferee of AAH, Section 7.02,
AAH (and its Permitted Transferees) shall have the right to Transfer at any time
all or any portion of its Interest (including any beneficial interest therein)
to any person without the prior consent of any person.
(c) Transfers by Other Members. (i) Subject to Sections 7.01(a) and
7.01(e), each Member shall have the right to Transfer at any time all or any
portion of its Interest (including any beneficial interest therein) to any
Permitted Transferee of such Member without the prior consent of any person.
(ii) Prior to the fifth anniversary of the date of this Agreement, no
Member other than AAH (or AAH's Permitted Transferees) shall have the right to
Transfer all or any portion of its Interest (including any beneficial interest
therein) to any person except (A) in accordance with Sections 7.01(a) and
7.01(e) and pursuant to Section 7.01(c)(i) or (iv), Section 7.02, Section 7.03,
Section 7.04 or Article VIII or (B) with the prior written consent of the Board
of Directors in its sole discretion.
(iii) On and after the fifth anniversary of the date of this
Agreement, each Member other than AAH (or AAH's Permitted Transferees) shall
have the right to Transfer at any time all or any portion of its Interest
(including any beneficial interest therein) in accordance with Section 7.01(a),
subject to this Section 7.01(c)(iii) and Section 7.01(e). If such a Member
proposes to Transfer all (or any portion) of its Interest other than pursuant to
Section 7.01(c)(i) or (iv), Section 7.02, Section 7.03, Section 7.04 or Article
VIII and such Member has identified a Third Party Purchaser for such Interest
(or such portion), such Member shall deliver to AAH a notice setting forth in
reasonable detail:
(A) the name and business background of the Third Party
Purchaser;
(B) the amount and form of the prospective purchase price of such
Interest (or such portion);
(C) all other material terms and conditions of the proposed
Transfer;
36
(D) such Member's offer, irrevocable by its terms for 15 days
following the date such notice is delivered (the "Offer Date"), to
sell to AAH such Interest (or such portion) for a purchase price, in
cash, equal to the price to be paid by such Third Party Purchaser and
on such other terms and conditions not less favorable to AAH than
those offered by such Third Party Purchaser; provided that if the
prospective purchase price is to be paid in non-cash consideration,
the Board of Directors in good faith shall determine the fair market
value of such non-cash consideration in accordance with Section
7.06(c) and AAH shall be offered the right to purchase such Interest
for a cash purchase price equal to such fair market value; and
(E) closing arrangements and a closing date (the "Scheduled
Closing Date") not less than 30 nor more than 60 days following the
Offer Date, for any purchase that may be effected by AAH pursuant to
this Section 7.01(c)(iii); provided that such time period may be
extended to the extent necessary to resolve any dispute regarding the
fair market value of non-cash consideration in accordance with Section
7.06(c).
Acceptance of an offer pursuant to this Section 7.01(c)(iii) shall be
evidenced by a notice signed by AAH and delivered to the Transferring Member
prior to the expiration of the subject offer to AAH. Upon delivery, such
acceptance shall constitute a binding commitment to purchase the Interest (or
such portion); provided, however, that AAH may assign its rights under this
Section 7.01(c)(iii) to any person. In the event that no acceptance is given
or acceptance is given but AAH fails (without fault of the Member proposing to
Transfer all (or any portion) of its Interest) to consummate the purchase of
such Interest (or such portion) by the Scheduled Closing Date or, solely if
necessary to obtain any consent of motor vehicle manufacturers to such
purchase, by the date that is 120 days following the Scheduled Closing Date,
then, without prejudice to such Member's rights against AAH, such Interest (or
such portion) may be sold to (but only to) the identified Third Party
Purchaser within 45 days from the expiration of such offer by such Member to
AAH (or the failure of AAH to consummate the purchase of such Interest);
provided, however, that such sale shall be upon terms and conditions not more
favorable to such Third Party Purchaser than those set forth in such Member's
offer to AAH and provided further that such sale may be postponed for up to an
additional 120 days solely if necessary to obtain any consent of motor vehicle
manufacturers to the sale. If at the end of such period, such Member shall not
have completed the sale of such Interest (or such portion),
37
it shall no longer be permitted to sell such Interest without again fully
complying with the provisions of this Section 7.01(c)(iii).
(iv) In addition, with the written consent of the Board of Directors,
which shall not be unreasonably withheld, and subject to Sections 7.01(a) and
7.01(e), each Member may pledge all or any part of such Member's Interest as
security for the payment or performance of recourse debts or recourse
obligations of such Member and to assign all or any part of such Member's rights
to share in the profits and losses of the Company, to receive distributions and
to receive allocations of income, gain, loss, deduction, credit or similar items
to which the Member is entitled (collectively, "Economic Rights"). A secured
party foreclosing on its security interest in any Interests pledged to it in
compliance with this Section 7.01(c)(iv) shall be treated as an assignee of all
of the Economic Rights of the pledging Member, without the need for approval of
such assignment by the Board of Directors, and the pledging Member shall cease
to have the right to exercise any rights as a Member upon the effectiveness of
such transfer in foreclosure; provided, however, that the secured party (A)
shall execute and deliver a counterpart of the signature page of this Agreement
(or other appropriate assumption agreement) and any other agreements, documents
or instruments as the Company may reasonably request and (B) shall not become a
Member (or have any of the rights of Members other than Economic Rights) unless
and until such secured party is admitted as a Member with the consent of the
Board of Directors pursuant to Section 7.01(a); and provided further, however,
that any such foreclosure shall be subject to Section 7.01(e).
(d) Involuntary and Impermissible Transfers. If an Involuntary
Transfer or a Transfer in violation of this Agreement shall occur with respect
to any Member other than AAH and such Transfer has not been cured within 30 days
after notice has been given by AAH to the Transferor or the Transferee, AAH
shall have the right, exercisable by delivery of written notice to such
Transferee within 90 days following the earlier to occur of (x) AAH's receipt of
notice of such event from the Transferor or (y) AAH's obtaining actual knowledge
of such event from any other source, to purchase all of the Interest acquired
directly or indirectly by such Transferee at a purchase price equal to the Fair
Market Value thereof, determined in good faith by the Board of Directors as of
the date of such event. The closing date of any purchase described in this
Section 7.01(d) shall be on the 30th day after a determination of the Fair
Market Value of the Interest to be
38
purchased is made, provided that such purchase may be postponed by AAH for up
to an additional 120 days solely if necessary to obtain any consent of a motor
vehicle manufacturer to the purchase.
(e) Publicly Traded Partnership. Notwithstanding anything in this
Agreement, in order to avoid the treatment of the Company as a "publicly traded
partnership" within the meaning of Section 7704 of the Code, (i) unless waived
in writing by the Tax Matters Partner in its sole discretion, no Transfer of all
or any part of a Member's Interest may be made if such Transfer would result in
the Company having more than 100 members (as determined in accordance with
Treasury Regulation Section 1.7704-1(h)) and (ii) no Transfer, or attempted
Transfer, of all or any part of a Member's Interest may be made through the
facilities of any "established securities market" or any "secondary market" (as
such terms are defined for purposes of Section 7704(b) of the Code).
SECTION 7.02. Tag-Along Rights. Subject to Sections 7.01(a), if AAH
desires to Transfer all (or any portion) of its Interest to a prospective
Transferee (or Transferees) other than to a Permitted Transferee of AAH or
pursuant to Section 8.01, AAH shall, as a condition to such Transfer, (i)
provide a notice to all other Members in writing (a "Tag-Along Notice") of the
material terms of the proposed Transfer at least 30 days prior to such Transfer
and (ii) permit all other Members (or cause all other Members to be permitted)
to sell (either to the prospective Transferee of AAH's Interest or to another
financially reputable Transferee reasonably acceptable to such other Members)
the same portion of their respective Interests at the same relative price
(taking into consideration the size and type of Interest of each such other
Member, but without applying any discount due to any Member's lack of control
with respect to the Company) in the same form of consideration and otherwise on
substantially similar terms as the sale by AAH, which sale shall take place on
the date AAH's Interest (or such portion) is Transferred to such Transferee (or
Transferees). Each Member shall have 15 days from the date of receipt of a
Tag-Along Notice to exercise its right to sell pursuant to clause (ii) above by
delivering written notice to AAH of its intent to exercise such right. The right
of the Members to sell pursuant to the above provisions shall terminate if not
exercised within such 15-day period. Each Member electing to exercise its right
to sell pursuant to the above provisions shall share, on a pro rata basis (based
on the relationship the sale price for the Interests being sold by such Member
bears to the aggregate sale price for all Interests being sold to
39
such Transferee), the legal, investment banking and other expenses of AAH
incurred in connection with such Transfer, other than any expenses payable to
AAH or to any Affiliate of AAH or the Company.
SECTION 7.03. Drag-Along Rights. If at any time AAH desires to
Transfer all (or any portion) of its Interest in accordance with Section 7.01(a)
to any Third Party Purchaser (or Third Party Purchasers), AAH shall have the
right to require that all other Members Transfer the same portion of their
respective Interests to such Third Party Purchaser (or Third Party Purchasers)
at the same relative price (taking into consideration the size and type of
Interest of each such other Member, but without applying any discount due to any
Member's lack of control with respect to the Company) in the same form of
consideration and otherwise on substantially similar terms as the sale by AAH.
AAH shall provide a notice to the Company in writing (the "Drag- Along Notice")
of such sale at least 30 days prior to the date of closing thereof, and the
Drag-Along Notice shall identify such Third Party Purchaser (or Third Party
Purchasers), all material terms of the sale and the date of closing. The Company
shall promptly notify each Member (other than AAH) of its receipt of the
Drag-Along Notice. Upon the closing of any sale by AAH of all (or such portion)
of its Interest as described in a Drag-Along Notice, such Third Party Purchaser
(or Third Party Purchasers) shall pay to each Member the consideration payable
to such Member in connection with such sale of all (or such portion) of the
Interests of such Member to such Third Party Purchaser (or Third Party
Purchasers), net of such Member's proportionate share (based on the relationship
the sale price for the Interests being sold by such member bears to the
aggregate sale price for all Interests being sold to such Transferee) of the
legal, investment banking and other expenses of AAH incurred in connection with
such sale, other than any expenses payable to AAH or to any Affiliate of AAH or
the Company, and the Interests (or such portion) of all such Members shall be
deemed Transferred to such Third Party Purchaser (or Third Party Purchasers).
SECTION 7.04. Purchase of Interests Upon Termination of Employment.
(a) Generally. (i) Upon the termination of employment with the Company or any of
its subsidiaries of any Management Employee for any reason, the Company shall
have an option to purchase all (or any portion) of the Interest held directly or
indirectly by (x) such Management Employee (or, if such Management Employee's
employment was terminated by death, such Management Employee's estate) and (y)
each Permitted Transferee of such Management Employee (other than a
40
Permitted Transferee that is a Management Employee or an entity wholly owned
by a Management Employee, provided such Management Employee is an executive
officer of the Company or a Platform Group) (all such Interests being referred
to as the "Callable Interests"), at a purchase price equal to the Fair Market
Value of such Interest (or such portion) as of the date of such termination of
employment (or, in the event such purchase is postponed pursuant to Section
7.04(b)(ii), as of the date of the purchase by the Company of such Interest
(or such portion)), as determined by the Board of Directors in its good faith
judgment in accordance with Section 7.06, increased by the sum of all Capital
Contributions, and decreased by the sum of all distributions, made in respect
of such Interest (or such portion) after such termination date through the
date on which the notice required by the following sentence is given by the
Company. The Company shall have three months from such termination date (such
three-month period being referred to as the "Option Period") during which to
give notice in writing to such Management Employee (or such Management
Employee's estate) of its election to exercise or not to exercise such option
(an "Exercise Notice"). Except as otherwise provided in Section 7.04(b), such
Management Employee shall have no rights of any kind as a Member under this
Agreement with respect to the Callable Interests after an Exercise Notice is
given, including rights to make Capital Contributions or to receive
distributions. Subject to Section 7.04(b), the completion of a Transfer
pursuant to this Section 7.04(a)(i) shall take place on the 20th Business Day
following the date of receipt by the Management Employee (or his or her estate
and, if applicable, his or her Permitted Transferees) of the notice required
to be given pursuant to this Section 7.04(a)(i); provided that such period may
be postponed by the Company to the extent necessary to resolve a dispute
regarding the Fair Market Value of a Callable Interest (or portion thereof)
pursuant to Section 7.06(b).
(ii) Subject to Section 7.01(a) and any restriction contained in any
other agreement to which the Company or its Affiliates are party, the Company
may assign its rights under this Section 7.04(a) to any person.
(iii) Upon any Transfer of any Interest pursuant to this Section 7.04,
the Percentage Interests of the Members will be adjusted as determined by the
Board of Directors so as to reflect such Transfer (including any adjustments to
the Members' Percentage Interests necessary to reflect any adjustment to the
Transferor's Percentage Interest required to be effected pursuant to Section
4.04(a) with respect to any Applicable Period (as defined in Schedule III)
ending on
41
a date after the date of such Transfer), and Schedule II hereof will be
amended to reflect the Percentage Interest of the Members, after giving effect
to such adjustment.
(iv) This Section 7.04(a)(iv) applies to each Management Employee who
(A) receives an Exercise Notice from the Company pursuant to Section 7.04(a)(i)
above in connection with his termination by the Company "for cause" or his
voluntary resignation from the Company, and (B) at the time of the termination
of his employment, is a Member of the Company or is the beneficial owner of
interests in a Member of the Company and is not bound by a non-competition
restriction contained in a consulting or employment agreement between such
Management Employee and the Company or any of its subsidiaries (each, a
"Terminated Member"); provided, however, that this Section 7.04(a)(iv) shall not
apply to any Management Employee that is an Affiliate of AAH (including for this
purpose any member of the Board of Directors designated by AAH). With respect to
any Terminated Member whose Callable Interest the Company elects to purchase
pursuant to Section 7.04(a)(i), such Terminated Member shall agree in writing
that (i) he shall not compete, directly or indirectly (including as an employee,
proprietor, owner, partner, shareholder, member, joint venturer or agent of, or
as a consultant to, any person or entity which competes), with the retail motor
vehicle business of the Company or any of its subsidiaries within 50 miles of
any motor vehicle dealership owned by the Company or any of its subsidiaries
where such Terminated Member worked during the year prior to the date of the
termination of his employment and (ii) he shall not violate Section 10.06(c)
(with respect to each Terminated Member, a "Non-Compete Covenant"). The
Terminated Member shall provide such written agreement in a form reasonably
satisfactory to the Company on or prior to the date on which the Company
completes its purchase of the Terminated Member's Callable Interest pursuant to
Section 7.04(a) or 7.04(b); provided that if such Terminated Member does not
provide such written agreement on or prior to such date, the Company's purchase
of the Terminated Member's Callable Interest still shall be deemed completed on
such date but the Company shall not be obligated to pay the purchase price for
such Callable Interest until the Terminated Member delivers such written
agreement. A Terminated Member's Non- Compete Covenant shall become effective on
the date the Exercise Notice is delivered to the Terminated Employee pursuant to
Section 7.04(a)(i) and shall terminate on the first anniversary of such date.
(b) Certain Restrictions on Payments. (i) Notwithstanding any other
provision of this
42
Section 7.04, the Company shall not be permitted to complete a purchase of any
Callable Interest (or portion) from any person if and to the extent (A) such
purchase would result in a violation of, or a default or an event of default
under, any bona fide term or provision imposed on the Company by another party
in any credit agreement, indenture, guaranty, security agreement or other
agreement governing indebtedness of the Company or any of its subsidiaries
from time to time, in each case as the same may be amended, modified or
supplemented from time to time (each, a "Financing Document"), and
notwithstanding its reasonable efforts the Company has not been able to have
such term or provision amended or waived, (B) a default has occurred under any
Financing Document and is continuing, (C) such purchase would, in the
reasonable opinion of the Board of Directors, be imprudent in view of the
financial condition (present or projected) of the Company and its
subsidiaries, taken as a whole, or the anticipated impact of such purchase on
the Company's or any of its subsidiaries' ability to meet their respective
obligations under any Financing Document, (D) any required consent of a motor
vehicle manufacturer, as shall be determined by the Board of Directors from
time to time, has not been obtained or (E) the Company is not permitted to
complete such purchase under applicable law.
(ii) If and to the extent the completion of a purchase otherwise
permitted under Section 7.04(a), and for which an exercise notice has been
properly given by the Company, is not permitted under Section 7.04(b)(i), the
Company shall provide written notice thereof to such Management Employee (or his
or her estate and, if applicable, his or her Permitted Transferees), and such
purchase will be postponed and will take place without the application of
further conditions or impediments (other than as set forth in Section 7.04(a) or
in this Section 7.04(b)) at the first opportunity thereafter when the Company
has funds legally available therefor and when such purchase is not prohibited by
Section 7.04(b)(i).
(iii) If the Company's purchase of a Management Employee's Callable
Interest is postponed pursuant to Section 7.04(b)(ii), then such Management
Employee's rights as a Member shall be automatically reinstated for the duration
of such postponement except for (x) any voting rights (except pursuant to the
second proviso in Section 13.02) under this Agreement, including pursuant to
Section 3.01, (y) any rights to make additional Capital Contributions pursuant
to Section 4.02 and (z) any rights to Transfer all or any portion of its
Interest pursuant to Section 7.01 except for a Transfer (I) made with the prior
written consent of the Board of Directors or (II) in
43
accordance with Article VIII. Notwithstanding anything herein to the contrary,
under no circumstances shall such Management Employee be entitled to receive
any interest on the purchase price as a result of a postponement pursuant to
Section 7.04(b)(ii).
(c) "Look-Back" Adjustment. (i) The Company shall pay to a Management
Employee whose employment with the Company or any of its subsidiaries is
terminated on account of the Management Employee's death or is terminated by the
Company other than "for cause" the additional consideration described in Section
7.04(c)(ii) below in the event that:
(A) the Company exercises its option under Section 7.04(a)(i) in
respect of all or a portion of such Management Employee's
Callable Interest (the "Acquired Interest");
(B) within twelve months following the date on which the Company pays
to such Management Employee or his estate in cash the purchase
price for the Acquired Interest in accordance with Section
7.04(a), (1) the Company consummates a merger or other business
combination with an unaffiliated third party or completes the
sale to such a third party of all or substantially all of its
assets or (2) the Company consummates the IPO; and
(C) the amount such Management Employee would have received as a
result of such merger, business combination, sale or IPO with
respect to the Acquired Interest had such Acquired Interest not
been purchased by the Company (the "Sale Value"), is greater than
the sum of (x) the amount such Management - Employee received
pursuant to Section 7.04(a)(i) for such Acquired Interest, and
(y) an amount calculated in the - same manner as interest on such
amount at the Prime Rate (such sum, the "Look-Back ---------
Threshold").
(ii) If all the conditions set forth in Section 7.01(c)(i) are
satisfied with respect to a Management Employee, then such Management Employee
shall be entitled to receive an amount equal to the excess of the Sale Value of
such Acquired Interest over the Look-Back Threshold with respect to such
Acquired Interest. Such additional consideration with respect to the Acquired
Interest shall be paid to the Management Employee no later
44
than 20 Business Days following the date on which such merger, business
combination, sale or IPO is consummated.
(iii) For purposes of this Section 7.04, "cause" shall mean any of the
following: (i) the Management Employee is convicted of a felony; (ii) the
continued failure by the Management Employee to substantially perform his duties
under his employment arrangement or agreement relating to the Company or its
subsidiaries (other than any such failure due to total physical or mental
disability as determined by an independent physician reasonably satisfactory to
the Company) after the Management Employee has received notice from the Company
describing his failure to substantially perform his duties in sufficient detail
to give the Management Employee the opportunity to cure such failure and such
Management Employee thereafter either (x) does not promptly take reasonable
steps to cure such failure or (y) does not cure such failure within ninety (90)
days; or (iii) the Management Employee is guilty of gross neglect or gross
misconduct in carrying out his duties under his employment arrangement or
agreement with the Company or its subsidiaries and, after the Management
Employee has received notice from the Company describing his gross neglect or
gross misconduct in sufficient detail to give the Management Employee the
opportunity to cure such deficiencies, such Management Employee thereafter
either (x) does not promptly take reasonable steps to cure such deficiencies or
(y) does not cure such deficiencies within ninety (90) days.
SECTION 7.05. Options to Purchase Interests. The Company and each
Member hereby acknowledges and agrees that those persons listed on Schedule IV
have the right to purchase Interests in the Company on the terms set forth on
Schedule IV. At the time of any such purchase of Interests, the Board of
Directors shall amend Schedule II hereof to reflect the Percentage Interests of
the Members, as determined after giving effect to such purchase.
SECTION 7.06. Fair Market Value. (a) In determining the "Fair Market
Value" of an Interest (or any portion thereof) pursuant to Section 7.01(d),
Section 7.04 or Section 7.07, the Board of Directors shall give due
consideration to such factors as it deems appropriate, including the earnings
and certain other financial and operating information of the Company and its
subsidiaries in recent periods (including its margins), its potential value and
that of its subsidiaries as a whole, the tax basis of its assets, its future
prospects (including growth prospects) and business strength and that of its
subsidiaries and the industries in which they compete, its history and
management and that of its subsidiaries, the
45
general condition of the securities markets and the fair market value of
securities of privately-owned companies engaged in businesses similar to the
Company, but without applying any discount due to any Member's minority
position or lack of control with respect to the Company or with respect to the
lack of liquidity of, or absence of a market for, Interests in the Company.
Subject to Section 7.06(b), the Fair Market Value as determined in good faith
by the Board of Directors shall be binding and conclusive upon all parties
hereto.
(b) Callable Interests. At any time when this Agreement requires the
Board of Directors to determine the Fair Market Value of a Callable Interest (or
portion thereof) pursuant to Section 7.04(a) or of a Deceased Member's Interest
(or portion thereof) pursuant to Section 7.07, the Board of Directors shall
promptly make such determination and notify the applicable Member or Members
thereof. If the Interest (or portion thereof) being valued by the Board of
Directors represents a Percentage Interest of 2% or greater or is beneficially
owned by one of the individuals listed on Schedule V hereto or by the estate of
one of the individuals listed on Schedule V hereto, the applicable Member may in
good faith disagree with a valuation proposed by the Board of Directors, in
which case the valuation in question shall be determined in accordance with the
procedure provided in Section 7.06(d).
(c) Non-Cash Consideration. If the Board of Directors is required to
determine the fair market value of non-cash consideration pursuant to Section
7.01(c)(iii)(D), the Board of Directors shall make such determination in good
faith, after consultation with an independent nationally recognized investment
banking, accounting or valuation firm selected by the Board of Directors, and
promptly notify the applicable Member thereof. If the Interest being offered to
AAH pursuant to section 7.01(c)(iii) represents a Percentage Interest of 2% or
greater or is beneficially owned by one of the individuals listed on Schedule V
hereto or by the estate of one of the individuals listed on Schedule V hereto,
the applicable Member offering the Interest may in good faith disagree with the
valuation of such non-cash consideration by the Board of Directors, in which
case the valuation in question shall be determined in accordance with the
procedure provided in Section 7.06(d). In all other cases, the valuation by the
Board of Directors shall be conclusive and binding on all the parties.
(d) Dispute Resolution. If the Board of Directors and the disagreeing
Member are unable to reach agreement within thirty days regarding a disputed
valuation
46
pursuant to Sections 7.06(b) or (c), such valuation shall be promptly
determined by a nationally recognized investment banking, accounting or
valuation firm (other than Houlihan Lokey Howard & Zukin Financial Advisors
Inc. or any successor thereto) selected by the Company with the consent of the
disagreeing Member. If the Company and the disagreeing Member fail to reach
agreement on such a firm within ten days, then within ten days of such failure
the Company shall select one such firm and the disagreeing Member shall select
another such firm, and promptly thereafter the two firms so selected shall
jointly designate an independent nationally recognized investment banking,
accounting or valuation firm, and such third firm shall determine the
valuation in question. If either the Company or the disagreeing Member fails
to select its independent nationally recognized investment banking, accounting
or valuation firm within such ten day period in accordance with the
immediately preceding sentence, such party shall be deemed to have agreed that
the firm selected within such ten day period by the other party shall
determine the valuation in question. The determination of the investment
banking, accounting or valuation firm selected pursuant to this Section
7.06(d) to determine the valuation in question shall be conclusive and binding
on all parties. The fees and expenses of the firm or firms performing a
valuation pursuant to the foregoing procedures shall be borne by the Company
if the final valuation is higher than the valuation by the Board of Directors
by more than 10% and otherwise shall be borne by the disagreeing Member or
Members.
SECTION 7.07. Estate Taxes. (a) In the event that:
(i) an executive officer of the Company or a Platform Group dies
while such individual directly or indirectly owns an Interest (such
individual, a "Deceased Member");
(ii) following the death of such Deceased Member, the Company
does not offer to purchase either (A) the Deceased Member's entire
Interest, for a cash purchase price equal to at least the Fair Market
Value of such Interest, or (B) a portion of the Deceased Member's
Interest having a Fair Market Value at least equal to the aggregate
federal and state estate taxes payable by the Deceased Member's estate
in respect of such Interest (the "Estate Taxes"), for a cash purchase
price equal to at least such Fair Market Value;
then the Company shall offer to loan to the Deceased Member's estate, on the
terms set forth in Section 7.07(b)
47
(an "Estate Tax Loan"), an amount equal to the lesser of (x) the Fair Market
Value of the Deceased Member's Interest and (y) the amount of the Deceased
Member's Estate Taxes. The Fair Market Value of a Deceased Member's Interest
or a portion thereof shall be measured for purposes of this Section 7.07 as of
the date of death of the Deceased Member.
(b) An Estate Tax Loan (i) shall bear interest at a per annum rate
equal to the higher of the Prime Rate or the Company's then current cost of
borrowed funds (as reasonably determined by the Board of Directors), with such
interest payable on the last day of each calendar quarter, (ii) shall be payable
in full (together with all accrued and unpaid interest thereon) on the later of
(A) the second anniversary of the date on which the Estate Tax Loan is made by
the Company and (B) the sixth anniversary of the date of this Agreement, and
(iii) shall be secured by a pledge of the Deceased Member's entire Interest. As
a condition precedent to the Company's obligation to make an Estate Tax Loan,
the Deceased Member's estate shall execute (x) a loan agreement and related note
reflecting the terms specified above in a form requested by the Company and
reasonably satisfactory to the Deceased Member's estate, (y) all security
documents requested by the Company in order to create the Company's security
interest in the Deceased Member's Interest and to perfect such security interest
and (z) such other agreements, documents and instruments reasonably requested by
the Company in connection with the Estate Tax Loan.
ARTICLE VIII
Initial Public Offering
-----------------------
SECTION 8.01. AAH's Right to Cause an IPO. If at any time AAH desires
to cause (A) a Transfer of all or a substantial portion of (x) the assets of the
Company or (y) the Members' Interests in the Company to a newly organized stock
corporation or other business entity ("Newco"), (B) a merger or consolidation of
the Company into or with a Newco as provided under ss. 18-209 of the Act or
otherwise, (C) the conversion of the Company into a corporation or other type of
entity as provided under ss. 18-216 of the Act or otherwise or (D) another
restructuring of all or substantially all of the assets of or Members' Interests
in the Company into a Newco, in any case in anticipation of an initial public
offering of equity securities registered under the Securities Act of a Newco
comprising all or any part of the motor vehicle dealerships and related
businesses owned directly or indirectly by the
48
Company (an "IPO"), each Member shall take such steps to effect such transfer,
merger, consolidation or other restructuring as may be requested by AAH,
including Transferring or tendering such Member's Interests to Newco in
exchange or consideration for shares of capital stock or other equity
interests of Newco, in an amount to be determined in accordance with the
formula set forth in Section 8.02, and entering into a Shareholders Agreement
in the form attached hereto as Exhibit A (the "Shareholders Agreement").
Except to the extent provided in the Shareholders Agreement, each Member shall
be entitled as a holder of shares of capital stock or other equity interests
in Newco to only those rights to which a common stockholder of a corporation
is entitled under the laws of the jurisdiction in which Newco is organized.
Any conversion of the Company into a Newco or other transaction in
anticipation of an IPO shall take legal effect as soon as practicable
following AAH's delivery of notice to the other Members of its intention to
exercise its rights pursuant to this Section 8.01. AAH and the Company shall
endeavor to cause the IPO and any transaction described in this Section 8.01
to occur reasonably contemporaneously. Because certain components of the
formula set forth in Section 8.02 may not be determinable at the time of the
conversion of the Company into a Newco, the contemporaneous issuance of shares
of Newco capital stock or other equity interests to Members in exchange for
their Interests shall not be a condition precedent to any such conversion.
Upon consummation of the IPO contemplated above, this Agreement shall
automatically terminate and be of no further force or effect; provided that
those provisions of this Agreement necessary to administer the Company's
outstanding accounting and tax matters (including Section 6.01(c)) with
respect to periods prior to effectiveness of the IPO shall survive such
termination and shall remain in effect following effectiveness of the IPO
solely for such purpose.
SECTION 8.02. Exchange of Interests. (a) Subject to Section
6.01(c)(iv), if AAH exercises its rights pursuant to Section 8.01, each Member
shall receive, in exchange for such Member's Interests, that number of shares of
capital stock (or other equity interests) of Newco equal to:
(x) the sum of:
(A) 33 1/3% of the amount of such Member's
Capital Account as of the time of the
conversion of the Company into a Newco; and
49
(B) the product of (I) such Member's IPO Value
Distribution Interest at the time of the conversion
of the Company into a Newco and (II) the difference
between (i) the product of the per share price of
the Newco common stock in the IPO and the number of
shares of Newco outstanding immediately prior to
the IPO and (ii) 331/3% of the aggregate amount of
all Members' Capital Accounts as of the time of the
conversion of the Company into a Newco;
divided by:
(y) the per share price of the Newco common stock in the IPO.
(b) Notwithstanding the foregoing, the Board of Directors may replace
the shares of capital stock (or other equity interests) of Newco that the
Managers would otherwise be entitled to receive with respect to their Carried
Interests under the formula set forth in Section 8.02(a) with an alternative
form of equity interest in, or incentive compensation payable by, Newco that the
Board of Directors determines is desirable under the circumstances in order to
provide appropriate incentives to the Managers after the IPO. In such event, the
formula set forth in Section 8.02(a) will be applied without regard to the
Carried Interests of the Managers (and any Capital Account balances associated
therewith). Any change in the consideration received by the Managers for the
Carried Interests pursuant to this Section 8.02(b) shall have the same impact on
the Dealer Members as it has on AAH, except for such differences as are
necessary to reflect, pro rata, the differences in such parties' Capital
Accounts and Percentage Interests.
(c) Newco shall issue shares of capital stock (or other equity
interests) of Newco in accordance with this Section 8.02 as soon as practical
after all components of the formula set forth above are determinable by the
Board of Directors. Subject to Section 8.02(b), each Member shall receive the
same form of equity interest of Newco.
SECTION 8.03. Shareholders Agreement. Immediately prior to the
consummation of the IPO, the parties to this Agreement shall cause Newco to
execute and deliver the Shareholders Agreement.
SECTION 8.04. Other Conversion to a Newco. If at any time AAH desires
to convert the Company into a Newco in
50
contemplation of a possible merger, consolidation, reorganization or other
business combination (a "Merger Conversion"), the terms and provisions of
Sections 8.01 and 8.02 shall apply to such Merger Conversion with such changes
as shall be necessary to reflect the change from an IPO to a Merger
Conversion.
SECTION 8.05. Power of Attorney and Proxy. Upon its admission as a
Member, each Member other than AAH hereby makes, constitutes and appoints AAH,
with full power of substitution and resubstitution, its true and lawful
attorney, for it and in its name, place and stead and for its use and benefit,
to act as its proxy in respect of (A) any vote or approval of Members required
to give effect to this Article VIII, including any vote or approval required
under ss. 18-209 of the Act, (B) the execution and delivery, on behalf of such
Member, of the signature page of the Shareholders' Agreement (or other
appropriate assumption agreement relating to the subject matter thereof) and (C)
the execution and delivery of any other document, or the granting of any other
approval, reasonably required in connection with an IPO or Merger Conversion and
not inconsistent with Sections 8.01, 8.02, 8.03 and 8.04. The proxy granted
pursuant to this Section 8.05 is a special proxy coupled with an interest and is
irrevocable until the fifth anniversary of the date hereof.
ARTICLE IX
Certificates, Etc.
------------------
SECTION 9.01. Right to Issue Certificates. If at any time the Board of
Directors determines that it is in the best interests of the Company to issue
certificates attesting to the ownership of Interests by Members, the provisions
of this Article IX shall thereafter apply (and prior to such determination by
the Board of Directors, if any, this Article IX shall have no force or effect).
SECTION 9.02. Form of Certificates. Certificates attesting to the
ownership of Interests shall be in such form as shall be approved by the Board
of Directors and shall state that the Company is a limited liability company
formed under the laws of the State of Delaware, the name of the Member to whom
such certificate is issued and that the certificates represent limited liability
company interests within the meaning of ss. 18-702(c) of the Act. Each such
certificate shall be signed by the President and Chief Executive Officer or the
Chief Operating Officer or the
51
Chief Financial Officer of the Company and by the Secretary or an Assistant
Secretary of the Company.
SECTION 9.03. Register. The transfer register or transfer books and
blank share certificates shall be kept by the Secretary of the Company or by any
transfer agent or registrar designated by the Board of Directors for that
purpose.
SECTION 9.04. Issuance. The certificates of the Company shall be
numbered and registered in the share register or transfer books of the Company
as they are issued.
SECTION 9.05. Transfer. Subject to all provisions hereof relating to
Transfers of Interests, if the Company shall issue certificates in accordance
with the provisions of this Section, Transfers of Interests shall be made on the
register or transfer books of the Company upon surrender of the certificate
therefor, endorsed by the person named in the certificate or by an attorney
lawfully constituted in writing.
SECTION 9.06. Record Holder. The Company shall be entitled to treat
the person in whose name any certificates issued by the Company stand on the
books of the Company as the absolute owner thereof, and shall not be bound to
recognize any equitable or other claim to, or interest in, such Interest on the
part of any other person.
SECTION 9.07. Lost, Destroyed or Mutilated Certificates. The holder of
any certificates issued by the Company shall immediately notify the Company of
any loss, destruction or mutilation of such certificates, and the Board of
Directors may cause a new certificate or certificates to be issued to such
holder, in case of mutilation of the certificate, upon the surrender of the
mutilated certificate or, in the case of loss or destruction of the certificate,
upon satisfactory proof of such loss or destruction and, if the Board of
Directors shall so determine, the granting of an indemnity and/or the deposit of
a bond in such form and in such sum, and with such surety or sureties, as the
Board of Directors may direct.
52
ARTICLE X
Accounting and Tax Matters;
Transactions with Members
-------------------------
53
SECTION 10.01. Fiscal Year. Unless otherwise required by the Code, the
fiscal year of the Company for financial reporting and tax purposes (the "Fiscal
Year") shall end on the last day of December in each year and shall begin on the
first day of January in each year; provided, however, that the first Fiscal Year
of the Company shall be deemed to have commenced on the date the Certificate of
Formation was filed with the Secretary of State and to have ended on the last
day of December in the same calendar year.
SECTION 10.02. Books and Records and Capital Accounts. The Company
shall maintain complete and accurate books and records at the Company's
principal place of business showing the names, addresses and Interests of each
of the Members, all receipts and expenditures, assets and liabilities, profits
and losses, and all other records necessary for recording the Company's business
and affairs, including a record of the Capital Account of each Member. Each
Member and its designees shall have the right, on reasonable notice and during
normal business hours, to inspect on a reasonable basis the books and records of
the Company. The Company shall maintain two sets of books. One set of books
shall be kept on the basis of generally accepted accounting principles and the
other shall be kept on the basis of Federal income tax principles (including ss.
704(b) of the Code).
SECTION 10.03. Bank Accounts. The Company shall maintain one or more
accounts with such bank or banks as the Board of Directors may determine from
time to time. The President and Chief Executive Officer and such other persons
as the Board of Directors shall designate shall be authorized signatories for
such accounts.
SECTION 10.04. (a) Auditors. Arthur Andersen LLP shall be appointed as
the Company's initial auditors, and any successors to Arthur Andersen LLP shall
be appointed by the Board of Directors; provided, however, that any such
successor shall be an accounting firm of recognized national standing in the
United States of America.
(b) Financial Statements. Each Member shall be entitled to receive,
and the Company shall timely furnish to each Member, (i) quarterly consolidated
and consolidating financial statements and reports of the Company and (ii)
annual audited consolidated and consolidating financial statements of the
Company.
(c) Accounting Methods. Prior to the occurrence of any IPO or Merger
Conversion or any steps preparatory to any IPO or Merger Conversion, the Company
agrees to utilize
54
the same inventory accounting methods for tax purposes as were used by the
respective Platform Groups for tax purposes prior to the Roll-Up Date, except
for such changes as may be required by any change in applicable tax laws or by
any taxing authority in an audit.
SECTION 10.05. Tax Matters. (a) Tax Elections. Except as otherwise
expressly provided herein, the Board of Directors shall make all elections and
determinations required or permitted to be made by the Company for applicable
Tax purposes, including any election under Section 754 of the Code and the
methods of accounting and depreciation to be utilized by the Company for Tax
purposes.
(b) Treatment as a Partnership. The Members agree that the Company
shall be treated as a partnership for purposes of United States Federal, state
and local income and other taxes, and further agree not to take any position or
make any election, in any Tax Return or otherwise, inconsistent therewith except
as may be required in connection with a transaction described in Article VIII.
(c) Tax Returns. The Board of Directors shall cause all required Tax
Returns to be filed with the appropriate office of the Internal Revenue Service
or any other relevant taxing authority, as the case may be. As promptly as
reasonably practicable after the end of each Fiscal Year (but in any event not
more than 90 days after the end of such Fiscal Year), the Board of Directors
shall cause the Company to deliver to each Member a copy of such Member's
Federal income tax Schedule K-1 for such Fiscal Year and such other tax
information as the Tax Matters Partner determines to be appropriate to enable
the Members to prepare and file their respective Tax Returns.
(d) Designation of Tax Matters Partner. AAH shall be the "Tax Matters
Partner" of the Company as defined in ss. 6231(a)(7) of the Code, and shall
manage all administrative and judicial proceedings conducted with respect to the
Company by the Internal Revenue Service or other Taxing authorities. All
expenses incurred by AAH while acting in such capacity shall be paid or
reimbursed by the Company.
SECTION 10.06. Business Transactions of a Member with the Company. (a)
Except to the extent provided in this Agreement, a Member may lend money to,
borrow money from, act as a surety, guarantor or endorser for, guarantee or
assume one or more specific obligations of, provide collateral for, and transact
other business with the Company and, subject to other applicable law, has the
same rights
55
and obligations with respect to any such matter as a person who is not a Member.
(b) Each Member is free to engage directly, or indirectly through any
other person, in any business that is the same or similar to any business
engaged in by the Company, and no Member shall have any duty or obligation to
bring any "corporate opportunity" to the Company; provided that no Member or
controlled Affiliate thereof shall establish or acquire a motor vehicle
dealership within 75 miles of a motor vehicle dealership then owned or operated
by the Company without the approval of the Board of Directors (including at
least two Dealer Directors).
(c) No Member (or if such Member is not a natural person, any natural
person that owns a beneficial interest in such Member) shall, during the time
such Member is a Member and for one (1) year after such Member ceases to be a
Member or such natural person ceases to own a beneficial interest in such
Member, (i) directly or indirectly employ, solicit, entice or encourage to leave
the employ of the Company or any of its subsidiaries, any person who is, or at
any time during the preceding twelve months was, employed by, or otherwise
engaged to perform services for, the Company or any of its subsidiaries or (ii)
otherwise intentionally interfere with the relationship of the Company or any of
its subsidiaries with any person who is employed by or otherwise engaged to
perform services for the Company or any of its subsidiaries; provided, however,
that the restrictions set forth in this Section 10.06(c) shall not apply to AAH,
any Affiliate of AAH or to any Member or natural person who is bound by a
non-solicitation restriction contained in a consulting or employment agreement
between such Member or natural person and the Company or its subsidiaries.
SECTION 10.07. Liability to Third Parties; Capital Account Deficits.
Except as may be otherwise provided by the Act or herein, the debts, obligations
and liabilities of the Company, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liabilities of the Company, and no
Member shall be obligated personally for any such debt, obligation or liability
of the Company solely by reason of being a Member. No Member shall be liable to
make up any deficit in its Capital Account.
56
ARTICLE XI
Indemnification of Officers,
Directors and Other Authorized Representatives
----------------------------------------------
SECTION 11.01. Scope of Indemnification. (a) General Rule. To the
fullest extent permitted by law, the Company shall indemnify an indemnified
representative on an after-tax basis against any liability incurred in condition
with any proceeding in which the indemnified representative may be involved as a
party or otherwise by reason of the fact that such person is or was serving in
an indemnified capacity, including liabilities resulting from any actual or
alleged breach or neglect of duty, error, misstatement or misleading statement
or act giving rise to strict or products liability; provided that no indemnity
shall be payable hereunder against any liability incurred by such indemnified
representative by reason of (i) fraud, wilful violation of law, gross negligence
or its material breach of this Agreement or its bad faith or (ii) the receipt by
such indemnified representative from the Company of a personal benefit to which
such indemnified representative is or was not legally entitled.
(b) Partial Payment. If an indemnified representative is entitled to
indemnification in respect of a portion, but not all, of any liabilities to
which such indemnified representative may be subject, the Company shall
indemnify such indemnified representative to the maximum extent legally
permissible for such liabilities.
(c) Presumption. The termination of a proceeding by judgment, order,
settlement or conviction or upon a plea of nolo contendere or its equivalent
shall not of itself create a presumption that the indemnified representative is
not entitled to indemnification under this Section 11.01.
(d) Definitions. For purposes of this Article XI: (i) "indemnified
capacity" means any and all past, present and future service by an indemnified
representative in one or more capacities as a Member, Director, officer,
employee or agent of the Company, or, at the request of the Company, as a
member, director, officer, employee, agent, fiduciary or trustee of another
limited liability company, corporation, partnership, joint venture, trust,
employee benefit plan or other entity or enterprise, (ii) "indemnified
representative" means any and all Members, Directors and officers of the
Company, all members, shareholders, partners, directors, officers, employees or
agents of any Member, all directors and officers of any Platform Group and any
other person designated as an
57
indemnified representative by the Board of Directors (which may, but need not,
include any person serving, at the request of the Company, as a member,
director, officer, employee, agent, fiduciary or trustee of another limited
liability company, corporation, partnership, joint venture, trust, employee
benefit plan or other entity or enterprise), (iii) "liability" means any
damage, judgment, amount paid in settlement, fine, penalty, punitive damages,
excise tax assessed with respect to any employee benefit plan, or cost or
expense of any nature (including attorneys' fees and disbursements) and (iv)
"proceeding" means any threatened, pending or completed action, suit, appeal
or other proceeding of any nature, whether civil, criminal, administrative or
investigative, whether formal or informal, and whether brought by or in the
right of the Company, its Members or otherwise.
SECTION 11.02. Advancing Expenses. To the fullest extent permitted by
law, the Company may pay the expenses (including attorneys' fees and
disbursements) incurred in good faith by an indemnified representative in
advance of the final disposition of a proceeding upon receipt of an undertaking
by or on behalf of the indemnified representative to repay the amount if it is
ultimately determined that such person is not entitled to be indemnified by the
Company pursuant to this Article XI.
SECTION 11.03. Securing of Indemnification Obligations. To further
effect, satisfy or secure the indemnification obligations provided in this
Article XI or otherwise, the Company may maintain insurance, obtain a letter of
credit, act as self-insurer, create a reserve, trust, escrow, cash collateral or
other fund or account, enter into indemnification agreements, pledge or grant a
security interest in any assets or properties of the Company, or use any other
mechanism or arrangement whatsoever in such amounts, at such costs, and upon
such other terms and conditions as the Board of Directors shall deem
appropriate.
SECTION 11.04. Scope of Article. The rights granted by this Article XI
shall not be deemed exclusive of any other rights to which those seeking
indemnification, contribution or advancement of expenses may be entitled under
any statute, agreement, vote of Members or disinterested Members of otherwise,
both as to action in an indemnified capacity and as to action in any other
capacity. The indemnification, contribution and advancement of expenses provided
by or granted pursuant to this Article XI shall continue as to a person who has
ceased to be an indemnified representative in respect of matters arising
58
prior to such time, and shall inure to the benefit of the successors, heirs,
executors, administrators and personal representatives of such a person.
SECTION 11.05. Assumption by Newco. Upon conversion of the Company
into a Newco pursuant to Article VIII, the Newco shall assume all of the
obligations of the Company under this Article XI and under Section 5.07 of the
Transfer and Exchange Agreement.
ARTICLE XII
Dissolution and Winding-Up
--------------------------
SECTION 12.01. Dissolution. The Company shall be dissolved upon the
earliest to occur of any of the following: (a) the sale, transfer or other
disposition of all or substantially all the non-cash assets of the Company, (b)
the decision of the Board of Directors to dissolve the Company or (c) the entry
of a decree of judicial dissolution under ss. 18-802 of the Act. The Bankruptcy,
death, retirement, resignation, expulsion or dissolution of a Member or the
occurrence of any other event which terminates the continued membership of a
Member in the Company shall not in and of itself cause a dissolution of the
Company to occur (and the Company, without such Member, shall continue), unless
there are no remaining Members of the Company.
SECTION 12.02. Winding-Up Affairs and Distribution of Assets. (a) Upon
dissolution of the Company, one or more Members appointed by the Board of
Directors or, in the case of dissolution where the Company has (or had) only one
remaining Member, such remaining Member, shall be the liquidating trustee for
the Company (the "Liquidating Member") and shall proceed to wind up the affairs
of the Company, liquidate the remaining property and assets of the Company and
wind up and terminate the business of the Company. The Liquidating Member shall
cause a full accounting of the assets and liabilities of the Company to be taken
and, unless all the Members otherwise agree, shall cause the assets to be
liquidated and the business to be wound up as promptly as possible by selling
the Company assets and distributing the net proceeds therefrom in accordance
with Section 12.02(b).
(b) Unless and to the extent otherwise required by the Act or any
other applicable law or Article VIII hereof, the proceeds of any such
liquidation shall be applied in the following order of priority: (i) first, to
59
creditors of the Company (including Members who are creditors, to the extent
permitted by law) in satisfaction of the liabilities of the Company (whether
by payment or the making of reasonable provision for payment thereof) and (ii)
second, to the Members in proportion to and in satisfaction of their
respective Capital Accounts.
ARTICLE XIII
Miscellaneous Provisions
SECTION 13.01. Entire Agreement. This Agreement sets forth the entire
understanding among the parties relating to the subject matter contained herein
and merges all prior discussions among them.
SECTION 13.02. Amendments and Modifications. This Agreement may be
amended or modified at any time and from time to time by the written consent of
AAH and a Majority in Interest of the Dealer Members; provided, however, that
the Board of Directors may amend or modify this Agreement at any time and from
time to time without the consent of any Member in order to effect any issuance
of Interests (or options to acquire Interests) or any adjustment to the
Percentage Interests pursuant to Article IV (each, a "Permitted Modification");
provided, further, that any modification or amendment (a) (i) increasing the
amount of Capital Contributions required to be made by any Member or that would
require any Member to make a loan to the Company, (ii) resulting in a loss of
any Member's limited liability status or (iii) modifying or amending this
Section 13.02, shall require the written consent of each Member affected
thereby, or (b) except for a Permitted Modification, altering or changing the
powers, preferences or rights of any Dealer Members so as to affect them
adversely shall require the written consent of a Majority in Interest of the
Dealer Members so adversely affected by the modification or amendment. Subject
to any mandatory provisions of the Act or applicable law to the contrary, any
amendment or modification so adopted shall be binding upon the Company and all
the Members except as otherwise provided in this Section 13.02.
SECTION 13.03. Severability. If any one or more of the provisions
contained in this Agreement or in any document executed in connection herewith
shall be invalid, illegal or unenforceable in any respect under any applicable
law, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired; provided,
however, that in such
60
case the Board of Directors shall endeavor to amend or modify this Agreement
(subject to the terms, conditions and requirements set forth in Section 13.02)
to achieve to the extent reasonably practicable the purpose of the invalid
provision.
SECTION 13.04. GOVERNING LAW. THIS AGREEMENT AND ALL ACTIONS
CONTEMPLATED HEREBY SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES).
SECTION 13.05. No Waiver of Rights. No failure or delay on the part of
any party in the exercise of any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power or
right preclude other or further exercise thereof or of any other right or power.
The waiver by any party or parties hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other or
subsequent breach hereunder. All rights and remedies existing under this
Agreement are cumulative and are not exclusive of any rights or remedies
otherwise available.
SECTION 13.06. SUBMISSION TO JURISDICTION. ANY AND ALL SUITS, LEGAL
ACTIONS OR PROCEEDINGS ARISING OUT OF THIS AGREEMENT SHALL BE BROUGHT IN THE
SUPERIOR COURT OR THE COURT OF CHANCERY OF THE STATE OF DELAWARE, THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE, THE SUPREME COURT OF THE
STATE OF NEW YORK, NEW YORK COUNTY OR THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND EACH MEMBER HEREBY SUBMITS TO AND ACCEPTS THE
EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE PURPOSE OF SUCH SUITS, LEGAL
ACTIONS OR PROCEEDINGS. IN ANY SUCH SUIT, LEGAL ACTION OR PROCEEDING, EACH
MEMBER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS AND
AGREES THAT SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED
TO IT AT ITS ADDRESS SET FORTH IN THE BOOKS AND RECORDS OF THE COMPANY. TO THE
FULLEST EXTENT PERMITTED BY LAW, EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
SUIT, LEGAL ACTION OR PROCEEDING IN ANY SUCH COURT AND HEREBY FURTHER WAIVES ANY
CLAIM THAT ANY SUIT, LEGAL ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 13.07. Specific Performance. The parties hereto hereby declare
that irreparable damage would occur as a result of the failure of any party
hereto to perform any of its obligations under this Agreement in accordance with
61
the specific terms hereof. Therefore, all parties hereto shall have the right
to specific performance of the obligations of the other parties under this
Agreement and if any party hereto shall institute any action or proceeding to
enforce the provisions hereof, any person against whom such action or
proceeding is brought hereby waives the claim or defense therein that such
party has an adequate remedy at law. The right to specific performance should
be in addition to any other remedy to which a party hereto may be entitled at
law or in equity.
SECTION 13.08. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 13.09. Headings. The Article, Section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
SECTION 13.10. Binding Agreement. Except as expressly provided herein,
the covenants and agreements contained herein shall be binding upon, and inure
to the benefit of, the estate, heirs, legal representatives, successors and
permitted assigns of the respective Members.
SECTION 13.11. Notices. All notices and other communications required
or permitted by this Agreement shall be made in writing and any such notice or
communication shall be deemed given or delivered when delivered in person,
transmitted by telecopier, or one Business Day after it has been sent by a
nationally recognized overnight courier, at the address or addresses for notices
to the recipient designated on Schedule II. Communications by telecopier also
shall be sent concurrently by first class mail or nationally recognized
overnight courier, but shall in any event be effective as stated above;
provided, however, that any and all Initial Offers, First Additional Offers and
Second Additional Offers delivered by the Company to the Members pursuant to
Section 4.02(a) shall be delivered both by telecopier and by nationally
recognized overnight courier. Each Member may from time to time change its
address for notices under this Section 13.11 by giving at least five days'
written notice of such changed address to the Company.
SECTION 13.12. Waiver of Partition; Classes or Group of Members. Each
Member hereby waives any and all rights, if any, that such Member may have to
maintain an action for partition of the Company's property. The Company
62
shall have one class or group of Members for all purposes under the Act,
including, without limitation, ss. 18-209 thereof.
SECTION 13.13. Proxy. Upon its admission as a Member, (i) each Manager
hereby makes, constitutes and appoints AAH, with full power of substitution and
resubstitution, its true and lawful attorney, for it and in its name, place and
stead and for its use and benefit, to act as its proxy in respect of all
Interests which such Manager now or hereafter may own or hold, including,
without limitation, the right to vote such Interest at any annual, general or
special meeting of Members, to consent to any action by written consent of
Members and to grant any other consent or approval required or sought from
Members, under this Agreement or applicable law and (ii) each Manager authorizes
such attorney-in-fact to take any further action which such attorney-in-fact
shall consider necessary or advisable in connection with any of the foregoing,
hereby giving such attorney-in-fact full power and authority to do and perform
each and every act or thing whatsoever requisite or advisable to be done in and
about the foregoing as fully as such Member might or could do if personally
present, and hereby ratifying and confirming all that such attorney-in- fact
shall lawfully do or cause to be done by virtue hereof; provided, however, that
the power of attorney granted under this Section 13.13 may not be used to amend
this Agreement under Section 13.02 or to exercise the rights of any Member under
Section 4.02. Each such Manager hereby further affirms that any such proxy
hereby granted shall be irrevocable and shall be deemed coupled with an
interest. Each Manager agrees to execute and deliver any further powers of
attorney, consents, proxies or other agreements necessary or appropriate to give
effect to this Section 13.13.
63
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed as of the day and year first written above.
ASBURY AUTOMOTIVE HOLDINGS L.L.C.,
by
----------------------------
Name:
Title:
ASBURY VILLANOVA IV L.L.C.,
by
----------------------------
Name:
Title:
NORTH POINT FORD, INC.,
by /s/ Stephen B. Humphries
----------------------------
Name: Stephen B. Humphries
Title: Secretary
NORTH POINT, INC.,
by /s/ Stephen B. Humphries
----------------------------
Name: Stephen B. Humphries
Title: Secretary
PRESTIGE, INC.,
by /s/ Stephen B. Humphries
----------------------------
Name: Stephen B. Humphries
Title: Secretary
64
PREMIER AUTOPLAZA, INC.,
by /s/ Stephen B. Humphries
----------------------------
Name: Stephen B. Humphries
Title: Secretary
MCLARTY AUTO MALL, INC.,
by /s/ Stephen B. Humphries
----------------------------
Name: Stephen B. Humphries
Title: Secretary
HOPE AUTO COMPANY,
by /s/ Stephen B. Humphries
----------------------------
Name: Stephen B. Humphries
Title: Secretary
NALLEY MANAGEMENT SERVICES, INC.,
by
----------------------------
Name:
Title:
NALLEY CHEVROLET, INC.,
by
----------------------------
Name:
Title:
SPECTRUM SOUND & ACCESSORIES, INC.,
by
----------------------------
Name:
Title:
65
NALLEY MARIETTA AUTOMOBILES, INC.,
by
----------------------------
Name:
Title:
NALLEY LUXURY IMPORTS, INC.,
by
----------------------------
Name:
Title:
NALLEY ATLANTA IMPORTS, INC.,
by
----------------------------
Name:
Title:
SPECTRUM LEASING, INC.,
by
----------------------------
Name:
Title:
LUTHER COGGIN,
/s/ Luther Coggin
-----------------------------------
J. H. BHATT,
/s/ J. H. Bhatt
-----------------------------------
RICHARD A. CARACELLO,
/s/ Richard A. Caracello
-----------------------------------
66
ROBERT W. CARACELLO
/s/ Robert W. Caracello
-----------------------------------
KEVIN DELANEY,
/s/ Kevin Delaney
-----------------------------------
MITCHELL W. LEGLER,
/s/ Mitchell W. Legler
-----------------------------------
LINDA L. MARLETTE,
/s/ Linda L. Marlette
-----------------------------------
CHARLES L. MCINTOSH,
/s/ Charles L. McIntosh
-----------------------------------
THOMAS R. MOORE,
/s/ Thomas R. Moore
-----------------------------------
NANCY D. NOBLE,
/s/ Nancy D. Noble
-----------------------------------
STEPHEN R. MOORE,
/s/ Stephen R. Moore
-----------------------------------
67
THOMAS G. ROETS, JR.,
/s/ Thomas G. Roets, Jr.
-----------------------------------
JOHN M. ROOKS,
/s/ John M. Rooks
-----------------------------------
TODD F. SETH,
/s/ Todd F. Seth
-----------------------------------
CHARLIE (C.B.) TOMM,
/s/ Charlie (C.B.) Tomm
-----------------------------------
CROWN NORTH CAROLINA, LLC,
by /s/ Royce O. Reynolds
------------------------------
Name: Royce O. Reynolds
Title: Manager
DEALER GROUP LLC,
by
------------------------------
Name:
Title:
JOHN R. CAPPS,
/s/ John R. Capps
-----------------------------------
68
J.I.W. ENTERPRISES, INC.,
by /s/ J.I. Wooley
------------------------------
Name: J.I. Wooley
Title: President
DAVID MCDAVID PONTIAC, INC.,
by
------------------------------
Name:
Title:
DAVID MCDAVID NISSAN, INC.,
by
------------------------------
Name:
Title:
JAY TORDA,
/s/ Jay Torda
-----------------------------------
DAVE WEGNER,
/s/ Dave Wegner
-----------------------------------
GIBSON FAMILY PARTNERSHIP, L.P.,
by
----------------------------
Name:
Title:
BRIAN KENDRICK,
/s/ Brian Kendrick
-----------------------------------
Schedule I
----------
Current Members
of the Company
--------------
1. Asbury Villanova IV L.L.C.
2. Dealer Group LLC
Schedule II
-----------
Members of the Company,
Initial Capital Accounts
and Percentage Interests
Upon Effectiveness of Third
Amended and Restated Limited
Liability Company Agreement
---------------------------
Initial
Capital Percentage
Member Account Interest
- ------ ------- --------
1. Asbury Automotive Holdings L.L.C
1050 Westlakes Drive, Suite 300
Berwyn, PA 19312....................... $194,996,287 59.08%
2. North Point Ford, Inc
4400 Landers Road
North Little Rock, AR 72231............ 4,785,493 1.45%
3. North Point, Inc.
6030 Landers Road
Sherwood, AR 72117..................... 329,203 0.10%
4. Premier Autoplaza, Inc.
1500 N. Shackleford Road
Little Rock, AR 72221.................. 1,714,266 0.52%
5. Prestige, Inc.
5045 Warden Road
North Little Rock, AR 72231............ 1,931,059 0.59%
6. McLarty Auto Mall, Inc.
3232 Summerhill Road
Texarkana, TX 75503.................... 1,025,749 0.31%
7. Hope Auto Company
1400 N. Hervey
Hope, AR 71802-0619.................... 50,183 0.02%
8. Nalley Management Services, Inc.
87 West Paces Ferry Road
Atlanta, GA 30305...................... 660,564 0.20%
9. Nalley Chevrolet, Inc.
2555 Metropolitan Parkway
Atlanta, GA 30315...................... 17,901,278 5.42%
10. Spectrum Sound & Accessories, Inc.
2536 Metropolitan Parkway
Atlanta, GA 30315...................... 1,321,128 0.40%
11. Nalley Marietta Automobiles, Inc.
3555 Cobb Parkway
Marietta, GA 30062..................... 3,236,762 0.98%
12. Nalley Luxury Imports, Inc.
1431 Cobb Parkway
Marietta, GA 30062..................... 6,011,130 1.82%
13. Nalley Atlanta Imports, Inc.
87 West Paces Ferry Road
Atlanta, GA 30305...................... 1,453,240 0.44%
2
Initial
Capital Percentage
Member Account Interest
- ------ ------- --------
14. Spectrum Leasing, Inc.
2560 Moreland Avenue
Atlanta, GA 30315.......................... 132,113 0.04%
15. Luther Coggin
P.O. Box 16469
Jacksonville, FL 32245-6469............... 17,769,343 5.38%
16. J.H. Bhatt
2560 Tempo Drive
Jacksonville, FL 32216..................... 480,253 0.15%
17. Richard A. Caracello
7839 Sabal Lake Drive
Port St. Lucie, FL 34986................... 120,063 0.04%
18. Robert W. Caracello
9670 Landings Drive
Port St. Lucie, FL 34986................... 960,505 0.29%
19. Kevin Delaney
4551 Swilcan Bridge Ln. N.
Jacksonville, FL 32224..................... 240,126 0.07%
20. Mitchell W. Legler
700A Wharfside Way
Jacksonville, FL 32207..................... 480,253 0.15%
21. Linda L. Marlette
12147 West Cattail Drive
Jacksonville, FL 32223..................... 180,095 0.05%
22. Charles L. McIntosh
5333 John Reynolds Drive
Jacksonville, FL 32227..................... 216,594 0.07%
23. Thomas R. Moore
13709 Glenhaven Court
Jacksonville, FL 32224..................... 240,126 0.07%
24. Nancy D. Noble
14471 Pablo Terrace
Jacksonville, FL 32224..................... 480,253 0.16%
25. Stephen R. Moore
13474 Aqualine Road
Jacksonville, FL 32224..................... 406,294 0.12%
26. Thomas G. Roets, Jr.
826 Brookmont Ave. E
Jacksonville, FL 32311..................... 120,063 0.04%
27. John M. Rooks
4210 Cordgrass Inlet Drive
Jacksonville Beach, FL 32250............... 120,063 0.04%
28. Todd F. Seth
12677 Muirfield Blvd. North
Jacksonville, FL 32225..................... 240,126 0.07%
3
Initial
Capital Percentage
Member Account Interest
- ------ ------- --------
29. Charlie (C.B.) Tomm
462 Inland Way
Atlantic Beach, FL 32233................... 1,478,217 0.45%
30. Crown North Carolina, LLC
3633 W. Wendover Avenue
Greensboro, NC 27407.......................17,127,276 5.19%
31. Dealer Group LLC
Benjamin Franklin Plaza
1 Southwest Columbus Street
Portland, OR 97258.........................16,263,661 4.93%
32. John R. Capps
11830 Olive Street Road
St. Louis, MO 63141........................ 6,356,175 1.93%
33. J.I.W. Enterprises, Inc
c/o Jeffrey I. Wooley
100000 Lindelaan Drive
Tampa, FL 33168............................15,098,860 4.57%
34. David McDavid Pontiac, Inc.
3700 West Airport Freeway
Irving, TX 75062........................... 9,592,299 2.91%
35. David McDavid Nissan, Inc.
3900 West Airport Freeway
Irving, TX 75062........................... 4,069,289 1.23%
36. Jay Torda
3600 West Airport Freeway
Irving, TX 75062........................... 976,207 0.30%
37. Dave Wegner
c/o David McDavid Nissan
11200 Gulf Freeway
Houston, TX 77034.......................... 976,207 0.30%
38. Brian Kendrick
c/o Asbury Automotive Group
1050 Westlakes Drive
Berwyn, PA 19312........................... 0 0.00%
39. Gibson Family Partnership, L.P.
c/o Asbury Automotive Group
1050 Westlakes Drive
Suite 300
Berwyn, PA 19312........................... 508,312 0.15%
Schedule III
------------
Percentage Interest
Adjustment Formula
Pursuant to Section 4.04 of this Agreement, the Percentage Interest of
each Dealer will be adjusted with respect to each Applicable Period as follows:
1. Same Store EBITDA Adjustment. Each such Dealer's
Percentage Interest shall be increased or decreased, as
applicable, by an amount equal to the Dealer's Same
Store EBITDA Adjustment for the Applicable Period,
which is determined as follows:
(i) first, divide the absolute value of the EBITDA
Percentage Change for the Dealer's Affiliated Platform Group for the
Applicable Period, by the sum of the absolute values of the EBITDA
Percentage Change for all Platform Groups for the Applicable Period;
(ii) second, subtract from the EBITDA Percentage Change for
the Dealer's Affiliated Platform Group for the Applicable Period, the
product of (x) the amount yielded by clause (i) and (y) the aggregate
sum of the values of the EBITDA Percentage Change for all Platform
Groups for the Applicable Period;
(iii) third, multiply the amount yielded by
clause (ii), by two;
(iv) fourth, multiply the amount yielded by clause (iii), by
75% (such product, the "Platform Same Store EBITDA Adjustment"); and
(v) fifth, multiply the Platform Same Store EBITDA
Adjustment by such Dealer's Pro Rata Share.
2. Acquisition Adjustment. Each such Dealer's Percentage
Interest shall be increased or decreased, as
applicable, by an amount equal to the Dealer's
Acquisition Adjustment for the Applicable Period, which
is determined as follows:
(i) first, divide (x) the Net Acquired EBITDA for the
Dealer's Affiliated Platform Group for the Applicable Period, by (y)
the aggregate sum of the Net Acquired EBITDA for all the Platform
Groups for the Applicable Period;
(ii) second, divide (x) the amount yielded by
clause (i), by (y) the largest amount yielded by
2
clause (i) for any single Platform Group for the
Applicable Period;
(iii) third, divide (x) the amount yielded by
clause (ii) by (y) two;
(iv) fourth, subtract .25 from the amount yielded
by clause (iii);
(v) fifth, multiply (x) the amount yielded by
clause (iv) by (y) eight;
(vi) sixth, divide (x) the absolute value of the amount
yielded by clause (v), by (y) the sum of the absolute values of the
amount yielded by clause (v) for all Platform Groups for the
Applicable Period;
(vii) seventh, subtract the product of (x) clause (vi) and
(y) the sum of clause (ii) for all Platform Groups for the Applicable
Period, from the amount yielded by clause (ii) for the Dealer's
Affiliated Platform Group for the Applicable Period;
(viii) eighth, multiply the amount yielded by
clause (vii), by 25% (such product, the "Platform
Acquisition Adjustment"); and
(ix) ninth, multiply the Platform Acquisition
Adjustment by such Dealer's Pro Rata Share.
3. Adjustment Cap; Other Adjustment. In the event that an
adjustment, taken together with the aggregate amount of
all other adjustments made pursuant to this
Schedule III to such Dealer's Percentage Interest, of a
Dealer's Percentage Interest provided for under this
Schedule III would result in such Percentage Interest
being increased or decreased by more than 20% of such
Dealer's Percentage Interest originally received in the
Roll-Up Transaction as such original Percentage
Interest (i.e., the Percentage Interest related to such
Dealer's initial Interest received in the Roll-Up
Transaction) has been adjusted as of the end of such
Applicable Period pursuant to this Agreement (other
than pursuant to Section 4.04 thereof) (the "Original
Percentage Interest"), then:
(i) the Percentage Interest of such Dealer (the "Adjusted
Dealer") shall be increased or decreased, as the case may be, by the
greatest amount that will cause the Adjusted Dealer's Percentage
Interest not to
3
increase or decrease by more than 20% of such Dealer's
Original Percentage Interest; and
(ii) the Percentage Interests of all other Dealers shall be
appropriately adjusted pro rata to take into account the amount of
the additional adjustment that such Adjusted Dealer's Percentage
Interest would have been adjusted, but for the operation of clause
(i) of this Section 3.
4. Equitable Modification by the Board of Directors;
Annex A. (a) In the event that the Board of Directors
determines in good faith that the application of this
Schedule III results in an adjustment with respect to
the Percentage Interest of a Member that (i) is
unintended by, and not in conformity with, the original
intent of Section 4.04 and Schedule III and (ii) is
grossly unfair or inequitable to such Member, the Board
of Directors shall have the power and authority to
equitably modify this Schedule III solely to the extent
necessary to rectify such unfairness or inequity.
(b) Annex A is attached hereto to illustrate the intended
effect of the adjustment formula set forth in this Schedule III,
provided that to the extent this Schedule III and Annex A are in
conflict, this Schedule III shall control.
5. Certain Definitions
"Acquisition" means an acquisition by the
Affiliated Platform Group on or after October 1, 1999 of an entity or
group of assets comprising a business engaged in the sale of trucks
or automobiles or related businesses; provided, however, that such
Affiliated Platform Group may elect to exempt any such acquisition
from the definition of Acquisition until such time that is six months
after the date of consummation of such Acquisition to accommodate
higher multiple Acquisitions predicated on a performance improvement
plan.
"Acquired EBITDA" means, for any Platform Group,
for any Applicable Period, the portion, if any, of such Platform
Group's EBITDA for such Applicable Period that is attributable to any
Acquisition or Acquisitions made by such Platform Group on or after
October 1, 1999 hereof.
"Acquisition Capital Charge" means, with respect to
each Acquisition, the Cost of Capital for such Acquisition, prorated
(based on a year of
4
365 days) for any Applicable Period of less than a fiscal year and
for any Acquisition initially completed during the Applicable Period.
"Affiliated Platform Group" means the Platform
Group in which such Dealer prior to the Roll-Up Date owned a Dealer
Transferred Interest (as defined in the Transfer and Exchange
Agreement) or, in the case of Dealer Group LLC, owned an Interest.
"Applicable Period" means each, if applicable, of
(i) the interim period beginning on October 1, 1999 and ending at the
end of the fiscal year in which the Roll-Up occurs (the "Roll-Up
Year"), (ii) any complete fiscal year after the Roll-Up Date and
(iii) the interim period beginning on the first day of a fiscal year
occurring after the Roll-Up Year in which the IPO is consummated and
ending on the last day of the month in such fiscal year preceding the
date of the preliminary prospectus distributed to prospective
investors for the IPO. If the IPO is consummated in 2000, there shall
be no adjustment pursuant to Section 4.04(a) and this Schedule III.
"Capital Charge" means, with respect to any
Affiliated Platform Group for any Applicable Period, the aggregate
sum of the Acquisition Capital Charges for the Applicable Period for
each Acquisition completed by the Affiliated Platform Group during
the period beginning on October 1, 1999 and ending on the last day of
the Applicable Period.
"Cost of Capital" means, with respect to an
Acquisition, the sum of (x) the product of 20.77% and the portion of
the Transaction Value of such Acquisition funded with equity capital
and (y) the product of 10% and the portion of the Transaction Value
of such Acquisition funded with debt capital.
"EBITDA" means, with respect to any Affiliated
Platform Group for any Applicable Period, the earnings of such person
before non-floor plan interest, taxes, depreciation and amortization
expenses for such Applicable Period; provided, however, that expenses
related to investments in new motor vehicle sales franchises (but not
renovations or relocations) will not be included in EBITDA until such
date that is six months after the opening of such franchise;
provided, further, that with respect to any sale or other disposition
of a motor vehicle franchise by such Affiliated Platform Group (an
"Asset Sale") during any
5
Applicable Period, the EBITDA for such Affiliated Platform Group for
such Applicable Period and all subsequent Applicable Periods shall be
calculated as if such motor vehicle franchise had not been owned by
such Affiliated Platform Group or the Company as of the beginning of
such Applicable Period. EBITDA as of September 30, 1999, and as of
the end of each Applicable Period shall be determined on a basis and
using a methodology consistent with the EBITDA for each Platform
Group determined and used by the Appraiser (as defined in the
Transfer and Exchange Agreement) to value each Platform Group as
described in Section 2.04(a) of the Transfer and Exchange Agreement.
"EBITDA Percentage Change" means, with respect to
any Affiliated Platform Group for any Applicable Period, the
percentage increase or decrease of Same Store EBITDA Percentage of
such Platform Group for the Applicable Period in question as compared
to Same Store EBITDA Percentage of such Platform Group (i) for the
previous Applicable Period or (ii) in the case of the first
Applicable Period following the Closing Date, as determined for
purposes of the appraisal described in Section 2.04 of the Transfer
and Exchange Agreement of such Platform Group; provided, that if
there is an Asset Sale during any Applicable Period, the applicable
motor vehicle franchise will be deemed for the purpose of calculating
the EBITDA Percentage Change for such Applicable Period to not have
been owned by the Company or such Affiliated Platform Group at any
time during the previous Applicable Period.
"Net Acquired EBITDA" means, with respect to each
Platform Group for any Applicable Period, such Platform Group's
Acquired EBITDA for the Applicable Period less the Platform Group's
Capital Charge for the Applicable Period.
"Pro Rata Share" means with respect to each Dealer
a fraction (a) the numerator of which equals the Percentage Interest
of the Dealer as of the date of this Agreement and (b) the
denominator of which equals the aggregate Percentage Interest of all
the Dealers associated with such Dealer's Affiliated Platform Group
as of the date of this Agreement.
"Same Store EBITDA Percentage" means, with respect
to any Platform Group for any Applicable Period, the EBITDA of the
Affiliated Platform Group for the Applicable Period that is
attributable to
6
automobile sales franchises (including without limitation, automobile
financing and used car sales businesses) owned as of September 30,
1999 expressed as a percentage of the total EBITDA of the Company for
such Applicable Period that is attributable to automobile sales
franchises owned as of September 30, 1999.
"Transaction Value" means, with respect to an
Acquisition, the aggregate amount of consideration paid by a Platform
Group to complete such Acquisition.
Schedule IV
-----------
Options to Purchase Interests
-----------------------------
Option
Grant Value/ Date Option
Name Purchase Price1 is Exercisable2
---- -------------- --------------
Brian Kendrick (TDB) 1/3 per year
Tad Decker $200,000 1/3 per year
Bob McLaughlin 50,000 1/3 per year
Carmelo Seguinot 50,000 1/2 per year
Joe Agresti 75,000 1/3 per year
Daryle Yergler 125,000 1/3 per year
Tony Lee 175,000 1/2 per year
Brett Hutchinson 50,000 1/3 per year
Tom Walker 75,000 1/2 per year
Gregory L. Zulli 50,000 1/3 per year
Weitz, Wayne 50,000 1/3 per year
Director Fixed
Operations 75,000 1/3 per year
Director Variable
Operations 75,000 1/3 per year
Director Planning
and Strategy 75,000 1/3 per year
Director Retail
Finance 75,000 1/3 per year
- --------
1 The exercise price for each option is listed under the column captioned
"Option Grant Value". Upon payment of such exercise price, the optionee will
receive a Membership Interest in the Company which will be equal to the
Membership Interest such optionee would have had if, on the date such option was
granted, such optionee had made a Capital Contribution to the Company in an
amount equal to such exercise price. This Membership Interest will reflect the
optionee's percentage of ownership in the Company based on the optionee's
exercise price in relation to the total pro forma fair market value of the
Company as of December 31, 1998, which was $314.654 million.
2 Options began to vest as of January 1, 1999.
Schedule V
----------
Dealer Principals
-----------------
Ben David McDavid, Sr.
Royce O. Reynolds
John Capps
Luther Coggin
C.V. Nalley, III
Thomas F. McLarty
Scott Thomason
Jeffrey I. Wooley
Schedule VI
-----------
Names of Acceptable Designees as
Dealer Directors
----------------
Ben David McDavid, Sr.
Royce O. Reynolds
John Capps
Luther Coggin
C.V. Nalley, III
Thomas F. McLarty
Scott Thomason
Jeffrey I. Wooley
Charlie (C.B.) Tomm
Exhibit A
---------
Form of Shareholders' Agreement
-------------------------------
EXHIBIT 10.7
MANAGEMENT AND CONSULTING AGREEMENT
MANAGEMENT AND CONSULTING AGREEMENT, dated as of February 23, 1999
(this "Agreement"), among ASBURY AUTOMOTIVE ARKANSAS L.L.C., a Delaware
limited liability company (the "Company"), McLARTY COMPANIES, INC., an
Arkansas corporation (the "Consulting Firm"), ASBURY AUTOMOTIVE GROUP L.L.C.,
a Delaware limited liability company ("Asbury Group") and Thomas F. McLarty,
III ("Consultant").
W I T N E S S E T H :
-------------------
WHEREAS, the Company owns and operates certain retail motor vehicle
dealerships located in the State of Arkansas (the "Business");
WHEREAS, the Company desires to retain the management and consulting
services of Consultant, and Consultant desires to provide such services, in
each case on the terms and conditions set forth in this Agreement;
WHEREAS, Asbury Group desires to retain the consulting services of
Consultant, and Consultant desires to provide such services, in each case on
the terms and conditions set forth in this Agreement; and
WHEREAS, the Consultant, as an employee of the Consulting Firm,
desires to provide its services as aforesaid as an employee of the Consulting
Firm, and the Consulting Firm desires to provide to the Company and Asbury
Group the services of the Consultant;
NOW, THEREFORE, in consideration of the premises and mutual
covenants and agreements contained herein and for other good and valuable
consideration, the parties hereto hereby agree as follows:
1. Agreements to Retain. (a) Upon the terms and subject to the
conditions of this Agreement, the Company hereby retains the Consulting Firm
for the purpose of causing Consultant to provide management and consulting
services to the Company, and Consultant and the Consulting Firm hereby each
accepts the terms of retainer herein by the Company.
(b) Upon the terms and subject to the conditions of this Agreement,
Asbury Group hereby retains the Consulting Firm for the purpose of causing
Consultant to provide consulting services to Asbury Group, and Consultant and
the Consulting Firm each hereby accepts the terms of retainer herein by Asbury
Group.
2
2. Term; Services to be Provided. (a) Term of Agreement. The term of
this Agreement shall commence on the date of this Agreement (the "Effective
Date"), and shall remain in effect for an initial term expiring on the third
anniversary of the Effective Date (the "Initial Term"); provided, that this
Agreement may be sooner terminated with respect to the consulting and
management arrangements among the Company, the Consulting Firm and Consultant
(the "Company Arrangements"), or with respect to the consulting arrangements
among Asbury Group, the Consulting Firm and Consultant (the "Asbury
Arrangements") (or both), pursuant, in each case, to the applicable provisions
of Section 6 hereof. After the Initial Term, this Agreement may be renewed for
additional one-year terms (each, an "Extended Term") upon the mutual written
consent, in the case of the Company Arrangements, of the Company, the
Consulting Firm and Consultant, and in the case of the Asbury Arrangements, of
Asbury Group, the Consulting Firm and Consultant. The period of time between
the Effective Date and the termination of this Agreement pursuant to its terms
is herein referred to, with respect to the Company Arrangements, as the
"Company Term," and with respect to the Asbury Arrangements, as the "Asbury
Term."
(b) Services to be Provided. (i) During the Company Term, the
Consulting Firm will cause the Consultant to provide, and Consultant agrees to
provide, to the Company, and, at the Company's request, to any direct or
indirect subsidiary of the Company, consulting and management services
equivalent to those services that would be provided by a chief executive
officer of a corporation under the Delaware General Corporation Law
(including, without limitation, those services described in Sections 3.3(b)
and 3.4(d) of the First Amended and Restated Limited Liability Company (the
"LLC Agreement"), dated as of the date hereof), and in addition, such other
services as may be determined from time to time by or under the authority of
the Board of Directors of the Company (the "Company Board"). All such services
will be referred to as the "Company Services." The Consulting Firm will cause
Consultant, and Consultant agrees, to devote his skill, knowledge and working
time sufficient to conscientiously perform the Company Services to his best
ability, subject to the arrangements described in the following sentence. The
Company acknowledges that Consultant is engaged in various business and other
interests that require his time, effort and attention and that Consultant will
continue to participate in these interests and others which require his time,
effort and attention.
(ii) During the Asbury Term, the Consulting Firm will cause the
Consultant to provide, and Consultant agrees to provide, to Asbury Group,
consulting services as may be determined from time to time by or under the
authority of the Board of Directors of Asbury Group (the "Asbury Board"),
which shall include, without limitation, acting as an ongoing intermediary
between Asbury Group and automobile manufacturers. All such services will be
referred to as the "Asbury Services". The Consulting Firm will cause
Consultant, and Consultant agrees, to devote his skill, knowledge and working
time
3
sufficient to conscientiously perform the Asbury Services to his best ability,
subject to the arrangements described in the last sentence of Section 2(b)(i),
provided that in the event there is a conflict between the Asbury Services and
the Company Services, the Company Services shall take precedence.
(iii) Each of the Consulting Firm and Consultant hereby represents
that this Agreement and compliance by Consultant with the terms and conditions
of this Agreement will not conflict with or result in the breach of any
agreement to which either Consultant or the Consulting Firm is a party or by
which he or it may be bound.
(iv) Authority of Consultant. Each of the relationships of each of
the Consulting Firm and Consultant to the Company and Asbury Group (and to
their respective affiliates) is that of an independent contractor, and nothing
contained in this Agreement shall be construed as creating a joint venture,
partnership or employment arrangement. The Consulting Firm will cause
Consultant, and Consultant agrees, to discharge all obligations under federal,
state, local or foreign law, regulation or order now or hereafter in force
arising out of its or his provision of services hereunder. Consultant (but not
the Consulting Firm) shall have the power and authority to enter into
contracts in the name of, and on behalf of, the Company or any of its
subsidiaries as if he were an authorized officer of the Company. Neither the
Consulting Firm nor Consultant shall have the power or authority to enter into
contracts in the name of, or on behalf of, Asbury Group or any of its
affiliates, except as may be expressly stated in a written delegation of such
power or authority from Asbury Group.
3. Consulting Fees. (a) In consideration for all Company Services to
be rendered by Consultant to the Company, the Company shall pay to the
Consulting Firm during the Company Term the fees provided in this Section
3(a).
(i) Cash Compensation. The Company shall pay the Consulting Firm an
annual consulting fee of $125,000 ("Company Consulting Fee"), payable in
arrears in equal monthly installments.
(ii) Incentive Compensation. The Company shall pay the Consulting
Firm an additional annual consulting fee, based on the performance of
Consultant for any calendar year, in an amount that the Company Board
shall in its sole discretion determine has been earned by Consultant on
behalf of the Consulting Firm during such year. In addition, Consultant
shall be entitled to participate in any stock option or similar program
of the Company, if adopted, provided that applicable law would permit the
participation of Consultant in such stock option or similar program.
4
(b) In consideration for all Asbury Services to be rendered by
Consultant to Asbury Group, Asbury Group shall pay to the Consulting Firm
during the Asbury Term an annual fee of $50,000 ("Asbury Fee"), payable in
arrears in equal monthly installments.
4. Benefits. During the Company Term and the Asbury Term,
Consultant, as an independent contractor, will not be permitted to participate
in any of the life insurance, medical insurance, disability insurance and
other benefits that may be provided to employees of the Company or Asbury
Group from time to time.
5. Expenses. (a) The Company shall reimburse the Consulting Firm for
reasonable travel, lodging and meal expenses incurred by Consultant in
connection with his performance of the Company Services upon submission of
evidence, satisfactory to the Company Board, of the incurrence and purpose of
each such expense.
(b) Asbury Group shall reimburse the Consulting Firm for reasonable
travel, lodging and meal expenses incurred by Consultant in connection with
his performance of the Asbury Services upon submission of evidence,
satisfactory to the Asbury Board, of the incurrence and purpose of each such
expense.
6. Termination of Agreement. (a) Termination Due to Death or
Disability. Consultant's provision of Company Services and Asbury Services
shall automatically terminate upon his death or Disability. For purposes of
this Agreement, "Disability" shall mean a physical or mental disability or
infirmity that prevents the performance by Consultant of his duties hereunder
lasting (or likely to last, based on competent medical evidence presented to
the Company Board and the Asbury Board) for a continuous period of six months
or longer. The reasoned and good faith judgment of the Company Board as to
Disability shall be final and shall be based on such competent medical
evidence as shall be presented to it by Consultant or by any physician or
group of physicians or other competent medical experts employed by Consultant
or the Company to advise the Company Board.
(b) Termination for Cause. (i) Consultant's provision of Company
Services may be terminated for "Cause" by the Company Board.
(ii) Consultants provision of Asbury Services may be terminated for
"Cause" by the Asbury Board.
(iii) "Cause", with respect to the termination of the Company
Services or the Asbury Services, shall mean (A) the willful failure by
Consultant to substantially perform his duties with respect to the Company or
Asbury Group, as the case may be, and continuance of such failure for more
than 20 days after the Company or Asbury Group, as
5
applicable, notifies Consultant and the Consulting Firm in writing that
Consultant is failing to substantially perform his duties, which writing shall
specify in reasonable detail sufficient to inform Consultant and the
Consulting Firm of the duties that Consultant is alleged to have failed to
substantially perform and the actions required to cure such failure, (B)
Consultant's engaging in serious misconduct (including, without limitation,
any criminal, fraudulent or dishonest conduct) that is injurious to the
Company or Asbury Group, as applicable, or any of their respective affiliates
or subsidiaries, (C) Consultant's conviction of, or entering a plea of nolo
contendere to, any crime that constitutes a felony or involves moral
turpitude, or (D) the breach by Consultant of any written covenant or
agreement with the Company or Asbury Group, as applicable, or any of their
respective affiliates not to disclose any information pertaining to the
Company or Asbury Group, as applicable, or any of their respective affiliates
or not to compete or interfere with the Company or Asbury Group, as
applicable, or any of their respective affiliates, including without
limitation the covenants set forth in Sections 7, 8, 9 and 10 hereof.
(c) Termination Without Cause. (i) Consultant's provision of Company
Services may be terminated "Without Cause" by the Company Board.
(ii) Consultant's provision of Asbury Services may be terminated
"Without Cause" by the Asbury Board.
(iii) A termination "Without Cause" shall mean, with respect to the
termination of the Company Services of the Asbury Services, a termination of
Company Services or Asbury Services by the Company Board or the Asbury Board,
as applicable, other than due to death or Disability as described in Section
6(a) or Cause as defined in Section 6(b).
(d) Termination by Consultant. (i) Consultant may terminate his
provision of Company Services for "Good Reason".
(ii) Consultant may terminate his provision of Asbury Services for
"Good Reason".
(iii) "Good Reason" shall mean, with respect to the termination of
the Company Services or the Asbury Services, a termination by Consultant of
his provision of Company Services or Asbury Services, as applicable, within 30
days following (A) any material diminution by the Company Board or the Asbury
Board, as applicable, in Consultant's duties, except in connection with
termination of Consultant's provision of services for Cause as provided in
Section 6(b) or death or Disability as provided in Section 6(a), (B) any
requirement by the Company Board or the Asbury Board, as applicable, that
Consultant be based outside of the State of Arkansas or (C) the failure of the
Company or Asbury Group, as applicable, timely to pay Consultant's or the
6
Consulting Firm's fees or benefits, provided that (x) Consultant shall have
given the Company or Asbury Group, as applicable, written notice of the
circumstances constituting Good Reason and the Company or Asbury Group, as
applicable, shall have failed to cure such circumstances within 20 days, and
(y) Consultant shall not have caused the occurrence constituting Good Reason
through the exercise of his authority as a consultant to the Company or Asbury
Group, as applicable.
(e) Notice and Effect of Termination. Any termination of
Consultant's provision of Company Services or Asbury Services, as applicable,
by the Company Board or the Asbury Board, as applicable, pursuant to Section
6(a) (in the case of Disability), 6(b) or 6(c), or by Consultant pursuant to
Section 6(d), shall be communicated by a written "Notice of Termination"
addressed to Consultant and the Consulting Firm, the Company or Asbury Group,
as appropriate. A "Notice of Termination" shall mean, with respect to the
Company or Asbury Group, as applicable, a notice stating that Consultant's
provision of Company Services or Asbury Services, as applicable, has been or
will be terminated, indicating the specific termination provisions in this
Agreement relied upon and setting forth in reasonable detail the facts and
circumstances claimed to provide a basis for the termination of the provision
of such services. At any time that the Consultant's provision of Company
Services or Asbury Services is terminated, the Consulting Firm's obligation
with respect to such services shall also be terminated.
(f) Payments Upon Certain Terminations of the Provision of Company
Services.
(i) Termination Without Cause or for Good Reason. (A) In the event
of a termination of Consultant's provision of Company Services by the
Company Board Without Cause or a termination by Consultant of the
provision of Company Services for Good Reason, in either case, prior to
the last day of the Company Term, the Company shall pay to the Consulting
Firm (x) a lump sum in an amount equal to the Company Board's good faith
determination of the present values of the Remaining Fee Amounts (as
defined below), as of the date of such lump sum payment, calculated using
a discount rate equal to the then prevailing interest rate payable on
senior indebtedness of an issuer rated "B" by Moody's Investors Service
or Standard & Poor's (or the then-equivalent rating) having a term as
close as practicable to the period from the date of termination of the
provision of Company Services through the last day of the Company Term,
plus (y) any additional performance-based fee for the portion of the
calendar year preceding Consultant's Date of Termination (as defined in
Section 6(h)) as the Company Board in its discretion determines to have
been earned by Consultant. "Remaining Fee Amounts" means the Company
Consulting Fees that would have been payable, monthly in arrears, between
the date on which Notice of Termination is
7
given as contemplated by Section 6(e) or, if no such Notice is given, the
date of termination of the provision of Company Services (the "Notice
Date"), and the last day of the Company Term, assuming no increase in the
Company Consulting Fee from the rate in effect immediately prior to the
Date of Termination.
(ii) Termination Upon Death or Disability. If Consultant's provision
of Company Services shall terminate upon his death or Disability, the
Company shall pay the Consulting Firm two times the full Company
Consulting Fee at the annual rate in effect immediately prior to the Date
of Termination, plus any additional performance-based fee for the portion
of the calendar year preceding the Date of Termination as the Company
Board in its discretion determines to have been earned by Consultant.
(iii) Termination for Cause or Voluntary Termination by Consultant.
If the Company Board shall terminate Consultant's provision of Company
Services for Cause or if Consultant shall voluntarily terminate his
provision of Company Services for other than Good Reason, the Consulting
Firm shall be paid the Company Consulting Fee through the Date of
Termination at the annual rate in effect immediately prior to the Date of
Termination, provided that the Consulting Firm shall not be paid any
additional performance-based fees for the portion of the calendar year
preceding the Date of Termination.
(g) Payments Upon Certain Terminations of the Provision of Asbury
Services.
(i) Termination Without Cause or for Good Reason. In the event of a
termination of Consultant's provision of Asbury Services by the Asbury Board
Without Cause, or upon Consultant's death or Disability, or in the event of a
termination by Consultant of the provision of Asbury Services for Good Reason,
in any case prior to the last day of the Asbury Term, no later than twenty
(20) days following the Date of Termination, Asbury Group shall pay to the
Consulting Firm in a single lump sum, the full Asbury Fee as set forth in
Section 3(b) for the year in which such termination occurred.
(ii) Termination for Cause or Voluntary Termination by Consultant.
In the event of a termination of Consultant's provision of Asbury Services by
the Asbury Board for Cause or in the event of a voluntary termination by
Consultant of the Asbury Services other than for Good Reason, in any case
prior to the last day of the Asbury Term, no later than twenty (20) days
following the Date of Termination, Asbury Group shall pay to the Consulting
Firm in a single lump sum, a pro rated portion of the Asbury Fee as set forth
in Section 3(b) for the year in which such termination occurred.
8
(h) Date of Termination. As used in this Agreement, the term "Date
of Termination" with respect to the Company or Asbury Group, as applicable,
shall mean (i) if Consultant's provision of Company Services or Asbury
Services is terminated by his death, the date of his death, (ii) if
Consultant's provision of Company Services or Asbury Services is terminated by
the Company Board or Asbury Board, as applicable, for Cause or by Consultant
for Good Reason, the later of the date on which (x) the Notice of Termination
is given as contemplated by Section 6(e) and (y) the lapsing of the cure
period described in Section 6(b) or 6(d), as applicable, and (iii) if
Consultant's provision of Company Services or Asbury Services is terminated by
the Company Board or Asbury Board, as applicable, Without Cause, due to
Consultant's Disability or otherwise, whether or not Notice of Termination is
given, 30 days after the date of termination of such services.
7. Covenant Not to Compete. (a) So long as Consultant's provision of
Company Services or Asbury Services hereunder shall continue, or as otherwise
expressly consented to, approved or otherwise permitted by the Company in
writing, and to the fullest extent permitted under applicable law, Consultant
shall not, directly or indirectly engage in, participate in, represent in any
way or be connected with, as an officer, director, partner, owner, employee,
agent, independent contractor, consultant, proprietor or stockholder (except
for the ownership of a less than 5% stock interest in a publicly traded
corporation) or otherwise, any business similar to the Business (as defined in
the Exchange Agreement, dated as of August 4, 1998 (as amended by Amendment
No. 1, dated as of February 23, 1999, the "Exchange Agreement"), among
Consultant, the Company and the other persons named therein) within the State
of Arkansas or within 80 miles of any business owned or controlled by the
Company, Asbury Group or any of their respective affiliates; or
(b) If the Consultant's provision of Company Services and Asbury
Services hereunder is terminated, the following provisions shall apply:
(i) The provisions of Section 7(a) shall continue in effect for the
longer of five years after the Effective Date and two years after the
final Date of Termination;
(ii) During the period described under Section 7(b)(i), Consultant
shall disclose in writing to the Company the name, address and type of
business conducted by any proposed employer or contractor of Consultant
within ten business days of commencing employment (or independent
contract work) with such new employer or contractor. In addition, during
the period described under Section 7(b)(i), but only to the extent that
Consultant is entitled to and requests a payment under clause (iii) of
this Section 7(b), Consultant shall promptly inform the Company in
writing of receipt of any amount, up to an
9
amount equal to one hundred percent (100%) of the sum of the Company
Consulting Fee and the Asbury Fee (the "Consulting Fees") per annum,
described in subclause (iii)(y) below; and
(iii) In the event of a termination of Consultant's provision of
Company Services and Asbury Services (A) pursuant to Section 6(b) or (B)
voluntarily by Consultant for any reason other than Good Reason or (C)
due to expiration of both the Company Term and the Asbury Term and any
extensions thereof, so long as this Section 7(b) shall apply, the Company
shall pay Consultant on an annual basis the excess of (x) an amount equal
to one hundred percent (100%) of the Consulting Fees over (y) the total
compensation (whether received as salary, consulting fee or otherwise and
calculated on a pre-tax basis) accrued, earned or received by Consultant
from any new employer, client or contractor during such period, provided
that such excess shall be payable monthly in arrears, provided further,
that the Company shall consider the amount described in clause (iii)(y)
above to be at least one hundred percent (100%) of the Consulting Fees
unless and until Consultant otherwise notifies the Company in writing;
provided, however, that the Company may at any time, in its sole discretion,
terminate all obligations imposed on the Company and Consultant under this
Section 7 by written notice to Consultant, provided further, however, that any
such termination shall not terminate any other non-competition agreement
between the Company or its affiliates (including Asbury Group) and Consultant,
provided further, that notwithstanding such termination the Company shall
continue to make any and all payments required by Section 6(f) hereunder.
Consultant shall be under no obligation to accept any employment during the
period for which Consultant receives continued payments pursuant to Section
7(b)(iii) or to otherwise attempt to mitigate the payment of such amounts by
the Company and the Company waives any right to allege that Consultant has any
duty to mitigate the payment of such amounts.
8. Unauthorized Disclosure. (a) During and after the Company Term
and the Asbury Term, without the written consent of the Company Board or the
Asbury Board, as applicable, or a person authorized thereby, (i) Consultant
shall not disclose to any person (other than an employee or director of the
Company or Asbury Group, as applicable, or their respective affiliates, or a
person to whom disclosure is reasonably necessary or appropriate in connection
with the performance by Consultant of his duties under this Agreement) or use
to compete with the Company or Asbury Group, as applicable, or any of their
respective affiliates any confidential or proprietary information, knowledge
or data that is not theretofore publicly known and in the public domain
obtained by him while providing Company Services or Asbury Services, as
applicable, with respect to the Company or Asbury Group, as applicable, or any
of their respective affiliates or with respect to any products, improvements,
customers, methods of
10
distribution, sales, prices, profits, costs, contracts (including, without
limitation the terms and provisions of this Agreement), suppliers, business
prospects, business methods, techniques, research, trade secrets or know-how
of the Company or Asbury Group or any of their respective affiliates
(collectively, "Proprietary Information" of the Company or Asbury Group, as
applicable), and (ii) Consultant shall use best efforts to keep confidential
any such Proprietary Information and to refrain from making any such
disclosure, in each case except as may be required by law or as may be
required in connection with any judicial or administrative proceedings or
inquiry.
(b) The covenant contained in this Section 8 shall survive the
termination of Consultant's provision of Company Services or Asbury Services,
as applicable, and shall be binding upon Consultant's heirs, successors and
legal representatives.
9. Non-Solicitation of Employees. During the period commencing on
the Effective Date and ending on the date that is the later of five years
after the Effective Date and two years after the final Date of Termination
(the "Non-Solicitation Restriction Period"), Consultant shall not, directly or
indirectly, for his own account or the account of any other person or entity
with which he shall become associated in any capacity or in which he shall
have any ownership interest, (a) solicit for employment or employ any person
who, at any time during the preceding 12 months, is or was employed by or
otherwise engaged to perform services for the Company or Asbury Group, or any
of their respective affiliates, regardless of whether such employment or
engagement is direct or through an entity with which such person is employed
or associated, or otherwise intentionally interfere with the relationship of
the Company or Asbury Group, or any of their respective affiliates with any
person or entity who or which is at the time employed by or otherwise engaged
to perform services for the Company or Asbury Group, as applicable, or any
such affiliate or (b) induce any employee of the Company or Asbury Group, or
any of their respective affiliates to engage in any activity which Consultant
is prohibited from engaging in under Sections 7, 8, 9 and 10 hereof or to
terminate his or her employment with the Company or Asbury Group, as
applicable, or such affiliate.
10. Return of Documents. In the event of the termination of
Consultant's provision of Company Services or Asbury Services for any reason,
Consultant will deliver to the Company or Asbury Group, as applicable, all
documents and data of any nature pertaining to his work with the Company or
Asbury Group, as applicable, and their respective affiliates, and he will not
take with him any documents or data of any description or any reproduction
thereof, or any documents containing or pertaining to any Proprietary
Information.
11. Injunctive Relief with Respect to Covenants. Consultant
acknowledges and agrees that the covenants and obligations of Consultant with
respect to
11
non-competition, non-disclosure, non-solicitation, confidentiality and the
property of the Company or Asbury Group, as applicable, and their respective
affiliates relate to special, unique and extraordinary matters and that,
notwithstanding any other provision of this Agreement to the contrary, a
violation of any of the terms of such covenants and obligations will cause the
Company or Asbury Group, as applicable, and their respective affiliates
irreparable injury for which adequate remedies are not available at law.
Therefore, Consultant expressly agrees that the Company or Asbury Group, as
applicable, and their respective affiliates (which shall be express
third-party beneficiaries of such covenants and obligations) shall be entitled
to an injunction (whether temporary or permanent), restraining order or such
other equitable relief (including the requirement to post bond) as a court of
competent jurisdiction may deem necessary or appropriate to restrain
Consultant from committing any violation of the covenants and obligations
contained in Sections 7, 8, 9 and 10 hereof. These injunctive remedies are
cumulative and in addition to any other rights and remedies the Company or
Asbury Group or any such affiliate may have at law or in equity. Further,
Consultant represents that his experience and capabilities are such that the
provisions of Sections 7, 8, 9 and 10 hereof will not prevent him from earning
his livelihood.
12. Entire Agreement. Except as otherwise expressly provided herein,
this Agreement, the Exchange Agreement and the LLC Agreement constitute the
entire agreements among the parties hereto with respect to the subject matter
hereof, and all promises, representations, understandings, arrangements and
prior agreements relating to such subject matter (including those made to or
with Consultant or the Consulting Firm by any other person or entity) are
merged herein and superseded hereby.
13. Indemnification. The Company agrees that Consultant shall be an
"indemnified representative" for purpose of Article VII of the LLC Agreement.
14. Miscellaneous. (a) Binding Effect. This Agreement shall be
binding on and inure to the benefit of the Company, Asbury Group and their
respective successors and permitted assigns. This Agreement shall also be
binding on and inure to the benefit of Consultant and his heirs, executors,
administrators and legal representatives. If Consultant's provision of Company
Services or Asbury Services is terminated by reason of his death, all amounts
payable by the Company or Asbury Group pursuant to Section 6(f)(ii) or 6(g)(i)
(or if Consultant shall die after the provision of all service hereunder has
terminated, any remaining amount payable by the Company pursuant to Section
6(f)(i)) shall be paid in accordance with the terms of this Agreement to
Consultant's devisee, legatee, or other designee or, if there be no such
designee, to his estate.
(b) Governing Law. (i)(A) THIS AGREEMENT (EXCEPT AS PROVIDED FOR IN
SECTION 14(b)(i)(B) BELOW) SHALL BE GOVERNED BY
12
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARKANSAS WITHOUT
REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS THEREUNDER. SUBJECT TO SECTION
14(b)(i)(B), ANY AND ALL SUITS, LEGAL ACTIONS OR PROCEEDINGS AGAINST ANY PARTY
HERETO ARISING OUT OF THIS AGREEMENT SHALL BE BROUGHT IN ANY UNITED STATES
FEDERAL COURT SITTING IN THE STATE OF ARKANSAS OR ANY OTHER COURT OF
APPROPRIATE JURISDICTION SITTING IN THE STATE OF ARKANSAS, AS THE PARTY
BRINGING SUCH SUIT MAY ELECT IN ITS SOLE DISCRETION, AND EACH PARTY HEREBY
SUBMITS TO AND ACCEPTS THE EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE
PURPOSE OF SUCH SUIT, LEGAL ACTION OR PROCEEDING, EACH PARTY HERETO WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS AND AGREES THAT
SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL. EACH PARTY HERETO
HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY SUCH SUIT, LEGAL ACTION OR PROCEEDING IN ANY SUCH
COURT AND HEREBY FURTHER WAIVES ANY CLAIM THAT ANY SUCH SUIT, LEGAL ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
(B) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS
AGREEMENT, THE PROVISIONS OF SECTIONS 7, 8, 9, 10 AND 11 SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT
REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS THEREUNDER: ANY AND ALL SUITS,
LEGAL ACTIONS OR PROCEEDINGS AGAINST ANY PARTY HERETO ARISING OUT OF SECTIONS
7, 8, 9, 10 OR 11 HEREOF SHALL BE BROUGHT IN ANY UNITED STATES FEDERAL COURT
SITTING IN THE STATE OF DELAWARE OR ANY OTHER COURT OF APPROPRIATE
JURISDICTION SITTING IN THE STATE OF DELAWARE, AS THE PARTY BRINGING SUCH SUIT
MAY ELECT IN ITS SOLE DISCRETION, AND EACH PARTY HEREBY SUBMITS TO AND ACCEPTS
THE EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE PURPOSE OF SUCH SUIT, LEGAL
ACTION OR PROCEEDING, EACH PARTY HERETO WAIVES PERSONAL SERVICE OF ANY
SUMMONS, COMPLAINT OR OTHER PROCESS AND AGREES THAT SERVICE THEREOF MAY BE
MADE BY CERTIFIED OR REGISTERED MAIL. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE
OF ANY SUCH SUIT, LEGAL ACTION OR PROCEEDING IN ANY SUCH COURT AND HEREBY
FURTHER WAIVES ANY CLAIM THAT ANY SUCH SUIT, LEGAL ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
13
(ii) EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR THE BREACH, TERMINATION OR VALIDITY OF THIS AGREEMENT, OR
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (W) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (X) EACH SUCH
PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (Y) EACH
SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (Z) EACH SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 14(b).
(c) [RESERVED]
(d) Amendments. No provisions of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is approved
by both the Company Board and the Asbury Board or a person authorized thereby
and is agreed to in writing by Consultant, the consulting firm and such
officers or agents of the Company and Asbury Group as may be specifically
designated by the Company Board and the Asbury Board, as applicable. No waiver
by any party hereto at any time of any breach by any other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. No
waiver of any provision of this Agreement shall be implied from any course of
dealing between or among the parties hereto or from any failure by any party
hereto to assert its rights hereunder on any occasion or series of occasions.
No agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement.
(e) Severability. In the event that any one or more of the
provisions of this Agreement shall be or become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
14
(f) Notices. Any notice or other communication required or permitted
to be delivered under this Agreement shall be (i) in writing, (ii) delivered
personally, by nationally recognized overnight courier service or by certified
or registered mail, first- class postage prepaid and return receipt requested,
(iii) deemed to have been received on the date of delivery or on the third
business day after the mailing thereof, and (iv) addressed as follows (or to
such other address as the party entitled to notice shall hereafter designate
in accordance with the terms hereof):
(A) if to the Company, to it:
c/o Asbury Automotive Group L.L.C.
One Tower Bridge
Suite 1440
Conshohocken, Pennsylvania 19428
Attention: Thomas R. Gibson
Telephone: (610) 260-9800
Fax: (610) 260-9804
-and to-
Ripplewood Holdings L.L.C.
One Rockefeller Plaza, 32nd Floor
New York, New York 10020
Attention: Timothy C. Collins
Telephone: (212) 582-6700
Fax: (212) 582-4110
(B) if to Consultant or the Consulting Firm, to him or it:
McLarty Companies, Inc.
P.O. Box 25511
Little Rock, AR 72221
Attention: Thomas F. McLarty, III
---------
Telephone:
Fax:
with a copy to:
Wright, Lindsey & Jennings
200 West Capital Avenue
Suite 2200
Little Rock, AR 72201-3699
15
Attention: Kevin W. Kennedy, Esq.
Telephone: (501) 212-1394
Fax: (501) 376-9442
Copies of any notices or other communications given under this Agreement shall
also be given to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Robert F. Quaintance, Jr., Esq.
Telephone: (212) 909-6451
Fax: (212) 909-6836
(g) Survival. In the event Consultant's provision of Company
Services but not Asbury Services is terminated, Sections 1(b), 2(a), 2(b)(ii),
2(b)(iii), 2(b)(iv), 3(b), 4, 5(b), 6, 7, 8, 9, 10, 11, 12, 13 and 14 shall
survive the termination of the provision by Consultant of the Company
Services. In the event Consultant's provision of Asbury Services but not
Company Services is terminated, Sections 1(a), 2(a), 2(b)(i), 2(b)(iii),
2(b)(iv), 3(a), 4, 5(a), 6, 7, 8, 9, 10, 11, 12, 13 and 14 shall survive the
termination of the provision by Consultant of the Asbury Services. In the
event Consultant's provision of both Company Services and Asbury Services is
terminated, Sections 7, 8, 9, 10, 11, 12, 13, 14 and, if Consultant's
provision of Company Services and Asbury Services terminates in a manner
giving rise to a payment under Section 6(f), Section 6(f) shall survive the
termination of this Agreement and the termination of the provisions of such
services by Consultant.
(h) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
(i) Headings. The section and other headings contained in this
Agreement are for the convenience of the parties only and are not intended to
be a part hereof or to affect the meaning or interpretation hereof.
(j) Consultant's Recusal. Consultant shall recuse himself from all
deliberations of the Company Board and its Managing Member and the Asbury
Board regarding this Agreement, Consultant's provision of services hereunder
or related matters.
16
IN WITNESS WHEREOF, each of the Company, Asbury Group and the
Consulting Firm has duly executed this Agreement by its authorized
representative and Consultant has hereunto set his hand, in each case
effective as of the date first above written.
ASBURY AUTOMOTIVE ARKANSAS L.L.C.
By:
/s/ Brian E. Kendrick
---------------------------------
Name: Brian E. Kendrick
Title: President & Chief Executive
Officer
ASBURY AUTOMOTIVE GROUP L.L.C.
By:
---------------------------------
Name:
Title:
McLARTY COMPANIES, INC.
By:
---------------------------------
Name:
Title:
THOMAS F. McLARTY, III, as Consultant
/s/ THOMAS F. McLARTY, III
-------------------------------------
EXHIBIT 10.8
SEVERANCE PAY AGREEMENT
FOR KEY EMPLOYEE
This agreement is entered into as of April 3, 2001 between Asbury Automotive
Group L.L.C. ("Asbury") and Philip R. Johnson ("Executive"), a key employee of
Asbury, in order to provide for an agreed-upon compensation in the event that
the Executive's employment is terminated as defined in this agreement.
1. Severance Pay Arrangement
If a Termination (as defined below) of Executive's employment occurs at any
time during Executive's employment, Asbury will pay Executive 12 months of
Executive's base salary as of the date of Termination as Severance Pay.
Payment (subject to required withholding) will be made by Asbury to Executive
monthly on the regular payroll dates of Asbury starting with the date of
Termination.
If Executive participates in a bonus compensation plan at the date of
Termination, Severance Pay will also include a portion of the target bonus
for the year of Termination in an amount equal to the target bonus multiplied
by the percentage of such year that has expired through the date of
Termination.
In addition, Executive shall be entitled for 12 months following the date of
Termination to continue to participate at the same level of coverage and
Executive contribution in any health and dental insurance plans, as may be
amended from time to time, in which Executive was participating immediately
prior to the date of Termination. Such participation will terminate 30 days
after Executive has obtained other employment under which Executive is
covered by equal benefits. The Executive agrees to notify Asbury promptly
upon obtaining such other employment.
2. Definition of Termination Triggering Severance Pay
A "Termination" triggering the Severance Pay set forth above in Section 1 is
defined as (1) termination of Executive's employment by Asbury for any
reason, except death, disability, retirement, voluntary resignation or
"cause", or (2) termination by Executive because of mandatory relocation of
Executive's current principal place of
business to a location more than 50 miles away, or (3) Asbury's reduction of
Executive's base salary, or (4) any material diminution of Executive's duties
or job title, except in a termination for "cause", death, disability,
retirement or voluntary resignation. The definition of "cause" is: (1)
Executive's gross negligence or gross misconduct in carrying out Executive's
duties resulting in either case in material harm to Asbury; or (2) Executive
being convicted of a felony; or (3) Executive's breach of Sections 3, 4 or 5
below.
3. Confidential Information Nondisclosure Provision
During and after employment with Asbury, Executive agrees not to disclose to
any person (other to an employee or director of Asbury or any affiliate and
except as may be required by law) and not to use to compete with Asbury or
any affiliate any confidential or proprietary information, knowledge or data
that is not in the public domain that was obtained by Executive while
employed by Asbury with respect to Asbury or any affiliate or with respect to
any products, improvements, customers, methods of distribution, sales,
prices, profits, costs, contracts, suppliers, business prospects, business
methods, techniques, research, trade secrets or know-how of Asbury or any
affiliate (collectively, "Confidential Information"). In the event that
Executive's employment ends for any reason, Executive will deliver to Asbury
all documents and data of any nature pertaining to Executive's work with
Asbury and will not take any documents or data or any reproduction, or any
documents containing or pertaining to any Confidential Information. Executive
agrees that in the event of a breach by Executive of this provision, Asbury
shall be entitled to inform all potential or new employers of this provision
and obtain injunctive relief and damages which may include recovery of
amounts paid to Executive under this agreement.
4. Non-Solicitation of Employees
Executive agrees that for a period of one year from Executive's last day of
employment with Asbury, Executive shall not directly or indirectly solicit
for employment or employ any person who, at any time during the preceding 12
months, is or was employed by Asbury or any affiliate or induce or attempt to
persuade any employee of Asbury or any affiliate to terminate their
employment relationship. Executive agrees that in the event of a breach by
Executive of this provision, Asbury shall be entitled to inform all potential
or new employers of this provision and obtain injunctive relief and damages
which may include recovery of amounts paid to Executive under this agreement.
5. Covenant Not to Compete
While Executive is employed by Asbury, Executive shall not directly or
indirectly engage in, participate in, represent or be connected with in any
way, as an officer, director, partner, owner, employee, agent, independent
contractor, consultant, proprietor or stockholder (except for the ownership
of a less than 5% stock interest in a publicly-traded corporation) or
otherwise, any business or activity which competes with the business of
Asbury or any affiliate unless expressly consented to in writing by the Chief
Executive Officer of Asbury (collectively, "Covenant Not To Compete").
In the event that Executive's employment ends for any reason, the provisions
of the Covenant Not To Compete shall remain in effect for one year following
the date of Termination except that the prohibition above on "any business or
activity which competes with the business of Asbury or any affiliate" shall
be limited to Autonation, Sonic, Lithia, United Auto Group and other
competitive groups of similar size. Executive shall disclose in writing to
Asbury the name, address and type of business conducted by any proposed new
employer of Executive if requested in writing by Asbury. Executive agrees
that in the event of a breach by Executive of this Covenant Not To Compete,
Asbury shall be entitled to inform all potential or new employers of this
Covenant and to obtain injunctive relief and damages which may include
recovery of amounts paid to Executive under this agreement.
GENERAL PROVISIONS
A. Employment is At Will
The Executive and Asbury acknowledge and agree that Executive is an "at
will" employee, which means that either the Executive or Asbury may
terminate the employment relationship at any time, for any reason, with or
without cause or notice, and that nothing in this agreement shall be
construed as an express or implied contract of employment.
B. Execution of Release
As a condition to the receipt of the Severance Pay payments and benefits
described in section 1 above, Executive agrees to execute a release of all
claims arising out of the Executive's employment or its termination
including but not limited to any claim of discrimination, harassment or
wrongful discharge under local, state or federal law.
C. Other Provisions
This agreement shall be binding upon the heirs, executors, administrators,
successors and assigns of Executive and Asbury, including any successor to
Asbury.
The headings and captions are provided for reference and convenience only
and shall not be considered part of this agreement.
If any provision of this agreement shall be held invalid or unenforceable,
such holding shall not affect any other provisions, and this agreement
shall be construed and enforced as if such provisions had not been
included.
This agreement supersedes any and all agreements between Asbury and
Executive relating to payments upon termination of employment or severance
pay and may only be modified in writing signed by Asbury and Executive.
This agreement shall be governed by and construed in accordance with the
laws of the State of Connecticut.
AGREED TO AS OF THE DATE FIRST WRITTEN ABOVE:
BY EXECUTIVE BY ASBURY AUTOMOTIVE
GROUP L.L.C.
/s/ Philip R. Johnson /s/ Brian E. Kendrick
---------------------- -------------------------
Print Name: Print Name and Title:
Philip R. Johnson Brian E. Kendrick
President & Chief Executive Officer
EXHIBIT 10.9
Note: Certain material has been omitted from this document pursuant to a request
for confidential treatment and has been filed separately with the SEC. Notations
of [REDACTED]* have been used to indicate such an omission.
CREDIT AGREEMENT
Dated as of January 17, 2001
between
ASBURY AUTOMOTIVE GROUP L.L.C.
as Borrower
and
FORD MOTOR CREDIT COMPANY,
CHRYSLER FINANCIAL COMPANY, L.L.C.,
GENERAL MOTORS ACCEPTANCE CORPORATION, and
the other Lenders party hereto,
as the Lenders
and
FORD MOTOR CREDIT COMPANY,
as Agent.
TABLE OF CONTENTS
Section Page
Article I: Definitions 3
Article II: Loan Facilities 23
Article III: Conditions Precedent 28
Article IV: Representations and Warranties 30
Article V: Covenants 36
Article VI: Events of Default 51
Article VII: Agent 54
Article VII: Acceleration, Waivers, 54
Amendments and Remedies
Article IX: General Provisions 54
Article X: Benefit of Agreement; 61
Assignments; Participations
Article XI: Notices 62
Article XII: Counterparts 62
2
EXHIBITS AND SCHEDULES
Exhibits
EXHIBIT A -- Form of Note
EXHIBIT B -- Form of Borrowing Notice
EXHIBIT C-1 -- Form of Dealership Guaranty
EXHIBIT C-2 -- Form of Subsidiary Holding Company Guaranty
EXHIBIT C-3 -- Form of Non-Dealership Guaranty
EXHIBIT D-1 -- Form of Dealership Security Agreement
EXHIBIT D-2 -- Form of Subsidiary Holding Company Security Agreement
EXHIBIT D-3 -- Form of Non-Dealership Security Agreement
EXHIBIT E -- Closing Statement
EXHIBIT F -- Form of Officer's Certificate
EXHIBIT G -- Form of Waiver, Guaranty and Disbursement Agreement
EXHIBIT H -- Form of Pledged Account Agreement
3
Schedules
Schedule 1.1.1 -- Permitted Existing Indebtedness
Schedule 1.1.2 -- Permitted Existing Investments
Schedule 1.1.3 -- Permitted Existing Liens
Schedule 1.1.4 -- Lender's Commitments
Schedule 1.1.5 -- Dealership Guarantors
Schedule 1.1.6 -- Existing Asbury Obligations
Schedule 1.1.7 -- Pending Acquisitions
Schedule 1.1.8 -- Subsidiaries not wholly owned
Schedule 3.1 -- Disclosed Litigation
Schedule 4.8 -- Subsidiaries
Schedule 4.9 -- ERISA
Schedule 9.3 -- Assignment & Acceptance
4
CREDIT AGREEMENT
This Credit Agreement dated January 17, 2001 is entered into among ASBURY
AUTOMOTIVE GROUP, L.L.C., a Delaware limited liability company, (together with
any successor permitted hereunder, the "Borrower"), FORD MOTOR CREDIT COMPANY, a
Delaware corporation, ("Ford Credit") CHRYSLER FINANCIAL COMPANY, L.L.C., a
Michigan limited liability company, ("Chrysler Financial"), GENERAL MOTORS
ACCEPTANCE CORPORATION, a Delaware corporation, ("GMAC"), the other Lenders from
time to time party hereto, and Ford Credit, as administrative agent and
collateral agent (in such capacity and together with any Successor Agent
appointed pursuant to Article VII, the "Agent") for the Secured Parties. The
parties hereto agree as follows:
ARTICLE I: DEFINITIONS
1.1 Certain Defined Terms. The following terms used in this Agreement shall
have the following meanings, applicable both to the singular and the plural
forms of the terms defined.
As used in this Agreement:
"Acquisition" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Borrower or a
Transaction Party (i) acquires any ongoing business or all or substantially all
of the assets of any automobile dealership and/or related operations (including,
without limitation, body shop and service repair centers), whether through
purchase of assets, merger or otherwise or (ii) directly or indirectly acquires
(in one or a series of transactions) at least a majority of the Voting Interests
of any Person.
"Acquisition Advance" is defined in Section 5.2 (K) hereof.
"Acquisition Cost" means, the acquisition price to be paid by Borrower or
any Subsidiary of Borrower for a Permitted Acquisition (including, without
limitation, the maximum amount of any deferred portion thereof or contingency
payments payable in connection therewith (and reasonable fees and expenses
incurred in connection therewith but only to the extent such fees and expenses
were not paid to an Affiliate of any Transaction Party), but excluding therefrom
(i) that portion of the purchase price, of a particular Permitted Acquisition,
specifically allocated to real property, (ii) that portion of the purchase
price, of any particular Permitted Acquisition, paid in Seller Paper, and (iii)
the value of any Equity Interests of the Borrower issued to the seller in
connection with a particular Permitted Acquisition) (computed with any non-cash
portion of the acquisition price being valued at the Fair Value thereof as of
the date of computation).
"Acquisition Documents" means all documents, instruments and agreements
entered into in connection with any Acquisition.
"Acquisition Price" means, the acquisition price to be paid by Borrower or
any Subsidiary of Borrower for a Permitted Acquisition (including, without
limitation, the maximum
5
amount of any deferred portion thereof or contingency payments payable in
connection therewith (and reasonable fees and expenses incurred in connection
therewith but only to the extent such fees and expenses were not paid to an
Affiliate of any Transaction Party), computed with any non-cash portion of the
acquisition price being valued at the Fair Value thereof as of the date of
computation).
"Advance" means any Working Capital Advance and any Acquisition Advance
made under Section 2.1 hereof or otherwise deemed made under the Loan Documents.
"Adjusted Leverage Ratio" is defined in Section 5.4(C) hereof.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person is the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended) of greater than five percent (5%) or more of any class of
voting securities (or other voting interests) of the controlled Person or
possesses, directly or indirectly, the power to direct or cause the direction of
the management or policies of the controlled Person, whether through ownership
of Capital Stock, by contract or otherwise.
"Agent" has the meaning set forth in the recital of parties to this
Agreement, together with any successor Agent.
"Agent's Account" means any account maintained in the name of the Agent of
which the Agent gives written notice to the Borrower or any Lender, as
applicable, that such account is the Agent's Account.
"Agreement" means this Credit Agreement, as it may be amended, restated or
otherwise modified and in effect from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles in effect from time to time, applied in a manner consistent with that
used in preparing the financial statements referred to in Section 5.1(A) hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6
Note: Certain material has been omitted from this document pursuant to a request
for confidential treatment and has been filed separately with the SEC. Notations
of [REDACTED]* have been used to indicate such an omission.
"Applicable LIBOR Rate" means as of any Payment Date, the LIBOR Rate plus a
percentage margin per annum as determined by reference to (i) the following
ratios, and (ii) the percentages listed (A) under Tier A if and for so long as
the Revolving Credit Obligations are greater than the Target Amount (as defined
herein) and (B) under Tier B if and for so long as the Revolving Credit
Obligations are equal to or less than the Target Amount (such percentage is
referred to herein as the "Margin").
TIER A TIER B
- -------------------------------------------------------------------------------
Adjusted Leverage Margin Adjusted Leverage Margin
Ratio Ratio
- -------------------------------------------------------------------------------
[REDACTED]* [REDACTED]*
Level 1 Level 1 Greater than
Greater than [REDACTED]* [REDACTED]*
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Level 2 [REDACTED]* Level 2 [REDACTED]*
Greater than [REDACTED]* but Greater than [REDACTED]* but
equal to or less than equal to or less than
[REDACTED]* [REDACTED]*
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Level 3 [REDACTED]* Level 3 [REDACTED]*
Greater than [REDACTED]* but Greater than [REDACTED]* but
equal to or less than equal to or less than
[REDACTED]* [REDACTED]*
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Level 4 [REDACTED]* Level 4 [REDACTED]*
Greater than [REDACTED]* but Greater than [REDACTED]* but
equal to or less than equal to or less than
[REDACTED]* [REDACTED]*
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Level 5 [REDACTED]* Level 5 [REDACTED]*
Greater than [REDACTED]* but Greater than [REDACTED]* but
equal to or less than equal to or less than
[REDACTED]* [REDACTED]*
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Level 6 [REDACTED]* Level 6 [REDACTED]*
Equal to or less than Equal to or less than
[REDACTED]* [REDACTED]*
- -------------------------------------------------------------------------------
The Applicable LIBOR Rate for each month shall be based on the LIBOR Rate
in effect on the first Business Day of such month. All changes in the Applicable
LIBOR Rate (due to a change in the LIBOR Rate) shall become effective on the
first day of a calendar month and shall be deemed in effect throughout such
month. The Applicable LIBOR Rate for each month shall be determined by reference
to the Adjusted Leverage Ratio and Tier in effect on the first Business Day of
such month; provided, however, that (A) no change in the Applicable LIBOR Rate
(which is based upon a change in the Adjusted Leverage Ratio) shall be effective
until the first Business Day of the first month following the date on which the
Agent receives the financial statements required to be delivered pursuant to
Section 5.1 (A) (i) and the Officer's Certificate required to be delivered
pursuant to Section 5.1 (A) (iv), (B) changes in the Applicable LIBOR Rate based
on the Target Amount shall be made only on the first day of a calendar quarter,
and (C) the Applicable LIBOR Rate shall be at Tier A, Level 1 for so long as the
Borrower has not submitted to the Agent the information described in clause (A)
of this proviso as and when required under Section 5.1 (A).
7
"Asbury Group" means the Borrower and each other Transaction Party.
"Asset Sale" means, with respect to any Person, the sale, lease,
conveyance, disposition or other transfer by such Person of any of its assets
(including by way of a sale-leaseback transaction and including the sale or
other transfer of any of the Equity Interests of any Subsidiary of such Person).
"Assignment and Acceptance" has the meaning set forth in Section 9.3 (a)
hereof.
"Authorized Officer" means, with respect to the Borrower or any of its
Subsidiaries, the chief executive officer, president, chief financial officer,
chief accounting officer, treasurer or assistant treasurer, acting singly.
"Benefit Plan" means a defined benefit plan as defined in Section 3(35) of
ERISA (other than a Multi-employer Plan) in respect of which the Borrower or any
other member of the Controlled Group is, or within the immediately preceding six
(6) years was, an "employer" as defined in Section 3(5) of ERISA.
"Borrower" means Asbury Automotive Group L.L.C., a Delaware limited
liability company, together with its successors and assigns, including a
debtor-in-possession on behalf of the Borrower.
"Borrower's Account" means such account as the Borrower may specify in
writing to the Agent.
"Borrower LLC Agreement" means the Third Amended and Restated Limited
Liability Company Agreement of Borrower, dated as of February 1, 2000, including
any amendments or restatements subsequent to the date hereof.
"Borrower Pledges" means each of (i) that certain Pledge Agreement, dated
as of even date herewith, from the Borrower to the Agent pursuant to which the
Borrower pledges the Capital Stock of certain corporate Subsidiaries, as it may
be amended, restated or otherwise modified and in effect from time to time, (ii)
that certain Pledge Agreement, dated as of even date herewith, from the Borrower
to the Agent pursuant to which the Borrower pledges the Capital Stock of certain
limited liability company Subsidiaries, as it may be amended, restated or
otherwise modified and in effect from time to time, (iii) that certain Pledge
Agreement, dated as of even date herewith, from the Borrower to the Agent
pursuant to which the Borrower pledges the Capital Stock of certain partnership
Subsidiaries, as it may be amended, restated or otherwise modified and in effect
from time to time, and (iv) any other pledge of Capital Stock delivered by
Borrower from time to time to the Agent, in each case delivered to the Agent,
for the benefit of the Lenders, to secure the Obligations.
"Borrower Security Agreement" means that certain Security Agreement, dated
as of even date herewith from the Borrower to the Agent, for the benefit of the
Lenders, pursuant to which the Borrower has pledged all of its assets to secure
the Obligations hereunder, as it may be amended, restated or otherwise modified
and in effect from time to time.
"Borrowing" means a borrowing consisting of either (i) the Initial
Borrowing pursuant to Section 2.1 (A) (1) or (ii) any Advance under Section
2.1(A) (2).
8
"Borrowing Spread" is defined in Section 2.1 (A) (2) (c) hereof.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.1 (A) (2) (b) hereof.
"Business Day" means a day (other than a Saturday or Sunday) on which
commercial banks are open for business in New York City and Dearborn, Michigan.
"Capital Expenditures" of a Person means, for any period, the aggregate of
all expenditures (other than in connection with Permitted Acquisitions), whether
paid in cash or accrued as liabilities, including Capitalized Lease Obligations,
during that period that, in conformity with Agreement Accounting Principles, are
required to be included in or reflected by the property, plant, equipment or
similar fixed asset accounts reflected in the consolidated balance sheet of such
Person.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited), (iv) in the case of a limited liability company,
any and all membership interests or other equivalents (however designated) and
(v) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Capitalized Lease" of a Person means any lease of property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be capitalized
on a balance sheet of such Person prepared in accordance with Agreement
Accounting Principles.
"Cash Equivalents" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by the
full faith and credit of the United States government; (ii) domestic and
Eurodollar certificates of deposit and time deposits, bankers' acceptances and
floating rate certificates of deposit issued by any commercial bank organized
under the laws of the United States, any state thereof, the District of
Columbia, or its branches or agencies; (iii) shares of money market, mutual or
similar funds having assets in excess of $100,000,000.00 and the investments of
which are limited to investment grade securities (i.e., securities rated at
least Baa by Moody's Investors Service, Inc. or at least BBB by Standard &
Poor's Corporation); (iv) commercial paper of United States and foreign banks
and bank holding companies and their subsidiaries and United States and foreign
finance, commercial industrial or utility companies which, at the time of
acquisition, are rated A-1 (or better) by Standard & Poor's Ratings Group or P-1
(or better) by Moody's Investors Services, Inc.; (v) corporate bonds,
mortgage-backed securities and municipal bonds in each case of a domestic issuer
rated at the date of acquisition not less than Aaa by Moody's Investor Services,
Inc. or AAA by Standard & Poor's Corporation with maturities of no more than two
(2) years from the date of acquisition; (vi) repurchase obligations of any
Lender or of any commercial
9
bank satisfying the requirements of clause (ii) of this definition, with respect
to securities issued or fully guaranteed or insured by the United States
government; and (vii) money market funds with respect to which not less than 90%
of such funds are invested in the type of investments specified in clauses (i)
through (v) above; provided, unless the context otherwise requires, the
maturities of such Cash Equivalents shall not exceed 365 days.
"Change of Control" means an event or series of events, not including the
events constituting the Roll-Up Transaction, by which:
(i) during any period of 24 consecutive calendar months, individuals:
(a) who were directors of the Borrower on the first day of such
period, or
(b) whose election or nomination for election to the board of
directors of the Borrower was recommended or approved by at least a
majority of the directors then still in office who were directors of
the Borrower on the first day of such period, or whose election or
nomination for election was so approved,
shall cease to constitute a majority of the board of directors of the
Borrower;
(ii) other than as might be permitted under the terms hereof in
connection with a Permitted IPO Conversion (as defined herein) the Borrower
consolidates with or merges into another corporation or conveys, transfers
or leases all or substantially all of its property to any Person, or any
corporation consolidates with or merges into the Borrower, in either event
pursuant to a transaction in which the outstanding Capital Stock of the
Borrower is reclassified or changed into or exchanged for (A) cash or Cash
Equivalents or (B) securities, and the holders of the Capital Stock in the
Borrower immediately prior to such transaction do not, as a result of such
transaction, own, directly or indirectly, more than fifty percent (50%) of
the combined voting power of the Borrower's Capital Stock or the Capital
Stock of its successor entity in such transaction;
(iii) prior to an Initial Public Offering, Asbury Automotive Holdings
L.L.C. ceases to control the board of directors of Borrower (which such
control is more fully described in Section 3.01 of the Borrower LLC
Agreement), and after an Initial Public Offering, Asbury Automotive
Holdings L.L.C. ceases to exercise voting control over the Shares (as
defined in the Shareholders Agreement), as such control is more fully
described in Section 3.01 of the Shareholders Agreement; or
(iv) other than as a result of transactions otherwise permitted by the
terms of this Agreement, the Borrower ceases to own, directly or
indirectly, 100% of the Voting Interests in a Subsidiary other than a
Subsidiary operating under a Restricted Franchise Agreement (as defined
herein), and except as set forth on Schedule 1.1.8 hereto.
"Charter Documents" means (i) in the case of a corporation, such entity's
articles or certificate of incorporation and by-laws, (ii) in the case of a
limited liability company, such entity's articles of organization and limited
liability company operating agreement or equivalent (however designated), (iii)
in the case of a partnership, such entity's partnership agreement or equivalent
(however designated) and (iv) in the case of an association or other business
entity not described above, such entity's founding documents (however
designated).
10
"Chrysler Financial" means Chrysler Financial Company, L.L.C., a Michigan
limited liability company, and its successors and assigns.
"Closing Fee" is defined in Section 3.1(C) (xxi) of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time, or any successor statute.
"Collateral" means all property and interests in property now or hereafter
acquired by ,covered by, or subject to, any Collateral Document.
"Collateral Documents" means all agreements, instruments and documents
executed in connection with this Agreement that are intended to create or
evidence Liens to secure the Obligations, including, without limitation, the
Loan Party Security Agreements, the Loan Party Pledges, the Cross Agreement, the
Waiver, Guaranty and Disbursement Agreement, the Pledged Account Agreements, and
all other security agreements, mortgages, deeds of trust, loan agreements,
notes, guaranties, subordination agreements, pledges, powers of attorney,
consents, assignments, contracts, fee letters, notices, leases, financing
statements and all other written matter whether heretofore, now, or hereafter
executed by or on behalf of the Borrower, any of its Subsidiaries or any other
Person and delivered to the Agent, together with all agreements and documents
referred to therein or contemplated thereby.
"Commission" means the United States Securities and Exchange Commission and
any Person succeeding to the functions thereof.
"Commitment" means with respect to any Lender at any time, the amount set
forth opposite such Lender's name on Schedule 1.1.4 hereto under the caption
"Commitment" or, if such Lender has entered into one or more Assignment and
Acceptances, set forth for such Lender in the Register maintained by the Agent
pursuant to Section 9.3, as any such amount may be reduced pursuant to Section
2.3.
"Consolidated Net Worth" means, at a particular date, the amount by which
the total consolidated assets of the Borrower and its consolidated Subsidiaries
exceeds the total consolidated liabilities of the Borrower and its consolidated
Subsidiaries.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos, polychlorinated biphenyls ("PCBs"), or any
constituent of any such substance or waste, and includes but is not limited to
these terms as defined under or regulated by any Environmental, Health or Safety
Requirements of Law.
"Contingent Obligation", as applied to any Person, means any direct or
indirect obligation of that Person with respect to any Indebtedness of another
or other obligation or liability of another, including, without limitation, any
such Indebtedness, obligation or liability of another directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary
course of business), co-made or discounted or sold with recourse by that Person,
or in respect of which that Person is otherwise directly or indirectly liable,
including obligations (contingent or otherwise) arising through any contract,
agreement or instrument, or any
11
agreement to purchase, repurchase, or otherwise acquire such Indebtedness,
obligation or liability or any security therefore, or to provide funds for the
payment or discharge thereof (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain solvency, assets,
level of income, or other financial condition, or to make payment other than for
value received.
"Contractual Obligation" as applied to any Person, means any material
provision of any equity or debt securities issued by that Person or any material
indenture, mortgage, deed of trust, security agreement, pledge agreement,
guaranty, contract, undertaking, agreement or instrument, in each case in
writing, to which that Person is a party or by which it or any of its properties
is bound, or to which it or any of its properties is subject.
"Controlled Group" means the group consisting of (i) any corporation which
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower; (ii) a partnership or other trade
or business (whether or not incorporated) which is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower; and (iii) a member
of the same affiliated service group (within the meaning of Section 414(m) of
the Code) as the Borrower, any corporation described in clause (i) above or any
partnership or trade or business described in clause (ii) above.
"Controlled Subsidiary" of any Person means a Subsidiary of such Person (i)
80% or more of the total Equity Interests or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more wholly-owned Subsidiaries of such Person or (ii) of
which such Person possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies, whether through the ownership
of voting securities, by agreement or otherwise.
"Cross Agreement" means that certain Cross Default Agreement dated as of
even date herewith, by and among the Transactions Parties, the Lenders and the
Agent, as such agreement may be amended, restated or otherwise modified from
time to time.
"Current Assets" means, at a particular date, all amounts which would, in
conformity with Agreement Accounting Principles, be included under current
assets on a balance sheet as at such date, plus LIFO reserve, if applicable.
"Current Liabilities" means, at a particular date, all amounts which would,
in conformity with Agreement Accounting Principles, be included under current
liabilities on a balance sheet as at such date.
"Current Ratio" is defined in Section 5.4(A) hereof.
"Customary Permitted Liens" means:
(i) Liens (other than environmental Liens and Liens in favor of the
PBGC) with respect to the payment of taxes, assessments or governmental
charges, in all cases which are not yet due or (if foreclosure, distraint,
sale or other similar proceedings shall not have been commenced) which are
being contested in good faith by appropriate proceedings and with respect
to which adequate reserves or other appropriate provisions are being
maintained in accordance with Agreement Accounting Principles;
12
(ii) statutory Liens of landlords and Liens of suppliers, mechanics,
carriers, materialmen, warehousemen or workmen and other similar Liens
imposed by law created in the ordinary course of business for amounts not
yet due or which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with Agreement
Accounting Principles;
(iii) Liens incurred or deposits made, in each case, in the ordinary
course of business in connection with worker's compensation, unemployment
insurance or other types of social security benefits or to secure the
performance of bids, tenders, sales, contracts (other than for the
repayment of borrowed money), surety, appeal and performance bonds;
provided that (A) all such Liens do not in the aggregate materially detract
from the value of the Borrower's or such Subsidiary's assets or property
taken as a whole or materially impair the use thereof in the operation of
the businesses taken as a whole, and (B) with respect to Liens securing
bonds to stay judgments or in connection with appeals, such Liens do not
secure at any time an aggregate amount exceeding $500,000.00;
(iv) Liens arising with respect to zoning restrictions, easements,
licenses, reservations, covenants, rights-of-way, utility easements,
building restrictions and other similar charges or encumbrances on the use
of real property which do not in any case materially detract from the value
of the property subject thereto or interfere with the ordinary conduct of
the business of the Borrower or any of its Subsidiaries;
(v) Liens of attachment or judgment with respect to judgments, writs
or warrants of attachment, or similar process against the Borrower or any
of its Subsidiaries which do not constitute an Event of Default under
Section 6.1(h) hereof;
(vi) any interest or title of the lessor in the property subject to
any operating lease entered into by the Borrower or any of its Subsidiaries
in the ordinary course of business;
(vii) Liens related to precautionary U.C.C. financing statement
filings with respect to Capitalized Leases or consignment arrangements
otherwise permitted under this Agreement entered into by the Borrower or
any of its Subsidiaries in the ordinary course of business, provided,
however, that any such Liens may not encumber assets other than those that
are the subject of such Capitalized Lease or consignment arrangement, as
the case may be;
(viii) Liens in favor of a banking institution arising by operation of
law encumbering deposits (including the right of set-off) held by such
banking institutions incurred in the ordinary course of business and that
are within the general parameters customary in the banking industry;
provided, however, that (A) any such Lien must be subordinated (on terms
acceptable to Agent and the Required Lenders) to the Liens evidenced by the
Collateral Documents and (B) any such right of set-off must be waived in
favor of the Agent.
13
"Dealership" means any Subsidiary that is an automobile dealership and/or
related body shop or service repair center owned, operated or acquired by any
Transaction Party.
"Dealership Guarantors" means each Person listed on Schedule 1.1.5 hereof
providing a Dealership Guaranty, a Dealership Security Agreement and a
Dealership Pledge to the Agent, for the benefit of the Lenders, and each other
Person providing a Dealership Guaranty, a Dealership Security Agreement and a
Dealership Pledge to Agent, for the benefit of the Lenders, pursuant to Section
5.2 (L) of this Agreement, and their respective successors and assigns.
"Dealership Guaranty" means each Guaranty in the form attached hereto as
Exhibit C-1, provided by a Dealership to the Agent, for the benefit of the
Lenders, as the same may be amended, modified, supplemented, reaffirmed and/or
restated, and as in effect from time to time.
"Dealership Pledge" means each Pledge Agreement delivered by any Dealership
to the Agent, for the benefit of the Lenders, pursuant to which such Person
pledges to the Agent, for the benefit of the Lenders, its Capital Stock of
certain corporation, limited liability company and/or partnership Subsidiaries,
as such Pledge Agreement may be amended, restated or otherwise modified from
time to time.
"Dealership Security Agreement" means any Security Agreement in the form
attached hereto as Exhibit D-1, pursuant to which a Dealership grants the Agent,
for the benefit of the Lenders, a security interest in all of its assets, as the
same may be amended, modified, supplemented and/or restated, and as in effect
from time to time.
"Decision Period" is defined in Section 5.2(G) hereof.
"Decision Reserve" is defined in Section 5.2(G) hereof.
"Defaulted Advance" means, with respect to any Lender at any time, the
portion of any Advance required to be made by such Lender to the Borrower
pursuant to Section 2.1 at or prior to such time that has not been made by such
Lender or the Agent for the account of such Lender pursuant to Section 2.1 as of
such time, or which otherwise is required to be made by such Lender at or prior
to such time that has not been made by such Lender as of such time.
"Defaulted Amount" means, with respect to any Lender, any amount required
to be paid by such Lender to the Agent or any other Lender hereunder or under
any other Loan Document at or prior to such time that has not been so paid as of
such time. In the event that a portion of a Defaulted Amount shall be deemed
paid pursuant to Section 2.12, the remaining portion of such Defaulted Amount
shall be considered a Defaulted Amount originally required to be paid hereunder
or under any other Loan Document on the same date as the Defaulted Amount so
deemed paid in part.
"Defaulting Lender" means, at any time, any Lender that, at such time, (a)
owes a Defaulted Advance or a Defaulted Amount , or (b) shall take any action or
be the subject of any action or proceeding of a type described in Section 6.1(f)
or Section 6.1(g).
14
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
that is 91 days after the Termination Date.
"DOL" means the United States Department of Labor and any Person succeeding
to the functions thereof.
"Dollar" and "$" means dollars in the lawful currency of the United States.
"EBITDA" means, for any period, on a consolidated basis for the Borrower
and its Subsidiaries, the sum of the amounts for such period, without
duplication, of:
(i) Net Income,
plus (ii) Interest Expense, to the extent deducted in computing
Net Income,
plus (iii) charges against income for foreign, federal, state and
local taxes, to the extent deducted in computing Net Income,
plus (iv) depreciation expense, to the extent deducted in
computing Net Income,
plus (v) amortization expense, including, without limitation,
amortization of goodwill, other intangible assets and
Transaction Costs, to the extent deducted in computing Net
Income,
plus (vi) other non-cash charges classified as long-term deferrals
in accordance with Agreement Accounting Principles, to the
extent deducted in computing Net Income,
plus (vii) all extraordinary losses (which have been included in
the determination of Net Income.)
minus (viii) all extraordinary gains (which have been included
in the determination of Net Income).
EBITDA shall be calculated for any period by including the actual amount for the
applicable period ending on such day, including the EBITDA attributable to
Permitted Acquisitions occurring during such period on a pro forma basis for the
period from the first day of the applicable period through the date of the
closing of each Permitted Acquisition, utilizing (a) where available or required
pursuant to the terms of this Agreement, historical audited and/or reviewed
unaudited financial statements obtained from the seller, broken down by fiscal
quarter in the Borrower's reasonable judgment or (b) unaudited financial
statements (where no audited or reviewed financial statements are required
pursuant to the terms of this Agreement) reviewed internally by the Borrower,
broken down in the Borrower's reasonable judgment.
15
"EBITDAR" means, for any period, on a consolidated basis for the Borrower
and its Subsidiaries, the sum of the amounts for such period, without
duplication, of (i) EBITDA and (ii) Rentals.
"Effective Date" is defined in Section 1.3 hereof.
"Eligible Assignee" is defined in Section 9.3 hereof.
"Environmental, Health or Safety Requirements of Law" means all
Requirements of Law derived from or relating to federal, state and local laws or
regulations relating to or addressing pollution or protection of the
environment, or protection of worker health or safety, including, but not
limited to, the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss. 9601 et seq., the Occupational Safety and Health Act of 1970,
29 U.S.C. ss. 651 et seq., and the Resource Conservation and Recovery Act of
1976, 42 U.S.C. ss. 6901 et seq., in each case including any amendments thereto,
any successor statutes, and any regulations or guidance promulgated thereunder,
and any state or local equivalent thereof.
"Environmental Property Transfer Act" means any applicable Requirement of
Law that conditions, restricts, prohibits or requires any notification or
disclosure triggered by the closure of any property or the transfer, sale or
lease of any property or deed or title for any property for environmental
reasons, including, but not limited to, any so-called "Industrial Site Recovery
Act" or "Responsible Property Transfer Act."
"Equipment" of a Person means all of such Person's present and future
furniture, machinery, service vehicles, supplies and other equipment and any and
all accessions, parts and appurtenances attached to any of the foregoing or used
in connection therewith, and any substitutions therefore and replacements,
products and proceeds thereof.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time including (unless the context otherwise requires) any
rules or regulations promulgated thereunder.
"Event of Default" means an event described in Section 6.1 hereof.
"Excluded Tax" is defined in Section 2.9 (A) hereof.
"Existing Asbury Obligations" is defined in Schedule 1.1.6 hereof.
"Extraordinary Receipt" means extraordinary gains (and any nonrecurring
unusual gains arising in or outside of the ordinary course of business) not
included in extraordinary gains determined in accordance with Agreement
Accounting Principles.
"Fair Value" means (a) with respect to the Capital Stock of the Borrower
(after the Initial Public Offering), the closing price for such Capital Stock on
the trading date immediately preceding the date of determination; and (b) with
respect to the Capital Stock of the Borrower
16
(prior to the Initial Public Offering) and other assets, the value of the
relevant asset as of the date of acquisition or sale as would be obtained in an
arm's-length transaction conducted in good faith between an informed and willing
buyer and an informed and willing seller each under no compulsion to buy or
sell.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day for such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Fixed Charge Coverage Ratio" is defined in Section 5.4(B) hereof.
"Floor Plan Indebtedness" means any and all loans, advances, debts,
liabilities and obligations, owing by any Dealership to any Lender (or any
Affiliate or Subsidiary thereof), of any kind or nature, present or future,
arising under a Wholesale Line, whether or not evidenced by any note, guaranty
or other instrument, whether or not for the payment of money, whether arising by
reason of an extension of credit, loan, guaranty, indemnification, or in any
other manner, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired. The term includes, without limitation,
all interest, charges, expenses, fees, attorneys' fees and disbursements and
paralegals' fees, and any other sum chargeable to the Borrower or a Dealership
under any documents, instruments or agreements executed by the Borrower or a
Dealership in connection with a Wholesale Line.
"Ford Credit" means Ford Motor Credit Company, a Delaware corporation, and
its successors and assigns.
"GMAC" means General Motors Acceptance Corporation, a Delaware corporation,
and its successors and assigns.
"Governmental Authority" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantor" means each Dealership Guarantor and Subsidiary Holding Company
Guarantor.
"Guaranty" means each Dealership Guaranty and Subsidiary Holding Company
Guaranty.
"Hedging Obligations" of a Person means any and all obligations of such
Person, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefore), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward
17
rates applicable to such Person's assets, liabilities or exchange transactions,
including, but not limited to, dollar-denominated or cross-currency interest
rate exchange agreements, forward currency exchange agreements, interest rate
cap or collar protection agreements, forward rate currency or interest rate
options, puts and warrants, and (ii) any and all cancellations, buy backs,
reversals, terminations or assignments of any of the foregoing.
"Indebtedness" of any Person means, without duplication, such Person's (a)
obligations for borrowed money, (b) obligations representing the deferred
purchase price of property or services (other than accounts payable arising in
the ordinary course of such Person's business payable on terms customary in the
trade), (c) obligations which are evidenced by notes, acceptances or other
similar instruments, (d) Capitalized Lease Obligations, (e) reimbursement
obligations with respect to letters of credit (other than commercial letters of
credit) issued for the account of such Person, (f) Hedging Obligations, (g)
Contingent Obligations in respect of obligations of another Person of the type
described in the foregoing clauses (a) through (f). The amount of Indebtedness
of any Person at any date shall be without duplication (i) the outstanding
balance at such date of all unconditional obligations as described above and the
maximum liability of any such Contingent Obligations at such date and (ii) in
the case of Indebtedness of others secured by a Lien to which the property or
assets owned or held by such Person is subject, the lesser of the fair market
value at such date of any asset subject to a Lien securing the Indebtedness of
others and the amount of the Indebtedness secured. For the avoidance of doubt,
in the case of the Borrower and its Subsidiaries, the term "Indebtedness"
includes all Floor Plan Indebtedness.
"Indemnified Matters" is defined in Section 8.7 (B) hereof.
"Indemnified Taxes" is defined in Section 2.9 (A) hereof.
"Indemnitees" is defined in Section 8.7 (B) hereof.
"Initial Borrowing" is defined in Section 2.1 (A) (1) hereof.
"Initial Public Offering" means an initial public offering of equity
securities of Borrower (or another entity formed in connection with a Permitted
IPO Conversion (as defined herein)) registered under the Securities Act of 1933,
as amended.
"Interest Expense" means, for any period, the total interest expense of the
Borrower and its consolidated Subsidiaries, whether paid or accrued (including
the interest component of Capitalized Leases, commitment and letter of credit
fees), but excluding interest expense not payable in cash (including
amortization of discount), and excluding Floor Plan Indebtedness, all as
determined in conformity with Agreement Accounting Principles.
"Interest Reconciliation Date" is defined in Section 2.5 hereof.
"Inventory" of a Person means any and all present and future motor
vehicles, tractors, trailers, service parts and accessories and all other
property of such Person held for sale or lease in the ordinary course of
business of such Person.
"Investment" of a Person means, (i) any purchase or other acquisition by
that Person of any Indebtedness, Equity Interests or other securities, or of a
beneficial interest in any
18
Indebtedness, Equity Interests or other securities, issued by any other Person,
(ii) any purchase by that Person of all or substantially all of the assets of a
business conducted by another Person, and (iii) any loan, advance (other than
deposits with financial institutions available for withdrawal on demand, prepaid
expenses, accounts receivable, advances to officers, directors, sales
representatives and employees and similar items made or incurred in the ordinary
course of business) or capital contribution by that Person to any other Person,
including all Indebtedness to such Person arising from a sale of property by
such Person other than in the ordinary course of its business.
"IRS" means the United States Internal Revenue Service and any Person
succeeding to the functions thereof.
"Lenders" means, collectively, Ford Credit, Chrysler Financial, GMAC and
their respective successors and Eligible Assignees that shall become a party to
this Agreement pursuant to Section 9.3 hereof; in each case for so long as such
Lender or Person shall be a party to this Agreement.
"Lender's Commitment" means, with respect to any Lender at any time, the
amount set forth opposite such Lender's name on Schedule 1.1.4 hereto under the
caption "Commitment" or, if such Lender has entered into one or more Assignment
and Acceptances, set forth for such Lender in the Register maintained by the
Agent pursuant to Section 9.3 (b) hereof as such lender's "Commitment," as such
amount may be reduced pursuant to Section 2.3.
"LIBOR Rate" means, for any given calendar month, the monthly arithmetic
average, as determined on the first Business Day of that particular calendar
month, of the per annum interest rate announced from time to time as the one
month London Interbank Offered Rate quoted each of the four Mondays immediately
preceding the date of determination (for the Friday immediately preceding such
Monday) under the Money Rates Column of The Wall Street Journal, or, if The Wall
Street Journal is unavailable for any reason, as published in such other
publications as the Agent may designate. In the event such rate is not quoted on
Monday for the previous Friday, the rate quoted on the first business day of the
week for the last business day of the previous week shall be utilized.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, encumbrance or security agreement or preferential
arrangements of any kind or nature whatsoever (including, without limitation,
the interest of a vendor or lessor under any conditional sale, Capitalized Lease
or other title retention agreement).
"Loan Documents" means this Agreement, the Notes, the Loan Party
Guaranties, the Collateral Documents and all other documents, instruments and
agreements executed in connection herewith or contemplated hereby (other than
any Wholesale Line), as the same may be amended, restated or otherwise modified
and in effect from time to time.
"Loan Party" means the Borrower and each other Person that has executed a
Loan Document in favor of the Agent at any time on or after the Effective Date.
"Loan Party Guaranties" means each Subsidiary Holding Company Guaranty and
each Dealership Guaranty.
19
"Loan Party Pledges" means each of (i) the Borrower Pledge, (ii) the
Dealership Pledge, (iii) the Subsidiary Holding Company Pledge, and (iv) any
other pledge of Capital Stock delivered by a Loan Party from time to time to the
Agent, for the benefit of the Lenders.
"Loan Party Security Agreements" means each of (i) the Borrower Security
Agreement, (ii) the Dealership Security Agreement, (iii) the Subsidiary Holding
Company Security Agreement, and (iv) any other security agreement delivered by a
Loan Party from time to time to the Agent, for the benefit of the Lenders.
"MAI Appraisal" means an appraisal of real property performed by a Member,
Appraisal Institute appraiser who meets the requirements of American Institute
of Real Estate Appraisers.
"Margin Stock" shall have the meaning ascribed to such term in Regulation
U.
"Material Adverse Change" means either (i) for so long as the structure of
the Asbury Group involves Platforms (as defined herein), any material adverse
change in the business, financial condition, operations, performance, properties
or prospects of any Platform, or (ii) in the event that the structure of the
Asbury Group involves geographic structures other than Platforms, a material
adverse change in the business, financial condition, operations, performance,
properties or prospects of any aggregation of Transaction Parties which such
aggregation, taken as a whole, equals the lesser of (A) the geographic
organizational component of the Asbury Group that replaces the Platform
structure or (B) ten percent (10%) of the total number of Transaction Parties.
"Material Adverse Effect" means a material adverse effect upon (a) the
business, financial condition, operations, performance, properties or prospects
of the Borrower and its Subsidiaries, taken as a whole, (b) the ability of any
Loan Party to perform its respective obligations under the Loan Documents in any
material respect, or (c) the ability of the Agent or any Lender to enforce in
any material respect the Obligations or its rights with respect to the Loan
Documents.
"Material Subsidiary" means (i) any "Significant Subsidiary" as defined in
Regulation S-X issued pursuant to the Securities Act and the Exchange Act, or
(ii) any Subsidiary of the Borrower that is a Loan Party.
"Maximum Availability" means $550,000,000.00, as such amount may be reduced
pursuant to Section 2.3 hereof.
"Maximum Rate" means the maximum nonusurious interest rate under applicable
law.
"Minority Holder" means any holder of an Equity Interest in a Subsidiary,
which Equity Interest does not exceed 20% of the Capital Stock of such
Subsidiary.
"Multi-employer Plan" means a "Multi-employer Plan" as defined in Section
4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years
was, contributed to by either the Borrower or any member of the Controlled
Group.
20
"Net Cash Proceeds" means, with respect to any sale, lease, transfer or
other disposition of any asset or the incurrence or issuance of any Indebtedness
or the sale or issuance of any Equity Interests (including, without limitation,
any capital contribution) by any Person, or any Extraordinary Receipt received
by or paid to or for the account of any Person, the aggregate amount of cash
received from time to time (whether as initial consideration or through payment
or disposition of deferred consideration) by or on behalf of such Person in
connection with such transaction after deducting therefrom only (without
duplication) (a) reasonable and customary brokerage commissions, underwriting
fees and discounts, legal fees, finder's fees and other similar fees,
disbursements and commissions, (b) the amount of taxes and other governmental
costs and expenses payable in connection with or as a result of such transaction
(including the amount of taxes payable by such Person's direct and indirect
owners if such Person is treated as a flow through entity for tax purposes as
determined for purposes of making Tax Distributions pursuant to Section 6.01 (c)
of the Borrower LLC Agreement), (c) the amount of any Indebtedness secured by a
Lien on such asset that, by the terms of the agreement or instrument governing
such Indebtedness, is required to be repaid upon such disposition, and (d)
reserves for purchase price adjustments and retained fixed liabilities that are
payable by Borrower or such Subsidiary in cash to the extent required under
Agreement Accounting Principles in connection with such sale, lease, transfer or
disposition (it being understood that immediately upon expiration of the
retention period for such reserves, amounts held as reserves must be paid as a
mandatory prepayment of the Revolving Credit Obligations pursuant to Section 2.2
(B) hereof), in the case of items (a) and (c) above, to the extent, but only to
the extent, that the amounts so deducted are, at the time of receipt of such
cash, actually paid either (a) to a Person that is not an Affiliate of such
Person, or (b) to Ripplewood Partners L.P. (with the prior written consent of
the Required Lenders, which such consent may not be unreasonably withheld), and
are properly attributable to such transaction or to the asset that is the
subject thereof,; provided, however, that in the case of taxes that are
deductible under clause (b) above but for the fact that, at the time of receipt
of such cash, such taxes or any Tax Distribution related thereto have not been
actually paid or are not then payable, such Person or Affiliate may deduct an
amount (the "Reserved Amount") equal to the amount reserved in accordance with
Agreement Accounting Principles for such party's reasonable estimate of such
taxes or any Tax Distribution, other than taxes of such party for which such
party is indemnified, provided further, however, that, at the time such taxes or
any Tax Distribution are paid, an amount equal to the amount, if any, by which
the Reserved Amount for such taxes or any Tax Distribution exceeds the amount of
such taxes or any Tax Distribution actually paid shall constitute "Net Cash
Proceeds" of the type for which such taxes were reserved for all purposes
hereunder.
"Net Income" means, for any period, the net earnings (or loss) after taxes
of the Borrower and its Subsidiaries on a consolidated basis for such period
taken as a single accounting period determined in conformity with Agreement
Accounting Principles.
"New Subsidiary" is defined in Section 5.3(F)(ii).
"Notes" means collectively, all promissory notes of the Borrower payable to
the order of a Lender, in substantially the form of Exhibit A hereto, evidencing
the indebtedness of the Borrower to such Lender, including any amendment,
restatement, modification, renewal, increase or replacement thereof.
21
"Obligations" means all Advances, debts, liabilities, obligations,
covenants and duties owing by a Loan Party to the Agent or any of the Lenders or
any Indemnitee, of any kind or nature, present or future, arising under any Loan
Document, whether or not evidenced by any note, guaranty or other instrument,
whether or not for the payment of money, whether arising by reason of an
extension of credit, loan, guaranty, indemnification, or in any other manner,
whether direct or indirect (including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter arising and however
acquired. The term includes, without limitation, all interest, charges,
expenses, fees, attorneys' fees and disbursements, paralegals' fees, and any
other sum chargeable to any Loan Party under any Loan Document.
"Off Balance Sheet Liabilities" of a Person means (a) any repurchase
obligation or liability of such Person or any of its Subsidiaries with respect
to accounts or notes receivable sold by such Person or any of its Subsidiaries,
(b) any liability under any sale and leaseback transactions which do not create
a liability on the consolidated balance sheet of such Person, (c) any liability
under any financing lease or so-called "synthetic" lease transaction, or (d) any
obligations arising with respect to any other transaction which is the
functional equivalent of borrowing but which does not constitute a liability on
the consolidated balance sheets of such Person and its Subsidiaries.
"Other Taxes" is defined in Section 2.9(B) hereof.
"Over Borrowing" means any Borrowing which, if funded, would not exceed the
Revolving Credit Availability at such time, but which, when allocated among the
Lenders in accordance with their respective Ratable Shares, would cause any one
or more of the Lenders to exceed its respective Unused Commitment at such time.
"Participants" is defined in Section 9.2(A) hereof.
"Payment Date" means the fifteenth day of each calendar month, provided,
however if such day is not a Business Day, then the Payment Date shall be the
next succeeding Business Day following such fifteenth day.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Pending Acquisition" means any Acquisition set forth on Schedule 1.1.7
hereto.
"Permitted Acquisition" is defined in Section 5.3(F)(iii) hereof.
"Permitted Existing Indebtedness" means the Indebtedness of the Borrower
and its Subsidiaries identified as such on Schedule 1.1.1 to this Agreement.
"Permitted Existing Investments" means the Investments of the Borrower and
its Subsidiaries identified as such on Schedule 1.1.2 to this Agreement.
"Permitted Existing Liens" means the Liens on assets of the Borrower and
its Subsidiaries identified as such on Schedule 1.1.3 to this Agreement.
"Permitted IPO Conversion" means, any of the following, occurring as a
precursor to an initial public offering of securities in the Borrower, (A) a
transfer of all of (x) the assets of
22
Borrower or (y) the Equity Interests in Borrower owned by the members of
Borrower, to a newly organized stock corporation or other business entity (any
such entity is referred to herein as a "Newco"), (B) a merger or consolidation
of Borrower into or with a Newco, (C) the conversion of Borrower into a
corporation or other type of entity, or (D) another restructuring of all of the
assets of or Equity Interests in Borrower owned by the members of Borrower into
a Newco; provided, however that such actions described in (A) through (D) may
occur only if (i) consented to in writing by the Agent and the Required Lenders
prior to the consummation of such actions, which such consent may not be
unreasonably withheld, (ii) any such Newco is a Person organized under the laws
of the United States, any State thereof or the District of Columbia, (iii) any
such Newco (A) expressly assumes the Obligations of the Borrower and performance
of the Borrower's covenants under the Loan Documents, by becoming a party
thereto, and (B) takes or has taken all action required by Section 5 of the
Borrower Security Agreement, and takes or has taken such other action as may be
necessary or desirable, or as the Agent may reasonably request, in order to
preserve the Liens, and continue the perfection thereof with the same priority,
as granted and provided for or purported to be granted and provided for by the
Borrower Security Agreement, and (iv) immediately after giving effect to such
transaction, no event shall occur and be continuing that constitutes an Event of
Default or Unmatured Default. From and after completion of a Permitted IPO
Conversion, references in the Loan Documents to "Borrower" shall constitute
references to Newco.
"Permitted Refinancing Indebtedness" means any replacement, renewal,
refinancing or extension of any Indebtedness permitted by this Agreement that
(i) does not exceed the aggregate principal amount (plus associated fees and
expenses) of the Indebtedness being replaced, renewed, refinanced or extended,
except to the extent permitted by Section 5.3 (A) (xi), (ii) does not rank at
the time of such replacement, renewal, refinancing or extension senior to the
Indebtedness being replaced, renewed, refinanced or extended, and (iii) does not
contain terms (including, without limitation, terms relating to security,
amortization, interest rate, premiums, fees, covenants, event of default and
remedies) materially less favorable to the Borrower or to the Lenders than those
applicable to the Indebtedness being replaced, renewed, refinanced or extended.
"Permitted Subordinated Indebtedness" means Indebtedness issued by the
Borrower (whether in a Rule 144A or private placement offering, an SEC
registered public offering or otherwise) that is consented to by the Agent and
the Required Lenders in writing (which such consent may not be unreasonably
withheld) and that is subordinated to the Obligations and the Wholesale Lines on
terms consented to by the Agent and the Required Lenders in writing (which such
consent may not be unreasonably withheld).
"Person" means any individual, corporation, firm, enterprise, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, limited liability company or other entity of any kind, or any
government or political subdivision or any agency, department or instrumentality
thereof.
"Plan" means an employee benefit plan defined in Section 3(3) of ERISA in
respect of which the Borrower or any member of the Controlled Group is, or
within the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"Platform" means each of (i) collectively, Asbury Automotive Arkansas
L.L.C., a Delaware limited liability company, and each entity it owns, directly
or indirectly, (ii) collectively,
23
Asbury Automotive Atlanta L.L.C., a Delaware liability company, and each entity
it owns, directly or indirectly, (iii) collectively, Asbury Automotive
Jacksonville, L.P., a Delaware limited partnership, and each entity it owns,
directly or indirectly, (iv) collectively, Asbury Automotive North Carolina
L.L.C., a Delaware limited liability company, Asbury Automotive North Carolina
Real Estate Holdings L.L.C., a Delaware limited liability company, and Camco
Finance, L.L.C., a Delaware limited liability company, and each entity any of
the foregoing owns, directly or indirectly, (v) collectively, Asbury Automotive
St. Louis L.L.C., a Delaware limited liability company, Asbury Automotive St.
Louis Gen. L.L.C., a Delaware limited liability company, and Asbury Automotive
St. Louis LR L.L.C., a Delaware limited liability company, and each entity any
of the foregoing owns, directly or indirectly, (vi) collectively, Asbury
Automotive Tampa L.P., a Delaware limited partnership, Asbury Tampa Management
L.L.C., a Delaware limited liability company, Asbury Automotive Tampa GP,
L.L.C., a Delaware limited liability company, and each entity it owns, directly
or indirectly, (vii) collectively, Asbury Automotive Texas L.L.C., a Delaware
limited liability company, and each entity it owns, directly or indirectly,
(viii) Asbury Automotive Oregon Dealership Holdings L.L.C., a Delaware limited
liability company, and each entity it owns, directly or indirectly, and (ix)
those entities acquired in connection with any Permitted Acquisition of a group
of Dealerships, operating under multiple franchise agreements with multiple
automobile manufacturers operating in a specific geographic region.
"Pledged Account Agreements" means, collectively, any Pledged Account
Agreement in the form attached hereto as Exhibit H, pursuant to which a
Transaction Party grants the Agent, for the benefit of the Lenders, a security
interest in all of its depository accounts, as the same may be amended,
modified, supplemented and/or restated, and as in effect from time to time.
"Ratable Portion-Initial Advance" means with respect to Ford Credit 45.7%,
with respect to Chrysler Financial 40%, and with respect to GMAC 14.3%.
"Ratable Share" means with respect to any Lender at any time, a percentage
represented by a fraction the numerator of which is the amount of such Lender's
Commitment at such time and the denominator of which is the sum of all
Commitments at such time, in either case as reduced pursuant to the terms
hereof.
"Reallocated Borrowing" means, as to any Lender at the time of a request
for an Over Borrowing, such Lender's Ratable Share of the given Over Borrowing
minus such Lender's Unused Commitment at such time.
"Reallocating Lender" is defined in Section 2.1 (A) (2) (c) hereof.
"Receivable(s)" of a Person means all of such Person's presently existing
and hereafter arising or acquired accounts, contract rights, chattel paper,
instruments, notes, letters of credit, documents, documents of title, investment
property, deposit accounts, other bank accounts, general intangibles, tax
refunds and other obligations of other Persons of any kind, now or hereafter
existing, including, but not limited to, those arising out of or in connection
with the sale or lease of goods, the rendering of services or otherwise, and all
rights now or hereafter existing in and to all security agreements, leases, and
other contracts securing or otherwise relating to any such accounts, contract
rights, chattel paper, instruments, notes, letters of credit, documents,
documents of title, investment property, deposit accounts, other bank accounts,
general intangibles, tax refunds or of other Persons.
24
"Register" has the meaning set forth in Section 9.3 (b).
"Regulation T" means Regulation T of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by and to brokers and dealers of securities for the purpose
of purchasing or carrying margin stock (as defined therein).
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit for the purpose of purchasing or carrying Margin Stock
applicable to member banks of the Federal Reserve System.
"Regulation X" means Regulation X of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by foreign lenders for the purpose of purchasing or carrying
margin stock (as defined therein).
"Release" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment, including the movement of Contaminants through or in the
air, soil, surface water or groundwater.
"Rentals" of a Person means the aggregate fixed amounts payable by such
Person under any lease of real or personal property but does not include any
amounts payable under Capitalized Leases of such Person.
"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 by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days after
such event occurs, provided, however, that a failure to meet the minimum funding
standards of Section 412 of the Code and of Section 302 of ERISA shall be a
Reportable Event regardless of the issuance of any such waiver of the notice
requirement in accordance with either Section 4043(a) of ERISA or Section 412(d)
of the Code.
"Required Lenders" means, at any time, Lenders owed or holding at least 65%
of the sum of (a) the aggregate principal amount of the Advances outstanding at
such time, and (b) the Unused Commitments at such time (such sum is referred to
as the "Credit"); provided, however, that if at any given time no one Lender is
owed or holds 25% or more of the Credit, "Required Lender" at such time will
mean Lenders owed or holding at least 51% of the Credit; provided, further,
however, that if any Lender shall be a Defaulting Lender at any such time, there
shall be excluded from the determination of Required Lenders at such time (X)
the aggregate principal amount of the Advances owing to such Lender (in its
capacity as a Lender) and outstanding at such time, and (Y) the Unused
Commitment of such Lender at such time.
25
"Requirements of Law" means, as to any Person, the charter and by-laws or
other organizational or governing documents of such Person, and any law, rule or
regulation, or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject including,
without limitation, the Securities Act of 1933, the Securities Exchange Act of
1934, Regulations T, U and X, ERISA, the Fair Labor Standards Act, the Worker
Adjustment and Retraining Notification Act, Americans with Disabilities Act of
1990, and any certificate of occupancy, zoning ordinance, building,
environmental or land use requirement or permit or environmental, labor,
employment, occupational safety or health law, rule or regulation.
"Responsible Officer" means any officer of any Transaction Party.
"Restricted Franchise Agreement" is defined in Section 5.3(F)(iii)(b).
"Restricted Payment" means (i) any dividend or other distribution, direct
or indirect, on account of any Equity Interests of the Borrower now or hereafter
outstanding, except (a) any Tax Distribution, or (b) a dividend payable solely
in the Borrower's Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to purchase such Capital Stock, (ii) any redemption,
retirement, purchase or other acquisition for value, direct or indirect, of any
Equity Interests of the Borrower or any of its Subsidiaries now or hereafter
outstanding, other than in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Transaction Party) of other
Equity Interests of the Borrower (other than Disqualified Stock), and (iii) any
payment of a claim for the rescission of the purchase or sale of, or for
material damages arising from the purchase or sale of any Equity Interests of
the Borrower or any of the Borrower's Subsidiaries, or of a claim for
reimbursement, indemnification or contribution arising out of or related to any
such claim for damages or rescission.
"Revolving Credit Availability" means, at any particular time, the
difference between the Maximum Availability at such time and the Revolving
Credit Obligations at such time.
"Revolving Credit Obligations" means, at any particular time, the sum of
the outstanding principal amount of all Advances at such time.
"Roll-Up Transaction" has the meaning assigned to it in the Borrower LLC
Agreement.
"Secretary's Certificate" with respect to any Person, means any
certificate, delivered by a secretary, assistant secretary, managing member,
general partner or governor of such Person which certifies (i) the names and
true signatures of the incumbent officers or managers of such Person authorized
to sign each Transaction Document to which it is a party and the other documents
to be executed thereunder, (ii) a true and correct copy of such Person's
Certificate of Incorporation, or similar charter document and all amendments
thereto, (iii) a true and correct copy of the by-laws or similar governing
document of such entity and all amendments thereto, and (iv) a true and correct
copy of the resolutions of such Person's board of directors or members approving
and authorizing the execution, delivery and performance by such entity of each
Transaction Document to which it is a party and the other documents to be
executed thereunder;
"Secured Parties" means the Agent, for itself and the other Lenders.
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"Seller Paper" means purchase price obligations of any Loan Party to a
seller of Equity Interests or assets in connection with a Permitted Acquisition,
provided that (i) incurrence of such obligations must have been consented to by
the Agent and the Required Lenders, which such consent may not be unreasonably
withheld, (ii) such obligations are subordinated in right of payment to the
prior payment in full of the Obligations and the Wholesale Lines, and (iii) such
obligations are subordinate to the Obligations and the Wholesale Lines in any
distributions made in any bankruptcy, insolvency or reorganization proceedings;
with respect to each of (ii) and (iii) on terms acceptable to the Agent and the
Required Lenders and otherwise in form reasonably acceptable to the Required
Lenders.
"Shareholders Agreement" has the meaning assigned to such term in the
Borrower LLC Agreement.
"Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"Solvent" means, with respect to any Person on a particular date, that on
such date (a) the present fair saleable value of the property of such Person is
greater than the total amount of liabilities, including, without limitation,
contingent liabilities, of such Person, after giving effect to the expected
value of rights of indemnity, contribution and subrogation (b) the present fair
salable value of the assets of such Person is not less than the amount that will
be required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay such debts and liabilities as they mature and (d) such Person is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute an unreasonably
small amount of capital. The amount of contingent liabilities at any time shall
be computed as the amount that, in the light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability, after giving effect to the expected value
of rights of indemnity, contribution and subrogation.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a
Subsidiary of the Borrower.
"Subsidiary Holding Companies" means and any Subsidiary of Borrower which
owns any Equity Interests in any other Person in the Asbury Group, in each case
together with its successors and assigns.
"Subsidiary Holding Company Guaranty" means each Guaranty in the form
attached hereto as Exhibit C-2, provided by a Subsidiary Holding Company to
Agent, for the benefit of the Lenders, as the same may be amended, modified,
supplemented, reaffirmed and/or restated, and in effect from time to time.
"Subsidiary Holding Company Pledge" means each Pledge Agreement delivered
by any Subsidiary Holding Company to the Agent, for the benefit of the Lenders,
pursuant to which such Person pledges their Capital Stock of certain
corporation, limited liability company and/or partnership Subsidiaries, as such
pledge agreement may be amended, restated or otherwise modified from time to
time.
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"Subsidiary Holding Company Security Agreement" means any Security
Agreement in the form attached hereto as exhibit D-2, pursuant to which a
Subsidiary Holding company grants the Agent, for the benefit of the Lenders, a
security interest in all of its assets, as the same may be amended, modified,
supplemented and/or restated, and in effect from time to time.
"Successor Agent" is defined in Section 7.6 of this Agreement.
"Target Amount" means a Dollar amount equal to (i) the Dollar amount of the
Initial Borrowing less the Closing Fee, plus (ii) the aggregate Dollar amount of
prepayments of the Revolving Credit Obligations made by Borrower from time to
time; provided, however, that only prepayments made with the following types of
funds may be included in (ii) above (the "Allowable Prepayments"): (A) Net Cash
Proceeds received by Borrower as a direct result of an Initial Public Offering
or any secondary public offering of equity securities of Borrower registered
under the Securities Act of 1933, (B) Net Cash Proceeds received by Borrower as
a direct result of Permitted Subordinated Indebtedness, (C) Net Cash Proceeds of
an Asset Sale, or (D) Borrower's after tax net income, as determined in
accordance with Agreement Accounting Principles. The Target Amount for each
quarter shall be based on the Target Amount in effect on the first Business Day
of such quarter and shall be determined by Agent in its sole discretion by
taking into account all Allowable Prepayments made on or prior to such date. All
changes in the Target Amount shall become effective on the first Business Day of
a calendar quarter and shall be deemed in effect throughout such calendar
quarter.
"Tax Distribution" means any distribution by the Borrower pursuant to
section 6.01 (c) of the Borrower LLC Agreement.
"Termination Date" means the earlier of (a) three years less one day after
the Effective Date or such other "Termination Date" specified in an Extension
Notice and agreed to by the Lenders and (b) the date of termination of the
Commitment pursuant to either of Section 2.3 or Section 6.2 hereof.
"Termination Event" means (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of the Borrower or any member of the
Controlled Group from a Benefit Plan during a plan year in which the Borrower or
such Controlled Group member was a "substantial employer" as defined in Section
4001(a)(2) of ERISA or the cessation of operations which results in the
termination of employment of twenty percent (20%) of Benefit Plan participants
who are employees of the Borrower or any member of the Controlled Group; (iii)
the imposition of an obligation on the Borrower or any member of the Controlled
Group under Section 4041 of ERISA to provide affected parties written notice of
intent to terminate a Benefit Plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to
terminate a Benefit Plan; (v) any event or condition which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to
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administer, any Benefit Plan; or (vi) the partial or complete withdrawal of the
Borrower or any member of the Controlled Group from a Multi-employer Plan.
"Total Adjusted Debt" means, for any period, on a consolidated basis for
the Borrower and its Subsidiaries, the amount of Total Debt less (i) any Floor
Plan Indebtedness and (ii) Permitted Subordinated Indebtedness.
"Total Debt" means, for any period, on a consolidated basis for the
Borrower and its Subsidiaries, the sum of Indebtedness of the Borrower and its
Subsidiaries, other than Hedging Obligations and Contingent Obligations.
"Transaction Costs" means the fees, costs and expenses payable by the
Borrower in connection with the execution, delivery and performance of the
Transaction Documents.
"Transaction Parties" means each of the Loan Parties and any Subsidiary of
the Borrower that is not yet a Loan Party.
"Transaction Documents" means the Loan Documents and the Acquisition
Documents.
"United States Person" means any Person that is resident in or organized
under the laws of the United States or any political subdivision thereof, as
each of these is determined for United States Federal tax purposes.
"Unmatured Default" means an event which, but for the lapse of time or the
giving of notice, or both, would constitute an Event of Default.
"Unused Commitment" means, with respect to any Lender, such Lender's
Commitment at such time minus the aggregate principal amount of Advances made by
such Lender and outstanding at such time.
"Voting Interests" means shares of Capital Stock in any Person, the holders
of which are ordinarily, in the absence of contingencies, entitled to vote for
the election of directors, or persons performing similar functions of such
Person, even if the right to vote has been suspended by the happening of such
contingency.
"Waiver, Guaranty and Disbursement Agreement" means each Waiver, Guaranty
and Disbursement Agreement in the form attached hereto as Exhibit G, delivered
by any Loan Party to the Agent, for the benefit of the Lenders, as the same may
be amended, restated, or otherwise modified from time to time.
"Wholesale Line" means any automotive floor plan wholesale credit line made
by Ford Credit, Chrysler Financial, GMAC, or any Lender or any Affiliate or
subsidiary thereof to a dealership.
"Working Capital Advances" is defined in Section 5.2 (K) hereof.
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Any accounting terms used in this Agreement which are not specifically
defined herein shall have the meanings customarily given them in accordance with
generally accepted accounting principles in existence as of the date hereof.
1.2 References. The existence throughout the Agreement of references to the
Borrower's Subsidiaries is for a matter of convenience only. Any references to
Subsidiaries of the Borrower set forth herein shall (i) with respect to
representations and warranties which deal with historical matters be deemed to
include each of the Subsidiaries existing on the date the particular
representation and warranty is deemed made; and (ii) shall not in any way be
construed as consent by a Lender to the establishment, maintenance or
acquisition of any Subsidiary, except as may otherwise be permitted hereunder.
1.3 Effectiveness of this Agreement. Upon the satisfaction of all of the
conditions precedent set forth in Section 3.1 of this Agreement (the date upon
which such conditions precedent are satisfied being hereinafter referred to as
the "Effective Date"), this Agreement shall become effective.
ARTICLE II: THE LOAN FACILITIES
2.1 Making Advances; Repayment of Advances.
(A) Making Advances.
(1) Initial Advance. No later than 11:00 A.M. (Eastern Standard Time)
on the Effective Date, each Lender severally agrees to make available to the
Agent, in same day funds, such Lender's Ratable Portion-Initial Advance of the
Existing Asbury Obligations (plus such Lender's Ratable Portion-Initial Advance
of the Closing Fee (as defined in Section 3.1 (xxi)). If funds are made
available to Agent by the Lenders as required herein, no later than 2:00 P.M.
(Eastern Standard Time) on the Effective Date, the Agent will make Advances on
Borrower's behalf in an aggregate amount sufficient to retire the Existing
Asbury Obligations (such Advances are referred to collectively as the "Initial
Borrowing"); Borrower acknowledges that a portion of the Advances comprising
such Initial Borrowing, in an amount sufficient to retire the Existing Asbury
Obligations owing to Agent, will be in the form of internal balance transfers
performed by Agent.
(2) Additional Advances. (a) Upon satisfaction of the conditions
precedent set forth in Sections 3.1 and 3.2, from and including the Effective
Date of this Agreement and prior to the Termination Date, each Lender severally
agrees, on the terms and conditions hereinafter set forth, to make Advances to
the Borrower from time to time on any Business Day during the period from the
Effective Date until the Termination Date in an amount for each such Advance not
to exceed such Lender's Unused Commitment at such time; provided, however, at no
time shall the Revolving Credit Obligations exceed the Commitment at such time.
Each Borrowing shall be in an aggregate amount no less than $500,000.00 and in
multiples of $10,000.00 if in excess thereof and will consist of Advances made
simultaneously by the Lenders in accordance with Section 2.1 (A) (2) (b). Within
the limits of each Lender's Unused Commitments in effect from time to time, and
subject to the terms of this Agreement, the Borrower may borrow under this
Section 2.1 (A) (2), prepay pursuant to Section 2.2 and reborrow under this
Section 2.1 (A) (2).
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(b) Borrowing Notice. Each Borrowing shall be made on notice, given
not later than 11:00 A.M. (Eastern Standard Time) on the third Business Day
prior to the date of the proposed Borrowing, by the Borrower to the Agent, which
shall give notice to each Lender thereof on the same Business Day by telex or
telecopier. Each such notice of a Borrowing (a "Borrowing Notice") must be by
telephone, confirmed immediately in writing, telex or telecopier, in
substantially the form of Exhibit B hereto, specifying therein the requested (i)
date of such Borrowing, (ii) the aggregate amount of such Borrowing, (iii) the
use of proceeds of such Borrowing, and (iv) the account or accounts into which
the Advances comprising such Borrowing should be funded. Each Lender shall,
before 11:00 A.M. (Eastern Standard Time) on the date of such Borrowing, make
available to the Agent, at the Agent's Account, in same day funds, such Lender's
Ratable Share of such Borrowing in accordance with the respective Commitments
not to exceed such Lender's Unused Commitment at such time. After the Agent's
receipt of such funds and upon fulfillment of the applicable conditions set
forth in Article III, the Agent will make such funds available to the Borrower
by crediting the Borrower's Account. Each Borrowing Notice shall be irrevocable
and binding on the Borrower. The Borrower shall indemnify each Lender against
any loss, cost or expense incurred by such Lender as a result of any failure to
fulfill on or before the date specified in such Borrowing Notice for such
Borrowing the applicable conditions set forth in Article III, including, without
limitation, any loss (including loss of anticipated profits), cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to fund the Advance to be made by such Lender as part of
such Borrowing when such Advance, as a result of such failure, is not made on
such date. Not later than 2:00 p.m. (Eastern Standard Time) on each Borrowing
Date, the Agent (on behalf of each Lender) shall make available the Advance (if
Agent has received funds from the Lenders as required herein), in funds
immediately available to the Borrower at such account or accounts as shall have
been notified to the Agent. Each Advance shall bear interest from and including
the date of the making of such Advance to (but not including) the date or
repayment thereof at the Applicable LIBOR Rate, changing when and as the
underlying LIBOR Rate changes, which interest shall be payable in accordance
with Section 2.7(B).
(c) Reallocation. Notwithstanding the provisions of the foregoing
Section 2.1 (A) (2) (b) to the contrary, should Borrower submit a Borrowing
Notice which, if honored, would result in an Over Borrowing, any Lender being
asked to exceed its Unused Commitment at such time (any such Lender is referred
to herein as a "Reallocating Lender") shall be required to make available to the
Agent only that portion of such Reallocating Lender's Ratable Share of the Over
Borrowing equal to such Reallocating Lender's Unused Commitment at such time;
any amounts not made available to the Agent by any such Reallocating Lender
(because such amounts would exceed such Lender's Unused Commitment at such time)
will be reallocated and made available to the Agent by the Lenders which are not
Reallocating Lenders (the reallocation of such amounts is referred to herein as
the "Borrowing Spread"). Any such Reallocated Borrowing shall be reallocated as
follows: (1) if more than one Lender is not a Reallocating Lender then each of
such Lenders shall make equal portions of the Reallocated Borrowing available to
the Agent, not in excess of each such Lender's Unused Commitment at such time,
(2) if only one Lender is not a Reallocating Lender then such Lender shall make
the full amount of the Reallocated Borrowing available to the Agent, not in
excess of its Unused Commitment at such time. If after the first Borrowing
Spread, the full amount of the Over Borrowing has not been reallocated, any such
amount shall be reallocated in another Borrowing Spread in the same manner as
described in the immediately preceding sentence; this process
31
will continue through as many Borrowing Spreads as are required to reallocate
the full amount of the Over-Borrowing.
(d) Unless the Agent shall have received notice from a Lender prior to
the date of any Borrowing that such Lender will not make available to the Agent
such Lender's ratable portion of such Borrowing, the Agent may assume that such
Lender has made such portion available to the Agent on the date of such
Borrowing in accordance with subsection (a) of this Section 2.1 (A) (2) and the
Agent may, in reliance upon such assumption, make available to the Borrower on
such date a corresponding amount. If and to the extent that such Lender shall
not have so made such ratable portion available to the Agent, such Lender and
the Borrower severally agree to repay or pay to the Agent forthwith on demand
such corresponding amount and to pay interest thereon, for each day from the
date such amount is made available to the Borrower until the date such amount is
repaid or paid to the Agent, at (i) in the case of the Borrower, the Applicable
LIBOR Rate, and (ii) in the case of such Lender (x) for the first three days
after demand, at the Federal Funds Rate from time to time in effect, and (y)
thereafter the Applicable LIBOR Rate. If such Lender shall pay to the Agent such
corresponding amount, such amount so paid shall constitute such Lender's Advance
as part of such Borrowing for all purposes.
(e) The failure of any Lender to make the Advance to be made by it as
part of any Borrowing shall not relieve any other Lender of its obligation
hereunder to make its Advance on the date of such Borrowing, but no Lender shall
be responsible for the failure of any other Lender to make the Advance to be
made by such other Lender on the date of any Borrowing.
(B) The Borrower shall repay in full to the Agent, for the ratable account
of the Lenders, on the Termination Date the aggregate principal amount of
Advances then outstanding.
2.2 Optional Payments; Mandatory Prepayments
2.2 (A) Optional Payments. The Borrower may from time to time repay or
prepay, without penalty or premium all or any part of outstanding Advances;
provided, however, that the Borrower may not so prepay Advances unless it shall
have provided written notice to Agent not less than 3 Business Days prior to the
date of such prepayment stating the proposed date and the aggregate principal
amount of the prepayment. The amount of any such partial prepayment must be no
less than $500,000.00, and in multiples of $100,000.00 if in excess thereof.
(B) Mandatory Prepayments. If at any time and for any reason the Revolving
Credit Obligations are greater than the Commitment, the Borrower shall
immediately make a mandatory prepayment of the Obligations in an amount equal to
such excess. Amounts equal to (i) Net Cash Proceeds of an Asset Sale shall be
mandatorily applied against the Revolving Credit Obligations and (ii) a Decision
Reserve in connection with or following restoration, rebuilding or replacement
of insured property shall be mandatorily applied against the Revolving Credit
Obligations in the amounts and in the manner set forth in Section 5.2(G) hereof.
The Borrower must also make mandatory prepayments against the Revolving Credit
Obligations of the following amounts: (i) eighty percent (80%) of the Net Cash
Proceeds received by Borrower as a direct result of an Initial Public Offering
or any other offering of equity securities of
32
Borrower,and (ii) one hundred percent (100%) of the Net Cash Proceeds received
by Borrower as a direct result of Permitted Subordinated Indebtedness.
(C) Allocation of Prepayments. Until such time as the aggregate amount of
all prepayments made under this Section 2.2 equals the amount of the Initial
Borrowing made under Section 2.1 (A) (1), the Agent will allocate the amount of
all prepayments among the Lenders in accordance with each Lender's respective
Ratable Portion-Initial Advance. From and after the time that the aggregate
amount of all prepayments made under this Section 2.2 equals the amount of the
Initial Borrowing made under Section 2.1 (A) (1), the Agent will allocate the
amount of all prepayments among the Lenders in accordance with each Lender's
respective Ratable Share.
2.3 Changes in the Commitment. Termination of Commitment. The Borrower may
permanently reduce the Commitment in whole, or in part, in an aggregate minimum
amount of $50,000,000.00 and integral multiples of $10,000,000.00 in excess of
that amount (unless the Commitment is reduced in whole); any reductions in the
Commitment will be made ratably among the Lenders in accordance with each
Lender's Commitment. Any such reduction may be made only upon at least three (3)
Business Day's written notice to the Agent, which notice shall specify the
amount of any such reduction, and, in the event that the Commitment is
terminated in whole, upon payment of a termination fee (payable to the Agent for
the account of each Lender) equal to the amount by which the Commitment is
reduced multiplied by:
(a) three percent (3.0%), if Borrower terminates the Commitment on or
before the first anniversary of the Effective Date; or
(b) two percent (2.0%), if Borrower terminates the Commitment after the
first anniversary of the Effective Date but before the second
anniversary of the Effective Date; or
(c) one percent (1.0%), if Borrower terminates the Commitment after the
second anniversary of the Effective Date before the third anniversary
of the Effective Date.
Notwithstanding the foregoing, the amount of the Commitment may not be
reduced below the aggregate principal amount of the outstanding Revolving
Credit Obligations. All accrued commitment fees and termination fees shall
be payable on the effective date of any complete termination of the
obligations of the Lenders to make Advances hereunder. Lenders will share
in any termination fee paid under this Section 2.3 in proportion with each
such Lender's Commitment. On the first Business Day following the Agent's
receipt of a termination fee hereunder, the Agent will remit to each Lender
its portion of the termination fee received by the Agent hereunder.
2.4 Default Rate: Late Payment Fee. After the occurrence and during the
continuation of an Event of Default, at the option of the Required Lenders, the
interest rate(s) applicable to the Advances shall be equal to the Applicable
LIBOR Rate plus two percent (2.0%) per annum. To the extent not in excess of the
Maximum Rate and in accordance with applicable law, any amount not paid by the
Borrower when due shall accrue interest at an additional two percent (2.0%) per
annum above the rate applicable thereto until such amounts have been paid in
full and shall be payable on demand by the Agent, at the direction of the
Required Lenders, and in no event later than the next succeeding Payment Date.
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2.5 Method of Payment. (A) All payments of principal, interest, and fees
hereunder shall be made, without setoff, deduction or counterclaim, in
immediately available funds to the Agent at the Agent's address specified
pursuant to Article XI, at any other address specified in writing by the Agent
to the Borrower, or via wire transfer pursuant to wire transfer instructions
provided by the Agent from time to time, by 12:00 noon (Eastern Standard Time)
on the date when due. The Agent will promptly thereafter cause like funds to be
distributed on the first Business Day after the receipt of any such payment (the
date of such distribution is referred to herein as the "Interest Reconciliation
Date") (i) if such payment by the Borrower is in respect of principal, interest,
commitment fees or any other Obligation then payable hereunder and under the
Notes to more than one Lender, to such Lender for its account ratably in
accordance with the amounts of such respective Obligations then payable to such
Lenders (with respect to each Lender, such Lender's Ratable Share of the
interest payable hereunder and under the Notes is referred to herein as the
"Interest Due Lenders") and (ii) if such payment by the Borrower is in respect
of any Obligation then payable hereunder to one Lender, to such Lender for its
account, in each case to be applied in accordance with the terms of this
Agreement; provided, however that the Administration Fee due to the Agent
(pursuant to Section 2.11 hereof) for the month immediately preceding such date
will be netted out of such amounts and be maintained in or remitted to the
Agent's Account by and for the benefit of the Agent. If Agent fails to remit to
any Lender its portion of the Interest Due Lenders or any amount of principal,
commitment fees or any other Obligation as required above, the Agent agrees to
pay to each such Lender interest on such Lender's portion of all such amounts
(x) for the first three days after the first Business Day following the Agent's
receipt of any such payment, at the Federal Funds Rate from time to time in
effect, and (y) thereafter the Applicable LIBOR Rate. Upon its acceptance of an
Assignment and Acceptance and recording of the information contained therein in
the Register pursuant to Section 9.3 from and after the effective date of such
Assignment and Acceptance, the Agent shall make all payments hereunder and under
the Notes in respect of the interest assigned thereby to the Lender assignee
thereunder, and the parties to such Assignment and Acceptance shall make all
appropriate adjustments in such payments for periods prior to such effective
date directly between themselves.
(B) Unless the Agent shall have received notice from the Borrower prior to
the date on which any payment is due to any Lender hereunder that the Borrower
will not make such payment in full, the Agent may assume that the Borrower has
made such payment in full to the Agent on such date and the Agent may (but shall
not be obligated to), in reliance upon such assumption, cause to be distributed
to each such Lender on such due date an amount equal to the amount then due such
Lender. If and to the extent the Borrower shall not have so made such payment in
full to the Agent, each such Lender shall repay to the Agent forthwith on demand
such amount distributed to such Lender together with interest thereon, (x) for
the first three days after such amount is distributed to such Lender until the
date such Lender repays such amount to the Agent, at the Federal Funds Rate from
time to time in effect, and (y) thereafter until the date such Lender repays
such amount to the Agent, at the Applicable LIBOR Rate.
2.6 Advances, Telephonic Notices. The Lenders are authorized to record the
principal amount of each Advance and each repayment with respect to its Advances
on the schedules attached to the Notes; provided, however, that the failure to
so record shall not affect the Borrower's obligations under the Notes; and
provided further that notwithstanding the face amount of any Note, the aggregate
principal amount of all Advances outstanding at any time to
34
a Lender under a Note shall not exceed the aggregate principal amount of all
Advances outstanding to such Lender. The Borrower authorizes the Lenders to
extend Advances and the Agent to transfer funds based on telephonic notices made
by any Authorized Officer the Agent reasonably and in good faith believes to be
acting on behalf of the Borrower. The Borrower agrees to deliver promptly to the
Agent a written confirmation, signed by an Authorized Officer, if such
confirmation is requested by the Agent, of each telephonic notice. If the
written confirmation differs in any material respect from the action taken by
the Agent, (i) the telephonic notice shall govern absent manifest error and (ii)
the Agent shall promptly notify the Authorized Officer who provided such
confirmation of such difference.
2.7 Promise to Pay; Interest and Commitment Fees; Interest Payment Dates;
Interest and Fee Basis.
(A) Promise to Pay. The Borrower shall repay to the Agent, for the ratable
account of the Lenders, on the Termination Date, the aggregate principal amount
of the Advances then outstanding. The Borrower unconditionally promises to pay
when due the principal amount of each Advance and all other Obligations incurred
by it, and to pay all unpaid interest accrued thereon and other amounts due
hereunder, in accordance with the terms of this Agreement, the Notes and the
other Loan Documents.
(B) Interest Payment Date.
(i) Interest Payable on Advances. Interest accrued on each Advance,
owing to each Lender shall be payable to the Agent on each Payment Date,
commencing with the first such date to occur after the date hereof and on the
Termination Date (whether by acceleration or otherwise). Borrower will make
interest payments to the Agent on each Payment Date via wire transfer (pursuant
to wire transfer instructions provided to Borrower by the Agent from time to
time).
(ii) Interest on other Obligations. Interest accrued on the principal
balance of all other Obligations shall be payable in arrears (i) on the last
Business Day of each calendar month, commencing on the first such day following
the incurrence of such Obligation, (ii) upon repayment of all Obligations in
full or in part, and (iii) if not theretofore paid in full, at the time such
other Obligation becomes due and payable (whether by acceleration or otherwise).
(C) Commitment Fees; Accounting for Commitment Fees.
(i) Commitment Fees. The Borrower shall pay to the Agent, for the
account of the Lenders, from and after the date hereof, and from the effective
date specified in the Assignment and Acceptance pursuant to which it became a
Lender, in the case of each other Lender, until the date on which the Commitment
shall be terminated in whole, a commitment fee equal to thirty five hundredths
of one percent (0.35%) per annum, on the Unused Commitments in effect from time
to time, provided, however, that any commitment fee accrued with respect to any
of the Commitments of a Defaulting Lender during the period prior to the time
such Lender became a Defaulting Lender and unpaid at such time shall not be
payable by the Borrower so long as such Lender shall be a Defaulting Lender
except to the extent that such commitment fee shall otherwise have been due and
payable by the Borrower prior to such time; and provided, further that no
commitment fee shall accrue on any of the Commitments of a Defaulting Lender so
long as such Lender shall be a Defaulting Lender. All
35
such commitment fees payable under this clause (C) shall be payable annually in
arrears (via wire transfer, pursuant to wire transfer instructions provided to
Borrower by the Agent in writing from time to time) on each anniversary of the
Effective Date occurring after the Effective Date (provided, however, that if
any such anniversary day is not a Business Day, the commitment fee must be paid
on the next succeeding Business Day) and, in addition, on the date on which the
Commitment shall be terminated in whole.
(ii) Accounting for Commitment Fees. On the first Business Day after
the Agent's receipt of a payment of the commitment fee provided for in the
preceding section, the Agent will remit to each Lender such Lender's share of
the commitment fee received by Agent, based on each such Lender's Unused
Commitment (via wire transfer, pursuant to wire transfer instructions provided
to the Agent by Lender in writing from time to time).
(D) Interest and Fee Basis. The Agent will calculate interest and fees for
actual days elapsed on the basis of a 365 day year. Interest shall be payable
for the day an Obligation is incurred but not for the day of any payment on the
amount paid if payment is received prior to 12:00 noon (Eastern Standard Time)
at the place of payment. If any payment of principal of or interest on an
Advance or any payment of any other Obligations shall become due on a day which
is not a Business Day, such payment shall be made on the next succeeding
Business Day and, in the case of a principal payment, such extension of time
shall be included in computing interest in connection with such payment. Absent
manifest error, each determination by the Agent of an interest rate, fee or
commission hereunder shall be conclusive and binding for all purposes.
2.8 Termination Date. This Agreement shall be effective until the
Termination Date. The Borrower shall have the right to submit a notice (an
"Extension Notice") requesting an extension of the Termination Date for
additional one-year periods. The Borrower shall deliver the Extension Notice to
the Agent on or before the date that is at least 45 and not more than 90 days
prior to the first anniversary of the Effective Date (and each like period in
each subsequent year thereafter in which such option is available). The Agent
shall, on or before the date that is 30 days after receipt of any such Extension
Notice, and acting in accordance with instructions received from all Lenders,
notify the Borrower in writing whether the then applicable Termination Date is
extended for one year; provided, however, failure to give such notice shall mean
that no such extension shall have been granted; and provided further, nothing
herein shall obligate the Lenders to extend the initial Termination Date or any
other Termination Date and any determination whether or not to so extend the
Termination Date shall be made by each Lender in its sole and absolute
discretion. Notwithstanding the termination of this Agreement on the Termination
Date, until all of the Obligations (other than contingent indemnity obligations,
but including all Floor Plan Indebtedness owed to any Lender or any of its
Subsidiaries or Affiliates) shall have been fully and indefeasibly paid and
satisfied and all financing arrangements between the Borrower and each Lender in
connection with this Agreement shall have been terminated (other than with
respect to Hedging Obligations), all of the rights and remedies under this
Agreement and the other Loan Documents shall survive and each Lender shall be
entitled to retain its security interest in and to all existing and future
Collateral.
2.9 Taxes. (A) Any and all payments by the Borrower hereunder shall be made
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings or any liabilities with
respect thereto including, but not
36
limited to, those arising after the date hereof as a result of the adoption of
or any change in any law, treaty, rule, regulation, guideline or determination
of a Governmental Authority or any change in the interpretation or application
thereof by a Governmental Authority, but excluding (a) such taxes (including
income taxes, franchise taxes and branch profit taxes) as are imposed on or
measured by any Lender's income by (i) the United States of America (or any
political subdivision thereof) or (ii) any Governmental Authority of the
jurisdiction under the laws of which any Lender is organized or in which its
principal office is located or having jurisdiction over any Lender by virtue of
any Lender's location(s) or of any Lender conducting business in such
jurisdiction (other than solely as a result of the transaction evidenced by this
Agreement) and (b) in the case of a Lender that is not a United States Person (a
"Non-U.S. Lender"), any withholding tax imposed by the United States of America
that (i) is in effect and would apply to amounts payable to such Non-U.S. Lender
at the time such Non-U.S. Lender becomes a party to this Agreement (or
designates a new lending office) or (ii) is attributable to such Non-U.S.
Lender's failure to comply with Section 2.9 (D) or (E) (either of (a) or (b) is
referred to as an "Excluded Tax" and all such items other than Excluded Taxes,
"Indemnified Taxes."). If the Borrower shall be required by law to deduct any
Indemnified Taxes from or in respect of any sum payable hereunder or under the
other Loan Documents to any Lender, (i) the sum payable shall be increased as
may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.9(A)) any
Lender receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions, and (iii)
the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(B) In addition, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges, or similar
levies which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, the
other Loan Documents, the Commitment or the Advances (hereinafter referred to as
"Other Taxes").
(C) The Borrower indemnifies each Lender for the full amount of Indemnified
Taxes and Other Taxes (including, without limitation, any Indemnified Taxes or
Other Taxes imposed by any Governmental Authority on amounts payable under this
Section 2.9) paid by any Lender and any liability (including penalties,
interest, and expenses) arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally asserted.
This indemnification shall be made within thirty (30) days after the date a
Lender makes written demand therefor. A certificate as to any additional amount
payable to a Lender under this Section 2.9 submitted to the Borrower by such
Lender shall show in reasonable detail the amount payable and the calculations
used to determine such amount and shall, absent manifest error, be final,
conclusive and binding upon each of the parties hereto. With respect to any
deduction or withholding for or on account of any Indemnified Taxes or payment
of any Other Taxes and to confirm that all such Indemnified Taxes or Other Taxes
have been paid to the appropriate Governmental Authorities, the Borrower shall
promptly (and in any event not later than thirty (30) days after receipt)
furnish to such Lender such certificates, receipts or other documents reasonably
satisfactory to the Lenders as evidencing payment thereof.
(D) Any Non-U.S. Lender that is entitled to an exemption from or reduction
of withholding tax under the laws of the United States (or any other
jurisdiction in which the Borrower is located), or any treaty to which the
United States (or any such other jurisdiction) is
37
a party, with respect to payments under this Agreement shall deliver to the
Borrower, within 30 days after receipt of a written request by Borrower, such
properly completed and executed documentation as will permit such payments to be
made without withholding or at a reduced rate, provided that such Non-U.S.
Lender is lawfully able to do so.
(E) Each Lender organized under the laws of a jurisdiction outside the
United States shall, on or prior to the date of its execution and delivery of
this Agreement or on or prior to the date of the Assignment and Acceptance
pursuant to which it becomes a Lender, and from time to time thereafter as
reasonably requested in writing by the Borrower (but only so long thereafter as
such Lender remains lawfully able to do so), provide each of the Agent and the
Borrower with either two original Internal Revenue Service Forms W-8BEN, W-8IMY
or W-8ECI, as appropriate, or any successor or other form prescribed by the
Internal Revenue Service or in the case of a Lender that has certified in
writing to the Agent that it is not (i) a "bank" (as defined in Section 881 (c)
(3) (A) of the Code), (ii) a 10 percent shareholder (within the meaning of
Section 871 (h) (3) (B) of the Code) or (iii) a controlled foreign corporation
related to the Borrower (within the meaning of Section 864 (d) (4) of the Code),
an Internal Revenue Service Form W-8BEN or Form W-8IMY as appropriate, or any
successor or other form prescribed by the Internal Revenue Service, certifying
that such Lender is exempt from or entitled to a reduced rate of United States
withholding tax on payments pursuant to this Agreement or any other Loan
Document or, in the case of a Lender that is not a "bank" as described above,
certifying that such Lender is a foreign corporation, partnership, estate or
trust. If the forms provided by a Lender at the time such Lender first becomes a
party to this Agreement indicate a United States interest withholding tax rate
in excess of zero, withholding tax at such rate shall be considered Excluded
Taxes; provided, however, that if at the date of the Assignment and Acceptance
pursuant to which a Lender becomes a party to this Agreement, the Lender
assignor was entitled to payments under this Section 2.9 (A) in respect of
United States withholding tax with respect to interest paid at such date, then,
to such extent, the term Indemnified Taxes shall include United States
withholding tax, if any, applicable with respect to the Lender assignor on such
date.
(F) For any period with respect to which a Non-United States Lender has
failed to provide the Borrower or the Agent with the appropriate form,
certificate or other document described in subsection (E) above , the Borrower
shall take such steps (at no cost to it) as such Lender shall reasonably request
to assist such Lender to recover such Taxes. For purposes of this Section 2.9,
the entry into force of the final U. S. Department of Treasury regulations
promulgated under Sections 1441 and 1442 of the Code, published but not yet
effective as of the date of this Agreement, will not be considered a change in
the applicable law or in the interpretation or application thereof.
(G) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower, the Agent
and each Lender contained in this Section 2.9 shall survive the payment in full
of principal and interest hereunder and the termination of this Agreement.
2.10. Mitigation Obligations; Replacement of Lenders. (a) If the Borrower
is required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.9 in respect of
United States withholding tax, then such Lender shall use reasonable efforts to
designate a different lending office for funding or booking its Loans hereunder
or to assign its rights and obligations hereunder to another of its offices,
38
branches or affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.9
in the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.9 in respect of
United States withholding tax, or if the Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 2.9 in respect of United States withholding tax,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Agent, require such Lender to assign and delegate, without recourse, all its
interests, rights and obligations under this Agreement to an assignee that shall
assume such obligations (which assignee may be another Lender, if a Lender
accepts such assignment); provided that (i) the Borrower shall have received the
prior written consent of the Agent, which consent shall not unreasonably be
withheld, (ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder, from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or the Borrower (in
the case of all other amounts) and (iii) such assignment will result in a
reduction in payments required to be made pursuant to Section 2.9.
2.11 Loan Account. Each Lender may maintain, in accordance with its
respective usual practices, an account or accounts (a "Loan Account") evidencing
the Obligations of the Borrower owing to such Lender from time to time,
including the amount of principal, interest and fees payable and paid to such
Lender from time to time hereunder and under the Notes. The entries made in any
Loan Account maintained by the Lenders shall be conclusive and binding for all
purposes, absent manifest error, unless the Borrower objects to information
contained in such Loan Account within thirty (30) days of the Borrower's receipt
of such information. Any Lender's failure to maintain such an account will not
affect the Borrower's obligations under the Notes.
2.12 Loan Administration Fee. On each Interest Reconciliation Date, each
Lender will pay the Agent a fee in consideration for the Agent's performance of
the administrative functions more particularly described herein (the
"Administration Fee"). With respect to each Lender, such fee will be in an
amount equal to one tenth of one percent (0.1%) per annum on the outstanding
aggregate principal balance of all Advances(made by such Lender) for the month
immediately preceding such Interest Reconciliation Date. Each Lender agrees to
pay the Agent the Administration Fee, on each Interest Reconciliation Date, by
allowing the Agent to net the Administration Fee out of the Interest Due
Lenders.
2.13 Defaulting Lenders. (A) In the event that, at any time, (i) any Lender
shall be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted
Amount or a Defaulted Advance to the Agent or any of the other Lenders and (iii)
the Borrower shall make any payment hereunder or under any other Loan Document
to the Agent for the account of such Defaulting Lender, then the Agent may, on
its behalf or on behalf of the other Lenders and to the fullest extent permitted
by applicable law, apply at such time the amount so paid by the Borrower to or
for the account of such Defaulting Lender to the payment of each such Defaulted
Amount or Defaulted Advance to the extent required to pay such Defaulted Amount
or Defaulted Advance. In the event that the Agent shall so apply any such amount
to the payment
39
of any such Defaulted Amount or Defaulted Advance on any date, the amount so
applied by the Agent shall constitute for all purposes of this Agreement and the
other Loan Documents payment, to such extent, of such Defaulted Amount or
Defaulted Advance on such date. Any such amount so applied by the Agent shall be
retained by the Agent or distributed by the Agent to the Lenders, ratably in
accordance with the respective portions of such Defaulted Amounts or Defaulted
Advances payable at such time to the Agent and the Lenders and, if the amount of
such payment made by the Borrower shall at such time be insufficient to pay all
Defaulted Amounts and Defaulted Advances owing at such time to the Agent, and
the Lenders, in the following order of priority:
(i) first, to the Agent for any Defaulted Amounts or Defaulted
Advances then owing to it, in its capacity as Agent; and
(ii) second, to the Lenders (including Agent in its capacity as a
Lender) for any Defaulted Amounts and Defaulted Advances then owing to the
Lenders, ratably in accordance with such respective Defaulted Amounts and
Defaulted Advances then owing to the Lenders.
Any portion of such amount paid by the Borrower for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Agent pursuant to this subsection (a), shall be applied by the Agent as
specified in subsection (b) of this Section 2.13.
(b) In the event that, at any one time, (i) any Lender shall be a
Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted Advance
or a Defaulted Amount and (iii) the Borrower, any Agent or any other Lender
shall be required to pay or distribute any amount hereunder or under any other
Loan Document to or for the account of such Defaulting Lender, then the Borrower
or such Agent or such other Lender shall pay such amount to the Agent to be held
by the Agent, to the fullest extent permitted by applicable law, in escrow or
the Agent shall, to the fullest extent permitted by applicable law, hold in
escrow such amount otherwise held by it. Any funds held by the Agent in escrow
under this subsection (b) shall be deposited by the Agent in an account with an
escrow agent (which is a bank or financial institution which acts as escrow
agent in the ordinary course of its business and is reasonably acceptable to the
Agent and the Required Lenders), in the name and under the control of the Agent,
but subject to the provisions of this subsection (b). The terms applicable to
such escrow account, including the rate of interest payable with respect to the
credit balance of such account from time to time, shall be such escrow agent's
standard terms applicable to escrow accounts maintained with it. Any interest
credited to such account from time to time shall be held by the Agent in escrow
under, and applied by the Agent from time to time in accordance with the
provisions of, this subsection (b). The Agent shall, to the fullest extent
permitted by applicable law, apply all funds so held in escrow from time to time
to the extent necessary to make any Advances required to be made by such
Defaulting Lender and to pay any amount payable by such Defaulting Lender
hereunder and under the other Loan Documents to the Agent or any other Lender,
as and when such Advances or amounts are required to be made or paid and, if the
amount so held in escrow shall at any time be insufficient to make and pay all
such Advances and amounts required to be made or paid at such time, in the
following order of priority:
(i) first, to the Agent for any amounts then due and payable by such
Defaulting Lender to it hereunder, in its capacity as such; and
40
(ii) second, to the Lenders (including Agent in its capacity as a
Lender) for any amount then due and payable by such Defaulting Lender to the
Lenders hereunder, ratably in accordance with such respective amounts then due
and payable to the Lenders.
In the event that any Lender that is a Defaulting Lender shall, at any time,
cease to be a Defaulting Lender, any funds held by the Agent in escrow at such
time with respect to such Lender shall be distributed by the Agent to such
Lender and applied by such Lender to the Obligations owing to such Lender at
such time under this Agreement and the other Loan Documents ratably in
accordance with the respective amounts of such Obligations outstanding at such
time.
(c) The rights and remedies against a Defaulting Lender under this Section
2.13 are in addition to other rights and remedies that the Borrower may have
against such Defaulting Lender with respect to any Defaulted Advance and that
any Agent or any Lender may have against such Defaulting Lender with respect to
any Defaulted Amount.
2.14 Evidence of Debt. (A) The Register maintained by the Agent pursuant to
Section 9.3 shall record (i) the date and amount of each Advance made hereunder,
(ii) the terms of each Assignment and Acceptance delivered to and accepted by
it, (iii) the amount of any principal or interest due and payable or to become
due and payable from the Borrower to each Lender hereunder, and (iv) the amount
of any sum received by the Agent from the Borrower hereunder and each Lender's
share thereof.
(B) Entries made in good faith by the Agent in the Register pursuant to
subsection (A) above, shall be prima facie evidence of the amount of principal
and interest due and payable or to become due and payable from the Borrower to,
in the case of the Register, each Lender and, in the case of such account or
accounts, such Lender, under this Agreement, absent manifest error; provided,
however, that the failure of the Agent or such Lender to make an entry, or any
finding that an entry is incorrect, in the Register shall not limit or otherwise
affect the obligations of the Borrower under this Agreement.
2.15. Sharing of Payments. If any Lender shall obtain at any time any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise, other than as a result of an assignment pursuant to
Section 9.3) (a) on account of Obligations due and payable to such Lender
hereunder and under the Notes at such time in excess of its Ratable Share
(according to the proportion of (i) the amount of such Obligations due and
payable to such Lender at such time to (ii) the aggregate amount of the
Obligations due and payable to all Lenders hereunder and under the Notes at such
time) of payments on account of the Obligations due and payable to all Lenders
hereunder and under the Notes at such time obtained by all the Lenders at such
time or (b) on account of Obligations owing (but not due and payable) to such
Lender hereunder and under the Notes at such time in excess of its Ratable Share
(according to the proportion of (i) the amount of such Obligations owing to such
Lender at such time to (ii) the aggregate amount of the Obligations owing (but
not due and payable) to all Lenders hereunder and under the Notes at such time)
of payments on account of the Obligations owing (but not due and payable) to all
Lenders hereunder and under the Notes at such time obtained by all of the
Lenders at such time, such Lender shall forthwith purchase from the other
Lenders such interests or participating interests in the Obligations due and
payable or owing to them, as the case may be, as shall be necessary to cause
such purchasing
41
Lender to share the excess payment ratably with each of them; provided, however,
that if all or any portion of such excess payment is thereafter recovered from
such purchasing Lender, such purchase from each other Lenders shall be rescinded
and such other Lenders shall repay to the purchasing Lender the purchase price
to the extent of each Lender's Ratable Share (according to the proportion of (i)
the purchase price paid to each Lender to (ii) the aggregate purchase price paid
to all Lenders) of such recovery together with an amount equal to each Lender's
Ratable Share (according to the proportion of (i) the amount of such other
Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lenders) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing an interest or participating interest from
another Lender pursuant to this Section 2.15 may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off) with respect to such interest or participating interest, as the case
may be, as fully as if such Lender were the direct creditor of the Borrower in
the amount of such interest or participating interest, as the case may be.
ARTICLE III: CONDITIONS PRECEDENT
3.1 Conditions of Effectiveness. The Effective Date of this Agreement shall
be the date on which all of the following conditions shall have been satisfied
or waived by the Agent:
(A) the Lenders shall have completed a due diligence investigation of
the Transaction Parties in scope, and with results satisfactory to the
Lenders, and nothing shall have come to the attention of the Lenders during
the course of such due diligence investigation to lead them to believe (i)
that any information provided by the Transaction Parties to any Lender was
or has become misleading, incorrect or incomplete in any material respect,
(ii) that, as of the Effective Date, the Transaction Parties would not have
good and marketable title to all of the material assets reflected in the
information provided by them to any Lender and (iii) that the financing
contemplated hereby will have a Material Adverse Effect; without limiting
the generality of the foregoing, the Lenders shall have been given such
access to the management, records, books of account, contracts and
properties of the Transaction Parties as they shall have requested;
(B) all due diligence materials requested by the Lenders from the
Borrower shall have been delivered to the Lenders and such due diligence
materials shall be in form and substance satisfactory to the Lenders;
(C) the Borrower has furnished to the Agent each of the following, all
in form and substance satisfactory to the Agent:
(i) this Agreement, duly executed by the Borrower;
(ii) the Notes, duly executed by the Borrower in favor of each Lender;
(iii) the Cross Agreement duly executed by Borrower and each
Guarantor;
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(iv) a Dealership Guaranty and Subsidiary Holding Company Guaranty,
duly executed by each Dealership and Subsidiary Holding Company,
respectively, to the Agent;
(v) the Borrower Security Agreement, a Dealership Security Agreement
and a Subsidiary Holding Company Security Agreement executed by Borrower,
each Dealership and each Subsidiary Holding Company to the Agent, and a
Pledged Account Agreement executed by each Transaction Party, together
with:
(A) acknowledgment copies of proper financing statements (to be
duly filed by the Agent on or before the day of the Initial
Borrowing), under the Uniform Commercial Code of all jurisdictions
that the Agent may deem necessary or desirable in order to perfect and
protect the first priority liens and security interests created under
the Collateral Documents, covering the Collateral described in the
Collateral Documents,
(B) completed requests for information, dated on or before the
date of the initial Borrowing, listing the financing statements
referred to in clause (A) above and all other effective financing
statements filed in the jurisdictions referred to in clause (A) above
that name the relevant Loan Party as debtor, together with copies of
such other financing statements,
(C) evidence of the completion of all other recordings and
filings of or with respect to each relevant Loan Party that the Agent
may deem necessary or desirable in order to perfect and protect the
Liens created thereby,
(D) evidence of the insurance required by the terms of the Loan
Documents,
(E) evidence that all other action that the Agent may deem
necessary or desirable in order to perfect and protect the first
priority liens and security interests created under the Collateral
Documents has been taken (including, without limitation, receipt of
duly executed payoff letters, UCC-3 termination statements and
landlords' and bailees' waiver and consent agreements).
(vi) the Borrower Pledges, the Dealership Pledge and the Subsidiary
Holding Company Pledge, executed by each of Borrower, each Dealership and
each Subsidiary Holding Company, respectively, to the Agent (for the
benefit of the Lenders) together, with (A) stock certificates evidencing
the pledged Equity Interests referred to therein and undated stock powers
executed in blank, and (B) acknowledgment copies of Uniform Commercial Code
financing statements covering "Investment Property";
(vii) to the extent the Borrower, any Dealership or Subsidiary Holding
Company has any Indebtedness other than Permitted Existing Indebtedness and
Liens other than Permitted Existing Liens, pay-out letters, releases and
UCC-3 Termination
43
Statements, where applicable, from all third-party creditors releasing all
Liens securing any such Indebtedness;
(viii) Certificates of good standing for each Transaction Party from
its jurisdiction of incorporation and each other jurisdiction where the
nature of its business requires it to be qualified as a foreign
corporation;
(ix) a copy of a certificate of the Secretary of State of the
jurisdiction of incorporation of each Transaction Party, dated reasonably
near the date of the initial Borrowing, certifying (A) as to a true and
correct copy of the certificate of incorporation (or other Charter
Documents) of such Person and each amendment thereto on file in such
Secretary's office and (B) that (1) such amendments are the only amendments
to such Person's certificate of incorporation (or other Charter Documents)
on file in such Secretary's office, (2) such Person has paid all franchise
taxes to the date of such certificate and (C) such Person is duly
incorporated and in good standing or presently subsisting under the laws of
the State of the jurisdiction of its incorporation;
(x) a Secretary's Certificate and a Solvency Certificate from each
Transaction Party;
(xi) a certificate, in form and substance satisfactory to the Lender,
signed by the chief financial officer of the Borrower stating that as of
the Effective Date, no Event of Default or Unmatured Default has occurred
and is continuing, and the representations and warranties of the Borrower
are true and correct with full force and effect as if made on the Effective
Date;
(xii) to the extent not included in the foregoing, the documents,
instruments and agreements set forth on the closing list attached as
Exhibit E hereto;
(xiii) such consents, waivers or other documents as any Lender or its
counsel may have reasonably requested;
(xiv) favorable opinions of counsel for each Loan Party in form and
substance satisfactory to the Agent;
(xv) the loss payable endorsements referenced in Section 5.2 (G) shall
have been delivered to the Agent;
(xvi) the Agent shall be satisfied with the corporate and legal
structure and capitalization of each Transaction Party, including the terms
and conditions of the Charter Documents of each such Person and of each
agreement or instrument relating to such structure or capitalization;
(xvii) there shall have occurred and be continuing no Material Adverse
Change since November 30, 2000;
(xviii) There shall exist no action, suit, investigation, litigation
or proceeding affecting any Transaction Party pending or threatened before
any Governmental Authority or arbitrator that (i) could be reasonably
likely to have a Material Adverse
44
Effect other than the matters described on Schedule 3.1 hereto (the
"Disclosed Litigation") or (ii) purports to affect the legality, validity
or enforceability of any Loan Document or the consummation of the
transactions contemplated thereby;
(xix) All material governmental and third party consents and approvals
necessary in connection with the Loan Documents shall have been obtained
(without the imposition of any conditions that are not acceptable to the
Required Lenders) and shall remain in effect; all applicable waiting
periods in connection with the Loan Documents or the consummation of the
transactions contemplated thereby shall have expired without any action
being taken by any competent authority, and no law or regulation shall be
applicable in the reasonable judgment of the Agent, in each case that
restrains, prevents or imposes materially adverse conditions upon the Loan
Documents or the consummation of the transactions contemplated thereby or
the rights of the Transaction Parties freely to transfer or otherwise
dispose of, or to create any Lien on, any properties now owned or hereafter
acquired by any of them;
(xx) Borrower shall have paid a fee in the amount of $11,000,000.00
(the "Closing Fee") to the Lenders (which will be distributed among the
Lenders pursuant to the terms of a separate agreement among the Lenders),
and all other reasonable accrued fees of the Agent and the Lenders and all
reasonable accrued expenses of the Agent and the Lenders (including the
reasonable accrued fees and expenses of counsel to the Agent and each
Lender);
(xxi) The Agent shall be satisfied with the amount, parties, terms and
conditions and prospects for performance of all Acquisition Documents then
in existence with respect to any Pending Acquisition by the Borrower or any
of its Subsidiaries which the Borrower reasonably expects, as of the date
hereof, to consummate after the day of the Effective Date; and the Agent
shall be satisfied with all aspects of such Pending Acquisitions.
3.2 Conditions Precedent to Each Advance. No Lender shall be required to
make any Advance, unless on the applicable Borrowing Date:
(i) There exists no Event of Default or Unmatured Default; and
(ii) The representations and warranties contained in Article IV are
true and correct as of such Borrowing Date (unless such representation and
warranty expressly relates to an earlier date).
Each Borrowing Notice with respect to each such Advance shall constitute a
representation and warranty by the Borrower that the conditions contained in
Sections 3.2(i) and (ii) have been satisfied.
45
ARTICLE IV: REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as of the date of this Agreement and
on the date of each Advance as follows to the Lenders:
4.1 Organization; Corporate Powers. Each Transaction Party (i) is a
corporation, limited liability company or limited partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (ii) is duly qualified to do business and is in good standing
under the laws of each jurisdiction in which failure to be so qualified and in
good standing could not reasonably be expected to have a Material Adverse Effect
and (iii) has all requisite corporate, company or partnership power and
authority to own, operate and encumber its property and to conduct its business
as presently conducted and as proposed to be conducted.
4.2 Authority.
(A) The execution, delivery, performance and filing, as the case may be, of
each of the Transaction Documents which must be executed or filed by any
Transaction Party or which have been executed or filed as required by this
Agreement and to which each Transaction Party is party, and the consummation of
the transactions contemplated thereby, have been duly approved by the respective
boards of directors or managers, or by the partners, as applicable, and, if
necessary, the shareholders, members or partners, as applicable, of each
Transaction Party, and such approvals have not been rescinded. No other
corporate, company or partnership action or proceedings on the part of any
Transaction Party is necessary to consummate such transactions contemplated by
the Transaction Documents.
(B) Each of the Transaction Documents to which each Transaction Party is a
party has been duly executed, delivered or filed, as the case may be, by such
party and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, is in full force and effect and no
material term or condition thereof has been amended, modified or waived without
the prior written consent of the Required Lenders, and to the Borrower's
knowledge, each of the Transaction Parties has, and, all other parties thereto
have, performed and complied with all the material terms, provisions, agreements
and conditions set forth therein and required to be performed or complied with
by such parties on or before the date hereof, and no Event of Default, Unmatured
Default or breach of any material covenant by any such Transaction Party exists
thereunder.
4.3 No Conflict; Governmental Consents. The execution, delivery and
performance of each of the Transaction Documents to which each Transaction Party
is a party do not and will not (i) conflict with the Charter Documents of any of
the Transaction Parties, (ii) to the Borrower's knowledge, constitute a tortious
interference with any Contractual Obligation of any Person or conflict with,
result in a breach of or constitute (with or without notice or lapse of time or
both) a default under any Requirement of Law (including, without limitation, any
Environmental Property Transfer Act) or Contractual Obligation of any Person, or
require termination of any Contractual Obligation, (iii) result in or require
the creation or imposition of any Lien whatsoever upon any of the property or
assets of any Transaction Party, other than Liens permitted by the Loan
Documents, or (iv) require any approval of the shareholders, members or partners
of any Transaction Party except such as have been obtained. The
46
execution, delivery and performance of each of the Transaction Documents to
which each Transaction Party is a party do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by any Governmental Authority, including under any Environmental
Property Transfer Act, except (i) filings, consents or notices which have been
made, obtained or given, or which, if not made, obtained or given, individually
or in the aggregate could not reasonably be expected to have a Material Adverse
Effect and (ii) filings necessary to create or perfect security interests in the
Collateral.
4.4 Financial Statements. All balance sheets, statements of profit and loss
and other financial data that have been given to each Lender and the Agent by or
on behalf of the Transaction Parties (the "Financial Information") are complete
and correct in all material respects, fairly present the financial condition of
the Transaction Parties as of such dates, and the results of each of their
operations for the periods specified in the Financial Information, and have been
prepared in accordance with Agreement Accounting Principles consistently
followed throughout the periods covered thereby. Except as specifically
disclosed (as to creditor, debtor, amount and security) by the Financial
Information and as set forth on Schedule 1.1.1 hereto, the Transaction Parties
do not have outstanding any loan or Indebtedness, direct or contingent, to any
party, other than the Indebtedness due and owing to Lenders, and none of their
assets is subject to any security interest, lien or other encumbrance in favor
of anyone other than Agent (except for the Permitted Existing Liens). Since
November 30, 2000 there has been no change in the assets, liabilities or
financial condition of any Transaction Party from that set forth in the
Financial Information other than changes in the ordinary course of affairs, none
of which changes has had or could reasonably be expected to have a Material
Adverse Effect.
4.5 No Material Adverse Effect. Since the date hereof, there has occurred
no event or circumstance which has had or could reasonably be expected to have a
Material Adverse Effect.
4.6 Taxes.
(A) Tax Examinations. All material deficiencies which have been asserted
against the Transaction Parties as a result of any federal, state, local or
foreign tax examination for each taxable year in respect of which an examination
has been conducted have been fully paid or finally settled or are being
contested in good faith, and as of the date hereof no issue has been raised by
any taxing authority in any such examination which, by application of similar
principles, reasonably can be expected to result in assertion by such taxing
authority of a material deficiency for any other year not so examined which has
not been reserved for in the consolidated financial statements of the applicable
Transaction Party to the extent, if any, required by Agreement Accounting
Principles.
(B) Payment of Taxes. All tax returns and reports of each Transaction Party
required to be filed have been timely filed, and all taxes, assessments, fees
and other governmental charges thereupon and upon their respective property,
assets, income and franchises which are shown in such returns or reports to be
due and payable by such Transaction Party have been paid except those items
which are being contested in good faith and have been reserved for in accordance
with Agreement Accounting Principles or for which the failure to file could not
be reasonably expected to result in the payment of amounts by the Transaction
Parties in the aggregate in excess of $250,000.00. The Borrower has no knowledge
of any proposed tax
47
assessment against any Transaction Party that will have or could reasonably be
expected to have a Material Adverse Effect.
4.7 Litigation; Loss Contingencies and Violations. There is no action,
suit, proceeding, arbitration or (to the Borrower's knowledge after diligent
inquiry) investigation before or by any Governmental Authority or private
arbitrator pending or, to the Borrower's knowledge after diligent inquiry,
threatened against any Transaction Party or any property of any of them (i)
challenging the validity or the enforceability of any material provision of the
Transaction Documents or (ii) which could reasonably be expected to have a
Material Adverse Effect. There is no material loss contingency within the
meaning of Agreement Accounting Principles which has not been reflected in the
consolidated financial statements of the Transaction Parties prepared and
delivered pursuant to Section 5.1(A) for the fiscal period during which such
material loss contingency was incurred. No Transaction Party is (A) in violation
of any applicable Requirements of Law which violation could reasonably be
expected to have a Material Adverse Effect, or (B) subject to or in default with
respect to any final judgment, writ, injunction, restraining order or order of
any nature, decree, rule or regulation of any court or Governmental Authority
which could reasonably be expected to have a Material Adverse Effect.
4.8 Subsidiaries. Schedule 4.8 to this Agreement (i) contains a description
as of the Effective Date (or as of the date of any supplement thereto) of the
corporate structure of, each Transaction Party and any other Person in which a
Transaction Party holds an Equity Interest; and (ii) accurately sets forth as of
the Effective Date (or as of the date of any supplement thereto) (A) the correct
legal name, the jurisdiction of incorporation or formation and the jurisdictions
in which each of the Transaction Parties is qualified to transact business as a
foreign corporation or other foreign entity and (B) a summary of the direct and
indirect partnership, joint venture, or other Equity Interests, if any, of each
Transaction Party in any Person that is not a corporation. After the formation
or acquisition of any New Subsidiary permitted under Section 5.3(F)(ii), if
requested by the Agent, the Borrower shall provide a supplement to Schedule 4.8
to this Agreement. None of the issued and outstanding Capital Stock of any
Transaction Party is subject to any redemption or repurchase agreement. The
outstanding Capital Stock of the Borrower and each Transaction Party is duly
authorized, validly issued, fully paid and nonassessable. The Borrower has no
Subsidiaries other than (i) the Subsidiaries set forth on Schedule 4.8 and (ii)
any Subsidiaries acquired in connection with a Permitted Acquisition, in
connection with which the Borrower shall have provided all of the documents,
instruments and agreements as required by this Agreement.
4.9 ERISA. No Benefit Plan has incurred any material accumulated funding
deficiency (as defined in Sections 302(a)(2) of ERISA and 412(a) of the Code)
whether or not waived. Neither the Borrower nor any member of the Controlled
Group has incurred any material liability to the PBGC which remains outstanding
other than the payment of premiums, and there are no premium payments which have
become due which are unpaid. Schedule B to the most recent annual report filed
with the IRS with respect to each Benefit Plan and, if so requested, furnished
to the Agent, is complete and accurate. Since the date of each such Schedule B,
there has been no material adverse change in the funding status or financial
condition of the Benefit Plan relating to such Schedule B. Neither the Borrower
nor any member of the Controlled Group has (i) failed to make a required
contribution or payment to a Multiemployer Plan or (ii) made a complete or
partial withdrawal under Sections 4203 or 4205 of ERISA from a Multiemployer
Plan, in either event which could result in any material liability. Neither the
Borrower nor any member of the Controlled Group has failed to make a required
installment or any other required
48
payment under Section 412 of the Code, in either case involving any material
amount, on or before the due date for such installment or other payment. Neither
the Borrower nor any member of the Controlled Group is required to provide
security to a Benefit Plan under Section 401(a)(29) of the Code due to a Plan
amendment that results in an increase in current liability for the plan year. No
Transaction Party maintains or contributes to any employee welfare benefit plan
within the meaning of Section 3(1) of ERISA which provides benefits to employees
after termination of employment other than as required by Section 601 of ERISA
or as set forth on Schedule 4.9 hereto. Each Plan which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service to the effect that it is
so qualified and that each trust related to such Plan is exempt from federal
income tax under Section 501 (a) of the Code, and, to the best knowledge of the
Borrower or any Subsidiary, there is no event or condition, including any
amendment to any such Plan, that would cause the loss of such qualification or
exemption. Each Transaction Party is in compliance in all material respects with
the responsibilities, obligations and duties imposed on them by ERISA and the
Code with respect to all Plans. No Transaction Party nor any fiduciary of any
Plan has engaged in a nonexempt prohibited transaction described in Sections 406
of ERISA or 4975 of the Code which could reasonably be expected to subject the
Borrower or any Dealership Guarantor to material liability. Neither the Borrower
nor any member of the Controlled Group has taken or failed to take any action
which would constitute or result in a Termination Event, which action or
inaction could reasonably be expected to subject the Borrower to material
liability. Neither the Borrower nor any Subsidiary is subject to any liability
under Sections 4063, 4064, 4069, 4204 or 4212(c) of ERISA and no other member of
the Controlled Group is subject to any liability under Sections 4063, 4064,
4069, 4204 or 4212(c) of ERISA which could reasonably be expected to subject the
Borrower or any Dealership Guarantor to material liability. No Transaction Party
has, by reason of the transactions contemplated hereby, any obligation to make
any payment to any employee pursuant to any Plan or existing contract or
arrangement. For purposes of this Section 4.9 "material" means any noncompliance
or basis for liability which could reasonably be likely to subject any
Transaction Party to liability individually or in the aggregate for all such
matters in excess of $250,000.00.
4.10 Accuracy of Information. The information, exhibits and reports
furnished by or on behalf of the Transaction Parties to the Lenders in
connection with the negotiation of, or compliance with, the Transaction
Documents, the representations and warranties of the Transaction Parties
contained in the Transaction Documents, and all certificates and documents
delivered to the Lenders pursuant to the terms thereof, taken as a whole, do not
contain as of the date furnished any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements contained
herein or therein, taken as a whole, in light of the circumstances under which
they were made, not misleading.
4.11 Securities Activities. No Transaction Party is engaged in the business
of extending credit for the purpose of purchasing or carrying Margin Stock.
4.12 Material Agreements. No Transaction Party is a party to any
Contractual Obligation or subject to any charter or other corporate restriction
which individually or in the aggregate will have or could reasonably be expected
to have a Material Adverse Effect. No Transaction Party has received notice or
has knowledge that (i) it is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
Contractual Obligation applicable to it, or (ii) any condition exists which,
with
49
the giving of notice or the lapse of time or both, would constitute a default
with respect to any such Contractual Obligation, in each case, except where such
default or defaults, if any, individually or in the aggregate will not have or
could not reasonably be expected to have a Material Adverse Effect.
4.13 Compliance with Laws; Compliance with Franchise Agreements. The
Transaction Parties are in compliance with all Requirements of Law applicable to
them and their respective businesses, in each case where the failure to so
comply individually or in the aggregate could reasonably be expected to have a
Material Adverse Effect. The execution, delivery and performance by each
Transaction Party of any Loan Document to which it is a party does not conflict
with the franchise agreement to which it is a party.
4.14 Assets and Properties. Each Transaction Party has good and marketable
title to all of its assets and properties (tangible and intangible, real or
personal) owned by it or a valid leasehold interest in all of its leased assets
(except insofar as marketability may be limited by any laws or regulations of
any Governmental Authority affecting such assets), except where the failure to
have any such title or leasehold interest, as the case may be, will not have or
could not reasonably be expected to have a Material Adverse Effect, and all such
assets and property are free and clear of all Liens, except Liens permitted
under Section 5.3(C). Substantially all of the assets and properties owned by,
leased to or used by each such Transaction Party are in adequate operating
condition and repair, ordinary wear and tear excepted. Neither this Agreement
nor any other Transaction Document, nor any transaction contemplated under any
such agreement, will affect any right, title or interest of any Transaction
Party in and to any of its assets in a manner that will have or could reasonably
be expected to have a Material Adverse Effect.
4.15 Statutory Indebtedness Restrictions. No Transaction Party is subject
to regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, or the Investment Company Act of 1940,
or any other federal, state or local statute, ordinance or regulation which
limits its ability to incur indebtedness or its ability to consummate the
transactions contemplated hereby.
4.16 Insurance. The insurance policies and programs of each Transaction
Party reflect coverage that is reasonably consistent with prudent industry
practice.
4.17 Labor Matters. As of the date hereof, to the knowledge of each
Transaction Party, there are no material labor disputes to which any Transaction
Party may become a party, including, without limitation, any strikes, lockouts
or other disputes relating to such Persons' plants and other facilities.
4.18 Environmental Matters. (a) (i) The operations of each Transaction
Party comply in all material respects with Environmental, Health or Safety
Requirements of Law;
(ii) each Transaction Party has all material permits, licenses or
other authorizations required under Environmental, Health or Safety
Requirements of Law and are in material compliance with such permits;
(iii) neither any Transaction Party, nor any of their respective
present property or operations, or, to the best of the knowledge of the
Transaction Parties, any
50
of their respective past property or operations, are subject to or the
subject of, any investigation known to any of the Transaction Parties, any
judicial or administrative proceeding, order, judgment, decree, settlement
or other agreement respecting: (A) any material violation of Environmental,
Health or Safety Requirements of Law; (B) any material remedial action; or
(C) any material claims or liabilities arising from the Release or
threatened Release of a Contaminant into the environment;
(iv) there is not now, nor to the best knowledge of any Transaction
Party has there ever been on or in the property of any Transaction Party
any landfill, waste pile, underground storage tanks, aboveground storage
tanks, surface impoundment or hazardous waste storage facility of any kind,
any polychlorinated biphenyls (PCBs) used in hydraulic oils, electric
transformers or other equipment, or any asbestos containing material that
in the case of any of the foregoing could be reasonably expected to result
in any material claims or liabilities; and
(v) no Transaction Party has any material Contingent Obligation in
connection with any Release or threatened Release of a Contaminant into the
environment.
(b) For purposes of this Section 4.18 "material" means any noncompliance or
basis for liability which could reasonably be likely to subject any Transaction
Party to liability individually or in the aggregate in excess of $500,000.00.
4.19 Benefits. Each Transaction Party will benefit from the financing
arrangement established by this Agreement. Each Lender has stated and the
Borrower acknowledges that, but for the agreement by each Transaction Party to
execute and deliver their respective Loan Documents, no Lender would have made
available the credit facilities established hereby on the terms set forth
herein.
4.20 Solvency. Before and after giving effect to the execution, delivery
and performance of the Transaction Documents and at the time of each Advance,
each Transaction Party is Solvent.
ARTICLE V: COVENANTS
The Borrower covenants and agrees that so long as any Commitment is
outstanding and thereafter until payment in full of all of the Obligations
(other than contingent indemnity obligations, unless each Lender shall otherwise
give its prior written consent (or, in those instances as more particularly
described in Section 7.1 hereof, the Agent shall otherwise give its prior
written consent):
5.1 Reporting. The Borrower shall:
(A) Financial Reporting. Furnish to the Agent (with sufficient copies for
each Lender), or with respect to subsection (iii) below, to each Lender in the
manner more particularly set forth therein:
(i) Quarterly Reports. As soon as practicable, and in any event within
fifty (50) days after the end of each fiscal quarter in each fiscal year,
the consolidated and
51
consolidating balance sheet of the Borrower and its Subsidiaries as at the
end of such period and the related consolidated and consolidating
statements of income and the related consolidated statements of cash flows
of the Borrower and its Subsidiaries for such fiscal quarter and for the
period from the beginning of the then current fiscal year to the end of
such fiscal quarter, certified by the chief financial officer of the
Borrower on behalf of the Borrower as fairly presenting the consolidated
and consolidating financial position of the Borrower and its Subsidiaries
as at the dates indicated and the results of their operations and cash
flows for the periods indicated in accordance with Agreement Accounting
Principles, subject to normal year end adjustments.
(ii) Annual Reports. As soon as practicable, and in any event within
ninety (90) days after the end of each fiscal year, (a) the consolidated
and consolidating balance sheet of the Borrower and its Subsidiaries as at
the end of such fiscal year and the related consolidated and consolidating
statements of income and the related consolidated statements of cash flows
of the Borrower and its Subsidiaries for such fiscal year, and in
comparative form the corresponding figures for the previous fiscal year and
(b) an audit report on the items listed in clause (a) hereof (other than
the consolidating statements) of independent certified public accountants
of recognized national standing, which audit report shall be unqualified
and shall state that such financial statements fairly present the
consolidated financial position of the Borrower and its Subsidiaries as of
the dates indicated and the results of their operations and cash flows for
the periods indicated in conformity with Agreement Accounting Principles
and that the examination by such accountants in connection with such
consolidated financial statements has been made in accordance with
generally accepted auditing standards. The deliveries made pursuant to this
clause (ii) shall be accompanied by any management letter prepared by the
above-referenced accountants.
(iii) Monthly Statements. As soon as practicable after a Lender's
request, and in any event within five (5) Business Days after such request,
with respect to any Dealership with which such Lender has outstanding a
Wholesale Line, certified copies of direct (factory) statements provided by
such Dealership to a manufacturer.
(iv) Officer's Certificate. Together with each delivery of any
financial statement pursuant to clauses (i) and (ii) of this Section
5.1(A), an Officer's Certificate of the Borrower, substantially in the form
of Exhibit F attached hereto and made a part hereof, stating that no Event
of Default or Unmatured Default exists, or if any Event of Default or
Unmatured Default exists, stating the nature and status thereof and setting
forth (X) such financial statements and information as shall be reasonably
acceptable to the Agent and (Y) upon the request of Agent, a valuation of
the Collateral.
(B) Notice of Event of Default. Promptly upon any of the chief executive
officer, chief operating officer, chief accounting officer, treasurer or
controller of the Borrower or any of its Subsidiaries obtaining knowledge (i) of
any condition or event which constitutes an Event of Default or Unmatured
Default, or (ii) that any Person has given any written notice to the Borrower or
any Transaction Party or taken any other action with respect to an Event of
Default or event or condition of the type referred to in Section 6.1(e), deliver
to the Agent a notice specifying (a) the nature and period of existence of any
such Event of Default or Unmatured Default (if the aggregate amount of the
Indebtedness which is the subject of the Unmatured Default exceeds $25,000.00),
condition or event, (b) the notice given or action taken by such
52
Person in connection therewith, and (c) what action the Borrower has taken, is
taking and proposes to take with respect thereto.
(C) Lawsuits. (i) Promptly upon the Borrower obtaining knowledge of the
institution of, or written threat of, any action, suit, proceeding, governmental
investigation or arbitration against or affecting any Transaction Party or any
property of any Transaction Party, which action, suit, proceeding, governmental
investigation or arbitration exposes, or in the case of multiple actions, suits,
proceedings, governmental investigations or arbitrations arising out of the same
general allegations or circumstances which expose, in the Borrower's reasonable
judgment, the Transaction Party to liability in an amount aggregating
$500,000.00 or more, give written notice thereof to the Agent and provide such
other information as may be reasonably available to enable each Lender and its
respective counsel to evaluate such matters; and (ii) in addition to the
requirements set forth in clause (i) of this Section 5.1(C), upon request of the
Agent, promptly give written notice of the status of any action, suit,
proceeding, governmental investigation or arbitration covered by a report
delivered pursuant to clause (i) above or disclosed in any filing with the
Commission and provide such other information as may be reasonably available to
it that would not violate any attorney-client privilege by disclosure to each
Lender and the Agent to enable each Lender or the Agent and its counsel to
evaluate such matters.
(D) ERISA Notices. Deliver or cause to be delivered to the Agent, at the
Borrower's expense, the following information and notices as soon as reasonably
possible, and in any event:
(i) (a) within ten (10) Business Days after the Borrower obtains
knowledge that a Termination Event has occurred, a written statement of the
chief financial officer of the Borrower describing such Termination Event
and the action, if any, which the Borrower has taken, is taking or proposes
to take with respect thereto, and when known, any action taken or
threatened by the IRS, DOL or PBGC with respect thereto and (b) within ten
(10) Business Days after any member of the Controlled Group obtains
knowledge that a Termination Event has occurred which could reasonably be
expected to subject the Borrower or any member of the Controlled Group to
liability individually or in the aggregate in excess of $2,500,000.00, a
written statement of the chief financial officer of the Borrower describing
such Termination Event and the action, if any, which the member of the
Controlled Group has taken, is taking or proposes to take with respect
thereto, and when known, any action taken or threatened by the IRS, DOL or
PBGC with respect thereto;
(ii) within ten (10) Business Days after the Borrower or any of its
Subsidiaries obtains knowledge that a prohibited transaction (defined in
Sections 406 of ERISA and Section 4975 of the Code) has occurred, a
statement of the chief financial officer of the Borrower describing such
transaction and the action which the Borrower or such Subsidiary has taken,
is taking or proposes to take with respect thereto;
(iii) within ten (10) Business Days after the Borrower or any of its
Subsidiaries receives notice of any unfavorable determination letter from
the IRS regarding the qualification of a Plan under Section 401(a) of the
Code, copies of each such letter;
53
(iv) within ten (10) Business Days after the filing thereof with the
IRS, a copy of each funding waiver request filed with respect to any
Benefit Plan and all communications received by the Borrower or a member of
the Controlled Group with respect to such request;
(v) within ten (10) Business Days after receipt by the Borrower or any
member of the Controlled Group of the PBGC's intention to terminate a
Benefit Plan or to have a trustee appointed to administer a Benefit Plan,
copies of each such notice;
(vi) within ten (10) Business Days after receipt by the Borrower or
any member of the Controlled Group of a notice from a Multi-employer Plan
regarding the imposition of withdrawal liability, copies of each such
notice;
(vii) within ten (10) Business Days after the Borrower or any member
of the Controlled Group fails to make a required installment or any other
required payment under Section 412 of the Code on or before the due date
for such installment or payment, a notification of such failure; and
(viii) within ten (10) Business Days after the Borrower or any member
of the Controlled Group knows or has reason to know that (a) a
Multi-employer Plan has been terminated, (b) the administrator or plan
sponsor of a Multi-employer Plan intends to terminate a Multi-employer
Plan, or (c) the PBGC has instituted or will institute proceedings under
Section 4042 of ERISA to terminate a Multi-employer Plan.
For purposes of this Section 5.1(D), the Borrower, any of its Subsidiaries and
any member of the Controlled Group shall be deemed to know all facts known by
the Administrator of any Plan of which the Borrower or any member of the
Controlled Group or such Subsidiary is the plan sponsor.
(E) Labor Matters. Notify the Agent in writing, promptly upon the
Borrower's learning thereof, of (i) any material labor dispute to which the
Borrower or any of its Subsidiaries may become a party, including, without
limitation, any strikes, lockouts or other disputes relating to such Persons'
plants and other facilities and (ii) any material liability incurred under the
Worker Adjustment and Retraining Notification Act with respect to the closing of
any plant or other facility of the Borrower or any of its Subsidiaries.
(F) Other Indebtedness. Deliver, or cause to be delivered, to the Agent (i)
a copy of each notice or communication regarding actual defaults (including any
accompanying officer's certificate) delivered by or on behalf of any Transaction
Party to the holders of funded Indebtedness pursuant to the terms of the
agreements governing such Indebtedness, such delivery to be made at the same
time and by the same means as such notice or other communication is delivered to
such holders, and (ii) a copy of each notice or other communication regarding
actual defaults received by any Transaction Party from the holders of funded
Indebtedness pursuant to the terms of such Indebtedness, such delivery to be
made promptly after such notice or other communication is received by any
Transaction Party.
(G) Other Reports. After an Initial Public Offering or incurrence of
Permitted Subordinated Indebtedness, deliver or cause to be delivered to the
Agent copies of all financial statements, reports and notices, if any, sent or
made available generally by the Borrower to its
54
securities holders or filed with the Commission by the Borrower, all press
releases made available generally by the Borrower or any other Transaction Party
to the public concerning material developments in the business of the Borrower
or any other Transaction Party and all notifications received from the
Commission by the any Transaction Party pursuant to the Securities Exchange Act
of 1934 and the rules promulgated thereunder (other than customary comment
letters received in connection with registration statements or other routine
communications between the Commission and the Borrower).
(H) Environmental Notices. Deliver, or cause to be delivered, as soon as
possible and in any event within ten (10) days after receipt by any Transaction
Party, a copy of (i) any notice or claim to the effect that such Transaction
Party is or may be liable to any Person as a result of the Release by such
Transaction Party, or any other Person of any Contaminant into the environment,
and (ii) any notice alleging any violation of any Environmental, Health or
Safety Requirements of Law by such Transaction Party if, in either case, such
notice or claim relates to an event which could reasonably be expected to
subject such Transaction Party to liability individually or in the aggregate in
excess of $500,000.00.
(I) Other Information. Promptly upon receiving a request therefore from the
Agent, prepare and deliver to the Agent such other information with respect to
any Transaction Party, or the Collateral, including, without limitation,
schedules identifying and describing the Collateral and any dispositions
thereof, as from time to time may be reasonably requested by the Agent.
(J) Real Estate. (i) Within thirty (30) days after the Effective Date of
this Agreement, Borrower shall have delivered to Agent, or cause to have been
delivered to Agent, a report of the following information with respect to each
piece of real property which is the subject of Section 5.3 (A) (xiv) of this
Agreement: (1) the physical address of such property, (2) the appraised value of
such property (as set forth in the first MAI Appraisal performed at the request
of a Transaction Party), (3) the date of the first MAI Appraisal of such
property, performed at the request of a Transaction Party, and name of the
appraiser who prepared the MAI Appraisal, (4) the reasonable cost of
improvements made to such property after the date of the first MAI Appraisal
performed at the request of a Transaction Party, (5) principal amount of
Indebtedness secured by such property, and (6) the name of the lender holding
the first lien on such property.
(ii) On each anniversary day of the Effective Date (or if any such day is
not a Business Day, on the next succeeding Business Day), deliver to Agent, or
cause to be delivered to Agent, a supplement to the report referenced in clause
(i) of this Section 5.1 (J), which must identify any changes to information
previously reported, and report the following information with respect to any
piece of real property which had not been the subject of a previous report and
which is the subject of Section 5.3 (A) (xiv) of this Agreement: (1) the
physical address of such property, (2) the appraised value of such property (as
set forth in the first MAI Appraisal performed at the request of a Transaction
Party), (3) the date of the first MAI Appraisal of such property, performed at
the request of a Transaction Party, and name of the appraiser who prepared the
MAI Appraisal, (4) the reasonable cost of improvements made to such property
after the date of the first MAI Appraisal performed at the request of a
Transaction Party, (5) principal amount of Indebtedness secured by such
property, and (6) the name of the lender holding the first lien on such
property.
55
(K) Meetings. The Borrower shall cause its chief executive officer and
chief financial officer to attend all meetings scheduled by the Agent pursuant
to Section 7.1 (d) of this Agreement.
5.2 Affirmative Covenants.
(A) Existence, Etc. Except for mergers permitted pursuant to Section 5.3(H)
and except for a Permitted IPO Conversion, the Borrower shall, and shall cause
each of its Subsidiaries to, at all times maintain its corporate, company or
partnership existence, as applicable, and preserve and keep, or cause to be
preserved and kept, in full force and effect its rights and franchises material
to its businesses. It is understood and agreed that any Subsidiary of the
Borrower may be dissolved in the ordinary course of business so long as the
Borrower gives prior notice to the Agent of such dissolution and the assets and
obligations of such dissolved Subsidiary are transferred to another Loan Party.
(B) Powers; Conduct of Business. The Borrower shall, and shall cause each
of its Subsidiaries to, qualify and remain qualified to do business in each
jurisdiction in which the nature of its business requires it to be so qualified
and where the failure to be so qualified will have or could reasonably be
expected to have a Material Adverse Effect. The Borrower will, and will cause
each Subsidiary to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is presently
conducted.
(C) Compliance with Laws, Etc The Borrower shall, and shall cause its
Subsidiaries to, (a) comply with all Requirements of Law and all restrictive
covenants affecting such Person or the business, properties, assets or
operations of such Person, and (b) obtain as needed all permits necessary for
its operations and maintain such permits in good standing, unless failure to
comply or obtain could not reasonably be expected to have a Material Adverse
Effect.
(D) Payment of Taxes and Claims. The Borrower shall pay, and cause each of
its Subsidiaries to pay, (i) all taxes, assessments and other governmental
charges required to be paid by it or its Subsidiaries, as the case may be, and
(ii) all claims (including, without limitation, claims for labor, services,
materials and supplies) for sums which have become due and payable and which by
law have or may become a Lien (other than a Lien permitted by Section 5.3(C))
upon any of the Borrower's or such Subsidiary's property or assets, prior to the
time when any penalty or fine shall be incurred with respect thereto; provided,
however, that no such taxes, assessments and governmental charges referred to in
clause (i) above or claims referred to in clause (ii) above (and interest,
penalties or fines relating thereto) need be paid if being contested in good
faith by appropriate proceedings diligently instituted and conducted and if such
reserve or other appropriate provision, if any, as shall be required in
conformity with Agreement Accounting Principles shall have been made therefore.
(E) Insurance. The Borrower shall maintain for itself and its Subsidiaries,
or shall cause each of its Subsidiaries to maintain in full force and effect,
insurance policies and programs reflecting coverage that is reasonably
consistent with prudent industry practice (it being understood that, to the
extent consistent with prudent business practice of Persons carrying on a
similar business in a similar location, with the prior written consent of the
Required Lenders
56
(which such consent will not be unreasonably withheld) a program of
self-insurance for first or other loss layers may be utilized).
(F) Inspection of Property; Books and Records; Discussions. The Borrower
shall permit and cause each of the Borrower's Subsidiaries to permit, any
authorized representative(s) designated by the Agent or any Lender to visit and
inspect any of the properties of the Borrower or any of its Subsidiaries, to
examine, audit, check and make copies of their respective financial and
accounting records, books, journals, orders, receipts and any correspondence and
other data relating to their respective businesses or the transactions
contemplated hereby or by the Acquisitions (including, without limitation, in
connection with environmental compliance, hazard or liability), and to discuss
their affairs, finances and accounts with their officers and independent
certified public accountants (it being understood that (i) the right of
inspection is subject to the confidentiality limitation set forth in Section 9.4
hereof, (ii) the Agent and the Lenders may speak with the Borrower's certified
public accountants so long as a representative of the Borrower is present, but
not otherwise, and (iii) Borrower will make a representative present for such a
discussion at the reasonable request of the Agent or any Lender), all upon
reasonable notice and at such reasonable times during normal business hours, as
often as may be reasonably requested; provided, that while no Event of Default
exists, all of the foregoing shall be at the joint expense of the Lenders. The
Borrower shall keep and maintain, and cause each of the Borrower's Subsidiaries
to keep and maintain, in all material respects, proper books of record and
account in which entries in conformity with Agreement Accounting Principles
shall be made of all dealings and transactions in relation to their respective
businesses and activities, including, without limitation, transactions and other
dealings with respect to the Collateral. If an Event of Default has occurred and
is continuing, the Borrower, upon the request of the Agent or any Lender, shall
turn over any such records to the Agent, such Lender, or their respective
representatives.
(G) Insurance and Condemnation Proceeds. Subject to the rights of Lenders
under any Floor Plan Indebtedness to receive and/or apply any insurance proceeds
for any loss with respect to the Collateral, the Borrower shall direct (and, if
applicable, shall cause its Subsidiaries to direct) all insurers under policies
of property damage, boiler and machinery and business interruption insurance and
payors of any condemnation claim or award relating to the Collateral to pay all
proceeds payable under such policies or with respect to such claim or award
directly to the Agent (for the benefit of the Lenders); provided, however, in
the event that such proceeds or award are less than $500,000.00 ("Excluded
Proceeds"), unless an Event of Default shall have occurred and be continuing,
the Agent shall remit such Excluded Proceeds to the Borrower or Subsidiary, as
applicable. Each such policy shall contain a long-form loss-payable endorsement
naming the Agent (for the benefit of the Lenders) as loss payee, which
endorsement shall be in form and substance acceptable to the Agent and shall
provide for all losses with respect to the Collateral to be paid on behalf of
Agent and the applicable Transaction Party as their respective interests may
appear and each policy for property damage insurance shall provide for all
losses to be paid directly to the Agent. Each such policy shall in addition (i)
name the applicable Transaction Party and the Agent (for the benefit of the
Lenders) as insured parties thereunder (without any representation or warranty
by or obligation upon the Agent) as their interests may appear, (ii) contain the
agreement by the insurer that any loss thereunder shall be payable to the Agent
(for the benefit of the Lenders) notwithstanding any action, inaction or breach
of representation or warranty by the Transaction Party, (iii) provide that there
shall be no recourse against the Agent or the Lenders for payment of premiums or
other amounts with respect thereto and (iv) provide that at least ten days'
prior written notice of
57
cancellation or of lapse shall be given to Agent by the insurer. Each
Transaction Party shall, if so requested by the Agent, deliver to the Agent
original or duplicate policies of such insurance and, as often as the Agent may
reasonably request, a report of a reputable insurance broker with respect to
such insurance. Further each Transaction Party shall, at the request of the
Agent, duly execute and deliver instruments of assignment of such insurance
policies to comply with the requirements of Section 5.2 (N) and cause the
insurers to acknowledge notice of such assignment. The Agent shall, upon receipt
of such proceeds (other than Excluded Proceeds) and at the Borrower's direction,
either apply the same to the principal amount of the Advances outstanding at the
time of such receipt and create a corresponding reserve against the Commitment
in an amount equal to such application (the "Decision Reserve") or hold them as
cash Collateral for the Obligations in an interest bearing account. For up to
150 days from the date of any loss (the "Decision Period"), the Borrower may
notify Agent that it intends to restore, rebuild or replace the property subject
to any insurance payment or condemnation award and shall, as soon as practicable
thereafter, provide Agent detailed information, including a construction
schedule and cost estimates. Should an Event of Default occur at any time during
the Decision Period, should the Borrower notify the Agent that it has decided
not to rebuild or replace such property during the Decision Period, or should
the Borrower fail to notify the Agent of the Borrower's decision during the
Decision Period, then the amounts held as cash collateral pursuant to this
Section 5.2(G) or as the Decision Reserve shall be applied as a mandatory
prepayment of the Advances pursuant to Section 2.2(B). Proceeds held as cash
collateral pursuant to this Section 5.2(G) or constituting the Decision Reserve
shall be disbursed as payments for restoration, rebuilding or replacement of
such property become due; provided, however, should an Event of Default occur
after the Borrower has notified the Agent that it intends to rebuild or replace
the property, the Decision Reserve or amounts held as cash collateral shall be
applied as a mandatory prepayment of the Advances pursuant to Section 2.2(B). In
the event the Decision Reserve is to be applied as a mandatory prepayment to the
Advances, the Borrower shall be deemed to have requested Advances in an amount
equal to the Decision Reserve, and such Advances shall be made regardless of any
failure of the Borrower to meet the conditions precedent set forth in Article
III. Upon completion of the restoration, rebuilding or replacement of such
property, the unused proceeds shall constitute net cash proceeds of an Asset
Sale and shall be applied as a mandatory prepayment of the Advances pursuant to
Section 2.2(B).
(H) ERISA Compliance. The Borrower shall, and shall cause each of the
Borrower's Subsidiaries to, establish, maintain and operate all Plans, if any,
to comply in all material respects with the provisions of ERISA, the Code, all
other applicable laws, and the regulations and interpretations thereunder and
the respective requirements of the governing documents for such Plans, except
where the failure to comply could not reasonably be expected to subject the
Borrower and its Subsidiaries to liability individually or in the aggregate in
excess of $250,000.00.
(I) Maintenance of Property. The Borrower shall cause all property used or
useful in the conduct of its business or the business of any Subsidiary to be
maintained and kept in good condition, repair and working order and, and
supplied with all necessary equipment and shall cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Borrower may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section 5.2(I) shall prevent the
Borrower from discontinuing the operation or maintenance of any of such property
if such discontinuance is, in
58
the judgment of the Borrower, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
any Lender. Each Transaction Party shall promptly furnish to the Agent a
statement respecting any material loss or damage to its respective collective
Equipment, taken as a whole.
(J) Environmental Compliance. The Borrower and its Subsidiaries shall
comply with all Environmental, Health or Safety Requirements of Law, except
where noncompliance could not reasonably be expected to subject the Borrower and
its Subsidiaries to liability individually or in the aggregate in excess of
$500,000.00. Neither the Borrower nor any of its Subsidiaries shall be the
subject of any proceeding or investigation pertaining to (i) the Release by the
Borrower or any of its Subsidiaries of any Contaminant into the environment or
(ii) the liability of the Borrower or any of its Subsidiaries arising from the
Release by any other Person of any Contaminant into the environment, which, in
either case, subjects or is reasonably likely to subject the Borrower and its
Subsidiaries individually or in the aggregate to liability in excess of the
amount set forth above.
(K) Use of Proceeds. Except as otherwise provided in Section 2.1 (A) (1)
hereof, the Borrower shall use the proceeds of Advances to (i) fund the
Acquisition Costs of Permitted Acquisitions (each such Advance is referred to
herein as an "Acquisition Advance") and (ii) provide funds for working capital
needs and other general corporate purposes of the Borrower and the Guarantors
(each such Advance is referred to as a "Working Capital Advance"), provided,
however, that at no time may the aggregate amount of Working Capital Advances
outstanding exceed four percent (4%) of the Revolving Credit Obligations. The
proceeds of Advances hereunder may not be used to make any mandatory prepayment
under Section 2.2(B). The Borrower will not, nor will it permit any Subsidiary
to, use any of the proceeds of the Loans to purchase or carry any "Margin Stock"
or to make any Acquisition, other than any Permitted Acquisition pursuant to
Section 5.3(F).
(L) Addition of Guarantors. The Borrower shall cause each present and
future Subsidiary Holding Company and each Dealership which has not heretofore
provided a Subsidiary Holding Company Guaranty or a Dealership Guaranty to the
Agent, to deliver to the Agent, for the benefit of the Lenders, a Subsidiary
Holding Company Guaranty, in the form of Exhibit C-2, or a Dealership Guaranty,
in the form of Exhibit C-1, together with Pledged Account Agreements and such
other appropriate Collateral Documents, so as to grant a Lien on all of its bank
accounts, property and assets, together with UCC-1 Financing Statements, an
acknowledgment to be bound by the Cross Agreement, together with appropriate
corporate resolutions, opinions and other documentation in form and substance
reasonably satisfactory to the Agent. Each Subsidiary Holding Company and each
Dealership shall provide such Subsidiary Holding Company Guaranty or Dealership
Guaranty, Pledged Account Agreement and other Collateral Documents prior to or
simultaneously with its Acquisition.
(M) Material Adverse Change. Promptly upon the occurrence of any Material
Adverse Change, Borrower will give the Agent written notice of such Material
Adverse Change, describing the nature of such Material Adverse Change and the
entities affected by such Material Adverse Change, and present Agent with an
action plan Borrower intends to implement to address such Material Adverse
Change.
(N) Further Assurances. Borrower, the Agent and the Lenders agree to,
promptly upon request by the Agent or the Borrower, as applicable, (i) correct,
and cause each of its
59
Subsidiaries promptly to correct, any material defect or error that may be
discovered in any Loan Document or in the execution, acknowledgment, filing or
recordation thereof, and (ii) do, execute, acknowledge, deliver, record,
re-record, file, re-file, register and re-register any and all such further
acts, deeds, conveyances, pledge agreements, mortgages, deeds of trust, trust
deeds, assignments, financing statements and continuations thereof, termination
statements, notices of assignment, transfers, certificates, assurances and other
instruments as the Agent may reasonably require from time to time in order to
(1) carry out more effectively the purposes of the Loan Documents, (2) to the
fullest extent permitted by applicable law, subject any Loan Party's properties,
assets, rights or interests to the Liens now or hereafter intended to be covered
by any of the Collateral Documents, (3) perfect and maintain the validity,
effectiveness and priority of any of the Collateral Documents and any of the
Liens intended to be created thereunder and (4) assure, convey, grant, assign,
transfer, preserve, protect and confirm more effectively unto the Lenders the
rights granted or now or hereafter intended to be granted to the Lenders under
any Loan Document or under any other instrument executed in connection with any
Loan Document to which any Lender is or is to be a party, and cause each of its
Subsidiaries to do so.
(O) Franchise Agreements. The Borrower shall use its reasonable best
efforts to obtain waivers under existing and future franchise agreements on
terms and conditions acceptable to the Lenders sufficient to permit the Liens
contemplated hereunder. To the extent any franchise agreement materially limits
the Liens contemplated hereunder or under any Collateral Document (other than
the Liens contemplated by the Borrower Pledges, Dealership Pledges and/or
Subsidiary Holding Company Pledges), the Borrower shall notify the Agent of such
restriction or limitation and to the extent such franchise agreement relates to
an Acquisition to be effected by the Borrower, prior to such Acquisition
becoming a Permitted Acquisition, the Required Lenders shall have provided their
written approval of such franchise agreement.
(P) Pledge of Capital Stock. The Borrower shall, and shall cause each of
the Subsidiary Holding Companies to, pledge to and grant to the Agent, for the
benefit of the Lenders, a first perfected and first priority Lien in all of its
Equity Interests in each Dealership and/or other Subsidiary Holding Company, as
the case may be; provided, however, such Equity Interest will be required to be
pledged only to the extent not prohibited by the manufacturer under the
applicable franchise agreement. In the event that a manufacturer refuses to
consent to the pledge by the Borrower or a Subsidiary Holding Company of the
Borrower's or Subsidiary Holding Companies' Capital Stock in a Dealership or
other Subsidiary Holding Company, the Borrower and/or Subsidiary Holding Company
must execute a Waiver, Guaranty and Disbursement Agreement.
5.3 Negative Covenants.
(A) Indebtedness. Neither the Borrower nor any of its Subsidiaries shall
directly or indirectly create, incur, assume or otherwise become or remain
directly or indirectly liable with respect to any Indebtedness, except:
(i) the Obligations;
(ii) Permitted Existing Indebtedness and Permitted Refinancing
Indebtedness;
60
(iii) Indebtedness in respect of obligations secured by Customary
Permitted Liens;
(iv) Indebtedness constituting Contingent Obligations in respect of
Indebtedness otherwise permitted hereunder;
(v) Indebtedness arising from intercompany loans from the Borrower to
any Guarantor or from any Subsidiary to the Borrower or any Guarantor;
provided that in each case such Indebtedness is subordinated upon terms
satisfactory to the Required Lenders to the obligations of the Borrower and
its Subsidiaries with respect to the Obligations;
(vi) Indebtedness with respect to surety, appeal and performance bonds
obtained by the Borrower or any of its Subsidiaries in the ordinary course
of business;
(vii) Indebtedness not in excess of $25,000,000.00, in the aggregate
outstanding at any time, in connection with the Liens set forth in Section
5.3(C)(v);
(viii) contingent obligations of the Guarantors incurred in connection
with sales in the ordinary course of business of vehicle chattel paper;
(ix) Floor Plan Indebtedness incurred by a Loan Party;
(x) Indebtedness incurred from time to time in connection with Capital
Expenditures, provided, however, that the aggregate of such Indebtedness
incurred during any twelve month period (with the first such twelve month
period beginning on the Effective Date, and each subsequent twelve month
period beginning on each succeeding anniversary day of the Effective Date),
may not exceed $20,000,000.00, and provided, further, that if during any
given twelve month period such Indebtedness is less than $20,000,000.00
(the difference between $20,000,000.00 and the actual amount of such
Indebtedness incurred during a given twelve month period not in excess of
$5,000,000.00 being referred to herein as the "Carry-Over Amount"), such
Carry-Over Amount may be carried either forward or back into any twelve
month period during the term of this Agreement and added to the amount of
Indebtedness that may be or may have been (as the case may be) incurred
during such twelve month period in connection with Capital Expenditures;
(xi) other Indebtedness in an aggregate principal amount outstanding
at any time not in excess of $7,500,000.00;
(xii) Indebtedness incurred hereunder in connection with a Permitted
Acquisition;
(xiii) Hedging Obligations permitted under Section 5.3 (P).;
(xiv) Indebtedness incurred from time to time and secured only by the
Liens described in Section 5.3 (C) (vi), provided, however, that with
respect to any such given Indebtedness, (1) the aggregate principal amount
of such Indebtedness may not exceed 100% of the value of the real property,
fixtures and improvements collateralizing
61
such Indebtedness (for purposes of this Section 5.3 (A) (xiv), the value of
the real property will be determined by adding the appraised value of the
real property as reported in the first MAI Appraisal performed at the
request of a Transaction Party and the Dollar amount reported in Section
5.1 (J) hereof as the cost of improvements made to such real property after
the date of such MAI Appraisal) , and (2) no Transaction Party may guaranty
such Indebtedness;
(xv) Permitted Subordinated Indebtedness; and
(xvi) obligations in respect of Seller Paper, provided, however, that
(i) the aggregate amount of Indebtedness outstanding in respect of Seller
Paper at any given time may not exceed $25,000,000.00, and (ii) obligations
in respect of Seller Paper incurred in connection with any given Permitted
Acquisition may not exceed 20% of the Acquisition Price of such Permitted
Acquisition.
(B) Sales of Assets. Neither the Borrower nor any of its Subsidiaries shall
sell, assign, transfer, lease, convey or otherwise dispose of any property
(including the Capital Stock of any Subsidiary), whether now owned or hereafter
acquired, or any income or profits therefrom, or enter into any agreement to do
so, except:
(i) sales of Inventory in the ordinary course of business;
(ii) the disposition in the ordinary course of business of (A) vehicle
chattel paper or sales contracts (provided that to the extent such chattel
paper and/or sales contracts are proceeds of motor vehicles financed under
the Floor Plan Indebtedness, the portion of the Floor Plan Indebtedness
related to such motor vehicles shall be retired in full) and (B) equipment
or other personal property that is obsolete, excess, condemned, worn out or
no longer useful in the Borrower's or its Subsidiaries' business;
(iii) sales, assignments, transfers, leases, conveyances or other
dispositions of other assets if (A) such transaction (1) is for all cash
consideration, (2) is for not less than Fair Value, and (3) when combined
with all such other transactions (each such transaction being valued at
book value) during the immediately preceding twelve-month period,
represents the disposition of not greater than $5,000,000.00, and (B) the
Net Cash Proceeds of any such sale, assignment, transfer, lease conveyance
or other disposition of assets are either (1) applied in their entirety to
reduce the Revolving Credit Obligations, or (2) reinvested, substantially
in whole with the prior written consent of Agent and the Required Lenders
(which may not be unreasonably withheld), in long-term assets necessary or
useful in the operation of the Asbury Group's business;
(iv) dispositions permitted by Sections 5.3 (G) and 5.3 (H);
(v) the sale of equipment to the extent such equipment is exchanged
for credit against the purchase price of materially similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to
the purchase price of such replacement equipment;
(vi) dispositions of assets by any Transaction Party to any other
Transaction Party that is also a Loan Party; and
62
(vii) sales of real property in connection with any REIT Transaction
(as defined in Section 5.3 (G) hereof), provided that the Net Cash Proceeds
of any such sale are applied as a mandatory prepayment of the Obligations
under Section 2.2 (B) hereof.
(C) Liens. Neither the Borrower nor any of its Subsidiaries shall directly
or indirectly create, incur, assume or permit to exist any Lien on or with
respect to any of their respective property or assets, except:
(i) Permitted Existing Liens;
(ii) Customary Permitted Liens;
(iii) Liens securing the Obligations;
(iv) Liens securing Floor Plan Indebtedness;
(v) Liens (other than on the stock, real property and fixtures of any
Subsidiaries) securing other obligations not exceeding $25,000,000.00 in
the aggregate at any time outstanding;
(vi) Liens (encumbering only real property, fixtures, and improvements
whether such real property, fixtures and improvements are now owned, under
construction or hereafter acquired), which the applicable Transaction Party
reasonably purported to grant as first priority Liens, securing the
Indebtedness described in Section 5.3 (A) (xiv);
(vii) Liens securing Capital Expenditures permitted under Section 5.3
(A) (x), provided any such Liens are limited in scope to cover only that
property which is the subject of the particular Capital Expenditure; and
(viii) Liens securing Permitted Refinancing Indebtedness permitted
under Section 5.3 (A) (ii).
In addition, neither the Borrower nor any of its Subsidiaries shall become a
party to any agreement, note, indenture or other instrument, or take any other
action, which would prohibit the creation of a Lien on any of its properties or
other assets in favor of the Agent (for the benefit of the Lenders), as
collateral for the Obligations; provided that any agreement, note, indenture or
other instrument in connection with Liens permitted pursuant to clause (i) above
may prohibit the creation of a Lien in favor of the Agent (for the benefit of
the Lenders) on the items of property subject to such Lien.
(D) Investments. Except to the extent permitted pursuant to paragraph (G)
below, neither the Borrower nor any of its Subsidiaries shall directly or
indirectly make or own any Investment except:
(i) Investments in Cash Equivalents;
63
(ii) Permitted Existing Investments in an amount not greater than the
amount thereof on the date hereof;
(iii) Investments in trade receivables or received in connection with
the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with, customers
and suppliers arising in the ordinary course of business;
(iv) Investments from the Borrower to any Subsidiary or from any
Subsidiary to the Borrower or any other Subsidiary permitted by Section
5.3(A)(v);
(v) Investments in any Guarantor;
(vi) Investments constituting Permitted Acquisitions;
(vii) Investments of any type in addition to those referred to
elsewhere in this Section 5.3(D) in an amount not to exceed $10,000,000.00
in the aggregate at any time outstanding; and
(viii) any Estate Tax Loan (as defined in the Borrower LLC Agreement)
required to be made pursuant to Section 7.07 of the Borrower LLC Agreement.
provided, however, that the Investments described in clauses (vi) through (vii)
above shall not be permitted if either an Event of Default or Unmatured Default
shall have occurred and be continuing on the date thereof or would result
therefrom.
(E) Restricted Payments. Neither the Borrower nor any of its
Subsidiaries shall declare or make any Restricted Payments, except:
(i) where the consideration therefore consists solely of Equity
Interests (but excluding Disqualified Stock) of the Borrower or its
Subsidiaries provided no Change of Control would occur as a result thereof;
(ii) Restricted Payments by a Subsidiary to the Borrower or to the
Subsidiary Holding Company that is a parent of such Subsidiary;
(iii) annual management fees to Borrower or its Affiliates in an
aggregate amount not in excess of $1,000,000.00 in any fiscal year;
(iv) so long as no Event of Default or Unmatured Default has occurred
and is continuing, the Borrower may repurchase (for value as described in
Article VII of the Borrower LLC Agreement) Equity Interests of the Borrower
and/or options to purchase Equity Interests of the Borrower held by
directors, executive officers, members of management or employees of the
Borrower or any of its Subsidiaries upon the death or termination of such
director, executive, officer, member or management or employee.
(F) Conduct of Business; Subsidiaries; Acquisitions. (i) Neither the
Borrower nor any of its Subsidiaries shall engage in any business other than the
businesses engaged in by the
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Borrower and such Subsidiaries on the date hereof and any business or
activities which are substantially similar, related or incidental thereto.
(ii) The Borrower may create, acquire and/or capitalize any Subsidiary
(a "New Subsidiary") after the date hereof pursuant to any transaction that is
permitted by or not otherwise prohibited by this Agreement; provided that upon
the creation or acquisition of each New Subsidiary, the requirements set forth
in Section 5.2(L) hereof shall have been satisfied and all New Subsidiaries that
are Material Subsidiaries shall be Controlled Subsidiaries. Only those
Subsidiaries (i) listed on Schedule 5.3 (F) hereto, or (ii) operating under a
Restricted Franchise Agreement may have any Equity Interests issued to a
Minority Holder, and, in the case of those entities operating under a Restricted
Franchise Agreement, only to the extent required by such Restricted Franchise
Agreement.
(iii) The Borrower shall not make any Acquisitions, other than
Acquisitions meeting the following requirements (each such Acquisition
constituting a "Permitted Acquisition"):
(a) no Event of Default or Unmatured Default shall have occurred and
be continuing or would result from such Acquisition or the incurrence of
any Indebtedness in connection therewith;
(b) in the case of an Acquisition of Equity Interests of an entity,
such Acquisition shall be of one hundred percent (100%) of the Equity
Interests of such entity or if so restricted by such entity's franchise
agreement (a "Restricted Franchise Agreement"), such Acquisition shall be
of at least eighty percent (80%) of the Equity Interests of such entity,
provided, however, that the Borrower shall use reasonable efforts to cause
such Equity Interests of Minority Holders to be pledged directly to the
Agent, for the benefit of the Lenders, simultaneously with such
Acquisition;
(c) the business or businesses being acquired shall be substantially
similar, related or incidental to the businesses or activities engaged in
by the Borrower and its Subsidiaries on the date hereof;
(d) within thirty (30) days prior to the anticipated closing date of a
contemplated Acquisition, the Borrower shall deliver to the Agent a
certificate from one of the Authorized Officers, demonstrating to the
reasonable satisfaction of the Agent that after giving effect to such
Acquisition and the incurrence of any Indebtedness hereunder and in
connection herewith, on a pro forma basis (both historically and on a
projected basis), as if the Acquisition and such incurrence of Indebtedness
had occurred on the first day of the twelve-month period ending on the last
day of the Borrower's most recently completed fiscal quarter, the Borrower
would have been in compliance with all of the covenants contained in this
Agreement, including, without limitation, the financial covenants set forth
in Section 5.4;
(e) after giving effect to such Acquisition, the representations and
warranties set forth in Article IV hereof shall be true and correct in all
material respects on and as of the date of such Acquisition with the same
effect as though made on and as of such date; and
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(f) the Borrower shall have obtained (and shall have based the
calculations set forth above on) historical audited financial statements
for the target and/or reviewed unaudited financial statements (in each case
to the extent available) for the target for a period of not less than (A)
two (2) years for Acquisitions in excess of $30,000,000.00 and (B) one (1)
year for Acquisitions in excess of $2,000,000.00, together with tax returns
for the one year prior to such year, in each case obtained from the seller
or provided by independent certified public accountants retained for the
purposes of such Acquisition, broken down by fiscal quarter in the
Borrower's reasonable judgment, copies of which shall be provided to the
Agent.
(g) the Borrower shall have obtained either (i) a new franchise
agreement between the Dealership and the manufacturer on substantially the
same terms as the franchise agreement entered into between the manufacturer
and the entity to be acquired in such Permitted Acquisition or (ii) any
consent required from a manufacturer for the continued enforceability and
validity of such franchise agreement after the completion of a Permitted
Acquisition shall have been obtained.
(h) all material consents from applicable Governmental Authorities,
and all other material consents necessary to permit, the Acquisitions shall
have been obtained.
(G) Transactions with Shareholders and Affiliates. Neither the Borrower nor
any Subsidiary shall directly or indirectly enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with any holder or
holders of any of the Equity Interests of the Borrower, or with any Affiliate of
the Borrower which is not a Guarantor, on terms that are less favorable to the
Borrower or any of its Subsidiaries, as applicable, than those that might be
obtained in an arm's length transaction at the time from Persons who are not
such a holder or Affiliate, except that (i) employment agreements from time to
time with senior management of Borrower and its Subsidiaries for services
rendered shall be permitted, and (ii) the Shareholder Agreement shall be
permitted and (iii) the sale by the owner of property leased to the Borrower or
any of its Subsidiaries to a public real estate investment trust or to a Person
that becomes a public real estate investment trust (a "REIT Transaction") and
leases of real property related to dealerships from the public real estate
investment trust formed in connection with the REIT Transaction shall be
permitted.
(H) Restriction on Fundamental Changes. Neither the Borrower nor any of its
Subsidiaries shall enter into any merger or consolidation, or liquidate, wind-up
or dissolve (or suffer any liquidation or dissolution), or convey, lease, sell,
transfer or otherwise dispose of, in one transaction or series of transactions,
all or substantially all of the Borrower's or any such Subsidiary's business or
property, whether now or hereafter acquired, except (i) transactions permitted
under Sections 5.3(B) or 5.3(G), (ii) the merger of a Transaction Party (other
than the Borrower) and a Person acquired in connection with a Permitted
Acquisition; (iii) the merger of a wholly-owned Transaction Party with and into
the Borrower; (iv) the merger of a Transaction Party (other than the Borrower)
with another Transaction Party; and (v) the conveyance, lease, sale, transfer or
other disposition of any or all of the assets of a Subsidiary (upon voluntary
liquidation or otherwise) to the Borrower or any Guarantor; provided, however,
(x) with respect to any such permitted mergers involving any Guarantor, the
surviving corporation in the merger shall also be or become a Guarantor; and (y)
after the consummation of any such transaction, the Borrower shall be in
compliance with the provisions of Sections 5.2(L) and 5.3(E).
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Notwithstanding the foregoing, this Section 5.3 (H) shall not apply to a
Permitted IPO Conversion.
(I) Sales and Leasebacks. Except for REIT Transactions, neither the
Borrower nor any of its Subsidiaries shall become liable, directly, by
assumption or by Contingent Obligation, with respect to any lease, whether an
operating lease or a Capitalized Lease, of any property (whether real or
personal or mixed) (i) which it or one of its Subsidiaries sold or transferred
or is to sell or transfer to any other Person, or (ii) which it or one of its
Subsidiaries intends to use for substantially the same purposes as any other
property which has been or is to be sold or transferred by it or one of its
Subsidiaries to any other Person in connection with such lease.
(J) Margin Regulations. Neither the Borrower nor any of its Subsidiaries,
shall use all or any portion of the proceeds of any credit extended under this
Agreement to purchase or carry Margin Stock.
(K) ERISA. The Borrower shall not
(i) engage, or permit any of its Subsidiaries to engage, in any
prohibited transaction described in Sections 406 of ERISA or 4975 of the
Code for which a statutory or class exemption is not available or a private
exemption has not been previously obtained from the DOL;
(ii) permit to exist any accumulated funding deficiency (as defined in
Sections 302 of ERISA and 412 of the Code), with respect to any Benefit
Plan, whether or not waived;
(iii) fail, or permit any Controlled Group member to fail, to pay
timely required contributions or annual installments due with respect to
any waived funding deficiency to any Benefit Plan;
(iv) terminate, or permit any Controlled Group member to terminate,
any Benefit Plan which would result in any liability of the Borrower or any
Controlled Group member under Title IV of ERISA;
(v) fail to make any contribution or payment to any Multiemployer Plan
which the Borrower or any Controlled Group member may be required to make
under any agreement relating to such Multiemployer Plan, or any law
pertaining thereto;
(vi) fail, or permit any Controlled Group member to fail, to pay any
required installment or any other payment required under Section 412 of the
Code on or before the due date for such installment or other payment; or
(vii) amend, or permit any Controlled Group member to amend, a Plan
resulting in an increase in current liability for the plan year such that
the Borrower or any Controlled Group member is required to provide security
to such Plan under Section 401(a)(29) of the Code,
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except where such transactions, events, circumstances, or failures will not have
or is not reasonably likely to subject the Borrower and its Subsidiaries to
liability individually or in the aggregate in excess of $250,000.00.
(L) Issuance of Equity Interests. None of the Borrower's Subsidiaries shall
issue any Equity Interests other than to the Borrower or if required by the
applicable manufacturer in connection with a Restricted Franchise Agreement or
the state motor vehicle dealer licensing authority, to Minority Holders whose
Equity Interests (i) do not exceed 20% of the Equity Interests of such
Subsidiary and (ii) have been pledged to the Lenders; provided, however, that no
such issuance of Equity Interests shall be permitted hereunder unless the
Subsidiary to which such issuance pertains operates only under a Restricted
Franchise Agreement.
(M) Corporate Documents; Franchise Agreements. Neither the Borrower nor any
of its Subsidiaries shall amend, modify or otherwise change any of the terms or
provisions in any of their respective constituent documents as in effect on the
date hereof in any manner adverse in any material respect to the interests of
any Lender without the prior written consent of such Lender. The Borrower shall
not permit any Dealership to amend, modify or otherwise change any of the terms
or provisions of such Dealership's franchise agreement in any manner adverse in
any material respect to the interests of any Lender without the prior written
consent of such Lender. It is understood and agreed that should any manufacturer
require the Borrower or any of its Subsidiaries to amend, modify or otherwise
change any of the foregoing documents, except to the extent that any such
amendment, modification or change may result in a Material Adverse Effect, it
shall not result in a breach of this Section 5.3 (M).
(N) Fiscal Year. Except as may be required by law, neither the Borrower nor
any of its consolidated Subsidiaries shall change its fiscal year for accounting
or tax purposes from a period consisting of the 12-month period ending on
December 31 of each calendar year.
(O) Subsidiary Covenants. The Borrower will not, and will not permit any
Subsidiary to, create or otherwise cause to become effective any consensual
encumbrance or restriction of any kind on the ability of any Subsidiary to pay
dividends or make any other distribution on its stock, or make any other
Restricted Payment, pay any Indebtedness or other Obligation owed to the
Borrower or any other Subsidiary, make loans or advances or other Investments in
the Borrower or any other Subsidiary, or sell, transfer or otherwise convey any
of its property to the Borrower or any other Subsidiary.
(P) Hedging Obligations. The Borrower shall not and shall not permit any of
its Subsidiaries to enter into any Hedging Obligations, other than interest
rate, foreign currency or commodity exchange, swap, collar, cap or similar
agreements entered into by the Borrower or a Subsidiary pursuant to which the
Borrower or such Subsidiary has hedged its actual interest rate, foreign
currency or commodity exposure.
5.4 Financial Covenants. The Borrower shall comply with the following:
(A) Current Ratio. The Borrower shall not permit the ratio (the "Current
Ratio") of Current Assets of the Asbury Group on a consolidated basis to Current
Liabilities of the Asbury Group on a consolidated basis to be less than 1.20 :
1. In each case, the Current Ratio shall be determined as of the last day of
each fiscal quarter.
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(B) Fixed Charge Coverage Ratio. The Borrower shall maintain a ratio
("Fixed Charge Coverage Ratio") of (i) EBITDAR less Capital Expenditures (to the
extent no Indebtedness was incurred to finance such Capital Expenditures), to
(ii) the sum of (a) Interest Expense plus (b) scheduled amortization of the
principal portion of all Indebtedness for money borrowed plus (c) Rentals plus
(d) taxes paid in cash during such period of the Borrower and its consolidated
Subsidiaries of at least 1.20 : 1 for each fiscal quarter ending from and after
the Effective Date. In each case the Fixed Charge Coverage Ratio shall be
determined as of the last day of each fiscal quarter for the four-quarter period
ending on such day.
(C) Total Adjusted Debt to EBITDA Ratio. The Borrower shall not permit the
ratio (the "Adjusted Leverage Ratio") of (i) Total Adjusted Debt of the Borrower
and its consolidated Subsidiaries to (ii) EBITDA of the Borrower and its
consolidated Subsidiaries, to be greater than 4.40 : 1. The Adjusted Leverage
Ratio shall be calculated, in each case, determined as of the last day of each
fiscal quarter based upon (a) for Total Adjusted Debt, Total Adjusted Debt as of
the last day of each such fiscal quarter; and (b) for EBITDA, EBITDA for the
twelve-month period ending on such day calculated as set forth in the definition
thereof.
All financial covenants set forth in this Section 5.4 shall be
calculated by the Agent based on the calculations set forth in and the financial
statements attached to Officer's Certificates delivered hereunder and shall be
binding on the Borrower for all purposes of this Agreement absent manifest
error.
ARTICLE VI: EVENT OF DEFAULTS
6.1 Event of Defaults. Each of the following occurrences shall constitute
an Event of Default under this Agreement:
(a) Failure to Make Payments When Due. The Borrower or any Loan Party shall
(i) fail to pay when due any of the Obligations consisting of principal with
respect to the Advances or (ii) fail to pay within ten (10) days of the date
when due any of the other Obligations under the Loan Documents.
(b) Breach of Certain Covenants. The Borrower shall fail duly and
punctually to perform or observe any agreement, covenant or obligation binding
on the Borrower under Sections 5.2(F), 5.2(K), 5.3 or 5.4.
(c) Breach of Representation or Warranty. Any representation or warranty
made or deemed made by any Loan Party in any Loan Documents or in any written
statement or certificate at any time given by any such Person pursuant to any
Loan Document shall be false or misleading in any material respect on the date
as of which made (or deemed made).
(d) Other Defaults. The Borrower shall default in the performance of or
compliance with any term contained in this Agreement (other than as covered by
paragraphs (a), (b) or (c) of this Section 6.1), or any Loan Party shall default
in the performance of or compliance with any term contained in any of the other
Loan Documents, and, in either case, such default shall continue for thirty (30)
days after the occurrence thereof.
(e) Default as to Other Indebtedness. Any Loan Party shall fail to make any
payment when due, after giving effect to any applicable grace periods, (whether
by scheduled maturity,
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required prepayment, acceleration, demand or otherwise) with respect to any
Indebtedness (other than Indebtedness constituting the deferred portion of the
purchase price of an asset which is subject to a good faith dispute, which,
together with all such other outstanding disputed Indebtedness, is not in excess
of $500,000.00 and which is being contested by any Loan Party, and provided that
the Loan Party has set aside adequate reserves covering such disputed
Indebtedness) the aggregate outstanding principal amount of which Indebtedness
is in excess of $500,000.00; or any breach, default or event of default shall
occur, or any other condition shall exist under any instrument, agreement or
indenture pertaining to any such Indebtedness, if the effect thereof is to cause
an acceleration, mandatory redemption, a requirement that the Loan Party offer
to purchase such Indebtedness or other required repurchase of such Indebtedness,
or permit the holder(s) of such Indebtedness to accelerate the maturity of any
such Indebtedness or require a redemption or other repurchase of such
Indebtedness; or any such Indebtedness shall be otherwise declared to be due and
payable (by acceleration or otherwise) or required to be prepaid, redeemed or
otherwise repurchased by any Loan Party (other than by a regularly scheduled
required prepayment) prior to the stated maturity thereof.
(f) Involuntary Bankruptcy; Appointment of Receiver, Etc.
(i) An involuntary case shall be commenced against any Transaction
Party and the petition shall not be dismissed, stayed, bonded or discharged
within sixty (60) days after commencement of the case; or a court having
jurisdiction in the premises shall enter a decree or order for relief in
respect of any Transaction Party in an involuntary case, under any
applicable bankruptcy, insolvency or other similar law now or hereinafter
in effect; or any other similar relief shall be granted under any
applicable federal, state, local or foreign law.
(ii) (A) A decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over any
Transaction Party or over all or a substantial part of the property of any
Transaction Party shall be entered; (B) or an interim receiver, trustee or
other custodian of any Transaction Party or of all or a substantial part of
the property of any Transaction Party shall be appointed or (C) a warrant
of attachment, execution or similar process against any substantial part of
the property of any Transaction Party shall be issued and any such event
described in subsection (A), (B), or (C) of this paragraph shall not be
stayed, dismissed, bonded or discharged within sixty (60) days after entry,
appointment or issuance.
(g) Voluntary Bankruptcy; Appointment of Receiver, Etc. Any Transaction
Party shall (i) commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (ii) consent to the
entry of an order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, (iii) consent to the
appointment of or taking possession by a receiver, trustee or other similar
custodian for the benefit of creditors for all or a substantial part of its
property, (iv) make any assignment for the benefit of creditors or (v) take any
corporate action to authorize any of the foregoing.
(h) Judgments and Attachments. Any money judgment(s) (other than a money
judgment covered by insurance as to which the insurance company has not
disclaimed coverage or if it has reserved the right to disclaim coverage, such
letter reserving the right to disclaim coverage is outstanding twelve months
after such money judgment was rendered), writ
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or warrant of attachment, or similar process against any Transaction Party or
any of their respective assets involving in any single case or in the aggregate
an amount in excess of $500,000.00 is or are entered and shall remain
undischarged, unvacated, unbonded or unstayed for a period of sixty (60) days or
in any event later than fifteen (15) days prior to the date of any proposed sale
thereunder.
(i) Dissolution. Any order, judgment or decree shall be entered against any
Transaction Party decreeing its involuntary dissolution or split up and such
order shall remain undischarged and unstayed for a period in excess of sixty
(60) days; or any Transaction Party shall otherwise dissolve or cease to exist
except as specifically permitted by this Agreement or with the consent of the
Required Lenders.
(j) Loan Documents; Failure of. At any time, for any reason, (i) any
provision of any Loan Document ceases to be valid and binding on or enforceable
against any Loan Party or any Loan Party seeks to repudiate its obligations
thereunder or the Liens intended to be created thereby are, or any Transaction
Party seeks to render such Liens, invalid or unperfected, or (ii) any Lien on
Collateral in favor of the Agent (for the benefit of the Lenders) contemplated
by the Loan Documents shall, at any time, for any reason, be invalidated or
otherwise cease to be perfected or in full force and effect or such Lien shall
not have the priority contemplated by this Agreement or the Loan Documents and
such failure shall continue for three (3) days after the occurrence thereof.
(k) Termination Event. Any Termination Event occurs which is reasonably
likely to subject the Borrower or any of its Subsidiaries to liability
individually or in the aggregate in excess of $250,000.00, and such Termination
Event shall continue for three (3) days after the occurrence thereof, provided
however, if such Termination Event is a Reportable Event, then prior to such
Termination Event causing an Event of Default under this Section 6.1(k), such
Termination Event shall continue for ten (10) days after the occurrence thereof.
(l) Waiver of Minimum Funding Standard. If the plan administrator of any
Plan applies under Section 412(d) of the Code for a waiver of the minimum
funding standards of Section 412(a) of the Code and the Lenders believe the
substantial business hardship upon which the application for the waiver is based
could reasonably be expected to subject either the Borrower or any Controlled
Group member to liability individually or in the aggregate in excess of
$250,000.00.
(m) Change of Control. A Change of Control shall occur.
(n) Material Adverse Effect. In the reasonable determination of the
Required Lenders, a Material Adverse Effect shall occur.
An Event of Default shall be deemed "continuing" until cured or until
waived in writing.
6.2. Remedies Upon Default. (A) Termination of Commitments; Acceleration.
If any Event of Default described in Section 6.1(f) or 6.1(g) occurs, the
obligations of any Lender to make Advances hereunder shall automatically
terminate and the Obligations shall immediately become due and payable without
any election or action on the part of any Lender. If any other Event of Default
occurs, the Agent may, with the consent of the Required Lenders, and shall at
the request of the Required Lenders (i) declare the obligations of the Lenders
to make
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Advances hereunder to be terminated, whereupon the same shall be terminated and
(ii) declare the Obligations to be due and payable whereupon, after written
notice to the Borrower, the Obligations shall become immediately due and
payable, without presentment, demand, protest or other notice of any kind, all
of which the Borrower expressly waives.
(B) Preservation of Rights. No delay or omission of any Lender or the Agent
to exercise any right under the Loan Documents shall impair such right or be
construed to be a waiver of any Event of Default or an acquiescence therein, and
the making of an Advance notwithstanding the existence of an Event of Default or
the inability of the Borrower to satisfy the conditions precedent to such
Advance shall not constitute any waiver or acquiescence. Any single or partial
exercise of any such right shall not preclude other or further exercise thereof
or the exercise of any other right, and no waiver, amendment or other variation
of the terms, conditions or provisions of the Loan Documents whatsoever shall be
valid unless in writing signed by the Required Lenders, and then only to the
extent in such writing specifically set forth. All remedies contained in the
Loan Documents or by law afforded shall be cumulative and all shall be available
to any Lender until the Obligations have been paid in full.
ARTICLE VII: THE AGENT
7.1 Authorization and Action. (a) Each Lender hereby appoints and
authorizes the Agent to take such action as Agent on its own behalf and to
exercise such powers and discretion under this Agreement and the other Loan
Documents as are delegated to the Agent by the terms hereof and thereof,
together with such powers and discretion as are reasonably incidental thereto.
As to any matters not expressly provided for by the Loan Documents (including,
without limitation, enforcement or collection of the Notes), the Agent shall be
required to exercise only such discretion or take only such action as is: (a) in
accordance with the manner in which the Agent acts or refrains from acting (and
shall be fully protected in so acting or refraining from acting, except with
respect to Agent's gross negligence or willful misconduct) in connection with
matters in which it is the sole lender, and (b) jointly agreed upon by the Agent
and the Lenders, or the Required Lenders, as the case may be, in writing (such
agreement will be binding upon each Lender and all holders of the Notes);
provided, however, that the Agent shall not be required to take any action that
exposes it to personal liability or that is contrary to this Agreement or
applicable law.
(b) For so long as Ford Credit is acting as the Agent hereunder, each
Lender agrees that Ford Credit may unilaterally grant requests for and waivers
of, the following matters only, provided, however, that Ford Credit must notify
each Lender prior to issuing such consents or waivers to Borrower:
(1) any Event of Default (as set forth in Article VI hereof)
which by its nature can be cured, and which based upon the
representation of Borrower (which Ford Credit believes in good faith)
will be cured, within ninety (90) days from the date upon which Ford
Credit will have learned of the occurrence of such Event of Default.
With respect to any Event of Default which, by its nature, cannot be
cured within ninety (90) days from the date upon which Ford Credit
will have learned of the occurrence of such Event of Default, Ford
Credit may not respond unilaterally to any request made by Borrower.
If any such Event of Default is not cured within such ninety (90) day
period, Ford Credit may not take any further action unilaterally;
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(2) noncompliance with any covenant or obligation binding on the
Borrower, provided Borrower has represented to Ford Credit (and Ford
Credit in good faith believes) that the condition causing such
noncompliance will last for no more than ninety (90) days. If any such
condition causing noncompliance lasts more than ninety (90) days, Ford
Credit may not take any further action unilaterally.
Nothing contained in this Section 7.1 (b) may be construed to obligate either
Ford Credit or a Lender to grant any such consents or forbear from exercising
any of its rights with respect to any Event of Default or non-compliance which
may occur from time to time. The rights and powers set forth in this Section 7.1
(b) apply only to Ford Credit acting as Agent and are not intended to benefit
any Successor Agent.
(c) The Agent will provide to each Lender the following:
(1) copies of all reports, certificates and notices furnished by
Borrower to the Agent pursuant to the Loan Documents (to the
extent such reports and parties were not furnished directly
to any Lender), within 5 Business Days after the Agent's
receipt thereof;
(2) reports of all calculations made by the Agent pursuant to
Section 5.4 hereof, within 5 Business Days after the Agent
will have made such calculations; and
(3) copies of all documents delivered to the Agent by Borrower
pursuant to Sections 5.2 (L), 5.2 (O) and 5.3 (F) hereof,
within 5 Business Days after the Agent's receipt thereof.
(d) The Agent will make reasonable efforts to schedule informational
meetings with the Borrower. Any such meeting will be attended by a
representative of Agent (deemed appropriate by Agent in its discretion) and the
chief executive officer and chief financial officer of Borrower, and which may
be attended by the Lenders. The Agent will schedule such meetings (1) no more
frequently than twice per year (unless there is an Unmatured Default or an Event
of Default, in which case such meetings may be called more frequently), (2) with
prior written notice to Borrower and the Lenders, which such notice will be
given by March 1 of each year for any meeting called before the end of the
second calendar quarter of such year, and by September 1 of each year for any
meeting called before the end of the fourth calendar quarter of such year, and
(3) to be conducted at a reasonable time and at a reasonable location.
7.2 Agent's Reliance, Etc. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable for any action taken or omitted to
be taken by it or them under or in connection with the Loan Documents, except
for its or their own gross negligence or willful misconduct. Without limitation
of the generality of the foregoing, the Agent: (a) may treat the payee of the
Note as the holder thereof until it receives written notice of the assignment
thereof signed by such payee and including the agreement of the assignee to be
bound thereby as it would have been if it had been an original party to this
Agreement, in form satisfactory to the Agent, as provided for in Section 9.3;
(b) may consult with legal counsel (including counsel for any Lender),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (c) makes no
warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations (whether written or
oral) made in or in connection with the Loan Documents; (d)
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shall not, other than as specifically set forth in the Loan Documents, have any
duty to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of any Loan Document on the part of any party
to any of the Loan Documents or to inspect the property of any party to any of
the Loan Documents; (e) shall not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of, or the perfection or priority of any lien or security interest created or
purported to be created under or in connection with, any Loan Document or any
other instrument or document furnished pursuant thereto; and (f) shall incur no
liability under or in respect of any Loan Document by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telegram,
telecopy or telex) reasonably believed by it to be genuine and signed or sent by
the proper party or parties.
7.3 Agent and Affiliates. With respect to its Commitments, the Advances
made by it and the Notes issued to it, the Agent shall have the same rights and
powers under the Loan Documents as any other Lender and may exercise the same as
though it were not an agent.
7.4 Lender Credit Decision. Each Lender acknowledges that (i) it has,
independently and without reliance upon the Agent and based on the financial
statements referred to in Section 4.4 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, (ii) it will, independently
and without reliance upon the Agent 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 (iii) there
is no fiduciary relationship between the Agent and the Lenders.
7.5 Indemnification. (a) Each Lender agrees to indemnify the Agent and its
directors, officers, agents and employees (to the extent not promptly reimbursed
by the Borrower) from and against each Lender's Ratable Share (determined as
provided below) of any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever that may be imposed on, incurred by, or asserted
against the Agent in any way relating to or arising out of the Loan Documents or
any action taken or omitted by the Agent under the Loan Documents (collectively,
the "Indemnified Costs"); provided, however, that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Agent's gross negligence or willful misconduct as found in a final,
non-appealable judgment by a court of competent jurisdiction. Without limitation
of the foregoing, each Lender agrees to reimburse Agent promptly upon demand for
its Ratable Share of any costs and expenses (including, without limitation, fees
and expenses of counsel) payable by the Borrower under Section 8.7 (A) , to the
extent that the Agent is not promptly reimbursed for such costs and expenses by
the Borrower. In the case of any investigation, litigation or proceeding giving
rise to any Indemnified Costs, this Section 7.5 applies whether any such
investigation, litigation or proceeding is brought by any Lender or any other
Person.
(b) For purposes of this Section 7.5, each Lender's Ratable Share of any
amount shall be determined, at any time, according to the aggregate principal
amount of the Advances outstanding at such time and owing to the respective
Lender plus such Lender's Unused Commitment. Without prejudice to the survival
of any other agreement of any Lender hereunder, the agreement and obligations of
the Lenders contained in this Section 7.5 shall
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survive the payment in full of principal, interest and all other amounts
payable hereunder and under the other Loan Documents.
7.6 Successor Agents. The Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower, which resignation will become
effective at such times as more specifically set forth in this Section 7.6. Upon
any such resignation, the Required Lenders shall have the right to appoint a
successor agent, provided, however, that any such appointment of a successor
agent must have been consented to in writing by Borrower, which consent shall
not be unreasonably withheld or delayed, unless an Event of Default shall have
occurred and be continuing, in which case no consent of Borrower shall be
required. If no successor agent shall have been so appointed by the Lenders, and
shall have accepted such appointment, within 30 days after the Agent's giving of
notice of resignation, then the Agent may, on behalf of the Lenders, appoint a
successor agent (from among the Lenders), which shall be a commercial bank or
finance company organized under the laws of the United States or of any State
thereof and having a combined capital and surplus of at least $250,000,000 (any
successor agent appointed under this Section 7.6 is referred to herein as a
"Successor Agent"). Upon the acceptance of any appointment as the Agent
hereunder by a Successor Agent, such Successor Agent shall succeed to and become
vested with such rights, powers, discretion, privileges and duties of the Agent
in its capacity as agent, and Agent shall be discharged from such duties and
obligations as the Agent under the Loan Documents. If within 45 days after
written notice is given of the retiring the Agent's resignation under this
Section 7.6 no Successor Agent shall have been appointed and shall have accepted
such appointment, then on such 45th day (a) the Agent's resignation shall become
effective, (b) Agent shall thereupon be discharged from such agency duties and
obligations under the Loan Documents and as identified in its notice of
resignation and (c) the Lenders shall thereafter perform all duties of the Agent
under the Loan Documents until such time, if any, as the Lenders appoint a
Successor Agent as provided above. After the Agent's resignation hereunder as
agent shall have become effective, the provisions of this Article VII shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was acting in its capacity as agent under this Agreement.
ARTICLE VIII: GENERAL PROVISIONS
8.1 Amendments. Other than as specifically set forth in Section 7.1 of this
Agreement, no amendment or waiver of any provision of this Agreement or the
Notes or any other Loan Document, nor consent to any departure, therefrom by any
Transaction Party party thereto shall in any event be effective unless the same
shall be in writing and signed (or, in the case of the Collateral Documents,
consented to) by the Required Lenders and each Transaction Party party to the
relevant Loan Document, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given; provided,
however, that (a) no amendment, waiver or consent shall, unless in writing and
signed by all of the Lenders (other than any Lender that is, at such time, a
Defaulting Lender), do any of the following at any time: (i) waive any of the
conditions specified in Section 3.1 or, in the case of the initial Borrowing,
Section 3.2, (ii) change the Ratable Share of any Lender, the number of Lenders
or the percentage of (x) the Commitments or (y) the aggregate unpaid principal
amount of the Advances that, in each case, shall be required for the Lenders or
any of them to take any action hereunder, (iii) amend the terms of any
Guarantor's Guaranty in a manner that -reduces or limits the payment obligations
of any Guarantor or otherwise limits such Guarantor's liability with respect to
payment of the Obligations owing to the Agent and the Lenders, (iv) release a
material portion of the Collateral in any transaction or series of related
transactions except to
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the extent permitted under the Loan Documents, (v) amend this Section 8.1, (vi)
increase the Commitments of the Lenders other than in accordance with terms of
the Loan Documents, (vii) reduce the principal of, or interest on, the Notes or
any fees or other amounts scheduled to be payable hereunder, (viii) postpone any
date scheduled for any payment of principal of, or interest on, the Notes or any
date fixed for payment of fees or other amounts payable hereunder, and (b) no
amendment, waiver or consent shall, unless in writing and signed by the Agent,
affect the rights or duties of the Agent under this Agreement or the other Loan
Documents.
8.2 Survival of Representations. All representations and warranties of the
Borrower contained in the Loan Documents shall survive delivery of the Notes and
the making of the Advances herein contemplated.
8.3 Governmental Regulation. Anything contained in this Agreement to the
contrary notwithstanding, no Lender shall be obligated to extend credit to the
Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
8.4 Performance of Obligations. The Borrower agrees that the Agent may, at
the direction of the Required Lenders, but shall have no obligation to (i) at
any time, pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against any Collateral, unless
such claims are being contested in good faith by the Borrower and the Borrower
has set aside adequate reserves covering such tax, lien, security interest or
other encumbrance and no Event of Default has occurred and is outstanding and
(ii) after the occurrence and during the continuance of an Event of Default,
make any payment or perform any act required of any Loan Party under any Loan
Document or take any other action which the Required Lenders, in their
reasonable discretion, deem necessary or desirable to protect or preserve the
Collateral, including, without limitation, any action to (y) effect any repairs
or obtain any insurance called for by the terms of any of the Loan Documents and
to pay all or any part of the premiums therefore and the costs thereof and (z)
pay any rents payable by any Loan Party which are more than 30 days past due, or
as to which the landlord has given notice of termination, under any lease. The
Agent shall use its reasonable efforts to give the Borrower notice of any action
taken under this Section 8.4 prior to the taking of such action or promptly
thereafter provided the failure to give such notice shall not affect the
Borrower's obligations in respect thereof. The Borrower agrees to pay the Agent
(for the benefit of the Lenders), upon demand, the principal amount of all funds
advanced by each Lender under this Section 8.4, together with interest thereon
at the rate from time to time applicable to Advances from the date of such
advance until the outstanding principal balance thereof is paid in full. All
outstanding principal of, and interest on, advances made under this Section 8.4
shall constitute Obligations for purposes hereof.
8.5 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.
8.6 Entire Agreement. The Loan Documents embody the entire agreement and
understanding among the Loan Parties and the Lenders with respect to matters
covered by the Loan Documents, and the Loan Documents delivered on the Effective
Date supersede all prior agreements and understandings among the Borrower and
the Lenders relating to the subject matter thereof.
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8.7 Expenses; Indemnification.
(A) Expenses. The Borrower shall reimburse the Agent and each Lender for
any reasonable costs, internal charges and out-of-pocket expenses (including
reasonable attorneys' and paralegals' fees and time charges of attorneys and
paralegals for the Agent or any Lender, which attorneys and paralegals may be
employees of the Agent or any Lender) paid or incurred by the Agent or any
Lender in connection with the preparation, negotiation, execution, delivery,
review, amendment, modification, and administration of the Loan Documents. The
Borrower also agrees to reimburse the Agent and each Lender for any reasonable
costs, and out-of-pocket expenses (including attorneys' and paralegals' fees and
time charges of attorneys and paralegals for the Agent and each Lender, which
attorneys and paralegals may be employees of the Agent or any Lender) paid or
incurred by the Agent or any Lender in connection with the collection of the
Obligations and enforcement of the Loan Documents. In addition to expenses set
forth above, the Borrower agrees to reimburse the Agent and each Lender,
promptly after the Agent's or any Lender's request therefor, for each audit or
other business analysis performed by it in connection with this Agreement or the
other Loan Documents at a time when an Unmatured Default or Event of Default
exists in an amount equal to the Agent's or a Lender's then reasonable and
customary charges for each person employed to perform such audit or analysis,
plus all costs and expenses (including without limitation, travel expenses)
incurred by the Agent or a Lender in the performance of such audit or analysis.
The Agent or the Lender shall provide the Borrower with a detailed statement of
all reimbursements requested under this Section 8.7(A).
(B) Indemnity. The Borrower further agrees to defend, protect, indemnify,
and hold harmless the Agent, each Lender and each of its respective Affiliates,
and each of the Agent's, Lender's, or Affiliate's respective officers,
directors, employees, attorneys and agents (including, without limitation, those
retained in connection with the satisfaction or attempted satisfaction of any of
the conditions set forth in Article III) (collectively, the "Indemnitees") from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses of any kind or nature
whatsoever (including, without limitation, the fees and disbursements of counsel
for such Indemnitees in connection with any investigative, administrative or
judicial proceeding, whether or not such Indemnitees shall be designated a party
thereto), imposed on, incurred by, or asserted against such Indemnitees in any
manner relating to or arising out of:
(i) this Agreement, the other Loan Documents or any of the Transaction
Documents, or any act, event or transaction related or attendant thereto,
the making of the Advances, hereunder, the management of such Advances, the
use or intended use of the proceeds of the Advances hereunder, or any of
the other transactions contemplated by the Transaction Documents;
(ii) any liabilities, obligations, responsibilities, losses, damages,
personal injury, death, punitive damages, economic damages, consequential
damages, treble damages, intentional, willful or wanton injury, damage or
threat to the environment, natural resources or public health or welfare,
costs and expenses (including, without limitation, attorney, expert and
consulting fees and costs of investigation, feasibility or remedial action
studies), fines, penalties and monetary sanctions, interest, direct or
indirect, known or unknown, absolute or contingent, past, present or future
relating to violation of
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any Environmental, Health or Safety Requirements of Law arising from or in
connection with the past, present or future operations of the Borrower, its
Subsidiaries or any of their respective predecessors in interest, or, the
past, present or future environmental, health or safety condition of any
respective property of the Borrower or its Subsidiaries, the presence of
asbestos-containing materials at any respective property of the Borrower or
its Subsidiaries or the Release or threatened Release of any Contaminant
into the environment (collectively, the "Indemnified Matters");
provided, however, the Borrower shall have no obligation to an Indemnitee
hereunder with respect to Indemnified Matters caused by or resulting from the
willful misconduct or gross negligence of such Indemnitee as determined by the
final non-appealed judgment of a court of competent jurisdiction. If the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Borrower shall contribute the maximum portion which it is permitted
to pay and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Matters incurred by the Indemnitees. It is understood and agreed
that, to the extent not precluded by a conflict of interest, each Indemnitee
shall endeavor to work cooperatively with the Borrower with a view toward
minimizing the legal and other expenses associated with any defense and any
potential settlement or judgment. Settlement of any claim or litigation
involving any material indemnified amount will require the approval of the
Borrower (which may not be unreasonably withheld).
(C) Waiver of Certain Claims; Settlement of Claims. The Borrower further
agrees to assert no claim against any of the Indemnitees on any theory of
liability for consequential, special, indirect, exemplary or punitive damages.
No settlement shall be entered into by the Borrower or any if its Subsidiaries
with respect to any claim, litigation, arbitration or other proceeding relating
to or arising out of the transactions evidenced by this Agreement, the other
Loan Documents (whether or not any Lender or any Indemnitee is a party thereto)
unless such settlement releases all Indemnitees from any and all liability with
respect thereto.
(D) Survival of Agreements. The obligations and agreements of the Borrower
under this Section 8.7 shall survive the termination of this Agreement.
8.8 Accounting. Except as provided to the contrary herein, all accounting
terms used herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with Agreement Accounting Principles.
8.9 Severability of Provisions. 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.
8.10 Nonliability of Lender. The relationship between the Borrower and each
Lender shall be solely that of borrower and lender. No Lender shall have
fiduciary responsibilities to any Loan Party and no Lender takes any
responsibility to any Loan Party to review or inform any Loan Party of any
matter in connection with any phase of any Loan Party's business or operations.
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8.11 GOVERNING LAW. ANY DISPUTE BETWEEN THE BORROWER AND A LENDER, OR ANY
INDEMNITEE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT
REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF NEW YORK.
8.12 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL. (A) NON
EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B), EACH OF THE
PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS
PROPERTY, TO THE NONEXCLUSIVE JURISDICITION OF ANY NEW YORK STATE COURT OR
FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK CITY, AND ANY
APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS , OR FOR RECOGNITION OR ENFORCEMENT
OF ANY JUDGMENT , AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH NEW YORK STATE COURT OR, TO
THE FULLEST EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES
HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY
RIGHT THAT ANY PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS IN THE COURTS OF
ANY JURISDICTION. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY IN ANY NEW YORK STATE OR FEDERAL
COURT. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE
OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
(B) OTHER JURISDICTIONS. THE BORROWER AGREES THAT ANY LENDER OR ANY
INDEMNITEE SHALL HAVE THE RIGHT TO PROCEED AGAINST THE BORROWER OR ITS PROPERTY
IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL
JURISDICTION OVER THE BORROWER OR (2) REALIZE ON THE COLLATERAL OR ANY OTHER
SECURITY FOR THE OBLIGATIONS OR ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED
IN FAVOR OF SUCH PERSON THE BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO
THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A PROCEEDING
DESCRIBED IN THIS SUBSECTION (B).
(C) SERVICE OF PROCESS. THE BORROWER WAIVES PERSONAL SERVICE OF ANY PROCESS
UPON IT AND IRREVOCABLY CONSENTS TO THE SERVICE OF
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PROCESS OF ANY WRITS, PROCESS OR SUMMONSES IN ANY SUIT, ACTION OR PROCEEDING BY
THE MAILING THEREOF BY AGENT BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO THE BORROWER ADDRESSED AS PROVIDED HEREIN. NOTHING HEREIN SHALL IN ANY WAY BE
DEEMED TO LIMIT THE ABILITY OF AGENT TO SERVE ANY SUCH WRITS, PROCESS OR
SUMMONSES IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW. THE BORROWER
IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH
ABOVE.
(D) APPOINTMENT OF AGENT FOR SERVICE OF PROCESS. THE BORROWER AND THE
LENDERS AGREE THAT PROCESS SERVED EITHER PERSONALLY OR BY REGISTERED MAIL,
RETURN RECEIPT REQUESTED, SHALL, TO THE EXTENT PERMITTED BY LAW, CONSTITUTE
ADEQUATE SERVICE OF PROCESS IN ANY SUCH PROCEEDING. THE BORROWER HEREBY
APPOINTS, IN THE CASE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN THE COURTS OF
OR IN THE STATE OF NEW YORK, CT CORPORATION SYSTEM, WITH OFFICES ON THE DATE
HEREOF AT 111 EIGHTH AVENUE, NEW YORK, NEW YORK 10011, TO RECEIVE, FOR IT AND ON
ITS BEHALF, SERVICE OF PROCESS IN THE STATE OF NEW YORK WITH RESPECT THERETO,
PROVIDED THAT THE BORROWER MAY APPOINT ANY OTHER PERSON WITH OFFICES IN THE
STATE OF NEW YORK TO REPLACE SUCH AGENT FOR SERVICE OF PROCESS UPON DELIVERY TO
THE REPRESENTATIVE HOLDER AND THE COLLATERAL TRUSTEE OF NOTICE HEREOF.
(E) WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY
AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(F) WAIVER OF BOND. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, THE
BORROWER WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF ANY PARTY HERETO
IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE ANY JUDGMENT
OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PARTY, OR TO ENFORCE BY SPECIFIC
PERFORMANCE, TEMPORARY RESTRAINING ORDER, PRELIMINARY OR PERMANENT INJUNCTION,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
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(G) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER PARTY
HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE PROVISIONS OF
THIS SECTION 8.12, WITH ITS COUNSEL.
8.13 No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of the Loan Documents. In the event an ambiguity
or question of intent or interpretation arises, the Loan Documents shall be
construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
8.14 Subordination of Intercompany Indebtedness. The Borrower agrees that
any and all claims of the Borrower against any Loan Party, any endorser or any
other guarantor of all or any part of the Obligations, or against any of its
properties, including, without limitation, pursuant to the any intercompany
Indebtedness permitted under Section 5.3(A)(v), shall be subordinate and subject
in right of payment to the prior payment, in full and in cash, of all
Obligations. Notwithstanding any right of the Borrower to ask, demand, sue for,
take or receive any payment from any Loan Party, all rights, liens and security
interests of the Borrower, whether now or hereafter arising and howsoever
existing, in any assets of any Loan Party shall be and are subordinated to the
rights, if any, of the Agent and the Lenders in those assets. The Borrower shall
have no right to possession of any such asset or to foreclose upon any such
asset, whether by judicial action or otherwise, unless and until all of the
Obligations shall have been paid in full in cash and satisfied and all financing
arrangements under this Agreement and the other Loan Documents between the
Borrower, the Agent and each Lender have been terminated. If, during the
continuance of an Event of Default, all or any part of the assets of any Loan
Party, or the proceeds thereof, are subject to any distribution, division or
application to the creditors of any Loan Party, whether partial or complete,
voluntary or involuntary, and whether by reason of liquidation, bankruptcy,
arrangement, receivership, assignment for the benefit of creditors or any other
action or proceeding, then, and in any such event, any payment or distribution
of any kind or character, either in cash, securities or other property, which
shall be payable or deliverable upon or with respect to any indebtedness of any
Loan Party to the Borrower, including, without limitation, pursuant to the any
intercompany Indebtedness permitted under Section 5.3(A)(v) ("Intercompany
Indebtedness") shall be paid or delivered directly to the Agent (for the benefit
of the Lenders) for application on any of the Obligations, due or to become due,
until such Obligations shall have first been paid in full in cash and satisfied;
provided, however, ordinary course payments or distributions made by any Loan
Party to the Borrower shall be required to be paid or delivered to the Agent
(for the benefit of the Lenders) only upon the Agent's request. The Borrower
irrevocably authorizes and empowers the Agent (if directed to do so by the
Required Lenders) to demand, sue for, collect and receive every such payment or
distribution and give acquittance therefor and to make and present for and on
behalf of the Borrower such proofs of claim and take such other action, in the
Agent's own name or in the name of the Borrower or otherwise, as Required
Lenders may deem necessary or advisable for the enforcement of this Section
8.14. Agent may vote such proofs of claim in any such proceeding, receive and
collect any and all dividends or other payments or disbursements made thereon in
whatever form the same may be paid or issued and apply the same on account of
any of the Obligations. Should any payment, distribution, security or instrument
or proceeds thereof be received by the Borrower upon or with respect to the
Intercompany Indebtedness during the continuance of an Event of Default and
prior to the satisfaction of all of the Obligations and the termination of all
financing arrangements under this
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Agreement and the other Loan Documents between the Borrower and the Lenders, the
Borrower shall receive and hold the same in trust, as trustee, for the benefit
of each Lender and shall forthwith deliver the same to the Agent (for the
benefit of the Lenders), in precisely the form received (except for the
endorsement or assignment of the Borrower where necessary), for application to
any of the Obligations, due or not due, and, until so delivered, the same shall
be held in trust by the Borrower as the property of each Lender; provided,
however, ordinary course payments or distributions made to or by any Loan Party
to the Borrower shall be required to be paid or delivered to the Agent (for the
benefit of the Lenders) only upon the Agent's request after the occurrence and
continuance of an Event of Default. If the Borrower fails to make any such
endorsement or assignment to the Agent (for the benefit of the Lenders), the
Agent or any of its officers or employees are irrevocably authorized to make the
same. The Borrower agrees that until the Obligations have been paid in full in
cash and satisfied and all financing arrangements under this Agreement and the
other Loan Documents between the Borrower and the Lender have been terminated,
the Borrower will not assign or transfer to any Person (other than the Agent
(for the benefit of the Lenders)) any claim the Borrower has or may have against
any Loan Party.
8.15 Usury Not Intended. It is the intent of the Borrower and each Lender
in the execution and performance of this Agreement and the other Loan Documents
to contract in strict compliance with applicable usury laws, including conflicts
of law concepts, governing the Advances of each Lender including such applicable
laws of the State of New York and the United States of America from time-to-time
in effect. In furtherance thereof, each Lender and the Borrower stipulate and
agree that none of the terms and provisions contained in this Agreement or the
other Loan Documents shall ever be construed to create a contract to pay, as
consideration for the use, forbearance or detention of money, interest at a rate
in excess of the Maximum Rate and that for purposes hereof "interest" shall
include the aggregate of all charges which constitute interest under such laws
that are contracted for, charged or received under this Agreement; and in the
event that, notwithstanding the foregoing, under any circumstances the aggregate
amounts taken, reserved, charged, received or paid on the Advances, include
amounts which by applicable law are deemed interest which would exceed the
Maximum Rate, then such excess shall be deemed to be a mistake and each Lender
receiving same shall credit the same on the principal of the Notes (or if the
Notes shall have been paid in full, refund said excess to the Borrower). In the
event that the maturity of the Notes is accelerated by reason of any election of
the holder thereof resulting from any Event of Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest may never include more than the Maximum
Rate and excess interest, if any, provided for in this Agreement or otherwise
shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited on the applicable Notes
(or, if the Notes shall have been paid in full, refunded to the Borrower of such
interest). In determining whether or not the interest paid or payable under any
specific contingencies exceeds the Maximum Rate, the Borrower and each Lender
shall to the maximum extent permitted under applicable law amortize, prorate,
allocate and spread in equal parts during the period of the full stated term of
the Notes all amounts considered to be interest under applicable law at any time
contracted for, charged, received or reserved in connection with the
Obligations. The provisions of this Section shall control over all other
provisions of this Agreement or the other Loan Documents which may be in
apparent conflict herewith.
ARTICLE IX: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
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9.1 Successors and Assigns. The terms and provisions of the Loan Documents
shall be binding upon and inure to the benefit of the Borrower, each Lender and
their respective successors and assigns, except that the Borrower shall not have
the right to assign its rights or obligations under the Loan Documents.
9.2 Participations.
(A) Permitted Participants; Effect. Subject to the terms set forth in this
Section 9.2, any Lender may, in accordance with applicable law, at any time sell
to one or more banks or other financial institutions ("Participants")
participating interests in any Advance owing to such Lender, the Notes, the
Commitment or any other interest of such Lender under the Loan Documents on a
pro rata or non-pro rata basis. Notice of such participation to the other
Lenders and to the Borrower shall be required prior to any participation
becoming effective. In the event of any such sale by any 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 holder of the Note for all purposes under the Loan Documents, all amounts
payable by the Borrower under this Agreement shall be determined as if such
Lender had not sold such participating interests, and the Borrower shall
continue to deal solely and directly with Agent in connection with each Lender's
rights and obligations under the Loan Documents, except to the extent permitted
by the Loan Documents.
(B) Voting Rights. No participant under any such participation shall have
any right to approve any amendment or waiver of any provision of any Loan
Document, or any consent to any departure by any Loan Party therefrom, except to
the extent that such amendment, waiver or consent would reduce the principal of,
or interest on, the Notes or any fees or other amounts payable hereunder, in
each case to the extent subject to such participation, postpone any date fixed
for any payment of principal of, or interest on, the Notes or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation, or release all or substantially all of the Collateral.
(C) Taxes. Any Participant under any such participation shall not be
entitled to receive any greater payment under Section 2.9 than the applicable
Lender would have been entitled to receive with respect to the participation
sold to such Participant, unless the sale of the participation to such
Participant is made with the Borrower's prior written consent. A Participant
that would be a Non-U.S. Lender if it were a Lender shall not be entitled to the
benefits of Section 2.9 unless the Borrower is notified of the participation
sold to such Participant and such Participant agrees, for the benefit of the
Borrower, to comply with Section 2.9 as though it were a Lender.
9.3 Assignments. (a) Each Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time assign to one or
more banks or other financial institutions in the United States approved in
writing by the Borrower and each other Lender (each referred to as an "Eligible
Assignee") within 10 days of notice to the Borrower and the Lenders by such
Lender of such assignment (which such approval shall not be unreasonably
withheld) all or a portion of its rights and obligations under this Agreement
and the other Loan Documents (including, without limitation, its Commitment and
all Advances owing to it) pursuant to an assignment and acceptance agreement in
the form attached hereto as Schedule 9.3
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(each referred to as an "Assignment and Acceptance"). Notwithstanding the
foregoing, (i) the Borrower shall not have any right to approve an assignee or
receive notice of assignment under this Section 9.3, after the occurrence and
continuance of an Event of Default, and (ii) the Borrower shall have a right to
receive notice of an assignment under this Section 9.3, but not an approval
right with respect to such assignment, if the assignee is an entity which has
merged with a particular Lender and such assignee has by operation of law
succeeded to all of the obligations, liabilities and rights of the particular
Lender, provided, however, that to the extent any Lender assigns its obligations
hereunder (including any assignment by operation of law), such Eligible Assignee
shall be a United States Person.
(b) Upon such execution, delivery and acceptance of, and from and after the
effective date specified in such Assignment and Acceptance, (i) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder and (ii) the
Lender assignor thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights (other than its rights under Sections 2.9 and 8.7 to the
extent any claim thereunder relates to an event arising prior to such
assignment) and be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all of the remaining portion
of an assigning Lender's rights and obligation sunder this Agreement, such
Lender shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Acceptance, each Lender
assignor thereunder and each assignee thereunder confirm to and agree with each
other and the other parties thereto and hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with any Loan
Document or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of, or the perfection or priority of any lien or security
interest created or purported to be created under or in connection with, any
Loan Document or any other instrument or document furnished pursuant thereto;
(ii) such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Loan Party, or the
performance or observance by any Loan Party of any of its obligations under any
Loan Document or any other instrument or document furnished pursuant thereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
together with copies of the financial statements referred to in Section 4.4 and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon the Agent, such
assigning Lender 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; (v) such assignee
confirms that it is an Eligible Assignee; (vi) such assignee appoints and
authorizes Agent to take such action as agent on its behalf and to exercise such
powers and discretion under the Loan Documents as are delegated to such Agent by
the terms hereof and thereof, together with such powers and discretion as are
reasonably incidental thereto; and (vii) such assignee agrees that it will
perform in accordance with their terms all of the obligations that by the terms
of this Agreement are required to be performed by it as a Lender.
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(d) The Agent, acting for this purpose (but only for this purpose) as the
agent of the Borrower, shall maintain at its address a copy of each Assignment
and Acceptance delivered to and accepted by it and a register for the
recordation of the names and addresses of the Lender and the Commitment of, and
principal amount of the Advances owing to, each Lender from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for
purposes of this Section 9.3, absent manifest error, and the Borrower, the Agent
and the Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or the Agent or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an assignment and acceptance agreement executed
pursuant to the preceding subsection (a), together with any Note or Notes
subject to such assignment, the Agent will (i) accept such Assignment and
Acceptance executed pursuant to the preceding subsection (a), (ii) record the
information contained therein in the Register, and (iii) give prompt notice
thereof to Borrower. In the case of any assignment by a Lender, within five (5)
Business Days after its receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Agent in exchange for the surrendered
Note or Notes a new Note to the order of such Eligible Assignee in an amount
equal to the Lender's Commitment assumed by it pursuant to such Assignment and
Acceptance agreement and, if any assigning Lender has retained a commitment
hereunder, a new Note to the order of such assigning Lender in an amount equal
to such assigning Lender's Commitment retained by it hereunder. Such new Note or
Notes shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such assignment and acceptance agreement and shall be in substantially the form
of Exhibit A hereto.
9.4 Confidentiality. Subject to Sections 9.3 and 9.5, each Lender shall
hold all nonpublic information obtained pursuant to the requirements of this
Agreement and identified as such by the Borrower in accordance with each
respective Lender's customary procedures for handling confidential information
of this nature and in any event may make disclosure reasonably required by a
prospective Transferee (as defined in Section 9.5) in connection with the
contemplated participation or as required or requested by any Governmental
Authority or representative thereof or pursuant to legal process and shall
require any such Transferee to agree (and require any of its Transferees to
agree) to comply with this Section 9.4. In no event shall any Lender be
obligated or required to return any materials furnished by the Borrower;
provided, however, each prospective Transferee shall be required to agree that
if it does not become a participant it shall return all materials furnished to
it by or on behalf of the Borrower in connection with this Agreement. In the
event that any Lender is requested to make a disclosure to a Governmental
Authority or representative thereof or pursuant to legal process, such Lender
will use reasonable efforts to give Borrower prior notice of such disclosure.
9.5 Dissemination of Information. The Borrower authorizes each Lender to
disclose to any Participant or Eligible Assignee or any other Person acquiring
an interest in the Loan Documents by operation of law (each a "Transferee") and
any prospective Transferee any and all information in the Lender's possession
concerning the Borrower and its Subsidiaries; provided that prior to any such
disclosure, such prospective Transferee shall agree to preserve in accordance
with Section 9.4 the confidentiality of any confidential information described
therein.
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ARTICLE X: NOTICES
10.1 Giving Notice. Except as otherwise permitted by Section 2.1 (a) (2)
(b) with respect to borrowing notices, all notices and other communications
provided to any party hereto under this Agreement or any other Loan Documents
shall be in writing or by telex or by facsimile and addressed or delivered to
such party at its address set forth below its signature hereto or at such other
address as may be designated by such party in a notice to the other parties. Any
notice, if mailed and properly addressed with postage prepaid, shall be deemed
given when received; any notice, if transmitted by telex or facsimile, shall be
deemed given when transmitted (answerback confirmed in the case of telexes).
10.2 Change of Address. The Borrower, the Agent and each Lender may each
change the address for service of notice upon it by a notice in writing to the
other parties hereto.
ARTICLE XI: COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart. This Agreement shall be
effective when it has been executed by the Borrower and each Lender.
IN WITNESS WHEREOF, the Borrower, the Agent and each Lender have executed
this Agreement as of the date first above written.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGES TO FOLLOW]
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ASBURY AUTOMOTIVE GROUP, L.L.C.,
as the Borrower
By: /s/ Brian Kendrick
---------------------------
Name: Brian Kendrick
Title: President
Address:
Asbury Automotive Group
3 Landmark Square - Suite 500
Stamford, CT 06901
Attention:
Telephone No.: (203) 356-4400
Facsimile No.: (203) 356-4470
[SIGNATURE PAGE TO CREDIT AGREEMENT]
87
FORD MOTOR CREDIT COMPANY,
as Lender, and as Agent
By: /s/ Stephen L. Starks
--------------------------
Name: Stephen L. Starks
Title: National Account Manager
Address:
Ford Motor Credit Company
The American Road
Major Accounts Office
Dearborn, Michigan 48124
Attention: Stephen L. Starks
Telephone No.: (313) 390-2472
Facsimile No.: (313) 390-5459
[SIGNATURE PAGE TO CREDIT AGREEMENT]
88
CHRYSLER FINANCIAL COMPANY, LLC,
as Lender
By: /s/ T.J. Madden
---------------------------
Name: T.J. Madden
Title: Vice President
Address:
Chrysler Financial Company L.L.C.
27777 Franklin Road, 25th Floor
Southfield, Michigan 48034-8286
Attention: Claude W. Muller
Telephone No.: -----------
Facsimile: (248) 948-3838
[SIGNATURE PAGE TO CREDIT AGREEMENT]
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GENERAL MOTORS ACCEPTANCE
CORPORATION, as Lender
By: /s/ Jeffrey G. McLeod
------------------------
Name: Jeffrey G. McLeod
Title: Vice President, GMAC National
Accounts
Address:
Mail Code 482-B10-C76
200 Renaissance Center
P.O. Box 200
Detroit, Michigan 48265-2000
Attention: Jeffrey G. McLeod
Telephone No.: (313) 665-6208
Facsimile No.: (313) 665-6089
[SIGNATURE PAGE TO CREDIT AGREEMENT]
90
EXHIBIT A
[Form of Note]
PROMISSORY NOTE
(Acquisition/Revolving Line of Credit)
(LIBOR Rate)
$--------------------- ----------------, -----------
------------------------, 2000
FOR VALUE RECEIVED, ASBURY AUTOMOTIVE GROUP, L.L.C, a Delaware limited
liability company ("Borrower"), whose address is ------------------, promises to
pay to --------------------------------, ("Lender"), or order, at
- ----------------------------------, or at such other place as Lender may from
time to time in writing designate, in lawful money of the United States of
America, the principal sum of --------------------------- DOLLARS
($--------------),or such lesser amount as may be advanced from time to time by
the Lender to the Borrower pursuant to the Credit Agreement dated as of even
date herewith, among the Borrower, the Agent and the Lenders who are parties
thereto (the "Agreement"; terms defined therein, unless otherwise defined
herein, being used herein as therein defined). The entire outstanding unpaid
principal balance of this Note (the Principal Balance") shall be payable in full
on the Termination Date.
The Borrower promises to pay interest on the Principal Balance, adjusted
monthly, on the Principal Balance outstanding from time to time, until such
Principal Balance is paid in full, at such interest rates, and payable at such
times, as are specified in the Agreement.
Both principal and interest are payable in lawful money of the United
States of America to the Agent under the Agreement, in same day funds. Each
Advance owing to the Lender by the Borrower, and all payments made on account of
principal thereof, shall be recorded by the Lender and, prior to any transfer
hereof, endorsed on the grid attached hereto, which is part of this Note;
provided, however, that the failure of the Lender to make any such recordation
or endorsement will not affect the Obligations of the Borrower under this Note.
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Agreement. The Agreement, among other things, (i) provides for
the making of Advances by the Lenders to or for the benefit of the Borrower from
time to time in an aggregate amount not to exceed at any time outstanding the
U.S. dollar amount first above mentioned, the indebtedness of the Borrower
resulting from each such Advance being evidenced by this Note, and (ii) contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal hereof prior to
the Termination Date upon the terms and conditions therein specified. The
Obligations of Borrower under this
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Note and the Loan Documents, and the obligations of the other Loan Parties are
secured by the Collateral as provided in the Loan Documents.
The Borrower hereby waives presentment, demand, protest or notice of any
kind in connection with this Note.
IN WITNESS WHEREOF, Borrower, intending to be legally bound hereby, has
duly executed this Note under seal, the day and year first above written.
ASBURY AUTOMOTIVE GROUP, L.L.C.,
a Delaware limited liability company
By: ___________________________ (SEAL)
Name:
Title:
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SCHEDULE OF REVOLVING LOANS AND PAYMENTS OR PREPAYMENTS
Amount of
Principal Unpaid
Amount of Paid or Principal Notation
Date Advance Prepaid Balance Made By
- -------- ---------- ---------- ---------- ----------
- -------- ---------- ---------- ---------- ----------
- -------- ---------- ---------- ---------- ----------
- -------- ---------- ---------- ---------- ----------
- -------- ---------- ---------- ---------- ----------
- -------- ---------- ---------- ---------- ----------
- -------- ---------- ---------- ---------- ----------
- -------- ---------- ---------- ---------- ----------
- -------- ---------- ---------- ---------- ----------
- -------- ---------- ---------- ---------- ----------
- -------- ---------- ---------- ---------- ----------
- -------- ---------- ---------- ---------- ----------
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EXHIBIT B
[form of Borrowing Notice]
Borrowing Notice
TO: FORD MOTOR CREDIT COMPANY (the "Agent") under that certain Credit
Agreement dated _______________, 2000 (the "Credit ----- -------
Agreement") by and between Asbury Automotive Group, L.L.C. (the
"Borrower") , Agent and the lenders more --------- -------- specifically
identified therein.
I, the undersigned, hereby certify that I am the ________________ of the
Borrower . On behalf of the Borrower, I hereby give to the Agent a Borrowing
Notice pursuant to Section 2.4 of the Credit Agreement, and Borrower hereby
requests to borrow on ________________, _____ (the "Borrowing Date") an
aggregate principal amount of $____________ in Advances under loan #
____________ to be funded to account ____________________________________ for
the purpose of ______________________________________________________________
_____________________________________________________________________________.
The undersigned hereby certifies that (i) the representations and
warranties of the Borrower contained in Section 4 of the Credit Agreement are
and shall be true and correct in all material respects on and as of the date
hereof and on and as of the Borrowing Date, except for representations and
warranties expressly stated to relate to a specific earlier date, in which
case such representations and warranties are true and correct in all material
respects as of such earlier date; (ii) I have reviewed the terms of the Credit
Agreement and I have made, or have caused to be made under my supervision, a
detailed review of the transactions and conditions of the Borrower and its
Subsidiaries during the accounting period covered by the attached financial
statements; (iii) the examinations described in section (ii) did not disclose,
and I have no knowledge of, the existence of any condition or event which
constitutes and Event of Default or Unmatured Default and which has occurred
and is continuing on the date hereof or on the Borrowing Date will result from
the making of the proposed Advances.
Unless otherwise defined herein, terms defined in the Credit Agreement
shall have the same meanings in this Borrowing Notice.
Date: ______________, 200_____ ASBURY AUTOMOTIVE GROUP, L.L.C.
By: ______________________________
Name:_________________________
Tile: __________________________
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EXHIBIT C-1
[Form of Dealership Guaranty]
GUARANTY
GUARANTY (this "Guaranty") dated _______________, 2000 made by each
of the entities listed on the signature pages hereto, jointly and severally,
(each referred to individually herein as a "Guarantor," and collectively, the
"Guarantors"), in favor of FORD MOTOR CREDIT COMPANY (the "Agent"), as agent
for the lenders (the "Lenders") under the Credit Agreement defined below.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings given to such terms in the Credit Agreement defined below.
PRELIMINARY STATEMENTS
WHEREAS, pursuant to the terms of a certain Credit Agreement dated
as of even date herewith, the Lenders extended to Asbury Automotive Group
L.L.C., a Delaware limited liability company, and the entity which exercises
control (directly or indirectly) over the Guarantors ("Borrower"), a revolving
credit facility in an amount not to exceed $550,000,000.00 (as such agreement
may be amended, restated, supplemented, refinanced, increased or otherwise
modified from time to time, the "Credit Agreement");
WHEREAS, the Credit Agreement is evidenced by the Notes as defined
in the Credit Agreement (the "Notes"); and -----
WHEREAS, it is a condition precedent to the making of loans under
the Credit Agreement, that each Guarantor executes and delivers this Guaranty;
NOW, THEREFORE, in consideration of the premises and in order to
induce each Lender to make Advances under the Credit Agreement, each Guarantor
hereby agrees as follows:
Section 1. Guaranty. (a) Each Guarantor hereby unconditionally and
irrevocably guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all obligations of each other Loan
Party now or hereafter existing under or in respect of the Loan Documents
(including, without limitation, any extensions, modifications, substitutions,
amendments or renewals of any or all of the foregoing obligations), whether
direct or indirect, absolute or contingent, and whether for principal,
interest, premiums, fees, indemnities, contract causes of action, costs,
expenses or otherwise (such obligations being the "Guaranteed Obligations"),
and agrees to pay any and all expenses (including reasonable counsel fees and
expenses) incurred by the Agent or the Lenders in enforcing any rights under
this Guaranty. Without limiting the generality of the foregoing, each
Guarantor's liability shall extend to all amounts that constitute part of the
Guaranteed Obligations and would be owed by any Loan Party to any Lender but
for the fact that they are unenforceable or not allowable due to the existence
of a bankruptcy, reorganization or similar proceeding involving such Loan
Party.
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(b) Each Guarantor, and by its acceptance of this Guaranty, the
Agent and each Lender, hereby confirms that it is the intention of all such
Persons that this Guaranty and the obligations of each Guarantor hereunder not
constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law
(as hereinafter defined), the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar foreign, federal or state law to the
extent applicable to this Guaranty and the obligations of each Guarantor
hereunder. To effectuate the foregoing intention, the Agent, the Lenders and
the Guarantors hereby irrevocably agree that the obligations of each Guarantor
under this Guaranty at any time shall be limited to the maximum amount as will
result in the obligations of such Guarantor under this Guaranty not
constituting a fraudulent transfer or conveyance. For purposes hereof,
"Bankruptcy Law" means any proceeding of the type referred to in Section
6.1(f) and (g) of the Credit Agreement or Title 11, U.S. Code, or any similar
foreign, federal or state law for the relief of debtors.
(c) Each Guarantor hereby unconditionally and irrevocably agrees
that, in the event any payment shall be required to be made to any Lender
under this Guaranty or any other guaranty (in respect of the Guaranteed
Obligations and/or any and all expenses (including reasonable counsel fees and
expenses) incurred by the Agent or the Lenders in enforcing any rights under
this Guaranty), such Guarantor will contribute, to the maximum extent
permitted by law, such amounts to each other Guarantor and each other
guarantor so as to maximize the aggregate amount paid to the Lenders under or
in respect of the Loan Documents
Section 2. Guaranty Absolute. Each Guarantor guarantees that the
Guaranteed Obligations will be paid strictly in accordance with the terms of
the Loan Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Agent or the Lenders with respect thereto. The obligations of
each Guarantor under this Guaranty are independent of the Guaranteed
Obligations or any other obligations of any other party under the Loan
Documents, and a separate action or actions may be brought and prosecuted
against each Guarantor to enforce this Guaranty, irrespective of whether any
action is brought against the Borrower or any other Loan Party or whether the
Borrower or any other Loan Party is joined in any such action or actions. This
Guaranty is a guaranty of payment and performance and not of collection. The
liability of each Guarantor under this Guaranty shall be irrevocable, absolute
and unconditional irrespective of, and each Guarantor hereby irrevocably
waives any defenses it may now or hereafter have in any way relating to, any
or all of the following:
(a) any lack of validity or enforceability of any Loan Document or
any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other
amendment or waiver of or any consent to departure from any Loan
Document, including, without limitation, any increase in the Guaranteed
Obligations resulting from the extension of additional credit to
Borrower or any other Loan Party or otherwise;
(c) any taking, exchange, release or non-perfection of any
Collateral, or any taking, release or amendment or waiver of or consent
to departure from any other guaranty, for all or any of the Guaranteed
Obligations;
96
(d) any manner of application of Collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or
other disposition of any Collateral for all or any of the Guaranteed
Obligations under the Loan Documents or any other assets of any Loan
Party;
(e) any change, restructuring or termination of the corporate
structure or existence of any Loan Party;
(f) any failure of the Agent or any Lender to disclose to any Loan
Party any information relating to the business, condition (financial or
otherwise), operations, performance, properties or prospects of any
other Loan Party now or hereafter known to the Agent or such Lender
(each Guarantor waiving any duty on the part of the Agent and the
Lenders to disclose such information);
(g) the failure of any other Person to execute or deliver this
Guaranty or any other guaranty or agreement or the release or reduction
of liability of any Guarantor or other guarantor or surety with respect
to the Guaranteed Obligations; or
(h) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by the Agent or any Lender that might otherwise
constitute a defense available to, or a discharge of, any Loan Party or
any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by the Agent or any Lender or any
other person upon the insolvency, bankruptcy or reorganization of any Loan
Party or otherwise, all as though such payment had not been made.
Section 3. Waivers and Acknowledgments. (a) Each Guarantor hereby
waives promptness, diligence, notice of acceptance and any other notice with
respect to any of the Guaranteed Obligations and this Guaranty and any
requirement that the Agent or any Lender protect, secure, perfect or insure
any lien or any property subject thereto or exhaust any right or take any
action against any Loan Party or any other Person or any Collateral.
(b) Each Guarantor hereby waives any right to revoke this Guaranty,
and acknowledges that this Guaranty is continuing in nature and applies
to all Guaranteed Obligations, whether existing now or in the future.
(c) Each Guarantor acknowledges that it will receive substantial
direct and indirect benefits from the financing arrangements
contemplated by the Loan Documents and that the waivers set forth in
this Guaranty are knowingly made in contemplation of such benefits.
(d) Each Guarantor hereby unconditionally and irrevocably waives (i)
any defense arising by reason of any claim or defense based upon an
election of remedies by the Agent or the Lenders that in any manner
impairs, reduces, releases or otherwise adversely affects the
subrogation, reimbursement, exoneration, contribution or
indemnification rights of such Guarantor or other rights of such
Guarantor to proceed
97
against any of the other Loan Parties, any other guarantor or any other
Person or any Collateral and (ii) any defense based on any right of
set-off or counterclaim against or in respect of the obligations of
such Guarantor hereunder.
(e) Each Guarantor hereby unconditionally and irrevocably waives any
duty on the part of the Agent or the Lenders to disclose to such
Guarantor any matter, fact or thing relating to the business, condition
(financial or otherwise), operations, performance, properties or
prospects of any other Loan Party or any of its Subsidiaries now or
hereafter known by the Agent or the Lenders.
Section 4. Subrogation. No Guarantor will exercise any rights that
it may now or hereafter acquire against any Loan Party that arise from the
existence, payment, performance or enforcement of the Guarantor's obligations
under this Guaranty, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Agent or any Lender against any Loan
Party or any Collateral, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, including, without
limitation, the right to take or receive from any Loan Party directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right, unless and
until all of the Guaranteed Obligations and all other amounts payable under
this Guaranty shall have been paid in full in cash in accordance with the
terms of the Loan Documents. If any amount shall be paid to any Guarantor in
violation of the preceding sentence at any time prior to the payment in full
in cash of the Guaranteed Obligations and all other amounts payable under this
Guaranty, such amount shall be held in trust for the benefit of the Agent and
shall forthwith be paid to the Agent to be credited and applied to the
Guaranteed Obligations and all other amounts payable under this Guaranty,
whether matured or unmatured, in accordance with the terms of the Loan
Documents, or to be held as Collateral for any Guaranteed Obligations or other
amounts payable under this Guaranty thereafter arising. If (i) any Guarantor
shall make payment to the Agent or any Lender of all or any part of the
Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other
amounts payable under this Guaranty shall be paid in full in cash and (iii)
the Loan Documents shall have terminated in accordance with their own terms,
the Agent and the Lenders will, at the Guarantors' request and expense,
execute and deliver to the Guarantors appropriate documents, without recourse
and without representation or warranty, necessary to evidence the transfer by
subrogation to the Guarantors of an interest in the Guaranteed Obligations
resulting from such payment by the Guarantor.
Section 5. Representations and Warranties. Each Guarantor hereby
represents and warrants as of the date hereof and as of the date of each
Advance as follows:
(a) Each Guarantor (i) is a corporation, limited liability company
or limited partnerhsip duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (ii)
is duly qualified and in good standing in each other jurisdiction in
which it owns or leases property or in which the conduct of its
business requires it to so qualify or be licensed except where the
failure to so qualify or be licensed would not have a Material Adverse
Effect (as defined in the Credit Agreement), and (iii) has all
requisite power and authority to own or lease and operate its
properties and to carry on its business as now conducted and as
proposed to be conducted.
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(b) The execution, delivery and performance by each Guarantor of
this Guaranty and the other Loan Documents executed by the Guarantor
are within each such Guarantor's powers, have been duly authorized by
all necessary corporate, limited liability company, or limited
partnership action, and do not (i) contravene each such Guarantor's
charter or bylaws or similar organizational documents, (ii) violate any
law (including, without limitation, the Securities Exchange Act of 1934
and the Racketeer Influenced and Corrupt Organizations Chapter of the
Organized Crime Control Act of 1970), rule, regulation (including,
without limitation, Regulations T, U and X of the Board of Governors of
the Federal Reserve System), order, writ, judgment, injunction, decree,
determination or award, (iii) conflict with or result in the breach of,
or constitute a default under, any loan agreement, contract, indenture,
mortgage, deed of trust, lease or other instrument binding on or
affecting such Guarantor or any of its properties, the effect of which
conflict, breach or default is reasonably likely to have a Material
Adverse Effect, or (iv) except for the liens permitted under the Loan
Documents, result in or require the creation or imposition of any lien
upon or with respect to any of the properties of any such Guarantor. No
Guarantor is in violation of any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award, or in
breach of any such contract, loan agreement, indenture, mortgage, deed
of trust, lease or other instrument, the violation or breach of which
would be reasonably likely to have a Material Adverse Effect.
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body or any
other third party is required for (i) the due execution, delivery,
recordation, filing or performance by any Guarantor of this Guaranty
and the other Loan Documents executed by the Guarantor, and (ii) the
exercise by the Agent or the Lenders of their rights under this
Guaranty and the other Loan Documents executed by the Guarantor in each
case, except for (a) those that have been made, obtained or given, and
(b) filings necessary to create or perfect security interests in the
Collateral.
(d) This Guaranty and the other Loan Documents executed by the
Guarantor have been duly executed and delivered by such Guarantor. This
Guaranty and the other Loan Documents executed by the Guarantor are the
legal, valid and binding obligation of such Guarantor, enforceable
against such Guarantor in accordance with their terms except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or limiting
creditors' rights or by equitable principles generally.
(e) There are no conditions precedent to the effectiveness of this
Guaranty and the other Loan Documents executed by the Guarantor that
have not been satisfied or waived.
(f) Each Guarantor has, independently and without reliance upon the
Agent or any Lender, and based on such documents and information as it
has deemed appropriate, made its own decision to enter into this
Guaranty and the other Loan Documents executed by the Guarantor.
Section 6. Covenants. Each Guarantor covenants and agrees that, so
long as any part of the Guaranteed Obligations shall remain unpaid or any Loan
Document shall be in effect,
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such Guarantor will perform and observe, and cause each of its Subsidiaries to
perform and observe, all of the terms, covenants and agreements set forth in
the Loan Documents on its or their part to be performed or observed or that
the Borrower has agreed to cause such Guarantor or such Subsidiaries to
perform or observe.
Section 7. No Waiver, Remedies. No failure on the part of the Agent
or any Lender to exercise, and no delay in exercising, any right under any
Loan Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies in the Loan Documents
are cumulative and not exclusive of any remedies provided by law.
Section 8. Indemnification. (a) Each Guarantor agrees to defend,
protect, indemnify, and hold harmless the Agent, each Lender and each of its
respective Affiliates, and each of the Agent's, Lender's, or Affiliate's
respective officers, directors, employees, attorneys and agents (including,
without limitation, those retained in connection with the satisfaction or
attempted satisfaction of any of the conditions set forth in Article III)
(collectively, the "Indemnified Parties" and each an "Indemnified Party") from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses of any kind or nature
whatsoever (including, without limitation, the fees and disbursements of
counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding, whether or not such Indemnitees shall
be designated a party thereto), imposed on, incurred by, or asserted against
such Indemnitees in any manner relating to or arising out of:
(i) this Guaranty, the other Loan Documents or any of the
Transaction Documents, or any act, event or transaction related or
attendant thereto, the making of the Advances, under the Credit
Agreement, the management of such Advances, the use or intended use of
the proceeds of the Advances under the Credit Agreement, or any of the
other transactions contemplated by the Transaction Documents;
(ii) any liabilities, obligations, responsibilities, losses,
damages, personal injury, death, punitive damages, economic damages,
consequential damages, treble damages, intentional, willful or wanton
injury, damage or threat to the environment, natural resources or
public health or welfare, costs and expenses (including, without
limitation, attorney, expert and consulting fees and costs of
investigation, feasibility or remedial action studies), fines,
penalties and monetary sanctions, interest, direct or indirect, known
or unknown, absolute or contingent, past, present or future relating to
violation of any Environmental, Health or Safety Requirements of Law
arising from or in connection with the past, present or future
operations of the Borrower, any Guarantor or any of their respective
predecessors in interest, or, the past, present or future
environmental, health or safety condition of any respective property of
the Borrower or any Guarantor, the presence of asbestos-containing
materials at any respective property of the Borrower or any Guarantor
or the Release or threatened Release of any Contaminant into the
environment (collectively, the "Indemnified Matters");
provided, however, that no Guarantor shall have any obligation to an
Indemnified Party hereunder with respect to any of the aforementioned
indemnified matters caused by or resulting from the willful misconduct or
gross negligence of such Indemnified Party as determined by the final
non-appealed judgment of a court of competent jurisdiction. If the undertaking
to indemnify,
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pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, each
Guarantor shall contribute the maximum portion which it is permitted to pay
and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Matters incurred by the Indemnified Parties. It is understood and
agreed that, to the extent not precluded by a conflict of interest, each
Indemnitee shall endeavor to work cooperatively with the Borrower with a view
toward minimizing the legal and other expenses associated with any defense and
any potential settlement or judgment. Settlement of any claim or litigation
involving any material indemnified amount will require the approval of the
Borrower (which may not be unreasonably withheld)., provided, however, that no
Guarantor shall have any obligation to an Indemnified Party hereunder with
respect to any of the aforementioned indemnified matters caused by or
resulting from the willful misconduct or gross negligence of such Indemnified
Party as determined by the final non-appealed judgment of a court of competent
jurisdiction.
(b) Each Guarantor hereby also agrees that none of the Indemnified
Parties shall have any liability (whether direct or indirect, in contract,
tort or otherwise) to any of the Guarantors or any of their respective
Affiliates or any of their respective officers, directors, employees, agents
and advisors, and each Guarantor hereby agrees not to assert any claim against
any Indemnified Party on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to the
Loan Documents, the actual or proposed use of the proceeds of the advances
made under the Loan Documents, the Loan Documents or any of the transactions
contemplated by the Loan Documents.
(c) Without prejudice to the survival of any of the other agreements
of any Guarantor under this Guaranty or any of the other Loan Documents, the
agreements and obligations of each Guarantor contained in Section 1(a) (with
respect to enforcement expenses), the last sentence of Section 2 and this
Section 8 shall survive the payment in full of the Guaranteed Obligations and
all of the other amounts payable under this Guaranty.
Section 9. Subordination. Each Guarantor hereby subordinates any and
all debts, liabilities and other Obligations owed to such Guarantor by each
other Loan Party (the "Subordinated Obligations") to the Guaranteed
Obligations to the extent and in the manner hereinafter set forth in this
Section 9:
(a) Prohibited Payments. Except during the continuance of an Event
of Default (including the commencement and continuation of any
proceeding under any Bankruptcy Law relating to any Loan Party), to the
extent permitted by the Credit Agreement, each Guarantor may receive
regularly scheduled payments from any other Loan Party on account of
the Subordinated Obligations. After the occurrence and during the
continuance of any Event of Default (including the commencement and
continuation of any proceeding under any Bankruptcy Law relating to any
Loan Party), however, unless the Agent otherwise agrees, no Guarantor
shall demand, accept or take any action to collect any payment on
account of the Subordinated Obligations.
(b) Prior Payment of Guaranteed Obligations. In any proceeding under
any Bankruptcy Law relating to any Loan Party, each Guarantor agrees
that the Lenders shall be entitled to receive payment in full in cash
of all Guaranteed Obligations (including all interest and expenses
accruing after the commencement of a proceeding under any Bankruptcy
Law, whether or not constituting an allowed claim in such
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proceeding ("Post Petition Interest")) before such Guarantor
receives payment of any Subordinated Obligations.
(c) Turn-Over. After the occurrence and during the continuance of
any Event of Default (including the commencement and continuation of
any proceeding under any Bankruptcy Law relating to any Loan Party),
each Guarantor shall, if the Agent so requests, collect, enforce and
receive payments on account of the Subordinated Obligations as trustee
for the Lenders and deliver such payments to the Agent on account of
the Guaranteed Obligations (including all Post Petition Interest),
together with any necessary endorsements or other instruments of
transfer, but without reducing or affecting in any manner the liability
of such Guarantor under the other provisions of this Guaranty and the
other Loan Documents executed by the Guarantor.
(d) Administrative Agent Authorization. After the occurrence and
during the continuance of any Event of Default (including the
commencement and continuation of any proceeding under any Bankruptcy
Law relating to any Loan Party), the Agent is authorized and empowered
(but without any obligation to so do), in its discretion, (i) in the
name of each Guarantor, to collect and enforce, and to submit claims in
respect of, Subordinated Obligations and to apply any amounts received
thereon to the Guaranteed Obligations (including any and all Post
Petition Interest), and (ii) to require each Guarantor (A) to collect
and enforce, and to submit claims in respect of, Subordinated
Obligations and (B) to pay any amounts received on such obligations to
the Agent for application to the Guaranteed Obligations (including any
and all Post Petition Interest).
Section 10. Continuing Guaranty. This Guaranty is a continuing
guaranty and shall (a) remain in full force and effect until the later of the
payment in full in cash of the Guaranteed Obligations and all other amounts
payable under this Guaranty and the date the Loan Documents shall have
terminated in accordance with their own terms, (b) be binding upon each
Guarantor, its successors and assigns, and (c) inure to the benefit of and be
enforceable by the Agent and any Lender and its successors, transferees and
assigns.
Section 11. Definitions. With respect to all Loan Documents executed
by the Guarantor, the singular shall include the plural and vice versa and any
gender shall include any other gender as the context may require.
Section 12. Successors and Assigns. This Guaranty and the other Loan
Documents executed by the Guarantor shall be binding upon and inure to the
benefit of the Guarantor, the Agent and the Lenders, and their respective
successors and assigns. The Guarantor's successors and assigns shall include,
without limitation, a receiver, trustee or debtor-in-possession of or for the
Guarantor. Without limiting the generality of the foregoing clause, any Lender
may assign or otherwise transfer all or any portion of its rights and
obligations under the Loan Documents (including, without limitation, all or
any portion of its Commitment, the Advances owing to it and any Note held by
it) to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to such Lender herein or
otherwise, subject, however to the provisions of Article VII of the Credit
Agreement.
Section 13. Governing Law; Severability. This Guaranty and the other
Loan Documents executed by the Guarantor shall be governed by, and construed
in
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accordance with, the internal laws (as opposed to conflict of laws
provisions) of the State of New York. Whenever possible, each provision of
this Guaranty and the other Loan Documents executed by the Guarantor shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty or the other Loan Documents executed by
the Guarantor shall be held to be prohibited or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Guaranty and the other Loan Documents executed by
the Guarantor.
Section 14. Advice of Counsel. The Guarantor represents and warrants
to the Agent that it has consulted with its legal counsel regarding all
waivers under the Loan Documents, it believes that it fully understands all
rights that it is waiving and the effect of such waivers, that it assumes the
risk of any misunderstanding that it may have regarding any of the foregoing,
and that it intends that such waivers shall be a material inducement to
Lenders to extend the indebtedness secured hereby.
Section 15. Further Assurances. The Guarantor agrees that it will
cooperate with the Agent and the Lenders and will execute and deliver, or
cause to be executed and delivered, all such other agreements, instruments,
documents, stock powers and proxies and will take all such other actions,
including, without limitation, the execution and filing of financing
statements, as the Agent may reasonably request from time to time in order to
carry out the provisions and purposes of the Loan Documents executed by the
Guarantor.
Section 16. Costs and Expenses. The Guarantor will upon demand pay
to the Agent the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents,
which the Agent may incur in connection with (i) the administration of the
Loan Documents executed by the Guarantor, (ii) the custody or preservation of,
or the sale of, collection from, or other realization upon, any of the Pledged
Collateral, (iii) the exercise or enforcement of any of the rights of the
Agent or the Lenders under the Loan Documents executed by the Guarantor, or
(iv) the failure by the Guarantor to perform or observe any of the provisions
of the Loan Documents executed by the Guarantor.
Section 17. Notices. All notices and other communications provided
for under any Loan Documents executed by the Guarantor shall be in writing
(including telecopier, telegraphic, telex or cable communication) and mailed,
telecopied, telegraphed, telexed, cabled or delivered, if to the Guarantor,
care of Borrower at its address at 3 Landmark Square, Suite 500, Stamford,
Connecticut 06901, if to the Agent, at its address specified in the Credit
Agreement; or, as to each party, at such other address as shall be designated
by such party in a written notice to the other party. All such notices and
communications shall be effective, upon receipt, or in the case of (i) notice
by mail, five days after being deposited in the United States mails, first
class postage prepaid, (ii) notice by overnight courier, one business day
after being deposited with a national overnight courier service, (iii) notice
by telex, when telexed against receipt of answer back or (iv) notice by
facsimile copy, when transmitted against mechanical confirmation of successful
transmission.
Section 18. Amendments, Waivers and Consents. No amendment or waiver
of any provision of any Loan Document executed by the Guarantor nor consent to
any departure by the Guarantor therefrom, shall in any event be effective
unless the same shall be in writing and
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signed by the Agent and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
Section 19. Section Headings. The section headings in the Loan
Documents executed by the Guarantor are for convenience of reference only, and
shall not affect in any way the interpretation of any of the provisions
hereof.
Section 20. Execution in Counterparts. The Loan Documents executed
by the Guarantor may be executed in any number of counterparts, each of which
shall be an original, but all of which shall together constitute one and the
same agreement.
Section 21. Merger. This Loan Documents executed by the Guarantor
represent the final agreement of the Guarantor with respect to the matters
contained herein and may not be contradicted by evidence of prior or
contemporaneous agreements, or subsequent oral agreements, between the
Guarantor and the Agent and the Lenders.
Section 22. No Strict Construction. The parties to the Loan
Documents have participated jointly in the negotiation and drafting of the
Loan Documents. In the event an ambiguity or question of intent or
interpretation arises, the Loan Documents shall be construed as if drafted
jointly by the parties hereto and no presumption or burden or proof shall
arise favoring or disfavoring any party by virtue of the authorship of any
provisions of the Loan Documents.
Section 23. Waiver of Jury Trial. To the maximum extent of
applicable law, each of the Guarantors waives any right to trial by jury in
any dispute, whether sounding in contract, tort, or otherwise, between the
Agent, the Lenders any Guarantor or any other Person arising out of or related
to this Guaranty or the other Loan Documents executed by the Guarantor and the
transactions contemplated by this Guaranty and the other Loan Documents
executed by the Guarantor or any other instrument, document or agreement
executed or delivered in connection herewith or therewith. The Guarantors or
the Agent or the Lenders may file an original counterpart or a copy of this
Guaranty with any court as written evidence of the consent of the parties
hereto to the waiver of their right to trial by jury.
Section 24. Consent to Jurisdiction; Service of Process; Jury Trial.
(a) Non Exclusive Jurisdiction. Each Guarantor irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York state court or federal court of the united States of America sitting
in New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Guaranty and the other Loan
Documents or arising out of or relating to the relationship established among
them in connection with this Guaranty or any of the other Loan Documents, or
for recognition or enforcement of any judgment, and each Guarantor irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such New York state court or, to
the fullest extent permitted by law, in such federal court. Each Guarantor
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. Nothing in this Guaranty shall affect
any right that any party may otherwise have to bring any action or proceeding
relating to this Guaranty or any of the other Loan Documents in the courts of
any jurisdiction. Each Guarantor irrevocably and unconditionally waives, to
the fullest extend it may legally and
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effectively do so, any objection that it may nor or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating
to this Guaranty or any of the other Loan Documents to which it is a party in
any New York state or federal court. Each Guarantor irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(b) Other Jurisdictions. Each of Agent and the Lenders shall have
the right to proceed against any Guarantor or its real or personal property in
a court in any location to enable the Agent or the Lenders to obtain personal
jurisdiction over the Guarantor, to realize on the Collateral or any other
security for the obligations or to enforce a judgment or other court order
entered in favor of the Agent or the Lenders. No Guarantor shall assert any
permissive counterclaims in any proceeding brought by the Agent or the Lenders
under this Section 24.
(c) Venue; Forum Non Conveniens. Each of the Agent and the
Guarantors waives any objection that it may have (including, without
limitation, any objection to the laying of venue or based on forum non
conveniens) to the location of the court in which any proceeding is commenced
in accordance with this Section 24.
Section 25. Service of Process. Each Guarantor waives personal
service of any process upon it and, as security for the Guaranteed
Obligations, irrevocably appoints CT Corporation Systems as its registered
agent for the purpose of accepting service of process issued by any court in
connection with any dispute between any Guarantor, the Agent and the Lenders
arising out of or related to the Loan Documents or the relationship
established between them in connection with the Loan Documents or any other
document to which any Guarantor is a party.
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
duly executed under seal and delivered by its officer thereunto duly
authorized as of the date first above written.
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EXHIBIT C-2
[Form of Subsidiary Holding Company Guaranty]
GUARANTY
GUARANTY (this "Guaranty") dated _______________, 2000 made by each
of the entities listed on the signature pages hereto, jointly and severally,
(each referred to individually herein as a "Guarantor," and collectively, the
"Guarantors"), in favor of FORD MOTOR CREDIT COMPANY (the "Agent"), as agent
for the lenders (the "Lenders") under the Credit Agreement defined below.
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings given to such terms in the Credit Agreement defined below.
PRELIMINARY STATEMENTS
WHEREAS, pursuant to the terms of a certain Credit Agreement dated
as of even date herewith, the Lenders extended to Asbury Automotive Group
L.L.C., a Delaware limited liability company, and the entity which exercises
control (directly or indirectly) over the Guarantors ("Borrower"), a revolving
credit facility in an amount not to exceed $550,000,000.00 (as such agreement
may be amended, restated, supplemented, refinanced, increased or otherwise
modified from time to time, the "Credit Agreement");
WHEREAS, the Credit Agreement is evidenced by the Notes as defined
in the Credit Agreement (the "Notes"); and -----
WHEREAS, it is a condition precedent to the making of loans under
the Credit Agreement, that each Guarantor executes and delivers this Guaranty;
NOW, THEREFORE, in consideration of the premises and in order to
induce each Lender to make Advances under the Credit Agreement, each Guarantor
hereby agrees as follows:
Section 1. Guaranty. (a) Each Guarantor hereby unconditionally and
irrevocably guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all obligations of each other Loan
Party now or hereafter existing under or in respect of the Loan Documents
(including, without limitation, any extensions, modifications, substitutions,
amendments or renewals of any or all of the foregoing obligations), whether
direct or indirect, absolute or contingent, and whether for principal,
interest, premiums, fees, indemnities, contract causes of action, costs,
expenses or otherwise (such obligations being the "Guaranteed Obligations"),
and agrees to pay any and all expenses (including reasonable counsel fees and
expenses) incurred by the Agent or the Lenders in enforcing any rights under
this Guaranty. Without limiting the generality of the foregoing, each
Guarantor's liability shall extend to all amounts that constitute part of the
Guaranteed Obligations and would be owed by any Loan Party to any Lender but
for the fact that they are unenforceable or not allowable due
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to the existence of a bankruptcy, reorganization or similar proceeding
involving such Loan Party.
(b) Each Guarantor, and by its acceptance of this Guaranty, the
Agent and each Lender, hereby confirms that it is the intention of all such
Persons that this Guaranty and the obligations of each Guarantor hereunder not
constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law
(as hereinafter defined), the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar foreign, federal or state law to the
extent applicable to this Guaranty and the obligations of each Guarantor
hereunder. To effectuate the foregoing intention, the Agent, the Lenders and
the Guarantors hereby irrevocably agree that the obligations of each Guarantor
under this Guaranty at any time shall be limited to the maximum amount as will
result in the obligations of such Guarantor under this Guaranty not
constituting a fraudulent transfer or conveyance. For purposes hereof,
"Bankruptcy Law" means any proceeding of the type referred to in Section
6.1(f) and (g) of the Credit Agreement or Title 11, U.S. Code, or any similar
foreign, federal or state law for the relief of debtors.
(c) Each Guarantor hereby unconditionally and irrevocably agrees
that, in the event any payment shall be required to be made to any Lender
under this Guaranty or any other guaranty (in respect of the Guaranteed
Obligations and/or any and all expenses (including reasonable counsel fees and
expenses) incurred by the Agent or the Lenders in enforcing any rights under
this Guaranty), such Guarantor will contribute, to the maximum extent
permitted by law, such amounts to each other Guarantor and each other
guarantor so as to maximize the aggregate amount paid to the Lenders under or
in respect of the Loan Documents
Section 2. Guaranty Absolute. Each Guarantor guarantees that the
Guaranteed Obligations will be paid strictly in accordance with the terms of
the Loan Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Agent or the Lenders with respect thereto. The obligations of
each Guarantor under this Guaranty are independent of the Guaranteed
Obligations or any other obligations of any other party under the Loan
Documents, and a separate action or actions may be brought and prosecuted
against each Guarantor to enforce this Guaranty, irrespective of whether any
action is brought against the Borrower or any other Loan Party or whether the
Borrower or any other Loan Party is joined in any such action or actions. This
Guaranty is a guaranty of payment and performance and not of collection. The
liability of each Guarantor under this Guaranty shall be irrevocable, absolute
and unconditional irrespective of, and each Guarantor hereby irrevocably
waives any defenses it may now or hereafter have in any way relating to, any
or all of the following:
(a) any lack of validity or enforceability of any Loan Document or
any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other
amendment or waiver of or any consent to departure from any Loan
Document, including, without limitation, any increase in the Guaranteed
Obligations resulting from the extension of additional credit to
Borrower or any other Loan Party or otherwise;
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(c) any taking, exchange, release or non-perfection of any
Collateral, or any taking, release or amendment or waiver of or consent
to departure from any other guaranty, for all or any of the Guaranteed
Obligations;
(d) any manner of application of Collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or
other disposition of any Collateral for all or any of the Guaranteed
Obligations under the Loan Documents or any other assets of any Loan
Party;
(e) any change, restructuring or termination of the corporate
structure or existence of any Loan Party;
(f) any failure of the Agent or any Lender to disclose to any Loan
Party any information relating to the business, condition (financial or
otherwise), operations, performance, properties or prospects of any
other Loan Party now or hereafter known to the Agent or such Lender
(each Guarantor waiving any duty on the part of the Agent and the
Lenders to disclose such information);
(g) the failure of any other Person to execute or deliver this
Guaranty or any other guaranty or agreement or the release or reduction
of liability of any Guarantor or other guarantor or surety with respect
to the Guaranteed Obligations; or
(h) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any
representation by the Agent or any Lender that might otherwise
constitute a defense available to, or a discharge of, any Loan Party or
any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by the Agent or any Lender or any
other person upon the insolvency, bankruptcy or reorganization of any Loan
Party or otherwise, all as though such payment had not been made.
Section 3. Waivers and Acknowledgments. (a) Each Guarantor hereby
waives promptness, diligence, notice of acceptance and any other notice with
respect to any of the Guaranteed Obligations and this Guaranty and any
requirement that the Agent or any Lender protect, secure, perfect or insure
any lien or any property subject thereto or exhaust any right or take any
action against any Loan Party or any other Person or any Collateral.
(b) Each Guarantor hereby waives any right to revoke this Guaranty,
and acknowledges that this Guaranty is continuing in nature and applies
to all Guaranteed Obligations, whether existing now or in the future.
(c) Each Guarantor acknowledges that it will receive substantial
direct and indirect benefits from the financing arrangements
contemplated by the Loan Documents and that the waivers set forth in
this Guaranty are knowingly made in contemplation of such benefits.
(d) Each Guarantor hereby unconditionally and irrevocably waives (i)
any defense arising by reason of any claim or defense based upon an
election of remedies
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by the Agent or the Lenders that in any manner impairs, reduces,
releases or otherwise adversely affects the subrogation, reimbursement,
exoneration, contribution or indemnification rights of such Guarantor
or other rights of such Guarantor to proceed against any of the other
Loan Parties, any other guarantor or any other Person or any Collateral
and (ii) any defense based on any right of set-off or counterclaim
against or in respect of the obligations of such Guarantor hereunder.
(e) Each Guarantor hereby unconditionally and irrevocably waives any
duty on the part of the Agent or the Lenders to disclose to such
Guarantor any matter, fact or thing relating to the business, condition
(financial or otherwise), operations, performance, properties or
prospects of any other Loan Party or any of its Subsidiaries now or
hereafter known by the Agent or the Lenders.
Section 4. Subrogation. No Guarantor will exercise any rights that
it may now or hereafter acquire against any Loan Party that arise from the
existence, payment, performance or enforcement of the Guarantor's obligations
under this Guaranty, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of the Agent or any Lender against any Loan
Party or any Collateral, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, including, without
limitation, the right to take or receive from any Loan Party directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right, unless and
until all of the Guaranteed Obligations and all other amounts payable under
this Guaranty shall have been paid in full in cash in accordance with the
terms of the Loan Documents. If any amount shall be paid to any Guarantor in
violation of the preceding sentence at any time prior to the payment in full
in cash of the Guaranteed Obligations and all other amounts payable under this
Guaranty, such amount shall be held in trust for the benefit of the Agent and
shall forthwith be paid to the Agent to be credited and applied to the
Guaranteed Obligations and all other amounts payable under this Guaranty,
whether matured or unmatured, in accordance with the terms of the Loan
Documents, or to be held as Collateral for any Guaranteed Obligations or other
amounts payable under this Guaranty thereafter arising. If (i) any Guarantor
shall make payment to the Agent or any Lender of all or any part of the
Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other
amounts payable under this Guaranty shall be paid in full in cash and (iii)
the Loan Documents shall have terminated in accordance with their own terms,
the Agent and the Lenders will, at the Guarantors' request and expense,
execute and deliver to the Guarantors appropriate documents, without recourse
and without representation or warranty, necessary to evidence the transfer by
subrogation to the Guarantors of an interest in the Guaranteed Obligations
resulting from such payment by the Guarantor.
Section 5. Representations and Warranties. Each Guarantor hereby
represents and warrants as of the date hereof and as of the date of each
Advance as follows:
(a) Each Guarantor (i) is a corporation, limited liability company
or limited partnerhsip duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (ii)
is duly qualified and in good standing in each other jurisdiction in
which it owns or leases property or in which the conduct of its
business requires it to so qualify or be licensed except where the
failure to so qualify or be licensed would not have a Material Adverse
Effect (as defined in the Credit Agreement),
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and (iii) has all requisite power and authority to own or lease and
operate its properties and to carry on its business as now conducted
and as proposed to be conducted.
(b) The execution, delivery and performance by each Guarantor of
this Guaranty and the other Loan Documents executed by the Guarantor
are within each such Guarantor's powers, have been duly authorized by
all necessary corporate, limited liability company, or limited
partnership action, and do not (i) contravene each such Guarantor's
charter or bylaws or similar organizational documents, (ii) violate any
law (including, without limitation, the Securities Exchange Act of 1934
and the Racketeer Influenced and Corrupt Organizations Chapter of the
Organized Crime Control Act of 1970), rule, regulation (including,
without limitation, Regulations T, U and X of the Board of Governors of
the Federal Reserve System), order, writ, judgment, injunction, decree,
determination or award, (iii) conflict with or result in the breach of,
or constitute a default under, any loan agreement, contract, indenture,
mortgage, deed of trust, lease or other instrument binding on or
affecting such Guarantor or any of its properties, the effect of which
conflict, breach or default is reasonably likely to have a Material
Adverse Effect, or (iv) except for the liens permitted under the Loan
Documents, result in or require the creation or imposition of any lien
upon or with respect to any of the properties of any such Guarantor. No
Guarantor is in violation of any such law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award, or in
breach of any such contract, loan agreement, indenture, mortgage, deed
of trust, lease or other instrument, the violation or breach of which
would be reasonably likely to have a Material Adverse Effect.
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body or any
other third party is required for (i) the due execution, delivery,
recordation, filing or performance by any Guarantor of this Guaranty
and the other Loan Documents executed by the Guarantor, and (ii) the
exercise by the Agent or the Lenders of their rights under this
Guaranty and the other Loan Documents executed by the Guarantor in each
case, except for (a) those that have been made, obtained or given, and
(b) filings necessary to create or perfect security interests in the
Collateral.
(d) This Guaranty and the other Loan Documents executed by the
Guarantor have been duly executed and delivered by such Guarantor. This
Guaranty and the other Loan Documents executed by the Guarantor are the
legal, valid and binding obligation of such Guarantor, enforceable
against such Guarantor in accordance with their terms except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or limiting
creditors' rights or by equitable principles generally.
(e) There are no conditions precedent to the effectiveness of this
Guaranty and the other Loan Documents executed by the Guarantor that
have not been satisfied or waived.
(f) Each Guarantor has, independently and without reliance upon the
Agent or any Lender, and based on such documents and information as it
has deemed appropriate, made its own decision to enter into this
Guaranty and the other Loan Documents executed by the Guarantor.
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Section 6. Covenants. Each Guarantor covenants and agrees that, so
long as any part of the Guaranteed Obligations shall remain unpaid or any Loan
Document shall be in effect, such Guarantor will perform and observe, and
cause each of its Subsidiaries to perform and observe, all of the terms,
covenants and agreements set forth in the Loan Documents on its or their part
to be performed or observed or that the Borrower has agreed to cause such
Guarantor or such Subsidiaries to perform or observe.
Section 7. No Waiver, Remedies. No failure on the part of the Agent
or any Lender to exercise, and no delay in exercising, any right under any
Loan Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies in the Loan Documents
are cumulative and not exclusive of any remedies provided by law.
Section 8. Indemnification. (a) Each Guarantor agrees to defend,
protect, indemnify, and hold harmless the Agent, each Lender and each of its
respective Affiliates, and each of the Agent's, Lender's, or Affiliate's
respective officers, directors, employees, attorneys and agents (including,
without limitation, those retained in connection with the satisfaction or
attempted satisfaction of any of the conditions set forth in Article III)
(collectively, the "Indemnified Parties" and each an "Indemnified Party") from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses of any kind or nature
whatsoever (including, without limitation, the fees and disbursements of
counsel for such Indemnitees in connection with any investigative,
administrative or judicial proceeding, whether or not such Indemnitees shall
be designated a party thereto), imposed on, incurred by, or asserted against
such Indemnitees in any manner relating to or arising out of:
(i) this Guaranty, the other Loan Documents or any of the
Transaction Documents, or any act, event or transaction related or
attendant thereto, the making of the Advances, under the Credit
Agreement, the management of such Advances, the use or intended use of
the proceeds of the Advances under the Credit Agreement, or any of the
other transactions contemplated by the Transaction Documents;
(ii) any liabilities, obligations, responsibilities, losses,
damages, personal injury, death, punitive damages, economic damages,
consequential damages, treble damages, intentional, willful or wanton
injury, damage or threat to the environment, natural resources or
public health or welfare, costs and expenses (including, without
limitation, attorney, expert and consulting fees and costs of
investigation, feasibility or remedial action studies), fines,
penalties and monetary sanctions, interest, direct or indirect, known
or unknown, absolute or contingent, past, present or future relating to
violation of any Environmental, Health or Safety Requirements of Law
arising from or in connection with the past, present or future
operations of the Borrower, any Guarantor or any of their respective
predecessors in interest, or, the past, present or future
environmental, health or safety condition of any respective property of
the Borrower or any Guarantor, the presence of asbestos-containing
materials at any respective property of the Borrower or any Guarantor
or the Release or threatened Release of any Contaminant into the
environment (collectively, the "Indemnified Matters");
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provided, however, that no Guarantor shall have any obligation to an
Indemnified Party hereunder with respect to any of the aforementioned
indemnified matters caused by or resulting from the willful misconduct or
gross negligence of such Indemnified Party as determined by the final
non-appealed judgment of a court of competent jurisdiction. If the undertaking
to indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, each
Guarantor shall contribute the maximum portion which it is permitted to pay
and satisfy under applicable law, to the payment and satisfaction of all
Indemnified Matters incurred by the Indemnified Parties. It is understood and
agreed that, to the extent not precluded by a conflict of interest, each
Indemnitee shall endeavor to work cooperatively with the Borrower with a view
toward minimizing the legal and other expenses associated with any defense and
any potential settlement or judgment. Settlement of any claim or litigation
involving any material indemnified amount will require the approval of the
Borrower (which may not be unreasonably withheld)., provided, however, that no
Guarantor shall have any obligation to an Indemnified Party hereunder with
respect to any of the aforementioned indemnified matters caused by or
resulting from the willful misconduct or gross negligence of such Indemnified
Party as determined by the final non-appealed judgment of a court of competent
jurisdiction.
(b) Each Guarantor hereby also agrees that none of the Indemnified
Parties shall have any liability (whether direct or indirect, in contract,
tort or otherwise) to any of the Guarantors or any of their respective
Affiliates or any of their respective officers, directors, employees, agents
and advisors, and each Guarantor hereby agrees not to assert any claim against
any Indemnified Party on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to the
Loan Documents, the actual or proposed use of the proceeds of the advances
made under the Loan Documents, the Loan Documents or any of the transactions
contemplated by the Loan Documents.
(c) Without prejudice to the survival of any of the other agreements
of any Guarantor under this Guaranty or any of the other Loan Documents, the
agreements and obligations of each Guarantor contained in Section 1(a) (with
respect to enforcement expenses), the last sentence of Section 2 and this
Section 8 shall survive the payment in full of the Guaranteed Obligations and
all of the other amounts payable under this Guaranty.
Section 9. Subordination. Each Guarantor hereby subordinates any and
all debts, liabilities and other Obligations owed to such Guarantor by each
other Loan Party (the "Subordinated Obligations") to the Guaranteed
Obligations to the extent and in the manner hereinafter set forth in this
Section 9:
(a) Prohibited Payments. Except during the continuance of an Event
of Default (including the commencement and continuation of any
proceeding under any Bankruptcy Law relating to any Loan Party), to the
extent permitted by the Credit Agreement, each Guarantor may receive
regularly scheduled payments from any other Loan Party on account of
the Subordinated Obligations. After the occurrence and during the
continuance of any Event of Default (including the commencement and
continuation of any proceeding under any Bankruptcy Law relating to any
Loan Party), however, unless the Agent otherwise agrees, no Guarantor
shall demand, accept or take any action to collect any payment on
account of the Subordinated Obligations.
(b) Prior Payment of Guaranteed Obligations. In any proceeding under
any Bankruptcy Law relating to any Loan Party, each Guarantor agrees
that the Lenders
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shall be entitled to receive payment in full in cash of all Guaranteed
Obligations (including all interest and expenses accruing after the
commencement of a proceeding under any Bankruptcy Law, whether or not
constituting an allowed claim in such proceeding ("Post Petition
Interest")) before such Guarantor receives payment of any Subordinated
Obligations.
(c) Turn-Over. After the occurrence and during the continuance of
any Event of Default (including the commencement and continuation of
any proceeding under any Bankruptcy Law relating to any Loan Party),
each Guarantor shall, if the Agent so requests, collect, enforce and
receive payments on account of the Subordinated Obligations as trustee
for the Lenders and deliver such payments to the Agent on account of
the Guaranteed Obligations (including all Post Petition Interest),
together with any necessary endorsements or other instruments of
transfer, but without reducing or affecting in any manner the liability
of such Guarantor under the other provisions of this Guaranty and the
other Loan Documents executed by the Guarantor.
(d) Administrative Agent Authorization. After the occurrence and
during the continuance of any Event of Default (including the
commencement and continuation of any proceeding under any Bankruptcy
Law relating to any Loan Party), the Agent is authorized and empowered
(but without any obligation to so do), in its discretion, (i) in the
name of each Guarantor, to collect and enforce, and to submit claims in
respect of, Subordinated Obligations and to apply any amounts received
thereon to the Guaranteed Obligations (including any and all Post
Petition Interest), and (ii) to require each Guarantor (A) to collect
and enforce, and to submit claims in respect of, Subordinated
Obligations and (B) to pay any amounts received on such obligations to
the Agent for application to the Guaranteed Obligations (including any
and all Post Petition Interest).
Section 10. Continuing Guaranty. This Guaranty is a continuing
guaranty and shall (a) remain in full force and effect until the later of the
payment in full in cash of the Guaranteed Obligations and all other amounts
payable under this Guaranty and the date the Loan Documents shall have
terminated in accordance with their own terms, (b) be binding upon each
Guarantor, its successors and assigns, and (c) inure to the benefit of and be
enforceable by the Agent and any Lender and its successors, transferees and
assigns.
Section 11. Definitions. With respect to all Loan Documents executed
by the Guarantor, the singular shall include the plural and vice versa and any
gender shall include any other gender as the context may require.
Section 12. Successors and Assigns. This Guaranty and the other Loan
Documents executed by the Guarantor shall be binding upon and inure to the
benefit of the Guarantor, the Agent and the Lenders, and their respective
successors and assigns. The Guarantor's successors and assigns shall include,
without limitation, a receiver, trustee or debtor-in-possession of or for the
Guarantor. Without limiting the generality of the foregoing clause, any Lender
may assign or otherwise transfer all or any portion of its rights and
obligations under the Loan Documents (including, without limitation, all or
any portion of its Commitment, the Advances owing to it and any Note held by
it) to any other Person, and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to such Lender herein or
otherwise, subject, however to the provisions of Article VII of the Credit
Agreement.
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Section 13. Governing Law; Severability. This Guaranty and the other
Loan Documents executed by the Guarantor shall be governed by, and construed
in accordance with, the internal laws (as opposed to conflict of laws
provisions) of the State of New York. Whenever possible, each provision of
this Guaranty and the other Loan Documents executed by the Guarantor shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty or the other Loan Documents executed by
the Guarantor shall be held to be prohibited or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Guaranty and the other Loan Documents executed by
the Guarantor.
Section 14. Advice of Counsel. The Guarantor represents and warrants
to the Agent that it has consulted with its legal counsel regarding all
waivers under the Loan Documents, it believes that it fully understands all
rights that it is waiving and the effect of such waivers, that it assumes the
risk of any misunderstanding that it may have regarding any of the foregoing,
and that it intends that such waivers shall be a material inducement to
Lenders to extend the indebtedness secured hereby.
Section 15. Further Assurances. The Guarantor agrees that it will
cooperate with the Agent and the Lenders and will execute and deliver, or
cause to be executed and delivered, all such other agreements, instruments,
documents, stock powers and proxies and will take all such other actions,
including, without limitation, the execution and filing of financing
statements, as the Agent may reasonably request from time to time in order to
carry out the provisions and purposes of the Loan Documents executed by the
Guarantor.
Section 16. Costs and Expenses. The Guarantor will upon demand pay
to the Agent the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents,
which the Agent may incur in connection with (i) the administration of the
Loan Documents executed by the Guarantor, (ii) the custody or preservation of,
or the sale of, collection from, or other realization upon, any of the Pledged
Collateral, (iii) the exercise or enforcement of any of the rights of the
Agent or the Lenders under the Loan Documents executed by the Guarantor, or
(iv) the failure by the Guarantor to perform or observe any of the provisions
of the Loan Documents executed by the Guarantor.
Section 17. Notices. All notices and other communications provided
for under any Loan Documents executed by the Guarantor shall be in writing
(including telecopier, telegraphic, telex or cable communication) and mailed,
telecopied, telegraphed, telexed, cabled or delivered, if to the Guarantor,
care of Borrower at its address at 3 Landmark Square, Suite 500, Stamford,
Connecticut 06901, if to the Agent, at its address specified in the Credit
Agreement; or, as to each party, at such other address as shall be designated
by such party in a written notice to the other party. All such notices and
communications shall be effective, upon receipt, or in the case of (i) notice
by mail, five days after being deposited in the United States mails, first
class postage prepaid, (ii) notice by overnight courier, one business day
after being deposited with a national overnight courier service, (iii) notice
by telex, when telexed against receipt of answer back or (iv) notice by
facsimile copy, when transmitted against mechanical confirmation of successful
transmission.
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Section 18. Amendments, Waivers and Consents. No amendment or waiver
of any provision of any Loan Document executed by the Guarantor nor consent to
any departure by the Guarantor therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Agent and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
Section 19. Section Headings. The section headings in the Loan
Documents executed by the Guarantor are for convenience of reference only, and
shall not affect in any way the interpretation of any of the provisions
hereof.
Section 20. Execution in Counterparts. The Loan Documents executed
by the Guarantor may be executed in any number of counterparts, each of which
shall be an original, but all of which shall together constitute one and the
same agreement.
Section 21. Merger. This Loan Documents executed by the Guarantor
represent the final agreement of the Guarantor with respect to the matters
contained herein and may not be contradicted by evidence of prior or
contemporaneous agreements, or subsequent oral agreements, between the
Guarantor and the Agent and the Lenders.
Section 22. No Strict Construction. The parties to the Loan
Documents have participated jointly in the negotiation and drafting of the
Loan Documents. In the event an ambiguity or question of intent or
interpretation arises, the Loan Documents shall be construed as if drafted
jointly by the parties hereto and no presumption or burden or proof shall
arise favoring or disfavoring any party by virtue of the authorship of any
provisions of the Loan Documents.
Section 23. Waiver of Jury Trial. To the maximum extent of
applicable law, each of the Guarantors waives any right to trial by jury in
any dispute, whether sounding in contract, tort, or otherwise, between the
Agent, the Lenders any Guarantor or any other Person arising out of or related
to this Guaranty or the other Loan Documents executed by the Guarantor and the
transactions contemplated by this Guaranty and the other Loan Documents
executed by the Guarantor or any other instrument, document or agreement
executed or delivered in connection herewith or therewith. The Guarantors or
the Agent or the Lenders may file an original counterpart or a copy of this
Guaranty with any court as written evidence of the consent of the parties
hereto to the waiver of their right to trial by jury.
Section 24. Consent to Jurisdiction; Service of Process; Jury Trial.
(a) Non Exclusive Jurisdiction. Each Guarantor irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York state court or federal court of the united States of America sitting
in New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Guaranty and the other Loan
Documents or arising out of or relating to the relationship established among
them in connection with this Guaranty or any of the other Loan Documents, or
for recognition or enforcement of any judgment, and each Guarantor irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in any such New York state court or, to
the fullest extent permitted by law, in such federal court. Each Guarantor
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. Nothing in this Guaranty shall
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affect any right that any party may otherwise have to bring any action or
proceeding relating to this Guaranty or any of the other Loan Documents in the
courts of any jurisdiction. Each Guarantor irrevocably and unconditionally
waives, to the fullest extend it may legally and effectively do so, any
objection that it may nor or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to this Guaranty or any
of the other Loan Documents to which it is a party in any New York state or
federal court. Each Guarantor irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.
(b) Other Jurisdictions. Each of Agent and the Lenders shall have
the right to proceed against any Guarantor or its real or personal property in
a court in any location to enable the Agent or the Lenders to obtain personal
jurisdiction over the Guarantor, to realize on the Collateral or any other
security for the obligations or to enforce a judgment or other court order
entered in favor of the Agent or the Lenders. No Guarantor shall assert any
permissive counterclaims in any proceeding brought by the Agent or the Lenders
under this Section 24.
(c) Venue; Forum Non Conveniens. Each of the Agent and the
Guarantors waives any objection that it may have (including, without
limitation, any objection to the laying of venue or based on forum non
conveniens) to the location of the court in which any proceeding is commenced
in accordance with this Section 24.
Section 25. Service of Process. Each Guarantor waives personal
service of any process upon it and, as security for the Guaranteed
Obligations, irrevocably appoints CT Corporation Systems as its registered
agent for the purpose of accepting service of process issued by any court in
connection with any dispute between any Guarantor, the Agent and the Lenders
arising out of or related to the Loan Documents or the relationship
established between them in connection with the Loan Documents or any other
document to which any Guarantor is a party.
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be
duly executed under seal and delivered by its officer thereunto duly
authorized as of the date first above written.
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EXHIBIT D-1
[Form of Dealership Security Agreement]
SECURITY AGREEMENT
SECURITY AGREEMENT (the "Agreement") dated ______________, 2000,
made by each of the entities listed on the signature pages hereto, jointly and
severally, (each referred to individually herein as a "Grantor," and
collectively, the "Grantors"), to FORD MOTOR CREDIT COMPANY, as agent (the
"Agent") for the lenders (the "Lenders") under the Credit Agreement defined
below. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings given to such terms in the Credit Agreement
defined below.
PRELIMINARY STATEMENTS:
WHEREAS, Asbury Automotive Group L.L.C., a Delaware limited
liability company, (the "Borrower"), the Agent and the Lenders have entered
into a certain Credit Agreement dated as of even date herewith, pursuant to
which the Lenders agreed, subject to certain conditions precedent, to make
loans and other financial accommodations to the Borrower from time to time in
an amount not to exceed $550,000,000.00 (as such agreement may be further
amended, restated, supplemented, refinanced, increased or otherwise modified
from time to time, the "Credit Agreement") and;
WHEREAS, the Grantors have entered into a Guaranty of even date
herewith (the "Guaranty"), pursuant to which each Grantor guaranties all of
the obligations of the Borrower under the Credit Agreement to the Lenders; and
WHEREAS, in order to comply with the terms of the Credit Agreement,
the Grantors must execute and deliver this Agreement;
NOW, THEREFORE, for and in consideration of the foregoing and of any
financial accommodations or extensions of credit (including, without
limitation, any loan or advance by renewal, refinancing or extension of the
agreements described hereinabove or otherwise) heretofore, now or hereafter
made to or for the benefit of the Borrower pursuant to the Credit Agreement
or, any other agreement, instrument or document executed pursuant to or in
connection therewith, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each Grantor hereby
agrees with Agent, for the benefit of the Lenders, as follows:
SECTION 1. Grant of Security. Each Grantor, severally, hereby
assigns and pledges to Agent, for the benefit of the Lenders, and hereby
grants to Agent, for the benefit of the Lenders, a security interest in, all
of its respective right, title and interest in and to the following, whether
now owned or hereafter acquired (collectively, the "Collateral"):
(a) all equipment in all of its forms, including furniture,
machinery, service vehicles, supplies and other equipment (the
"Equipment");
(b) all inventory in all of its forms, including motor vehicles,
tractors, trailers, service parts and accessories and other inventory
("Inventory");
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(c) all accounts, contract rights, chattel paper, instruments,
notes, letters of credit, documents, documents of title, investment
property, deposit accounts, other bank accounts, general intangibles,
tax refunds and other obligations of third persons of any kind, now or
hereafter existing, whether or not arising out of or in connection with
the sale or lease of goods, the rendering of services or otherwise, and
all rights now or hereafter existing in and to all security agreements,
leases, and other contracts securing or otherwise relating to any such
accounts, contract rights, chattel paper, instruments, notes, letters
of credit, documents, documents of title, investment property, deposit
accounts, other bank accounts, general intangibles, tax refunds or
obligations of third persons (any and all such accounts, contract
rights, chattel paper, instruments, notes, letters of credit,
documents, documents of title, investment property, deposit accounts,
other bank accounts, general intangibles, tax refunds and obligations
of third persons being the "Receivables", and any and all such leases,
security agreements and other contracts being the "Related Contracts");
(d) all of the Grantor's governmental approvals and authorizations
to the maximum extent permitted by applicable law;
(e) all property and interests in property of the Grantor now or
hereafter coming into the actual possession, custody or control of the
Agent or a Lender in any way or for any purpose (whether for
safekeeping, deposit, custody, pledge, transmission, collection or
otherwise);
(f) leasehold interests in and fixtures located on any real
property;
(g) records and other books and records relating to the foregoing;
(h) all intellectual property;
(i) all goods;
(j) all UCC references;
(k) all security entitlements; and
(l) all accessions and additions to, substitutions for, and
replacements, products and proceeds of any of the foregoing (including,
without limitation, proceeds which constitute property of the types
described in clauses (a) through (k) of this Section 1 and, to the
extent not otherwise included, all (i) payments under insurance
(whether or not the Agent or a Lender is the loss payee thereof), or
any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral
and (ii) cash.
Provided that the foregoing shall exclude (A) any Contract Rights
(other than any Contract Rights pursuant to a franchise agreement between
Borrower and an automobile manufacturer) or General Intangibles of the Grantor
to the extent the Grantor may not grant a security interest in the same
without breach of the terms thereof and (B) unless the relevant automobile
manufacturer grants its consent thereto, any Contract Rights or General
Intangibles related to a franchise agreement with an
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automobile manufacturer if the granting of the foregoing security
interest would permit such automobile manufacturer to terminate or
materially alter such franchise agreement or any related agreements
with the Borrower, provided that Grantor shall use commercially
reasonable efforts to obtain agreements from the relevant
manufacturers (a) permitting the grant of a security interest
described in subsection (A) above and (b) granting the consent
described in subsection (B) above.
It is hereby acknowledged that certain of the franchise agreements
and other related agreements between the various automobile
manufacturers and the Grantors contain (i) restrictions on the ability
of each Grantor to transfer its ownership interest in any Dealership
without the consent of the relevant automobile manufacturer, (ii)
provisions giving the automobile manufacturer a right of first refusal
over any proposed sale or transfer of the ownership interests in any
Dealership or any portion of the assets of any Dealership (provided,
however, that for the purposes of this acknowledgment, the
interpretation of the Agent and the Lenders is that "transfer" does not
include the granting of a security interest in assets other than
ownership interests in a Dealership and contract rights under franchise
agreements) and (iii) requirements that under certain circumstances
(including, without limitation, upon termination of the relevant
franchise agreement) the Grantor must sell certain property (consisting
primarily of a particular manufacturer's vehicles, parts, accessories,
signs, tools and other similar items) to the manufacturer free and
clear of any liens and encumbrances. It is understood and agreed that
the existence or occurrence of any of the foregoing shall not result in
a breach of or default under this Agreement, provided, however, that it
is understood that for purposes of this acknowledgment, the
interpretation of the Agent and the Lenders is that nothing contained
in clause (iii) of the preceding sentence may be construed as
invalidating the Liens evidenced by, or the terms of, any of the
Collateral Documents.
SECTION 2. Security for Obligations. This Agreement secures the
payment of (i) all obligations of the Grantors now or hereafter existing under
the Guaranty, whether for principal, interest, fees, expenses or otherwise,
and (ii) all obligations of any Grantor hereafter existing under this
Agreement (all such obligations of the Grantors and the Borrower being the
"Obligations"). Without limiting the generality of the foregoing, this
Agreement secures the payment of all amounts which constitute part of the
Obligations and would be owed by any Grantor to any Lender under the Credit
Agreement but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
any Grantor or the Borrower.
SECTION 3. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to
perform all of its respective duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by Agent
of any of the rights hereunder shall not release any Grantor from any of its
respective duties or obligations under the contracts and agreements included
in the Collateral, and (c) neither the Agent nor the Lenders shall have any
obligation or liability under the contracts and agreements included in the
Collateral by reason of this Agreement, nor shall the Agent or the Lenders be
obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
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SECTION 4. Representations and Warranties. Each Grantor represents
and warrants as follows as of the date hereof and as of the date of each
Advance:
(a) All of its Equipment and Inventory is located at the places
specified on Schedule 4 (a) hereto. The chief place of business and chief
executive office of each Grantor and the office where the Grantor keeps its
records concerning the Receivables, and the originals of all chattel paper
that evidence Receivables, are located at the address specified in Section 16.
None of the Receivables is evidenced by a promissory note or other instrument.
(b) Each Grantor is the legal and beneficial owner of its respective
Collateral free and clear of any lien, security interest, option or other
charge or encumbrance except for (i) the security interest created by this
Agreement, and (ii) any security interests consented to by the Lenders in the
Credit Agreement (collectively, the "Permitted Liens"). Other than financing
statements with respect to Permitted Liens, no effective financing statement
or other document similar in effect covering all or any part of the Collateral
is on file in any recording office, except such as may have been filed in
favor of the Agent relating to this Agreement.
(c) Each Grantor has exclusive possession and control of its
Equipment and Inventory.
(d) Subject to the Permitted Liens, this Agreement creates a valid
and perfected first priority security interest in the Collateral, securing the
payment of the Obligations, and all filings and other actions necessary or
desirable to perfect and protect such security interest have been duly taken
or are being taken substantially contemporaneously with the execution and
delivery of this Agreement.
(e) No consent of any other Person and no authorization, approval or
other action by, and no notice to or filing with, any governmental authority
or regulatory body is required (i) for the grant by the Grantors of the
security interest granted hereby or for the execution, delivery or performance
of this Agreement by the Grantors, (ii) for the perfection or maintenance of
the security interest created hereby (including the first priority nature of
such security interest) or (iii) for the exercise by the Agent (for the
benefit of the Lenders) of its rights and remedies hereunder, in each case,
except for (i) filings made or to be made with respect to Agent's security
interest in the Collateral, and (ii) those that have been made, obtained or
given.
(f) There are no conditions precedent to the effectiveness of this
Agreement that have not been satisfied or waived.
(g) Each Grantor has, independently and without reliance upon the
Agent or any Lender and based on such documents and information as it has
deemed appropriate, made its own decision to enter into this Agreement.
SECTION 5. Further Assurances. (a) Each Grantor agrees that from
time to time, at its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary
or desirable, or that the Agent may reasonably request, in order to perfect
and protect any security interest granted or purported to be granted hereby or
to enable the Agent (acting for the benefit of the Lenders) to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the
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generality of the foregoing, each Grantor will upon such reasonable request:
(i) mark conspicuously each item of chattel paper included in the Receivables
and each Related Contract and, at the request of the Agent, each of its
records pertaining to the Collateral with a legend, in form and substance
satisfactory to the Agent, indicating that such document, chattel paper,
Related Contract or Collateral is subject to the security interest granted
hereby; (ii) if any Receivable shall be evidenced by a promissory note or
other instrument or chattel paper, deliver and pledge to the Agent (for the
benefit of the Lenders) hereunder such note or instrument or chattel paper
duly endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Agent; and (iii)
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as the Agent may reasonably request, in order to perfect and
preserve the security interest granted or purported to be granted hereby.
(b) Each Grantor hereby authorizes the Agent to file one or more
financing or continuation statements, and amendments thereto, relating to all
or any part of the Collateral without its signature where permitted by law. A
photocopy or other reproduction of this Agreement or any financing statement
covering the Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law.
(c) Each Grantor will furnish to the Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Agent may
reasonably request, all in reasonable detail.
SECTION 6. As to Equipment and Inventory. (a) Each Grantor shall
keep its Equipment and Inventory at the locations referred to on Section 4(a)
or, upon 30 days' prior written notice to the Agent, at such other places in
the United States of America in jurisdictions where all action required by
Section 5 shall have been taken with respect to its Equipment and Inventory.
SECTION 7. As to Receivables. (a) Each Grantor shall keep its chief
place of business and chief executive office and the office where it keeps its
records concerning the Receivables, and the originals of all chattel paper
that evidence Receivables, if any, at the location therefor referred to in
Section 4(a) or, upon 30 days' prior written notice to Agent, at any other
locations in the United States of America in a jurisdiction where all action
required by Section 5 shall have been taken with respect to the Receivables.
Each Grantor will hold and preserve such records and chattel paper and will
permit representatives of the Agent at any time during normal business hours
to inspect and make abstracts from such records and chattel paper. No Grantor
shall change its name, identity or corporate structure to such an extent that
any financing statement filed in connection with this Agreement would become
seriously misleading, unless the Borrower shall have given the Agent at least
30 days prior written notice thereof and prior to effecting any such change,
taken such steps, at Borrower's expense, as Agent may deem necessary or
desirable to continue the perfecting and priority of the liens in favor of the
Agent granted in connection herewith.
(b) Except as otherwise provided in this subsection (b), the Grantor
shall continue to collect, at its own expense, all amounts due or to become
due the Grantor under the Receivables. In connection with such collections,
the Grantor may take (and, at the Agent's direction, shall take) such action
as the Grantor or the Agent may reasonably deem necessary
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or advisable to enforce collection of the Receivables; provided, however, that
the Agent shall have the right at any time, upon the occurrence and during the
continuance of an Event of Default or an Unmatured Default and upon written
notice to the Grantor of its intention to do so, to notify the account debtors
or obligors under any Receivables of the assignment of such Receivables to the
Agent and to direct such account debtors or obligors to make payment of all
amounts due or to become due to the Grantor thereunder directly to the Agent
and, upon such notification and at the expense of the Grantor, to enforce
collection of any such Receivables, and to adjust, settle or compromise the
amount or payment thereof, in the same manner and to the same extent as the
Grantor might have done. After receipt by the Grantor of the notice from the
Agent referred to in the proviso to the preceding sentence, (i) all amounts
and proceeds (including instruments) received by the Grantor in respect of the
Receivables shall be received in trust for the benefit of the Agent hereunder,
shall be segregated from other funds of the Grantor and shall be forthwith
paid over to the Agent in the same form as so received (with any necessary
indorsement) to be held as cash collateral and either (A) released to the
Grantor so long as no Event of Default shall have occurred and be continuing
or (B) if any Event of Default shall have occurred and be continuing, applied
as provided by Section 12(b), and (ii) the Grantor shall not adjust, settle or
compromise the amount or payment of any Receivable, release wholly or partly
any account debtor or obligor thereof, or allow any credit or discount
thereon, except in the ordinary course of business consistent with past
practice.
SECTION 8. Transfers and Other Liens. No Grantor may (i) sell,
assign (by operation of law or otherwise) or otherwise dispose of, or grant
any option with respect to, any of the Collateral, or (ii) create or permit to
exist any lien, security interest, option or other charge or encumbrance upon
or with respect to any of the Collateral, except for the security interest
under this Agreement and Liens permitted by the Credit Agreement.
SECTION 9. Agent Appointed Attorney-in-Fact. Each Grantor hereby
irrevocably appoints Agent such Grantor's attorney-in-fact, with full
authority in the place and stead of the Grantor and in the name of the
Grantor, the Lenders or otherwise, from time to time in the Agent's
discretion, upon the occurrence and continuance of an Unmatured Default or an
Event of Default to take any action and to execute any instrument which the
Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to the Agent
pursuant to Section 7,
(b) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due
under or in connection with the Collateral,
(c) to receive, indorse, and collect any drafts or other
instruments, documents and chattel paper, in connection therewith, and
(d) to file any claims or take any action or institute any
proceedings which the Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights
of the Agent or the Lenders with respect to any of the Collateral.
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SECTION 10. Agent May Perform. If any Grantor fails to perform any
agreement contained herein, the Agent may itself perform, or cause performance
of, such agreement, and the expenses of the Agent or the Lenders incurred in
connection therewith shall be payable by the Grantors upon demand.
SECTION 11. Agent's Duties. The powers conferred on the Agent
hereunder are solely to protect its interest (in its capacity as agent on
behalf of the Lenders) in the Collateral and shall not impose any duty upon it
to exercise any such powers. Except for the exercise of reasonable care in the
safe custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, Agent shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral. Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of any Collateral in its possession if such Collateral is
accorded treatment substantially equal to that which Agent accords its own
property.
SECTION 12. Remedies. If any Event of Default shall have occurred
and be continuing:
(a) Agent may exercise in respect of the Collateral, in addition to
other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the
Uniform Commercial Code in effect in the State of New York at that time
(the "Code") (whether or not the Code applies to the affected
Collateral), and also may (i) require any of the Grantors to, and each
of the Grantors hereby agrees that it will at its expense and upon
request of Agent forthwith, assemble all or part of the Collateral as
directed by the Agent and make it available to Agent at a place to be
designated by Agent which is reasonably convenient to both parties and
(ii) without notice except as specified below, sell the Collateral or
any part thereof in one or more parcels at public or private sale, at
any of the Agent's or Lender's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as the Agent
may deem commercially reasonable. Each Grantor agrees that, to the
extent notice of sale shall be required by law, at least ten days'
notice to the applicable Grantor of the time and place of any public
sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Agent shall not be obligated to
make any sale of Collateral regardless of notice of sale having been
given. The Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to
which it was so adjourned.
(b) Any cash held by Agent as Collateral and all cash proceeds
received by the Agent in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral may, in the
discretion of the Agent, be held by the Agent as collateral for, and/or
then or at any time thereafter be applied (after payment of any amounts
payable to the Agent or the Lenders pursuant to any indemnity in the
Guaranty) in whole or in part by the Agent against, all or any part of
the Obligations in such order as the Agent shall elect. Any surplus of
such cash or cash proceeds held by the Agent and remaining after
payment in full in cash of all the Obligations shall be paid over to
the Grantors or to whomsoever may be lawfully entitled to receive such
surplus.
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SECTION 13. Continuing Security Interest; Assignments under Credit
Agreement. This Agreement shall create a continuing assignment of and security
interest in the Collateral and shall (i) remain in full force and effect until
the payment in full in cash of the Obligations and all other amounts payable
under this Agreement and termination of the Loan Documents (such date, the
"Security Termination Date"), (ii) be binding upon each Grantor, and such
Grantor's successors and assigns and (iii) inure to the benefit of, and be
enforceable by, the Agent and its successors, transferees and assigns. On the
Security Termination Date, the security interest granted hereby shall
terminate and all rights to the Collateral shall revert to the Grantor. Upon
any such termination, the Agent will, at the Grantors' expense, execute and
deliver to each Grantor such documents as it shall reasonably request to
evidence such termination.
SECTION 14. Security Interest Absolute. The obligations of the
Grantor under this Agreement are independent of the Obligations, and a
separate action or actions may be brought and prosecuted against the Grantor
to enforce this Agreement, irrespective of whether any action is brought
against any other Loan Party or whether any other Loan Party is joined in any
such action or actions. All rights of the Agent and security interests
hereunder, and all obligations of the Grantor hereunder, shall be absolute and
unconditional, irrespective of:
(a) any lack of validity or enforceability of any Loan Document or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from any Loan Document,
including, without limitation, any increase in the Obligations
resulting from the extension of additional credit to any Loan Party or
any of its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any other
collateral, or any taking, release or amendment or waiver of or consent
to departure from any guaranty, for all or any of the Obligations;
(d) any manner of application of collateral, or proceeds thereof, to
all or any of the Obligations, or any manner of sale or other
disposition of any Collateral for all or any of the Obligations or any
other assets of any loan Party or any of its Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of any loan Party or any of its Subsidiaries; or
(f) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, any Loan Party or a third
party grantor of a security interest.
SECTION 15. Revised Article 9. It is the intention of the parties to
this Agreement that the priorities and agreements herein contained continue to
apply after the enactment by the various States of Revised Article 9 --
Secured Transactions (with conforming amendments to Articles 1, 2, 2a, 4, 5,
6, 7 and 8) to the UCC as approved by The American Law Institute in 1998 and
approved and recommended for enactment in all the States by the
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National Conference of Commissioners for Uniform State Laws in 1998 ("Revised
Article 9") and the effectiveness of Revised Article 9 in any State. After the
effectiveness of Revised Article 9 in any State governing perfection and the
effect of perfection or non-perfection of a security interest in any
Collateral, as to such State and such Collateral, (i) all section references
herein to, and all defined terms used herein defined in, Article 9 of the UCC
as currently in effect shall be deemed to be to any corresponding Section or
definition of Revised Article 9, (ii) if any definition used herein by
reference to Revised Article 9 is broader than the corresponding definition
used in current Article 9 of the UCC, such broader definition will apply
herein.
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EXHIBIT D-2
[Form of Subsidiary Holding Company Security Agreement]
SECURITY AGREEMENT
SECURITY AGREEMENT (the "Agreement") dated ______________, 2000,
made by each of the entities listed on the signature pages hereto, jointly and
severally, (each referred to individually herein as a "Grantor," and
collectively, the "Grantors"), to FORD MOTOR CREDIT COMPANY, as agent (the
"Agent") for the lenders (the "Lenders") under the Credit Agreement defined
below. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings given to such terms in the Credit Agreement
defined below.
PRELIMINARY STATEMENTS:
WHEREAS, Asbury Automotive Group L.L.C., a Delaware limited
liability company, (the "Borrower"), the Agent and the Lenders have entered
into a certain Credit Agreement dated as of even date herewith, pursuant to
which the Lenders agreed, subject to certain conditions precedent, to make
loans and other financial accommodations to the Borrower from time to time in
an amount not to exceed $550,000,000.00 (as such agreement may be further
amended, restated, supplemented, refinanced, increased or otherwise modified
from time to time, the "Credit Agreement") and;
WHEREAS, the Grantors have entered into a Guaranty of even date
herewith (the "Guaranty"), pursuant to which each Grantor guaranties all of
the obligations of the Borrower under the Credit Agreement to the Lenders; and
WHEREAS, in order to comply with the terms of the Credit Agreement,
the Grantors must execute and deliver this Agreement;
NOW, THEREFORE, for and in consideration of the foregoing and of any
financial accommodations or extensions of credit (including, without
limitation, any loan or advance by renewal, refinancing or extension of the
agreements described hereinabove or otherwise) heretofore, now or hereafter
made to or for the benefit of the Borrower pursuant to the Credit Agreement
or, any other agreement, instrument or document executed pursuant to or in
connection therewith, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each Grantor hereby
agrees with Agent, for the benefit of the Lenders, as follows:
SECTION 1. Grant of Security. Each Grantor, severally, hereby
assigns and pledges to Agent, for the benefit of the Lenders, and hereby
grants to Agent, for the benefit of the Lenders, a security interest in, all
of its respective right, title and interest in and to the following, whether
now owned or hereafter acquired (collectively, the "Collateral"):
(a) all equipment in all of its forms, including furniture,
machinery, service vehicles, supplies and other equipment (the
"Equipment");
(b) all inventory in all of its forms, including motor vehicles,
tractors, trailers, service parts and accessories and other inventory
("Inventory");
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(c) all accounts, contract rights, chattel paper, instruments,
notes, letters of credit, documents, documents of title, investment
property, deposit accounts, other bank accounts, general intangibles,
tax refunds and other obligations of third persons of any kind, now or
hereafter existing, whether or not arising out of or in connection with
the sale or lease of goods, the rendering of services or otherwise, and
all rights now or hereafter existing in and to all security agreements,
leases, and other contracts securing or otherwise relating to any such
accounts, contract rights, chattel paper, instruments, notes, letters
of credit, documents, documents of title, investment property, deposit
accounts, other bank accounts, general intangibles, tax refunds or
obligations of third persons (any and all such accounts, contract
rights, chattel paper, instruments, notes, letters of credit,
documents, documents of title, investment property, deposit accounts,
other bank accounts, general intangibles, tax refunds and obligations
of third persons being the "Receivables", and any and all such leases,
security agreements and other contracts being the "Related Contracts");
(d) all of the Grantor's governmental approvals and authorizations
to the maximum extent permitted by applicable law;
(e) all property and interests in property of the Grantor now or
hereafter coming into the actual possession, custody or control of the
Agent or a Lender in any way or for any purpose (whether for
safekeeping, deposit, custody, pledge, transmission, collection or
otherwise);
(f) leasehold interests in and fixtures located on any real
property;
(g) records and other books and records relating to the foregoing;
(h) all intellectual property;
(i) all goods;
(j) all UCC references;
(k) all security entitlements; and
(l) all accessions and additions to, substitutions for, and
replacements, products and proceeds of any of the foregoing (including,
without limitation, proceeds which constitute property of the types
described in clauses (a) through (k) of this Section 1 and, to the
extent not otherwise included, all (i) payments under insurance
(whether or not the Agent or a Lender is the loss payee thereof), or
any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral
and (ii) cash.
Provided that the foregoing shall exclude (A) any Contract Rights
(other than any Contract Rights pursuant to a franchise agreement between
Borrower and an automobile manufacturer) or General Intangibles of the
Grantor to the extent the Grantor may not grant a security interest in
the same without breach of the terms thereof and (B) unless the relevant
automobile manufacturer grants its consent thereto, any Contract Rights
or General Intangibles related to a franchise agreement with an
127
automobile manufacturer if the granting of the foregoing security
interest would permit such automobile manufacturer to terminate or
materially alter such franchise agreement or any related agreements
with the Borrower, provided that Grantor shall use commercially
reasonable efforts to obtain agreements from the relevant
manufacturers (a) permitting the grant of a security interest
described in subsection (A) above and (b) granting the consent
described in subsection (B) above.
It is hereby acknowledged that certain of the franchise agreements
and other related agreements between the various automobile
manufacturers and the Grantors contain (i) restrictions on the ability
of each Grantor to transfer its ownership interest in any Dealership
without the consent of the relevant automobile manufacturer, (ii)
provisions giving the automobile manufacturer a right of first refusal
over any proposed sale or transfer of the ownership interests in any
Dealership or any portion of the assets of any Dealership (provided,
however, that for the purposes of this acknowledgment, the
interpretation of the Agent and the Lenders is that "transfer" does not
include the granting of a security interest in assets other than
ownership interests in a Dealership and contract rights under franchise
agreements) and (iii) requirements that under certain circumstances
(including, without limitation, upon termination of the relevant
franchise agreement) the Grantor must sell certain property (consisting
primarily of a particular manufacturer's vehicles, parts, accessories,
signs, tools and other similar items) to the manufacturer free and
clear of any liens and encumbrances. It is understood and agreed that
the existence or occurrence of any of the foregoing shall not result in
a breach of or default under this Agreement, provided, however, that it
is understood that for purposes of this acknowledgment, the
interpretation of the Agent and the Lenders is that nothing contained
in clause (iii) of the preceding sentence may be construed as
invalidating the Liens evidenced by, or the terms of, any of the
Collateral Documents.
SECTION 2. Security for Obligations. This Agreement secures the
payment of (i) all obligations of the Grantors now or hereafter existing under
the Guaranty, whether for principal, interest, fees, expenses or otherwise,
and (ii) all obligations of any Grantor hereafter existing under this
Agreement (all such obligations of the Grantors and the Borrower being the
"Obligations"). Without limiting the generality of the foregoing, this
Agreement secures the payment of all amounts which constitute part of the
Obligations and would be owed by any Grantor to any Lender under the Credit
Agreement but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
any Grantor or the Borrower.
SECTION 3. Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to
perform all of its respective duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by Agent
of any of the rights hereunder shall not release any Grantor from any of its
respective duties or obligations under the contracts and agreements included
in the Collateral, and (c) neither the Agent nor the Lenders shall have any
obligation or liability under the contracts and agreements included in the
Collateral by reason of this Agreement, nor shall the Agent or the Lenders be
obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
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SECTION 4. Representations and Warranties. Each Grantor represents
and warrants as follows as of the date hereof and as of the date of each
Advance:
(a) All of its Equipment and Inventory is located at the places
specified on Schedule 4 (a) hereto. The chief place of business and chief
executive office of each Grantor and the office where the Grantor keeps its
records concerning the Receivables, and the originals of all chattel paper
that evidence Receivables, are located at the address specified in Section 16.
None of the Receivables is evidenced by a promissory note or other instrument.
(b) Each Grantor is the legal and beneficial owner of its respective
Collateral free and clear of any lien, security interest, option or other
charge or encumbrance except for (i) the security interest created by this
Agreement, and (ii) any security interests consented to by the Lenders in the
Credit Agreement (collectively, the "Permitted Liens"). Other than financing
statements with respect to Permitted Liens, no effective financing statement
or other document similar in effect covering all or any part of the Collateral
is on file in any recording office, except such as may have been filed in
favor of the Agent relating to this Agreement.
(c) Each Grantor has exclusive possession and control of its
Equipment and Inventory.
(d) Subject to the Permitted Liens, this Agreement creates a valid
and perfected first priority security interest in the Collateral, securing the
payment of the Obligations, and all filings and other actions necessary or
desirable to perfect and protect such security interest have been duly taken
or are being taken substantially contemporaneously with the execution and
delivery of this Agreement.
(e) No consent of any other Person and no authorization, approval or
other action by, and no notice to or filing with, any governmental authority
or regulatory body is required (i) for the grant by the Grantors of the
security interest granted hereby or for the execution, delivery or performance
of this Agreement by the Grantors, (ii) for the perfection or maintenance of
the security interest created hereby (including the first priority nature of
such security interest) or (iii) for the exercise by the Agent (for the
benefit of the Lenders) of its rights and remedies hereunder, in each case,
except for (i) filings made or to be made with respect to Agent's security
interest in the Collateral, and (ii) those that have been made, obtained or
given.
(f) There are no conditions precedent to the effectiveness of this
Agreement that have not been satisfied or waived.
(g) Each Grantor has, independently and without reliance upon the
Agent or any Lender and based on such documents and information as it has
deemed appropriate, made its own decision to enter into this Agreement.
SECTION 5. Further Assurances. (a) Each Grantor agrees that from
time to time, at its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary
or desirable, or that the Agent may reasonably request, in order to perfect
and protect any security interest granted or purported to be granted hereby or
to enable the Agent (acting for the benefit of the Lenders) to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the
129
generality of the foregoing, each Grantor will upon such reasonable request:
(i) mark conspicuously each item of chattel paper included in the Receivables
and each Related Contract and, at the request of the Agent, each of its
records pertaining to the Collateral with a legend, in form and substance
satisfactory to the Agent, indicating that such document, chattel paper,
Related Contract or Collateral is subject to the security interest granted
hereby; (ii) if any Receivable shall be evidenced by a promissory note or
other instrument or chattel paper, deliver and pledge to the Agent (for the
benefit of the Lenders) hereunder such note or instrument or chattel paper
duly endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Agent; and (iii)
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as the Agent may reasonably request, in order to perfect and
preserve the security interest granted or purported to be granted hereby.
(b) Each Grantor hereby authorizes the Agent to file one or more
financing or continuation statements, and amendments thereto, relating to all
or any part of the Collateral without its signature where permitted by law. A
photocopy or other reproduction of this Agreement or any financing statement
covering the Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law.
(c) Each Grantor will furnish to the Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Agent may
reasonably request, all in reasonable detail.
SECTION 6. As to Equipment and Inventory. (a) Each Grantor shall
keep its Equipment and Inventory at the locations referred to on Section 4(a)
or, upon 30 days' prior written notice to the Agent, at such other places in
the United States of America in jurisdictions where all action required by
Section 5 shall have been taken with respect to its Equipment and Inventory.
SECTION 7. As to Receivables. (a) Each Grantor shall keep its chief
place of business and chief executive office and the office where it keeps its
records concerning the Receivables, and the originals of all chattel paper
that evidence Receivables, if any, at the location therefor referred to in
Section 4(a) or, upon 30 days' prior written notice to Agent, at any other
locations in the United States of America in a jurisdiction where all action
required by Section 5 shall have been taken with respect to the Receivables.
Each Grantor will hold and preserve such records and chattel paper and will
permit representatives of the Agent at any time during normal business hours
to inspect and make abstracts from such records and chattel paper. No Grantor
shall change its name, identity or corporate structure to such an extent that
any financing statement filed in connection with this Agreement would become
seriously misleading, unless the Borrower shall have given the Agent at least
30 days prior written notice thereof and prior to effecting any such change,
taken such steps, at Borrower's expense, as Agent may deem necessary or
desirable to continue the perfecting and priority of the liens in favor of the
Agent granted in connection herewith.
(b) Except as otherwise provided in this subsection (b), the Grantor
shall continue to collect, at its own expense, all amounts due or to become
due the Grantor under the Receivables. In connection with such collections,
the Grantor may take (and, at the Agent's direction, shall take) such action
as the Grantor or the Agent may reasonably deem necessary
130
or advisable to enforce collection of the Receivables; provided, however, that
the Agent shall have the right at any time, upon the occurrence and during the
continuance of an Event of Default or an Unmatured Default and upon written
notice to the Grantor of its intention to do so, to notify the account debtors
or obligors under any Receivables of the assignment of such Receivables to the
Agent and to direct such account debtors or obligors to make payment of all
amounts due or to become due to the Grantor thereunder directly to the Agent
and, upon such notification and at the expense of the Grantor, to enforce
collection of any such Receivables, and to adjust, settle or compromise the
amount or payment thereof, in the same manner and to the same extent as the
Grantor might have done. After receipt by the Grantor of the notice from the
Agent referred to in the proviso to the preceding sentence, (i) all amounts
and proceeds (including instruments) received by the Grantor in respect of the
Receivables shall be received in trust for the benefit of the Agent hereunder,
shall be segregated from other funds of the Grantor and shall be forthwith
paid over to the Agent in the same form as so received (with any necessary
indorsement) to be held as cash collateral and either (A) released to the
Grantor so long as no Event of Default shall have occurred and be continuing
or (B) if any Event of Default shall have occurred and be continuing, applied
as provided by Section 12(b), and (ii) the Grantor shall not adjust, settle or
compromise the amount or payment of any Receivable, release wholly or partly
any account debtor or obligor thereof, or allow any credit or discount
thereon, except in the ordinary course of business consistent with past
practice.
SECTION 8. Transfers and Other Liens. No Grantor may (i) sell,
assign (by operation of law or otherwise) or otherwise dispose of, or grant
any option with respect to, any of the Collateral, or (ii) create or permit to
exist any lien, security interest, option or other charge or encumbrance upon
or with respect to any of the Collateral, except for the security interest
under this Agreement and Liens permitted by the Credit Agreement.
SECTION 9. Agent Appointed Attorney-in-Fact. Each Grantor hereby
irrevocably appoints Agent such Grantor's attorney-in-fact, with full
authority in the place and stead of the Grantor and in the name of the
Grantor, the Lenders or otherwise, from time to time in the Agent's
discretion, upon the occurrence and continuance of an Unmatured Default or an
Event of Default to take any action and to execute any instrument which the
Agent may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to the Agent
pursuant to Section 7,
(b) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due
under or in connection with the Collateral,
(c) to receive, indorse, and collect any drafts or other
instruments, documents and chattel paper, in connection therewith, and
(d) to file any claims or take any action or institute any
proceedings which the Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights
of the Agent or the Lenders with respect to any of the Collateral.
131
SECTION 10. Agent May Perform. If any Grantor fails to perform any
agreement contained herein, the Agent may itself perform, or cause performance
of, such agreement, and the expenses of the Agent or the Lenders incurred in
connection therewith shall be payable by the Grantors upon demand.
SECTION 11. Agent's Duties. The powers conferred on the Agent
hereunder are solely to protect its interest (in its capacity as agent on
behalf of the Lenders) in the Collateral and shall not impose any duty upon it
to exercise any such powers. Except for the exercise of reasonable care in the
safe custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, Agent shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral. Agent
shall be deemed to have exercised reasonable care in the custody and
preservation of any Collateral in its possession if such Collateral is
accorded treatment substantially equal to that which Agent accords its own
property.
SECTION 12. Remedies. If any Event of Default shall have occurred
and be continuing:
(a) Agent may exercise in respect of the Collateral, in addition to
other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the
Uniform Commercial Code in effect in the State of New York at that time
(the "Code") (whether or not the Code applies to the affected
Collateral), and also may (i) require any of the Grantors to, and each
of the Grantors hereby agrees that it will at its expense and upon
request of Agent forthwith, assemble all or part of the Collateral as
directed by the Agent and make it available to Agent at a place to be
designated by Agent which is reasonably convenient to both parties and
(ii) without notice except as specified below, sell the Collateral or
any part thereof in one or more parcels at public or private sale, at
any of the Agent's or Lender's offices or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as the Agent
may deem commercially reasonable. Each Grantor agrees that, to the
extent notice of sale shall be required by law, at least ten days'
notice to the applicable Grantor of the time and place of any public
sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Agent shall not be obligated to
make any sale of Collateral regardless of notice of sale having been
given. The Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to
which it was so adjourned.
(b) Any cash held by Agent as Collateral and all cash proceeds
received by the Agent in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral may, in the
discretion of the Agent, be held by the Agent as collateral for, and/or
then or at any time thereafter be applied (after payment of any amounts
payable to the Agent or the Lenders pursuant to any indemnity in the
Guaranty) in whole or in part by the Agent against, all or any part of
the Obligations in such order as the Agent shall elect. Any surplus of
such cash or cash proceeds held by the Agent and remaining after
payment in full in cash of all the Obligations shall be paid over to
the Grantors or to whomsoever may be lawfully entitled to receive such
surplus.
SECTION 13. Continuing Security Interest; Assignments under Credit
Agreement. This Agreement shall create a continuing assignment of and security
interest in the
132
Collateral and shall (i) remain in full force and effect until the payment in
full in cash of the Obligations and all other amounts payable under this
Agreement and termination of the Loan Documents (such date, the "Security
Termination Date"), (ii) be binding upon each Grantor, and such Grantor's
successors and assigns and (iii) inure to the benefit of, and be enforceable
by, the Agent and its successors, transferees and assigns. On the Security
Termination Date, the security interest granted hereby shall terminate and all
rights to the Collateral shall revert to the Grantor. Upon any such
termination, the Agent will, at the Grantors' expense, execute and deliver to
each Grantor such documents as it shall reasonably request to evidence such
termination.
SECTION 14. Security Interest Absolute. The obligations of the
Grantor under this Agreement are independent of the Obligations, and a
separate action or actions may be brought and prosecuted against the Grantor
to enforce this Agreement, irrespective of whether any action is brought
against any other Loan Party or whether any other Loan Party is joined in any
such action or actions. All rights of the Agent and security interests
hereunder, and all obligations of the Grantor hereunder, shall be absolute and
unconditional, irrespective of:
(a) any lack of validity or enforceability of any Loan Document or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from any Loan Document,
including, without limitation, any increase in the Obligations
resulting from the extension of additional credit to any Loan Party or
any of its Subsidiaries or otherwise;
(c) any taking, exchange, release or non-perfection of any other
collateral, or any taking, release or amendment or waiver of or consent
to departure from any guaranty, for all or any of the Obligations;
(d) any manner of application of collateral, or proceeds thereof, to
all or any of the Obligations, or any manner of sale or other
disposition of any Collateral for all or any of the Obligations or any
other assets of any loan Party or any of its Subsidiaries;
(e) any change, restructuring or termination of the corporate
structure or existence of any loan Party or any of its Subsidiaries; or
(f) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, any Loan Party or a third
party grantor of a security interest.
SECTION 15. Revised Article 9. It is the intention of the parties to
this Agreement that the priorities and agreements herein contained continue to
apply after the enactment by the various States of Revised Article 9 --
Secured Transactions (with conforming amendments to Articles 1, 2, 2a, 4, 5,
6, 7 and 8) to the UCC as approved by The American Law Institute in 1998 and
approved and recommended for enactment in all the States by the National
Conference of Commissioners for Uniform State Laws in 1998 ("Revised Article
9") and the effectiveness of Revised Article 9 in any State. After the
effectiveness of Revised Article 9 in any State governing perfection and the
effect of perfection or non-perfection of a
133
security interest in any Collateral, as to such State and such Collateral, (i)
all section references herein to, and all defined terms used herein defined
in, Article 9 of the UCC as currently in effect shall be deemed to be to any
corresponding Section or definition of Revised Article 9, (ii) if any
definition used herein by reference to Revised Article 9 is broader than the
corresponding definition used in current Article 9 of the UCC, such broader
definition will apply herein.
IN WITNESS WHEREOF, the Grantors have caused this Agreement to be
duly executed under seal and delivered by its officer thereunto duly
authorized as of the date first above written.
134
EXHIBIT E
EXHIBIT E
REVOLVING LOAN FACILITY
CLOSING STATEMENT
Closing statement for revolving loan facility in the original
principal amount of $550,000,000.00 (the "Loan") to be made by FORD MOTOR
CREDIT COMPANY ("Ford Credit" or "Agent"), GENERAL MOTORS ACCEPTANCE
CORPORATION ("GMAC"), CHRYSLER FINANCIAL COMPANY, L.L.C. ("Chrysler
Financial," and together with Ford Credit, GMAC and any and all other lenders
under the Credit Agreement, the "Lender") to ASBURY AUTOMOTIVE GROUP, L.L.C. a
Delaware limited liability company ("Borrower"), and guaranteed by each of the
following (collectively, "Guarantor"):
NORTH CAROLINA PLATFORM:
- -----------------------
Asbury Automotive North Carolina L.L.C
Asbury Automotive North Carolina Dealership Holdings L.L.C Crown CPG L.L.C.
Crown CHH L.L.C.
Crown GBM L.L.C
Crown CHV L.L.C
Crown GAU L.L.C.
Crown RPG L.L.C.
Crown GKI L.L.C.
Crown RIS L.L.C.
Crown GMI L.L.C.
Crown RIM L.L.C.
Crown GDO L.L.C.
Crown RIB L.L.C.
Crown GNI L.L.C.
Crown RIA L.L.C.
Crown GAC L.L.C.
Asbury Automotive North Carolina Management L.L.C.
Crown GHO L.L.C.
Asbury Automotive North Carolina Real Estate Management L.L.C.
Crown Used Car Mall L.L.C.
Crown FFO Holdings L.L.C.
Crown FFO L.L.C.
Camco Finance L.L.C.
135
OREGON PLATFORM:
- ---------------
Asbury Automotive Oregon Dealership Holdings L.L.C.
Thomason FRD L.L.C.
Thomason TY L.L.C.
Thomason SUZU L.L.C.
Thomason Hon L.L.C.
Thomason Sub L.L.C.
Thomason HUND L.L.C.
Thomason NISS L.L.C.
Thomason MAZ L.L.C.
Thomason ZUK L.L.C.
Thomason On Canyon L.L.C.
Thomason Auto Credit Northwest, Inc.
Asbury Automotive Oregon Management L.L.C.
Asbury Automotive Oregon Real Estate Management L.L.C.
Thomason Dam L.L.C.
Asbury Automotive North Carolina Real Estate Holdings L.L.C.
ATLANTA PLATFORM:
- -----------------
Asbury Automotive Atlanta L.L.C.
Asbury Atlanta Hon L.L.C.
Asbury Atlanta Chevrolet L.L.C.
Asbury Atlanta LEX L.L.C.
Asbury Atlanta AC L.L.C.
ST. LOUIS PLATFORM:
- -------------------
Asbury Automotive St. Louis L.L.C.
Asbury St. Louis LEX L.L.C.
Asbury St. Louis Cadillac L.L.C.
Asbury St. Louis LR L.L.C.
Asbury St. Louis Gen L.L.C.
136
TEXAS PLATFORM:
- --------------
Asbury Automotive Texas L.L.C.
Asbury Texas Management L.L.C.
Asbury Automotive Texas Holdings L.L.C.
McDavid Grande L.P.
McDavid Auction L.P.
McDavid Outfitters L.P.
McDavid Houston Hon L.P.
McDavid Houston NISS L.P.
McDavid Houston Kia L.P.
McDavid Irving PG&G L.P.
McDavid Irving ZUK L.P.
McDavid Plano Acura L.P.
McDavid Austin Acura L.P.
McDavid Communications L.P.
McDavid Irving - Hon L.P.
Plano Lincoln-Mercury, Inc.
TAMPA PLATFORM:
- --------------
Asbury Villanova II L.L.C.
Asbury Automotive Tampa GP L.L.C.
Asbury Automotive Tampa L.P.
Asbury Tampa Management L.L.C.
Tampa HUND L.P.
Tampa Kia L.P.
Tampa LM L.P.
Tampa MIT L.P.
Tampa SUZU L.P.
WMZ Motors L.P.
WMZ Brandon Motors L.P.
WTY Motors L.P.
Tampa Pontiac GMC L.P.
Asbury Automotive Brandon L.P.
Precision Enterprises Tampa, Inc.
Precision Nissan, Inc.
Precision Computer Services, Inc
Precision Motorcars, Inc.
Precision Infiniti, Inc.
137
JACKSONVILLE PLATFORM:
- ---------------------
Asbury Automotive Jacksonville GP L.L.C.
Asbury Automotive Jacksonville L.P.
Asbury Jax Holdings L.P.
Coggin Automotive Corp.
CN Motors Ltd.
CP-GMC Motors Ltd.
CFP Motors Ltd.
Avenues Motors Ltd.
CH Motors Ltd.
CHO Partnership Ltd.
Asbury Automotive Central Fl, L.L.C.
Coggin Starling Chevrolet L.L.C.
Coggin Starling Chevrolet Olds, L.L.C.
Asbury Jax Management L.L.C.
ANL L.P.
Bayway Financial Service L.P.
Coggin Management L.P.
C & O Properties Ltd.
Asbury Deland Imports 2, L.L.C.
Asbury-Deland Imports, L.L.C.
Asbury Automotive Deland, L.L.C.
AF Motors, L.L.C.
ALM Motors, L.L.C.
Coggin Cars L.L.C.
CSA Imports L.L.C.
Coggin Chevrolet L.L.C.
138
ARKANSAS PLATFORM:
- -----------------
Asbury Villanova V L.L.C.
Asbury Automotive Arkansas L.L.C.
Asbury Automotive Arkansas Dealership Holdings L.L.C.
NP FLM L.L.C.
NP VKW L.L.C.
Prestige TOY L.L.C.
Premier NSN L.L.C.
Premier Lm L.L.C.
Hope FLM L.L.C.
NP MZD L.L.C.
Prestige Bay L.L.C.
Premier PON L.L.C.
Hope CPD L.L.C.
TXK L.L.C.
TXK FRD L.P.
TXK CPD L.P.
Hope FLM L.L.C.
Escude NN L.L.C.
Escude T L.L.C.
Escude M L.L.C.
Escude Ns L.L.C.
Escude D L.L.C.
Asbury Management L.L.C.
Asbury Everest Holdings L.L.C.
The conditions set forth in Section I hereof and the documents set
forth in Section II hereof are subject to change and may be added to or
otherwise modified by Ford Credit in its sole and absolute discretion as
the transaction progresses.
139
EXHIBIT F
[Form of Officer's Certificate]
OFFICER'S CERTIFICATE
I, the undersigned, hereby certify that I am the ____________________ of
ASBURY AUTOMOTIVE GROUP, L.L.C., a limited liability company duly organized
and existing under the laws of the State of Delaware (the "Borrower").
Capitalized terms used herein and not otherwise defined herein are as defined
in that certain Credit Agreement dated ______________, 2000, between the
Borrower and FORD MOTOR CREDIT COMPANY (the "Agent") and each of the lenders
as more specifically set forth therein (as amended, restated, supplemented or
modified from time to time, the "Credit Agreement").
I further certify that, pursuant to Section 3.2 of the Credit Agreement,
as of the date hereof:
1. The representations and warranties of the Borrower contained in
Section 4 of the Credit Agreement are true and correct in all material
respects on and as of the date hereof with the same effect as if made on the
date hereof, except for representations and warranties expressly stated to
relate to a specific earlier date, in which case such representations and
warranties are true and correct in all material respects as of such earlier
date;
2. I have reviewed the terms of the Credit Agreement and I have made, or
have caused to be made under my supervision, a detailed review of the
transactions and conditions of the Borrower and its Subsidiaries during the
accounting period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or event which constitutes and
Event of Default or Unmatured Default during or at the end of the accounting
period covered by the attached financial statements or as of the date of this
Certificate, except as set forth below:
Describe nature and status of Event of Default) ____________________________
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
4. The current outstanding dollar amount of all Off Balance Sheet
Liabilities of the Asbury Group is $-------------------------.
IN WITNESS WHEREOF, I hereby subscribe my name on behalf of the Borrower
on this _____ day of ________________.
Asbury Automotive Group, L.L.C.
By ________________________
Name _______________________
Title ________________________
140
EXHIBIT G
[form of Waiver, Guaranty and Disbursement Agreement]
WAIVER, GUARANTY AND DISBURSEMENT AGREEMENT
THIS WAIVER, GUARANTY AND DISBURSEMENT AGREEMENT (the "Agreement"), dated
as of ______________, is made by and among _______________________________
(the "Subsidiary"), ____________________________ (the "Agent") for the lenders
(the "Lenders") under the Credit Agreement defined below (the "Agent"), and
______________________, as borrower ("Borrower").
A. The Borrower, Agent and the Lender have entered into that certain
Credit Agreement dated as of __________________________, (as the same may have
been or may be amended, restated or otherwise modified from time to time, the
"Credit Agreement") pursuant to which the Lender has agreed to finance the
acquisition by the Borrower of automobile dealerships. Unless defined herein
to the contrary, all of the defined terms in the Credit Agreement are
incorporated herein by reference.
B. The Borrower has entered into a contract under which the Subsidiary
will acquire all or substantially all of the tangible and intangible assets
(collectively, the "Acquired Assets") of an existing automobile dealership
which will then be used by the Subsidiary to operate as a Asbury Dealership.
This acquisition has been approved, and will be financed, by the Lender. The
Borrower is required by the Credit Agreement to pledge its Capital Stock in
the Subsidiary to the Lender. The applicable manufacturer, which must consent
to the acquisition by the Borrower or the Subsidiary of the Acquired Assets,
has generally consented to the acquisition but has refused to consent to the
pledge by the Borrower of the Borrower's Capital Stock in the Subsidiary. The
Borrower has requested that the Lender waive its requirement of the pledge,
and the Lender is willing to do so on the terms set forth in this Agreement.
Accordingly, the Subsidiary, the Lender and the Borrower, in
consideration of the foregoing and other good and valuable consideration,
hereby agree as follows:
1. Direct Disbursement; Status as Advance. An Advance in the amount of
$_____________________ (the "Direct Disbursement") has been requested to
finance the acquisition of the Acquired Assets. The Direct Disbursement shall
be made directly to, or as directed by, the Subsidiary, and shall be used by
the Subsidiary to finance the acquisition of the Acquired Assets. The Borrower
acknowledges and agrees that the Direct Disbursement is and shall constitute
an Advance for all purposes under the Credit Agreement.
2. Waiver of Requirement of Pledge of Capital Stock. The Lender waives
the requirement that the Borrower pledge its Capital Stock in the Subsidiary
as collateral for the Borrower's obligations to the Lender. In consideration
of this waiver, the Borrower shall not pledge the Capital Stock of the
Subsidiary to any person other than the Lender for any purpose. Should the
applicable manufacturer subsequently allow the pledging by the Borrower to the
Lender of the Borrower's Capital Stock in the Subsidiary, the Borrower shall
promptly upon the request of the Lender execute and deliver a Borrower Pledge
of the Borrower's Capital Stock in the Subsidiary.
141
3. Conditions Precedent. Unless otherwise waived by the Lender, all of
the conditions precedent to an Advance under the Credit Agreement including,
without limitation, the execution and delivery by the Subsidiary of a
Dealership Guaranty and a Dealership Security Agreement, shall be delivered to
the Lender.
4. Acknowledgment of Benefit; Guaranty. The making of the Direct
Disbursement will allow the Subsidiary to finance the acquisition of the
Acquired Assets, which acquisition clearly constitutes a direct, pecuniary
benefit to the Subsidiary. Without limiting the Subsidiary's obligations under
the Dealership Guaranty executed or to be executed by the Subsidiary, the
Subsidiary hereby (i) guarantees to the Lender prompt payment of the Direct
Disbursement in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise) strictly in accordance with the
terms of the Credit Agreement with respect to the Revolving Credit Obligations
and (ii) agrees that if any of the Direct Disbursement is not paid in full
when due (whether at stated maturity, as a mandatory prepayment, by
acceleration or otherwise), the Subsidiary will promptly pay and perform the
same, without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of the Revolving Credit Obligations,
the Direct Disbursement will be promptly paid in full when due (whether at
extended maturity, as a mandatory prepayment, by acceleration or otherwise) in
accordance with the terms of such extension or renewal.
5. Terms Not Changed; General. Unless expressly modified or waived by the
terms of this Agreement, all of the terms and conditions of the Credit
Agreement and the other Loan Documents shall remain in full force and effect.
This Agreement may be executed in two or more counterparts, each of which
shall constitute an original but all of which when taken together shall
constitute one contract.
IN WITNESS WHEREOF, the Subsidiary, the Borrower and the Agent have each
caused this Waiver, Guaranty and Disbursement Agreement to be duly executed by
its authorized officers as of the day and year first above written.
142
EXHIBIT H
[form of Pledged Account Agreement]
PLEDGED ACCOUNT AGREEMENT
THIS PLEDGED ACCOUNT AGREEMENT (this "Agreement") is made and entered
into as of this ____ day of _____________________, 2000, by and among [NAME OF
BANK], a national banking association (the "Bank"), [NAME OF ASBURY ENTITY],
(a) (an) ____________________ corporation/limited liability company/limited
partnership (the "Company"), and FORD MOTOR CREDIT COMPNY, a Delaware
corporation, as agent (the "Agent") for the lenders (collectively, the
"Lenders") from time to time party to the Credit Agreement described below.
Pursuant to that certain Credit Agreement dated as of
___________________________ among Asbury Automotive Group L.L.C., a Delaware
limited liability company, (the entity which directly or indirectly owns and
controls the Company; the "Borrower"), the Lenders and the Agent (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
the Lenders have agreed to make loans and extend other financial
accommodations to the Borrower. The Company guarantees the obligations of
Borrower under the Credit Agreement pursuant to the terms of a Guaranty (as
defined in the Credit Agreement) from the Company to the Agent, for the
benefit of the Lenders.
The Company has established deposit accounts with the Bank as more
specifically identified on Schedule I attached hereto (collectively the
"Pledged Accounts" and each, a "Pledged Account").
The parties hereto desire to enter into this Agreement in order to set
forth their relative rights and duties with respect to the Pledged Accounts
and all funds on deposit therein from time to time.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
1. Effectiveness. This Agreement shall take effect immediately upon its
execution by all parties hereto and shall supersede any blocked account or
similar agreement in effect with respect to any Pledged Account.
2. Security Interest; Agency. As collateral security for all obligations
of the Company to the Agent and the Lenders now or hereafter existing under
the Company's Guaranty, whether for principal, interest, fees, expenses or
otherwise, the Company hereby grants to the Agent, for its own benefit and the
ratable benefit of the Lenders, a present and continuing security interest in
(a) the Pledged Accounts, (b) all contract rights, claims and privileges in
respect of the Pledged Accounts, and (c) all cash, checks, money orders,
instruments, all investment property and other items of value of the Company
now or hereafter paid, deposited, credited, held (whether for collection,
provisionally or otherwise) or otherwise in the possession or under the
control of, or in transit to, the Bank or any agent, bailee or custodian
143
thereof (collectively, "Receipts"), and all proceeds of the foregoing, and the
Bank acknowledges that this Agreement constitutes notice of the Agent's
security interest in such collateral and does hereby consent thereto. The
Agent hereby appoints the Bank as the Agent's bailee and pledgee-in-possession
for the Pledged Accounts and all Receipts, and the Bank hereby accepts such
appointment and agrees to be bound by the terms of this Agreement. The Company
hereby agrees to such appointment and further agrees that the Bank, on behalf
of the Agent, shall be entitled to exercise, upon the written instructions of
the Agent (without any further consent from the Company), any and all rights
which the Agent may have under the Guaranty, the Credit Agreement, the other
Loan Documents described therein or under applicable law with respect to the
Pledged Accounts, all Receipts and all other collateral described in this
paragraph 2; provided, that the Agent and the Company acknowledge that the
Bank shall not be obligated to exercise any such rights which the Agent may
have except as specifically required under this Agreement. The Bank agrees to
comply with instructions originated by the Agent directing disposition of the
funds in the Pledged Accounts without further consent by the Company.
3. Control of Pledged Accounts. Each Pledged Account shall be under the
sole dominion and control of the Agent and shall be maintained by the Bank in
the name of [NAME OF ASBURY ENTITY]; provided, however, that unless and until
notice in writing to the contrary is provided by the Agent, in its sole
discretion, to the Bank, the Company shall have the right from time to time to
write checks against amounts from the Pledged Accounts and to make transfers
and withdrawals of funds from the Pledged Accounts. If so directed in such
notice (without the need of any further consent from the Company), all checks
received by the Bank on or after the second Banking Day (a day on which the
Bank is open to conduct its regular banking business, other than a Saturday,
Sunday or public holiday) after the Banking Day on which the Bank receives
such notice will be returned unpaid to the presenter marked "REFER TO MAKER".
The Bank will comply with any written instructions it receives from the Agent
(without any further consent from the Company) to transfer immediately all
collected funds then on deposit in any or all Pledged Accounts and to close
such Pledged Account(s).
4. Statements and Other Information. Upon the Agent's request, the Bank
shall provide the Agent with copies of the regular monthly bank statements
provided to the Company and such other information relating to each Pledged
Account as shall reasonably be requested by the Agent. Bank shall also deliver
a copy of all notices and statements required to be sent to Company pursuant
to any agreement governing or related to each Pledged Account to the Agent at
such times as provided therein.
5. Fees. The Company agrees to pay on demand all usual and customary
service charges, transfer fees and account maintenance fees (collectively,
"Fees") of the Bank in connection with the Pledged Accounts. In the event the
Company fails to timely make a payment to the Bank of any Fees, the Bank may
thereafter exercise its right of set-off against the Pledged Accounts for such
amounts. The Agent shall not have any responsibility or liability for the
payment of any Fees.
144
6. Set-off; Subordination. The Bank hereby agrees that it will not
exercise or claim any right of set-off or banker's lien against any Pledged
Account or any Receipts on deposit therein, and Bank hereby further waives any
such right or lien which it may have against any Receipts deposited in the
Pledged Accounts, except (a) for debits to cover the full amount of any check
or other item credited to a Pledged Account and then returned unpaid for any
reason, and (b) to the extent expressly set forth in paragraph 5 above. The
Bank hereby subordinates any security interest it now has or may hereafter
acquire in the Pledged Accounts and/or the Receipts and agrees that the
security interest granted to the Agent (for the benefit of the Lenders)
pursuant to paragraph 2 of this Agreement shall at all times be prior to any
security interest of the Bank in the Pledged Accounts and/or the Receipts. The
priorities set forth herein shall apply notwithstanding the time or order of
attachment or perfection of any security interest or the rules of priority
established under the Uniform Commercial Code as adopted in New York or other
applicable law.
7. Exculpation of Bank; Indemnification by Company. The Company and the
Agent agree that the Bank shall have no liability to either of them for any
loss or damage that either or both may claim to have suffered or incurred,
either directly or indirectly, by reason of this Agreement or any transaction
or service contemplated by the provisions hereof, unless occasioned by the
gross negligence or willful misconduct of the Bank. In no event shall the Bank
be liable for losses or delays resulting from computer malfunction,
interruption of communication facilities, labor difficulties or other causes
beyond the Bank's reasonable control or for indirect, special, punitive or
consequential damages. The Company agrees to indemnify the Bank and hold it
harmless from and against any and all claims, other than those ultimately
determined to be founded on gross negligence or willful misconduct of the
Bank, and from and against any damages, penalties, judgments, liabilities,
losses or expenses (including reasonable attorney's fees and disbursements)
incurred as a result of the assertion of any claim, by any person or entity,
arising out of, or otherwise related to, any transaction conducted or service
provided by the Bank through the use of any account at the Bank pursuant to
the procedures provided for or contemplated by this Agreement.
8. Termination. This Agreement may be terminated by the Company only upon
delivery to the Bank of a written notification thereof jointly executed by the
Company and the Agent. This Agreement may be terminated by the Agent at any
time, with or without cause, upon its delivery of written notice thereof to
each of the Company and the Bank. This Agreement may be terminated by the Bank
at any time on not less than 60 days prior written notice delivered to each of
the Company and the Agent. Upon delivery or receipt of such notice of
termination to or by the Bank, the Bank will (without any further consent from
the Company): (a) immediately transmit to such account as the Agent may direct
(i) all collected funds, if any, then on deposit in, or otherwise to the
credit of, each Pledged Account, and (ii) upon receipt, all funds received
after such notice for deposit in, or otherwise to the credit of, each Pledged
Account; and (b) deliver directly to the Agent all Receipts consisting of
checks, money orders, drafts and other instruments or items of value, whether
then in the possession of the Bank or received by the Bank after such notice,
without depositing such Receipts in any Pledged Account or any other account.
The provisions of paragraphs 2, 3 and 6 shall survive termination of this
Agreement unless and until specifically released by the Agent in writing. All
rights of Bank under paragraphs 5 and 7 shall survive any termination of this
Agreement.
145
9. Irrevocable Agreements. The Company acknowledges that the agreements
made by it and the authorizations granted by it in paragraphs 2 and 3 hereof
are irrevocable and that the authorizations granted in paragraphs 2 and 3
hereof are powers coupled with an interest and may be exercised by Agent with
no need for any authorization by the Company beyond the authorizations as set
forth herein.
10. Notices. All notices, requests or other communications given to the
Company, Agent or Bank shall be given in writing (including by facsimile) at
the address specified below:
Agent:
FORD MOTOR CREDIT COMPANY
The American Road
Dearborn, Michigan 48126
Attention: Stephen Starks
Telephone: (____) _____-_______
Facsimile: (____) _____-_______
Bank:
_______________________________
Attention: ___________________
Telephone: (____) _____-_______
Facsimile: (____) ______-______
Company:
_____________
c/o Asbury Automotive Group L.L.C.
3 Landmark Square - Suite 500
Stamford, Connecticut 06901
Attention: Brian Kendrick, President & CEO
Telephone: (203) 356-4400
Facsimile: (____) _____-_________
Any party may change its address for notices hereunder by notice to each other
party hereunder given in accordance with this paragraph 10. Each notice,
request or other communication shall be effective (a) if given by facsimile,
when such facsimile is transmitted to the facsimile number specified in this
paragraph 10 and confirmation of receipt is made by the appropriate party, (b)
if given by overnight courier, 24 hours after such communication is deposited
with the overnight courier for delivery, addressed as aforesaid, or (c) if
given by any other means, when delivered at the address specified in this
paragraph 10.
146
11. Miscellaneous.
(a) This Agreement may be amended only by a written instrument executed
by the Agent, the Bank and the Company acting by their respective duly
authorized representatives.
(b) This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns, but neither
the Company nor the Bank shall be entitled to assign or delegate any of its
rights or duties hereunder without first obtaining the express prior written
consent of the Agent.
(c) This Agreement may be executed in any number of several counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
(d) THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAW RULES).
(e) Revised Article 9. It is the intention of the parties to this
Agreement that the priorities and agreements herein contained continue to
apply after the enactment by the various States of Revised Article 9 - Secured
Transactions (with conforming amendments to Articles 1, 2, 2a, 4, 5, 6, 7, and
8) to the UCC as approved by The American Law Institute in 1998 and approved
and recommended for enactment in all the States by the National Conference of
Commissioners for Uniform State Laws in 1998 ("Revised Article 9") and the
effectiveness of Revised Article 9 in any State. After the effectiveness of
Revised Article 9 in any State governing perfection and the effect of
perfection or non-perfection of a security interest in a Pledged Account, as
to such State and such Pledged Account, (i) all section references herein to,
and all defined terms used herein defined in, Article 9 of the UCC as
currently in effect shall be deemed to be any corresponding Section or
definition of Revised Article 9, (ii) if any definition used herein by
reference to Revised Article 9 is broader than the corresponding definition
used in current Article 9 of the UCC, such broader definition will apply.
(f) Severability. Any provision in this Agreement 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 this Agreement are declared to be severable.
IN WITNESS WHEREOF, each of the parties has executed and delivered this
Agreement as of the day and year first above set forth.
147
Schedule 1.1.1
[Permitted Existing Indebtedness]
148
Schedule 1.1.2
[Permitted Existing Investments]
149
Schedule 1.1.3
[Permitted Existing Liens]
150
Schedule 1.1.4
[Lender's Commitment]
"Commitment"
Ford Motor Credit Company $235,000,000.00
Chrysler Financial Company, L.L.C. $235,000,000.00
General Motors Acceptance Corporation $80,000,000.00
151
Schedule 1.1.5
[Dealership Guarantors]
152
Schedule 1.1.6
"Existing Asbury Obligations" means, collectively, all outstanding amounts of
principal and accrued interest, plus other amounts due and owing on the
Effective Date under each of the following obligations:
1.
2.
3.
4.
153
Schedule 1.1.7
[Pending Acquisitions]
NONE
154
Schedule 1.1.8
[Subsidiaries not wholly owned]
155
Schedule 3.1
"Disclosed Litigation"
156
Schedule 4.8
[Subsidiaries]
157
Schedule 4.9
[ERISA: employee welfare benefit plans]
NONE
158
Schedule 5.3 (F)
[Entities with a Minority Holder of Equity Interests]
Jacksonville Platform
Asbury Automotive Central Florida, L.L.C.
Asbury Automotive Deland, L.L.C.
Asbury Deland Imports 2, L.L.C.
3 Total Subsidiaries in Platform
St. Louis Platform
Asbury St. Louis LR L.L.C.
1 Total Subsidiaries in Platform
159
SCHEDULE 9.3
FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of __________ ____,
____ (as amended, amended and restated, supplemented or otherwise modified
from time to time, the "Credit Agreement"; the terms defined therein, unless
otherwise defined herein, being used herein as therein defined) among
____________________, a _______________ corporation (the "Borrower"), the
Lender Parties party thereto, _______________, as Administrative Agent for the
Lender Parties.
Each "Assignor" referred to on Schedule 1 hereto (each, an "Assignor")
and each "Assignee" referred to on Schedule 1 hereto (each, an "Assignee")
agrees severally with respect to all information relating to it and its
assignment hereunder and on Schedule 1 hereto as follows:
1. Such Assignor hereby sells and assigns, without recourse except as to
the representations and warranties made by it herein, to such Assignee, and
such Assignee hereby purchases and assumes from such Assignor, an interest in
and to such Assignor's rights and obligations under the Credit Agreement as of
the date hereof equal to the percentage interest specified on Schedule 1
hereto of all outstanding rights and obligations under the Credit Agreement
[Facility or Facilities specified on Schedule 1 hereto]. After giving effort
to such sale and assignment, such Assignee's Commitments and the amount of the
Advances owing to such Assignee will be as set forth on Schedule 1 hereto.
2. Such Assignor (i) represents and warrants that its name set forth on
Schedule 1 hereto is its legal name, that it is the legal and beneficial owner
of the interest or interests being assigned by it hereunder and that such
interest or interests are free and clear of any adverse claim; (ii) make no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with any
Loan Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of, or the perfection or priority of any
lien or security interest created or purported to be created under or in
connection with any Loan Document or any other instrument or document
furnished pursuant thereto; (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of any Loan
Party or the performance or observance by any Loan Party of any of its
obligations under any Loan Document or any other instrument or document
furnished pursuant thereto; and (iv) attaches the Note or Notes held by such
Assignor and requests that the Administrative Agent exchange such Note or
Notes for a new Note or Notes payable to the order of such Assignee in an
amount equal to the Commitments assumed by such Assignee pursuant hereto or
new Notes payable to the order of such Assignee in an amount equal to the
Commitments assumed by such Assignee pursuant hereto and such Assignor in an
amount equal to the Commitments retained by such Assignor under the Credit
Agreement, respectively, as specified on Schedule 1 hereto.
3. Such Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 4.4 thereof and such other
160
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (ii)
agrees that it will, independently and without reliance upon any Agent, any
Assignor or any other Lender Party 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 the Credit Agreement; (iii)
represents and warrants that its name set forth on Schedule 1 hereto is its
legal name; (iv) confirms that it is an Eligible Assignee; (v) appoints and
authorizes the Agent to take such action as agent on its behalf and to
exercise such powers and discretion under the Loan Documents as are delegated
to such Agent by the terms thereof, together with such powers and discretion
as are reasonably incidental thereto; (vi) agrees that it will perform in
accordance with their terms all of the obligations that by the terms of the
Credit Agreement are required to be performed by it as a Lender Party; and
(vii) attaches any U.S. Internal Revenue Service forms required under Section
2.12 of the Credit Agreement.
4. Following the execution of this Assignment and Acceptance, it will be
delivered to the Administrative Agent for acceptance and recording by the
Administrative Agent. The effective date for this Assignment and Acceptance
(the "Effective Date") shall be the date of the acceptance hereof by the
Administrative Agent, unless otherwise specified on Schedule 1 hereto.
5. Upon such acceptance and recording by the Administrative Agent, as of
the Effective Date, (i) such Assignee shall be a party to the Credit Agreement
and, to the extent provided in this Assignment and Acceptance, have the rights
and obligations of a Lender Party thereunder and (ii) such Assignor shall, to
the extent provided in this Agreement and Acceptance, relinquish its rights
and be released from its obligations under the Credit Agreement (other than
its rights and obligations under the Loan Documents that are specified under
the terms of such Loan Documents to survive the payment in full of the
Obligations of the Loan Parties under the Loan Documents to the extent any
claim thereunder relates to an event arising prior to the Effective Date of
this Assignment and Acceptance) and, if this Assignment and Acceptance covers
all of the remaining portion of the rights and obligations of such Assignor
under the Credit Agreement, such Assignor shall cease to be a party thereto.
6. Upon such acceptance and recording by the Agent, from and after the
Effective Date, the Agent shall make all payments under the Credit Agreement
and the Notes in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest and commitment fees with
respect thereto) to such Assignee. Such Assignor and such Assignee shall make
all appropriate adjustments in payments under the Credit Agreement and the
Notes for periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of Schedule 1 to this Assignment and Acceptance by
telecopier shall be effective as delivery of an original executed counterpart
of this Assignment and Acceptance.
161
IN WITNESS WHEREOF, each Assignor and each Assignee have caused Schedule
1 to this Assignment and Acceptance to be executed by their officers thereunto
duly authorized as of the date specified thereon.
Effective Date (if other than date of acceptance by Administrative Agent):
- -------------- -----, ------
Assignors
Assignees
Accepted [and Approved] this ______
day of _______________, _______
[NAME OF AGENT],
as Agent
By ________________________________
Title:
[Approved this ____ day
of _______________, ______
[NAME OF BORROWER]
By________________________________
Title:]
162
EXHIBIT 10.10
[FORM OF SHAREHOLDERS AGREEMENT]
SHAREHOLDERS AGREEMENT dated as of o, o (this "Agreement"),
among [NEWCO], a [Delaware] 1 corporation (the "Company"), ASBURY
AUTOMOTIVE HOLDINGS L.L.C., a Delaware limited liability company
("AAH"), and the other stockholders listed on the signature pages
hereto (collectively, the "Specified Shareholders" and, together
with AAH, the "Shareholders").
Preliminary Statements
WHEREAS, the Shareholders were members of Asbury Automotive Group
L.L.C., a Delaware limited liability company ("Oldco"), and are parties to the
LLC Agreement (as defined below); and
WHEREAS, the LLC Agreement provided for the IPO (as defined below) and
the execution of this Agreement by the Shareholders and the Company; and
WHEREAS, the Company, as successor to Oldco 2 , currently intends to
consummate the IPO.
NOW THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definition of Certain Terms Used Herein. (a) As used
herein, the following terms shall have meanings specified below:
- --------
1/ This form of shareholders agreement assumes that Newco will be a
Delaware corporation. In the event Newco is formed in another jurisdiction, this
form of agreement shall be appropriately modified.
2/ This form of shareholders agreement assumes that all of Oldco's assets
and liabilities will be acquired by the Company by merger or otherwise and Oldco
will cease to exist. In the event another form of transaction is utilized, this
form of agreement shall be appropriately modified.
2
"Affiliate" shall mean, with respect to any person, any other person
that directly or indirectly through one or more intermediaries controls or is
controlled by or is under common control with such person. For the purposes of
this definition, "control" when used with respect to any particular person,
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"AAH Matter" shall mean any matter brought before a Shareholders
Meeting and proposed or sponsored by AAH to be acted upon by the stockholders of
the Company at such Shareholders Meeting.
"AAH Nominee" shall mean any person nominated by AAH for election as a
director to the Board of Directors.
"beneficial owner" shall have the meaning assigned to such term in
Rule 13d-3 under the Exchange Act.
"Blackout Period" shall have the meaning specified in Section 5.01(b).
"Board of Directors" shall mean the Board of Directors of the Company.
"Claims" shall have the meaning specified in Section 5.06(a).
"Common Stock" shall mean the common stock, par value $[ ] per share,
of the Company.
"Dealer Nominee" shall mean any person nominated by the holders of a
majority of the Shares held by the Specified Shareholders for election as a
director to the Board of Directors, provided such person is reasonably
acceptable to AAH. AAH agrees that each of the individuals set forth on Schedule
I is an acceptable Dealer Nominee so long as such individual continues to be
employed by the Company or an Affiliate of the Company.
"Demand Holder" shall mean (i) AAH or (ii) a Majority in Interest of
the Specified Shareholders.
"Demand Number" shall mean (i) with respect to AAH, five and (ii) with
respect to the Specified Shareholders, two; provided that if a Triggering Event
occurs and if the Voting Termination Date has not occurred, the Demand Number
with respect to the Specified Shareholders
3
shall be three; provided, further, that if a Triggering Event is no longer
continuing or if the Voting Termination Date occurs, the Specified Shareholders'
Demand Number shall revert to two. Each Specified Shareholder shall be deemed to
have exercised a Demand Request if a Majority in Interest of the Specified
Shareholders make a Demand Request.
"Demand Period" shall have the meaning specified in Section 5.01(a).
"Demand Registration" shall have the meaning specified in Section
5.01(a).
"Demand Request" shall have the meaning specified in Section 5.01(a).
"Directors" shall mean members of the Board of Directors.
"DGCL" shall mean the Delaware General Corporation Law, as amended.
"Effective Period" shall have the meaning specified in Section
5.04(a)(iii).
"Effective Time" shall mean the date on which the IPO is consummated.
"Election Meeting" shall mean any Shareholders Meeting relating to the
election of Directors to the Board of Directors.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Exercising Demand Holder" shall mean a Demand Holder who has
exercised a Demand Request that it is entitled to exercise under the terms of
this Agreement (together with any Subsidiary Holder thereof whose shares are
included in such Demand Request). If a Majority in Interest of the Specified
Shareholders make a Demand Request, each Specified Shareholder participating in
such Demand Request shall be deemed an Exercising Demand Holder.
"Governmental Entity" shall mean any Federal, state or local
government or any court, administrative or regulatory agency or commission or
other governmental authority or agency, domestic or foreign.
4
"Inspectors" shall have the meaning specified in Section 5.04(a)(iv).
"IPO" shall have the meaning assigned to such term in the LLC
Agreement.
"Liens" shall mean any pledges, claims, liens, charges, encumbrances
or security interests of any kind or nature whatsoever.
"LLC Agreement" shall mean the Third Amended and Restated Limited
Liability Company Agreement of Asbury Automotive Group L.L.C. dated as of
February 1, 2000, among AAH and the Specified Shareholders.
"Majority in Interest of the Specified Shareholders" shall mean the
Specified Shareholders who, at the time in question, hold (together with their
Subsidiary Holders) Shares aggregating more than 50% of all Shares held by all
Specified Shareholders (together with their Subsidiary Holders).
"Material Transaction" shall have the meaning specified in Section
5.01(b).
"Maximum Number" shall have the meaning specified in Section 5.02(b).
"Other Holder" shall have the meaning specified in Section 5.02(b).
"Other Matter" shall mean any matter (including the election of
directors to the Board of Directors) brought before a Shareholders Meeting and
proposed or sponsored by a person other than AAH, to be acted upon by the
stockholders of the Company.
"Piggy Back Registration" shall have the meaning specified in Section
5.02(a).
"Piggy Back Request" shall have the meaning specified in Section
5.02(a).
"Records" shall have the meaning specified in Section 5.04(a)(iv).
"Registered Shares" shall have the meaning specified in Section
5.04(a)(xvii).
"Registration" shall have the meaning specified in Section 5.02(a).
5
"Registration Expenses" shall have the meaning specified in Section
5.05.
"SEC" shall mean the United States Securities and Exchange Commission
or any other United States federal agency at the time administering the
Securities Act or the Exchange Act, as applicable, whichever is the relevant
statute.
"Securities Act" shall mean the Securities Act of 1933 and the rules
and regulations thereunder.
"Shareholders Meeting" shall mean (i) any annual or special meeting of
the stockholders of the Company or (ii) any action by written consent of the
stockholders of the Company.
"Shares" shall mean, with respect to a Shareholder, the shares of
Common Stock owned by such Shareholder or any Subsidiary Holder, including any
shares of Common Stock acquired by such Shareholder or any subsidiary Holder
after the date of this Agreement.
"Subsidiary Holder" shall mean any Affiliate of a Shareholder which
has beneficial ownership of any of the Shares while this Agreement is in effect
and has executed a counterpart hereto in accordance with Section 7.06 hereof.
"Triggering Event" shall mean (i) the declaration, pronouncement,
ruling, order, decision or written opinion of the SEC or a United States federal
court that a voting arrangement factually similar to Section 3.01(a) of this
Agreement causes all of the Specified Shareholders collectively to constitute a
single "affiliate" of the Company for purposes of the sale of Shares by the
Specified Shareholders in compliance with the provisions of Rule 144(e)(1)
promulgated under the Securities Act or (ii) the Company's refusal to cause stop
transfer restrictions to be released or the legends described in Section 7.02 to
be removed if the Company has taken the position that the Specified Shareholders
collectively constitute a single "affiliate" of the Company. A Triggering Event
shall be deemed to continue (i) for so long as such declaration, pronouncement,
ruling, order, decision or written opinion remains in effect or is not
rescinded, overruled, repealed or superseded or (ii) until the Company either
(x) causes stop transfer restrictions to be released and the legends described
in Section 7.02 to be removed or (y) ceases to take the position that the
Specified Shareholders collectively constitute a single "affiliate" of the
Company.
6
"Voting Termination Date" shall mean the earlier of the date that (i)
is the fifth anniversary of the Effective Time, (ii) is two years after the date
that AAH and its Subsidiary Holders first are the beneficial owners in aggregate
of less than 20% of the outstanding shares of Common Stock or (iii) AAH and its
Subsidiary Holders first are the beneficial owners in aggregate of less than 5%
of the outstanding shares of Common Stock.
(b) All other terms used herein without definitions shall have the
meanings ascribed to such terms in the LLC Agreement.
SECTION 1.02. Usage. The definitions in this Article I shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. All references in this Agreement to Articles,
Sections and Exhibits shall be deemed to be references to Articles, Sections and
Exhibits of or to this Agreement, unless the context shall otherwise require.
The words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation", regardless of whether such phrase so
appears.
ARTICLE II
Representations and Warranties
SECTION 2.01. Representations and Warranties of the Company. The
Company hereby represents and warrants to each other party that it is a
corporation duly organized and validly existing under the laws of the State of
Delaware and has all requisite corporate power and authority to execute and
deliver this Agreement, to carry out the provisions hereof and to perform its
obligations hereunder. The execution, delivery and performance by the Company of
its obligations under this Agreement and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly and
validly executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable against it in accordance with its
terms.
SECTION 2.02. Representations and Warranties of the Shareholders. Each
Shareholder hereby represents and warrants to the Company and each other
Shareholder that this Agreement has been duly and validly executed and delivered
by such Shareholder and constitutes the legal, valid and
7
binding obligation of such Shareholder, enforceable against it in accordance
with its terms.
ARTICLE III
Voting
SECTION 3.01. Agreement to Vote. (a) At each and every Shareholders
Meeting held after the Effective Time and prior to the Voting Termination Date,
each Specified Shareholder hereby agrees (x) if any annual or special meeting of
the stockholders of the Company is held, to appear at such meeting or otherwise
cause its Shares to be counted as present thereat for purposes of establishing a
quorum, and to vote or (y) to act by written consent with respect to (or cause
to be voted or acted upon by written consent), (i) all Shares for which such
Specified Shareholder or any Subsidiary Holder thereof is the record holder or
beneficial owner at the time of such vote or action by written consent and (ii)
all Shares as to which such Specified Shareholder or any Subsidiary Holder
thereof at the time of such vote or action by written consent has voting
control, in each case:
(A) In favor of:
(i) All of the AAH Nominees;
(ii) Any AAH Matter; and/or
(iii) Any Other Matter, only if AAH has informed (by oral or
written notice) the Specified Shareholders that AAH intends to vote in
favor of such Other Matter; and
(B) Against:
(i) The election of any person or persons nominated in opposition
to the AAH Nominees;
(ii) Any matter brought before such Shareholders Meeting to be
acted upon by the shareholders of the Company that is in opposition to
an AAH Matter; and/or
(iii) Any Other Matter, only if AAH has informed (by oral or
written notice) the Specified Shareholders that AAH intends to vote
against such Other Matter.
8
(b) At each and every Shareholders Meeting held after the Effective
Time and prior to the Voting Termination Date, each Shareholder hereby agrees
(x) if any annual or special meeting of the stockholders of the Company is held,
to appear at such meeting or otherwise cause its Shares to be counted as present
thereat for purposes of establishing a quorum, and to vote or (y) act by written
consent with respect to (or cause to be voted or acted upon by written consent),
(i) all Shares for which such Shareholder or any Subsidiary Holder thereof is
the record holder or beneficial owner at the time of such vote or action by
written consent and (ii) all shares as to which such Shareholder or any
Subsidiary Holder thereof at the time of such vote or action by written consent
has voting control, in each case in favor of (A) at least one Dealer Nominee if
the total number of Directors (excluding Directors that are employees of the
Company) on the Board of Directors at the time of such Shareholders Meeting is
less than seven and at least two Dealer Nominees if such number of Directors is
more than six and (B) against the election of any person or persons nominated in
opposition to such Dealer Nominee(s).
SECTION 3.02. Financial and Other Information. Each Shareholder shall
be entitled to receive, and the Company shall provide to such Shareholder (i)
quarterly unaudited financial statements and reports, (ii) annual audited
financial statements and reports, (iii) budgets and financial plans and (iv)
such other data relating to the business, affairs, prospects or condition
(financial or otherwise) of the Company as is available to the Company that (A)
such Shareholder may reasonably request so long as such Shareholder is the
record holder or beneficial owner of at least 5% of the outstanding shares of
Common Stock or (B) such Shareholder is, or is controlled by, one of the
individuals listed on Schedule I hereto.
SECTION 3.03. Grant of Irrevocable Proxy. In the event that any
Specified Shareholder shall fail at any time to vote or act by written consent
with respect to any of such Specified Shareholder's Shares as agreed by such
Specified Shareholder in this Agreement, such Specified Shareholder hereby
irrevocably grants to and appoints AAH (and any officer of AAH or each of them
individually), such Specified Shareholder's proxy and attorney-in-fact (with
full power of substitution), for and in the name, place and stead of such
Specified Shareholder, to vote, act by written consent or grant a consent, proxy
or approval in respect of such Shares with respect to such vote or action by
written consent exclusively as agreed by such Specified Shareholder in this
Agreement. Each Specified Shareholder hereby affirms that any such irrevocable
proxy set forth in this
9
Section 3.03 is given in connection with the consummation of the IPO and that
such irrevocable proxy is given to secure the performance of obligations of such
Specified Shareholder under this Agreement. Each such Specified Shareholder
hereby further affirms that any such proxy hereby granted shall be irrevocable
and shall be deemed coupled with an interest, in accordance with Section 212(e)
of the DGCL. Each Specified Shareholder agrees to execute and deliver any
further powers of attorney, consents, proxies or other agreements necessary or
appropriate to give effect to this Section 3.03. This Section 3.03 shall
terminate upon the occurrence of the Voting Termination Date.
SECTION 3.04. Certain Actions. Each Shareholder agrees that it will,
and will cause its subsidiaries and Affiliates to, take all action as a
stockholder of the Company or as is otherwise within its control as are
necessary to give effect to the provisions of this Agreement and to perform, pay
and satisfy all of their respective obligations and liabilities hereunder as and
when due.
ARTICLE IV
Covenants
SECTION 4.01. Lock-Up. Each Specified Shareholder hereby agrees that,
without the prior written consent of the Company, it will not, during the period
ending two years 3 after the Effective Time (the "Lock-Up Period"), (i) offer,
pledge, sell, assign, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
of its Shares or any securities convertible into or exercisable or exchangeable
for Common Stock or (ii) enter into any swap or other arrangement that transfers
to another, in whole or in part, any of the economic consequences of ownership
of Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other securities, in
cash, property or otherwise (any action
- --------
3/ The Company agrees to use reasonable efforts to assist the Dealers in
negotiating with the underwriters of the IPO for a shorter lock-up period to the
extent a shorter "lock-up period" is customary for initial public offerings such
as the IPO. If the underwriters of the IPO agree to a shorter "lock-up period",
such shorter period shall be the Lock-Up Period for purposes of this Section
4.01.
10
prohibited by the foregoing clauses (i) or (ii), a "Transfer") except that a
Specified Shareholder (x) 180 days or more following the Effective Time, may
Transfer any of its Shares to (A) a person, other than a charity or a trust for
the benefit of a charity, that is a Permitted Transferee (as defined in clauses
(ii) or (iii) of the definition of "Permitted Transferee" in the LLC Agreement)
or (B) a charity or a trust for the benefit of a charity solely controlled by
such Specified Shareholder so long as during the Lock-Up Period such Specified
Shareholder does not Transfer in aggregate pursuant to this clause (x)(B) more
than 15% of the Shares it held at the Effective Time, (y) 180 days or more
following the Effective Time, may pledge Shares to a lender solely in connection
with a recourse loan to such Specified Shareholder so long as the aggregate
principal amount of such recourse loan does not exceed 20% of the fair market
value (determined at the time such recourse loan is made) of the Shares that
such Specified Shareholder pledges as security for such recourse loan pursuant
to this clause (y) and (z) may pledge Shares solely to the extent the pledge of
such Shares is in substitution for and to the same Lender as a pledge by such
Specified Shareholder prior to the Effective Time of all or a portion of its
equity interest in the Company or the predecessor entity of the Company, as
applicable, and such prior pledge complied with Section 7.01(c)(iv) of the LLC
Agreement; provided that each transferee pursuant to the foregoing clauses (x),
(y) and (z) prior to such Transfer shall agree in writing in a form reasonably
acceptable to the Company to be bound by this Section 4.01. In addition, each
Specified Shareholder agrees that, without the prior written consent of the
Company, it will not during the Lock- Up Period exercise any right available to
it under Article V of this Agreement with respect to the registration of any
shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock. Each Specified Shareholder agrees to enter into a
"lockup" agreement with the underwriters of the IPO for a term equal to the
Lock-Up Period and that otherwise is substantially the same as this Section
4.01.
SECTION 4.02. Noncompetition. This Section 4.02 applies to each
employee of the Company or any subsidiary of the Company who owns Shares,
whether directly or indirectly, in the Company who is a Specified Shareholder of
the Company or is the beneficial owner of interests in a Specified Shareholder
of the Company (or a Subsidiary Holder thereof) and is not bound by a
non-competition restriction contained in a consulting or employment agreement
between such employee and the Company or any of its subsidiaries (each, a
"Management Employee"); provided, however, that this
11
Section 4.02 shall not apply to any Management Employee that is an Affiliate of
AAH (including for this purpose any member of the Board of Directors who was an
AAH Nominee). Each Management Employee shall agree in writing (or if a party to
this Agreement, hereby agrees) that following any termination of his employment
by the Company or a subsidiary thereof "for cause" or his voluntary resignation
from such employment (a) he shall not compete, directly or indirectly (including
as an employee, proprietor, owner, partner, shareholder, member, joint venturer
or agent of, or as a consultant to, any person or entity which competes), with
the retail motor vehicle business of the Company or any of its subsidiaries
within 50 miles of any motor vehicle dealership owned by the Company or any of
its subsidiaries where such Management Employee worked during the year prior to
the termination of his employment and (b) he shall not violate Section 4.03
(with respect to each Management Employee, a "Non-Compete Covenant"). A
Management Employee's Non-Compete Covenant shall become effective on the date
that such Management Employee's employment by the Company or a subsidiary
thereof terminates and shall terminate on the first anniversary of such date.
The Company shall not be obligated to provide any Specified Shareholders with
the benefit of any of the Company's obligations under Section 4.01 or Article V
unless each Management Employee that is a direct or indirect beneficial owner of
such Specified Shareholder has provided the Company with such written agreement
in a form reasonably satisfactory to the Company.
SECTION 4.03. Nonsolicitation. No Specified Shareholder (or if such
Specified Shareholder is not a natural person, any natural person that owns a
beneficial interest in such Specified Shareholder or a Subsidiary Holder
thereof) shall, during the time such Specified Shareholder is a Specified
Shareholder and for one (1) year after such Specified Shareholder ceases to be a
Specified Shareholder or such natural person ceases to own a beneficial interest
in such Specified Shareholder or a Subsidiary Holder thereof, (i) directly or
indirectly employ, solicit, entice or encourage to leave the employ of the
Company or any of its subsidiaries, any person who is, or at any time during the
preceding twelve months was, employed by, or otherwise engaged to perform
services for, the Company or any of its subsidiaries or (ii) otherwise
intentionally interfere with the relationship of the Company or any of its
subsidiaries with any person who is employed by or otherwise engaged to perform
services for the Company or any of its subsidiaries; provided, however, that the
restrictions set forth in this Section 4.03 shall not apply to AAH, any
Affiliate of AAH or to any Specified Shareholder
12
or natural person who is bound by a non-solicitation restriction contained in a
consulting or employment agreement between such Member or natural person or the
Company or its subsidiaries.
ARTICLE V
Registration Rights
SECTION 5.01. Demand Registrations. (a) Any time following the
Effective Time and prior to the date on which the Company shall have obtained a
written opinion of legal counsel reasonably satisfactory to each Demand Holder
and addressed to the Company and such Demand Holder to the effect that the
Shares may be publicly offered for sale in the United States by such Demand
Holder or any Subsidiary Holder thereof without restriction as to manner of sale
and amount of securities sold and without registration or other restriction
under the Securities Act (such period, the "Demand Period"), such Demand Holder
shall have the right on a number of occasions equal to the Demand Number for
such Demand Holder to require the Company to file a registration statement under
the Securities Act in respect of all or a portion of the Shares then held by
such Demand Holder and any Subsidiary Holder thereof (so long as such request
covers at least 1% of the shares of Common Stock then outstanding), by
delivering to the Company written notice stating that such right is being
exercised, specifying the number of the Shares to be included in such
registration and describing the intended method of distribution thereof (a
"Demand Request"). In the case of any Demand Holder other than AAH, (i) such
Demand Holder may not make a Demand Request during the Lock-Up Period, (ii) such
Demand Holder may only make one Demand Request during each successive one- year
period following the termination of the Lock-Up Period and (iii) the first
Demand Request made by such Demand Holder shall be limited with respect to each
applicable Exercising Demand Holder to a number of Shares that is less than or
equal to 50% of the number of Shares owned at such time by such Exercising
Demand Holder and any Subsidiary Holder thereof; provided that such Exercising
Demand Holders may not in aggregate register pursuant to such Demand Request
more than 20% of the aggregate number of Shares owned at such time by the
Specified Shareholders and any Subsidiary Holders thereof (the "Share Limit");
provided, further, that if the aggregate number of Shares that such Exercising
Demand Holders have included in their Demand Request exceeds the Share Limit,
the Shares of each Exercising Demand Holder requesting the registration of more
than 20% of the aggregate number of Shares owned at such
13
time by such Exercising Demand Holder and any Subsidiary Holder thereof (with
respect to each Exercising Demand Holder, its "20% Limit") shall be excluded
from the Demand Requests, to the extent necessary to comply with the Share
Limit, on a pro rata basis according to the total number of Shares requested to
be registered by all such Exercising Demand Holders until the Demand Request of
each such Exercising Demand Holder has been reduced to (and not below) its 20%
Limit. As promptly as practicable, but in no event later than forty-five (45)
days after the Company receives a Demand Request, the Company shall file with
the SEC and thereafter use its reasonable best efforts to cause to be declared
effective promptly a registration statement (a "Demand Registration") providing
for the registration of such number of Shares as such Exercising Demand
Holder(s) shall have demanded be registered for distribution in accordance with
such intended method of distribution.
(b) Anything in this Agreement to the contrary notwithstanding, the
Company shall be entitled to postpone and delay, for a reasonable period of
time, not to exceed forty-five (45) days in the case of clauses (i) and (ii)
below, or fifteen (15) days in the case of clause (iii) below (each, a "Blackout
Period"), the filing of any Demand Registration if the Company shall determine
that any such filing or the offering of any Shares would (i) in the good faith
judgment of the Board, unreasonably impede, delay or otherwise interfere with
any pending or contemplated material acquisition, corporate reorganization or
other material matter involving the Company (each, a "Material Transaction"),
(ii) based upon advice from the Company's investment banker or financial
advisor, materially adversely affect any pending or contemplated financing,
offering or sale of any class of securities by the Company, or (iii) in the
reasonable and good faith judgment of the Board require disclosure of material
non-public information (other than information relating to an event described in
clause (i) or (ii) of this subsection (b)) which, if disclosed at such time,
would be materially harmful to the interests of the Company and its
stockholders; provided, however, that in the case of a Blackout Period pursuant
to clause (i) or (ii) above, the Blackout Period shall earlier terminate upon
the completion or abandonment of the relevant securities offering or sale,
financing, acquisition, corporate reorganization or other similar material
transaction; and provided, further, that in the case of a Blackout Period
pursuant to clause (iii) above, the Company shall give written notice of its
determination to postpone or delay the filing of any Demand Registration and in
the case of clause (iii) above, the Blackout Period shall earlier terminate upon
public disclosure by the Company or public admission by
14
the Company of such material non-public information or such time as such
material non-public information shall be publicly disclosed without breach by
the Exercising Demand Holder(s) of the penultimate sentence of this subsection
(b); and provided, further, that in the case of a Blackout Period pursuant to
clause (i), (ii) or (iii) above, the Company shall furnish to the Exercising
Demand Holder(s) a certificate of an executive officer of the Company to the
effect that an event permitting a Blackout Period has occurred. Notwithstanding
anything herein to the contrary, the Company shall not exercise pursuant to
clause (i), (ii), or (iii) of the preceding sentence the right to postpone or
delay the filing of any Demand Registration for an aggregate period of more than
ninety (90) days in any twelve (12) month period. Upon notice by the Company to
each Exercising Demand Holder of any such determination, such Exercising Demand
Holder covenants that it shall keep the fact of any such notice strictly
confidential, and, in the case of a Blackout Period pursuant to clause (iii)
above or Section 5.01(c) below, promptly halt any offer, sale, trading or
transfer by it or any of its Affiliates of any Common Stock for the duration of
the Blackout Period set forth in such notice (or until such Blackout Period
shall be earlier terminated in writing by the Company) and promptly halt any
use, publication, dissemination or distribution of the Demand Registration, each
prospectus included therein, and any amendment or supplement thereto by it and
any of its Affiliates for the duration of the Blackout Period set forth in such
notice (or until such Blackout Period shall be earlier terminated in writing by
the Company) and, if so directed by the Company, will deliver to the Company any
copies then in such Exercising Demand Holder's possession of the prospectus
covering such Shares, that was in effect at the time of receipt of such notice.
After the expiration of any Blackout Period and without further request from any
Demand Holder, the Company shall effect the filing of the relevant Demand
Registration and shall use its reasonable best efforts to cause any such Demand
Registration to be declared effective as promptly as practicable unless such
Demand Holder shall have, prior to the effective date of such Demand
Registration, withdrawn in writing its initial request, in which case such
withdrawn request shall not constitute a Demand Registration for purposes of
determining the number of Demand Registrations to which such Demand Holder is
entitled under this Agreement.
(c) Anything in this Agreement to the contrary notwithstanding, in
case a Demand Registration has been filed, if a Material Transaction has
occurred, the Company may cause such Demand Registration to be withdrawn and its
effectiveness terminated or may postpone amending or
15
supplementing such Demand Registration for a reasonable period of time, not to
exceed forty-five (45) days; provided, however, that in no event shall a Demand
Registration so withdrawn by the Company count for the purposes of determining
the number of Demand Registrations to which the applicable Demand Holder is
entitled under Section 5.01(a); provided further that the Company shall not so
withdraw or terminate a Demand Registration Statement more than one time or
postpone or delay amending or supplementing any Demand Registration Statements
for an aggregate period of more than ninety (90) days during any twelve (12)
month period.
(d) A Demand Holder may withdraw a Demand Request in circumstances
including, but not limited to, the following: if (i) the Company is in material
breach of its obligations hereunder and has not cured such breach after having
received notice thereof and a reasonable opportunity to do so or (ii) the
withdrawal occurs during a Blackout Period. Any Demand Request withdrawn (x)
pursuant to subsection (d)(ii) prior to such Demand Registration becoming
effective or (y) pursuant to subsection (d)(i) shall not constitute a Demand
Registration for the purposes of determining the number of Demand Registrations
to which such Demand Holder is entitled under Section 5.01(a).
(e) Subject to Section 5.02, the Company may elect to include in any
registration statement filed pursuant to this Section 5.01 any Common Stock to
be issued by it or held by any of its subsidiaries or by any other shareholders
only to the extent such Common Stock is offered and sold pursuant to, and on the
terms and subject to the conditions of, any underwriting agreement or
distribution arrangements entered into or effected by the applicable Demand
Holder and only to the extent the managing underwriter thereof does not
reasonably and in good faith advise each applicable Exercising Demand Holder
prior to the consummation of any Demand Registration that the inclusion in such
registration statement of any such Common Stock to be issued by the Company or
sold by any of its subsidiaries or any other shareholder will not create a
substantial risk that the price per share of Common Stock that the Exercising
Demand Holder(s) will derive from such Demand Registration will be materially
and adversely affected or that the number of shares of Common Stock sought to be
registered (including any shares of Common Stock sought to be registered at the
request of the Company and any other shareholder and those sought to be
registered by such Exercising Demand Holder(s)) is a greater number than can be
reasonably sold.
16
(f) The managing underwriter for any Demand Registration shall be
selected by the Demand Holder exercising the Demand Request, provided that such
managing underwriter or underwriters shall be of recognized national standing.
SECTION 5.02. "Piggy-Back" Registrations. (a) Subject to Section 4.01,
if, at any time following the Effective Time, the Company proposes to register
any Common Stock under the Securities Act, whether or not for sale for its own
account, on a registration statement on Form S-1, Form S-2 or Form S-3 (or any
equivalent general registration form then in effect) for purposes of a primary
offering, secondary offering (including any Demand Registration) or combined
offering of such Common Stock, the Company shall give prompt written notice to
each Shareholder of its intention to do so. Such notice shall specify, at a
minimum, the number of shares of Common Stock so proposed to be registered, the
proposed date of filing of such registration statement, any proposed means of
distribution of such Common Stock, any proposed managing underwriter or
underwriters of such offering and a good faith estimate by the Company of the
proposed maximum offering price thereof, as such price is proposed to appear on
the facing page of such registration statement. Upon the written direction of a
Shareholder (a "Piggy-Back Request"), given within thirty (30) business days
following the receipt by such Shareholder of any such written notice (which
direction shall specify the number of the Shares intended to be disposed of by
such Shareholder or any Subsidiary Holder thereof), the Company shall include in
such registration statement (a "Piggy-Back Registration" and, collectively with
a Demand Registration, a "Registration"), subject to the provisions of Section
5.02 hereof, such number of the Shares as shall be set forth in any such
Piggy-Back Request delivered by a Shareholder.
(b) In the event that the Company proposes to register Common Stock in
connection with an underwritten offering and a nationally recognized independent
investment banking firm selected by the Company or a Demand Holder to act as
managing underwriter thereof reasonably and in good faith shall have advised the
Company, any holder of Common Stock (including a Demand Holder if it has made a
Demand Request) intending to offer such Common Stock in a secondary offering or
combined offering (each, an "Other Holder") or any Shareholder who submitted a
Piggy-Back Request in writing that, in its opinion, the inclusion in the
registration statement of some or all of the Shares sought to be registered by
any such Shareholder making a Piggyback Request creates a substantial risk that
the price per share of Common Stock that the Company or any Other Holder will
17
derive from such registration will be materially and adversely affected or that
the number of shares of Common Stock sought to be registered (including any
shares of Common Stock sought to be registered at the request of the Company and
any Other Holder and those sought to be registered by any such Shareholder
making a Piggyback Request) is a greater number than can reasonably be sold, the
Company shall include in such registration statement such number of shares of
Common Stock as the Company, any Other Holder and any such Shareholder making a
Piggyback Request are so advised can be sold in such offering without such an
effect (the "Maximum Number") as follows and in the following order of priority:
(A) first, in the case of a secondary or combined offering, if a Demand Holder
has made a Demand Request, such number of shares of Common Stock as each
applicable Exercising Demand Holder intended to be registered and sold by it
(subject to any limitation pursuant to Section 5.01(a) on the number of Shares
that may be registered under such Demand Request by such Exercising Demand
Holder), provided that if such number exceeds the Maximum Number, the shares of
Common Stock of such Shareholders will be excluded on a pro rata basis according
to the total number of Shares requested to be registered by such persons (after
giving effect to any limitation pursuant to Section 5.01(a)), (B) second, in the
case of a secondary or combined offering, if an Other Holder (other than such
Exercising Demand Holder(s)) has exercised a similar demand registration right
and if to the extent that such number of shares of Common Stock to be registered
under clause (A) is less than the Maximum Number, such number of shares of
Common Stock as the Other Holder intended to be registered and sold by it which,
when added to the number of shares of Common Stock to be registered under clause
(A), is less than or equal to the Maximum Number, (C) third, in the case of a
primary or combined offering and if and to the extent that such number of shares
of Common Stock to be registered under clauses (A) and (B) is less than the
Maximum Number, such number of shares of Common Stock as the Company intended to
be registered and sold by the Company which, when added to the number of shares
of Common Stock to be registered under clauses (A) and (B), is less than or
equal to the Maximum Number, and (D) fourth, in the case of a secondary or
combined offering and if and to the extent that the number of shares of Common
Stock to be registered under clauses (A) , (B) and (C) is less than the Maximum
Number, such number of shares of Common Stock as the Shareholders who submitted
Piggy-Back Requests shall have intended to register which, when added to the
number of shares of Common Stock to be registered under clauses (A), (B), (C)
and (D), is less than or equal to the Maximum Number; provided that if such
number exceeds the Maximum Number, the shares of Common Stock of
18
such Shareholders will be excluded on a pro rata basis according to the total
number of Shares requested to be registered by such persons.
(c) No Piggy-Back Registration effected under this Section 5.02 shall
be deemed to have been effected pursuant to Section 5.01 hereof or shall release
the Company of its obligations to a Demand Holder to effect any Demand
Registration upon request as provided under Section 5.01 hereof.
(d) Notwithstanding any request under this Section 5.02, each
Shareholder who submitted a Piggy-Back Request may elect in writing to withdraw
its request for inclusion of its Shares in any registration statement provided,
however, that (i) such request must be made in writing prior to the earlier of
the execution of the underwriting agreement or the execution of the custody
agreement with respect to such registration and (ii) such withdrawal shall be
irrevocable and, after making such withdrawal, any such Shareholder shall no
longer have any right to include Shares in the registration as to which such
withdrawal was made.
(e) If, at any time after giving written notice of its intention to
register any Common Stock and prior to the effective date of the registration
statement filed in connection with such registration, the Company shall
determine for any reason not to register or to delay registration of such Common
Stock, the Company may, at its election, give written notice of such
determination to each Shareholder who submitted a Piggy-Back Request and (i) in
the case of a determination not to register, shall be relieved of its obligation
to register any Shares in connection with such abandoned registration, without
prejudice, however, to the rights of an Exercising Demand Holder under Section
5.01 and (ii) in the case of a determination to delay such registration of the
Company's Common Stock, shall be permitted to delay the registration of such
Shares for the same period as the delay in registering such other Common Stock.
(f) If, as a result of the proration provisions of this Section 5.02,
each Shareholder who submitted a Piggy-Back Request shall not be entitled to
include all Shares in a registration that each such Shareholder has requested to
be included, each such Shareholder may elect to withdraw his request to include
Shares in such registration or may reduce the number of Shares requested to be
included, provided that the same limitations in subsection (d) shall apply.
19
SECTION 5.03. Additional Agreements. Anything in this Agreement to the
contrary notwithstanding, if at any time the Company shall obtain a written
opinion of legal counsel reasonably satisfactory to AAH and addressed to the
Company and the Shareholders to the effect that the Shares may be publicly
offered for sale in the United States by each Shareholder or any Subsidiary
Holder without restriction as to manner of sale and amount of securities sold
and without registration or other restriction under the Securities Act, the
Company shall no longer be obligated to file or maintain a registration
statement with respect to the Shares pursuant to this Agreement. In such case,
the Company shall issue to each Shareholder certificates representing the Shares
without any legend restricting transfer and shall remove all stop transfer
orders relating to the Shares.
SECTION 5.04. Registration Procedures. (a) In connection with each
registration statement prepared pursuant to this Agreement, and in accordance
with the intended method or methods of distribution of the Shares as described
in such registration statement, the Company shall, as soon as reasonably
practicable (and, in any event, subject to the terms of this Agreement,
including, without limitation, Section 5.01(a), at or before the time required
by applicable laws and regulations):
(i) prepare and file with the SEC a registration statement on an
appropriate registration form of the SEC, with respect to such Shares,
which form shall be selected by the Company with the Shareholder's
reasonable consent, and use its reasonable best efforts to cause such
registration statement to become and remain effective promptly; provided
that before filing a registration statement or prospectus or any amendments
or supplements thereto, the Company will furnish to one counsel selected by
the Demand Holder exercising the Demand Request and one counsel to the
Shareholders selling under a Piggy-Back Registration, and the sales or
placement agent or agents, if any, for the Shares and the managing
underwriter or underwriters, if any, draft copies of all such documents
proposed to be filed at least seven (7) days prior to such filing, which
documents will be subject to the reasonable review of the Shareholders, the
sales or placement agent or agents, if any, for the Shares and the managing
underwriter or underwriters, if any, and their respective agents and
representatives and the Company will not file any Demand Registration or
amendment thereto or any prospectus or any supplement
20
thereto to which such Demand Holder exercising such Demand Request shall
reasonably object in writing;
(ii) furnish without charge to the Shareholders, the sales or
placement agent or agents, if any, and the managing underwriter or
underwriters, if any, such number of copies of such registration statement
and of each amendment and supplement thereto (in each case including all
exhibits), such number of copies of the summary, preliminary, final,
amended or supplemented prospectuses included in such registration
statement in conformity with the requirements of the Securities Act and any
regulations promulgated thereunder and (upon the reasonable request by the
Shareholders) any documents incorporated therein by reference and such
other documents as the Shareholders may reasonably request in order to
facilitate the public sale or other disposition of such Shares (the Company
hereby consenting to the use in accordance with all applicable law of the
prospectus or any amendment or supplement thereto by the Shareholders in
connection with the offering and sale of the Shares covered by the
prospectus or any amendment or supplement thereto);
(iii) use its reasonable best efforts to keep such registration
statement effective for at least 180 days (not counting any period that
such registration statement is not effective pursuant to Section 5.01(c))
(the "Effective Period"); prepare and file with the SEC such amendments,
post-effective amendments and supplements to the registration statement and
the prospectus as may be necessary to maintain the effectiveness of the
registration for the Effective Period and to cause the prospectus (and any
amendments or supplements thereto) to be filed pursuant to Rules 424 and
430A under the Securities Act and/or any successor rules that may be
adopted by the SEC, as such rules may be amended from time to time; and
comply with the provisions of the Securities Act with respect to the
disposition of all Shares covered by such registration statement during the
applicable period in accordance with the intended method or methods of
distribution thereof, as specified in writing by the Shareholder;
(iv) except during any Blackout Period, make available for inspection
by the Shareholders or by any underwriter, attorney, accountant or other
agent retained by the Shareholders (collectively, the "Inspectors")
financial and other records and pertinent corporate documents of the
Company (collectively, the
21
"Records"), provide the Inspectors with opportunities to discuss the
business of the Company with its officers and provide opportunities to
discuss the business of the Company with the independent public accountants
who have certified its most recent annual financial statements, in each
case to the extent customary for transactions of the size and type
intended, as specified by the Shareholders, but only to the extent
reasonably necessary to enable each Shareholder or any underwriter retained
by the Shareholders to conduct a "reasonable investigation" for purposes of
Section 11(a) of the Securities Act. Records which the Company determines,
in good faith, to be confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspector unless (A) the
disclosure of such Records is necessary to avoid or correct a misstatement
of a material fact or omission to state a material fact in the
Registration, (B) the disclosure of such Records is required by any court
or governmental body with jurisdiction over any of the Shareholders or
Inspector or (C) all of the information contained in such Records has been
made generally available to the public. Each Shareholder agrees that it
will, upon learning that disclosure of such Records is sought in a court of
competent jurisdiction or by any governmental body, promptly give prior
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of those Records deemed
confidential;
(v) if requested by (i) a Demand Holder exercising a Demand Request,
use reasonable best efforts to participate in and assist with a "road show"
and other customary marketing efforts in connection with the sale of Shares
pursuant to such registration statement, at such times and in such manner
as the Company and such Demand Holder mutually may determine (and as do not
unreasonably interfere with the Company's operations); provided that the
executives of the Company shall not be required to participate in a "road
show" unless the proposed aggregate offering price of the Shares being sold
pursuant to such registration statement equals or exceeds $35,000,000 and
(ii) a Demand Holder executing a block trade, use reasonable best efforts
to assist with such block trade, at such times and in such manner as the
Company and such Demand Holder mutually may determine (and as do not
unreasonably interfere with the Company's operations);
22
(vi) use its reasonable best efforts to register or qualify the Shares
covered by such registration statement under such other securities or "blue
sky" laws of such jurisdictions in the United States as the Shareholders
shall reasonably request, keep such registrations or qualifications in
effect for so long as the registration statement remains in effect, and do
any and all other acts and things which may be reasonably necessary to
enable the Shareholders or any underwriter to consummate the public sale or
other disposition of the Shares in such jurisdictions; provided, however,
that in no event shall the Company be required to qualify to do business as
a foreign corporation in any jurisdiction where it is not so qualified; to
execute or file any general consent to service of process under the laws of
any jurisdiction; to take any action that would subject it to service of
process in suits other than those arising out of the offer and sale of the
Shares covered by the registration statement; or to subject itself to
taxation in any jurisdiction where it would not otherwise be obligated to
do so, but for this paragraph (vii);
(vii) use its reasonable best efforts to cause the Shares to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the Shareholders to consummate
the public sale or other disposition of the Shares;
(viii) use its reasonable best efforts to cause all Shares covered by
such registration statement to be approved for listing on a national
securities exchange or approved for trading on a national interdealer
quotation system or listed on the securities exchanges on which similar
securities issued by the Company are then listed or traded;
(ix) promptly notify each Shareholder whose Shares are covered by a
Registration, at any time when a prospectus relating to any of the Shares
covered by such registration statement is required to be delivered under
the Securities Act, of the Company's becoming aware that the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and, at the
request of the Demand Holder exercising the Demand Request, promptly
prepare and furnish to the
23
Shareholders a reasonable number of copies of a prospectus supplemented or
amended so that, as thereafter delivered to the purchasers of such Shares,
such prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing;
(x) promptly notify the Shareholders whose Shares are covered by a
Registration, the sales or placement agent or agents, if any, for the
Shares and the managing underwriter or underwriters, if any, thereof, after
becoming aware thereof, when the registration statement or any related
prospectus or any amendment or supplement has been filed, and, with respect
to the registration statement or any post-effective amendment, when the
same has become effective, (A) of any request by the SEC for amendments or
supplements to the registration statement or the related prospectus or for
additional information, (B) of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement or the
initiation of any proceedings for that purpose, (C) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of the Shares for sale in any jurisdiction or the initiation
of any proceeding for such purpose or (D) within the Effective Period of
the happening of any event which makes any statement in the registration
statement or any post-effective amendment thereto, prospectus or any
amendment or supplement thereto, or any document incorporated therein by
reference untrue in any material respect or which requires the making of
any changes in the registration statement or post- effective amendment
thereto or any prospectus or amendment or supplement thereto so that they
will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein (in light of the circumstances under which they were
made) not misleading;
(xi) during the Effective Period, use its reasonable best efforts to
obtain the withdrawal of any order suspending the effectiveness of the
registration statement or any post-effective amendment thereto;
(xii) permit AAH if, in AAH's sole judgment exercised in good faith,
it believes it might be deemed to be a controlling person of the Company,
to
24
participate in the preparation of such registration statement and all
discussions between the Company and the SEC or its staff with respect to
such registration statement, and to require the insertion therein of
material, furnished to the Company in writing, which in the sole judgment
exercised in good faith of AAH should be included;
(xiii) deliver promptly to each Shareholder whose Shares are subject
to a Registration, upon such Shareholder's request, copies of all
correspondence between the SEC and the Company, its counsel or auditors and
all memoranda relating to discussions with the SEC or its staff with
respect to the registration statement and permit such Shareholder to do
such investigation, with respect to information contained in or omitted
from the registration statement, as it deems reasonably necessary. Each
such Shareholder agrees that it will use its reasonable efforts not to
interfere unreasonably with the Company's business when conducting any such
investigation;
(xiv) provide a transfer agent and registrar for all such Shares
covered by such registration statement not later than the effective date of
such registration statement, which transfer agent and registrar may be the
Company, subject to any applicable law or regulations;
(xv) cooperate with each Shareholder whose Shares are subject to a
Registration and the managing underwriter or underwriters, if any, to
facilitate the timely preparation and delivery of certificates representing
such Shares to be sold under the registration statement, which certificates
shall not bear any restrictive legends except as required by law; and, in
the case of an underwritten offering, enable such Shares to be in such
denominations and registered in such names as the managing underwriter or
underwriters, if any, may request in writing at least two (2) business days
prior to any sale of the Shares to the underwriters;
(xvi) enter into such agreements (including, if the offering is an
underwritten offering, an underwriting agreement) as are customary in
transactions of such kind and take such other actions as are reasonably
necessary in connection therewith in order to expedite or facilitate the
disposition of such Shares; and (A) make such representations and
warranties with respect to the registration statement,
25
post-effective amendment or supplement thereto, prospectus or any amendment
or supplement thereto, and documents incorporated by reference, if any, to
the managing underwriter or underwriters, if any, of the Shares and, at the
option of each Shareholder whose Shares are subject to a Registration, make
to and for the benefit of such Shareholder the representations, warranties
and covenants of the Company which are being made to the underwriters, in
form, substance and scope as are customarily made by the Company in
connection with offerings of Shares in transactions of such kind
(representations and warranties by the Other Holders shall also be made as
are customary in agreements of that type); provided that the Company shall
not be required to make any representations or warranties with respect to
information specifically provided by such Other Holders for inclusion in
the registration documents; (B) obtain an opinion of counsel to the Company
(which counsel may be internal counsel for the Company unless the managing
underwriter or underwriters shall otherwise reasonably request) in
customary form and covering matters of the type customarily covered by such
an opinion, addressed to such managing underwriter or underwriters, if any,
and to the Shareholders and dated the date of the closing of the sale of
the Shares relating thereto; (C) obtain a "comfort" letter or letters from
the independent certified public accountants who have certified the
Company's most recent audited financial statements that are incorporated by
reference in the registration statement which is addressed to the
Shareholders and the managing underwriter or underwriters, if any, and is
dated the date of the prospectus used in connection with the offering of
such Shares and/or the date of the closing of the sale of such Shares
relating thereto, such letter or letters to be in customary form and
covering such matters of the type customarily covered by "comfort" letters
of such type; (D) deliver such documents and certificates as may be
reasonably requested by any Shareholder whose Shares are subject to a
Registration and the managing underwriter or underwriters, if any, of the
Shares to evidence compliance with any customary conditions contained in
the underwriting agreement or other agreement entered into by the Company;
and (E) undertake such obligations relating to expense reimbursement,
indemnification and contribution as provided in Sections 5.05 and 5.06
hereof; and
(xvii) comply with all applicable rules and regulations of the SEC and
generally make available to
26
its security holders an earnings statement (which need not be audited), as
soon as reasonably practicable but in no event later than ninety (90) days
after the end of the period of twelve (12) months commencing on the first
day of any fiscal quarter next succeeding each sale by each Shareholder of
Shares which have been registered pursuant to this Agreement (the
"Registered Shares") after the date hereof, which earnings statement shall
cover such twelve (12) month period and shall satisfy the provisions of
Section 11(a) of the Securities Act and may be prepared in accordance with
Rule 158 under the Securities Act.
(b) In the event that the Company would be required, pursuant to
Section 5.04(a)(xi)(D) above, to notify any Shareholder, the sales or placement
agent or agents, if any, for the Shares and the managing underwriter or
underwriters, if any, thereof, the Company shall, subject to the provisions of
Section 5.01(b) hereof, as promptly as practicable, prepare and furnish to each
Shareholder, to each placement or sales agent, if any, and to each underwriter,
if any, a reasonable number of copies of a prospectus supplemented or amended so
that, as thereafter delivered to purchasers of Registered Shares, such
prospectus shall not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Each Shareholder agrees that, upon receipt of any notice
from the Company pursuant to Section 5.04(a)(xi)(D) hereof, such Shareholder
shall, and shall use its reasonable best efforts to cause any sales or placement
agent or agents for the Shares and the underwriters, if any, thereof, to
forthwith discontinue disposition of the Shares until such person shall have
received copies of such amended or supplemented prospectus and, if so directed
by the Company, to destroy or to deliver to the Company all copies, other than
permanent file copies, then in its possession of the prospectus (prior to such
amendment or supplement) covering such Shares as soon as practicable after such
Shareholder's receipt of such notice.
(c) Each Shareholder whose Shares are covered by a Registration shall
furnish to the Company in writing such information regarding such Shareholder
and its intended method of distribution of the Shares as the Company may from
time to time reasonably request in writing, but only to the extent that such
information is required in order for the Company to comply with its obligations
under all applicable securities and other laws and to ensure that the prospectus
relating to such Shares conforms to the applicable
27
requirements of the Securities Act and the rules and regulations thereunder.
Each Shareholder whose Shares are covered by a Registration shall notify the
Company as promptly as practicable of any inaccuracy or change in information
previously furnished by such Shareholder to the Company or of the occurrence of
any event, in either case as a result of which any prospectus relating to the
Shares contains or would contain an untrue statement of a material fact
regarding such Shareholder or its intended method of distribution of such Shares
or omits to state any material fact regarding such Shareholder or its intended
method of distribution of such Shares required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, and promptly furnish to the Company any additional
information required to correct and update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Shareholder or the distribution of the Shares, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(d) Each Shareholder agrees not to, and shall not cause any Subsidiary
Holder to, effect any public sale or distribution of any Shares, including any
sale pursuant to Rule 144 under the Securities Act, and not to effect any such
public sale or distribution of any other equity security of the Company or of
any security convertible into or exchangeable or exercisable for any equity
security of the Company (in each case, other than as part of such underwritten
public offering) during the ten (10) days prior to, and during the ninety (90)
day period (or such longer period as the Shareholder and/or the applicable
Subsidiary Holder agrees with the underwriter of such offering) beginning on,
the consummation of any underwritten public offering of the Shares covered by a
registration statement referred to in Section 5.02 to the extent the
Shareholder's or Subsidiary Holder's Registered Shares are being sold
thereunder.
(e) In the case of any registration under Section 5.01 pursuant to an
underwritten offering, or in the case of a Registration under Section 5.02 if
the Company has determined to enter into an underwriting agreement in connection
therewith, all Shares to be included in such Registration shall be subject to
such underwriting agreement and no person may participate in such Registration
unless such person agrees to sell such person's securities on the basis provided
therein which shall be the same for all
28
Shareholders whose Shares are covered by such Registration and completes and
executes all questionnaires, indemnities, underwriting agreements and other
document s(other than powers of attorney) which must be executed in connection
therewith, and provides such other information to the Company or the underwriter
as may be reasonably requested to register such person's Shares.
SECTION 5.05. Registration Expenses. The Company agrees to bear and to
pay, or cause to be paid, promptly upon request being made therefor, all
expenses incident to the Company's performance of or compliance with this
Agreement, including, without limitation: (a) all fees and expenses in
connection with the qualification of the Registered Shares for offering and sale
under state securities or "blue sky" laws referred to in Section 5.04(a)(vii)
hereof, including reasonable fees and disbursements of counsel for any placement
or sales agent or underwriter in connection with such qualifications, (b) all
expenses relating to the preparation, printing, distribution and reproduction of
the registration statement, each prospectus included therein or prepared for
distribution pursuant hereto, each amendment or supplement to the foregoing, the
certificates representing the Shares and all other documents relating hereto,
(c) the costs and charges of any escrow agent, transfer agent, registrar, any
custodian or attorney-in-fact appointed to act on behalf of the Shareholders
(including, without limitation, all salaries and expenses of the Company's
officers and employees performing legal or accounting duties), (d) fees,
disbursements and expenses of the Company's counsel and its other advisors and
experts and independent certified public accountants of the Company (including
the expenses of any opinions or "comfort" letters required by or incident to
such performance and compliance), (e) the fees and expenses incurred in
connection with the listing of the Shares on The New York Stock Exchange, Inc.
and any other stock exchange or national securities exchange on which Shares
shall at such time be listed, and (f) fees, disbursements and expenses of one
counsel selected by a Demand Holder exercising a Demand Request and retained on
behalf of all Shareholders registering Shares in connection with such Demand
Request and any Piggyback Request in connection therewith (collectively, the
"Registration Expenses"). To the extent that any Registration Expenses are
incurred, assumed or paid by the Shareholders, any sales or placement agent or
agents for the Shares and the underwriters, if any, thereof, the Company shall
reimburse such person for the full amount of the Registration Expenses so
incurred, assumed or paid promptly after receipt of a request therefor. Each
Shareholder shall pay its pro rata portion
29
of underwriting discounts and commissions and any capital gains, income or
transfer taxes, if any, attributable to the sale of such Shareholder's Shares
being registered.
SECTION 5.06. Indemnification; Contribution. (a) Indemnification by
the Company. The Company shall, and it hereby agrees to, indemnify and hold
harmless each Shareholder, and each person who participates as a placement or
sales agent or as an underwriter in any offering or sale of the Shares, against
any losses, claims, damages or liabilities to which each such Shareholder or
such agent or underwriter may become subject, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof)
(collectively, "Claims") arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any registration
statement pursuant to which any Shares of such Shareholder are registered
pursuant to this Agreement, or any preliminary or final prospectus contained
therein, or any amendment or supplement thereto, or any document incorporated by
reference therein, or arise out of or are based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, and the Company shall, and it hereby agrees to,
reimburse each such Shareholder or any such agent or underwriter for any legal
or other out-of-pocket expenses reasonably incurred by them in connection with
investigating or defending any such Claims; provided, however, that the Company
shall not be liable to any such person in any such case to the extent that any
such Claims arise out of or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
or preliminary or final prospectus, or amendment or supplement thereto, in
reliance upon and in conformity with written information furnished to the
Company by such Shareholder or any agent, underwriter or representative of such
Shareholder expressly for use therein, or by such Shareholder's failure to
furnish the Company, upon request, with the information with respect to such
Shareholder, or any agent, underwriter or representative of such Shareholder, or
such Shareholder's intended method of distribution, that is the subject of the
untrue statement or omission or if the Company shall sustain the burden of
proving that such Shareholder or such agent or underwriter sold securities to
the person alleging such Claims without sending or giving, at or prior to the
written confirmation of such sale, a copy of the applicable prospectus
(excluding any documents incorporated by reference therein) or of the applicable
prospectus, as then amended or supplemented (excluding any documents
30
incorporated by reference therein), if the Company had previously furnished
copies thereof to such Shareholder or such agent or underwriter, and such
prospectus corrected such untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement.
(b) Indemnification by the Shareholders and Any Agents or
Underwriters. Each Shareholder shall, and hereby agrees, severally and not
jointly, to (i) indemnify and hold harmless the Company, its directors,
officers, employees and controlling persons, if any, each other Shareholder, and
each underwriter, its partners, officers, directors, employees and controlling
persons, if any, in any offering or sale of Shares, against any Claims to which
the Company, its directors, officers, employees and controlling persons, if any,
may become subject, insofar as such Claims (including any amounts paid in
settlement as provided herein), or actions or proceedings in respect thereof,
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in such registration statement, or any preliminary
or final prospectus contained therein, or any amendment or supplement thereto,
or any document incorporated by reference therein, or arise out of or are based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such Shareholder
or any agent, underwriter, or representative (as the case may be) expressly for
use therein, and (ii) reimburse the Company for any legal or other out-of-pocket
expenses reasonably incurred by the Company in connection with investigating or
defending any such Claim.
(c) Notice of Claims, Etc. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of written notice of the commencement of
any action or proceeding for which indemnification under subsection (a) or (b)
may be requested, such indemnified party shall, without regard to whether a
claim in respect thereof is to be made against an indemnifying party pursuant to
the indemnification provisions of, or as contemplated by, this Section 5.06,
notify such indemnifying party and the underwriter in writing of the
commencement of such action or proceeding; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party in respect of such action or proceeding on account of the
indemnification provisions of
31
or contemplated by Section 5.06(a) or 5.06(b) hereof unless the indemnifying
party was materially prejudiced by such failure of the indemnified party to give
such notice, and in no event shall such omission relieve the indemnifying party
from any other liability it may have to such indemnified party. In case any such
action or proceeding shall be brought against any indemnified party and it shall
notify an indemnifying party of the commencement thereof, unless in the
reasonable opinion of outside counsel to the indemnified party a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim, such indemnifying party shall be entitled to participate therein
and, to the extent that it shall determine, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, such indemnifying party shall not be liable to such indemnified party
for any legal or any other expenses subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable costs of
investigation (unless such indemnified party reasonably objects to such
assumption on the grounds that there may be defenses available to it which are
different from or in addition to the defenses available to such indemnifying
party, in which event the indemnified party shall have the right to control its
defense and shall be reimbursed by the indemnifying party for the expenses
incurred in connection with retaining one separate counsel). If the indemnifying
party is not entitled to, or elects not to, assume the defense of a claim, it
will not be obligated to pay the fees and expenses of more than one counsel for
each indemnified party with respect to such claim. The indemnifying party will
not be subject to any liability for any settlement made without its consent,
which consent shall not be unreasonably withheld or delayed. No indemnifying
party shall, without the prior written consent of the indemnified party,
compromise or consent to entry of any judgment or enter into any settlement
agreement with respect to any action or proceeding in respect of which
indemnification is sought under Section 5.06(a) or (b) (whether or not the
indemnified party is an actual or potential party thereto), unless such
compromise, consent or settlement includes an unconditional term thereof the
giving by the claimant or plaintiff to the indemnified party of a release from
all liability in respect of such claim or litigation and does not subject the
indemnified party to any material injunctive relief or other material equitable
remedy.
32
(d) Contribution. Each Shareholder and the Company agree that if, for
any reason, the indemnification provisions contemplated by Sections 5.06(a) or
5.06(b) hereof are unavailable to or are insufficient to hold harmless an
indemnified party in respect of any Claims referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such Claims in such proportion as is
appropriate to reflect the relative fault of, and benefits derived by, the
indemnifying party and the indemnified party, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The relative benefit derived by the parties shall be
determined by reference to the fact that the Company entered into this Agreement
as an integral part of the transactions pursuant to which the Shares were
acquired. The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5.06(d) were determined by any method of
allocation which does not take account of the equitable considerations referred
to in this Section 5.06(d). The amount paid or payable by an indemnified party
as a result of the Claims referred to above shall be deemed to include (subject
to the limitations set forth in Section 5.06(c) hereof) any legal or other fees
or expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action, proceeding or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(e) The indemnification and contribution required by this Section 5.06
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
(f) Beneficiaries of Indemnification. The obligations of the Company
under this Section 5.06 shall be in addition to any liability that it may
otherwise have and shall extend, upon the same terms and conditions, to each
employee, officer, director and partner of each Shareholder or any Subsidiary
Holder, each agent of such Shareholder or
33
any Subsidiary Holder, each underwriter of the Shares and each person, if any,
who controls such Shareholder or any Subsidiary Holder or any such agent or
underwriter within the meaning of the Securities Act; and the obligations of
such Shareholder and each Subsidiary Holder and any agents or underwriters
contemplated by this Section 5.06 shall be in addition to any liability that
such Shareholder or any Subsidiary Holder or their respective agents or
underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company (including any person
who, with his consent, is named in any registration statement as about to become
a director of the Company) and to each person, if any, who controls the Company
within the meaning of the Securities Act.
SECTION 5.07. Underwriters. If any of the Shares are to be sold
pursuant to an underwritten offering, the investment banker or bankers and the
managing underwriter or underwriters thereof shall be selected by the Company
except in the case of a Demand Registration, in which the managing underwriter
or underwriters shall be selected by the Demand Holder exercising the Demand
Request, provided that such managing underwriter or underwriters must be of
recognized national standing.
SECTION 5.08. Exchange Act Filings; Rule 144; Rule 144A. (a) The
Company covenants to and with each Shareholder that to the extent it shall be
required to do so under the Exchange Act, the Company shall timely file the
reports required to be filed by it under the Exchange Act or the Securities Act
(including, but not limited to, the reports under Sections 13 and 15(d) of the
Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the SEC
under the Securities Act and the rules and regulations adopted by the SEC
thereunder) and shall take such further action as any Shareholder may reasonably
request, all to the extent required from time to time to enable the Shareholders
to sell Shares without registration under the Securities Act within the
limitations of the exemption provided by Rule 144 under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC. Upon the request of a Shareholder, the Company
shall deliver to such Shareholder a written statement as to whether it has
complied with such requirements.
(b) If at any time the Company is not subject to Section 13 or 15(d)
of the Exchange Act and is not exempt from reporting pursuant to Rule 12g3-2(b)
under the Exchange Act, the Company agrees, upon the request of a Shareholder
seeking to transfer Shares in conformity with Rule 144A
34
under the Securities Act, to furnish to such Shareholder or prospective
purchasers of the Shares from the Shareholder the information required by Rule
144A(d)(4)(i) under the Securities Act in the manner and at the times
contemplated by such Rule.
(c) The Company covenants to make available "adequate current public
information" concerning the Company within the meaning of Rule 144(c) under the
Securities Act.
SECTION 5.09. Agreements of the Shareholders. Each Shareholder agrees
not to, and it shall cause its Affiliates not to, make any sale, transfer or
other disposition of Shares except in compliance with the registration
requirements of the Securities Act and the rules and regulations thereunder,
including exemptions, and in accordance with the terms of this Agreement.
SECTION 5.10. Recapitalizations, Exchanges, Etc. Affecting the Shares.
The provisions of this Agreement shall apply to any and all shares of capital
stock of the Company or any successor or assign of the Company (whether by
merger, consolidation, sale of assets or otherwise) which may be issued in
respect of, in exchange for, or in substitution of the Shares, by reason of a
stock dividend, stock split, stock issuance, reverse stock split, combination,
recapitalization, reclassification, merger, consolidation or otherwise. Upon the
occurrence of any such event, amounts hereunder shall be appropriately adjusted.
ARTICLE VI
Term of Agreement
SECTION 6.01. Term of Agreement. This Agreement shall take effect
immediately upon the occurrence of Effective Time. This Agreement (other than
the provisions of Section 5.06) shall terminate with respect to any Shareholder
on the date that such Shareholder and its Subsidiary Holders no longer own any
shares of Common Stock.
ARTICLE VII
Miscellaneous Provisions
SECTION 7.01. Specific Performance. The parties hereto hereby declare
that irreparable damage would occur as a result of the failure of any party
hereto to perform any of its obligations under this Agreement in accordance with
35
the specific terms hereof. Therefore, all parties hereto shall have the right to
specific performance of the obligations of the other parties under this
Agreement and if any party hereto shall institute any action or proceeding to
enforce the provisions hereof, any person against whom such action or proceeding
is brought hereby waives the claim or defense therein that such party has an
adequate remedy at law. The right to specific performance should be in addition
to any other remedy to which a party hereto may be entitled at law or in equity.
SECTION 7.02. Legends. (a) Each certificate representing Shares shall
bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TERMS
AND CONDITIONS (INCLUDING RESTRICTIONS ON VOTING AND TRANSFER) SET
FORTH IN A SHAREHOLDERS AGREEMENT DATED AS OF o, o, A COPY OF WHICH
MAY BE OBTAINED FROM [NEWCO], INC. NO TRANSFER OF SUCH SECURITIES WILL
BE MADE ON THE BOOKS OF, OR BE EFFECTIVE WITH RESPECT TO, [NEWCO],
INC. UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THE TERMS OF
SUCH AGREEMENT.
(b) In addition, stop transfer restrictions will be given to the
Company's transfer agent(s) with respect to the Shares and there will be placed
on the certificates or instruments representing the Shares, and on any
certificate or instrument delivered in substitution therefor, a legend stating
in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT
TO SUCH REGISTRATION OR IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
(c) The Company hereby agrees that it will cause stop transfer
restrictions to be released with respect to any Shares that are transferred in
compliance with the terms and provisions of this Agreement and (i) pursuant to
an effective registration statement under the Securities Act, (ii) pursuant to
Rule 144 or 145 under the Securities Act, (iii) in accordance with the
requirements of Rule 903 or 904 of Regulation S under the Securities Act, or
(iv) pursuant to another exemption from the registration requirements of the
Securities Act; provided, however, that
36
in the case of any transfer pursuant to clause (ii), (iii) or (iv) above, the
request for transfer is accompanied by a written statement signed by a
Shareholder confirming compliance with the requirements of the relevant
exemption from registration; and provided, further, that in the case of any
transfer pursuant to clause (iv) above, other than any transfer by such
Shareholder to one or more of such Shareholder's direct or indirect
subsidiaries, or among such subsidiaries, or by any such subsidiary to such
Shareholder, the Company shall have received a written opinion of counsel
reasonably satisfactory to the Company. The Company further agrees that it will
cause the legends described in subsections (a) and (b) of this Section 7.02 to
be removed in the event of any transfer as provided in clause (i), (ii) or (iii)
above.
SECTION 7.03. Conflicts and Inconsistent Agreements. Each of the
Shareholders and the Company shall take all action necessary, including but not
limited to the voting of capital stock of the Company, to ensure that the
certificate of incorporation and by-laws of the Company and the certificates of
incorporation and by-laws or other governing documents of the Company's
subsidiaries are consistent with, and do not conflict with, the terms of this
Agreement. Neither the Company nor any Shareholder shall enter into any
agreement inconsistent with the terms of this Agreement.
SECTION 7.04. Complete Agreement. This Agreement constitutes the
entire agreement and understanding among the parties hereto with respect to the
matters referred to herein and supersedes all prior agreements and
understandings among the parties hereto with respect to the matters referred to
herein.
SECTION 7.05. Amendment. This Agreement may not be amended, modified
or supplemented and no waivers of or consents to departures from the provisions
hereof may be given unless consented to in writing by the Company, AAH and
Specified Shareholders holding a majority of all Shares held by Specified
Shareholders.
SECTION 7.06. Successors; Assigns; Subsidiary Holders. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned, directly or indirectly, including by operation of law, by any
Shareholder without the prior written consent of the Company. The terms and
conditions of this Agreement shall be binding on and inure to the benefit of the
respective successors and permitted assigns of the parties hereto. Each
Shareholder agrees with respect to any Affiliate that
37
becomes a Subsidiary Holder hereunder, to promptly thereafter cause such
Affiliate to execute a counterpart hereof agreeing to be bound by all of the
terms, conditions and restrictions of this Agreement, as and to the same extent
as such Shareholder. The execution of a counterpart hereof by an Affiliate who
has become a Subsidiary Holder does not constitute an assignment of any part of
this Agreement prohibited by this Section 7.06, and the Shareholder with which
such Subsidiary Holder is affiliated with will remain bound by all of the terms,
conditions and restrictions of this Agreement.
SECTION 7.07. Attorney Fees. A party in breach of this Agreement
shall, on demand, indemnify and hold harmless the other party for and against
all reasonable out-of-pocket expenses, including legal fees and expenses,
incurred by such other party by reason of the enforcement and protection of its
rights under this Agreement. The payment of such expenses is in addition to any
other relief to which such other party may be entitled.
SECTION 7.08. Notices. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent by prepaid telex, cable or telecopy or sent, postage prepaid, by
registered, certified or express mail or reputable overnight courier service and
shall be deemed given when so delivered by hand, telexed, cabled or
38
telecopied, or if mailed, three days after mailing (one business day in the case
of express mail or overnight courier service), as follows (or at such other
address, telephone number and fax number as a party shall notify each other
party hereto):
(i) if to the Company:
1050 Westlakes Drive
Suite 300
Berwyn, PA, 19312
Attention: [ ]
Telecopy: [ ]
Telephone: [ ]
with copies to:
[ ]
[ ]
[ ]
Attention: [ ]
Telecopy: [ ]
Telephone: [ ]
(ii) if to AAH:
c/o Ripplewood Holdings L.L.C.
One Rockefeller Plaza
32nd Floor
New York, NY 10020
Attention: [ ]
Telecopy: [ ]
Telephone: [ ]
with copies to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Peter S. Wilson, Esq.
Telecopy: (212) 474-3700
Telephone: (212) 474-1000
(iii) if to any of the Specified Shareholders, at the addresses,
telecopy and telephone numbers beneath each Specified Shareholder's
signature on the signature pages hereto.
39
with copies to:
Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas
New York, NY 10036
Attention: George S. Frazza, Esq.
Telecopy: [ ]
Telephone: [ ]
SECTION 7.09. Interpretation; Exhibits and Schedules. The headings
contained in this Agreement, in any Exhibit or Schedule hereto and in the table
of contents to this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. All Exhibits
and Schedules annexed hereto or referred to herein are hereby incorporated in
and made a part of this Agreement as if set forth in full herein. Any
capitalized terms used in any Schedule or Exhibit but not otherwise defined
therein, shall have the meaning as defined in this Agreement.
SECTION 7.10. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each of the parties and delivered to the other party.
SECTION 7.11. Severability. If any provision of this Agreement (or any
portion thereof) or the application of any such provision (or any portion
thereof) to any person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof (or the remaining portion thereof) or the application of such provision
to any other persons or circumstance.
SECTION 7.12. GOVERNING LAW. THIS AGREEMENT AND ALL ACTIONS
CONTEMPLATED HEREBY SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES).
SECTION 7.13. SUBMISSION TO JURISDICTION. ANY AND ALL SUITS, LEGAL
ACTIONS OR PROCEEDINGS ARISING OUT OF THIS AGREEMENT SHALL BE BROUGHT IN THE
SUPERIOR COURT OR THE COURT OF CHANCERY OF THE STATE OF DELAWARE OR THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
40
OR IN THE SUPREME COURT OF THE STATE OF NEW YORK, NEW YORK COUNTY OR THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND EACH PARTY
HEREBY SUBMITS TO AND ACCEPTS THE EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE
PURPOSE OF SUCH SUITS, LEGAL ACTIONS OR PROCEEDINGS. IN ANY SUCH SUIT, LEGAL
ACTION OR PROCEEDING, EACH PARTY WAIVES PERSONAL SERVICE OF ANY SUMMONS,
COMPLIANT OR OTHER PROCESS AND AGREES THAT SERVICE THEREOF MAY BE MADE BY
CERTIFIED OR REGISTERED MAIL DIRECTED TO IT AT ITS ADDRESS SET FORTH IN THE
BOOKS AND RECORDS OF THE COMPANY. TO THE FULLEST EXTENT PERMITTED BY LAW, EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OR ANY SUCH SUIT, LEGAL ACTION OR
PROCEEDING IN ANY SUCH COURT AND HEREBY FURTHER WAIVES ANY CLAIM THAT ANY SUIT,
LEGAL ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
SECTION 7.14. WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY (I) CERTIFIES THAT NO
REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 7.14.
SECTION 7.15. No Waiver of Rights. No failure or delay on the part of
any party in the exercise of any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power or
right preclude other or further exercise thereof or of any other right or power.
The waiver by any party or parties hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any other or
subsequent breach hereunder. All rights and remedies
41
existing under this Agreement are cumulative and are not exclusive of any rights
or remedies otherwise available.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
[NEWCO],
by
--------------------------
Name:
Title:
ASBURY AUTOMOTIVE HOLDINGS L.L.C.,
by
--------------------------
Name:
Title:
SPECIFIED SHAREHOLDERS:
----------------------
[ ]
----------------------
[ ]
----------------------
[ ]
Schedule I
Names of Acceptable Designees as
Dealer Directors
David McDavid
Royce Reynolds
John Capps
Luther Coggin
Jim Nalley
Thomas F. McLarty
Scott Thomason
Jeffrey I. Wooley
Charlie (C.B.) Tomm
EXHIBIT 24.1
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and
officers of Asbury Automotive Group, L.L.C. (the "Company"), constitutes and
appoints Brian E. Kendrick and Thomas F. Gilman, as his or her true and lawful
attorneys-in-fact and agents, each acting alone, with full powers of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign a Registration Statement on Form
S-1 (the "Registration Statement") to be filed with the Securities and
Exchange Commission (the "SEC") in connection with the registration under the
Securities Act of 1933, as amended (the "Securities Act"), of common stock,
and any or all amendments to such Registration Statement, including
post-effective amendments, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the SEC and other appropriate
governmental agencies, and grants unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully to all intent and
purposes as he or she might or could do in person, and hereby ratifies and
confirms all that said attorneys-in-fact and agents, each acting alone, or his
or her substitute or substitutes, may lawfully do or cause to be done by
virtue hereof. This Power of Attorney may be executed in any number of
counterparts (whether facsimile or original), each of which shall be deemed an
original with respect to any party whose signature appears thereon, and all of
which shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have duly signed this Power of
Attorney this [ ] day of July, 2001.
/s/ Brian E. Kendrick
- ----------------------------
Brian E. Kendrick
President and Chief Executive
Officer
2
/s/ Thomas F. Gilman
- ----------------------------
Thomas F. Gilman
Vice President and Chief
Financial Officer
/s/ Thomas R. Gibson
- ----------------------------
Thomas R. Gibson
Chairman and Director
/s/ Michael C. Paul
- ----------------------------
Michael C. Paul
Controller
/s/ Timothy C. Collins
- ----------------------------
Timothy C. Collins
Director
/s/ Ian K. Snow
- ----------------------------
Ian K. Snow
Director
/s/ John M. Roth
- ----------------------------
John M. Roth
Director
/s/ C.V. Jim Nalley
- ----------------------------
C.V. Jim Nalley
Director
/s/ B. David McDavid
- ----------------------------
B. David McDavid
Director
/s/ Charles B. Tomm
- ----------------------------
Charles B. Tomm
Director