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Item 1.01.
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Entry into a Material Definitive Agreement.
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Underwriting Agreement
On March 25, 2020, O’Reilly Automotive,
Inc. (the “Company”) entered into an Underwriting Agreement (the “Underwriting Agreement”) with J.P. Morgan
Securities LLC and U.S. Bancorp Investments, Inc., as the representatives of the underwriters named on Schedule I thereto (the
“Underwriters”), with respect to the Company’s issuance and sale of $500 million aggregate principal amount of
the Company’s 4.200% Senior Notes due 2030 (the “Notes”). The issuance and sale of the Notes closed on March
27, 2020 (the “Closing Date”). The Underwriting Agreement includes customary representations, warranties and covenants.
Under the terms of the Underwriting Agreement, the Company has agreed to indemnify the Underwriters against certain liabilities.
The estimated net proceeds from the offering
of the Notes are expected to be approximately $495.7 million, after deducting the underwriting discounts and estimated offering
expenses payable by the Company. The Company intends to use the net proceeds from the offering of the Notes to repay outstanding
borrowings under its credit facility and, to the extent any net proceeds remain, for general corporate purposes, which may include
ordinary course working capital, repurchases of shares of common stock, and investments in other business opportunities, including
acquisitions, and to pay related fees and expenses.
The above description of the Underwriting
Agreement does not purport to be complete and is qualified in its entirety by reference to the Underwriting Agreement, attached
as Exhibit 1.1 hereto, and incorporated herein by reference.
Supplemental Indenture
The terms of the Notes are governed by an
Indenture, dated as of May 20, 2019 (the “Base Indenture”), by and between the Company and U.S. Bank National Association
(the “Trustee”), as supplemented by the Second Supplemental Indenture, dated as of the Closing Date (the “Supplemental
Indenture” and, together with the Base Indenture, the “Indenture”), by and between the Company and the Trustee.
The Notes mature on April 1, 2030 and bear
interest at a rate of 4.200% per year. Interest on the Notes is payable on April 1 and October 1 of each year, beginning on October
1, 2020. The Notes are the Company’s general unsecured senior obligations and are equal in right of payment with all of the
Company’s other existing and future unsecured and unsubordinated indebtedness, including the Company’s credit facility
and the Company’s 4.875% Senior Notes due 2021, the Company’s 4.625% Senior Notes due 2021, the Company’s 3.800%
Senior Notes due 2022, the Company’s 3.850% Senior Notes due 2023, the Company’s 3.550% Senior Notes due 2026, the
Company’s 3.600% Senior Notes due 2027, the Company’s 4.350% Senior Notes due 2028 and the Company’s 3.900% Senior
Notes due 2029 (such series of notes, collectively, the “Existing Notes”). The Notes are effectively junior to the
Company’s future secured indebtedness, if any, to the extent of the value of the collateral securing such indebtedness.
The Notes are not initially guaranteed by
any of the Company’s subsidiaries. However, if in the future, any of the Company’s subsidiaries incurs or guarantees
obligations under the Company’s credit facility or certain other credit facility debt or capital markets debt of the Company
or any future subsidiary guarantor, such subsidiary would be required to guarantee the Notes on a senior unsecured basis. The
Company would be permitted to release any such future guarantee without the consent of holders of the Notes under the circumstances
described in the Indenture.
Prior to January 1, 2030 (three months prior
to the maturity date (such date, the “Par Call Date”)), the Notes are redeemable, in whole, at any time, or in part,
from time to time, at the Company’s option, for cash, at a redemption price, plus accrued and unpaid interest to, but not
including, the redemption date, equal to the greater of (1) 100% of the principal amount thereof, or (2) the sum of the present
values of the remaining scheduled payments of principal and interest thereon that would have been due if the Notes matured on the
Par Call Date, not including accrued and unpaid interest to, but not including, the redemption date, discounted to the redemption
date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the applicable Treasury Yield (as defined
in the Indenture) plus 50 basis points. On or after the Par Call Date, the Notes are redeemable, in whole, at any time, or in part,
from time to time, at the Company’s option, for cash, at a redemption price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest to, but not including, the redemption date.
Upon the occurrence of a Change of Control
Triggering Event (as defined in the Indenture), unless the Company has exercised its right to redeem the Notes, each holder of
Notes will have the right to require the Company to repurchase all or a portion of such holder’s Notes, for cash, at a repurchase
price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, on the amount repurchased
to, but not including, the date of repurchase.
The Indenture contains covenants that limit
the ability of the Company and each of its subsidiaries, as applicable to, among other things: (i) create certain liens on its
assets to secure certain debt; (ii) enter into certain sale and leaseback transactions; and (iii) in the case of the Company,
merge or consolidate with another company or transfer all or substantially all of the Company’s property, in each case as
set forth in the Indenture. These covenants are, however, subject to a number of important limitations and exceptions.
The Indenture also contains customary event
of default provisions including, among others, the following: (i) default in the payment of principal of or premium, if any, on
any Note when due at its maturity; (ii) default for 30 days in the payment when due of interest on the Notes; (iii) failure to
comply with the other covenants or agreements in the Indenture or the Notes and failure to cure or obtain a waiver of such default
within 90 days following notice as described below; (iv) a default under any debt for money borrowed by the Company or any future
subsidiary guarantor that results in acceleration of the maturity of such debt, or failure to pay any such debt within any applicable
grace period after final stated maturity, in an aggregate amount greater than (a) $25.0 million, at any time that any Existing
Notes remain outstanding, or (b) $100.0 million at any time that no Existing Notes remain outstanding, without such debt having
been discharged or acceleration having been rescinded or annulled; and (v) certain events of bankruptcy, insolvency or reorganization
with respect to the Company or any future subsidiary guarantor that is a Significant Subsidiary (as defined in the Indenture),
in each case as set forth in the Indenture. In the case of an event of default, other than a default under clause (v) above, the
Trustee or the holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Company
(and to the Trustee if the notice is given by the holders of the Notes), may declare the principal of and accrued and unpaid interest,
if any, on the Notes to be immediately due and payable. If an event of default under clause (v) above occurs, the principal of
and accrued and unpaid interest, if any, on the Notes will be immediately due and payable without any act on the part of the Trustee
or holders of the Notes.
The Trustee is also a lender under the Company’s
credit facility, and an affiliate of the Trustee was an underwriter in the offering of the Notes.
The offering of the Notes was registered
under the Securities Act of 1933, as amended, pursuant to the Company’s shelf registration statement on Form S-3 which became
automatically effective upon filing with Securities and Exchange Commission (the “SEC”) on March 1, 2019 (File No.
333-230033).
The above description of the Indenture and
the Notes does not purport to be complete and is qualified in its entirety by reference to the Base Indenture (which was previously
filed by the Company with the SEC) and the Second Supplemental Indenture (including the Form of Note included therein), attached
as Exhibit 4.1 and referenced as Exhibit 4.2 hereto, respectively, and incorporated herein by reference.
In addition to the specific agreements and
arrangements described above, from time to time, certain of the underwriters of the Notes and/or their respective affiliates have
been, and may in the future be, lenders under the Company’s credit facility and have directly and indirectly engaged, and
may engage in the future, in investment and/or commercial banking transactions with the Company for which they have received, or
may receive, customary compensation and expense reimbursement.