EXHIBIT 10.30
CREDIT AGREEMENT
This Credit Agreement (this "Agreement") dated November 23, 1998 is
entered into between LITHIA MOTORS, INC., an Oregon corporation, ("Borrower")
and FORD MOTOR CREDIT COMPANY, a Delaware corporation ("Lender"). The parties
hereto agree as follows:
Borrower has requested Lender to extend a revolving line of credit to
Borrower in the principal amount not to exceed $60,000,000.00 (the "Loan") in
order to fund the used floor plan financing for certain dealership Subsidiaries
(as defined herein) of Borrower.
Lender is willing to make the Loan to Borrower provided that Borrower
grants to Lender a security interest in the Collateral and provides such other
security as required by this Agreement and that Borrower complies with the
conditions precedent and other terms and conditions of this Agreement and the
Security Documents (as defined herein).
Now therefore, in consideration of the promises, covenants and
undertakings set forth herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the parties hereto,
Lender and Borrower hereby agree as follows:
1. DEFINITIONS
1.1 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.
(a) "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.
(b) "ACQUISITION DOCUMENTS" means all documents, instruments and
agreements entered into in connection with any Acquisition.
(c) "ADVANCE" means any loan made by the Lender under SECTION 2.1
hereof.
(d) "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.
(e) "AGREEMENT" means this Agreement, as it may be amended, restated
or otherwise modified and in effect from time to time.
(f) "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, 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).
(g) "APPLICABLE COMMERCIAL PAPER RATE" means the Commercial Paper Rate
PLUS two and fifty hundredths percent (2.50%) per annum.
(h) "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).
(i) "AUTHORIZED OFFICER" means any of the chief executive officer,
president, chief financial officer or vice president of accounting of the
Borrower, acting singly.
(j) "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.
(k) "BORROWER GUARANTY" means that certain Guaranty, dated as of even
date herewith, pursuant to which the Borrower guaranties all Lithia Dealership
obligations arising under any Wholesale Line, as it may be amended, restated or
otherwise modified and in effect from time to time.
(l) "BORROWER PLEDGES" means each of (i) that certain Pledge
Agreement, dated as of even date herewith, 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 even date
herewith, 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 Lithia
Group from time to time to the Lender.
(m) "BORROWER SECURITY AGREEMENT" means that certain Security
Agreement, dated as of even date herewith, from the Borrower to the Lender
pursuant to which the Borrower pledged all of its assets to secure the
Obligations hereunder and the obligations of each Lithia Dealership under any
Wholesale Line provided by the Lender to such Lithia Dealership, as it may be
amended, restated or otherwise modified and in effect from time to time.
(n) "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.
(o) "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
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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.
(p) "CAPITALIZED LEASE" of a Person means any lease of property by
such Person as lessee which would be capitalized on a balance sheet of such
Person prepared in accordance with Agreement Accounting Principles.
(q) "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.
(r) "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 and the investments of which are limited to investment grade
securities (i.e., securities rated at least BAA by ▇▇▇▇▇'▇ 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 ▇▇▇▇▇'▇
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 ▇▇▇▇▇'▇ 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.
(s) "CHANGE OF CONTROL" means an event or series of events by which:
(i) Lithia Holding Company, L.L.C. ceases to own,
directly or indirectly, more than 51.0% of the voting power of the
Borrower's Capital Stock ordinarily having the right to vote at an
election of directors or the Principal, , ceases to control Lithia
Holding Company, L.L.C.;
(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;
(iii) the Borrower consolidates with or merges into
another corporation or conveys, transfers or leases all or
substantially all of its property to any Person, or any corporation
consolidates with or merges into the Borrower, in either event
pursuant to a transaction in which the outstanding Capital Stock of
the Borrower is reclassified or changed into or exchanged for (A) cash
or Cash Equivalents or (B) securities, and the holders of the Capital
Stock in the Borrower immediately prior to such transaction do not, as
a result of such transaction, own, directly or indirectly, more than
fifty percent (50%) of the combined voting
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power of the Borrower's Capital Stock or the Capital Stock of its
successor entity in such transaction;
(iv) Borrower ceases to own, directly or indirectly, 80%
of any Subsidiary.
(u) "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).
(v) "CODE" means the Internal Revenue Code of 1986, as amended,
reformed or otherwise modified from time to time, or any successor statute.
(w) "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.
(x) "COLLATERAL DOCUMENTS" means all agreements, instruments and
documents executed in connection with this Agreement that are intended to create
or evidence Liens to secure the Obligations and all Floor Plan Indebtedness,
including, without limitation, the Borrower Security Agreement, the Borrower
Pledges, the subsidiary holding company pledges, each Dealership 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.
(y) "COMMERCIAL PAPER RATE" means the interest rate for "1-Month
Finance Paper Placed Directly" under the column entitled "Week Ending" for the
Friday preceding the last Monday of a calendar month as reported in the Federal
Reserve Statistical Release No. H.15 (519) issued by the Federal Reserve Board.
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.
(z) "COMMISSION" means the Securities and Exchange Commission and any
Person succeeding to the functions thereof.
(aa) "COMMITMENT" means the lesser of (i) $60,000,000 MINUS the amount
of any Decision Reserve, if any, in effect from time to time, or (ii) 100% of
Used Vehicle Value MINUS the amount of any Decision Reserve, if any, in effect
from time to time.
(bb) "CONSOLIDATED NET WORTH" means, at a particular date, the amount
by which the total consolidated assets (other than amounts for Equipment and
real estate) of the Borrower and its consolidated Subsidiaries exceeds the total
consolidated liabilities (other than liabilities for Equipment and real estate)
of the Borrower and its consolidated Subsidiaries.
(cc) "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.
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(dd) "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.
(ee) "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.
(ff) "CONTRIBUTION AGREEMENT" means that certain Contribution
Agreement, dated as of even date herewith, as it may be amended, restated or
otherwise modified and in effect from time to time.
(gg) "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.
(hh) "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.
(ii) "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.
(jj) "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.
(kk) "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
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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 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;
(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.
(ll) "DEALERSHIP GUARANTORS" means each Lithia Dealership, Lithia
Fiancial Corporation and Lithia Real Estate, Inc. providing a Dealership
Guaranty and/or a Dealership Security Agreement to the Lender, and their
respective successors and assigns.
(mm) "DEALERSHIP GUARANTY" means that certain Dealership Guaranty in
the form attached hereto as Exhibit C-1, provided by a Lithia Dealership to the
Lender, as the same may be amended, modified, supplemented and/or restated, and
as in effect from time to time.
(nn) "DEALERSHIP SECURITY AGREEMENT" means any Security Agreement in
the form attached hereto as Exhibit D-1, pursuant to which a Lithia 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.
(oo) "DISQUALIFIED STOCK" means any Capital Stock that, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or
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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.
(pp) "DOL" means the United States Department of Labor and any Person
succeeding to the functions thereof.
(qq) "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.
(rr) "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.
(ss) "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. Section 9601 ET SEQ., the Occupational Safety and Health Act of
1970, 29 U.S.C. Section 651 ET SEQ., and the Resource Conservation and Recovery
Act of 1976, 42 U.S.C. Section 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.
(tt) "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
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environmental reasons, including, but not limited to, any so-called "Industrial
Site Recovery Act" or "Responsible Property Transfer Act."
(uu) "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.
(vv) "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).
(ww) "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.
(xx) "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.
(yy) "FLOOR PLAN INDEBTEDNESS" means any and all loans, advances,
debts, liabilities and obligations owing by a Lithia Dealership to the Lender of
any kind or nature, present or future, arising under a Wholesale Line, whether
or not evidenced by any note, guaranty or other instrument, whether or not for
the payment of money, whether arising by reason of an extension of credit, loan,
guaranty, indemnification, or in any other manner, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising and however acquired. The term
includes, without limitation, all interest, charges, expenses, fees, attorneys'
fees and disbursements, paralegals' fees (in each case whether or not allowed),
and any other sum chargeable to the Borrower or a Lithia Dealership under any
Wholesale Line.
(zz) "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.
(aaa) "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
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such date of all unconditional obligations as described above and the maximum
liability of any such Contingent Obligations at such date and (ii) in the case
of Indebtedness of others secured by a lien to which the property or assets
owned or held by such Person is subject, the lesser of the fair market value at
such date of any asset subject to a lien securing the Indebtedness of others and
the amount of the Indebtedness secured.
(bbb) "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.
(ccc) "INVENTORY" shall mean any and all motor vehicles, tractors,
trailers, service parts and accessories and other inventory of the Borrower and
each Dealership Guarantor.
(ddd) "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.
(eee) "IRS" means the Internal Revenue Service and any Person succeeding
to the functions thereof.
(fff) "LITHIA 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.
(ggg) "LITHIA GROUP" means each of the Borrower and each Subsidiary of
the Borrower.
(hhh) "LITHIA GUARANTIES" means each of the Borrower Guaranty, each
Dealership Guaranty and the Contribution Agreement.
(iii) "LOAN DOCUMENTS" means this Agreement, the Note, the Lithia
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.
(jjj) "MAINETENANCE CAPITAL EXPENDITURES" shall have the meaning set
forth in Section 5.4 (d) hereof.
(kkk) "MAJORITY ACQUISITION" shall mean any Acquisition of Equity
Interests of an entity, in which Borrower is not permitted to hold 100% of such
Equity Interest because of limitations imposed by the relevant automotive
manufacturer's franchise agreement.
(lll) "MARGIN STOCK" shall have the meaning ascribed to such term in
Regulation U.
(mmm) "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.
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(nnn) "MAXIMUM RATE" means the maximum nonusurious interest rate under
applicable law.
(ooo) "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.
(ppp) "NET CASH" means the value of (A) the difference between (i) the
inventory of Borrower and its Subsidiaries, including new vehicles and
demonstration vehicles, less (ii) the outstanding Indebtedness owed by Borrower
and its Subsidiaries for such new vehicles and demonstration vehicles plus (B)
cash of Borrower and its Subsidiaries (C) receivables of Borrowers and its
Subsidiaries for new finance contracts, plus (D) vehicle account receivable of
Borrower and its Subsidiaries (E) holdbacks of Borrower and its Subsidiaries,
less (F) customer deposits, less (G) the sum of one months principal payments on
all outstanding Indebtedness of Borrower of its Subsidiaries, less (H)
accommodations of Borrower and its Subsidiaries (I) average monthly expenses of
Borrower and its Subsidiaries, less (J) net cash excess of Borrower and its
Subsidiaries; as these terms are defined and reported on Borrower's and/or its
Subsidiaries Ford Motor Company Dealer Financial Statement and determined in
accordance with Agreement Accounting Principals.
(qqq) "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.
(rrr) "NOTE" means that certain promissory note, in substantially the
form of EXHIBIT A hereto, duly executed by the Borrower and payable to the order
of the Lender in the amount of $60,000,000.00 including any amendment,
restatement, modification, renewal or replacement thereof.
(sss) "OBLIGATIONS" means all Advances, debts, liabilities, obligations,
covenants and duties owing by the Borrower or a Lithia Dealership 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 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 or a Lithia Dealership
under this Agreement or any other Loan Document.
(ttt) "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.
(uuu) "OTHER FLOOR PLAN INDEBTEDNESS" means loans advances, debts,
liabilities and obligations owing by a Lithia Dealership to a floor plan lender
for the financing of new vehicle inventory.
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(vvv) "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.
(www) "PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
(xxx) "PERMITTED EXISTING INDEBTEDNESS" means the Indebtedness of the
Borrower and its Subsidiaries identified as such on SCHEDULE 1 to this
Agreement.
(yyy) "PERMITTED EXISTING INVESTMENTS" means the Investments of the
Borrower and its Subsidiaries identified as such on SCHEDULE 2 to this
Agreement.
(zzz) "PERMITTED EXISTING LIENS" means the Liens on assets of the
Borrower and its Subsidiaries identified as such on SCHEDULE 3 to this
Agreement.
(aaaa) "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.
(bbbb) "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.
(cccc) "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.
(dddd) "PRINCIPAL" means ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, or a successor reasonably
acceptable to Lender.
(eeee) "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.
(fffff) "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).
(gggg) "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
12
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.
(hhhh) "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).
(iiii) "RELATED PARTY" with respect to the 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).
(jjjj) "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.
(kkkk) "RENTALS" of a Person means the aggregate fixed amounts payable by
such Person under any lease of personal property but does not include any
amounts payable under Capitalized Leases of such Person.
(llll) "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.
(mmmm) "RESTRICTED DEALERSHIP" means any Lithia Dealership, the franchise
agreement with respect to which contains restrictions on such Lithia
Dealership's ability to pledge its assets as collateral for the Obligations.
(nnnn) "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.
(oooo) "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.
(pppp) "REVOLVING CREDIT OBLIGATIONS" means, at any particular time, the
sum of the outstanding principal amount of all Advances at such time.
(qqqq) "SCALED ASSETS" means with respect to the Lithia Group, the sum of
(A) an amount equal to 75% of the Lithia Group's Receivables which constitute
factory receivables, (B) an amount
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equal to 60% of the Lithia Group's Receivables which constitute current
finance receivables, (C) an amount equal to 60% of the Lithia 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 Lithia Group), (D) an amount equal to 55% of the Lithia Group's
Inventory which constitutes parts and accessories, (E) an amount equal to 80%
of the difference between (i) that portion of the Lithia Group's Inventory
which constitutes used vehicles and (ii) the amount of any Floor Plan
Indebtedness of any member of the Lithia Group incurred or available in
connection with such used vehicles, and (F) an amount equal to 45% of the
difference between (i) the value of the Lithia Group's Equipment and (ii) the
amount of Indebtedness of any member of the Lithia Group incurred in
connection with such Equipment. The value of the Lithia 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.
(rrrr) "SECRETARY'S CERTIFICATE" with respect to any entity in the Lithia
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 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;
(ssss) "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.
(tttt) "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, except that Lithia Financial Corporation and Lithia
Real Estate, Inc. shall be excluded therefrom.
(uuuu) "TANGIBLE BASE CAPITAL" means, at a particular date of
calculation, the amount 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;
14
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) 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;
(c) the aggregate amount of the Borrower's and its
Subsidiaries Investments in Affiliates (other
than the Borrower's Subsidiaries);
(d) organizational expenses related to start-up of
operations with respect to the Borrower and
its Subsidiaries;
(e) goodwill and other intangible assets (as determined
in accordance with Agreement Accounting
Principles);
(f) any amount paid to a third-party as consideration
for no-competition agreements;
(g) 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
(h) other assets (including, without limitation,
airplanes, cattle, etc.) not related to the
operations of the Dealerships as automobile
dealerships.
(vvvv) "TERMINATION DATE" means the earlier of (a) two (2) years after
the date hereof 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.
(wwww) "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.
15
(xxxx) "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 and less Indebtedness for Equipment and real estate.
(yyyy) "TOTAL DEBT" means, for any period, on a consolidated basis for
the Borrower and its Subsidiaries, the sum of Indebtedness of the Borrower and
its Subsidiaries, other than Hedging Obligations and other than Indebtedness for
Equipment and real estate.
(zzzz) "TRANSACTION COSTS" means the fees, costs and expenses payable by
the Borrower in connection with the execution, delivery and performance of the
Transaction Documents.
(aaaaa) "TRANSACTION DOCUMENTS" means the Loan Documents and the
Acquisition Documents.
(bbbbb) "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.
(cccccc) "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.
(ddddd) "UNRESTRICTED DEALERSHIP" means any Lithia Dealership other than
a Restricted Dealership.
(eeeee) "USED VEHICLE VALUE" means the value of Dealership Guarantors'
used vehicle inventory, as such amounts are reported on the ledger kept in
accordance with Section 5.2(o) hereof; such amount, however, not to exceed 100%
of the used vehicle current trade in value, as reported in N.A.D.A. OFFICIAL
USED CAR GUIDE.
(fffff) "WHOLESALE LINE" means any wholesale credit line made by the
Lender to a Litiha 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.
16
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.
2. THE LOAN
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 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. Any Advance over $5,000,000 shall be subject to Lender's prior
written consent, which consent may be withheld for any reason. Subject to the
terms of this Agreement, the Borrower may borrow, repay and reborrow Advances at
any time prior to the Termination Date. Borrower shall repay in full the
outstanding principal balance of the Loan on the Termination Date.
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 then 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 and integral multiples of $1,000,000 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).
17
2.5 MINIMUM AMOUNT OF EACH ADVANCE. Each Advance shall be in the
minimum amount of $250,000 (and in multiples of $50,000 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. If any of the Principal
Balance or interest on this Note or other sum due hereunder is not paid within
ten (10) days of when due, Borrower shall pay to Lender a late charge payment
equal to five percent (5%) of the amount of such installment or the maximum rate
permitted by law, whichever is less.
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 authorized to act 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, the Borrower shall
pay interest at the Applicable Commercial Paper Rate on each Advance
outstanding on such date.
(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).
(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-eighth of one percent (0.125%) 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
18
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.
19
2.10 TERMINATION DATE. This Agreement shall be effective until the
Termination Date. 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 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.
20
(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.
3. 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 reasonably 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;
(iii) a Dealership Guaranty executed by each Lithia
Dealership which has not heretofore provided a Dealership
Guaranty to the Lender, it being understood that if such
Lithia Dealership is an Unrestricted Dealership, such
Dealership Guaranty will be substantially in the form of
the Dealership Guaranty attached hereto as EXHIBIT C-1, and
if such Lithia Dealership is a Restricted Dealership, such
Dealership Guaranty will be substantially in the form of
the Dealership Guaranty attached hereto as EXHIBIT C-2;
(iv) a Dealership Security Agreement executed by
each Lithia Dealership which has not heretofore provided a
Dealership Security Agreement to the Lender, it being
understood that if such Lithia Dealership is an
Unrestricted Dealership, such Dealership Security Agreement
will be substantially in the form of the Dealership
Security Agreement attached hereto as EXHIBIT D-1, and if
such Lithia Dealership is a Restricted Dealership, such
Dealership Security Agreement will be substantially in the
form of the Dealership Security Agreement attached hereto
as EXHIBIT D-2;
(v) to the extent any Lithia Dealership has any
Indebtedness other than Permitted Existing Indebtedness,
pay-out letters, releases and UCC-3 Termination Statements,
where applicable, from all third-party creditors releasing
all Liens securing any such Indebtedness;
21
(vi) certificates of good standing for the Borrower
and each of the Dealership Guarantors from its jurisdiction
of incorporation and each other jurisdiction where the
nature of its business requires it to be qualified as a
foreign corporation;
(vii) a Secretary's Certificate from the Borrower
and each Lithia Dealership acquired by the Borrower on or
prior to the date hereof.
(viii) 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
Lithia 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;
(ix) a written opinion of the Borrower's and
Dealership Guarantors' counsel, addressed to the Lender, in
form and substance satisfactory to the Lender;
(x) 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
(xi) 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 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).
22
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;
(ii) The loss payable endorsements referenced in SECTION
5.2(G) shall have been delivered to the Lender.
4. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows to the Lender as of the
date hereof and as of the Effective Date and thereafter on each date as required
by SECTION 4.2:
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 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 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 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, 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
23
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.
(a) FINANCIAL INFORMATION. All balance sheets, statements of
profit and loss and other financial data that have been given to Lender by or on
behalf of Borrower (the "Financial Information") are complete and correct in all
material respects, accurately present the financial condition of Borrower 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 amount, (and if over
$500,000,as to creditor or debtor , amount and security ) by the Financial
Information, Borrower does 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 and liens premitted under Section 5.3 (c) arising subsequent to
the date of this Agreement). 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.
24
4.5 TAXES.
(a) TAX EXAMINATIONS. All 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, 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. 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.
4.6 LITIGATION; LOSS CONTINGENCIES AND VIOLATIONS. There is no action,
suit, proceeding, arbitration or investigation before or by any governmental
authority or private arbitrator pending or 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 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 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 be expected to have a material adverse
effect.
4.7 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 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 and, is not (other than
Capital Stock in Borrower) Margin Stock. 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.
25
4.8 ERISA. No Benefit Plan has incurred any 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 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 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. To the best of
Borrower's knowledge, 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 income tax under Section 501(a)
of the Code as currently in effect. To the best of Borrower's knowledge, the
Borrower and all Subsidiaries are in compliance in all respects with the
responsibilities, obligations and duties imposed on them by ERISA and the Code
with respect to all Plans. To the best of Borrower's knowledge, 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 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 be expected to
subject the Borrower to liability. Neither the Borrower nor any Subsidiary is
subject to any liability under Sections 4063, 4064, 4069, 4204 or 4212(c) of
ERISA and no other member of the Controlled Group is subject to any liability
under Sections 4063, 4064, 4069, 4204 or 4212(c) of ERISA which could be
expected to subject the Borrower or any Dealership Guarantor to 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.)
4.9 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 fact or
omit to state a 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.
4.10 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.
4.11 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 be expected to have a material adverse effect. Neither the Borrower
26
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.
4.12 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 be expected to have
a material adverse effect. The execution, delivery and performance by each
Lithia 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 Lithia
Dealership is operating under a valid and enforceable franchise agreement, which
such franchise agreements prohibit certain transfers of ownership or control
without the consent of the relevant manufacturer.
4.13 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 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 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.
27
4.14 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.
4.15 INSURANCE. The Borrower's and its Subsidiaries' insurance policies
and programs reflect coverage that is reasonably consistent with prudent
industry practice.
4.16 LABOR MATTERS. As of the date hereof, to the Borrower's and its
Subsidiaries' knowledge, there are no 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.
4.17 ENVIRONMENTAL MATTERS. (a)(i) The operations of the Borrower's
Subsidiaries, Lithia Financial Corporation, Lithia Real Estate, Inc.
(collectively, the "Lithia Subsidiaries") and Borrower comply in all respects
with Environmental, Health or Safety Requirements of Law;
(ii) the Borrower and the Lithia Subsidiaries have
all permits, licenses or other authorizations required
under Environmental, Health or Safety Requirements of Law
and are in compliance with such permits;
(iii) neither the Borrower,any of the Lithia
Subsidiaries nor any of their respective present property
or operations, or any of their respective past property or
operations, are subject to or the subject of, any
investigation known to the Borrower or any of the Lithia
Subsidiaries, any judicial or administrative proceeding,
order, judgment, decree, settlement or other agreement
respecting: (A) any violation of Environmental, Health or
Safety Requirements of Law; (B) any remedial action under
any Environmental, Health or Safety Requirements of Law; or
(C) any claims or liabilities arising from the Release or
threatened Release of a Contaminant into the environment;
(iv) there is not now, nor has there ever been on
or in the property of the Borrower or any of the Lithia
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 could be expected to result in any claims or
liabilities in excess of $500,000.00; and
(v) neither the Borrower nor any of the Lithia
Subsidiaries has any Contingent Obligation in connection
with any Release or threatened Release of a Contaminant
into the environment.
4.18 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
Dealership Guarantors to execute and deliver its respective Dealership Guaranty
and Dealership Security Agreements, the Lender would not have made available the
credit facilities established hereby on the terms set forth herein.
5. COVENANTS
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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 forty-five (45) days after the end of
each fiscal quarter in each fiscal quarter, the
consolidated and consolidating balance sheet of the
Borrower and the Lithia Subsidiaries as at the end of such
period and the related consolidated and consolidating
statements of income and cash flows of the Borrower and the
Lithia 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 the Lithia
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 the Lithia 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 the Lithia Subsidiaries
for such fiscal year, and in comparative form the
corresponding figures for the previous fiscal year and (b)
an audit report on the items listed in CLAUSE (A) hereof
(other than the consolidating statements) of independent
certified public accountants of recognized national
standing, which audit report shall be unqualified and shall
state that such financial statements fairly present the
consolidated financial position of the Borrower and the
Lithia 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 by the 25th day of each following month,
certified copies of direct (factory) statements provided to
a manufacturer by any Lithia Dealership.
29
(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, president, chief financial officer, treasurer 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 LithiaSubsidiary 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 the Lithia Subsidiaries or any property of the Borrower or any of the
Lithia 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 the Lithia Subsidiaries to liability in an
amount aggregating $500,000 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 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.
(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
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
30
aggregate in excess of $250,000, 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 the Lithia 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 Lithia
Subsidiary has taken, is taking or proposes to take with
respect thereto;
(iii) within ten (10) business days after the
Borrower or any of the Lithia 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
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.
31
(e) LABOR MATTERS. Notify the Lender in writing, promptly upon the
Borrower's learning thereof, of (i) any 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 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
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.
(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.
(j) USED VEHICLE INVENTORY. On each Payment Date, an itemized list of
used vehicle inventory, showing the vehicle identification number of each
vehicle, the make and model of each vehicle, and the value of each vehicle and
the aggregate value of all used vehicle inventory.
32
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 be expected to have a material adverse effect.
(d) PAYMENT OF TAXES AND CLAIMS; TAX. The Borrower shall pay, and cause
each of the Lithia 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
LithiaSubsidiary'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 the Lithia 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. The Borrower shall
permit and cause each of the Borrower's Lithia 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 Lithia 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, at such times during normal business hours, as often as may be
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 Lithia Subsidiaries to keep and maintain, in
all 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.
33
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. Neither Borrower nor any Lithia Subsidiary shall be
required to violate any attorney-client privilege by disclosure to Lender
(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 ("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 reasonably 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).
34
(h) ERISA COMPLIANCE. The Borrower shall, and shall cause each of
the Borrower's Subsidiaries to, establish, maintain and operate all Plans, if
any, to comply in all material respects with the provisions of ERISA, the
Code, all other applicable laws, and the regulations and interpretations
thereunder and the respective requirements of the governing documents for
such Plans, except where the failure to comply 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.
(i) MAINTENANCE OF PROPERTY. The Borrower shall cause all property used
or useful in the conduct of its business or the business of any Lithia
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 Lithia
Subsidiary and not disadvantageous in any material respect to the Lender.
(j) ENVIRONMENTAL COMPLIANCE. The Borrower and the Lithia Subsidiaries
shall comply with all Environmental, Health or Safety requirements of law,
except where noncompliance could not be expected to subject the Borrower and the
Lithia Subsidiaries to liability individually or in the aggregate in excess of
$500,000. Neither the Borrower nor any of the Lithia Subsidiaries shall be the
subject of any proceeding or investigation pertaining to (i) the Release by the
Borrower or any of the Lithia Subsidiaries of any Contaminant into the
environment or (ii) the liability of the Borrower or any of the Lithia
Subsidiaries arising from the Release by any other Person of any Contaminant
into the environment, which, in either case, subjects or is likely to subject
the Borrower and the Lithia 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 fund the Dealership Guarantors' used automotive inventory. 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.
(l) ADDITION OF DEALERSHIP GUARANTORS. The Borrower shall cause each
Lithia Dealership which has not heretofore provided a Dealership Guaranty to the
Lender, to deliver to the Lender a Dealership Guaranty, in the form of Exhibit
C-1, a Dealership Security Agreement in the form of Exhibit D-1, UCC-1 Financing
Statements 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
Lithia Dealership shall provide such 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 Subsidiaries that is required to guarantee the Obligations and
Lithia Financial Corporation and Lithia Real Estate, Inc., to deliver to Lender,
immediately upon its acquisition or leasing of any real property after the date
hereof, copies of any mortgage, deed of trust, collateral assignment or other
appropriate instrument evidencing a lien upon any such acquired property that
would be other than a Customary Permitted Lien if the real property were
included in the Collateral (in the case of any acquisition of real property), or
copies of a lease (in the case of a real property lease) and the Borrower or the
applicable Subsidiary, as the case may be, shall use their best efforts provide
the Lender with such opinions, landlord and mortgagee waivers as the Lender
shall have reasonably requested in connection with such acquisition or leasing
of real property,only if 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.
35
(n) FRANCHISE AGREEMENTS. The Borrower shall use its 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) MINORITY HOLDERS. Borrower shall cause any minority holder holding
an Equity Interest in a Subsidiary pursuant to a Majority Acquisition to pledge
its Equity Interest to Lender in connection with said Permitted Acquisition
(provided, however, that ▇▇▇▇▇▇▇ ▇▇▇▇ shall not be required to pledge his 20%
equity interest in Lithia VS, L.L.C.).
(p) USED VEHICLE LEDGER. Borrower and/or each Dealership Guarantor shall
maintain a current ledger of used vehicle inventory, noting the make, mode,
vehicle identification number and value of each used vehicle.
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 Dealership Guarantor or from any
Subsidiary to the Borrower or any Dealership Guarantor;
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 or any Dealership Guaranty;
(ix) Indebtedness (evidenced by a promissory note
or notes) constituting that portion of the deferred
purchase price payable by the Borrower in connection with a
Permitted Acquisition, and Indebtedness (evidenced by a
promissory note or notes) to shareholders, members or
partners of a Subsidiary or a predecessor of such a
subsidiary acquired in a Permitted Acquisition that are
credited against the purchase price (the "Seller's Notes");
(x) Other Floor Plan Indebtedness;
36
(xi) Indebtedness incurred in connection with Capital
Expenditures; and renewals and refinancings thereof;
(xii) Guaranties by Borrower of operating leases of
Subsidiaries, including but not limited to leases of real
property;
(xiii) Guaranties by Borrower of Indebtedness incurred by
Lithia Financial Corporation and Lithia Real Estate, Inc.;
(xiv) Indebtedness of a dealership Subsidiary acquired in a
Permitted Acquisition, including but not limited to:
(a) recourse liability to purchasers of automobile
chattel paper and retail leases; and
(b) Indebtedness to lenders providing wholesale
lease financing.
(xv) Indebtedness not in excess of $250,000 in
connection with the liens set forth in Section 5.3(C)(v).
(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 (and sales of automotive chattel paper and leases
generated thereby);
(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;
(iii) transfers by a Dealership Guarantor to
Lithia Financial Corporation of equipment, fixtures and
vehicles to be leased by Lithia Financial Corporation to a
Dealership Guarantor;
(iv) transfers by a Dealership Guarantor to Lithia Real
Estate, Inc. of real property to be leased by Lithia Real Estate,
Inc. to a Dealership Guarantor; and
(v) 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, 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 and (d) if a, a sale by the Borrower of Capital Stock
in any Subsidiary, except as provided in 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;
37
(ii) Customary Permitted Liens;
(iii) Liens securing the Obligations;
(iv) Liens securing the Indebtedness described in
Section (a)(ix), provided the amount of such liens shall
not at any time exceed $10,000,000;
(v) liens, for the purpose of securing Indebtedness
described in Section 5.3 (a)(xiv) above, in chattel paper,
vehicle leases to retail customers, the vehicles sold or leased
thereunder, returns or repossessions of such vehicles, and
proceeds of such collateral;
(vi) liens of General Motors Acceptance Corporation
("GMAC") in present and future contracts held by GMAC (in the
case of a Lithia Dealership that sells chattel paper to GMAC);
(vii) liens of wholesalers or refiners of oil or other
petroleum products in equipment supplied to Borrower or a
Subsidiary in connection with contracts to supply such
products;
(viii) liens securing the Other Floor Plan Indebtedness; and
(ix) Liens (other than on the stock of any
Subsidiaries) securing other obligations not exceeding $250,000
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 (other than any
franchise agreement with Ford Motor Company), 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 intercompany loans
from any Subsidiary to the Borrower or any other Subsidiary
permitted by SECTION 5.3(A)(V);
(v) Investments in any Dealership Guarantor;
(vi) Investments constituting Permitted Acquisitions; and
(vii) Investments in addition to those referred to
elsewhere in this SECTION 5.3(D) in an amount not to exceed
$500,000 in the aggregate at any time outstanding;
38
PROVIDED, HOWEVER, that the Investments described in CLAUSE (VII) above shall
not be permitted if either an Event of Default or Unmatured Default shall have
occurred and be continuing on the date thereof or would result therefrom.
(e) RESTRICTED PAYMENTS. Neither the Borrower nor any of its
Subsidiaries shall declare or make any Restricted 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. (i) Neither the Borrower nor
any of its Subsidiaries shall engage in any business other than the businesses
engaged in by the Borrower and its Subsidiaries, collectively, 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.
(iii) The Borrower shall not make any Acquisitions, other than
Acquisitions meeting the requirements set forth in Section 5.3(f)(iii) of the
Credit Agreement between Borrower and Lender dated as of even date herewith,
pursuant to which Lender extended an acquisition line of credit to Borrower
(each such Acquisition constituting a "PERMITTED ACQUISITION").
(g) TRANSACTIONS WITH SHAREHOLDERS AND. 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 Dealership Guarantor, on terms that are less
favorable to the Borrower or any of its Subsidiaries, as applicable, than those
that might be obtained in an arm's length transaction at the time from Persons
who are not such a holder or Affiliate.
(h) RESTRICTION ON FUNDAMENTAL CHANGE. 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 or with a Person acquired or being 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 the Lithia
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 the Lithia Subsidiaries sold or transferred or is to sell or
transfer to any other Person,
39
or (ii) which it or one of the Lithia 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 the Lithia Subsidiaries to any other
Person in connection with such lease, other than a (A) Dealership Guarantor's
sale to, and lease of Equipment from, Lithia Financial Corporation and (B) a
Dealership Guarantor's sale to, and lease of real estate from, Lithia Real
Estate, Inc.
(j) MARGIN REGULATIONS. Neither the Borrower nor any of its
Subsidiaries, shall use all or any portion of the proceeds of any credit
extended under this Agreement to purchase or carry Margin Stock.
(k) ERISA. The Borrower shall not
(i) engage, or permit any of its Subsidiaries to
engage, in any prohibited transaction described in Sections
406 of ERISA or 4975 of the Code for which a statutory or
class exemption is not available or a private exemption has
not been previously obtained from the DOL;
(ii) permit to exist any accumulated funding
deficiency (as defined in Sections 302 of ERISA and 412 of
the Code), with respect to any Benefit Plan, whether or not
waived;
(iii) fail, or permit any Controlled Group member to
fail, to pay timely required contributions or annual
installments due with respect to any waived funding
deficiency to any Benefit Plan;
(iv) terminate, or permit any Controlled Group
member to terminate, any Benefit Plan which would result in
any liability of the Borrower or any Controlled Group
member under Title IV of ERISA;
(v) fail to make any contribution or payment to any
Multiemployer Plan which the Borrower or any Controlled
Group member may be required to make under any agreement
relating to such Multiemployer Plan, or any law pertaining
thereto;
(vi) fail, or permit any Controlled Group member to
fail, to pay any required installment or any other payment
required under Section 412 of the Code on or before the due
date for such installment or other payment; or
(vii) amend, or permit any Controlled Group member
to amend, a Plan resulting in an increase in current
liability for the plan year such that the Borrower or any
Controlled Group member is required to provide security to
such Plan under Section 401(a)(29) of the Code,
except where such transactions, events, circumstances, or failures will not have
or is not likely to subject the Borrower and its Subsidiaries to liability
individually or in the aggregate in excess of $250,000.
(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 except as permitted in connection with a Majority
Acquisition or as required to comply with the terms of the relevant franchise
agreement with a particular automotive manufacturer.
(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 respect to the interests of the
Lender without the prior written consent of the Lender. The Borrower
40
shall not permit any Lithia Dealership to amend, modify or otherwise change
any of the terms or provisions of such Lithia Dealership's franchise
agreement in any manner adverse in any 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 Lithia Subsidiary to, create or otherwise cause to become effective any
consensual encumbrance or restriction of any kind on the ability of any Lithia
Subsidiary to (i) pay dividends or make any other distribution on its stock,
(ii) make any other Restricted Payment, (iii) pay any Indebtedness or other
Obligation owed to the Borrower or any other Lithia Subsidiary, (iv) make loans
or advances or other Investments in the Borrower or any other Lithia Subsidiary,
or (v) sell, transfer or otherwise convey any of its property to the Borrower or
any other Lithia Subsidiary, except as may be required to comply with any
applicable financial covenants under the terms of the franchise or dealer
agreement that Borrower or each of its Dealership Subsidiaries has with vehicle
manufactuerers.
(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 Borrower or a
Subsidiary pursuant to which the Borrower or such Subsidiary has hedged its
actual interest rate, foreign currency or commodity exposure.
( r) NEGATIVE PLEDGE. With respect to any Dealership Guarantor
operating under a franchise agreement with Toyota Motor Sales in USA, Inc,
American Honda Motor Corporation, or Nissan in USA, Inc., Borrower hereby agrees
that it shall not pledge or otherwise transfer its Capital Stock in such
Dealership to any Person.
5.4 FINANCIAL COVENANTS. The Borrower shall comply with the following:
(a) TOTAL DEBT TO TANGIBLE BASE CAPITAL. The Borrower shall not at any
time permit the ratio ("TBC RATIO") of Total Debt of the Lithia Group on a
consolidated basis to Tangible Base Capital of the Lithia Group on a
consolidated basis to be greater than 30:1.
(b) TOTAL ADJUSTED DEBT TO TANGIBLE BASE CAPITAL. The Borrower shall
not at any time permit the ratio ("ADJUSTED TBC RATIO") of Total Adjusted Debt
of the Lithia Group on a consolidated basis to Tangible Base Capital of the
Lithia Group on a consolidated basis to be greater than 15:1.
(c) CURRENT RATIO. The Borrower shall not at any time permit the ratio
(the "CURRENT RATIO") of Current Assets of the Lithia Group on a consolidated
basis to Current Liabilities of the Lithia Group on a consolidated basis to be
less than 1.2:1.
(d) FIXED CHARGE COVERAGE RATIO. The Borrower shall maintain a ratio
("FIXED CHARGE COVERAGE RATIO") of (i) EBITDAR LESS Capital Expenditures for
tangible and intangible personal property paid in cash, to (ii) (a) Interest
Expense PLUS (b) scheduled amortization of the principal portion of all
Indebtedness for money borrowed (except for Seller's Notes) PLUS (c) Rentals
PLUS (d) taxes paid in cash during such period of the Borrower and its
consolidated Subsidiaries of at least 1.2:1 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.
(e) NET CASH. Borrower shall maintain positive Net Cash.
41
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 Certificates delivered hereunder and
shall be binding on the Borrower for all purposes of this Agreement absent
manifest error.
6. 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 certificate of any Authorized Officer at any time given by any such
Person pursuant to any of the Loan Documents shall be false or misleading in any
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 the
LithiaSubsidiaries 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 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; 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 the Lithia Subsidiaries (other than by a
regularly scheduled required prepayment) prior to the stated maturity thereof.
(f) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
42
(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 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.
43
(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 SECURITY. At any time, for any reason,
(i) any Loan Document as a whole that 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 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, 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.
(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 Lithia 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 Lithia Guaranty or the Borrower or any Dealership
Guarantor shall fail to comply with any of the terms or provisions of any Lithia
Guaranty to which it is a party, or the Borrower or any Dealership Guarantor
denies that it has any further liability under any Lithia Guaranty to which it
is a party, or gives notice to such effect.
44
(p) ENVIRONMENTAL MATTERS. The Borrower or any of the Lithia
Subsidiaries shall be the subject of any proceeding or investigation pertaining
to (i) the Release by the Borrower or any of the Lithia Subsidiaries of any
Contaminant into the environment, (ii) the liability of the Borrower or any of
the Lithia 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 the Lithia
Subsidiaries, which, in any case, has subjected or is reasonably likely to
subject the Borrower or any of the Lithia Subsidiaries to liability individually
or in the aggregate in excess of $500,000.
An Event of Default shall be deemed "continuing" until cured or until
waived in writing in accordance with SECTION 7.3.
7. 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.
8. 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
45
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 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 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 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 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 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 or not such
46
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.
47
(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.
(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 or 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 OREGON.
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8.11 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL
(a) EXCLUSIVE JURISDICTION. 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 OREGON, BUT THE PARTIES HERETO
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF OREGON. (b) OTHER JURISDICTIONS. THE BORROWER AGREES THAT
THE LENDER OR ANY INDEMNITEE SHALL HAVE THE RIGHT TO PROCEED AGAINST THE
BORROWER OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE SUCH PERSON TO (1)
OBTAIN PERSONAL JURISDICTION OVER THE BORROWER OR (2) REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR ENFORCE A JUDGMENT OR OTHER COURT
ORDER ENTERED IN FAVOR OF SUCH PERSON. THE BORROWER WAIVES ANY OBJECTION THAT
IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH SUCH PERSON HAS COMMENCED A
PROCEEDING DESCRIBED IN THIS SUBSECTION (B).
(c) SERVICE OF PROCESS. THE BORROWER WAIVES PERSONAL SERVICE OF ANY
PROCESS UPON IT AND IRREVOCABLY CONSENTS TO THE SERVICE OF 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.
(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.
49
(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 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, ▇▇▇ for, take or receive any payment from 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 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
Dealership Guarantor, or the proceeds thereof, are subject to any distribution,
division or application to the creditors of 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 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 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 and empowers the Lender to demand, ▇▇▇ 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 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
50
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 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 Oregon 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 determining whether or ot 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.
9. 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; EFFEC. 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
51
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.
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.
10. NOTICES
10.1 GIVING NOTICE. Except as otherwise permitted by SECTION 2.8 with
respect to borrowing notices, all notices and other communications provided for
hereunder shall be in writing (including telecopier, telegraphic, telex or cable
communication) and mailed, telecopied, telegraphed, telexed, cabled or
delivered, if to the Borrower, at its address at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, if to the Lender, at its address specified in the Credit
Agreement; or, as to each party, at such other address as shall be designated by
such party in a written notice to the other party. All such notices and
communications shall be effective, upon receipt, or in the case of (i) notice by
mail, five days after being deposited in the United States mails, first class
postage prepaid, (ii) notice by overnight courier, one business day after being
deposited with a national overnight courier service, (iii)
52
notice by telex, when telexed against receipt of answer back or (iv) notice
by facsimile copy, when transmitted against mechanical confirmation of
successful transmission.
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.
11. 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.
12. CAPITAL STOCK PLEDGES
With respect to all Capital Stock in any Lithia Dealerships pledged to
Lender, Lender agrees that upon written notice from Borrower that an automotive
manufacturer objects to such pledge, Lender shall fully release any interest it
may have in such Capital Stock and return pledged certificates, if any, to
Borrower.
53
IN WITNESS WHEREOF, the Borrower and the Lender have executed this
Agreement as of the date first above written.
LITHIA MOTORS, INC., as the Borrower
By:
-----------------------------------
M. L. Dick, Heimann, President
Attest
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Secretary
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇
Attention:
-----------------------------
Telephone No.:
-------------------------
Facsimile No.:
-------------------------
FORD MOTOR CREDIT COMPANY, as Lender
By:
------------------------------------
▇. ▇. ▇▇▇▇▇, National
Account Manager
Address:
--------------------------------
--------------------------------
Attention: ▇. ▇. ▇▇▇▇▇
Telephone No.:
--------------------------
Facsimile No.:
--------------------------
54
