SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________________ to ____________________
Commission file number 0-21318
O'REILLY AUTOMOTIVE, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Missouri 44-0618012
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
233 South Patterson
Springfield, Missouri 65802
- --------------------------------------------------------------------------------
(Address of principal executive offices, Zip code)
(417) 862-6708
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Common stock, $0.01 par value - 21,097,551 shares outstanding as of September
30, 1997
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
FORM 10-Q
Quarter Ended September 30, 1997
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
----
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets .................... 3
Condensed Consolidated Statements of Income .............. 4
Condensed Consolidated Statements of Cash Flows .......... 5
Notes to Condensed Consolidated Financial Statements ..... 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION .................... 7
PART II - OTHER INFORMATION
ITEM 2 - CHANGES IN SECURITIES ................................... 9
ITEM 5 - OTHER INFORMATION ....................................... 9
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K ........................ 10
SIGNATURE PAGE ............................................................ 11
EXHIBIT INDEX ............................................................. 12
2
<PAGE>
PART I Financial Information
- ------------------------------
ITEM 1. Financial Statements
- -----------------------------
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
(Unaudited) (Note)
(In thousands, except share data)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents .......................... $ 1,625 $ 1,207
Short-term investments ............................. 1,000 1,000
Accounts receivable ................................ 13,637 11,296
Inventory .......................................... 107,330 83,909
Other current assets ............................... 2,759 2,740
----------- -----------
Total current assets .................................... 126,351 100,152
Property and equipment, at cost ......................... 125,524 101,220
Accumulated depreciation ................................ 26,924 21,435
----------- -----------
98,600 79,785
Other assets ............................................ 4,770 3,686
----------- -----------
Total assets ............................................ $ 229,721 $ 183,623
=========== ===========
Liabilities and stockholders' equity
Current liabilities:
Notes payable to banks ............................. $ -- $ 3,000
Accounts payable ................................... 25,445 17,288
Income taxes payable ............................... 767 --
Other current liabilities .......................... 11,472 5,307
Current portion of long-term debt .................. 98 154
----------- -----------
Total current liabilities ............................... 37,782 25,749
Long-term debt, less current portion .................... 13,898 237
Other liabilities ....................................... 2,176 1,855
Stockholders' equity:
Common stock, $.01 par value:
Authorized shares- 30,000,000
Issued and outstanding shares - 21,097,551
in 1997 and 20,937,014 in 1996 ................. 211 209
Additional paid-in capital ......................... 76,335 73,964
Retained earnings .................................. 99,319 81,609
----------- -----------
Total stockholders' equity .............................. 175,865 155,782
----------- -----------
Total liabilities and stockholders' equity .............. $ 229,721 $ 183,623
=========== ===========
</TABLE>
NOTE: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
3
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Product sales ...................................................... $ 87,517 $ 70,432 $238,437 $194,535
Cost of goods sold, including warehouse and distribution expenses .. 50,986 41,185 138,000 114,667
Operating, selling, general and administrative expenses ............ 26,064 20,953 72,549 57,742
-------- -------- -------- --------
77,050 62,138 210,549 172,409
-------- -------- -------- --------
Operating income ................................................ 10,467 8,294 27,888 22,126
Other income, net ............................................... 76 259 313 822
-------- -------- -------- --------
Income before income taxes ...................................... 10,543 8,553 28,201 22,948
Provision for income taxes ...................................... 3,922 3,131 10,491 8,491
-------- -------- -------- --------
Net Income ...................................................... $ 6,621 $ 5,422 $ 17,710 $ 14,457
======== ======== ======== ========
Net income per share ............................................ $ 0.31 $ 0.26 $ 0.84 $ 0.69
======== ======== ======== ========
Weighted average common shares outstanding ...................... 21,081 20,896 21,019 20,844
======== ======== ======== ========
See notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
-----------------------
1997 1996
-------- --------
(In thousands)
Net cash provided by operating activities ......... $ 14,225 $ 7,156
Investing activities:
Purchases of property and equipment .......... (25,070) (24,204)
Proceeds from sale of property and equipment . 283 248
Purchases of short-term investments .......... -- (13,879)
Proceeds from sale of short-term investments . -- 30,095
Other ........................................ (786) 34
-------- --------
Net cash used in investing activities ............. (25,573) (7,706)
Financing activities:
Borrowings on notes payable to banks ......... 11,200 --
Payments on notes payable to banks ........... (500) --
Payments on long-term debt ................... (95) (151)
Proceeds from issuance of common stock ....... 1,161 1,554
-------- --------
Net cash provided by financing activities ......... 11,766 1,403
-------- --------
Net increase in cash .............................. 418 853
Cash at beginning of period ....................... 1,207 2,833
-------- --------
Cash at end of period ............................. $ 1,625 $ 3,686
======== ========
See notes to condensed consolidated financial statements.
5
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1997
1. Basis of Presentation
- -------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months and nine months ended
September 30, 1997 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
O'Reilly Automotive, Inc. and Subsidiaries' annual report on Form 10-K for the
year ended December 31, 1996.
2. Earnings Per Share
- ----------------------
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share," which is required to be adopted during the quarter
and year ended December 31, 1997. At that time, O'Reilly Automotive, Inc. (the
"Company") will be required to change the method currently used to compute
earnings per share and restate all prior periods. Under the new requirements for
calculating basic earnings per share, the dilutive effect of stock options will
be excluded. The impact of Statement No. 128 was not material to the calculation
of primary and fully diluted earnings per share for the quarters ended September
30, 1997 and 1996.
3. Stock Split
- ---------------
On July 8, 1997, the Company's Board of Directors declared a two-for-one stock
split in the form of a 100% stock dividend to all shareholders of record as of
July 31, 1997. The stock dividend was paid on August 31, 1997. All share and
per share information included in the accompanying consolidated financial
statements have been restated to reflect the effect of the stock split.
4. Subsequent Events
- ---------------------
On October 1, 1997, the Company replaced its credit facility with Commerce Bank,
N.A. with an agreement allowing the Company to borrow up to $32.5 million until
September 30, 2000.
On October 16, 1997, the Company replaced its credit facility with NationsBank,
N.A. (formerly The Boatmen's National Bank of St. Louis) with an agreement
allowing the Company to borrow up to $32.5 million until October 15, 2000.
Pursuant to the new facilities described above, the Company has reclassified the
related debt from short-term debt to long-term debt on the accompanying
consolidated financial statements.
6
<PAGE>
The information discussed below in Management's Discussion and Analysis of
Financial Condition and Results of Operations contains statements regarding
matters that are not historical facts (including statements as to beliefs or
expectations of O'Reilly Automotive, Inc.) which are forward-looking statements.
Because such forward-looking statements include risks and uncertainties,
including those risks discussed in Exhibit 99.1 hereto, the actual results could
differ materially from those expressed or implied by such forward-looking
statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
-----------------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
---------------------------------------------
RESULTS OF OPERATIONS
Product sales for the third quarter of 1997 increased by $17.1 million, or
24.3%, over product sales for the third quarter of 1996 due to an 8.7% increase
in comparable store product sales for the quarter, the opening of 9 new O'Reilly
stores during the last quarter of 1996, the opening of 30 new stores, net, and
the relocation or renovation of 21 stores during the first nine months of 1997.
Product sales for the first nine months of 1997 increased by $43.9 million, or
22.6% over product sales for the first nine months of 1996 due to a 7.2%
increase in comparable store product sales and the opening of the new O'Reilly
stores discussed above. Management believes that the consumer acceptance
experienced by these new O'Reilly stores and the increased product sales
achieved by the existing O'Reilly stores is the result of the continuation of
media advertising during the first nine months of 1997 at the levels set in
1996, an increase in the broad selection of stock keeping units (SKU's)
available at both new and existing O'Reilly stores, the increase in inventory
levels at most O'Reilly stores and the increasing penetration of the general
geographic markets in which O'Reilly Automotive, Inc. (the "Company") operates.
Gross profit increased 24.9% from $29.2 million (or 41.5% of product sales) in
the third quarter of 1996 to $36.5 million (or 41.7% of product sales) in the
third quarter of 1997. Gross profit for the first nine months increased 25.8%
from $79.9 million (or 41.1% of product sales) in 1996 to $100.4 million (or
42.1% of product sales) in 1997. The increase in gross profit margin resulted
primarily from improvements in the Company's product acquisition programs and
changes in the product sales mix. The Company's product acquisition programs
have resulted in lower product costs due to increased buying power and
promotional programs and allowances offered by many of the Company's vendors.
Operating, selling, general and administrative expenses (OSG&A expenses)
increased $5.1 million from $21.0 million (or 29.7% of product sales) in the
third quarter of 1996 to $26.1 million (or 29.8% of product sales) in the third
quarter of 1997. OSG&A expenses increased $14.8 million from $57.7 million (or
29.7% of product sales) in the first nine months of 1996 to $72.5 million (or
30.4% of product sales) in the first nine months of 1997. OSG&A expenses
increased in dollar amount and as a percent of product sales primarily from the
new store openings during the last quarter of 1996 and the first nine months of
1997, additions to administrative staff and facilities in order to support the
increased level of the Company's operations and, to a lesser extent, increased
medical claims and worker's compensation under the Company's insurance program.
Other income, net, decreased by $183,000 in the third quarter of 1997 compared
to the third quarter of 1996 and by $509,000 for the first nine months of 1997
compared to the first nine months of 1996. These decreases were primarily due to
reduced interest income from short-term investments and increased interest
expense from short-term borrowings.
The Company's estimated provision for income taxes increased from 36.6% of
income before income taxes in the third quarter of 1996 to 37.2% in the third
quarter of 1997 and increased from 37.0% of income before income taxes in the
first nine months of 1996 to 37.2% in the first nine months of 1997. The
increase in the estimated effective income tax rate was primarily due to
increased sales occurring in states with higher income tax rates.
7
<PAGE>
Principally as a result of the foregoing, net income increased from $5.4 million
or 7.7% of product sales in the third quarter of 1996 to $6.6 million or 7.6% of
product sales in the third quarter of 1997 and from $14.5 million or 7.4% of
product sales in the first nine months of 1996 to $17.7 million or 7.4% of
product sales in the first nine months of 1997.
LIQUIDITY AND CAPITAL RESOURCES
Net cash of $14.2 million was provided by operating activities for the first
nine months of 1997 as compared to $7.2 net cash provided by operating
activities for the first nine months of 1996. This increase was principally the
result of increases in net income, accounts payable, depreciation and accrued
expenses partially offset by an increase in accounts receivable and inventory.
These increases are primarily due to the addition of new stores and increased
sales levels in existing and newly opened stores.
Net cash used in investing activities has increased from $7.7 million in 1996 to
$25.6 million in 1997 primarily due to a decrease in net proceeds from the sales
of short-term investments, and to a lesser extent, an increase in purchases of
property and equipment as a result of the Company's accelerated store growth
program.
Cash provided by financing activities has increased from $1.4 million in the
first nine months of 1996 to $11.8 million in the first nine months of 1997. The
increase was primarily due to increased net borrowings under the Company's
credit facilities during the first nine months of 1997.
The Company has available an unsecured line of credit with NationsBank, N.A.
(formerly The Boatmen's National Bank of St. Louis). Under the terms thereof,
the Company may borrow up to $17 million until October 15, 1997. Borrowings
outstanding under the line of credit bear interest at LIBOR plus 0.75% (6.41% as
of September 30, 1997). At September 30, 1997, $8.6 million was outstanding
under the line of credit. On October 16, 1997, this credit facility was replaced
by an agreement allowing the Company to borrow up to $32.5 million until October
15, 2000. Borrowings outstanding under this facility will bear interest at LIBOR
plus a margin ranging from 0.50% to 1.00% based upon certain financial ratios of
the Company.
The Company also has available an unsecured revolving credit facility with
Commerce Bank, N.A. of Springfield, Missouri. Under terms of this agreement, the
Company may borrow up to $15 million upon compliance with various minimum
financial ratios. This credit facility bears interest at LIBOR plus 1.00% (6.66%
at September 30, 1997) and matures on October 31, 1997. At September 30, 1997,
$5.1 million was outstanding under this credit facility. On October 1, 1997 this
credit facility was replaced by an agreement allowing the Company to borrow up
to $32.5 million until September 30, 2000. Borrowings outstanding under this
facility will bear interest at LIBOR plus a margin ranging from 0.50% to 1.00%
based upon certain financial ratios of the Company.
The Company plans to open an additional 10 stores in 1997 (for a net total of
40). Management believes the funds required for such planned expansions will be
provided by the cash expected to be generated from operating activities,
existing cash and short-term investments and the Company's bank credit
facilities described above.
Management believes that the cash expected to be generated from operating
activities, existing cash and short-term investments, existing bank credit
facilities and trade credit will be sufficient to fund both the short and
long-term capital and liquidity needs of the Company for the foreseeable future.
8
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
Not applicable
Item 2. Changes in Securities
- ------------------------------
On July 8, 1997, the Company's Board of Directors declared a two-for-one stock
split in the form of a 100% stock dividend to all shareholders of record as of
the close of business on July 31, 1997, which said stock dividend was paid on
August 31, 1997.
Item 3. Defaults Upon Senior Securities
- ----------------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not applicable
Item 5. Other Information
- --------------------------
On August 20, 1997 Jay Burchfield was appointed to the Board of Directors of the
Company to fill the vacancy created by the resignation of Paul Lederer as of
July 1, 1997. Mr. Burchfield will serve as director through Mr. Lederer's
remaining term ending at the May 1999 Annual Shareholders meeting. Such
resignation was not the result of any disagreements between Mr. Lederer and the
Company on any matter relating to the Company's operations, policies or
practices.
9
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits: See Exhibit Index on page 12 hereof
(b) Reports on Form 8-K: No reports on Form 8-K were filed by
the Registrant during the three months ended September 30,
1997.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
O'REILLY AUTOMOTIVE, INC.
November 14, 1997 /s/ David E. O'Reilly
- ------------------ --------------------------------------------------
Date David E. O'Reilly, President and Chief Executive
Officer
November 14, 1997 /s/ James R. Batten
- ------------------ --------------------------------------------------
Date James R. Batten, Vice-president of Finance/Chief
Financial Officer (Principal Financial Officer)
November 14, 1997 /s/ Chris Stange
- ------------------ --------------------------------------------------
Date Chris Stange, Director of Accounting/Controller
(Principal Accounting Officer)
11
<PAGE>
EXHIBIT INDEX
Number Description Page
- ------ ------------ ----
10.17 Credit Agreement between the Registrant 13
and NationsBank, N.A. dated October 16,
1997, filed herewith.
10.19 Loan Agreement between the Registrant and 44
Commerce Bank, N.A. dated October 1, 1997,
filed herewith.
27.1 Financial Data Schedule, filed herewith. 67
99.1 Certain Risk Factors, filed herewith. 68
12
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement
CREDIT AGREEMENT
Dated as of October 16, 1997
Between
O'REILLY AUTOMOTIVE, INC.
as
Borrower
and
NATIONSBANK, N. A.
as Lender
U.S. $32,500,000
13
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached but
is for convenience of reference.
ARTICLE I
DEFINITIONS
SECTION 1.01. Basic Definitions...............................................1
SECTION 1.02. Additional Definitions..........................................3
ARTICLE II
LOANS
SECTION 2.01. Committed Loans.................................................7
SECTION 2.02. Note............................................................8
SECTION 2.03. Letters of Credit Subfeature....................................8
SECTION 2.04. Repayment of Loans..............................................8
SECTION 2.05. Interest........................................................8
SECTION 2.06. Borrowing Procedure.............................................9
SECTION 2.07. Prepayments, Conversions, and Continuations of Loans............9
SECTION 2.08. Minimum Amounts................................................10
SECTION 2.09. Certain Notices................................................10
SECTION 2.10. Use of Proceeds................................................11
SECTION 2.11. Fees...........................................................11
SECTION 2.12. Computations...................................................11
SECTION 2.13. Adjustment of Commitment.......................................11
SECTION 2.14. Payments.......................................................12
SECTION 2.15. Mandatory Prepayment...........................................12
ARTICLE III
CHANGE IN CIRCUMSTANCES
SECTION 3.01. Increased Cost and Reduced Return..............................12
SECTION 3.02. Limitation on Types of Loans...................................13
SECTION 3.03. Illegality.....................................................13
SECTION 3.04. Compensation...................................................14
SECTION 3.05. Taxes..........................................................14
ARTICLE IV
CONDITIONS
SECTION 4.01. Initial Loan...................................................15
SECTION 4.02. Each Loan......................................................15
SECTION 4.03. Issuance of Letters of Credit..................................16
14
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
ARTICLE V
REPRESENTATION AND WARRANTIES
SECTION 5.01. Existence......................................................17
SECTION 5.02. Financial Statements...........................................17
SECTION 5.03. Authorization; No Breach.......................................17
SECTION 5.04. Litigation.....................................................17
SECTION 5.05. Enforceability.................................................17
SECTION 5.06. Approvals......................................................17
SECTION 5.07. Disclosure.....................................................17
ARTICLE VI
COVENANTS
SECTION 6.01. Information....................................................18
SECTION 6.02. Obligations....................................................19
SECTION 6.03. Financial Covenants............................................19
SECTION 6.04. Additional Covenants...........................................20
ARTICLE VII
DEFAULT
SECTION 7.01. Events of Default..............................................21
SECTION 7.02. Remedies.......................................................22
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Expenses.......................................................23
SECTION 8.02. Indemnification................................................23
15
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
SECTION 8.03. Right of Set-off...............................................23
SECTION 8.04. No Waiver; Cumulative Remedies.................................24
SECTION 8.05. Successors and Assigns.........................................24
SECTION 8.06. Amendments.....................................................24
SECTION 8.07. Notices........................................................24
SECTION 8.08. Counterparts...................................................25
SECTION 8.09. Severability...................................................25
SECTION 8.10. Controlling Agreement..........................................25
SECTION 8.11. Survival.......................................................25
SECTION 8.12. Governing Law..................................................25
SECTION 8.13. Accounting Terminology.........................................26
SECTION 8.14. WAIVER OF JURY TRIAL...........................................26
SECTION 8.15. ENTIRE AGREEMENT...............................................26
16
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
CREDIT AGREEMENT
CREDIT AGREEMENT (the "Agreement") dated as of October 16, 1997,
between O'Reilly Automotive, Inc., a Missouri corporation (the "Borrower"), and
NATIONSBANK N.A., a national banking association (the "Bank").
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Basic Definitions. As used in this Agreement, the
following terms have the following meanings:
"Applicable Margin" means:
(i) with respect to Base Rate Loans, zero percent (0%);
(ii) with respect to Eurodollar Loans,
0.50% when the ratio of Total Funded Debt (as
hereinafter defined to EBITDA (as hereinafter defined)
is less than 1.0, to 1.0,
0.75% when the ratio of Total Funded Debt to EBITDA is
less than 2.0, but equal to or greater than 1.0, to 1.0,
1.00% when the ratio of Total Funded Debt to EBITDA is
less than 2.5, but equal to or greater than 2.0, to 1.0,
Notwithstanding anything to the contrary herein, the
Applicable Margin with respect to Eurodollar Loans shall
immediately and automatically become 1.00% during such
times as the Borrower shall not have submitted to the
Bank the financial information required by Section 6.01.
17
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
(iii) with respect to Overnight Loans,
0.625% when the ratio of Total Funded Debt to EBITDA is
less than 1.0, to 1.0,
0.875% when the ratio of Total Funded Debt to EBITDA is
less than 2.0, but equal to or greater than 1.0, to 1.0,
1.125% when the ratio of Total Funded Debt to EBITDA is
less than 2.5, but equal to or greater than 2.0, to 1.0.
Adjustments to be made to the Applicable Margin based on the ratios
described in clauses (ii) and (iii) immediately above shall be made on
the second Business Day following of the Bank's receipt of the
information required to be submitted by the Borrower to the Bank in
Sections 6.01(a) and 6.01(b). Such adjustments shall apply to all then
outstanding balances under this Agreement as well as to outstanding
balances under future Loans until the next adjustment is made.
"Commitment" means the obligation of the Bank to make
Committed Loans and issue Letters of Credit in an aggregate principal
amount at any time outstanding up to but not exceeding $32,500,000.00,
as the same may be adjusted upward or downward from time to time
pursuant to this Agreement (but never to exceed $32,500,000.00).
"Commitment Fees" means a per annum fee payable on each
Quarterly Date and on the Termination Date (calculated on the basis of
the actual number of days elapsed in a hypothetical year of 360 days)
equal to:
0.125% of the daily average unused (available)
Commitment when the ratio of Total Funded Debt to EBITDA
is less than 1.0, to 1.0;
0.15% of the daily average unused (available) commitment
when the ratio of Total Funded Debt to EBITDA is less
than 2.0, but equal to or greater than 1.0, to 1.0; and
18
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
0.1875% of the daily average unused (available)
Commitment and 0.125% of the average daily unavailable
Commitment when the ratio of total funded debt to EBITDA
is equal to or greater than 2.0 (based on the face
amount of $32,500,000 regardless of the face Commitment
amount which may be unavailable pursuant to a reduction
as set forth herein).
"Fees" means Commitment Fees and Letter of Credit Fees.
"Letter of Credit Fees" means a per annum fee payable on each
Quarterly Date and on the Termination Date equal to the outstanding
face amount of all Letters of Credit issued by the Bank for the account
of Borrower multiplied by the Applicable Margin for Eurodollar Loans
plus a fronting fee equal to 0.10% of the face amount of all such
Letters of Credit.
"Principal Office" means the office of the bank located at
800 Market Street, 12th Floor, St. Louis, Missouri 63101,
Attention: Juan Cazorla.
"Termination Date" means the date three years from the date of
this Agreement.
SECTION 1.02. Additional Definitions. As used in this Agreement,
the following terms have the following meanings.
"Adjusted Eurodollar Rate" means, for any Eurodollar Loan for
any Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined by the Bank to be
equal to the quotient obtained by dividing (a) the Eurodollar Rate for
such Eurodollar Loan for such Interest Period by (b) 1 minus the
Reserve Requirement for such Eurodollar Loan for such Interest Period.
"Base Rate" means, for any day, the rate per annum equal to
the higher of (a) the Federal Funds Rate for such day plus one-half of
one percent (.5%) and (b) the Prime Rate for such day. Any change in
the Base Rate due to a change in the Prime Rate or the Federal Funds
Rate shall be effective on the effective date of such change in the
Prime Rate or Federal Funds Rate.
"Base Rate Loans" means Loans that bear interest at rates
based upon the Base Rate.
"Business Day" means any day except a Saturday, Sunday, or
other day on which banks in the State where the Principal Office is
located are authorized by law to close and, if the applicable Business
Day relates to Eurodollar Loans,
19
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
on which commercial banks in London are open for international business
(including dealings in Dollar deposits in the London interbank market).
"Committed Loans" has the meaning specified in Section 2.01.
"Continue", "Continuation", and "Continued" shall refer to a
continuation pursuant to Section 2.07 of a Fixed Rate Loan as a Loan of
the same Type from one Interest Period to the next Interest Period.
"Convert", "Conversion", and "Converted" shall refer to the
conversion pursuant to Section 2.07 or Article III of one Type of Loan
into another Type of Loan.
"Debtor Relief Laws" means the Bankruptcy Code of the United
States of America and all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization, suspension of payments, or similar debtor
relief laws from time to time in effect affecting the rights of
creditors generally.
"Default" means an Event of Default or the occurrence of an
event or condition that with notice or lapse of time or both would
become an Event of Default.
"Default Rate" means, with respect to any principal of any
Loan or any other amount payable by the Borrower under this Agreement
or any other Loan Document that is not paid when due (whether at stated
maturity, by acceleration, or otherwise), a rate per annum during the
period from and including the due date to but excluding the date on
which such amount is paid in full equal to two percent (2%) plus the
Base Rate as in effect from time to time plus the Applicable Margin for
Base Rate Loans (provided that, if the amount in default is principal
of a Fixed Rate Loan and the due date thereof is a day other than the
last day of the Interest Period therefor, the "Default Rate" for such
principal shall be, for the period from and including the due date and
to but excluding the last day of the Interest Period therefor, two
percent (2%) plus the interest rate for such Loan as provided in
Section 2.05(b), as the case may be, and, thereafter, the rate provided
for above in this definition).
"Dollars" and "$" mean lawful money of the United States of
America.
"EBITDA" shall have the meaning given it in Section 6.03(a).
"Eurodollar Loans" means Loans that bear interest at rates
based upon the Adjusted Eurodollar Rate.
"Event of Default" has the meaning specified in Section 7.01.
20
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
"Eurodollar Rate" means, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum appearing on Telerate Page
3750 (or any successor page) as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period. If for any reason such rate is not
available, the term "Eurodollar Rate" shall mean, for any Eurodollar
Loan for any Interest Period therefor, the rate per annum appearing on
Reuters Screen LIBO Page as the London interbank offered rate for
deposits in Dollars at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period; provided, however, if more than one
rate is specified on Reuters Screen LIB Page, the applicable rate shall
be the arithmetic mean of all such rates.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day; provided
that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and
(b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate
charged to the Bank on such day on such transactions as determined by
the Bank.
"Financial Statements" means the financial statements of the
Borrower and the Subsidiaries most recently furnished to the Bank prior
to the date of this Agreement.
"Fixed Charges" shall have the meaning given it in Section
6.03(b).
"Governmental Authority" means any nation or government, any
state or political subdivision thereof, any central bank (or similar
monetary or regulatory authority), and any entity exercising executive,
legislative, judicial, regulatory, or administrative functions of or
pertaining to government.
"Interest Period" means with respect to any Eurodollar Loan,
each period commencing on the date such Loan is made or Converted from
a Loan of another Type or the last day of the next preceding Interest
Period with respect to such Loan, and ending on the numerically
corresponding day in the first, second, third, or sixth calendar month
thereafter, as the Borrower may select as provided in Section 2.09,
except that each such Interest Period which commences on the last
Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Business Day of the appropriate subsequent
calendar month.
21
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
Notwithstanding the foregoing: (a) each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the
next succeeding Business Day (or if such succeeding Business Day falls
in the next succeeding calendar month, on the next preceding Business
Day); (b) any Interest Period which would otherwise extend beyond
the Termination Date shall end on the Termination Date; and (c) no
Interest Period for any Eurodollar Loan shall have a duration of
less than 1 month and, if the Interest Period for any Eurodollar Loan
would otherwise be a shorter period, such Loan shall not be available
hereunder.
"Letters of Credit" shall mean all outstanding letters of
credit issued by the Bank for the account of the Borrower which have
not been fully drawn upon or which have not expired.
"Loan Documents" means this Agreement, the Note, and all other
documents, instruments, and agreements executed or delivered pursuant
to or in connection with this Agreement, including, without limitation,
Letters of Credit, as the same may be amended, modified, renewed,
extended, or supplemented.
"Loan Party" means the Borrower or any Person that guarantees
or secures any or all of the Borrower's obligations under the Loan
Documents.
"Loans" means Committed Loans.
"Material Adverse Effect" means a material adverse effect on
(a) the properties, prospects, business, operations, financial
condition, liabilities, or capitalization of the Borrower and the
Subsidiaries taken as a whole, (b) the ability of any Loan Party to pay
and perform its obligations under any Loan Document, or (c) the
validity or enforceability of any Loan Document or the rights and
remedies of the Bank thereunder.
"Note" has the meaning specified in Section 2.02.
"Overnight Rate Loans" means Loans that bear interest at rates
based on the Over-night Rate. (The Overnight Rate is a daily variable
rate.)
"Overnight Rate Loan Maturity Date" means the date which is
the third day from (and including) the day in which any Overnight Rate
Loan is made.
"Overnight Rate" means, for any Overnight Loan, the per annum
Federal Funds Rate for any given day.
"Person" means any individual, corporation, company, joint
venture, association, partnership, trust, unincorporated organization,
Governmental Authority, or other entity.
22
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
"Prime Rate" means the per annum rate of interest established
from time to time by the Bank as its prime rate, which rate may not be
the lowest rate of interest charged by the Bank to its customers.
"Quarterly Date" means the last day of each March, June,
September, and December of each year, the first of which shall be the
first such day after the date of this Agreement.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Reserve Requirement" means, at any time, the maximum rate at
which reserves (including any marginal, special, supplemental, or
emergency reserves) are required to be maintained under regulations
issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) by member banks of the Federal
Reserve System in New York City with deposits exceeding one billion
Dollars against "Eurocurrency liabilities" (as such term is used in
Regulation D). Without limiting the effect of the foregoing, the
Reserve Requirement shall reflect any other reserves required to be
maintained by such member banks with respect to (i) any category of
liabilities which includes deposits by reference to which the Adjusted
Eurodollar Rate is to be determined, or (ii) any category of extensions
of credit or other assets which include Eurodollar Loans. The Adjusted
Eurodollar Rate shall be adjusted automatically on and as of the
effective date of any change in the Reserve Requirement.
"Subsidiary" means, any corporation or other entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other Persons performing
similar functions are at the time directly or indirectly owned by the
Borrower.
"Total Funded Debt" shall have the meaning given it in Section
6.03(a).
"Type" means any type of Loan (i.e., Base Rate Loan,
Eurodollar Loan or Overnight Rate Loan).
ARTICLE II
LOANS
SECTION 2.01. Committed Loans. Subject to the terms and conditions of
this Agreement, the Bank agrees to make one or more loans ("Committed Loans") to
the Borrower from time to time from and including the date hereof to but
excluding the Termination Date, provided that the aggregate principal amount of
the Loans and Letters of Credit at any time outstanding shall not exceed the
amount of the Commitment, as the same may be adjusted from time to time pursuant
to the terms
23
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
hereof. Subject to the foregoing limitations, and the other terms and
provisions of this Agreement, the Borrower may borrow, repay, and reborrow
hereunder the amount of the Commitment by means of Base Rate Loans, Eurodollar
Loans, and Overnight Rate Loans as well as by means of Letters of Credit.
SECTION 2.02. Note. The Loans made by the Bank shall be evidenced by a
single promissory note of the Borrower in substantially the form of Exhibit A,
dated the date hereof, payable to the order of the Bank in a principal amount
equal to the Commitment as originally in effect and otherwise duly completed (as
from time to time amended, modified, renewed, or extended, the "Note").
SECTION 2.03. Letters of Credit Sublimit. During the term of this
Agreement, the Borrower may request that the Bank issue, from time to time,
Letters of Credit for the account of the Borrower, which the Bank shall issue
subject to the terms of this Agreement and the following conditions:
(a) The maximum face amount of all outstanding Letters of
Credit shall not at any time exceed $5,000,000.00 and the outstanding
amount of all Loans and Letters of Credit shall not exceed the
Commitment, as the same may be adjusted from time to time pursuant to
the terms hereof;
(b) The form and content of all Letters of Credit shall be
acceptable to the Bank;
(c) The Commitment shall be reduced by the face amount of all
outstanding Letters of Credit;
(d) Letters of Credit shall not have an expiration date later
than the Termination Date;
(e) The repayment terms, interest rate, expiration date and
other terms of the Letters of Credit shall be governed by each such
Letter of Credit; and
(f) There shall be no Event of Default existing (or which
would exist with the lapse of time) at the time of the Borrower's
request for the issuance of any such Letter of Credit.
SECTION 2.04. Repayment of Loans. Except as otherwise provided in
this Agreement, the Borrower shall pay to the Bank the outstanding principal
amount of the Loans on the Termination Date.
SECTION 2.05. Interest. The Borrower shall pay to the Bank interest on
the unpaid principal amount of each Loan for the period commencing on the date
of such Loan to but excluding the date such Loan shall be paid in full, at the
following rates per annum:
24
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
(a) during the periods such Loan is a Base Rate Loan, the Base
Rate plus the Applicable Margin;
(b) during the periods such Loan is a Eurodollar Loan, the Adjusted
Eurodollar Rate plus the Applicable Margin; and
(c) during the periods such Loan is an Overnight Rate Loan, the
Overnight Rate plus the Applicable Margin.
Notwithstanding the foregoing, the Borrower shall pay to the Bank interest at
the Default Rate on any principal of any Loan and (to the fullest extent
permitted by law) on any other amount payable by the Borrower under this
Agreement or any other Loan Document which is not paid in full when due (whether
at stated maturity, by acceleration, or otherwise), for the period from and
including the due date thereof to but excluding the date the same is paid in
full. Accrued interest on the Loans shall be due and payable as follows: (i) in
the case of Base Rate Loans, on each Quarterly Date; (ii) in the case of each
Eurodollar Loan, on the last day of the Interest Period with respect thereto
and, in the case of an Interest Period greater than three months, at three-month
intervals after the first day of such Interest Period; (iii) in the case of each
Overnight Rate Loan on the applicable Overnight Rate Loan Maturity Date; (iv)
upon the payment or prepayment of any Loan or the Conversion of any Loan to a
Loan of another Type (but only on the principal amount so paid, prepaid, or
Converted); and (v) on the Termination Date; provided that interest payable at
the Default Rate shall be payable from time to time on demand.
The Borrower acknowledges and agrees that interest rates related to Base Rate
Loans and Overnight Rate Loans are variable and that interest rates related to
Eurodollar Loans are fixed rates for the duration of the applicable Interest
Periods.
SECTION 2.06. Borrowing Procedure. The Borrower shall give the Bank
notice of each borrowing hereunder in accordance with Section 2.09. Not later
than 2:00 p.m. (at the Principal Office) on the date specified for each
borrowing hereunder, the Bank will make available the amount of the Loan to be
made by it on such date to the Borrower by depositing the same, in immediately
available funds, in an account of the Borrower (designated by the Borrower)
maintained with the Bank at the Principal Office or as otherwise directed by the
Borrower.
SECTION 2.07. Prepayments, Conversions, and Continuations of Loans.
Subject to Section 2.08, the Borrower shall have the right from time to time to
prepay the Loans, or to Convert all or part of a Loan of one Type into a Loan of
another Type or to Eurodollar Loans of one Type as Eurodollar Loans of the same
Type (with adjustments to the interest rate as otherwise provided herein),
provided that: (a) the Borrower shall give the Bank notice of each such
prepayment, Conversion, or Continuation as provided in Section 2.09, (b)
Eurodollar Loans may only be Converted on the last day of the Interest Period,
(c) the Borrower may not Continue an Overnight Rate Loan or Convert a Loan into
a Overnight Rate Loan, (d) notwithstanding
25
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
anything in this Agreement to the contrary, each Overnight Rate Loan either
must be paid in full by the Borrower on or before each such Overnight Rate Loan
Maturity Date, or if not so prepaid, each Overnight Rate Loan shall
automatically convert to a Base Rate Loan on the day after the Overnight Rate
Loan Maturity Date, and (e) except for Conversions into Base Rate Loans, no
Conversions or Continuations shall be made while an Event of Default has
occurred and is continuing.
SECTION 2.08. Minimum Amounts. Except for Conversions and prepayments
pursuant to Section 2.15 and Article III, each borrowing, each Conversion, and
each prepayment of principal of the Loans shall be in an amount at least equal
to $500,000 and incremental multiples thereof. Anything in this Agreement to the
contrary notwithstanding, the aggregate principal amount of Eurodollar Loans of
the same Type having the same Interest Period shall be at least equal to
$500,000.
SECTION 2.09. Certain Notices. Notices by the Borrower to the Bank of
adjustments of the Commitment, of borrowings, Conversions, Continuations and
optional prepayments of Loans and of the duration of Interest Periods shall be
irrevocable and shall be effective only if received by the Bank not later than
11:00 a.m. (local time at the Principal Office) on the number of Business Days
prior to the date of the relevant adjustment, borrowing, Conversion,
Continuation, or prepayment or the first day of such Interest Period specified
below:
Number of Business
Notice Days Prior
-------- ------------
Commitment adjustments 3
Borrowing or prepayment of,
or Conversions into, Base
Rate Loans same day
Borrowing or prepayment of,
Conversions into,
Continuations as, or
duration of Interest Periods
for, Eurodollar Loans 3
Borrowing or prepayment of Overnight
Rate Loans same day
Each notice of adjustment of the Commitment amount (as provided in Section 2.13)
shall specify the amount of the Commitment to be adjusted upward or downward.
Each such notice of borrowing, Conversion, Continuation, or optional prepayment
shall
26
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
specify (a) the amount and Type of the Loan to be borrowed, Converted,
Continued, or prepaid (and, in the case of a Conversion, the Type of Loan to
result from such Conversion), (b) the date of borrowing, Conversion,
Continuation, or prepayment (which shall be a Business Day), and (c) in the case
of a borrowing of a Eurodollar Loan, a Conversion, or a Continuation, the
duration of the Interest Period. In the event the Borrower fails to select the
Type of Loan, or the duration of any Interest Period for any Eurodollar Loan,
within the time period and otherwise as provided in this Section 2.09, such Loan
(if outstanding as a Eurodollar Loan) will be automatically Converted into a
Base Rate Loan on the last day of the preceding Interest Period for such Loan or
(if outstanding as a Base Rate Loan) will remain as, or (if not then
outstanding) will be made as, a Base Rate Loan.
SECTION 2.10. Use of Proceeds. The proceeds of the Loans shall be used
by the Borrower for any lawful corporate purposes, including working capital in
the ordinary course of business and capital expenditures related to business
expansion. The Borrower will not, directly or indirectly, use any part of such
proceeds for the purpose of purchasing or carrying any margin stock within the
meaning of Regulations G, U, T, or X of the Board of Governors of the Federal
Reserve System.
SECTION 2.11. Fees. The Borrower agrees to pay to the Bank the Fees as
specified herein.
SECTION 2.12. Computations. Interest and Fees payable by the Borrower
hereunder and under the other Loan Documents shall be computed on the basis of a
year of 360 days and the actual number of days elapsed (including the first day
but excluding the last day) occurring in the period for which payable.
SECTION 2.13. Adjustment of Commitment. Not more than four (4) times
each calendar year, the Borrower shall have the right to reduce the unused
portion of the Commitment effective on the third (3rd) Business Day following
timely receipt by the Bank of the notice provided in Section 2.09, provided
that: (a) the Borrower shall give notice of each such reduction as provided in
Section 2.09; (b) each partial reduction shall be in an aggregate amount at
least equal to $1,000,000; and (c) the reduction(s) shall not result in the
Commitment being less than $17,500,000 at any time. If the Commitment has been
reduced as set forth above so that the Commitment is less than $32,500,000, the
Borrower shall have the right to increase the amount of the Commitment, each
such increase to be effective on the third (3rd) Business Day following receipt
by the Bank of the notice provided in Section 2.09, provided that: (a) there
shall not exist an Event of Default or any state of facts which with the lapse
of time would lead to an Event of Default; (b) the Borrower shall give notice of
each such increase as required by Section 2.09; (c) each partial increase shall
be in an aggregate amount at least equal to $1,000,000; (d) the maximum
Commitment hereunder shall not exceed $32,500,000 at any time; and (e) the
Borrower shall have the right to increase the Commitment not more than four (4)
times each calendar year.
27
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
SECTION 2.14. Payments. All payments of principal, interest, and other
amounts to be made by the Borrower under this Agreement and other Loan Documents
shall be made to the Bank at the Principal Office (or at such other office as
may be designated by the Bank from time to time) in Dollars and in immediately
available funds, without setoff, deduction, or counterclaim. Whenever any
payment under this Agreement or any other Loan Document shall be stated to be
due on a day that is not a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time in such case shall be
included in the computation of interest and Fees, as applicable and as the case
may be.
SECTION 2.15. Mandatory Prepayment. If at any time the outstanding
principal amount of the Loans and Letters of Credit exceed the Commitment, as
the same may be adjusted from time to time pursuant to the terms of this
Agreement, the Borrower shall immediately make a prepayment of the Loans in an
amount equal to the excess.
ARTICLE III
CHANGE IN CIRCUMSTANCES
SECTION 3.01. Increased Cost and Reduced Return.
(a) If, after the date hereof, the adoption of any applicable law,
rule, or regulation, or any change in any applicable law, rule, or regulation,
or any change in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or administration
thereof, or compliance by the Bank with any request or directive (whether or not
having the force of law) of any such Governmental Authority:
(i) shall subject the Bank to any tax, duty, or other
charge with respect to any Eurodollar Loans, the Note, or its
obligation to make Eurodollar Loans, or change the basis of taxation of
any amounts payable to the Bank under this Agreement or the Note in
respect of a Eurodollar Loans (other than taxes imposed on the overall
net income of the Bank by the jurisdiction in which the Bank has its
Principal Office);
(ii) shall impose or modify any reserve, special deposit,
or similar requirement (other than the Reserve Requirement utilized in
the determination of the Adjusted Eurodollar Rate) or any capital
adequacy requirement relating to any extensions of credit or other
assets of, or any deposits with or other liabilities or commitments of,
the Bank (including the Commitment); or
(iii) shall impose on the Bank or on the United States
market for certificates of deposit or the London interbank market any
other condition
28
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
affecting this Agreement or the Note or any of such extensions of
credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to the Bank of
making, Converting into, Continuing, or maintaining any Eurodollar Loans or to
reduce any sum received or receivable by the Bank under this Agreement or the
Note with respect to any Eurodollar Loans, or would have the effect of reducing
the rate of return on the capital of the Bank or any corporation controlling the
Bank as a consequence of the Bank's obligations hereunder to a level below that
which the Bank or such corporation could have achieved but for such adoption
change, request, or directive (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by the Bank to be material,
then the Borrower shall pay to the Bank on demand such amount or amounts as will
compensate the Bank for such increased cost or reduction.
(b) A certificate of the Bank claiming compensation under this Section
and setting forth the additional amount or amounts to be paid to it hereunder
shall be conclusive in the absence of clearly demonstrable error. In determining
such amount, the Bank may use any reasonable averaging and attribution methods.
SECTION 3.02. Limitation on Types of Loans. If on or prior to the
first day of any Interest Period for any Eurodollar Loan:
(a) the Bank determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate, for such Interest Period; or
(b) the Bank determines (which determination shall be
conclusive) that the Adjusted Eurodollar Rate will not adequately and
fairly reflect the cost to the Bank of funding Eurodollar Loans for
such Interest Period;
then the Bank shall give the Borrower prompt notice thereof specifying the
relevant Type of Loans and the relevant amounts or periods, and so long as such
condition remains in effect, the Bank shall be under no obligation to make
additional Loans of such Type, Continue Loans of such Type, or to Convert Loans
of any other Type into Loans of such Type and the Borrower shall, on the last
day(s) of the then current Interest Period(s) for the outstanding Loans of the
affected Type, either prepay such Loans or Convert such Loans into another Type
of Loan in accordance with the terms of this Agreement.
SECTION 3.03. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for the Bank to make, maintain,
or fund Eurodollar Loans hereunder, then the Bank shall promptly notify the
Borrower thereof and the Bank's obligation to make or Continue Eurodollar Loans
and to Convert other Types of Loans into Eurodollar Loans shall be suspended
until such time as the Bank may again make, maintain, and fund Eurodollar Loans
and the Borrower
29
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
shall, on the last day of the Interest Period for each outstanding Eurodollar
Loan (or earlier, if required by law), either prepay such Loans or Convert such
Loans into Base Rate Loans in accordance with the terms of this Agreement.
SECTION 3.04. Compensation. Upon the request of the Bank, the Borrower
shall pay to the Bank such amount or amounts as shall be sufficient (in the
reasonable opinion of the Bank) to compensate it for any loss, cost, or expense
incurred by it as a result of:
(a) any payment, prepayment or Conversion of a Eurodollar Loan
for any reason (including, without limitation, the acceleration of the
Loans pursuant to Section 7.02) on a date other than the last day of an
Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including,
without limitation, the failure of any conditions precedent specified
in Article IV to be satisfied) to borrow, Convert, Continue, or prepay
a Eurodollar Loan on the date for such borrowing, Conversion,
Continuation, or prepayment specified in the relevant notice of
borrowing, prepayment, Continuation, or Conversion under this
Agreement.
Without limiting the effect of the preceding sentence, such compensation shall
include any loss, cost, or expense incurred in obtaining, liquidating, or
employing deposits from third parties (including loss of margin).
SECTION 3.05. Taxes. (a) Any and all payments by the Borrower to or for
the account of the Bank hereunder or under any other Loan Document shall be made
free and clear of and without deduction for any and all present or future taxes,
duties, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of the Bank, taxes
imposed on its income, and franchise taxes imposed on it, by the jurisdiction
under the laws of which the Bank is organized or any political subdivision
thereof (all such non-excluded taxes, duties, levies, imposts, deductions,
charges, withholdings, and liabilities 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 any Loan Document to the Bank,
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 3.05) the Bank receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower shall make
such deductions, (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law, and (iv) the Borrower shall furnish to the Bank, at its address referred to
in Section 8.06, the original or a certified copy of a receipt evidencing
payment thereof.
(b) In addition, the Borrower agrees to pay any and all present or
future stamp or documentary taxes and any other excise or property taxes or
charges or
30
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
similar levies which arise from any payment made hereunder or under any other
Loan Document or from the execution or delivery of, or otherwise with respect
to, this Agreement or any other Loan Document (hereinafter referred to as "Other
Taxes").
(c) The Borrower agrees to indemnify the Bank for the full amount of
Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed or asserted by any jurisdiction on amounts payable under this Section
3.05) paid by the Bank and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto.
ARTICLE IV
CONDITIONS
SECTION 4.01. Initial Loan. The obligation of the Bank to make the
initial Loan hereunder is subject to the satisfaction of the following
conditions:
(a) receipt by the Bank of the duly executed Note, complying
with the provisions of Section 2.02, and such other Loan Documents as
the Bank may reasonably request, including, without limitation, any
guaranties requested by the Bank pursuant to the commitment letter
dated September 14, 1997;
(b) receipt by the Bank of an opinion of counsel for the Loan
Parties, substantially in the form of Exhibit B and covering such
additional matters as the Bank may reasonably request; and
(c) receipt by the Bank of all documents that the Bank may
request relating to the existence of the Loan Parties, the
authorization for and the validity of the Loan Documents, and any other
matters relevant thereto, all in form and substance satisfactory to the
Bank.
SECTION 4.02. Each Loan. The obligation of the Bank to make any Loan
(including the initial Loan) is subject to the satisfaction of the following
conditions precedent:
(a) receipt by the Bank of a notice of borrowing in accordance
with Section 2.06;
(b) the fact that immediately after the making of such Loan,
the aggregate outstanding principal amount of the Loans plus Letters of
Credit will not exceed the amount of the Commitment, as the same may
have been adjusted pursuant to the terms of this Agreement;
31
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
(c) the fact that, immediately before and after such Loan, no
Default (including, without limitation, a Material Adverse Change in
the financial condition of the Borrower) shall have occurred and be
continuing; and
(d) the fact that the representations and warranties of the
Borrower contained in this Agreement and the other Loan Documents shall
be true and correct on and as of the date of such Loan.
SECTION 4.03. Issuance of Letters of Credit. The obligation of the Bank
to issue each Letter of Credit is subject to the following conditions:
(a) receipt by the Bank of a duly executed application for
such Letter of Credit on the Bank's standard form as well as those
items specified in Section 4.01 above;
(b) the fact that after issuing such Letter of Credit, the
aggregate outstanding principal amount of the Loans plus the Letters of
Credit will not exceed the amount of the Commitment, as the same may be
adjusted from time to time pursuant to the terms hereof;
(c) the fact that after issuing such Letter of Credit the
outstanding amounts of all Letters of Credit will not exceed
$5,000,000;
(d) the fact that, immediately before and after issuing such
Letter of Credit, no Default (including, without limitation, any
Material Adverse Change in the financial condition of the Borrower)
shall have occurred and be continuing; and
(e) the fact that the warranties and representations of the
Borrower contained in this Agreement and the other Loan Documents
(including the application for such Letter of Credit) shall be true and
correct as of the date of the issuance of the Letter of Credit.
Each borrowing, hereunder, whether in the form of a Loan or a Letter of Credit,
shall be deemed to be a representation and warranty by the Borrower on the date
of such borrowing that the conditions precedent specified in clauses (b), (c),
and (d) of Section 4.02 and in clauses (b), (c), (d) and (e) of Section 4.03, as
applicable, have been satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, the Borrower, as of
the date of this Agreement and as of the date of each Loan made or Letter of
Credit issued hereunder, represents and warrants to the Bank that:
32
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
SECTION 5.01. Existence. The Borrower and each Subsidiary (a) is duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its organization; and (b) has the requisite power and authority
and legal right to own its assets and carry on its business as now being or as
proposed to be conducted. The Borrower has the power, authority, and legal right
to execute, deliver, and perform its obligations under the Loan Documents.
SECTION 5.02. Financial Statements. The Financial Statements are
complete and correct, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis, and fairly and accurately
present the financial condition of the Borrower and the Subsidiaries as of the
respective dates indicated therein and the results of operations for the
respective periods indicated therein. Since the effective date of the Financial
Statements, no event or condition has occurred that could have a Material
Adverse Effect.
SECTION 5.03. Authorization; No Breach. The execution, delivery, and
performance by the Borrower of the Loan Documents to which it is a party and
compliance with the terms and provisions thereof have been duly authorized by
all requisite action on the part of the Borrower and do not and will not (a)
violate or conflict with, or result in a breach of, or require any consent under
(i) the articles of incorporation, bylaws, or other organizational documents of
the Borrower or any of the Subsidiaries, (ii) any applicable law, rule, or
regulation or any order, writ, injunction, or decree of any Governmental
Authority or arbitrator, or (iii) any agreement or instrument to which the
Borrower or any of the Subsidiaries is a party or by which any of them or any of
their property is bound or subject, or (b) constitute a default under any such
agreement or instrument.
SECTION 5.04. Litigation. There is no action, suit, investigation, or
proceeding before or by any Governmental Authority or arbitrator pending, or to
the knowledge of the Borrower, threatened against or affecting the Borrower or
any Subsidiary, that could, if adversely determined, have a Material Adverse
Effect.
SECTION 5.05. Enforceability. This Agreement constitutes, and the other
Loan Documents when executed and delivered by the Borrower shall constitute, the
legal, valid, and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms, except as limited by
applicable Debtor Relief Laws and general principles of equity.
SECTION 5.06. Approvals. No authorization, approval, or consent of, and
no filing or registration with, any Governmental Authority or third party is or
will be necessary for the execution, delivery, or performance by the Borrower of
any of the Loan Documents to which it is a party or for the validity or
enforceability thereof.
SECTION 5.07. Disclosure. No statement, information, report,
representation, or warranty made by the Borrower in any Loan Document or
furnished to the Bank in connection with any Loan Document contains any untrue
statement of a material fact
33
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
or omits to state any material fact necessary to make the statements herein or
therein not misleading.
ARTICLE VI
COVENANTS
The Borrower agrees that, so long as the Bank has any Commitment
hereunder or any amount payable under the Note remains unpaid or any Letter of
Credit remains outstanding:
SECTION 6.01. Information. The Borrower shall deliver to the Bank:
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrower a consolidated balance
sheet of the Borrower and the Subsidiaries as of the end of such fiscal
year and the related consolidated statements of income and cash flows
for such fiscal year, setting forth in each case in comparative form
the figures for the previous fiscal year, all prepared in accordance
with generally accepted accounting principles applied on a consistent
basis and certified by independent public accountants of nationally
recognized standing, such information to be accompanied by a Compliance
Certificate of the Borrower's chief financial officer as described
below;
(b) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the
Borrower a consolidated balance sheet of the Borrower and the
Subsidiaries as of the end of such quarter and the related consolidated
statements of income and cash flows for such quarter and for the
portion of the Borrower's fiscal year ended at the end of such quarter,
setting forth in each case in comparative form the figures for the
corresponding quarter and the corresponding portion of the Borrower's
previous fiscal year, all in reasonable detail and duly certified
(subject to normal year-end adjustments) by the chief financial officer
of the Borrower as having been prepared in accordance with generally
accepted accounting principles applied on a consistent basis, such
information to be accompanied by a Compliance Certificate of the
Borrower's chief financial officer as described below;
(c) within three (3) days after any officer of the Borrower
obtains knowledge of any Default, a certificate of the chief financial
officer of the Borrower setting forth the details thereof and any
action that the Borrower is taking or proposes to take with respect
thereto; and
(d) from time to time any additional information regarding the
financial condition or business of the Borrower and the Subsidiaries as
the Bank may reasonably request.
34
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
Each Compliance Certificate described above in this Section shall be in the form
of Exhibit C attached hereto, shall contain detailed calculations of the
financial measurements referred to in Section 6.03 for the relevant periods, and
shall include statements by the signing officer to the effect that, except as
explained in reasonable detail in such Compliance Certificate, (i) the attached
financial information is complete and correct in all material respects (subject,
in the case of financial statements other than annual, to normal year-end audit
adjustments) and have been prepared in accordance with generally accepted
accounting principles applied consistently throughout the periods covered
thereby and with prior periods (except as disclosed therein), (ii) all
representations and warranties contained in this Agreement are true and correct
as of the date such certification is made, and (iii) there is no existing Event
of Default. If any Compliance Certificate discloses that a representation or
warranty is not true and correct, or that there is an existing Event of Default,
such Compliance Certificate shall state the action the Borrower has taken or
proposes to take with respect thereto.
SECTION 6.02. Obligations. The Borrower shall, and shall cause each of
the Subsidiaries to:
(a) preserve and maintain all of its rights, privileges,
and franchises necessary or desirable in the normal conduct of its
business;
(b) comply with the requirements of all applicable laws,
rules, regulations, and orders of Governmental Authorities;
(c) pay and discharge when due all taxes, assessments, and
governmental charges or levies imposed on it or on its income or
profits or any of its property, except for any such tax, assessment,
charge, or levy the payment of which is being contested in good faith
and by proper proceedings and against which adequate reserves are being
maintained;
(d) maintain all of its properties owned or used in its
business in good working order and condition ordinary wear and tear
excepted;
(e) permit representatives of the Bank, during normal business
hours, to examine, copy, and make extracts from its books and records,
to inspect its properties, and to discuss its business and affairs with
its officers, directors, and accountants; and
(f) maintain insurance in such amounts, with such deductibles,
and against such risks as is customary for similarly situated
businesses.
SECTION 6.03. Financial Covenants. The Borrower shall:
35
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
(a) maintain a ratio of (i) Total Funded Debt as of the end of
each fiscal quarter of Borrower to (ii) Borrower's EBITDA, for the four
consecutive fiscal quarters then-ended, of less than 2.5 to 1.0. "Total
Funded Debt" means, at any time, the sum of (i) the principal amount of
all indebtedness for borrowed-money of the Borrower and its
Subsidiaries on a consolidated basis, and (ii) the unamortized
capitalized amount of all capital leases of Borrower and its
Subsidiaries on a consolidated basis, all as of such date. "EBITDA"
means, for any period for which it is determined, an amount equal to
the sum of (i) the net income of the Borrower for such period, (ii)
interest expense of the Borrower for such period (including the
interest component of payments on capital leases), (iii) the aggregate
amount of depreciation and amortization expenses and other non-cash
charges that reduced net income for such period deducted by the
Borrower for such period, (iv) federal, state, and local income tax
expense, (v) losses on the sale or other disposition of assets other
than in the ordinary course of business if included in the calculation
of net income, and (vi) extraordinary losses if included in the
calculation of net income, minus (a) gains on the sale or other
disposition of assets other than in the ordinary course of business if
included in net income, and (b) extraordinary gains if included in net
income, all as accrued in such period, and as such foregoing
calculation for each such period is adjusted by subtracting therefrom
capital expenditures as accrued in such period;
(b) maintain a ratio of EBITDA (as defined above) plus an
amount equal to the product of rent expense times eight to Fixed
Charges (as hereinafter defined), calculated at the end of each fiscal
quarter of Borrower for the four consecutive fiscal quarters
then-ended, of at least 1.5 to 1.0. "Fixed Charges" means, for any
period for which it is determined, the sum of (i) interest expenses
accrued in such period, (ii) rent expenses, (iii) dividends paid in
such period, (iv) federal, state, and local income tax expenses, and
(v) current maturities of long-term debt; and
(c) from June 30, 1997, maintain at all times a minimum
tangible net worth (defined as net worth of Borrower, determined
according to generally accepted accounting principles, less any
intangible assets) of $160,000,000 plus 50% of cumulative quarterly
net income of the Borrower (with no deductions for losses).
SECTION 6.04. Additional Covenants. The Borrower shall not:
(a) create, incur, assume, or allow to exist any secured
indebtedness (of any type or kind including the guaranty of any
obligation) in excess of $15,000,000 in the aggregate; nor
36
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
(b) permit the Subsidiaries, or any of them, to create, incur,
assume, or allow to exist any indebtedness of any type or kind
including the guaranty of any obligation, whether secured or unsecured.
ARTICLE VII
DEFAULT
SECTION 7.01. Events of Default. Each of the following shall
constitute an "Event of Default":
(a) the Borrower shall fail to pay within three days of its
due date any principal of or interest on any Loan, or any Loan Party
shall fail to pay within three days of its due date any other amount
payable under any Loan Document;
(b) any representation, warranty, certification, or statement
made or deemed made by any Loan Party (or any of its officers) in any
Loan Document or in any certificate, financial statement, or other
document delivered pursuant thereto shall be false, misleading, or
incorrect in any material respect when made or deemed made.
(c) the Borrower shall fail to perform, observe, or comply
with any covenant, agreement, or term contained in Section 6.01 of this
Agreement.
(d) any Loan Party shall fail to perform, observe, or comply
with any other covenant, agreement, or term contained in any Loan
Document (other than a failure covered elsewhere in this Section 7.01)
and such failure shall continue for a period of thirty (30) days after
notice thereof to such Loan Party by the Bank.
(e) any Loan Party or any Subsidiary shall admit in writing
its inability to, or be generally unable to, pay its debts as such
debts become due.
(f) any voluntary or involuntary proceeding under any Debtor
Relief Law shall be commenced by or against any Loan Party or any
Subsidiary or any of their respective assets, and if an involuntary
proceeding is commenced, such proceeding shall not be dismissed within
thirty (30) days after the commencement thereof.
(g) any Loan Party or any Subsidiary shall fail to pay when
due any principal of or interest on any indebtedness for borrowed money
(other than the Note) having an outstanding principal amount greater
than $500,000, whether as principal obligations, guarantor, or
otherwise, or the maturity of any such indebtedness shall have been
accelerated, or any event shall have occurred that permits (or, with
the giving of notice or lapse of time or both, would permit) any
37
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
holder or holders of such indebtedness or any Person acting on behalf
of such holder or holders to accelerate the maturity thereof.
(h) any judgment or order for the payment of money in excess
of $500,000 shall be rendered against any Loan Party or any Subsidiary
and either (i) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order or (ii) there shall be any period
of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect.
(i) any Loan Party shall dissolve, liquidate, or terminate its
legal existence or shall convey, transfer, lease, or dispose of
(whether in one transaction or a series of transactions) all or
substantially all of its assets to any Person.
(j) any person or group of persons (within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said
Act) of 20% or more of the outstanding shares of common stock of the
Borrower; or during any period of 12 consecutive calendar months,
individuals who were directors of the Borrower on the first day of such
period shall cease to constitute a majority of the board of directors
of the Borrower.
(k) any event or condition shall occur that could reasonably
be expected to have a Material Adverse Effect.
SECTION 7.02. Remedies. If any Event of Default shall occur and be
continuing, the Bank may do any one or more of the following:
(a) Acceleration. Declare all outstanding principal of and
accrued and unpaid interest on the Note and all other amounts payable
by the Borrower under the Loan Documents immediately due and payable,
and the same shall thereupon become immediately due and payable,
without presentment, demand, protest, notice of acceleration, notice of
intent to accelerate, or other notices or formalities of any kind, all
of which are hereby expressly waived by the Borrower.
(b) Termination of Commitment. Terminate the Commitment
without notice to the Borrower.
(c) Rights. Exercise any and all rights and remedies afforded
by applicable law or otherwise.
Notwithstanding the foregoing, upon the occurrence of an Event of Default under
Section 7.01(f), the Commitment shall automatically terminate, and the
outstanding
38
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
principal of and accrued and unpaid interest on the Note and all other amounts
payable by the Borrower under the Loan Documents shall thereupon become
immediately due and payable without presentment, demand, protest, notice of
acceleration, notice of intent to accelerate, or other notices or formalities
of any kind, all of which are hereby expressly waived by the Borrower.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Expenses. The Borrower shall on demand pay or reimburse
the Bank for paying (a) all reasonable costs and expenses of the Bank, including
the fees and disbursements of counsel for the Bank (including the allocated cost
of internal counsel), in connection with the preparation and administration of
the Loan Documents, the preparation of any waiver or consent thereunder or any
amendment thereof or any Default or alleged Default and (b) if an Event of
Default occurs, all costs and expenses incurred by the Bank, including the fees
and disbursements of counsel (including the allocated cost of internal counsel),
in connection with such Event of Default and any collection, bankruptcy,
insolvency, and other enforcement proceedings resulting therefrom.
SECTION 8.02. Indemnification. The Borrower shall indemnify the Bank
from and against any and all liabilities, obligations, claims, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
whatsoever which may be imposed on, incurred by or asserted against the Bank
relating to or resulting from this Agreement or the Loan Documents and all
transactions and events at any time associated therewith (including the
enforcement of any right of the Bank or the defense of any action or inaction by
the Bank in connection therewith), except to the limited extent such
liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements are proximately caused by the
Bank's gross negligence or willful misconduct. If any person (including, without
limitation, the Borrower or any of its Subsidiaries) ever alleges such gross
negligence of willful misconduct, the indemnification provided for in this
Section 8.02 shall nonetheless be paid upon demand, subject to later adjustment
or reimbursement, until such time as a court of competent jurisdiction enters a
final judgment as to the extent and effect of the alleged gross negligence or
willful misconduct.
SECTION 8.03. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, the Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Bank (or
any of its affiliates) to or for the credit or the account of the Borrower
against any and all of the obligations of the
39
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
Borrower now or hereafter existing under the Loan Documents, irrespective of
whether the Bank shall have made any demand under the Loan Documents and
although such obligations may be unmatured. The Bank agrees promptly to
notify the Borrower after any such set-off and application made by the Bank;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Bank under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) that the Bank may have.
SECTION 8.04. No Waiver; Cumulative Remedies. No failure on the part of
the Bank to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under any Loan Document shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power, or privilege under any Loan Document preclude any other or further
exercise thereof or the exercise of any other right, power, or privilege. The
rights and remedies provided for in the Loan Documents are cumulative and not
exclusive of any rights and remedies provided by law.
SECTION 8.05. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights or obligations hereunder without the prior written consent of the
Bank. The Bank may at any time and from time to time (a) grant participating
interests in the Commitment and the Loans to any Person(s), and (b) assign all
or any portion of its rights and/or obligations under the Loan Documents to any
Person(s); provided, that the Bank may not assign its Commitment to any Person
(other than an affiliate of the Bank) without the prior written consent of the
Borrower. All information provided by the Borrower to the Bank may be furnished
by the Bank to its affiliates and to any actual or proposed assignee or
participant.
SECTION 8.06. Amendments. No amendment or waiver of any provision of
any Loan Document to which the Borrower is a party, nor any consent to any
departure by the Borrower therefrom, shall be effective unless the same shall be
agreed or consented to in writing by the Bank and the Borrower, and each such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
SECTION 8.07. Notices. All notices, requests, and other communications
to either party hereunder shall be in writing (including facsimile transmission)
and shall be given to such party at its address or facsimile number set forth on
the signature pages hereof. Each such notice, request, or other communication
shall be effective (i) if given by facsimile transmission, when transmitted to
the facsimile number referred to in this Section and confirmation of receipt is
received, (ii) if given by mail, three (3) Business Days after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid, or (iii) if given by any other means, when delivered at
the address referred to in this Section; provided that notices to the Bank shall
not be effective until received.
40
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
SECTION 8.08. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
SECTION 8.09. Severability. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
SECTION 8.10. Controlling Agreement. Notwithstanding anything to the
contrary contained in any Loan Document, the interest paid or agreed to be paid
under the Loan Documents shall not exceed the maximum rate of non-usurious
interest permitted by applicable law (the "Maximum Rate"). If the Bank shall
receive interest in an amount that exceeds the Maximum Rate, the excessive
interest shall be applied to the principal of the Loans or, if it exceeds the
unpaid principal, refunded to the Borrower. In determining whether the interest
contracted for, charged, or received by the Bank exceeds the Maximum Rate, the
Bank may, to the extent permitted by applicable law, (a) characterize any
payment that is not principal as an expense, fee, or premium rather than
interest, (b) exclude voluntary prepayments and the effects thereof, and (c)
amortize, prorate, allocate, and spread in equal or unequal parts the total
amount of interest throughout the contemplated term of the Loans.
SECTION 8.11. Survival. All representations and warranties made or
deemed made by the Borrower in the Loan Documents shall survive the execution
and delivery thereof and the making of the Loans, and no investigation by the
Bank or any closing shall affect the representations and warranties by the
Borrower or the right of the Bank to rely upon them. Without prejudice to the
survival of any other obligation of the Borrower hereunder, the obligations of
the Borrower under Article III and Sections 8.01 and 8.02 shall survive
repayment of the Note and termination of the Commitment.
SECTION 8.12. Governing Law. This Agreement and the Note shall be
governed by and construed in accordance with, the law of the State where the
Principal Office is located and the applicable laws of the United States of
America. The Borrower hereby submits to the nonexclusive jurisdiction of the
United States District Court and each state court in the city where the
Principal Office is located for the purposes of all legal proceedings arising
out of or relating to any of the Loan Documents or the transactions contemplated
thereby. The Borrower irrevocably consents to the service of any and all process
in any such action or proceeding by the mailing of copies of such process to the
Borrower at its address set forth underneath its signature hereto. The Borrower
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum.
41
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
SECTION 8.13. Accounting Terminology. Unless otherwise specifically
defined or addressed in this Agreement, accounting terms used herein shall have
the meanings and determinations given them according to generally accepted
accounting principles set forth in the Financial Accounting Standards Board and
in Opinions of the Accounting Principles Board of the American Institute of
Certified Public Accounts or which have other substantial authoritative support
in the United States and are applicable in the circumstances, as applied on a
consistent basis.
SECTION 8.14. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND EXPRESSLY
WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO
ANY LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS
OF THE BANK IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
SECTION 8.15. ENTIRE AGREEMENT. ORAL AGREEMENTS OF COMMITMENTS TO LOAN
MONEY, EXTEND CREDIT OR TO FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING
PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU
(BORROWER) AND US (BANK OR CREDITOR) FROM MISUNDERSTANDINGS OR DISAPPOINTMENT,
ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING,
WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US,
EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
42
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.17 - Credit Agreement (continued)
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BORROWER:
O'REILLY AUTOMOTIVE, INC.
By: /s/ James R. Batten
----------------------------------
Title: VP Finance/CFO
-------------------------------
Address for Notices:
233 S. Patterson
Springfield, MO 65802
Facsimile No.: (417) 863-2242
Attention: James R. Batten
BANK:
NATIONSBANK, N.A.
By: /s/ Juan A. Cazorla
---------------------------------
Title: Vice-President
-------------------------------
Address for Notices:
NationsBank
901 Main Street, 14th Floor
Dallas, TX 75020-3714
Facsimile No.: (214) 508-0944
Attention: Stacey Smith
43
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is entered into on October 1, 1997
by and between COMMERCE BANK, N.A., a national banking association ("Commerce")
and O'REILLY AUTOMOTIVE, INC. ("Company"), a Missouri corporation.
WHEREAS, under the terms and conditions of this Agreement, Commerce has
approved a $32,500,000 revolving credit facility (the "Revolving Credit
Facility"), with term loan conversion options, to Company. The Revolving Credit
Facility and any term loans shall be hereinafter referred to collectively as the
"Loans".
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement, the parties agree as follows:
ARTICLE I -- DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
have the following meanings:
"Business Day" means any day other than a Saturday, Sunday or other day
on which banking institutions in Springfield, Missouri are authorized or
required by law to close.
"Closing Date" shall mean October 1, 1997 at Commerce's main offices
at 233 South Patterson, Springfield, Missouri.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commerce" means Commerce Bank, N.A. and its successors and assigns.
"Company" means O'Reilly Automotive, Inc. and its successors and
assigns.
"Contractual Obligation" means as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound.
"EBITDA" means the adjusted earnings, before interest, taxes,
depreciation and amortization, of Company and its Subsidiaries, and as defined
and determined in accordance with GAAP.
"EBITDAR" means the adjusted earnings, before interest, taxes,
depreciation, amortization and lease expense, of Company and its Subsidiaries,
and as defined and determined in accordance with GAAP.
44
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) which together with Company or a Subsidiary would be deemed to be
a "single employer" within the meaning of Section 4001 of ERISA.
"Event of Default" means any of the events specified in Article VII,
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Fixed Charge Coverage Ratio" shall mean the quotient, the numerator of
which is the total of EBITDAR (for the twelve [12] month period most recently
ending prior to the date of calculation), and the denominator of which is the
total of interest expense (for the twelve [12] month period most recently ending
prior to the date of calculation), plus lease expense (for the twelve [12] month
period most recently ending prior to the date of calculation), plus Preceding
Fiscal-Year-End Current Maturities of Long Term Debt.
"Funded Debt" means long term debt determined in accordance with GAAP.
"GAAP" means the generally accepted accounting principles in the United
States of America in effect from time to time.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled (through
stock or capital ownership or otherwise) by any of the foregoing.
"Indebtedness" means (i) all indebtedness for borrowed money
(including, without limitation, Company's revolving credit facility with
NationsBank, N.A. in the maximum principal amount of $32,500,000) or for the
deferred purchase price of property or services; (ii) all obligations evidenced
by bonds, debentures, notes or other similar instruments; (iii) all direct or
indirect guaranties in respect of, and all obligations or undertakings otherwise
to assure a creditor against loss in respect of, indebtedness of another for
borrowed money or for the deferred purchase price of property or services; (iv)
any obligation for borrowed money which is non-recourse but which is secured by
assets; (v) all obligations under capital leases, secured or unsecured; and (vi)
all liabilities in respect of unfunded vested benefits under plans covered by
Title IV of ERISA; provided, however, that "Indebtedness" shall not include the
indebtedness or guaranties on customary trade terms owing to trade creditors in
the ordinary course of business, and no amount shall be included more than once
in the aggregate of the above described amounts.
45
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
"Interest Period" means the period applicable to each LIBOR Rate Loan,
which shall be thirty, sixty or ninety days, as selected by Company in
accordance with Subsection 2.9.
"LIBOR Rate" shall mean the London Interbank Offered Rate as determined
by Commerce from the Money Rates section of The Wall Street Journal, the
Knight-Ridder News Service or such other service used by Commerce Bank from time
to time, or as determined by Commerce (via transmission by computer network by
Knight-Ridder, Inc. or Telerate, Inc. [or such other service as Commerce shall
determine to be appropriate]) on the date two (2) Business Days prior to the
first day of such Interest Period.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction).
"Loan Documents" shall mean collectively this Agreement, the Notes and
any other documents, instruments or agreements executed in connection with the
Loans.
"Net Income" means for a Person, for a particular period, the net
income (deficit), if any, of such Person for such period as determined in
accordance with GAAP.
"Notes" means the collective reference to the Revolving Credit Note and
the Term Notes; one of the Notes, a "Note".
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA, or any successor thereto.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of whatever
nature.
"Plan" means any pension plan which is covered by Title IV of ERISA and
in respect of which Company or any of its Subsidiaries is an "employer" as
defined in Section 3(5) of ERISA.
"Preceding Fiscal-Year-End Current Maturities of Long Term Debt" means
the current maturities of long term debt of the Company and its Subsidiaries for
the fiscal year ending immediately preceding the period for which the Fixed
Charge Coverage Ratio is being calculated, determined in accordance with GAAP.
"Prime Rate" means the per annum rate of interest established from time
to time by Commerce for its own internal convenience as its prime rate, which
when used to compute the rate of interest
46
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
hereunder shall change as of the date of any change in said Prime Rate, and no
representation is made that the Prime Rate is the best, lowest or a favored
rate of interest.
"Reportable Event" means any of the events set forth in Section 4043(b)
of ERISA or the regulations thereunder.
"Requirement of Law" means as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation, or any interpretation thereof,
or any determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
properties or to which such Person or any of its properties is subject.
"Revolving Credit Note" means the Revolving Credit Note, substantially
in the form of Exhibit A, to be executed and delivered by Company to Commerce.
"Subsidiary" means (i) any corporation more than 50% of whose stock of
any class or classes having by the terms thereof ordinary voting power to elect
a majority of the directors of such corporation (irrespective of whether or not
at the time stock of any class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at the
time owned by Company and/or one or more Subsidiaries of Company, (ii) any
partnership, association, joint venture, trust or other entity in which Company
has more than a 50% equity or beneficial interest at the time, or (iii) any
entity whose net earnings or portions thereof would properly be included and
consolidated with the net earnings of Company and are recorded on the books of
Company for financial reporting purposes; provided, however, that the term
"Subsidiary" shall not include any entity that is not reflected on the balance
sheet of Company due to inactivity and lack of material assets and liabilities.
"Tangible Net Worth" means at any time, the excess of total assets
after all appropriate deductions (including, without limitation, reserves for
doubtful receivables, obsolescence, depreciation and amortization) over total
liabilities (including tax and other proper accruals), total assets and total
liabilities each to be determined in accordance with GAAP consistent with those
applied in the preparation of the financial statements referred to in Subsection
3.7 below, excluding from the determination of total assets all assets which
would be classified as intangible assets under GAAP, including, without
limitation, goodwill, licenses, patents, trademarks, trade names, copyrights and
franchises, and specifically excluding from the determination of total assets
any loans to a parent, affiliate or Subsidiary of Company or any shareholder or
officer of Company or any Subsidiary.
"Term Note" means any Term Note, substantially in the form of Exhibit
B, to be executed and delivered by Company to Commerce.
47
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
1.2 Other Definitional Provisions.
(a) Unless otherwise defined therein, all terms
defined in this Agreement shall have the defined meanings when used in
the Notes or any certificate or other document made or delivered
pursuant hereto or thereto.
(b) As used herein and in the Notes, and any
certificate or other document made or delivered pursuant hereto,
accounting terms relating to Company and its Subsidiaries not defined
in Subsection 1.1, and accounting terms partly defined in Subsection
1.1 to the extent not defined, shall have the respective meanings given
to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and Article, subsection and exhibit references are to this
Agreement unless otherwise specified.
(d) The titles and headings of the Subsections and
paragraphs of this Agreement have been inserted for convenience of
reference only and are not intended to summarize or otherwise describe
the subject matter of such Subsections and paragraphs and shall not be
given any consideration in the construction of this Agreement.
ARTICLE II -- LENDING ARRANGEMENT
2.1 Revolving Credit Advances. Commerce agrees, on the terms and
subject to the conditions hereinafter set forth, to make revolving credit loans
(each, an "Advance") to Company, from time to time during the period commencing
on the date hereof to but not including October 1, 2000 (the "Termination
Date"; such period, the "Commitment Period"), at such times and in such amounts,
up to $32,500,000 at any time outstanding (the "Commitment"), as Company shall
request. The Advances shall not exceed, in aggregate principal amount at any one
time outstanding, the Commitment, less any amounts advanced as a Term Loan as
hereinafter provided. During the Commitment Period Company may borrow, repay and
re-borrow hereunder. Each Advance to Company shall be in the amount of not less
than $500,000. Advances made by Commerce shall be evidenced by the Revolving
Credit Note. The Advances shall be payable as to principal on the Termination
Date. In addition to the foregoing, the Revolving Credit Facility shall be
deemed to automatically terminate if the occurrence of an Event of Default (as
defined under Article VII hereof) causes the Notes to become immediately due and
payable.
2.2 Revolving Credit Note. On the Closing Date Company shall execute
and deliver to Commerce the Revolving Credit Note in form and substance
acceptable to Commerce. Commerce is authorized to endorse on a schedule annexed
to the Revolving Credit Note and made a part thereof, or on a continuation
thereof, or to otherwise record in a manner satisfactory to Commerce,
appropriate notations evidencing the date and amount of each Advance, the
48
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
interest rate and Interest Period applicable to such Advance and the date and
amount of each payment, which endorsement or recording shall constitute prime
facie evidence of the accuracy of the information endorsed or recorded;
provided, however, that the failure to make such notations or recordings shall
not affect the obligations of Company under the Revolving Credit Note or this
Agreement or affect the validity of any Advance.
2.3 Termination or Reduction of Commitment. Unless sooner terminated
under Article VII or this Subsection 2.3, the Revolving Credit Facility shall
terminate and the principal balance outstanding and accrued interest under the
Revolving Credit Note and all other fees and sums owing thereunder shall be due
and payable in full on the Termination Date. Company shall have the right at any
time and from time to time to terminate the unused Commitment or reduce the
Commitment in the minimum amount of $500,000 upon three (3) Business Days notice
to Commerce. Additionally, Company may declare as unavailable for any upcoming
quarter all or any portion of the amount then available for borrowing on the
Revolving Credit Facility, which amount may not be borrowed during such quarter.
Any amount so declared by Company unavailable for borrowing shall not be used in
calculating the fee on the unused portion of the Revolving Credit Facility set
forth in Subsection 2.6 below.
2.4 Term Loans. Commerce agrees, on the terms and subject to the
conditions hereinafter set forth, from time to time during the second (2nd) and
third (3rd) years of the Commitment Period and/or on the Termination Date, to
make not more than ten (10) term loans (each, a "Term Loan" and collectively,
"Term Loans") to Company, each in an amount requested by Company, but not to be
less than $1,500,000. If any Term Loan is made during the Commitment Period, the
principal amount thereof shall not exceed Commerce's Commitment, as then in
effect, less the principal balance of all Loans to remain outstanding
immediately following the making of such Term Loan. If any Term Loan is made on
the Termination Date, then, concurrently with and as a condition to making such
Term Loan, Company shall pay all outstanding Advances in full, including accrued
interest, and the principal amount of such Term Loan shall not exceed Commerce's
Commitment as in effect on the last day of the Commitment Period, less the
principal balance of all Term Loans to remain outstanding immediately following
the making of such Term Loan. Each Term Loan shall be evidenced by a respective
Term Note. Each Term Note shall be payable as to principal in thirty-five (35)
equal consecutive monthly principal installments (such installments to be
calculated based upon a seven [7] year amortization schedule) commencing one
month following the date of issuance, with the outstanding principal balance,
together with accrued interest, due and payable on the thirty-sixth (36th) month
following the date of issuance.
2.5 Payments. Except as otherwise specifically provided herein, all
payments due under this Agreement or under the Notes shall be made to Commerce
not later than 12:00 noon (Springfield, Missouri time) on the date when due and
shall be made in lawful money of the United States of America in immediately
available funds at Commerce's principal office. Whenever any payment to be made
hereunder or under any Note shall be stated to be due on a day which is not a
Business Day, the due date thereof shall be extended to the next succeeding
49
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
Business Day (except as provided in Subsection 2.9) and, with respect to
payments of principal, interest shall be payable at the applicable rate during
such extension.
2.6 Interest/Fees. The Revolving Credit Facility and any Term Loan
shall accrue interest at a per annum rate based upon Company's ratio of funded
debt to EBITDA as set forth in the table below, and a fee based on the unused
portion of the Revolving Credit Facility shall also be based on Company's ratio
of funded debt to EBITDA as set forth below:
Fee on Unused Portion
Funded Debt/ Applicable LIBOR of Revolving Credit
EBITDA Ratio Rate Facility
-----------------------------------------------------------------------------
X less than 1.0 LIBOR + .5% .1250%
X greater than or equal to 1.0
and less than or equal to 2.0 LIBOR + .75% .1250%
X is greater than 2.0 LIBOR + 1% .1875%
Company shall elect an Interest Period of 30, 60 or 90 days at the time of any
Advance under the Revolving Credit Facility or the closing of any Term Loan (as
applicable), and interest shall be payable at the expiration of the Interest
Period chosen. With respect to Advances or Term Loans outstanding accruing
interest at a LIBOR Rate, Company shall select the Interest Period to apply at
the expiration of the then current interest period not less than one (1)
Business Day prior to the expiration of the then current Interest Period for
such Advance or Term Loan. If Company fails to make an Interest Period selection
as herein provided, then the applicable Advance or Term Loan shall thereafter
accrue interest at a variable per annum rate equal to the Prime Rate, and
interest shall be payable monthly, in arrears.
Overdue principal, fees and, to the extent permitted by law, overdue
interest in respect of each Loan shall bear interest at a rate per annum equal
to 3.0% above the Prime Rate in effect from time to time; provided, however,
that no Loan shall bear interest after maturity at a rate per annum less than
the rate of interest applicable thereto at maturity.
Interest shall accrue from and including the date of any borrowing to
but excluding the date of any repayment thereof (provided repayment is made
before 12:00 noon, Springfield, Missouri time), and shall be payable (i) in
respect of each Loan accruing interest at a LIBOR Rate, on the last day of each
Interest Period applicable to such Loan, (iii) in the case of each Loan accruing
interest at the Prime Rate, monthly, in arrears and (iii) in the case of all
Loans, on the date of any prepayment or conversion of an outstanding Advance to
a Term Loan (on the amount prepaid or converted) and at maturity (whether by
acceleration or otherwise).
All calculations of interest shall be on the basis of the actual number
of days elapsed divided by 360.
50
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
2.8 Requests for Advances and Conversions.
(a) Whenever Company desires to obtain a LIBOR Rate
Loan hereunder, Company shall give Commerce at least one (1) Business
Day notice. Such notice shall specify the aggregate principal amount of
the Loan to be made pursuant to such borrowing, the date of borrowing
(which shall be a Business Day) and the initial Interest Period to be
applicable thereto.
(b) Whenever Company desires to obtain any Term Loan
hereunder, Company shall give Commerce at least five (5) Business Days'
notice. Such notice shall specify the aggregate amount of such Term
Loan to be made (which shall not exceed the applicable amount
determined in accordance with Subsection 2.4), the date of the Term
Loan (which shall be a Business Day) and the initial Interest Period to
be applicable thereto.
2.9 Interest Periods. At the time Company requests an Advance under the
Revolving Credit Facility or notifies Commerce of a conversion of an outstanding
Advance to a Term Loan or two (2) Business Days prior to the expiration of an
Interest Period applicable to an outstanding Advance or Term Loan, Company shall
have the right to elect the Interest Period applicable to such Advance or Term
Loan; provided, however, that no Interest Period shall extend beyond the
Termination Date. If any Interest Period would otherwise expire on a day which
is not a Business Day, such Interest Period shall expire on the next preceding
Business Day. If upon the expiration of any Interest Period for any LIBOR Rate
Loan, Company has failed to elect a new Interest Period to be applicable to such
LIBOR Rate Loan as provided above, Company shall be deemed to have elected to
convert such Advance or Term Loan into a Prime Rate Loan effective as of the
expiration date of such Interest Period.
2.10 Prepayments.
(a) Company shall have the right at any time and from
time to time to prepay without premium any Advance in full or in part
in the minimum amount of $500,000 or multiples thereof.
(b) Company shall have the right, at any time and
without penalty, to make prepayments on any Term Loan, provided that
such prepayment is not made with funds borrowed from another lender or
financial services company; if such prepayment is made with funds
borrowed from another lender or financial services company, Company
shall pay a prepayment fee equal to (i) three percent (3%) of the
prepayment amount, if prepayment is made during the first year of the
applicable Term Loan, and (ii) two percent (2%) of the prepayment
amount, if prepayment is made during the second year of the applicable
Term Loan. Any prepayments under a Term Loan shall be applied to the
monthly payments in the inverse order of their maturities.
51
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
2.11 Illegality; Indemnity; Additional Costs.
(a) If at any time due to any new Requirement of Law,
or for any other reason arising subsequent to the date hereof, it shall
become unlawful for Commerce to fund any LIBOR Rate Loan which it is
committed to make hereunder, the obligation of Commerce to provide
LIBOR Rate Loans shall, upon the happening of such event, forthwith be
suspended for the duration of such illegality. If any such Requirement
of Law or other reason shall make it unlawful for Commerce to continue
any LIBOR Rate Loan previously made by Commerce hereunder, Commerce
shall give Company notice thereof, stating the reasons therefor, and
Company shall, on the earlier of (i) the last day of the then current
Interest Period, if applicable, or (ii) if required by such Requirement
of Law or other reason on such date as shall be specified in such
notice, either convert each such unlawful LIBOR Rate Loan to Prime Rate
Loans or prepay all such unlawful Loans, without penalty, except as
provided in paragraph (b) of this Subsection 2.11, to Commerce in full.
(b) Company will indemnify Commerce against any loss
or expense which Commerce may sustain (i) in employing deposits to
effect, fund or maintain a LIBOR Rate Loan, as a consequence of any
failure by Company to make any payment when due of any amount due
hereunder in connection with such LIBOR Rate Loan, (ii) due to any
failure of Company to borrow, continue or convert a LIBOR Rate Loan on
a date specified therefor in a notice thereof, or (iii) due to any
payment, prepayment or conversion of any LIBOR Rate Loan on a date
other than the last day of the Interest Period for such LIBOR Rate
Loan.
(c) If due to either (i) any Requirement of Law or
(ii) compliance by Commerce with any request from any Governmental
Authority, there shall be any increase in the cost to Commerce of
agreeing to make or making, funding or maintaining any Loan, Company
shall from time to time, upon demand by Commerce, pay to Commerce
additional amounts sufficient to indemnify Commerce against such
increased costs. The determination of such increased costs by Commerce
shall be conclusive if made reasonably and in good faith.
2.12 Purpose. Company shall use the Revolving Credit Facility to
finance the expansion of its retail stores and for general working capital
purposes.
2.13 Affirmation. Each request for an Advance under the Revolving
Credit Note shall be deemed to constitute a representation by Company at the
time of the request that no Event of Default (as defined in Article VII hereof)
exists or is imminent and that the representations and warranties of Company
contained in this Agreement and the other Loan Documents are true in all
material respects on or as of the date of such request for an Advance.
52
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
ARTICLE III -- REPRESENTATIONS AND WARRANTIES
To induce Commerce to make the Loans, Company hereby represents and
warrants to Commerce (which representations and warranties will survive the
execution and delivery of the Notes and shall continue so long as any sums
remain outstanding under the Loans, this Agreement or any Loan Documents) as
follows:
3.1 Standing. Company is a corporation duly organized, validly existing
and in good standing under the laws of the state of Missouri. Company is duly
qualified as a foreign corporation and is in good standing in every other
jurisdiction where such qualification and good standing is required in order to
conduct business in such jurisdiction. Company has the power and authority to
own its property and to carry on its business.
3.2 Authority. Company has the full power and authority to execute and
deliver this Agreement, the Notes and the other Loan Documents, and the same
constitute the binding and enforceable obligations of Company in accordance with
their terms. No consent or approval of the shareholders of Company or any other
Person, governmental department, agency or body or entity are required as a
condition to the effectiveness and validity of the Loan Documents. The execution
of and performance by Company of its obligations under the Loan Documents has
been duly authorized by all appropriate and required corporate proceedings and
will not violate or contravene any Requirement of Law, Company's Articles of
Incorporation, By-Laws or any Contractual Obligation, indenture, agreement,
lease, contract or other instrument governing or binding on Company.
3.3 Litigation. There are no actions, suits, arbitration proceedings,
mediations or other proceedings of any nature pending or, to the knowledge of
Company, threatened, or any basis therefor, against or affecting Company at law
or in equity, in any court or before any governmental department or agency,
which may result in any material adverse change in the properties, assets,
business or condition, financial or otherwise, of Company or the ability of
Company to perform its obligations under this Agreement and/or the other Loan
Documents.
3.4 Conflicting Agreements. There are no provisions of any existing
Requirement of Law, Contractual Obligation, mortgage, indenture, contract or
agreement binding on Company or affecting its property, which would conflict
with or in any way prevent the execution, delivery, or carrying out of the terms
of this Agreement and/or the Loan Documents.
3.5 Title and Liens. Company has good, valid and marketable title of
record to its real and personal property, all of which is owned free and clear
of all mortgages, liens, pledges, hypothecations, charges, attachments and other
security interests and encumbrances of any nature, except as provided in this
Agreement or disclosed to Commerce in writing.
53
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
3.6 Taxes. Company has filed all federal, state and other tax and
similar returns and has paid or provided for the payment of all taxes and
assessments due thereunder through the date of this Agreement, including without
limitation, all withholding, FICA and franchise taxes.
3.7 Financial Statements. Company's audited financial statements (which
include a balance sheet, related statement of earnings and statement of cash
flows) dated as of December 31, 1996, copies of which have been furnished to
Commerce, are complete and correct and fairly and accurately present the
financial condition of Company as of such date and the results of its operations
for the period covered by such statements, all in accordance with generally
accepted accounting principles consistently applied, and there has been no
material adverse change in the condition (financial or otherwise), business or
operations of Company subsequent thereto. Company has no liabilities, direct or
contingent, except those disclosed in the foregoing financial statements or as
otherwise disclosed to Commerce in writing.
3.8 Other. All statements by Company contained in any certificate,
statement, document or other instrument or writing delivered by or on behalf of
Company at any time pursuant to this Agreement or the other Loan Documents shall
constitute representations and warranties made by Company hereunder. No
representation or warranty of Company contained in this Agreement or any other
Loan Document, and no statement contained in any certificate, schedule, list,
financial statement or other instrument furnished to Commerce by or on behalf of
Company contains, or will contain, any untrue statement of a material fact, or
omits, or will omit, to state a material fact necessary to make the statements
contained herein or therein not misleading. To the best of Company's knowledge,
all information material to the transactions contemplated in this Agreement has
been expressly disclosed to Commerce in writing.
3.9 Regulation U. No part of the proceeds of the Revolving Credit
Facility will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any such margin stock or to
reduce or retire any indebtedness incurred for any such purpose. If requested by
Commerce, Company will furnish to Commerce a statement in conformity with the
requirements of Federal Reserve Form U-1 referred to in Regulation U to the
foregoing effect.
3.10 No Defaults or Proceedings. Except as disclosed to Commerce in
writing, (a) neither Company nor any Subsidiary is in default under any
agreement for borrowed money (subject to any cure right provided therein) to
which it is a party or by which it may be bound; (b) no investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of Company, threatened by or against Company or, if applicable,
any of its Subsidiaries or against any of its or their properties or revenues
(i) with respect to this Agreement, the Notes or any of the transactions
contemplated hereby or thereby, or (ii) which, if adversely determined would
have a material adverse effect on the business, operations, assets or financial
or other condition of Company and, if applicable, its Subsidiaries; and (c)
there is no other action, suit or proceeding pending or threatened against
Company or, if applicable, any of its Subsidiaries, to the knowledge of Company,
which, if adversely determined, would materially
54
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
adversely affect Company and, if applicable, its Subsidiaries or Company's
ability to perform and observe the obligations binding upon it under this
Agreement and the Notes.
3.11 ERISA. Each Plan is in compliance in all material respects with
ERISA; no Plan is insolvent or in reorganization; no Plan has an accumulated or
waived funding deficiency within the meaning of Section 412 of the Code; neither
Company nor any Subsidiary nor any ERISA Affiliate has incurred any material
liability (including any material contingent liability) to or on account of a
Plan pursuant to Section 4062, 4063, 4064, 4201 or 4204 of ERISA; no proceedings
have been instituted to terminate any Plan; and no condition exists which
presents a risk to Company or a Subsidiary of incurring a liability to or on
account of a Plan pursuant to any of the foregoing sections of ERISA, which
condition would have a material adverse effect on Company and its Subsidiaries.
3.12 Investment Company Act. Company is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
3.13 Subsidiaries. Company, as of the date of this Agreement, has the
Subsidiaries identified on Schedule 3.13 attached hereto. Company will notify
Commerce upon the creation of any additional Subsidiary.
ARTICLE IV -- CONDITIONS PRECEDENT
4.1 Conditions to Initial Loan. Commerce shall have no obligation to
make the initial Loan hereunder unless, on or prior to the date of the initial
Loan, Commerce shall have received (all in form satisfactory to Commerce and its
counsel):
(a) the Revolving Credit Note, duly executed by Company;
(b) copies of the Articles of Incorporation and Bylaws
of Company, as now in effect, and of each resolution of Company's
Board of Directors duly authorizing the execution and delivery of
this Agreement, the Notes and the other Loan Documents and Company's
performance hereunder and thereunder, in each case certified by an
appropriate officer of Company;
(c) certificates of incumbency and specimen signatures of the
corporate officers executing this Agreement, the Notes and the other
Loan Documents; and
(d) any other documents, instruments and reports as Commerce
shall reasonably request.
55
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
4.2 Conditions to All Loans.
(a) In addition to the conditions set forth in
Subsection 4.1, no Loan shall be made by Commerce hereunder unless
Commerce shall have received from Company prior thereto a request for
such Loan, in accordance with Subsection 2.8 and containing the
effective date for such Loan, and unless the following conditions have
been satisfied with the request constituting a representation and
warranty by Company that the following conditions are then satisfied:
(i) no Event of Default has occurred and is
then continuing;
(ii) there has been no material adverse
change in the financial condition of Company and its
Subsidiaries, if any, since the date of this Agreement; and
(iii) the representations and warranties
contained in Article III are true and correct as of the date
of such request, except as previously disclosed to Commerce in
writing, and except that the representations and warranties
contained in Subsection 3.1 shall be deemed to refer to the
latest balance sheet, statement of earnings, and statement of
cash flows, all on a consolidated basis, if applicable,
furnished by Company to Commerce.
(b) In addition to all other requirements of this
Article IV, Commerce shall have no obligation to make any Term Loan
unless, on or prior to the date of such Term Loan, Commerce shall have
received (in form satisfactory to Commerce) a Term Note, duly executed
by Company.
ARTICLE V -- AFFIRMATIVE AND FINANCIAL COVENANTS
So long as this Agreement remains in effect, or as long as there is any
principal or interest due under any of the Notes, unless Bank shall otherwise
consent in writing, Company hereby covenants and agrees that:
5.1 Financial Statements.
(a) Company will deliver to Bank financial
information in such form and detail and at such times as are
satisfactory to Commerce, including, without limitation:
(i) Company's, and its Subsidiaries', if
any, year end financial statements (to include, but not be
limited to, balance sheet, income statement, cash flow
analysis and net worth reconciliation) prepared by, examined
and accompanied by an audit report of, certified public
accountants of recognized standing acceptable to Bank, within
ninety (90) days after the end of each of Company's fiscal
years;
56
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
(ii) Company's, and its Subsidiaries', if
any, interim quarterly financial statements (to include a
profit and loss statement on a consolidated basis), signed and
certified correct by Company's Chief Financial Officer, within
thirty (30) days after the end of each quarter; and
(iii) such other/additional information,
reports or statements respecting Company's, and its
Subsidiaries', if any, business operations and financial
conditions as Bank may reasonably request from time to time.
(b) All such financial statements shall fairly
present the financial position and results of operations of Company and
its Subsidiaries, if any, in accordance with GAAP.
5.2 Certifications; Other Reports.
(a) Company will furnish to Commerce, within thirty
(30) days after the end of each quarter, a certificate of Company
executed by its chief financial officer, stating that Company is not in
Default under this Agreement and that Company is not aware of any event
or condition which with notice or passage of time or both would
constitute an Event of Default under this Agreement, and, where
appropriate, containing the necessary statistical data and calculations
to support said certificate.
(b) Company will furnish to Commerce a copy of each
registration statement and periodic and current report of Company filed
with or furnished to the Securities and Exchange Commission within five
(5) Business Days after such statement or report has been so filed or
furnished.
(c) Company will furnish to Commerce, promptly after
becoming available, a copy of all financial statements, reports, proxy
statements, notices and other communications which Company shall have
sent to the holders of its shares or other securities generally.
(d) Company will promptly, from time to time, furnish
to Commerce such information regarding the business, operations and
financial condition of Company and its Subsidiaries, if any, as
Commerce may reasonably request.
5.3 Payment of Debts, Taxes and Claims. Company shall promptly pay and
discharge prior to delinquency all Indebtedness, accounts, liabilities, taxes,
assessments and other governmental charges or levies imposed upon, or due from,
Company, as well as all claims of any kind (including claims for labor,
materials and supplies) which, if unpaid, might by law become a lien or charge
upon any of its property, except that nothing herein contained shall be
interpreted to require the payment of any such Indebtedness, account, liability,
tax, assessment or charge so long as its validity is being contested in good
faith by appropriate legal proceedings.
57
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
5.4 Maintenance of Existence. Company will preserve and maintain its
corporate existence, franchises and privileges in its jurisdiction of
incorporation, and qualify and remain qualified as a foreign corporation in each
jurisdiction where such qualification is necessary and the failure to be so
qualified would materially adversely affect the business of Company and its
Subsidiaries, if any.
5.5 Insurance. Company will purchase and at all times maintain
insurance including but not limited to: (i) fire, windstorm and other hazards,
casualties and contingencies covered by the "all-risk" form of insurance; (ii)
public liability; (iii) workers' compensation and (iv) property damage as is
customarily maintained by similar businesses and/or as Commerce from time to
time requires. The amounts, limits, forms, deductibles, contents and issuer of
said policies shall be subject to Commerce's reasonable approval. All such
insurance shall provide for noncancellation without at least thirty (30) days
prior written notice to Commerce, and such insurance shall be maintained in full
force and effect at all times during the period of this Agreement and while any
sums outstanding on the Loans remains unpaid.
5.6 Books and Records. Company shall maintain proper books and records,
and account for financial transactions in accordance with generally accepted
accounting practices, consistently applied, and permit Commerce's officers
and/or its authorized representatives or accountants to visit and inspect
Company's properties, examine its books and records, and discuss its accounts
and business with its respective officers, accountants and auditors, all at
reasonable times upon reasonable notice. Without the prior written consent of
Commerce, Company shall not change in any material way the accounting principles
upon which the financial statements referenced in Section 3.7 were prepared and
based.
5.7 Notices.
(a) Company will promptly notify Commerce in writing
of the occurrence of any event which is likely to materially adversely
affect Company or any of its Subsidiaries, if any, or which constitutes
an Event of Default hereunder or under its revolving credit facility
with NationsBank, N.A. in the maximum principal amount of $32,500,000.
(b) Company will, promptly after obtaining knowledge
thereof, notify Commerce in writing of (i) any action, suit,
counterclaim, arbitration or mediation proceeding, investigation or
proceeding at law or in equity or by or before any Governmental
Authority involving a claim not covered by insurance involving Company
or any of its Subsidiaries which (A) has remained unsettled for a
period of one hundred and eighty (180) days from the commencement
thereof and involves claims for damages or relief in an amount greater
than $1,000,000, or (B) has resulted in a final judgment or judgments
for the payment of money in an amount greater than $1,000,000, or (C)
has resulted in a Lien on assets or holdings of Company or any of its
Subsidiaries for an amount exceeding $1,000,000, or (ii) any material
labor dispute resulting in or threatening to result in a strike against
Company or any Subsidiary and which might have a material adverse
effect
58
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
on the operations or financial condition of Company and its
Subsidiaries, or (iii) any action, suit or proceeding at law or in
equity or by or before any Governmental Authority involving any
environmental matter or claim.
5.8 ERISA. As soon as possible and, in any event, within ten (10) days
after Company or any Subsidiary knows or has reason to know that (a) a
Reportable Event has occurred, (b) an accumulated funding deficiency has been
incurred or an application may be or has been made to the Secretary of the
Treasury for a waiver of the minimum funding standard under Section 412 of the
Code with respect to a Plan, (c) a Plan has been or may be terminated, or that
proceedings may be or have been instituted to terminate a Plan, or (d) Company,
a Subsidiary or an ERISA Affiliate will or may incur any liability to or on
account of a Plan under Section 4062, 4063, 4064, 4201 or 4202 of ERISA, Company
will deliver to Commerce a certificate of a senior financial officer of Company
setting forth details as to such occurrence and action, if any, which Company or
the Subsidiary is required or proposes to take, together with any notices
required or proposed to be filed with or by Company, the Subsidiary, the ERISA
Affiliate, the PBGC or the Plan administrator with respect thereto. Copies of
any notices required to be delivered to Commerce hereunder shall be delivered no
later than ten (10) days after the later of the date such notice has been filed
with the Internal Revenue Service or the PBGC or received by Company or the
Subsidiary.
5.9 Financial Covenants. Company shall comply at all times with the
following financial covenants (each of which shall be determined and calculated
in accordance with GAAP, applied on a basis consistent with those applied in the
preparation of the financial statements referred to in Subsection 3.7 above):
(a) Company shall maintain at all times a Tangible
Net Worth of not less than $150,000,000 with such minimum amount
increasing each year by fifty percent (50%) of Company's prior year's
Net Income;
(b) Company shall maintain at all times a Fixed
Charge Coverage Ratio of not less than 2.0 to 1.0; and
(c) Company shall maintain at all times a ratio of
Funded Debt to EBITDA of not greater than 2.5 to 1.0.
5.10 Operating Accounts. Company shall maintain all of its primary
operating accounts at Commerce.
ARTICLE VI -- NEGATIVE COVENANTS
So long as this Agreement remains in effect, or as long as there is any
principal or interest due under any of the Notes, unless Bank shall otherwise
consent in writing, Company hereby covenants and agrees that:
59
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
6.1 Liens. Except for Liens referred to in the audited financial
statements, including the financial statement notes thereto, as at, and for the
fiscal year ended December 31, 1996, Company will not hereafter create, incur or
permit to exist against any of its or any Subsidiary's properties or assets,
real or personal, now or hereafter acquired, any Lien, except (a) purchase money
Liens arising in the ordinary course of business, (b) other similar Liens
arising in the ordinary course of business securing obligations which are not
overdue or are being contested in good faith by appropriate legal proceedings
diligently conducted, provided the amount of such obligations shall not exceed
in the aggregate, during any fiscal year of Company, the sum of $200,000, and
(c) the refinancing, extension or other modification of any Indebtedness secured
by any Lien referred to in such financial statements.
6.2 Fundamental Changes. Company will not (a) merge or consolidate into
or with any other Person, except in the ordinary course of Company's business
consistent with past practices, (b) sell, lease or otherwise transfer all or
substantially all of its assets to any other Person, or (c) permit any
Subsidiary, if any, to merge or consolidate into or with, or to transfer all or
substantially all of its assets to, any Person other than a wholly-owned
Subsidiary of Company. David O'Reilly shall remain the President and Chief
Executive Officer, Larry O'Reilly shall remain the President and Chief Operating
Officer and James Batten shall remain the Chief Financial Officer of Company and
Company shall make no other changes in its executive management without the
prior written consent of Commerce.
6.3 Conduct of Business. Company will not materially alter the
character in which it conducts its business or the locations of such business or
the nature of such business conducted at the date hereof.
6.4 Investments. Company will not acquire for investment purposes,
investments that would not qualify as customary and prudent investments
consistent with the current investment practices of Company.
6.5 Debt. Company shall not create, incur, assume or suffer to exist
any direct or indirect indebtedness, except:
(a) Indebtedness under or pursuant to this Agreement
or the other Loan Documents;
(b) Accounts payable to trade creditors for goods or
services which are not aged more than the later of (i) sixty (60) days
from the billing date, or (ii) ten (10) days from the due date, or
(iii) the "special payment date" offered to Company from time to time
by a particular trade creditor, and current operating liabilities
(other than for borrowed money) which are not more than thirty (30)
days past due, in each case incurred in the ordinary course of
business, as presently conducted, and paid within the specified time,
unless contested in good faith and by appropriate proceedings; and
60
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
(c) Company's current revolving credit facility with
NationsBank, N.A. in the maximum principal amount of $32,500,000.
ARTICLE VII -- DEFAULT
7.1 Events of Default. Each of the following events shall constitute an
"Event of Default" under this Agreement:
(a) failure by Company to pay in full when due
(whether by demand, acceleration or otherwise) any principal or
interest on any Note; or
(b) failure by Company to pay in full any amount of
any fee contemplated hereunder within five (5) Business Days after
written notice of nonreceipt of such amount to Company by Commerce; or
(c) any failure by Company in the performance or
observance of any agreement, term, covenant, condition or obligation
hereunder, under any Note or under any Loan Document and such failure
continues for fifteen (15) Business Days after written notice thereof
to Company by Commerce; or
(d) any information, certification, financial
statement, representation or warranty made herein, in any other Loan
Document or in any other writing furnished by or on behalf of Company
to Commerce in connection with the Loans or this Agreement shall be or
become incomplete, false or misleading in any material respect; or
(e) Company or any Subsidiary shall default in the
payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any other Indebtedness of, or guaranteed
by, Company or such Subsidiary, as the case may be, or Company or any
Subsidiary shall default in the performance or observance of any
obligation or condition with respect to any such other Indebtedness if
the effect of such default (after giving effect to any applicable grace
period) is to accelerate the maturity of any such Indebtedness or to
permit the holder or holders thereof, or any trustee or agent for such
holders, to cause such Indebtedness to become due and payable prior to
its expressed maturity or any such Indebtedness shall become due prior
to its maturity; or
(f) Company shall (i) generally not pay, or be unable
to pay, or admit in writing its inability to pay its debts as such
debts become due; or (ii) makes an assignment for the benefit of
creditors, or petitions or applies to any tribunal for the appointment
of a custodian, receiver, or trustee for it or for a substantial part
of its assets; or (iii) commences any proceeding under any bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution, or
liquidation law or statute of any jurisdiction, whether now or
hereafter in effect; or (iv) has any such bankruptcy, reorganization,
dissolution or readjustment of debt petition or application filed or
any such proceeding commenced
61
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
against it which is not discharged within thirty (30) days; or (v)
takes any action indicating consent to, approval of, or acquiescence
in any such proceeding, or order for relief, or the appointment of a
custodian, receiver, or trustee for all or any substantial part of its
assets and properties; or (vi) suffers any judgment, writ of
attachment, execution or similar process to be issued or levied
against it, any Collateral or all or a substantial part of its
property or assets which is not released, stayed or bonded within
thirty (30) days; or
(g) a Plan shall fail to maintain the minimum funding
standard required by Section 412 of the Code for any plan year or a
waiver of such standard is sought or granted under Section 412(d); or a
Plan is, shall have been or is likely to be terminated or the subject
of termination proceedings under ERISA; or Company or a Subsidiary or
an ERISA Affiliate has incurred or is likely to incur a liability to or
on account of a Plan under Section 4062, 4063, 4064, 4201 or 4204 of
ERISA, and there shall result from any such event or events either a
liability or a material risk of incurring a liability to the PBGC or a
Plan, which will have a material adverse effect upon the business,
operations or the financial condition of Company and its Subsidiaries.
7.2 Remedies. Upon the occurrence of an Event of Default, Commerce may,
but shall not be obligated to, exercise the following remedies, in its sole
discretion and without demand or notice of any kind, which are hereby expressly
waived:
(a) terminate the Commitment and refuse to make
further Loans hereunder;
(b) declare the unpaid balance of any outstanding
Note and accrued interest thereon, immediately due and payable and
proceed to collect same;
(c) exercise all or any of its rights, powers and
remedies given it by this Agreement or the Notes; and
(d) exercise all or any of its rights and remedies as
it may otherwise have under applicable law.
Commerce may apply all moneys recovered through the exercise of its respective
remedies to the payment of the repayment and other obligations of Company under
this Agreement in such order of priority as determined by Commerce in its sole
judgment.
ARTICLE VIII -- MISCELLANEOUS
8.1 Amendment and Waiver. Neither this Agreement nor any provisions
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by an authorized officer of Company and Commerce,
respectively.
62
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
8.2 Notices. All notices, demands or other communications hereunder
shall be given or made in writing and shall be delivered personally, or sent by
registered or certified mail, postage prepaid, return receipt requested, to the
party or parties to whom they are directed at the following addresses, or at
such other addresses as may be designated by notice from such party to all other
parties:
Company: O'Reilly Automotive, Inc.
233 South Patterson
Springfield, Missouri 65802
Attn: Mr. James Batten
Bank: Commerce Bank, N.A.
1345 East Battlefield
P.O. Box 2817
Springfield, Missouri 65801-2817
Attn: President
with a copy to: Commerce Bancshares, Inc.
1000 Walnut
P.O. Box 13686
Kansas City, Missouri 64199-3686
Attn: General Counsel
Any notice, demand or other communication given in a manner prescribed in this
paragraph shall be deemed to have been delivered on receipt; provided, however,
that any notice sent by mail, postage prepaid, shall in any event be deemed
given on the third (3rd) day following delivery thereof to the United States
Postal Service.
8.3 No Waiver; Cumulative Remedies. Any forbearance, failure, or delay
by Bank in exercising any right, power or remedy shall not preclude the further
exercise thereof, and all of Bank's rights, powers and remedies shall continue
in full force and effect until specifically waived in writing by Commerce. The
rights, remedies, powers and privileges of Bank are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law. Company shall
pay all reasonable and necessary expenses (including attorneys' fees and
disbursements) incurred in connection with the collection or enforcement of this
Agreement and the Notes.
8.4 Survival. The representations and warranties of Company contained
herein shall survive the making of Loans and shall remain effective until all
indebtedness contemplated hereby shall have been paid by Company in full.
8.5 Payment of Expenses and Taxes. Company shall, whether or not the
transactions hereby contemplated are consummated, (i) pay all reasonable
out-of-pocket costs and expenses in
63
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
connection with the preparation, execution, delivery and enforcement of this
Agreement, the Notes, the documents and instruments referred to herein and
any amendment, waiver or consent relating hereto or thereto, and (ii) pay and
hold Commerce harmless from and against any and all current and future stamp and
other similar taxes with respect to the foregoing matters and save Commerce
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to Commerce)
to pay such taxes.
8.6 Indemnity. Company shall indemnify Commerce from and against any
and all liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements whatsoever which may be
imposed on, incurred by or asserted against Commerce relating to or resulting
from this Agreement and the Notes and any other document or instrument delivered
hereunder or thereunder and all transactions and events at any time associated
therewith (including the enforcement of any right of Commerce or the defense of
any action or inaction by Commerce in connection therewith), except to the
limited extent such liabilities, obligations, claims, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements are
proximately caused by Commerce's gross negligence or willful misconduct. If any
Person (including, without limitation, Company or any of its Subsidiaries) ever
alleges such gross negligence of willful misconduct, the indemnification
provided for in this Subsection 8.6 shall nonetheless be paid upon demand,
subject to later adjustment or reimbursement, until such time as a court of
competent jurisdiction enters a final judgment as to the extent and effect of
the alleged gross negligence or willful misconduct.
8.7 Right of Setoff. In addition to any rights now or hereafter granted
under applicable law or otherwise, and not by way of limitation of any such
rights, upon the occurrence of an Event of Default, Commerce is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to Company or to any other person, any such
notice being hereby expressly waived, to setoff and to appropriate and apply any
and all deposits (general or special) and any other indebtedness at any time
held or owing by Commerce to or for the credit or the account of Company against
and on account of the obligations and liabilities of Company to Commerce under
this Agreement and the Notes, including (without limitation) all claims of any
nature or description arising out of or connected with this Agreement and the
Notes, irrespective of whether or not Commerce shall have made any demand
hereunder and although such obligations, liabilities or claims, or any of them,
shall be contingent or unmatured.
8.8 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Company, Commerce and their respective successors and
assigns; provided, however, that Company may not transfer any of its interest
under this Agreement without prior written consent of Commerce, which consent
may be granted or withheld in the sole discretion of Bank.
8.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any party hereto may execute this Agreement by signing any such counterpart.
64
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
8.10 Severability. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
8.11 Governing Law. This Agreement and all rights hereunder shall be
governed by, and construed in accordance with, the laws of the State of
Missouri.
8.12 Acknowledgments and Admissions. Company hereby represents,
warrants, acknowledges and admits that (a) it has been advised by counsel on the
negotiation, execution and delivery of this Agreement, the Notes and any other
instrument or document entered into in connection herewith, (b) Company has made
an independent decision to enter into this Agreement and such other instruments
and documents, without reliance on any representation, warranty, covenant or
undertaking by Commerce, whether written, oral or implicit, other than as
expressly set forth in this Agreement, (c) other than as expressly set forth in
this Agreement, Commerce has not made any representation, covenant or
undertaking to Company in connection with the rights and obligations of Company
pursuant to this Agreement or any such instruments and documents, (d) there are
no representations, warranties, covenants or undertakings or agreements by
Commerce as to this Agreement or such instruments and documents except as
expressly set forth herein or therein, (e) Commerce has no fiduciary obligations
toward Company with respect to this Agreement, any such instruments and
documents or the transactions contemplated hereby or thereby, (f) the
relationship between Commerce and Company, pursuant to this Agreement and such
instruments and documents, is and shall be solely that of creditor and debtor,
respectively, (g) no joint venture exists between Commerce and Company, and (h)
Commerce has relied upon the truthfulness of the foregoing acknowledgments in
deciding to execute and deliver this Agreement and to accept the Notes.
8.13 Entire Agreement.
(a) This Agreement and the Exhibits embody the entire
agreement and understanding between the parties hereto and supersedes
all prior agreements and understandings relating to the subject matter
hereof.
(b) ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT,
INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO
PROTECT YOU (BORROWER(S)) AND US (CREDITOR) FROM MISUNDERSTANDING OR
DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE
CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN
WRITING TO MODIFY IT.
65
<PAGE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 10.19 - Loan Agreement (continued)
8.14 Waiver of Jury Trial; Limitation on Damages. All parties to this
Agreement hereby irrevocably waive (a) all right to a trial by jury in any
action or proceeding relating to transactions under this Agreement, and (b) all
right to claim or recover in any such action or proceeding any special,
exemplary, punitive or consequential damages, or damages other than, or in
addition to, actual damages.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
COMMERCE BANK, N.A.
By: /s/ Robert Fulp
------------------------
Title: VP
--------------------
O'REILLY AUTOMOTIVE, INC.
By: /s/ James R. Batten
-----------------------
Title: CFO & Treasurer
--------------------
66
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet at September 30, 1997 (Unaudited) and the
Condensed Consolidated Statement of Income for the Nine Months Ended September
30, 1997 (Unaudited) and is qualified in its entirety by reference to such
financial statements.</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,625
<SECURITIES> 1,000
<RECEIVABLES> 14,081
<ALLOWANCES> 444
<INVENTORY> 107,330
<CURRENT-ASSETS> 2,759
<PP&E> 125,524
<DEPRECIATION> 26,924
<TOTAL-ASSETS> 229,721
<CURRENT-LIABILITIES> 37,782
<BONDS> 0
0
0
<COMMON> 211
<OTHER-SE> 175,654
<TOTAL-LIABILITY-AND-EQUITY> 229,721
<SALES> 238,437
<TOTAL-REVENUES> 238,833
<CGS> 138,000
<TOTAL-COSTS> 72,549
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 630
<INTEREST-EXPENSE> 83
<INCOME-PRETAX> 28,201
<INCOME-TAX> 10,491
<INCOME-CONTINUING> 17,710
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,710
<EPS-PRIMARY> 0.84
<EPS-DILUTED> 0.84
</TABLE>
O'REILLY AUTOMOTIVE, INC. AND SUBSIDIARIES
Exhibit 99.1 - Certain Risk Factors
The following factors could affect the Company's actual results, including its
revenues, expenses and net income, and could cause them to differ from any
forward-looking statements made by or on behalf of the Company.
Competition
The Company competes with a large number of retail and wholesale automotive
aftermarket product suppliers. The distribution of automotive aftermarket
products is a highly competitive industry, particularly in the more densely
populated market areas served by the Company. Competitors include national and
regional automotive parts chains, independently owned parts stores (some of
which are associated with national auto parts distributors or associations),
automobile dealerships, mass or general merchandise, discount and convenience
chains that carry automotive products, independent warehouse distributors and
parts stores and national warehouse distributors and associations. Some of the
Company's competitors are larger than the Company and have greater financial
resources than the Company.
No Assurance of Future Growth
Management believes that the Company's ability to open additional stores at an
accelerated rate will be a significant factor in achieving its growth objectives
for the future. The ability of the Company to accomplish its growth is
dependent, in part, on matters beyond the Company's control, such as weather
conditions, zoning and other issues related to new store site development, the
availability of qualified management personnel and general business and economic
conditions. No assurance can be given that the Company's current growth rate can
be maintained.
Dependence Upon Key and Other Personnel
The success of the Company has been largely dependent on the efforts of certain
key personnel of the Company, including David E. O'Reilly, Lawrence P. O'Reilly,
Charles H. O'Reilly, Jr., Rosalie O'Reilly Wooten and Ted F. Wise. The loss of
the services of one or more of these individuals could have a material adverse
effect on the Company's business and results of operations. Additionally, in
order to successfully implement and manage its growth strategy, the Company will
be dependent upon its ability to continue to attract and retain qualified
personnel. There can be no assurance that the Company will be able to continue
to attract such personnel.
Concentration of Ownership by Management
The Company's executive officers and directors as a group beneficially own a
substantial percentage of the outstanding shares of the Company's common stock.
These officers and directors have the ability to exercise effective voting
control of the Company, including the election of all of the Company's
directors, and to effectively determine the vote on any matter being voted on by
the Company shareholders, including any merger, sale of assets or other change
in control of the Company.
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