EXHIBIT 10.3
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This Second Amended and Restated Credit Agreement dated as of July 28,
1999 is entered into between SONIC AUTOMOTIVE, INC., a Delaware corporation, and
FORD MOTOR CREDIT COMPANY, a Delaware corporation, and amends and restates that
certain Credit Agreement, dated as of October 15, 1997, as amended by that
certain Credit Agreement Amendment dated November 12, 1997, as amended by that
certain Amended and Restated Credit Agreement dated as of December 15, 1997, as
amended by that certain Letter Agreement dated July 28, 1998, as amended by that
certain Letter Agreement dated September 21, 1998, as amended by that certain
Letter Agreement dated October 15, 1998, as further amended by that certain
Amendment to Amended and Restated Credit Agreement dated March 2, 1999,
(collectively, the "ORIGINAL CREDIT AGREEMENT") among the parties hereto. 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 Subsidiary Holding Company (i) acquires any going business or all
or substantially all of the assets of any automobile dealership and/or related
operations (e.g. body shop and service repair centers), whether through purchase
of assets, merger or otherwise or (ii) directly or indirectly acquires (in one
transaction or as the most recent transaction in a series of transactions) at
least a majority (in number of votes) of the securities of such a corporation
which have ordinary voting power for the election of directors (other than
securities having such power only by reason of the happening of a contingency)
or a majority (by percentage of voting power) of the outstanding equity
interests of such an entity.
"ACQUISITION DOCUMENTS" means all documents, instruments and agreements
entered into in connection with any Acquisition and the Initial Acquisitions.
"ADDITIONAL SUBORDINATED DEBT" means indebtedness of the Borrower which
(i) Lender has determined to be sufficiently subordinate to the payment of the
Obligations, (ii) Lender has consented to in writing, and (iii) Lender has
agreed to deduct from the calculation of Total Adjusted Debt (as defined
herein).
"ADVANCE" means any loan made by the Lender under Section 2.1 hereof.
"ADJUSTED LEVERAGE RATIO" is defined in Section 5.4(F) hereof.
"ADJUSTED TBC RATIO" is defined in Section 5.4(B) hereof.
"AFFILIATE" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person is the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) of greater than five percent (5%) or more of any class of voting
securities (or other voting interests) of the controlled Person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management or policies of the controlled Person, whether through ownership of
Capital Stock, by contract or otherwise.
"AGREEMENT" means this Second Amended and Restated 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,
provided, however, that with respect to the calculation of financial ratios and
other financial tests required by this Agreement, "Agreement Accounting
Principles" means generally accepted accounting principles as in effect as of
the date of the Original Credit Agreement, applied in a manner consistent with
that used in preparing the financial statements referred to in Section 5.1(A)
hereof; provided, further, however, all pro forma financial statements
reflecting Acquisitions shall be prepared in accordance with the requirements
established by the Commission for acquisition accounting for reporting
acquisitions by public companies (whether or not such Acquisitions are required
to be publicly reported).
"APPLICABLE COMMERCIAL PAPER RATE" means as of any Quarterly Payment Date,
(a) with respect to that portion of the Obligations the principal amount of
which is less than the value of the Sonic Group's Scaled Assets on such
Quarterly Payment Date, the Commercial Paper Rate plus two and seventy-five
hundredths percent (2.75%) per annum, and (b) with respect to that portion of
the Obligations the principal amount of which equals or exceeds the value of the
Sonic Group's Scaled Assets on such Quarterly Payment Date, the Commercial Paper
Rate plus three and seventy-five hundredths percent (3.75%) per annum. As of the
Effective Date, the Applicable Commercial Paper Rate is the Commercial Paper
Rate plus 2.75%, or _______%.
"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).
"AUTHORIZED OFFICER" means any of the chief executive officer, president,
chief financial officer, treasurer or assistant treasurer of the Borrower,
acting singly.
"AVERAGE SCALED ASSETS" means, as of any Quarterly Payment Date, the
average of (a) the Sonic Group's Scaled Assets on the first day of the
immediately preceding Quarter, and (b) the Sonic Group's Scaled Assets on the
last day of the immediately preceding Quarter.
"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.
1
"BORROWER" means Sonic Automotive, Inc., a Delaware corporation, together
with its successors and assigns, including a debtor-in-possession on behalf of
the Borrower.
"BORROWER GUARANTY" means that certain Guaranty, dated as of October 15,
1997, pursuant to which the Borrower guaranties all Sonic Dealership obligations
arising under any Wholesale Line, as it may be amended, restated or otherwise
modified and in effect from time to time.
"BORROWER PLEDGES" means each of (i) that certain Pledge Agreement, dated
as of October 15, 1997, from the Borrower to the Lender 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 October 15, 1997, from the Borrower
to the Lender 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 and (iii) any other pledge
of Capital Stock delivered by a member of the Sonic Group from time to time to
the Lender.
"BORROWER SECURITY AGREEMENT" means that certain Security Agreement, dated
as of October 15, 1997 from the Borrower to the Lender pursuant to which the
Borrower pledged all of its assets to secure its obligations under the Bridge
Facility and the Obligations hereunder and the obligations of each Sonic
Dealership under any Wholesale Line provided by the Lender to such Sonic
Dealership, as it may be amended, restated or otherwise modified and in effect
from time to time.
"BORROWING DATE" means a date on which an Advance is made hereunder.
"BORROWING NOTICE" is defined in Section 2.4 hereof.
"BRIDGE FACILITY" means the credit facility made available by the Lender
to the Borrower pursuant to the Credit Agreement dated as of November 12, 1997.
"BUSINESS DAY" means a day (other than a Saturday or Sunday) on which
banks are open for business in Dearborn, Michigan, Atlanta, Georgia and
Charlotte, North Carolina.
"CAPITAL EXPENDITURES" 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,
by the Borrower and its Subsidiaries 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 the Borrower and its Subsidiaries.
"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
2
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 Xxxxx'x 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 Xxxxx'x Investor Services,
Inc. or AAA by Standard & Poor's Corporation with maturities of no more than two
(2) years from the date of acquisition; and (vi) money market funds with respect
to which not less than 90% of such funds are invested in the type of investments
specified in clauses (i) through (v) above; provided, unless the context
otherwise requires, that the maturities of such Cash Equivalents shall not
exceed 365 days.
"CASH MANAGEMENT AGREEMENT" means any cash management agreement to be
entered into between the Lender and the Borrower and its Subsidiaries, pursuant
to which the Borrower and such Subsidiaries may participate in a sweep-account
program managed by the Lender.
"CHANGE OF CONTROL" means an event or series of events by which:
(i) the Principals and their Related Parties cease to own, directly
or indirectly, more than fifty percent (50%) of the combined voting power
of the Borrower's Capital Stock ordinarily having the right to vote at an
election of directors;
(ii) during any period of 24 consecutive calendar months,
individuals:
(a) who were directors of the Borrower on the first day of
such period, or
(b) whose election or nomination for election to the board of
directors of the Borrower was recommended or approved by at least a
majority of the directors then still in office who were directors of
the Borrower on the first day of such period, or whose election or
nomination for election was so approved,
shall cease to constitute a majority of the board of directors of the
Borrower; and
(iii) the Borrower consolidates with or merges into another
corporation or
3
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.
"CHARTER DOCUMENTS" means (i) in the case of a corporation, such entity's
articles of incorporation and by-laws, (ii) in the case of a limited liability
company, such entity's articles of organization and operating agreement or
equivalent (however designated), (iii) in the case of a partnership, such
entity's partnership agreement or equivalent (however designated) and (iv) in
the case of an association or other business entity not described above, such
entity's founding documents (however designated).
"CODE" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time, or any successor statute.
"COLLATERAL" means all property and interests in property now owned or
hereafter acquired by the Borrower or any of its Subsidiaries in or upon which a
security interest, lien or mortgage is granted to the Lender, whether under the
Borrower Security Agreement, under any of the other Collateral Documents or
under any of the other Loan Documents.
"COLLATERAL DOCUMENTS" means all agreements, instruments and documents
executed in connection with this Agreement, the Original Agreement or the Bridge
Facility that are intended to create or evidence Liens to secure the Obligations
and all Floor Plan Indebtedness, including, without limitation, the Borrower
Security Agreement, the Borrower Pledges, the Subsidiary Holding Company
Pledges, the Cross Agreement, the Waiver, Guaranty and Disbursement Agreement,
the Reaffirmation of Guaranty, each Dealership Security Agreement, Subsidiary
Holding Company Security Agreement and all other security agreements, mortgages,
deeds of trust, loan agreements, notes, guaranties, subordination agreements,
pledges, powers of attorney, consents, assignments, contracts, fee letters,
notices, leases, financing statements and all other written matter whether
heretofore, now, or hereafter executed by or on behalf of the Borrower or any of
its Subsidiaries and delivered to the Lender, together with all agreements and
documents referred to therein or contemplated thereby.
"COMMERCIAL PAPER RATE" means a fluctuating per annum rate of interest
equal to the interest rate for commercial paper with a 30-day term, as specified
under the column entitled "Week Ending" for "1-Month Finance Paper Placed
Directly" as set forth in the Federal Reserve Board on the last Monday of a
calendar month. In the event such release is discontinued or modified to
eliminate the reporting of a 30-day commercial paper rate, then Lender will
substitute, in its sole discretion, a comparable report or release of the 30-day
commercial paper rate published by a comparable source.
"COMMISSION" means the Securities and Exchange Commission and any Person
succeeding to the functions thereof.
"COMMITMENT" means the lesser of (a) $150,000,000.00 and (b) the Scaled
Assets of
4
the Sonic Group plus $25,000,000.00.
"COMMITMENT LETTER" means that certain commitment letter dated October 3,
1997 between the Borrower and the Lender as amended by the Letter Agreement
dated October 20, 1997, as further modified by the Commitment Letter dated
December 17, 1998.
"CONSOLIDATED NET WORTH" means, at a particular date, the amount by which
the total consolidated assets of the Borrower and its consolidated Subsidiaries
exceeds the total consolidated liabilities of the Borrower and its consolidated
Subsidiaries.
"CONTAMINANT" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos, polychlorinated biphenyls ("PCBS"), or any
constituent of any such substance or waste, and includes but is not limited to
these terms as defined in Environmental, Health or Safety Requirements of Law.
"CONTINGENT OBLIGATION", as applied to any Person, means any Contractual
Obligation, contingent or otherwise, of that Person with respect to any
Indebtedness of another or other obligation or liability of another, including,
without limitation, any such Indebtedness, obligation or liability of another
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business), co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable, including Contractual Obligations (contingent or
otherwise) arising through any agreement to purchase, repurchase, or otherwise
acquire such Indebtedness, obligation or liability or any security therefor, or
to provide funds for the payment or discharge thereof (whether in the form of
loans, advances, stock purchases, capital contributions or otherwise), or to
maintain solvency, assets, level of income, or other financial condition, or to
make payment other than for value received.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any material
provision of any equity or debt securities issued by that Person or any material
indenture, mortgage, deed of trust, security agreement, pledge agreement,
guaranty, contract, undertaking, agreement or instrument, in each case in
writing, to which that Person is a party or by which it or any of its properties
is bound, or to which it or any of its properties is subject.
"CONTRIBUTION AGREEMENT" means that certain Amended and Restated
Contribution Agreement, dated as of October 20, 1997, as amended by the Second
Amended and Restated Contribution Agreement, dated as of December 15, 1997, as
amended by the Third Amended and Restated Contribution Agreement, dated as of
March 24, 1998, as amended and restated by the Fourth Amended and Restated
Contribution Agreement, dated as of December 1, 1998, as amended and restated by
the Fifth Amended and Restated Contribution Agreement dated March 2, 1999, as
further amended and restated by the Sixth Amended and Restated Contribution
Agreement dated _____________, 1999, as such agreement may be amended, restated
or otherwise modified and in effect from time to time.
5
"CONTROLLED GROUP" means the group consisting of (i) any corporation which
is a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower; (ii) a partnership or other trade
or business (whether or not incorporated) which is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower; and (iii) a member
of the same affiliated service group (within the meaning of Section 414(m) of
the Code) as the Borrower, any corporation described in clause (i) above or any
partnership or trade or business described in clause (ii) above.
"CONTROLLED SUBSIDIARY" of any Person means a Subsidiary of such Person
(i) 80% or more of the total Equity Interests or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more wholly-owned Subsidiaries of such Person and (ii)
of which such Person possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies, whether through the ownership
of voting securities, by agreement or otherwise.
"CROSS AGREEMENT" means that certain Cross Default and Cross
Collateralization Agreement dated as of even date herewith, 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.
"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(C) hereof.
"CUSTOMARY PERMITTED LIENS" means:
(i) Liens (other than Environmental Liens, Liens in favor of the IRS
and Liens in favor of the PBGC) with respect to the payment of taxes,
assessments or governmental charges in all cases which are not yet due or
(if foreclosure, distraint, sale or other similar proceedings shall not
have been commenced) which are being contested in good faith by
appropriate proceedings properly instituted and diligently conducted and
with respect to which adequate reserves or other appropriate provisions
are being maintained in accordance with Agreement Accounting Principles;
(ii) statutory Liens of landlords and Liens of suppliers, mechanics,
carriers, materialmen, warehousemen or workmen and other similar Liens
imposed by law created in the ordinary course of business for amounts not
yet due or which are being contested in good faith by appropriate
proceedings properly instituted and diligently conducted and with respect
to which adequate reserves or other appropriate provisions are being
maintained in accordance with Agreement Accounting Principles;
(iii) Liens (other than Environmental Liens, Liens in favor of the
IRS and Liens in favor of the PBGC) incurred or deposits made, in each
case, in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other
6
types of social security benefits or to secure the performance of bids,
tenders, sales, contracts (other than for the repayment of borrowed
money), surety, appeal and performance bonds; provided that (A) all such
Liens do not in the aggregate materially detract from the value of the
Borrower's or such Subsidiary's assets or property taken as a whole or
materially impair the use thereof in the operation of the businesses taken
as a whole, and (B) with respect to Liens securing bonds to stay judgments
or in connection with appeals do not secure at any time an aggregate
amount exceeding $250,000.00;
(iv) Liens arising with respect to zoning restrictions, easements,
licenses, reservations, covenants, rights-of-way, utility easements,
building restrictions and other similar charges or encumbrances on the use
of real property which do not in any case materially detract from the
value of the property subject thereto or interfere with the ordinary
conduct of the business of the Borrower or any of its Subsidiaries;
(v) Liens of attachment or judgment with respect to judgments, writs
or warrants of attachment, or similar process against the Borrower or any
of its Subsidiaries which do not constitute an Event of Default under
Section 6.1(h) hereof; and
(vi) any interest or title of the lessor in the property subject to
any operating lease entered into by the Borrower or any of its
Subsidiaries in the ordinary course of business.
"DAILY ADJUSTMENT AMOUNT" means, as of each day during a Quarter, the
difference between (a) the Average Scaled Assets for such Quarter, and (b) the
Revolving Credit Obligations for each such day, multiplied by 100 basis points
per annum.
"DEALERSHIP GUARANTORS" means each Sonic Dealership providing a Dealership
Guaranty and a Dealership Security Agreement to the Lender, and their respective
successors and assigns.
"DEALERSHIP GUARANTY" means each Guaranty and/or Guaranty and
Reaffirmation of Guaranty in the forms attached hereto as Exhibit C-1, provided
by a Sonic Dealership to the Lender, as the same may be amended, modified,
supplemented and/or restated, and as in effect from time to time.
"DEALERSHIP SECURITY AGREEMENT" means any Security Agreement in the form
attached hereto as Exhibit D-1, pursuant to which a Sonic Dealership grants the
Lender 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.
"DEBT OFFERING NOTES" means, collectively, each of these certain
promissory notes from the Borrower to various investors issued in accordance
with and pursuant to the terms of the Indenture dated as of July 1, 1998 and
entered into by and among Borrower, its Subsidiaries and U.S. Bank Trust
National Association, as trustee.
"DECISION PERIOD" is defined in Section 5.2(G) hereof.
"DECISION RESERVE" is defined in Section 5.2(G) hereof.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by
the terms of any
7
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,
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,
minus (vii) all 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 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.
"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.
8
"EFFECTIVE DATE" is defined in Section 1.3 hereof.
"ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS OF LAW" means all
Requirements of Law derived from or relating to federal, state and local laws or
regulations relating to or addressing pollution or protection of the
environment, or protection of worker health or safety, including, but not
limited to, the Comprehensive Environmental Response, Compensation and 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" means all of the Borrower's and each Dealership Guarantor's
present and future furniture, machinery, service vehicles, supplies and other
equipment and any and all accessions, parts and appurtenances attached to any of
the foregoing or used in connection therewith, and any substitutions therefor
and replacements, products and proceeds thereof.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time including (unless the context otherwise requires) any
rules or regulations promulgated thereunder.
"EVENT OF DEFAULT" means an event described in Article VI hereof.
"EXCLUDED REAL PROPERTY" means any real property owned by Town & Country
Toyota, Inc., a North Carolina corporation, and Ford Mill Ford, Inc. (f/k/a FMF
Management, Inc.), a South Carolina corporation if and to the extent such real
property is mortgaged to secure Indebtedness of such entities.
"FAIR VALUE" means (a) with respect to the Capital Stock of the Borrower,
the closing price for such Capital Stock on the trading date immediately
preceding the date of the applicable acquisition agreement; and (b) with respect
to other assets, the value of the relevant asset as of the date of acquisition
or sale determined in an arm's-length transaction conducted in good faith
between an informed and willing buyer and an informed and willing seller under
no compulsion to buy.
"FIXED CHARGE COVERAGE RATIO" is defined in Section 5.4(D) hereof.
"FLOOR PLAN INDEBTEDNESS" means any and all loans, advances, debts,
liabilities and obligations owing by a Sonic Dealership to the Lender of any
kind or nature, present or future, arising under a Wholesale Line or any other
Loan Document, whether or not evidenced by any
9
note, guaranty or other instrument, whether or not for the payment of money,
whether arising by reason of an extension of credit, loan, guaranty,
indemnification, or in any other manner, whether direct or indirect (including
those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired. The term includes, without
limitation, all interest, charges, expenses, fees, attorneys' fees and
disbursements, paralegals' fees (in each case whether or not allowed), and any
other sum chargeable to the Borrower, a Sonic Dealership or Sonic Financial
under this Agreement or any other Loan Document.
"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.
"GROSS NEGLIGENCE" means recklessness, the absence of the slightest care
or the complete disregard of consequences. Gross Negligence does not mean the
absence of ordinary care or diligence, or an inadvertent act or inadvertent
failure to act. If the term "gross negligence" is used with respect to the
Lender or any indemnitee in any of the other Loan Documents, it shall have the
meaning set forth herein.
"HEDGING OBLIGATIONS" of a Person means any and all obligations of such
Person, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (ii) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.
"INDEBTEDNESS" of any Person means, without duplication, such Person's (a)
obligations for borrowed money, (b) obligations representing the deferred
purchase price of property or services (other than accounts payable arising in
the ordinary course of such Person's business payable on terms customary in the
trade), (c) obligations, whether or not assumed, secured by Liens or payable out
of the proceeds or production from property or assets now or hereafter owned or
acquired by such Person, (d) obligations which are evidenced by notes,
acceptances or other instruments, (e) Capitalized Lease Obligations, (f)
reimbursement obligations with respect to letters of credit (other than
commercial letters of credit) issued for the account of such Person, (g) Hedging
Obligations, (h) Off Balance Sheet Liabilities and (i) Contingent Obligations in
respect of obligations of another Person of the type described in the foregoing
clauses (a) through (h). The amount of Indebtedness of any Person at any date
shall be without duplication (i) the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability of any
such Contingent Obligations at such date and
10
(ii) in the case of Indebtedness of others secured by a Lien to which the
property or assets owned or held by such Person is subject, the lesser of the
fair market value at such date of any asset subject to a Lien securing the
Indebtedness of others and the amount of the Indebtedness secured.
"INDEMNIFIED MATTERS" is defined in Section 8.6(B) hereof.
"INDEMNITEES" is defined in Section 8.6(B) hereof.
"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), all as determined in conformity with Agreement
Accounting Principles.
"INVENTORY" shall mean any and all motor vehicles, tractors, trailers,
service parts and accessories and other inventory of the Borrower and each
Dealership Guarantor.
"INVESTMENT" means, with respect to any Person, (i) any purchase or other
acquisition by that Person of any Indebtedness, Equity Interests or other
securities, or of a beneficial interest in any Indebtedness, Equity Interests or
other securities, issued by any other Person, (ii) any purchase by that Person
of all or substantially all of the assets of a business conducted by another
Person, and (iii) any loan, advance (other than deposits with financial
institutions available for withdrawal on demand, prepaid expenses, accounts
receivable, advances to employees and similar items made or incurred in the
ordinary course of business) or capital contribution by that Person to any other
Person, including all Indebtedness to such Person arising from a sale of
property by such Person other than in the ordinary course of its business.
"IRREGULAR FRANCHISE AGREEMENT" means any franchise agreement listed on
Schedule 1.1.0.
"IRS" means the Internal Revenue Service and any Person succeeding to th
functions thereof.
"LENDER" means Ford Motor Credit Company, a Delaware corporation and its
successors and assigns.
"LIEN" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, encumbrance or security agreement or preferential
arrangements of any kind or nature whatsoever (including, without limitation,
the interest of a vendor or lessor under any conditional sale, Capitalized Lease
or other title retention agreement).
"LOAN DOCUMENTS" means this Agreement, the Note, the Sonic Guaranties, the
Collateral Documents and all other documents, instruments and agreements
executed in connection therewith or contemplated thereby, as the same may be
amended, restated or otherwise modified and in effect from time to time.
"LOAN TO VALUE RATIO" is defined in Section 5.4(G) hereof.
11
"MARGIN STOCK" shall have the meaning ascribed to such term in Regulation
U.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower, any Material Subsidiary of the
Borrower, or the Borrower and its Subsidiaries, taken as a whole, (b) the
ability of the Borrower or any of its Subsidiaries to perform their respective
obligations under the Loan Documents in any material respect, or (c) the ability
of the Lender to enforce in any material respect the Obligations or its rights
with respect to the Collateral.
"MATERIAL SUBSIDIARY" means (a) any "Significant Subsidiary" as defined in
Regulation S-X issued pursuant to the Securities Act and the Exchange Act and
(b) any other Subsidiary of the Borrower which at any time comprises five
percent (5%) or more of the Borrower's Tangible Base Capital.
"MAXIMUM RATE" means the maximum nonusurious interest rate under
applicable law.
"MINORITY HOLDER" means any holder of an Equity Interest in a Subsidiary
which such Equity Interest may not exceed 20% of the Capital Stock of such
Subsidiary.
"MULTI-EMPLOYER PLAN" means a "Multi-employer Plan" as defined in Section
4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years
was, contributed to by either the Borrower or any member of the Controlled
Group.
"NET CASH PROCEEDS" means the net cash proceeds (net of underwriting
discount and Transaction Costs) received by the Borrower in connection with the
Public Offering.
"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).
"NOTE" means that Promissory Note dated October 15, 1997 duly executed by
the Borrower and payable to the order of Lender in the original principal amount
of $26,000,000.00, as amended and restated by that certain Amended and Restated
Promissory Note dated December 15, 1997, duly executed by the Borrower and
payable to the order of Lender in the principal amount of $75,000,000.00, as
amended and restated by that certain Second Amended and Restated Promissory Note
dated March 2, 1999, duly executed by the Borrower and payable to the order of
Lender in the principal amount of $100,000,000.00, as further amended and
restated by that certain Third Amended and Restated Promissory Note dated
____________, 1999, duly executed by the Borrower and payable to the order of
Lender in the principal amount of $150,000,000.00, in substantially the form of
Exhibit A hereto, duly executed by the Borrower and payable to the order of
Lender in the amount of the Commitment, including any amendment, restatement,
modification, renewal, increase or replacement of such Note.
"OBLIGATIONS" means all Advances, debts, liabilities, obligations,
covenants and duties owing by the Borrower, a Sonic Dealership or Sonic
Financial to the Lender or any Indemnitee, of any kind or nature, present or
future, arising under this Agreement, the Note, the Collateral Documents or any
other Loan Document, whether or not evidenced by any note, guaranty or
12
other instrument, whether or not for the payment of money, whether arising by
reason of an extension of credit, loan, guaranty, indemnification, or in any
other manner, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired. The term includes, without limitation,
all interest, charges, expenses, fees, attorneys' fees and disbursements,
paralegals' fees (in each case whether or not allowed), and any other sum
chargeable to the Borrower, a Sonic Dealership or Sonic Financial under this
Agreement or any other Loan Document.
"OFF BALANCE SHEET LIABILITIES" of a Person means (a) any repurchase
obligation or liability of such Person or any of its Subsidiaries with respect
to accounts or notes receivable sold by such Person or any of its Subsidiaries,
(b) any liability under any sale and leaseback transactions which do not create
a liability on the consolidated balance sheet of such Person, (c) any liability
under any financing lease or so-called "synthetic" lease transaction, or (d) any
obligations arising with respect to any other transaction which is the
functional equivalent of or takes the place of borrowing but which does not
constitute a liability on the consolidated balance sheets of such Person and its
Subsidiaries.
"ORIGINAL CREDIT AGREEMENT" is defined in the first paragraph hereof.
"OTHER TAXES" is defined in Section 2.11(B) hereof.
"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 successo
thereto.
"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 REFINANCING INDEBTEDNESS" means any replacement, renewal,
refinancing or extension of any Indebtedness permitted by this Agreement that
(i) does not exceed the aggregate principal amount (plus associated fees and
expenses) of the Indebtedness being replaced, renewed, refinanced or extended,
(ii) does not rank at the time of such replacement, renewal, refinancing or
extension senior to the Indebtedness being replaced, renewed, refinanced or
extended, and (iii) does not contain terms (including, without limitation, terms
relating to security, amortization, interest rate, premiums, fees, covenants,
event of default and remedies) materially less favorable to the Borrower or to
the Lender than those applicable to the Indebtedness being replaced, renewed,
refinanced or extended.
13
"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.
"PRINCIPALS" means O. Xxxxxx Xxxxx and B. Xxxxx Xxxxx.
"QUARTER" means each three-month period commencing January 1, April 1,
July 1, and October 1, beginning July 1, 1999.
"QUARTERLY PAYMENT DATE" means each Payment Date occurring on January 15,
April 15, July 15 and October 15, commencing with April 15, 1998.
"REAFFIRMATION OF GUARANTY" means that certain Reaffirmation of Guaranty
dated as of even date herewith from each Dealership Guarantor and each
Subsidiary Holding Company Guarantor to Lender, pursuant to which each
Dealership Guarantor and each Subsidiary Holding Company Guarantor reaffirms its
guaranty of the Obligations as such Obligations have been amended, restated and
increased by this Agreement.
"RECEIVABLE(S)" means and includes all of the Borrower's and each
Dealership Guarantor's presently existing and hereafter arising or acquired
accounts, contract rights, chattel paper, instruments, notes, letters of credit,
documents, documents of title, investment property, deposit accounts, other bank
accounts, general intangibles, tax refunds and other obligations of third
persons of any kind, now or hereafter existing, whether arising out of or in
connection with the sale or lease of goods, the rendering of services or
otherwise, and all rights now or hereafter existing in and to all security
agreements, leases, and other contracts securing or otherwise relating to any
such accounts, contract rights, chattel paper, instruments, notes, letters of
credit, documents, documents of title, investment property, deposit accounts,
other bank accounts, general intangibles, tax refunds or obligations of third
persons.
"REGULATION G" means Regulation G of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by nonbank, nonbroker lenders for the purpose of purchasing
or carrying margin stock (as defined therein).
"REGULATION T" means Regulation T of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by and to brokers and dealers of securities for the purpose
of purchasing or carrying margin stock (as defined therein).
14
"REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying Margin
Stock applicable to member banks of the Federal Reserve System.
"REGULATION X" means Regulation X of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by foreign lenders for the purpose of purchasing or carrying
margin stock (as defined therein).
"RELATED PARTY" with respect to any Principal means (i) any spouse or
immediate family member of such Principal or (ii) any trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding the outstanding Equity Interest of which consist
of such Principal and/or such other Persons referred to in the immediately
preceding clause (i).
"RELEASE" means any release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment, including the movement of Contaminants through or in the
air, soil, surface water or groundwater.
"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.
"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
0000, Xxxxxxxxxxx X, X, 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, including
Environmental, Health or Safety Requirements of Law.
15
"RESTRICTED PAYMENT" means (i) any dividend or other distribution, direct
or indirect, on account of any Equity Interests of the Borrower now or hereafter
outstanding, except a dividend payable solely in the Borrower's Capital Stock
(other than Disqualified Stock) or in options, warrants or other rights to
purchase such Capital Stock, (ii) any redemption, retirement, purchase or other
acquisition for value, direct or indirect, of any Equity Interests of the
Borrower or any of its Subsidiaries now or hereafter outstanding, other than in
exchange for, or out of the proceeds of, the substantially concurrent sale
(other than to a Subsidiary of the Borrower) of other Equity Interests of the
Borrower (other than Disqualified Stock), and (iii) any payment of a claim for
the rescission of the purchase or sale of, or for material damages arising from
the purchase or sale of any Equity Interests of the Borrower or any of the
Borrower's Subsidiaries, or of a claim for reimbursement, indemnification or
contribution arising out of or related to any such claim for damages or
rescission.
"RESTRICTED FRANCHISE AGREEMENT" is defined in Section 5.3(F)(iii)(b).
"REVOLVING CREDIT AVAILABILITY" means, at any particular time, the amount
by which the Commitment at such time exceeds the Revolving Credit Obligations at
such time.
"REVOLVING CREDIT OBLIGATIONS" means, at any particular time, the sum of
the outstanding principal amount of all Advances (including the loans made under
the Original Credit Agreement) at such time.
"SCALED ASSETS" means with respect to the Sonic Group, the sum of (A) an
amount equal to 75% of the Sonic Group's Receivables which constitute factory
receivables, (B) an amount equal to 60% of the Sonic Group's Receivables which
constitute current finance receivables, (C) an amount equal to 60% of the Sonic
Group's Receivables which constitute receivables for parts and services (after
netting any amounts payable in connection with such parts and services by any
member of the Sonic Group), (D) an amount equal to 55% of the Sonic Group's
Inventory which constitutes parts and accessories, (E) an amount equal to 80% of
the that portion of the Sonic Group's Inventory which constitutes used vehicles
less the amount of any outstanding Floor Plan Indebtedness of any member of the
Sonic Group incurred in connection with such used vehicles, and (F) an amount
equal to 45% of the difference between (i) the value of the Sonic Group's
Equipment and (ii) the amount of Indebtedness of any member of the Sonic Group
incurred in connection with such Equipment. The value of the Sonic Group's
Scaled Assets shall be calculated by the Lender and shall be determined based on
the financial statements and monthly factory statements delivered to the Lender
pursuant to Section 5.1(A). Scaled Assets shall be measured as of the Effective
Date and as of the end of each calendar quarter.
"SCALED ASSETS ADJUSTMENT AMOUNT" means, as of any Quarterly Payment Date,
the sum of the Daily Adjustment Amounts for each day of the immediately
preceding Quarter.
"SECRETARY'S CERTIFICATE" with respect to any entity in the Sonic Group,
means any certificate, delivered by a secretary, assistant secretary, managing
member, general partner or governor of such entity which certifies (i) the names
and true signatures of the incumbent officers or managers of such entity
authorized to sign each Transaction Document to which it is a party and the
other documents to be executed thereunder, (ii) a true and correct copy of such
entity's Certificate of Incorporation, or similar charter document and all
amendments thereto, (iii) a true and correct copy of the by-laws or similar
governing document of such entity and all amendments thereto, and (iv) a true
and correct copy of the resolutions of such entity's board
16
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;
"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.
"SONIC DEALERSHIP" means any Subsidiary dealership and/or related body
shop or service repair center owned, operated or acquired by the Borrower or any
Subsidiary of the Borrower.
"SONIC FINANCIAL" means Sonic Financial Corporation, a Delaware
corporation.
"SONIC GROUP" means each of the Borrower and each Subsidiary of th
Borrower.
"SONIC GUARANTIES" means each of the Borrower Guaranty, each Subsidiary
Holding Company Guaranty, each Dealership Guaranty and the Contribution
Agreement.
"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 each of Sonic Automotive of
Tennessee, Inc., a corporation organized under the laws of the State of
Tennessee, Sonic Automotive of Nevada, Inc., a corporation organized under the
laws of the State of Nevada, Sonic Automotive of Georgia, Inc., a corporation
organized under the laws of the State of Georgia, Sonic of Texas, Inc., a
corporation organized under the laws of the State of Texas, and any other
Subsidiary of Borrower which owns any Capital Stock in any other entity in the
Sonic Group, in each case together with its successors and assigns.
"SUBSIDIARY HOLDING COMPANY PLEDGES" means each Pledge Agreement delivered
by any Subsidiary Holding Company to Lender, pursuant to which such Persons
pledge 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.
"SUBSIDIARY HOLDING COMPANY GUARANTY" means each Guaranty and/or Guaranty
and Reaffirmation of Guaranty in the forms attached hereto as Exhibit C-2,
provided by a Subsidiary Holding Company to Lender, as the same may be amended,
modified, supplemented and/or restated, and in effect from time to time.
"SUBSIDIARY HOLDING COMPANY SECURITY AGREEMENTS" means any Security
Agreement in the form attached hereto as exhibit D-2, pursuant to which a
Subsidiary Holding company grants the Lender 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.
"TANGIBLE BASE CAPITAL" means, at a particular date of calculation, the
amount
17
determined by the Lender to be equal to :
(i) Consolidated Net Worth
PLUS
(ii) the sum of
(A) Indebtedness of the Borrower or its Subsidiaries to officers
of the Borrower, which Indebtedness is subordinated in writing
to the Obligations on terms and conditions acceptable to the
Lender; and
(B) an amount equal to 64% of the LIFO reserve (as determined in
accordance with Agreement Accounting Principles) reflected on
the Borrower's balance sheet;
(C) Indebtedness of the Borrower and/or its Subsidiaries evidenced
by the Debt Offering Notes;
MINUS
(iii) the sum of
(A) Receivables with respect to which the account debtor is a
director, officer, employee, Subsidiary or Affiliate of the
Borrower or other amounts (whether or not classified as
Receivables) from Affiliates of the Borrower or its
Subsidiaries (other than those payable within 30 days and
incurred in the ordinary course of business); and
(B) the value of leasehold improvements after deductions for
depreciation of the Borrower and its Subsidiaries on a
consolidated basis;
(C) that part of the Borrower's and its Subsidiaries (on a
consolidated basis) capitalization or reserves attributable to
any writing up of book values on any fixed assets after the
date of the most recently delivered financial statements of
the Borrower and its Subsidiaries;
(D) the aggregate amount of the Borrower's and its Subsidiaries
Investments in Affiliates (other than the Borrower's
Subsidiaries);
(E) organizational expenses related to start-up of operations with
respect to the Borrower and its Subsidiaries;
(F) goodwill and other intangible assets (as determined in
accordance with Agreement Accounting Principles);
(G) any amount paid to a third-party as consideration for
no-competition agreements;
18
(H) the value of daily rental franchise payments made by the
Borrower or its Subsidiaries under any franchise agreements
(net of any amounts owed by a franchisor to Borrower or its
Subsidiaries); and
(I) other assets (including, without limitation, airplanes,
cattle, etc.) not related to the operations of the Dealerships
as automobile dealerships.
"TAXES" is defined in Section 2.11(A) hereof.
"TBC RATIO" is defined in Section 5.4(A) hereof.
"TERMINATION DATE" means the earlier of (a) March 2, 2001or such other
"Termination Date" specified in an Extension Notice and agreed to by the Lender
and (b) the date of termination of the Commitment pursuant to either of Section
2.3 or Section 7.1 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 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 any Floor Plan
Indebtedness, less the outstanding principal balance of the Debt Offering Notes,
and less the outstanding principal balance of any Additional Subordinated Debt.
"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.
"TRANSACTION COSTS" means the fees, costs and expenses payable by the
Borrower in connection with the execution, delivery and performance of the
Transaction Documents.
"TRANSACTION DOCUMENTS" means the Loan Documents and the Acquisition
Documents.
19
"UNFUNDED LIABILITIES" means (i) in the case of Single Employer Plans, the
amount (if any) by which the present value of all vested nonforfeitable benefits
under all Single Employer Plans exceeds the fair market value of all such Plan
assets allocable to such benefits, all determined as of the then most recent
valuation date for such Plans, and (ii) in the case of Multi- employer Plans,
the withdrawal liability that would be incurred by the Controlled Group if all
members of the Controlled Group completely withdrew from all Multi-employer
Plans.
"UNMATURED DEFAULT" means an event which, but for the lapse of time or the
giving of notice, or both, would constitute an Event of Default.
"WAIVER, GUARANTY AND DISBURSEMENT AGREEMENT" means each Waiver, Guaranty
and Disbursement Agreement delivered by Borrower or any Subsidiary Holding
Company in the form attached hereto as Exhibit G to Lender, as the same may be
amended, restated, or otherwise modified from time to time.
"WHOLESALE LINE" means any wholesale credit line made by the Lender to a
Sonic Dealership.
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 hereof; and (ii) shall not
in any way be construed as consent by the Lender to the establishment,
maintenance or acquisition of any Subsidiary, except as may otherwise be
permitted hereunder.
1.3 Effectiveness of this Agreement. Upon the satisfaction of all of 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 and the Original
Credit Agreement be amended and restated in its entirety in accordance with the
provisions of Article XI hereof.
ARTICLE II: THE LOAN FACILITIES
2.1 Advances. Upon the satisfaction of the conditions precedent set forth
in Sections 3.1 and 3.2, from and including the date of this Agreement and prior
to the Termination Date, the Lender shall, on the terms and conditions set forth
in this Agreement, make Advances to the Borrower from time to time, in Dollars,
in an amount not to exceed the Revolving Credit Availability at such time;
provided, however, at no time shall the Revolving Credit Obligations exceed the
Commitment at such time. Subject to the terms of this Agreement, the Borrower
may borrow, repay and re-borrow Advances at any time prior to the Termination
Date. The Borrower shall repay in full the outstanding principal balance of each
Advance on the earlier to occur of (a) the date that is 24 months from the
Borrowing Date applicable to such Advance and (b) the Termination Date.
20
2.2 Optional Payments; Mandatory Prepayments
(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,
that the Borrower may not so prepay Advances unless it shall have provided at
least one Business Day's written notice to the Lender of such prepayment.
(B) Mandatory Prepayments. If at any time and for any reason the 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 a Decision Reserve or net cash proceeds of an
Asset Sale 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. All of the mandatory prepayments made under this Section
2.2(B) shall be applied first to Advances maturing on such date and then to
subsequently maturing Advances in order of maturity.
2.3 Changes in the Commitment. Reduction of Commitment. The Borrower may
permanently reduce the Commitment in whole, or in part, in an aggregate minimum
amount of $5,000,000.00 and integral multiples of $1,000,000.00 in excess of
that amount (unless the Commitment is reduced in whole), upon at least three (3)
Business Days' written notice to the Lender, which notice shall specify the
amount of any such reduction; provided, however, that the amount of the
Commitment may not be reduced below the aggregate principal amount of the
outstanding Revolving Credit Obligations. All accrued commitment fees shall be
payable on the effective date of any partial or complete termination of the
obligations of the Lender to make Advances hereunder.
2.4 Method of Borrowing. The Borrower shall give the Lender irrevocable
notice in substantially the form of Exhibit B hereto (a "BORROWING NOTICE") not
later than 10:00 a.m. (Eastern Standard Time) on the Business Day preceding the
Borrowing Date of each Advance, specifying: (i) the Borrowing Date (which shall
be a Business Day) of such Advance; (ii) the aggregate amount of such Advance;
(iii) the use of proceeds of such Advance, and (iv) the account or accounts into
which the Advances should be funded. Not later than 2:00 p.m. (Eastern Standard
Time) on each Borrowing Date, the Lender shall make available its Advance, in
funds immediately available to the Borrower at such account or accounts as shall
have been notified to the Lender. Each Advance shall bear interest from and
including the date of the making of such Advance to (but not including) the date
of repayment thereof at the Applicable Commercial Paper Rate, changing when and
as the underlying Commercial Paper Rate changes, which such interest shall be
payable in accordance with Section 2.9(B).
2.5 Minimum Amount of Each Advance. Each Advance shall be in the minimum
amount of $250,000.00 (and in multiples of $50,000.00 if in excess thereof),
provided, however, that any Advance may be in the amount of the unused
Commitment.
2.6 Default Rate; Late Payment Fee. After the occurrence and during the
continuance of an Event of Default, at the option of the Lender, the interest
rate(s) applicable to the Advances shall be equal to the Applicable Commercial
Paper Rate plus three percent (3.0%) 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 five percent (5.0%)
per annum above the rate applicable thereto until such amounts have been paid in
full
21
and shall be payable on demand by the Lender and at any rate no later than the
next succeeding Payment Date.
2.7 Method of Payment. All payments of principal, interest, and fees
hereunder shall be made, without setoff, deduction or counterclaim, in
immediately available funds to the Lender at the Lender's address specified
pursuant to Article X, or at any other address specified in writing by the
Lender to the Borrower, by 2:00 p.m. (Eastern Standard Time) on the date when
due.
2.8 Advances, Telephonic Notices. The Lender is authorized to record the
principal amount of each Advance and each repayment with respect to its Advances
on the schedule attached to the Note; provided, however, that the failure to so
record shall not affect the Borrower's obligations under the Note. The Borrower
authorizes the Lender to extend Advances and to transfer funds based on
telephonic notices made by any person or persons the Lender in good faith
believes to be acting on behalf of the Borrower. The Borrower agrees to deliver
promptly to the Lender a written confirmation, signed by an Authorized Officer,
if such confirmation is requested by the Lender, of each telephonic notice. If
the written confirmation differs in any material respect from the action taken
by the Lender, (i) the telephonic notice shall govern absent manifest error and
(ii) the Lender shall promptly notify the Authorized Officer who provided such
confirmation of such difference.
2.9 Promise to Pay; Interest and Commitment Fees; Interest Payment Dates;
Interest and Fee Basis; Taxes.
(A) Promise to Pay. 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, in accordance with the terms of
this Agreement and the Note.
(B) Interest Payment Date.
(i) Interest payable on Advances. Interest accrued on each Advance shall
be payable on each Payment Date, commencing with the first such date to
occur after the date hereof and at maturity (whether by acceleration or
otherwise). On each Payment Date other than a Quarterly Payment Date, the
Borrower shall pay interest at the Commercial Paper Rate plus 2.75% per
annum (the "Collection Rate") on each Advance outstanding on such date. On
each Payment Date which is a Quarterly Payment Date, the Borrower shall
pay, in addition to interest at the Collection Rate, an amount equal to
the Scaled Assets Adjustment Amount to the Lender.
(ii) Interest on other Obligations. Interest accrued on the principal
balance of all other Obligations shall be payable in arrears (i) on the
last day of each calendar month, commencing on the first such day
following the incurrence of such Obligation, (ii) upon repayment thereof
in full or in part, and (iii) if not theretofore paid in full, at the time
such other Obligation becomes due and payable (whether by acceleration or
otherwise).
22
(C) Commitment Fees. The Borrower shall pay to the Lender, from and after
the date hereof until the date on which the Commitment shall be terminated in
whole, a commitment fee equal to one-quarter of one percent (0.25%) per annum,
on the amount by which (A) the Commitment in effect from time to time exceeds
(B) the Revolving Credit Obligations in effect from time to time. All such
commitment fees payable under this clause (C) shall be payable annually in
arrears on each anniversary occurring after the Effective Date and, in addition,
on the date on which the Commitment shall be terminated in whole.
(D) Interest and Fee Basis. Interest and fees shall be calculated for
actual days elapsed on the basis of a 365 or when appropriate 366, 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 2:00 p.m.
(Eastern Standard Time) at the place of payment. If any payment of principal of
or interest on an Advance or any payment of any other Obligations 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.
2.10 Termination Date. This Agreement shall be effective until the
Termination Date. The Borrower shall have the right, exercisable no more than 3
(three) times, to submit a notice (an "EXTENSION NOTICE") requesting an
extension of the initial Termination Date for additional one-year periods. The
Borrower shall deliver the Extension Notice 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 Lender shall, on or before the date that is 30
days after receipt of any such Extension Notice notify the Borrower in writing
whether or not 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
LENDER 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 THE LENDER IN ITS SOLE 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)
shall have been fully and indefeasibly paid and satisfied and all financing
arrangements between the Borrower and the 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 the Lender shall be entitled to retain its
security interest in and to all existing and future Collateral.
2.11 Taxes. (A) Any and all payments by the Borrower hereunder 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 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 such taxes
(including income taxes, franchise taxes and branch profit taxes) as are imposed
on or measured by the Lender's income by the United States of America or any
Governmental Authority of the jurisdiction under the laws of which the Lender is
organized or having jurisdiction over the Lender by virtue of the Lender's
location(s) (other than solely as a result of the transaction evidenced by this
Agreement) (all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings, and liabilities which the Lender determines to be applicable to
this Agreement, the
23
other Loan Documents, the Commitment or the Advances being hereinafter referred
to as "TAXES"). If the Borrower shall be required by law to deduct any Taxes
from or in respect of any sum payable hereunder or under the other Loan
Documents to the Lender, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.11(A)) the 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 the Lender for the full amount of Taxes and
Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by
any Governmental Authority on amounts payable under this Section 2.11 paid by
the Lender and any liability (including penalties, interest, and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. This indemnification shall be made
within thirty (30) days after the date the Lender makes written demand therefor.
A certificate as to any additional amount payable to the Lender under this
Section 2.11 submitted to the Borrower by the Lender 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 such deduction or withholding for or on account
of any Taxes and to confirm that all such Taxes have been paid to the
appropriate Governmental Authorities, the Borrower shall promptly (and in any
event not later than thirty (30) days after receipt) furnish to the Lender such
certificates, receipts and other documents as may be required (in the judgment
of the Lender) to establish any tax credit to which the Lender may be entitled.
(D) Within thirty (30) days after the date of any payment of Taxes or
Other Taxes by the Borrower, the Borrower shall furnish to the Lender the
original or a certified copy of a receipt evidencing payment thereof.
(E) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this Section 2.11 shall survive the payment in full of principal and interest
hereunder and the termination of this Agreement.
2.12 Loan Account. The Lender shall maintain in accordance with its usual
practice an account or accounts (a "LOAN ACCOUNT") evidencing the Obligations of
the Borrower to the Lender owing to the Lender from time to time, including the
amount of principal and interest payable and paid to the Lender from time to
time hereunder and under the Note. The entries made in the Loan Account shall be
conclusive and binding for all purposes, absent manifest error, unless the
Borrower objects to information contained in the Loan Account within thirty (30)
days of the Borrower's receipt of such information.
24
ARTICLE III: CONDITIONS PRECEDENT
3.1 Conditions of Effectiveness. The Effective Date of this Agreement
shall be on the date on which all of the following conditions shall have been
satisfied:
(A) no law, regulation, order, judgment or decree of any Governmental
Authority shall, and the Lender shall not have received any notice that
litigation is pending or threatened which is likely to, (a) enjoin,
prohibit or restrain the making of an Advance hereunder or (b) impose or
result in the imposition of a Material Adverse Effect;
(B) all due diligence materials requested by the Lender from the Borrower
shall have been delivered to the Lender and such due diligence materials
shall be in form and substance satisfactory to the Lender;
(C) the Borrower has furnished to the Lender each of the following, all in
form and substance satisfactory to the Lender:
(i) this Agreement, duly executed by the Borrower;
(ii) the Note, duly executed by the Borrower in favor of the Lender;
the Cross Agreement executed by Borrower, each Dealership Guaranto
and each Subsidiary Holding Company;
(iv) a Dealership Guaranty executed by each Sonic Dealership which
has not heretofore provided a Dealership Guaranty to the Lender;
(v) a Dealership Security Agreement executed by each Sonic
Dealership which has not heretofore provided a Dealership Security
Agreement to the Lender;
(vi) a Subsidiary Holding Company Guaranty executed by each
Subsidiary Holding Company which has not heretofore provided a Subsidiary
Holding Company Guaranty to Lender.
(vii) a Subsidiary Holding Company Security Agreement executed by
each Subsidiary Holding Company which has not heretofore provided a
Subsidiary Holding Company Security Agreement to Lender.
(viii) with respect to each Dealership/Subsidiary Holding Company
Security Agreement delivered by a Sonic Dealership/Subsidiary Holding
Company, an amendment to such Security Agreement attaching a revised
exhibit thereto, which such revised exhibit shall reflect only Permitted
Existing Liens;
the Reaffirmation of Guaranty duly executed by each Dealership
Guarantor and each Subsidiary Holding Company Guarantor which has
previously provided either a Dealership Guaranty or a Subsidiary Holding
Company Guaranty;
(x) an amendment of each of the Borrower Pledges and the Subsidiary
Holding
25
Company Pledges attaching a revised exhibit thereto, which such revised
exhibit shall reflect a pledge of any Sonic Dealership/Subsidiary Holding
Company not heretofore pledged, together with, for each corporate entity
so acquired, a stock certificate evidencing the issued and outstanding
pledged stock and undated stock powers executed in blank;
(xi) To the extent any Sonic Dealership or Subsidiary Holding
Company has any Indebtedness other than Permitted Indebtedness, pay-out
letters, releases and UCC-3 Termination Statements, where applicable, from
all third-party creditors releasing all Liens securing any such
Indebtedness;
(xii) Certificates of good standing for the Borrower, and if
requested by Lender, each Subsidiary Holding Company and each Dealership
Guarantor from its jurisdiction of incorporation and each other
jurisdiction where the nature of its business requires it to be qualified
as a foreign corporation;
(xiii) a Secretary's Certificate from the Borrower, each Subsidiary
Holding Company and each Sonic Dealership acquired by the Borrower on or
prior to the date hereof, provided, however that the Borrower, any
Subsidiary Holding Company and any Sonic Dealership which provided a
Secretary's Certificate in connection with the Amendment to Amended and
Restated Credit Agreement dated March 2, 1999 (the "Amendment") or
thereafter may deliver a bring-down certificate of such previously
delivered Secretary's Certificate, certifying that as of March 2, 1999 or
earlier, there has been no change to any of the information provided
therein and, in the case of any such Subsidiary Holding Companies or Sonic
Dealerships, that the representations and warranties contained in any
Collateral Document delivered by such Subsidiary Holding Company or Sonic
Dealership in connection with the Amendment or other later Acquisition
continues to be true and correct with full force and effect as if made on
the Effective Date.
(xiv) A certificate, in form and substance satisfactory to the
Lender, signed by the chief financial officer of the Borrower stating that
as of the Effective Date, no Event of Default or Unmatured Default has
occurred and is continuing and setting forth the calculation of the Sonic
Group's Scaled Assets as of the Effective Date, and the representations
and warranties of the Borrower are true and correct with full force and
effect as if made on the Effective Date;
(xv) To the extent not included in the foregoing, the documents,
instruments and agreements set forth on the closing list attached as
Exhibit E hereto; and
(xvi) Such other documents as the Lender or its counsel may have
reasonably requested.
3.2 Conditions Precedent to Each Advance. The Lender shall not 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
26
as of such Borrowing Date (unless such representation and warranty
expressly relates to an earlier date or is no longer true solely as a
result of transactions permitted by this Agreement).
Each Borrowing Notice with respect to each such Advance shall constitute a
representation and warranty by the Borrower that the conditions contained in
Sections 3.2(i) and (ii) have been satisfied. If the Lender has a reasonable
basis for believing an Event of Default or Unmatured Default may have occurred
and is continuing or that the Borrower is not able to make one or more of the
representations and warranties set forth in Article IV, the Lender may require a
duly completed officer's certificate in substantially the form of Exhibit F
hereto as a condition to making an Advance.
3.3 Condition Precedent to Additional Advance. Notwithstanding anything to
the contrary in this Agreement, the Lender shall be under no obligation to make
an Advance to the Borrower hereunder, until and unless the following
requirements shall have been satisfied:
(i) There shall exist no Liens on the Collateral other than Permitted
Existing Liens and those Permitted Existing Liens appearing on Schedule
1.1.3 marked with an asterisk shall have been released and or terminated,
and the Borrower shall have confirmed delivery of such releases, UCC-3
termination statements or other documentation reasonably requested by the
Lender evidencing such release or termination; and
(ii) The loss payable endorsements referenced in Section 5.2(G) shall have
been delivered to the Lender.
ARTICLE IV: REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows to the Lender as of the
date hereof and as of the Effective Date:
4.1 Organization; Corporate Powers. The Borrower and each of its
Subsidiaries (i) is a corporation, limited liability company or limited
partnership duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization, (ii) is duly qualified to do business
and is in good standing under the laws of each jurisdiction in which failure to
be so qualified and in good standing could not reasonably be expected to have a
Material Adverse Effect and (iii) has all requisite corporate, company or
partnership power and authority to own, operate and encumber its property and to
conduct its business as presently conducted and as proposed to be conducted.
4.2 Authority.
(A) The execution, delivery, performance and filing, as the case may be,
of each of the Transaction Documents which must be executed or filed by the
Borrower or any of its Subsidiaries in connection with the Related Transactions
or which have been executed or filed as required by this Agreement on or prior
to the Effective Date and to which the Borrower or any of its Subsidiaries is
party, and the consummation of the transactions contemplated thereby, have been
duly approved by the respective boards of directors or managers, or by the
partners, as applicable, and, if necessary, the shareholders, members or
partners, as applicable, of the Borrower and its Subsidiaries, and such
approvals have not been rescinded. No other corporate,
27
company or partnership action or proceedings on the part of the Borrower or its
Subsidiaries are necessary to consummate such transactions.
(B) Each of the Transaction Documents to which the Borrower or any of its
Subsidiaries is a party has been duly executed, delivered or filed, as the case
may be, by it and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, is in full force and effect
and no material term or condition thereof has been amended, modified or waived
without the prior written consent of the Lender, and the Borrower and its
Subsidiaries have, and, to the best of the Borrower's and its Subsidiaries'
knowledge, all other parties thereto have, performed and complied with all the
material terms, provisions, agreements and conditions set forth therein and
required to be performed or complied with by such parties on or before the date
hereof, and no unmatured default, default or breach of any material covenant by
any such party exists thereunder.
4.3 No Conflict; Governmental Consents. The execution, delivery and
performance of each of the Loan Documents and other Transaction Documents to
which the Borrower or any of its Subsidiaries is a party do not and will not (i)
conflict with the Charter Documents of the Borrower or any such Subsidiary, (ii)
constitute a tortious interference with any Contractual Obligation of any Person
or conflict with, result in a breach of or constitute (with or without notice or
lapse of time or both) a default under any Requirement of Law (including,
without limitation, any Environmental Property Transfer Act) or Contractual
Obligation of the Borrower or any such Subsidiary, or require termination of any
Contractual Obligation, (iii) result in or require the creation or imposition of
any Lien whatsoever upon any of the property or assets of the Borrower or any
such Subsidiary, other than Liens permitted by the Loan Documents, or (iv)
require any approval of the Borrower's or any such Subsidiary's shareholders
except such as have been obtained. The execution, delivery and performance of
each of the Transaction Documents to which the Borrower or any of its
Subsidiaries is a party do not and will not require any registration with,
consent or approval of, or notice to, or other action to, with or by any
Governmental Authority, including under any Environmental Property Transfer Act,
except (i) filings, consents or notices which have been made, obtained or given,
or which, if not made, obtained or given, individually or in the aggregate could
not reasonably be expected to have a Material Adverse Effect and (ii) filings
necessary to create or perfect security interests in the Collateral.
4.4 Financial Statements. All balance sheets, statements of profit and
loss and other financial data that have been given to Lender by or on behalf of
Borrower and the Subsidiaries (the "Financial Information") are complete and
correct in all material respects, accurately present the financial condition of
Borrower and the Subsidiaries as of the dates, and the results of its operations
for the periods specified in the Financial Information, and have been prepared
in accordance with generally accepted accounting principles consistently
followed throughout the periods covered thereby. Except as specifically
disclosed as to creditor, debtor, amount and security) by the Financial
Information, Borrower and Subsidiaries do not have outstanding any loan or
indebtedness, direct or contingent, to any party, other than the indebtedness
due and owing to Lender, and none of its assets is subject to any security
interest, lien or other encumbrance in favor of anyone other than Lender (except
for the Permitted Existing Liens). There has been no change in the assets,
liabilities or financial condition of Borrower from that set forth in the
Financial Information other than changes in the ordinary course of affairs, none
of which changes has been materially adverse to Borrower. After giving effect to
the Acquisitions, neither Borrower nor any of the Guarantors are or will be
rendered insolvent by the indebtedness incurred in connection
28
therewith, will be left with unreasonably small capital with which to engage its
business or will have incurred debts beyond its ability to pay such debts as
they mature.
4.5 No Material Adverse Change 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 Borrower or any of the Borrower's Subsidiaries as a result of any
federal, state, local or foreign tax examination for each taxable year in
respect of which an examination has been conducted have been fully paid or
finally settled or are being contested in good faith, and as of the date hereof
no issue has been raised by any taxing authority in any such examination which,
by application of similar principles, reasonably can be expected to result in
assertion by such taxing authority of a material deficiency for any other year
not so examined which has not been reserved for in the Borrower's consolidated
financial statements to the extent, if any, required by Agreement Accounting
Principles.
(B) Payment of Taxes. All tax returns and reports of the Borrower and its
Subsidiaries required to be filed have been timely filed, and all taxes,
assessments, fees and other governmental charges thereupon and upon their
respective property, assets, income and franchises which are shown in such
returns or reports to be due and payable have been paid 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 Borrower and its
Subsidiaries in the aggregate in excess of $250,000.00. The Borrower has no
knowledge of any proposed tax assessment against the Borrower or any of its
Subsidiaries 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 the Borrower or any of its Subsidiaries or any property of
any of them (i) challenging the validity or the enforceability of any material
provision of the Transaction Documents or (ii) which will have or could
reasonably be expected to have a Material Adverse Effect. There is no material
loss contingency within the meaning of Agreement Accounting Principles which has
not been reflected in the consolidated financial statements of the Borrower and
its Subsidiaries prepared and delivered pursuant to Section 5.1(A) for the
fiscal period during which such material loss contingency was incurred. Neither
the Borrower nor any of its Subsidiaries is (A) in violation of any applicable
Requirements of Law which violation will have or could reasonably be expected to
have a Material Adverse Effect, or (B) subject to or in default with respect to
any final judgment, writ, injunction, restraining order or order of any nature,
decree, rule or regulation of any court or Governmental Authority which will
have or could reasonably be expected to have a Material Adverse Effect.
4.8 Subsidiaries. Schedule 4.8 to this Agreement (i) contains a
description as of the Effective Date (or as of the date of any supplement
thereto) of the corporate structure of, the Borrower and its Subsidiaries and
any other Person in which the Borrower or any of its
29
Subsidiaries holds an Equity Interest; and (ii) accurately sets forth as of the
Effective Date (or as of the date of any supplement thereto) (A) the correct
legal name, the jurisdiction of incorporation or formation and the jurisdictions
in which each of the Borrower and the Subsidiaries of the Borrower is qualified
to transact business as a foreign corporation or other foreign entity and (B) a
summary of the direct and indirect partnership, joint venture, or other Equity
Interests, if any, of the Borrower and each Subsidiary of the Borrower in any
Person that is not a corporation. After the formation or acquisition of any New
Subsidiary permitted under Section 5.3(F)(ii), if requested by the Lender, the
Borrower shall provide a supplement to Schedule 4.8 to this Agreement. None of
the issued and outstanding Capital Stock of the Borrower or any of its
Subsidiaries is subject to any redemption or repurchase agreement. The
outstanding Capital Stock of the Borrower and each of the Borrower's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable.
The Borrower has no Subsidiaries other (i) the Subsidiaries set forth on
Schedule 4.8 and (ii) any Subsidiaries acquired in connection with a Permitted
Acquisition, in connection with which the Borrower shall have provided all of
the documents, instruments and agreements as required by this Agreement.
4.9 ERISA. No Benefit Plan has incurred any material accumulated funding
deficiency (as defined in Sections 302(a)(2) of ERISA and 412(a) of the Code)
whether or not waived. Neither the Borrower nor any member of the Controlled
Group has incurred any material liability to the PBGC which remains outstanding
other than the payment of premiums, and there are no premium payments which have
become due which are unpaid. Schedule B to the most recent annual report filed
with the IRS with respect to each Benefit Plan and, if so requested, furnished
to the Lender, is complete and accurate. Since the date of each such Schedule B,
there has been no material adverse change in the funding status or financial
condition of the Benefit Plan relating to such Schedule B. Neither the Borrower
nor any member of the Controlled Group has (i) failed to make a required
contribution or payment to a Multiemployer Plan or (ii) made a complete or
partial withdrawal under Sections 4203 or 4205 of ERISA from a Multiemployer
Plan, in either event which could result in any material liability. Neither the
Borrower nor any member of the Controlled Group has failed to make a required
installment or any other required payment under Section 412 of the Code, in
either case involving any material amount, on or before the due date for such
installment or other payment. Neither the Borrower nor any member of the
Controlled Group is required to provide security to a Benefit Plan under Section
401(a)(29) of the Code due to a Plan amendment that results in an increase in
current liability for the plan year. Neither the Borrower nor any of its
Subsidiaries maintains or contributes to any employee welfare benefit plan
within the meaning of Section 3(1) of ERISA which provides benefits to employees
after termination of employment other than as required by Section 601 of ERISA.
Each Plan which is intended to be qualified under Section 401(a) of the Code as
currently in effect is so qualified, and each trust related to any such Plan is
exempt from federal incometax under Section 501(a) of the Code as currently in
effect. The Borrower and all Subsidiaries are in compliance in all material
respects with the responsibilities, obligations and duties imposed on them by
ERISA and the Code with respect to all Plans. Neither the Borrower nor any of
its Subsidiaries nor any fiduciary of any Plan has engaged in a nonexempt
prohibited transaction described in Sections 406 of ERISA or 4975 of the Code
which could reasonably be expected to subject the Borrower or any 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
30
4212(c) of ERISA which could reasonably be expected to subject the Borrower or
any Dealership Guarantor to material liability. Neither the Borrower nor any of
its Subsidiaries 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
the Borrower or any of its Subsidiaries to liability individually or in the
aggregate for all such matters in excess of $250,000.00.
4.10 Accuracy of Information. The information, exhibits and reports
furnished by or on behalf of the Borrower and any of its Subsidiaries to the
Lender in connection with the negotiation of, or compliance with, the Loan
Documents, the representations and warranties of the Borrower and its
Subsidiaries contained in the Transaction Documents, and all certificates and
documents delivered to the Lender pursuant to the terms thereof, taken as a
whole, do not contain as of the date furnished any untrue statement of a
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. Neither the Borrower nor any of its
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
4.12 Material Agreements. Neither the Borrower nor any of its Subsidiaries
is a party to any Contractual Obligation or subject to any charter or other
corporate restriction which individually or in the aggregate will have or could
reasonably be expected to have a Material Adverse Effect. Neither the Borrower
nor any of its Subsidiaries has received notice or has knowledge that (i) it is
in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Contractual Obligation
applicable to it, or (ii) any condition exists which, with the giving of notice
or the lapse of time or both, would constitute a default with respect to any
such Contractual Obligation, in each case, except where such default or
defaults, if any, individually or in the aggregate will not have or could not
reasonably be expected to have a Material Adverse Effect.
4.13 Compliance with Laws; Compliance with Franchise Agreements. The
Borrower and its Subsidiaries are in compliance with all Requirements of Law
applicable to them and their respective businesses, 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 Sonic Dealership of any Loan Document to which it is a party
does not and will not conflict with the franchise agreement to which it is a
party. Each Sonic Dealership is, other than with respect to any Sonic Dealership
operating under an Irregular Franchise Agreement from the date hereof until the
condition set forth in Section 3.3(i) has been satisfied, operating under a
valid and enforceable franchise agreement.
4.14 Assets and Properties. The Borrower and each of its Subsidiaries has
good and marketable title to all of its assets and properties (tangible and
intangible, real or personal) owned by it or a valid leasehold interest in all
of its leased assets (except insofar as marketability may be limited by any laws
or regulations of any Governmental Authority affecting such assets), except
where the failure to have any such title 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
the Borrower and/or each such Subsidiary of the Borrower are
31
in adequate operating condition and repair, ordinary wear and tear excepted.
Neither this Agreement nor any other Transaction Document, nor any transaction
contemplated under any such agreement, will affect any right, title or interest
of the Borrower or such Subsidiary in and to any of its assets in a manner that
will have or could reasonably be expected to have a Material Adverse Effect.
4.15 Statutory Indebtedness Restrictions. Neither the Borrower nor any of
its Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, or the
Investment Company Act of 1940, or any other federal, state or local statute,
ordinance or regulation which limits its ability to incur indebtedness or its
ability to consummate the transactions contemplated hereby.
4.16 Insurance. The Borrower's and its Subsidiaries' insurance policies
and programs reflect coverage that is reasonably consistent with prudent
industry practice.
4.17 Labor Matters. As of the date hereof, to the Borrower's and its
Subsidiaries' knowledge, there are no material labor disputes to which the
Borrower or any of its Subsidiaries may become a party, including, without
limitation, any strikes, lockouts or other disputes relating to such Persons'
plants and other facilities.
4.18 Acquisitions. As of the Effective Date and as of the date of each
Acquisition, all material conditions precedent to, all consents from applicable
Governmental Authorities, and all other material consents necessary to permit,
the Acquisitions pursuant to the Acquisition Documents have been or will be
satisfied or waived by the Borrower with the prior written consent of the
Lender.
4.19 Environmental Matters. (a)(i) The operations of the Borrower and its
Subsidiaries comply in all material respects with Environmental, Health or
Safety Requirements of Law;
(ii) the Borrower and its Subsidiaries have all material permits,
licenses or other authorizations required under Environmental, Health or
Safety Requirements of Law and are in material compliance with such
permits;
(iii) neither the Borrower, any of its Subsidiaries nor any of their
respective present property or operations, or, to the best of, the
Borrower's or any of its Subsidiaries' knowledge, any of their respective
past property or operations, are subject to or the subject of, any
investigation known to the Borrower or any of its Subsidiaries, any
judicial or administrative proceeding, order, judgment, decree, settlement
or other agreement respecting: (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 of the Borrower's or any of
its Subsidiaries' knowledge has there ever been on or in the property of
the Borrower or any of its Subsidiaries any landfill, waste pile,
underground storage tanks, aboveground storage tanks, surface impoundment
or hazardous waste storage facility of any kind, any polychlorinated
biphenyls (PCBs) used in hydraulic oils, electric transformers or other
equipment, or any asbestos containing material that in the case of any of
the foregoing
32
could be reasonably expected to result in any material claims or
liabilities; and
(v) neither the Borrower nor any of its Subsidiaries has any
material Contingent Obligation in connection with any Release or
threatened Release of a Contaminant into the environment.
(b) For purposes of this Section 4.19 "material" means any noncompliance
or basis for liability which could reasonably be likely to subject the Borrower
or any of its Subsidiaries to liability individually or in the aggregate in
excess of $500,000.00.
4.20 Benefits. Each of the Borrower and its Subsidiaries will benefit from
the financing arrangement established by this Agreement. The Lender has stated
and the Borrower acknowledges that, but for the agreement by each of the
Subsidiary Holding Companies and the Dealership Guarantors to execute and
deliver their respective Subsidiary Holding Company Guaranty, Dealership
Guaranty, Subsidiary Holding Company Security Agreement, and Dealership Security
Agreement, the Lender would not have made available the credit facilities
established hereby on the terms set forth herein.
ARTICLE V: COVENANTS
The Borrower covenants and agrees that so long as any Commitment is
outstanding and thereafter until payment in full of all of the Obligations
(other than contingent indemnity obligations, but including Floor Plan
Indebtedness), unless the Lender shall otherwise give its prior written consent:
5.1 Reporting. The Borrower shall:
(A) Financial Reporting. Furnish to the Lender:
(i) Quarterly Reports. As soon as practicable, and in any event
within thirty (30) days after the end of each fiscal quarter in each
fiscal quarter, the consolidated and consolidating balance sheet of the
Borrower and its Subsidiaries as at the end of such period and the related
consolidated and consolidating statements of income and cash flows of the
Borrower and its Subsidiaries for such fiscal quarter and for the period
from the beginning of the then current fiscal year to the end of such
fiscal quarter, certified by the chief financial officer of the Borrower
on behalf of the Borrower as fairly presenting the consolidated and
consolidating financial position of the Borrower and its Subsidiaries as
at the dates indicated and the results of their operations and cash flows
for the periods indicated in accordance with Agreement Accounting
Principles, subject to normal year end adjustments.
(ii) Annual Reports. As soon as practicable, and in any event within
ninety (90) days after the end of each fiscal year, (a) the consolidated
and consolidating balance sheet of the Borrower and its Subsidiaries as at
the end of such fiscal year and the related consolidated and consolidating
statements of income, stockholders' equity and cash flows of the Borrower
and its Subsidiaries for such fiscal year, and in comparative form the
corresponding figures for the previous fiscal year and (b) an audit report
on the items listed in clause (a) hereof (other than the consolidating
statements) of independent certified public accountants of recognized
national standing, which audit report shall be
33
unqualified and shall state that such financial statements fairly present
the consolidated financial position of the Borrower and its Subsidiaries
as at the dates indicated and the results of their operations and cash
flows for the periods indicated in conformity with Agreement Accounting
Principles and that the examination by such accountants in connection with
such consolidated financial statements has been made in accordance with
generally accepted auditing standards. 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, and in any event
within five (5) Business Days after receipt thereof, certified copies of
direct (factory) statements provided by a manufacturer to any Sonic
Dealership.
(iv) Officer's Certificate. Together with each delivery of any
financial statement pursuant to clauses (i) and (ii) of this Section
5.1(A), an Officer's Certificate of the Borrower, substantially in the
form of Exhibit F attached hereto and made a part hereof, stating that no
Event of Default or Unmatured Default exists, or if any Event of Default
or Unmatured Default exists, stating the nature and status thereof and
setting forth (X) such financial statements and information as shall be
reasonably acceptable to the Lender and (Y) a valuation of the Collateral.
(B) Notice of Event of Default. Promptly upon any of the chief executive
officer, chief operating officer, chief financial officer, treasurer or
controller of the Borrower or any of its Subsidiaries obtaining knowledge (i) of
any condition or event which constitutes an Event of Default or Unmatured
Default, or (ii) that any Person has given any written notice to the Borrower or
any Subsidiary of the Borrower or taken any other action with respect to a
claimed default or event or condition of the type referred to in Section 6.1(e),
deliver to the Lender a notice specifying (a) the nature and period of existence
of any such claimed default, Event of Default, Unmatured Default, condition or
event, (b) the notice given or action taken by such Person in connection
therewith, and (c) what action the Borrower has taken, is taking and proposes to
take with respect thereto.
(C) Lawsuits. (i) Promptly upon the Borrower obtaining knowledge of the
institution of, or written threat of, any action, suit, proceeding, governmental
investigation or arbitration against or affecting the Borrower or any of its
Subsidiaries or any property of the Borrower or any of its Subsidiaries, which
action, suit, proceeding, governmental investigation or arbitration exposes, or
in the case of multiple actions, suits, proceedings, governmental investigations
or arbitrations arising out of the same general allegations or circumstances
which expose, in the Borrower's reasonable judgment, the Borrower or any of its
Subsidiaries to liability in an amount aggregating $500,000.00 or more, give
written notice thereof to the Lender and provide such other information as may
be reasonably available to enable the Lender and its counsel to evaluate such
matters; and (ii) in addition to the requirements set forth in clause (i) of
this Section 5.1(C), upon request of the Lender, promptly give written notice of
the status of any action, suit, proceeding, governmental investigation or
arbitration covered by a report delivered pursuant to clause (i) above or
disclosed in any filing with the Commission and provide such other information
as may be reasonably available to it that would not violate any attorney-client
privilege by disclosure to the Lender to enable the Lender and its counsel to
evaluate such matters.
34
(D) ERISA Notices. Deliver or cause to be delivered to the Lender, at the
Borrower's expense, the following information and notices as soon as reasonably
possible, and in any event:
(i) (a) within ten (10) Business Days after the Borrower obtains
knowledge that a Termination Event has occurred, a written statement of
the chief financial officer of the Borrower describing such Termination
Event and the action, if any, which the Borrower has taken, is taking or
proposes to take with respect thereto, and when known, any action taken or
threatened by the IRS, DOL or PBGC with respect thereto and (b) within ten
(10) Business Days after any member of the Controlled Group obtains
knowledge that a Termination Event has occurred which could reasonably be
expected to subject the Borrower or any member of the Controlled Group to
liability individually or in the aggregate in excess of $250,000.00, 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;
(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
35
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 Lender in writing, promptly upon the
Borrower's learning thereof, of (i) any material labor dispute to which the
Borrower or any of its Subsidiaries may become a party, including, without
limitation, any strikes, lockouts or other disputes relating to such Persons'
plants and other facilities and (ii) any material liability incurred under the
Worker Adjustment and Retraining Notification Act with respect to the closing of
any plant or other facility of the Borrower or any of its Subsidiaries.
(F) Other Indebtedness. Deliver to the Lender (i) a copy of each notice or
communication regarding potential or actual defaults (including any accompanying
officer's certificate) delivered by or on behalf of the Borrower or any of its
Subsidiaries to the holders of funded Indebtedness pursuant to the terms of the
agreements governing such Indebtedness, such delivery to be made at the same
time and by the same means as such notice or other communication is delivered to
such holders, and (ii) a copy of each notice or other communication regarding
potential or actual defaults received by the Borrower or any of its Subsidiaries
from the holders of funded Indebtedness pursuant to the terms of such
Indebtedness, such delivery to be made promptly after such notice or other
communication is received by the Borrower or any such Subsidiary.
(G) Other Reports. Deliver or cause to be delivered to the Lender copies
of all financial statements, reports and notices, if any, sent or made available
generally by the Borrower to its securities holders or filed with the Commission
by the Borrower, all press releases made available generally by the Borrower or
any of the Borrower's Subsidiaries to the public concerning material
developments in the business of the Borrower or any such Subsidiary and all
notifications received from the Commission by the Borrower or its Subsidiaries
pursuant to the Securities Exchange Act of 1934 and the rules promulgated
thereunder (other than customary comment letters received in connection with
registration statements or other routine communications between the Commission
and the Borrower).
(H) Environmental Notices. As soon as possible and in any event within ten
(10) days after receipt by the Borrower or any of its Subsidiaries, a copy of
(i) any notice or claim to the effect that the Borrower or any of its
Subsidiaries is or may be liable to any Person as a result of the Release by the
Borrower, any of its Subsidiaries, or any other Person of any Contaminant into
the environment, and (ii) any notice alleging any violation of any
Environmental, Health or Safety Requirements of Law by the Borrower or any of
its Subsidiaries if, in either case, such notice or claim relates to an event
which could reasonably be expected to subject the Borrower or any Subsidiary to
liability individually or in the aggregate in excess of $500,000.00.
(I) Other Information. Promptly upon receiving a request therefor from the
Lender, prepare and deliver to the Lender such other information with respect to
the Borrower, any of its Subsidiaries, or the Collateral, including, without
limitation, schedules identifying and describing the Collateral and any
dispositions thereof, as from time to time may be reasonably requested by the
Lender.
36
5.2 Affirmative Covenants.
(A) Existence, Etc. Except for mergers permitted pursuant to Section
5.3(H), the Borrower shall, and shall cause each of its Subsidiaries to, at all
times maintain its corporate company or partnership existence, as applicable,
and preserve and keep, or cause to be preserved and kept, in full force and
effect its rights and franchises material to its businesses.
(B) Powers; Conduct of Business. The Borrower shall, and shall cause each
of its Subsidiaries to, qualify and remain qualified to do business in each
jurisdiction in which the nature of its business requires it to be so qualified
and where the failure to be so qualified will have or could reasonably be
expected to have a Material Adverse Effect. The Borrower will, and will cause
each Subsidiary to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is presently
conducted.
(C) Compliance with Laws, Etc The Borrower shall, and shall cause its
Subsidiaries to, (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; Tax Consolidation. The Borrower shall
pay, and cause each of its Subsidiaries to pay, (i) all taxes, assessments and
other governmental charges imposed upon it or on any of its properties or assets
or in respect of any of its franchises, business, income or property before any
penalty or interest accrues thereon, and (ii) all claims (including, without
limitation, claims for labor, services, materials and supplies) for sums which
have become due and payable and which by law have or may become a Lien (other
than a Lien permitted by Section 5.3(C)) upon any of the Borrower's or such
Subsidiary's property or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; provided, however, that no such taxes,
assessments and governmental charges referred to in clause (i) above or claims
referred to in clause (ii) above (and interest, penalties or fines relating
thereto) need be paid if being contested in good faith by appropriate
proceedings diligently instituted and conducted and if such reserve or other
appropriate provision, if any, as shall be required in conformity with Agreement
Accounting Principles shall have been made therefor. The Borrower will not, nor
will it permit any of its Subsidiaries to, file or consent to the filing of any
consolidated income tax return with any other Person other than the consolidated
return of the Borrower.
(E) Insurance. The Borrower shall maintain for itself and its
Subsidiaries, or shall cause each of its Subsidiaries to maintain in full force
and effect, insurance policies and programs reflecting coverage that is
reasonably consistent with prudent industry practice.
(F) Inspection of Property; Books and Records; Discussions. The Borrower
shall permit and cause each of the Borrower's Subsidiaries to permit, any
authorized representative(s) designated by the Lender to visit and inspect any
of the properties of the Borrower or any of its Subsidiaries, to examine, audit,
check and make copies of their respective financial and accounting records,
books, journals, orders, receipts and any correspondence and other data relating
to their respective businesses or the transactions contemplated hereby or by the
Acquisitions (including, without limitation, in connection with environmental
compliance, hazard or liability), and to discuss their affairs, finances and
accounts with their officers and independent certified public accountants, all
upon reasonable notice and at such reasonable times during
37
normal business hours, as often as may be reasonably requested; provided, that
while no Event of Default exists, all of the foregoing shall be at the expense
of the Lender. The Borrower shall keep and maintain, and cause each of the
Borrower's Subsidiaries to keep and maintain, in all material respects, proper
books of record and account in which entries in conformity with Agreement
Accounting Principles shall be made of all dealings and transactions in relation
to their respective businesses and activities, including, without limitation,
transactions and other dealings with respect to the Collateral. If an Event of
Default has occurred and is continuing, the Borrower, upon the Lender's request,
shall turn over any such records to the Lender or its representatives.
(G) Insurance and Condemnation Proceeds. The Borrower directs (and, if
applicable, shall cause its Subsidiaries to direct) all insurers under policies
of property damage, boiler and machinery and business interruption insurance and
payors of any condemnation claim or award relating to the property to pay all
proceeds payable under such policies or with respect to such claim or award for
any loss with respect to the Collateral directly to the Lender; provided,
however, in the event that such proceeds or award are less than $250,000.00
("EXCLUDED PROCEEDS"), unless an Event of Default shall have occurred and be
continuing, the Lender 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 Lender as loss payee, which endorsement
shall be in form and substance acceptable to the Lender. The Lender shall, upon
receipt of such proceeds (other than Excluded Proceeds) and at the Borrower's
direction, either apply the same to the principal amount of the Advances
outstanding at the time of such receipt and create a corresponding reserve
against the Commitment in an amount equal to such application (the "DECISION
RESERVE") or hold them as cash collateral for the Obligations in an interest
bearing account. For up to 150 days from the date of any loss (the "DECISION
PERIOD"), the Borrower may notify the Lender that it intends to restore, rebuild
or replace the property subject to any insurance payment or condemnation award
and shall, as soon as practicable thereafter, provide the Lender detailed
information, including a construction schedule and cost estimates. Should an
Event of Default occur at any time during the Decision Period, should the
Borrower notify the Lender that it has decided not to rebuild or replace such
property during the Decision Period, or should the Borrower fail to notify the
Lender of the Borrower's decision during the Decision Period, then the amounts
held as cash collateral pursuant to this Section 5.2(G) or as the Decision
Reserve 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
Lender 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
38
and interpretations thereunder and the respective requirements of the governing
documents for such Plans, except where the failure to comply will not or could
not reasonably be expected to subject the Borrower and its Subsidiaries to
liability individually or in the aggregate in excess of $250,000.00.
(I) Maintenance of Property. The Borrower shall cause all property used or
useful in the conduct of its business or the business of any Subsidiary to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Borrower may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section 5.2(H) shall prevent the
Borrower from discontinuing the operation or maintenance of any of such property
if such discontinuance is, in the judgment of the Borrower, desirable in the
conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Lender.
(J) Environmental Complianc. The Borrower and its Subsidiaries shall
comply with all Environmental, Health or Safety Requirements of Law, except
where noncompliance could not reasonably be expected to subject the Borrower and
its Subsidiaries to liability individually or in the aggregate in excess of
$500,000.00. Neither the Borrower nor any of its Subsidiaries shall be the
subject of any proceeding or investigation pertaining to (i) the Release by the
Borrower or any of its Subsidiaries of any Contaminant into the environment or
(ii) the liability of the Borrower or any of its Subsidiaries arising from the
Release by any other Person of any Contaminant into the environment, which, in
either case, subjects or is reasonably likely to subject the Borrower and its
Subsidiaries individually or in the aggregate to liability in excess of the
amount set forth above.
(K) Use of Proceeds. The Borrower shall use the proceeds of the Advances
to (i) to fund Permitted Acquisitions, and (ii) provide funds for working
capital needs and other general corporate purposes of the Borrower in an amount
not to exceed $15,000,00.00. 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 Subsidiary
Holding Company and each Sonic Dealership which has not heretofore provided a
Subsidiary Holding Company Guaranty or a Dealership Guaranty to the Lender, to
deliver to the Lender a Subsidiary Holding Company Guaranty, in the form of
Exhibit C-2, or a Dealership Guaranty, in the form of Exhibit C-1, a Subsidiary
Holding Company Security Agreement, in the form of Exhibit D-2, or a Dealership
Security Agreement, in the form of Exhibit D-1, UCC-1 Financing Statements, an
acknowledgment to be bound by the Cross Agreement, and an acknowledgment to be
bound by the Contribution Agreement, together with appropriate corporate
resolutions, opinions and other documentation in form and substance reasonably
satisfactory to the Lender. Each Subsidiary Holding Company and each Sonic
Dealership shall provide such Subsidiary Holding Company Guaranty or Dealership
Guaranty and Collateral Documents prior to or simultaneously with its
Acquisition.
(M) Future Liens on Real Property. The Borrower shall, and shall cause
each of its
39
Subsidiaries that is required to guarantee the Obligations to, execute and
deliver to the Lender, immediately upon its acquisition or leasing of any real
property after the date hereof, a mortgage, deed of trust, collateral assignment
or other appropriate instrument evidencing a Lien upon any such acquired
property, lease or interest, to be in form and substance reasonably acceptable
to the Lender and subject only to such Liens as otherwise shall be permitted by
this Agreement and the Borrower or the applicable Subsidiary, as the case may
be, shall have provided the Lender with such opinions, landlord and mortgagee
waivers or title insurance as the Lender shall have reasonably requested in
connection with such acquisition or leasing of real property. The foregoing
provision shall not apply to Excluded Real Property and shall apply to the
leasing of any real property only if (i) the term of such lease (without regard
to any extension thereof at then current market rent) is more than five years or
(ii) such lease has a material value by reason of a purchase option,
below-market rent or otherwise.
(N) 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 Lender sufficient to permit the security
interests and liens contemplated hereunder. To the extent any franchise
agreement materially limits the security interests and liens contemplated
hereunder or under any Collateral Document, the Borrower shall notify the Lender
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 Lender shall have provided its
written approval of such franchise agreement.
(O) Pledge of Capital Stock. The Borrower shall, and shall cause each of
the Subsidiary Holding Companies to pledge to and grant Lender a first perfected
security interest in all of its Capital Stock in each Sonic Dealership and/or
other Subsidiary Holding Company, as the case may be; provided, however, such
Capital Stock will be required to be pledged only to the extent permitted 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 Sonic Dealership, 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;
(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 Dealership or from any Subsidiary to the Borrower or any
Guarantor
40
Dealership; provided that in each case such Indebtedness is subordinated
upon terms satisfactory to the Lender to the obligations of the Borrower
and its Subsidiaries with respect to the Obligations;
(vi) Guaranties by the Borrower of Indebtedness permitted to be
incurred by any Subsidiary;
(vii) Indebtedness with respect to surety, appeal and performance
bonds obtained by the Borrower or any of its Subsidiaries in the ordinary
course of business;
(viii) Indebtedness arising under the Borrower Guaranty, any
Subsidiary Holding Company Guaranty, or any Dealership Guaranty;
(ix) Indebtedness constituting that portion of the deferred purchase
price payable by the Borrower in connection with an Acquisition, which
such Indebtedness shall not be secured by any of the Collateral; and
(x) Indebtedness not in excess of $250,000.00 in connection with the
Liens set forth in Section 5.3(C)(iv).
.
(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 equipment
that is obsolete, excess or no longer useful in the Borrower's or its
Subsidiaries' business; and
(iii) sales, assignments, transfers, leases, conveyances or other
dispositions of other assets (including sales of Capital Stock of a
Subsidiary) if such transaction (a) is for all cash consideration, (b) is
for not less than Fair Value, (c) when combined with all such other
transactions (each such transaction being valued at book value) (i) during
the immediately preceding twelve-month period, represents the disposition
of not greater than $250,000.00, and (ii) during the period from the date
hereof to the date of such proposed transaction, represents the
disposition of not greater than $500,000.00 and (d) is a sale by the
Borrower of Capital Stock in any Subsidiary, except as provided in
41
subclause (c) above, the Borrower shall continue to own, of record and
beneficially, with sole voting and dispositive power, 100% (unless required by
the Subsidiary's franchise agreement to be less, in which event at least 80%) of
the outstanding shares of Capital Stock of any such Subsidiary.
(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; and
(iv) Liens (other than on the stock of any Subsidiaries) securing
other obligations not exceeding $250,000.00 in the aggregate at any time
outstanding.
In addition, neither the Borrower nor any of its Subsidiaries 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 Lender, as collateral for the Obligations; provided
that any agreement, note, indenture or other instrument in connection with Liens
permitted pursuant to clause (i) above may prohibit the creation of a Lien in
favor of the Lender on the items of property subject to such Lien.
(D) Investments. Except to the extent permitted pursuant to paragraph (G)
below, neither the Borrower nor any of its Subsidiaries shall directly or
indirectly make or own any Investment except:
(i) Investments in Cash Equivalents;
(ii) Permitted Existing Investments in an amount not greater than
the amount thereof on the date hereof;
(iii) Investments in trade receivables or received in connection
with the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with,
customers and suppliers arising in the ordinary course of business;
(iv) Investments consisting of deposit accounts maintained by the
Borrower or its Subsidiaries in the ordinary course of business in
connection with the Cash Management Agreement entered into with the
Lender;
(v) Investments consisting of intercompany loans from any Subsidiary
to the Borrower or any other Subsidiary permitted by Section 5.3(A)(v);
(vi) Investments in any Guarantor Dealership;
(vii) Investments constituting Permitted Acquisitions; and
42
(viii) Investments in addition to those referred to elsewhere in
this Section 5.3(D) in an amount not to exceed $500,000.00 in the
aggregate at any time outstanding;
provided, however, that the Investments described in clauses (vii) and (viii)
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 Payment, except:
(i) where the consideration therefor consists solely of Equity
Interests (but excluding Disqualified Stock) of the Borrower or its
Subsidiaries provided no Change of Control would occur as a result
thereof; and
(ii) in connection with the payment of dividends by a Subsidiary to
the Borrower.
(F) Conduct of Business; Subsidiaries; Acquisitions. (i) Neither the
Borrower nor any of its Subsidiaries shall engage in any business other than the
businesses engaged in by the Borrower 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. To the extent any Subsidiary has Equity Interests issued to a
Minority Holder, the franchise agreement under which such Subsidiary operates
shall be limited to a 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 such Equity Interests of Minority Holders will be
required to be pledged directly to the Lender as a precondition to such
Acquisition;
(c) the 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) after the end of each Quarter, or at such other frequency as
Lender may
43
request, the Borrower shall deliver to the Lender a certificate from one
of the Authorized Officers, demonstrating to the reasonable satisfaction
of the Lender that after giving effect to such Acquisition 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;
(f) the purchase is consummated pursuant to a negotiated acquisition
agreement on a non-hostile basis;
(g) after giving effect to such Acquisition, the representations and
warranties set forth in Article IV hereof 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
(h) the written consent of the Lender shall have been obtained,
which such consent shall not be unreasonably withheld, in connection with
any Acquisition if the acquisition price therefore (including the maximum
amount of any deferred portion thereof or contingency payments payable in
connection therewith) (computed with any non-cash portion of the
acquisition price being valued at the fair value thereof as of the date of
computation) exceeds $3,000,000.00 for such Acquisition or series of
related Acquisitions.
(i) 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 for the
target for a period of not less than (A) two (2) years for Acquisitions in
excess of $20,000,000.00 and (B) one (1) year for any other Acquisition,
together with tax returns for the one year prior to such year, in each
case obtained from the seller or provided by independent certified public
accountants retained for the purposes of such Acquisition, broken down by
fiscal quarter in the Borrower's reasonable judgment, copies of which
shall be provided to the Lender.
(j) the Borrower shall have obtained either (i) a new franchise
agreement between the Sonic 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.
(G) Transactions with Shareholders and Affiliates. Neither the Borrower
nor any of its Subsidiaries 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 Dealership, 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.
44
(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
Subsidiary of the Borrower into a Person acquired in connection with a Permitted
Acquisition; (iii) the merger of a wholly-owned Subsidiary of the Borrower with
and into the Borrower; and (iv) the merger of a Subsidiary of the Borrower with
another Subsidiary of the Borrower; provided, however, (i) with respect to any
such permitted mergers involving any Dealership Guarantor, the surviving
corporation in the merger shall also be or become a Dealership Guarantor; and
(ii) after the consummation of any such transaction, the Borrower shall be in
compliance with the provisions of Sections 5.2(K) and 5.3(E).
(I) Sales and Leasebacks. Neither the Borrower nor any of its Subsidiaries
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. Notwithstanding the above, the Borrower may, in connection with
a refinancing of indebtedness secured by Excluded Real Property effect the type
of transaction described in the preceding sentence.
(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;
45
(vi) fail, or permit any Controlled Group member to fail, to pay any
required installment or any other payment required under Section 412 of
the Code on or before the due date for such installment or other payment;
or
(vii) amend, or permit any Controlled Group member to amend, a Plan
resulting in an increase in current liability for the plan year such that
the Borrower or any Controlled Group member is required to provide
security to such Plan under Section 401(a)(29) of the Code,
except where such transactions, events, circumstances, or failures will not have
or is not reasonably likely to subject the Borrower and its Subsidiaries to
liability individually or in the aggregate in excess of $250,000.00.
(L) Issuance of Equity Interests. The Borrower shall not issue any Equity
Interests if as a result of such issuance a Change of Control shall occur. 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 Lender
(other than with respect to Equity Interests held by Minority Holders as of the
Effective Date); provided, however, that no such issuance of Equity Interests
shall be permitted hereunder unless the Subsidiary with respect to which
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 the Lender without the prior written consent of the Lender. The Borrower
shall not permit any Sonic Dealership to amend, modify or otherwise change any
of the terms or provisions of such Sonic Dealership's franchise agreement in any
manner adverse in any material respect to the interests of the Lender without
the prior written consent of the Lender.
(N) Fiscal Year. Neither the Borrower nor any of its consolidated
Subsidiaries 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 interest rate, commodity or foreign
currency exchange, swap, collar, cap or similar agreements evidencing Hedging
Obligations, other than interest rate, foreign currency or commodity exchange,
swap, collar, cap or similar agreements entered into by the
46
Borrower or a Subsidiary pursuant to which the Borrower or such Subsidiary has
hedged its actual interest rate, foreign currency or commodity exposure.
(R) Payments on Subordinated Debt. The Borrower shall not make any
payments on the Debt Offering Notes except in accordance with the Indenture
dated as of July 1, 1998 entered into by and among Borrower, its Subsidiaries
and U.S. Bank Trust National Association, as trustee (the "Indenture").
5.4 Financial Covenants. The Borrower shall comply with the following:
(A) Total Adjusted Debt to Tangible Base Capital Ratio. The Borrower shall
not at any time permit the ratio ("ADJUSTED TBC RATIO") of Total Adjusted Debt
of the Sonic Group on a consolidated basis to Tangible Base Capital of the Sonic
Group on a consolidated basis to be greater than 15:1.
(B) Current Ratio. The Borrower shall not at any time permit the ratio
(the "CURRENT RATIO") of Current Assets of the Sonic Group on a consolidated
basis to Current Liabilities of the Sonic Group on a consolidated basis to be
less than 1.25: 1.
(C) Fixed Charge Coverage Ratio. The Borrower shall maintain a ratio
("FIXED CHARGE COVERAGE RATIO") of (i) EBITDAR less Capital Expenditures, to
(ii) (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 1.3: 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.
(D) Interest Coverage Ratio. The Borrower shall maintain a ratio (the
"INTEREST COVERAGE RATIO") of EBITDA to Interest Expense of at least 2: 1 for
each fiscal quarter ending from and after the Effective Date. In each case the
Interest Coverage Ratio shall be determined as of the last day of each fiscal
quarter for the four-quarter period ending on such day.
(E) Total Adjusted Debt to EBITDA Ratio. The Borrower shall not at any
time 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 2.25: 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 provided however, (a) for the fiscal quarter ending December
31, 1997, the Adjusted Leverage Ratio shall be calculated using EBITDA for the
fiscal quarter ending December 31, 1997 multiplied by four (4), (b) for the
fiscal quarter ending March 31, 1998, the Adjusted Leverage Ratio shall be
calculated using EBITDA for the two fiscal quarters ending March 31, 1998
multiplied by two (2), and (c) for the fiscal quarter ending June 30, 1998, the
Adjusted Leverage Ratio shall be calculated using EBITDA for the three fiscal
quarters ending June 30, 1998 multiplied by four- thirds (4/3).
All financial covenants set forth in this Section 5.4 shall be
calculated by the Lender based on the calculations set forth in and the
financial statements attached to Officer's
47
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 shall (i) fail to pay
when due any of the Obligations consisting of principal with respect to the
Advances or (ii) shall fail to pay within ten (10) days of the date when due any
of the other Obligations under this Agreement or the other 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 the Borrower to the Lender herein or by the Borrower or
any of its Subsidiaries in any of the other Loan Documents or in any written
statement or certificate at any time given by any such Person pursuant to any of
the Loan Documents 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 the Borrower or any of its
Subsidiaries shall default in the performance of or compliance with any term
contained in any of the other Loan Documents, and such default shall continue
for thirty (30) days after the occurrence thereof.
(e) Default as to Other Indebtedness. The Borrower or any of its
Subsidiaries shall fail to make any payment when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) with respect
to any Indebtedness (other than Indebtedness constituting the deferred portion
of the purchase price of an asset which is subject to a good faith dispute,
which, together with all such other outstanding disputed Indebtedness, is not in
excess of $500,000.00 and which is being contested by the Borrower, and provided
that the Borrower has set aside adequate reserves covering such disputed
Indebtedness) the outstanding principal amount of which Indebtedness is in
excess of $100,000.00; 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 Borrower offer to
purchase such Indebtedness or other required repurchase of such Indebtedness, or
permit the holder(s) of such Indebtedness to accelerate the maturity of any such
Indebtedness or require a redemption or other repurchase of such Indebtedness;
or any such Indebtedness shall be otherwise declared to be due and payable (by
acceleration or otherwise) or required to be prepaid, redeemed or otherwise
repurchased by the Borrower or any of its Subsidiaries (other than by a
regularly scheduled required prepayment) prior to the stated maturity thereof.
(f) Involuntary Bankruptcy; Appointment of Receiver, Etc.
48
(i) An involuntary case shall be commenced against the Borrower or
any of the Borrower's Subsidiaries 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 the Borrower or any
of the Borrower's Subsidiaries in an involuntary case, under any
applicable bankruptcy, insolvency or other similar law now or hereinafter
in effect; or any other similar relief shall be granted under any
applicable federal, state, local or foreign law.
(ii) A decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over the
Borrower or any of the Borrower's Subsidiaries or over all or a
substantial part of the property of the Borrower or any of the Borrower's
Subsidiaries shall be entered; or an interim receiver, trustee or other
custodian of the Borrower or any of the Borrower's Subsidiaries or of all
or a substantial part of the property of the Borrower or any of the
Borrower's Subsidiaries shall be appointed or a warrant of attachment,
execution or similar process against any substantial part of the property
of the Borrower or any of the Borrower's Subsidiaries shall be issued and
any such event shall not be stayed, dismissed, bonded or discharged within
sixty (60) days after entry, appointment or issuance.
(g) Voluntary Bankruptcy; Appointment of Receiver, Etc. The Borrower or
any of the Borrower's Subsidiaries 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 or warrant of attachment, or
similar process against the Borrower or any of its Subsidiaries or any of their
respective assets involving in any single case or in the aggregate an amount in
excess of $250,000.00 is or are entered and 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
the Borrower or any of its Subsidiaries 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 the Borrower or any of its Subsidiaries shall
otherwise dissolve or cease to exist except as specifically permitted by this
Agreement.
(j) Loan Documents; Failure of. At any time, for any reason, (i) any Loan
Document as a whole that materially affects the ability of the Lender to enforce
the Obligations or enforce its rights against the Collateral ceases to be in
full force and effect or the Borrower or any of the
49
Borrower's Subsidiaries party thereto seeks to repudiate its obligations
thereunder and the Liens intended to be created thereby are, or the Borrower or
any such Subsidiary seeks to render such Liens, invalid or unperfected, or (ii)
any Lien on Collateral in favor of the Lender contemplated by the Loan Documents
shall, at any time, for any reason, be invalidated or otherwise cease to be 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 Lender believes the
substantial business hardship upon which the application for the waiver is based
could reasonably be expected to subject either the Borrower or any Controlled
Group member to liability individually or in the aggregate in excess of
$250,000.00.
(m) Change of Control. A Change of Control shall occur.
(n) Hedging Agreements. Nonpayment by the Borrower or any Subsidiary of
any obligation under any contract with respect to Hedging Obligations entered
into by the Borrower or such Subsidiary with the Lender (or Affiliate thereof)
or the breach by the Borrower or Subsidiary of any other term, provision or
condition contained in any agreement and such nonpayment or breach shall
continue for ten (10) days after the occurrence thereof.
(o) Guarantor Default or Revocation. Any Sonic Guaranty shall fail to
remain in full force or effect or any action shall be taken by the Borrower or
any Dealership Guarantor to discontinue or to assert the invalidity or
unenforceability of any Sonic Guaranty or the Borrower or any Dealership
Guarantor shall fail to comply with any of the terms or provisions of any Sonic
Guaranty to which it is a party, or the Borrower or any Dealership Guarantor
denies that it has any further liability under any Sonic Guaranty to which it is
a party, or gives notice to such effect.
(p) Environmental Matters. The Borrower or 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, (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, or (iii) any violation of any Environmental, Health or Safety
Requirements of Law by the Borrower or any of its Subsidiaries, which, in any
case, has subjected or is reasonably likely to subject the Borrower or any of
its Subsidiaries to liability individually or in the aggregate in excess of
$250,000.00.
An Event of Default shall be deemed "continuing" until cured or until
waived in writing in accordance with Section 7.3.
50
ARTICLE VII: ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
7.1 Termination of Commitments; Acceleration. If any Event of Default
described in Section 6.1(f) or 6.1(g) occurs with respect to the Borrower, the
obligation of the Lender to make Advances hereunder shall automatically
terminate and the Obligations shall immediately become due and payable without
any election or action on the part of the Lender. If any other Event of Default
occurs, the Lender may terminate or suspend its obligations to make Advances
hereunder, or declare the Obligations to be due and payable, or both, whereupon,
after written notice to the Borrower, the Obligations shall become immediately
due and payable, without presentment, demand, protest or other notice of any
kind, all of which the Borrower expressly waives.
7.2 Amendments. No amendment, waiver or modification of any provision of
this Agreement shall be effective unless signed by each of the parties hereto
and then only to the extent in such writing specifically set forth.
7.3 Preservation of Rights. No delay or omission of the Lender to exercise
any right under the Loan Documents 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 Lender, 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 the Lender until the
Obligations have been paid in full.
ARTICLE VIII: GENERAL PROVISIONS
8.1 Survival of Representations. All representations and warranties of the
Borrower contained in this Agreement shall survive delivery of the Note and the
making of the Advances herein contemplated.
8.2 Governmental Regulation. Anything contained in this Agreement to the
contrary notwithstanding, the Lender shall not be obligated to extend credit to
the Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
8.3 Performance of Obligations. The Borrower agrees that the Lender may,
but 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 to make any payment or perform any act
required of the Borrower under any Loan Document or take any other action which
the Lender in its reasonable discretion deems necessary or desirable to protect
or preserve the Collateral, including, without limitation, any action to (y)
effect any repairs or obtain any insurance called for by the terms of any of the
Loan Documents and to pay all or any part of the premiums therefor and the costs
thereof and (z) pay
51
any rents payable by the Borrower which are more than 30 days past due, or as to
which the landlord has given notice of termination, under any lease. The Lender
shall use its reasonable efforts to give the Borrower notice of any action taken
under this Section 8.3 prior to the taking of such action or promptly thereafter
provided the failure to give such notice shall not affect the Borrower's
obligations in respect thereof. The Borrower agrees to pay the Lender, upon
demand, the principal amount of all funds advanced by the Lender under this
Section 8.3, together with interest thereon at the rate from time to time
applicable to Advances (in excess of the Scaled Assets) 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 8.3
shall constitute Obligations for purposes hereof.
8.4 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.
8.5 Entire Agreement. The Loan Documents embody the entire agreement and
understanding among the Borrower and the Lender and the Loan Documents delivered
on the Effective Date supersede all prior agreements and understandings among
the Borrower and the Lender relating to the subject matter thereof.
8.6 Expenses; Indemnification.
(A) Expenses. The Borrower shall reimburse the Lender for any reasonable
costs, internal charges and out-of-pocket expenses (including reasonable
attorneys' and paralegals' fees and time charges of attorneys and paralegals for
the Lender, which attorneys and paralegals may be employees of the Lender) paid
or incurred by the Lender in connection with the preparation, negotiation,
execution, delivery, review, amendment, modification, and administration of the
Loan Documents. The Borrower also agrees to reimburse the Lender for any
reasonable costs, internal charges and out-of-pocket expenses (including
attorneys' and paralegals' fees and time charges of attorneys and paralegals for
the Lender, which attorneys and paralegals may be employees of the Lender) paid
or incurred by the Lender in connection with the collection of the Obligations
and enforcement of the Loan Documents. In addition to expenses set forth above,
the Borrower agrees to reimburse the Lender, promptly after the Lender's request
therefor, for each audit or other business analysis performed by it in
connection with this Agreement or the other Loan Documents at a time when an
Event of Default exists in an amount equal to the Lender's then reasonable and
customary charges for each person employed to perform such audit or analysis,
plus all costs and expenses (including without limitation, travel expenses)
incurred by the Lender in the performance of such audit or analysis. Lender
shall provide the Borrower with a detailed statement of all reimbursements
requested under this Section 8.6(A).
(B) Indemnity. The Borrower further agrees to defend, protect, indemnify,
and hold harmless the Lender and each of its Affiliates, and each of the
Lender's, or Affiliate's respective officers, directors, employees, attorneys
and agents (including, without limitation, those retained in connection with the
satisfaction or attempted satisfaction of any of the conditions set forth in
Article III) (collectively, the "INDEMNITEES") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses of any kind or nature whatsoever (including, without
limitation, the fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding,
whether
52
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; or
(ii) any liabilities, obligations, responsibilities, losses,
damages, personal injury, death, punitive damages, economic damages,
consequential damages, treble damages, intentional, willful or wanton
injury, damage or threat to the environment, natural resources or public
health or welfare, costs and expenses (including, without limitation,
attorney, expert and consulting fees and costs of investigation,
feasibility or remedial action studies), fines, penalties and monetary
sanctions, interest, direct or indirect, known or unknown, absolute or
contingent, past, present or future relating to violation of any
Environmental, Health or Safety Requirements of Law arising from or in
connection with the past, present or future operations of the Borrower,
its Subsidiaries or any of their respective predecessors in interest, or,
the past, present or future environmental, health or safety condition of
any respective property of the Borrower or its Subsidiaries, the presence
of asbestos-containing materials at any respective property of the
Borrower or its Subsidiaries or the Release or threatened Release of any
Contaminant into the environment (collectively, the "INDEMNIFIED
MATTERS");
provided, however, the Borrower 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.
(C) Notwithstanding anything else in this Agreement to the contrary, no
party shall have any obligation to reimburse any person for attorneys' fees and
expenses unless such fees and expenses are (i) reasonable in amount, (ii)
determined without reference to any statutory presumption and (iii) calculated
using the actual time expended and the standard hourly rate for the attorneys
and paralegals performing the tasks in question and the actual out-of-pocket
expenses incurred.
53
(D) Waiver of Certain Claims; Settlement of Claims. The Borrower further
agrees to assert no claim against any of the Indemnitees on any theory of
liability for consequential, special, indirect, exemplary or punitive damages.
No settlement 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 the Lender or any Indemnitee is a party thereto)
unless such settlement releases all Indemnitees from any and all liability with
respect thereto.
(E) Survival of Agreements. The obligations and agreements of the Borrower
under this Section 8.6 shall survive the termination of this Agreement.
8.7 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.
8.8 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.
8.9 Nonliability of Lender. The relationship between the Borrower and the
Lender shall be solely that of borrower and lender. The Lender shall have no
fiduciary responsibilities to the Borrower and the Lender does not take any
responsibility to the Borrower to review or inform the Borrower of any matter in
connection with any phase of the Borrower's business or operations.
8.10 GOVERNING LAW. ANY DISPUTE BETWEEN THE BORROWER AND THE LENDER, OR
ANY INDEMNITEE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT
REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF NORTH CAROLINA.
8.11 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL. EXCEPT AS
PROVIDED IN SUBSECTION (B), EACH OF THE PARTIES HERETO AGREES THAT ALL DISPUTES
AMONG THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR
OTHERWISE, SHALL BE RESOLVED EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED IN
NORTH CAROLINA, BUT THE PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS FROM THOSE
COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NORTH CAROLINA. EACH
OF THE PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION
(A) ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE
DISPUTE.
(B) OTHER JURISDICTIONS. THE BORROWER AGREES THAT THE LENDER OR
ANY INDEMNITEE SHALL HAVE THE RIGHT TO PROCEED AGAINST THE BORROWER OR
54
ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1) OBTAIN
PERSONAL JURISDICTION OVER THE BORROWER OR (2) REALIZE ON THE COLLATERAL OR ANY
OTHER SECURITY FOR THE OBLIGATIONS OR ENFORCE A JUDGMENT OR OTHER COURT ORDER
ENTERED IN FAVOR OF SUCH PERSON. THE BORROWER AGREES THAT IT WILL NOT ASSERT ANY
PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY SUCH PERSON TO REALIZE ON
THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF SUCH PERSON. THE BORROWER WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS
COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION (B).
(C) SERVICE OF PROCESS. THE BORROWER WAIVES PERSONAL SERVICE OF ANY
PROCESS UPON IT AND IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY WRITS,
PROCESS OR SUMMONSES IN ANY SUIT, ACTION OR PROCEEDING BY THE MAILING THEREOF BY
THE LENDER BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER
ADDRESSED AS PROVIDED HEREIN. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT
THE ABILITY OF THE LENDER TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES IN ANY
OTHER MANNER PERMITTED BY APPLICABLE LAW THE BORROWER IRREVOCABLY WAIVES ANY
OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH IN ANY JURISDICTION SET FORTH ABOVE.
(D) WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION 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.
55
(E) WAIVER OF BOND. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, THE
BORROWER WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF ANY PARTY HERETO
IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE ANY JUDGMENT
OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PARTY, OR TO ENFORCE BY SPECIFIC
PERFORMANCE, TEMPORARY RESTRAINING ORDER, PRELIMINARY OR PERMANENT INJUNCTION,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
(F) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER PARTY
HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE PROVISIONS OF
THIS SECTION 8.11, WITH ITS COUNSEL.
8.12 No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement 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.
8.13 Subordination of Intercompany Indebtedness. The Borrower agrees that
any and all claims of the Borrower against any Subsidiary Holding Company
Guarantor or any Dealership Guarantor, any endorser or any other guarantor of
all or any part of the Obligations, or against any of its properties, including,
without limitation, pursuant to the any intercompany Indebtedness permitted
under Section 5.3(A)(vi), 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, xxx for, take or receive any payment
from any Subsidiary Holding Company Guarantor or any Dealership Guarantor, all
rights, liens and security interests of the Borrower, whether now or hereafter
arising and howsoever existing, in any assets of any Subsidiary Holding Company
Guarantor or any Dealership Guarantor shall be and are subordinated to the
rights, if any, of the Lender 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 and the Lender
have been terminated. If, during the continuance of an Event of Default, all or
any part of the assets of any Subsidiary Holding Company Guarantor or any
Dealership Guarantor, or the proceeds thereof, are subject to any distribution,
division or application to the creditors of any Subsidiary Holding Company
Guarantor or any Dealership Guarantor, whether partial or complete, voluntary or
involuntary, and whether by reason of liquidation, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors or any other action or
proceeding, then, and in any such event, any payment or distribution of any kind
or character, either in cash, securities or other property, which shall be
payable or deliverable upon or with respect to any indebtedness of any
Subsidiary Holding Company Guarantor or any Dealership Guarantor to the
Borrower, including, without limitation, pursuant to the any intercompany
Indebtedness permitted under Section 5.3(A)(vi) ("INTERCOMPANY INDEBTEDNESS")
shall be paid or delivered directly to the Lender 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 Subsidiary Holding Company Guarantor or any
Dealership Guarantor to the Borrower shall be required to be paid or delivered
to the Lender only upon the Lender's request. The Borrower irrevocably
authorizes
56
and empowers the Lender to demand, xxx for, collect and receive every such
payment or distribution and give acquittance therefor and to make and present
for and on behalf of the Borrower such proofs of claim and take such other
action, in the Lender's own name or in the name of the Borrower or otherwise, as
the Lender may deem necessary or advisable for the enforcement of this Section
8.13. The Lender may vote such proofs of claim in any such proceeding, receive
and collect any and all dividends or other payments or disbursements made
thereon in whatever form the same may be paid or issued and apply the same on
account of any of the Obligations. Should any payment, distribution, security or
instrument or proceeds thereof be received by the Borrower upon or with respect
to the Intercompany Indebtedness during the continuance of an Event of Default
and prior to the satisfaction of all of the Obligations and the termination of
all financing arrangements under this Agreement and the other Loan Documents
between the Borrower and the Lender, the Borrower shall receive and hold the
same in trust, as trustee, for the benefit of the Lender and shall forthwith
deliver the same to the Lender, in precisely the form received (except for the
endorsement or assignment of the Borrower where necessary), for application to
any of the Obligations, due or not due, and, until so delivered, the same shall
be held in trust by the Borrower as the property of the Lender; provided,
however, ordinary course payments or distributions made to or by any Subsidiary
Holding Company Guarantor or any Dealership Guarantor to the Borrower shall be
required to be paid or delivered to the Lender only upon the Lender's request
after the occurrence and Continuance of an Event of Default. If the Borrower
fails to make any such endorsement or assignment to the Lender, the Lender or
any of its officers or employees are irrevocably authorized to make the same.
The Borrower agrees that until the Obligations have been paid in full in cash
and satisfied and all financing arrangements under this Agreement and the other
Loan Documents between the Borrower and the Lender have been terminated, the
Borrower will not assign or transfer to any Person (other than the Lender) any
claim the Borrower has or may have against any Subsidiary Holding Company
Guarantor or any Dealership Guarantor.
8.14 Usury Not Intended. It is the intent of the Borrower and the Lender
in the execution and performance of this Agreement and the other Loan Documents
to contract in strict compliance with applicable usury laws, including conflicts
of law concepts, governing the Advances of the Lender including such applicable
laws of the State of North Carolina and the United States of America from
time-to-time in effect. In furtherance thereof, the Lender and the Borrower
stipulate and agree that none of the terms and provisions contained in this
Agreement or the other Loan Documents 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 the Lender receiving same shall credit the same on the principal of
its Note (or if the Note shall have been paid in full, refund said excess to the
Borrower). In the event that the maturity of the Note is accelerated by reason
of any election of the holder thereof resulting from any Event of Default under
this Agreement or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest may never include
more than the Maximum Rate and excess interest, if any, provided for in this
Agreement or otherwise shall be canceled automatically as of the date of such
acceleration or prepayment and, if theretofore paid, shall be credited on the
applicable Note (or, if the Note shall have been paid in full, refunded to the
Borrower of such interest). In
57
determining wheher or not the interest paid or payable under any specific
contingencies exceeds the Maximum Rate, the Borrower and the 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 Note all
amounts considered to be interest under applicable law at any time contracted
for, charged, received or reserved in connection with the Obligations. The
provisions of this Section 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
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 and the 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, the Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time sell to one or more banks or other
financial institutions ("PARTICIPANTS") participating interests in any Advance
owing to the Lender, the Note, the Commitment or any other interest of the
Lender under the Loan Documents on a pro rata or non-pro rata basis. Notice of
such participation to the Borrower shall be required prior to any participation
becoming effective. In the event of any such sale by the Lender of participating
interests to a Participant, the Lender's obligations under the Loan Documents
shall remain unchanged, the Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, the Lender shall remain
the holder of the Note for all purposes under the Loan Documents, all amounts
payable by the Borrower under this Agreement shall be determined as if the
Lender had not sold such participating interests, and the Borrower shall
continue to deal solely and directly with the Lender in connection with the
Lender's rights and obligations under the Loan Documents.
(B) Voting Rights. The Lender shall retain the sole right to approve,
without the consent of any Participant, any amendment, modification or waiver of
any provision of the Loan Documents other than any amendment, modification or
waiver with respect to any Advance or Commitment in which such Participant has
an interest.
9.3 Assignments. The Lender may, in the ordinary course of its business
and in accordance with applicable law, at any time assign to one or more banks
or other financial institutions approved by the Borrower within 10 days of
notice to the Borrower by the Lender of such assignment (which such approval
shall not be unreasonably withheld) all or a portion of its rights and
obligations under this Agreement (including, without limitation, its Commitment
and all Advances owing to it) pursuant to an assignment agreement in form and
substance satisfactory to the Lender. Notwithstanding the foregoing, the
Borrower shall not have any right to approve an assignee under this Section 9.3,
after the occurrence and continuance of an Event of Default or to the extent
such assignee is an Affiliate of the Lender, provided, however, that to the
extent the Lender assigns its obligations hereunder, such Affiliate shall be a
United States Person and the Lender shall have provided such financial
statements as the Borrower shall have reasonably requested.
58
9.4 Confidentiality. Subject to Section 9.5, the Lender shall hold all
nonpublic information obtained pursuant to the requirements of this Agreement
and identified as such by the Borrower in accordance with the Lender's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure reasonably required by a prospective Transferee in connection with
the contemplated participation or as required or requested by any Governmental
Authority or representative thereof or pursuant to legal process and shall
require any such Transferee to agree (and require any of its Transferees to
agree) to comply with this Section 9.4. In no event shall the Lender be
obligated or required to return any materials furnished by the Borrower;
provided, however, each prospective Transferee 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.
9.5 Dissemination of Information. The Borrower authorizes the Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "TRANSFEREE") and any
prospective Transferee any and all information in the Lender's possession
concerning the Borrower and its Subsidiaries; provided that prior to any such
disclosure, such prospective Transferee shall agree to preserve in accordance
with Section 9.4 the confidentiality of any confidential information described
therein.
ARTICLE X: NOTICES
10.1 Giving Notice. Except as otherwise permitted by Section 2.8 with
respect to borrowing notices, all notices and other communications provided to
any party hereto under this Agreement or any other Loan Documents 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 and the Lender may each change the
address for service of notice upon it by a notice in writing to the other
parties hereto.
ARTICLE XI: COUNTERPARTS
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 the Lender.
59
ARTICLE XII: RESTATEMENT OF ORIGINAL CREDIT AGREEMENT
Effective as of the Effective Date, this Agreement amends and restates the
Original Credit Agreement in its entirety. It is the intent of the parties
hereto that this Agreement not constitute a novation, that this Agreement
replace in its entirety the Original Credit Agreement, and that from and after
the Effective Date the Original Credit Agreement be of no further force or
effect. Upon and as of the Effective Date, all references in any Loan Document
to the "Credit Agreement" shall mean and be a reference to this Agreement.
IN WITNESS WHEREOF, the Borrower and the Lender have executed this
Agreement as of the date first above written.
SONIC AUTOMOTIVE, INC.,
as the Borrower
By: /s/ B. Xxxxx Xxxxx
Name: B. Xxxxx Xxxxx
Title:President
Address:
0000 Xxxx Xxxxxxxxxxxx Xxxxxxxxx
P.O. Box 18747
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: O. Xxxxxx Xxxxx
Telephone No.:
Facsimile No.:
FORD MOTOR CREDIT COMPANY,
as Lender
By: /s/ Xxxxxxx X. Xxxx XX
Name: Xxxxxxx X. Xxxx XX
Title: National Account Manager
Address:
0000 Xxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
60
