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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
June 29, 1998
Date of Report (Date of earliest event reported)
AUTOZONE, INC.
(Exact Name of Registrant as Specified in Its Charter)
Nevada
(State or Other Jurisdiction of Incorporation)
1-10714 62-1482048
(Commission File Number) (I.R.S. Employer
Identification No.)
123 South Front Street, Memphis, Tennessee 38103
(Address of Principal Executive Offices)(Zip Code)
(901) 495-6500
(Registrant's Telephone Number, Including Area Code)
(Not applicable)
(Former name or former address, if changed since last report.)
Item 2. Acquisition or Disposition of Assets
On June 29, 1998, AutoZone, Inc. (the "Company") acquired all of the
outstanding capital stock of Chief Auto Parts Inc. ("Chief"), a retailer
of automotive parts and accessories, for approximately $75 million dollars
in cash, in an arms length transaction. The shares were acquired
from the prior shareholders of Chief, principally affiliates of Trust
Company of the West ("TCW"). Funds for the transaction were from the
Company's existing credit lines. There are no material relationships
between the Company and Chief or the Company and TCW.
Chief will be operated by the Company as a wholly-owned subsidiary.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
Financial statements of acquired business are omitted pursuant to
Rule 3-05(b)(2)(i) of Regulation S-X.
(b) Pro forma financial statements.
Pro forma financial statements are omitted pursuant to Rule 11-01(c)
of Regulation S-X.
(c) Exhibits
2.1 Agreement and Plan of Merger by and among AutoZone, Inc., a Nevada
corporation, Chief Auto Parts Inc., a Delaware corporation, and
Orange Sub, Inc., a Delaware corporation dated as of May 11, 1998.
99.1 Press Release dated June 29, 1998.
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 hereunto duly authorized.
AUTOZONE, INC.
Date: July 1, 1998 By: /s/ Harry L. Goldsmith
-----------------------------------
Harry L. Goldsmith
Senior Vice President
EXHIBIT INDEX
2.1 Agreement and Plan of Merger by and among AutoZone, Inc., a Nevada
corporation, Chief Auto Parts Inc., a Delaware corporation, and
Orange Sub, Inc., a Delaware corporation dated as of May 11, 1998.
99.1 Press Release dated June 29, 1998.
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by and among
AutoZone, Inc., a Nevada corporation,
Chief Auto Parts Inc., a Delaware corporation,
and
Orange Sub, Inc., a Delaware corporation
Dated as of: May 11, 1998
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 1
1.1. DEFINED TERMS 1
ARTICLE II.THE MERGER 12
2.1 THE MERGER 12
2.2. EFFECT OF THE MERGER. 12
2.3. DISSENTING SHARES 13
2.4. PAYING AGENT AND SURRENDER OF SHARES 13
2.5. STOCKHOLDERS TO HAVE NO FURTHER RIGHTS 14
2.6. COMPANY STOCK OPTIONS AND COMPANY WARRANTS 14
2.7. STOCKHOLDERS MEETING OR STOCKHOLDERS CONSENT 15
2.8. CLOSING OF THE COMPANY'S TRANSFER BOOKS 15
2.9. CHARTER DOCUMENTS; DIRECTORS; OFFICERS 16
ARTICLE III. ESCROW AGREEMENT; NET WORTH ADJUSTMENT 16
3.1. ESCROW AGREEMENT 16
3.2. NET WORTH ADJUSTMENT 16
ARTICLE IV.CLOSING 17
4.1. CLOSING 17
4.2. DELIVERIES AT CLOSING 17
4.3. CLOSING COSTS 18
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 18
5.1. ORGANIZATION OF THE COMPANY 18
5.2. SUBSIDIARIES 18
5.3. AUTHORIZATION 19
5.4. ABSENCE OF CERTAIN CHANGES OR EVENTS 19
5.5. PERSONAL PROPERTY LEASES 22
5.6. FACILITIES: OWNED AND LEASED 22
5.7. CONTRACTS AND COMMITMENTS 23
5.8. ABSENCE OF BREACHES AND DEFAULTS. 25
5.9. PERMITS, CONSENTS AND APPROVALS 25
5.10. NO CONFLICT OR VIOLATION 25
5.11. FINANCIAL STATEMENTS 26
5.12 LITIGATION 26
5.13. LABOR MATTERS 26
5.14. BOOKS AND RECORDS 27
5.15. COMPLIANCE WITH LAW 27
5.16. NO OTHER AGREEMENTS TO SELL ASSETS OR
CAPITAL STOCK OF THE COMPANY 27
5.17. PROPRIETARY RIGHTS 27
5.18. EMPLOYEE BENEFIT PLANS 28
5.19. TAX MATTERS 30
5.20. PURCHASE COMMITMENTS AND OUTSTANDING BIDS 32
5.21. PAYMENTS 32
5.22. COMPLIANCE WITH ENVIRONMENTAL LAWS 32
5.23. BANKING RELATIONSHIPS 34
5.24. SEC DOCUMENTS; UNDISCLOSED LIABILITIES 34
5.25. MATERIAL MISSTATEMENTS OR OMISSIONS 34
ARTICLE VI.REPRESENTATIONS AND WARRANTIES OF THE PARENT AND
THE PURCHASER 34
6.1. ORGANIZATION 34
6.2. AUTHORIZATION 34
6.3. CONSENTS AND FILINGS 35
6.4. NO CONFLICT OR VIOLATION 35
ARTICLE VII.ADDITIONAL AGREEMENTS AND COVENANTS OF THE
COMPANY, THE PURCHASER AND THE PARENT 35
7.1. FURTHER ASSURANCES 35
7.2. NO SOLICITATION 36
7.3. NOTIFICATION OF CERTAIN MATTERS 36
7.4. ACCESS TO INFORMATION 37
7.5. CONDUCT OF BUSINESS 37
7.6. BOOKS AND RECORDS; TAX MATTERS 38
7.7. FACILITY LEASES 39
7.8. FIRST QUARTER 1998 FORM 10-Q 39
ARTICLE VIII.CONDITIONS TO THE OBLIGATIONS OF THE COMPANY,
THE PARENT AND THE PURCHASER 40
8.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
TRANSACTIONS 40
8.2. CONDITIONS TO THE PARENT'S AND THE PURCHASER'S
OBLIGATIONS TO EFFECT THE TRANSACTIONS 40
8.3. CONDITIONS TO THE COMPANY'S OBLIGATIONS TO EFFECT
THE TRANSACTIONS 41
ARTICLE IX.SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATIONS 42
9.1. SURVIVAL OF REPRESENTATIONS, ETC. 42
9.2. INDEMNIFICATIONS 42
ARTICLE X. MISCELLANEOUS 44
10.1. TERMINATION 44
10.2. ASSIGNMENT 45
10.3. NOTICES 46
10.4. ENTIRE AGREEMENT; AMENDMENTS;
EXTENSIONS AND WAIVERS 46
10.5. MULTIPLE COUNTERPARTS 47
10.6. INVALIDITY 47
10.7. TITLES 47
10.8. PUBLICITY 47
10.9. CONFIDENTIAL INFORMATION 47
10.10. CUMULATIVE REMEDIES 48
10.11. GOVERNING LAW; JURISDICTION 49
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of this 11th day
of May, 1998 (this "Agreement"), is by and among AutoZone, Inc.,
a Nevada corporation (the "Parent"), Chief Auto Parts Inc., a
Delaware corporation (the "Company"), and Orange Sub, Inc., a
Delaware corporation (the "Purchaser").
RECITALS
A. The respective Boards of Directors of the Parent, the
Purchaser and the Company have approved the acquisition of the
Company pursuant to the terms of this Agreement.
B. In furtherance of such acquisition, the respective Boards of
Directors of the Parent, the Purchaser and the Company have
approved the merger of the Purchaser with and into the Company
(the "Merger"), in accordance with the General Corporation Law of
the State of Delaware (the "Delaware Law"), pursuant to which the
Company will be the surviving corporation in the Merger.
C. Pursuant to the Merger, each Share (as defined below) shall
be converted into the right to receive the Initial Merger
Consideration (as defined below), subject to possible adjustment
as provided in Article III hereof.
D. The holders of a majority of the outstanding shares of
common stock of the Company, $.01 par value ("Company Common
Stock"), have approved the Merger and have entered into a
Stockholders Agreement dated as of the date hereof (the
"Stockholders Agreement") whereby such holders have agreed to
vote all of the shares of Company Common Stock held by such
holders in favor of the Merger and the terms and provisions of
the Agreement (including without limitation Section 9.2 hereof)
and have agreed to execute the Escrow Agreement (as defined
below) on or prior to the Effective Date.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants
and premises contained herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1. Defined Terms
. As used herein, the terms below shall have the
following meanings. Any of such terms, unless the context
otherwise requires, may be used in the singular or plural,
depending upon the reference.
"1997 Indenture" shall mean the Indenture dated as of
May 28, 1997 between the Company and First Trust National
Association, as trustee.
"Accounting Firm" shall have the meaning set forth in
Section 3.2 hereof.
"Action" shall mean any action, claim, suit,
litigation, proceeding, labor dispute, arbitral action,
governmental audit, inquiry, criminal prosecution, investigation
or unfair labor practice charge or filed complaint.
"Affiliate" shall have the meaning set forth in the
Exchange Act.
"Aggregate Escrow Amount" shall mean $6,000,000.
"Agreement" shall mean this Agreement and Plan of
Merger dated as of May 11, 1998 by and among the Parent, the
Company and the Purchaser.
"Assets" shall mean any right, title and interest of
the Company in and to the business, properties, assets and rights
of any kind, whether tangible or intangible, real or personal and
constituting, or used or useful in connection with, or related
to, the Company or in which the Company has any interest,
including without limitation any right, title and interest of the
Company in and to the following:
(a) all accounts and notes receivable (whether current
or noncurrent), refunds, deposits, prepayments or prepaid
expenses (including without limitation any prepaid insurance
premiums) of the Company;
(b) all Contract Rights, to the extent transferable;
(c) all Leases;
(d) all Leasehold Estates, to the extent transferable;
(e) all Leasehold Improvements;
(f) all Fixtures and Equipment;
(g) all Inventory;
(h) all Books and Records;
(i) all Proprietary Rights;
(j) all Permits;
(k) all computers and software of the Company;
(l) all Insurance Policies;
(m) all Real Property;
(n) all supplies, sales literature, promotional
literature, customer, supplier and distributor lists, art work,
display units, telephone and fax numbers and purchasing records
of the Company;
(o) all rights under or pursuant to all warranties,
representations and guarantees made by suppliers in connection
with the Assets or services furnished to the Company pertaining
to the Business or affecting the Assets, to the extent such
warranties, representations and guarantees are assignable;
(p) all deposits and prepaid expenses of the Company;
(q) all claims, causes of action, choices in action,
rights of recovery and rights of set-off of any kind of the
Company, against any person or entity, including without
limitation any liens, security interests, pledges or other rights
to payment or to enforce payment in connection with products
delivered by the Company on or prior to the Effective Date;
(r) all goodwill related to the Business; and
(s) cash.
"Benefit Arrangement" means any material benefit
arrangement that is not an Employee Benefit Plan, including (i)
any employment or consulting agreement, (ii) any arrangement
providing for insurance coverage or/workers' compensation
benefits, (iii) any incentive bonus or deferred bonus
arrangement, (iv) any arrangement providing termination
allowance, severance, or similar benefits, (v) any equity
compensation plan, (vi) any deferred compensation plan and (vii)
any compensation policy and practice.
"Books and Records" shall mean (a) all records and
lists of the Company pertaining to the Assets, (b) all records
and lists pertaining to the Business or customers, suppliers or
Personnel, and (c) all books, ledgers, files, reports, plans,
drawings and operating records of every kind maintained by the
Company.
"Business" shall mean the Company's business of selling
automotive parts, including new and remanufactured hard parts,
accessories and maintenance items.
"Certificate of Merger" shall mean that certain
Certificate of Merger dated as of the Effective Date relating to
the Merger to be filed with the Secretary of State of the State
of Delaware on the Effective Date.
"Certificates" shall have the meaning set forth in
Section 2.4 hereof.
"CERCLA" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. 9601 et
seq.).
"Claim" shall have the meaning set forth in Section
9.2(c) hereof.
"Claim Expiration Date" shall have the meaning set
forth in the Escrow Agreement.
"Claim Notice" shall have the meaning set forth in
Section 9.2(c) hereof.
"Clause A Amount" shall have the meaning set forth in
Section 2.2(a) hereof.
"Clause B Amount" shall have the meaning set forth in
Section 2.2(a) hereof.
"Closing" shall mean the closing of the Transactions on
and as of the Effective Date.
"Closing Balance Sheet" shall mean the unaudited
balance sheet of the Company as of the close of business on the
Effective Date, prepared on a basis consistent with the Company's
past practice in prior periods and in accordance with GAAP.
"Closing Balance Sheet Amount" shall mean Total Assets,
as set forth on the Closing Balance Sheet, less Total
Liabilities, as set forth on the Closing Balance Sheet, excluding
the impact (if any) on Total Assets or Total Liabilities from
(i) any exercise of any Company Stock Options and/or Company
Warrants listed on Schedule 5.1(b) and the collection of any
outstanding stockholder notes receivable listed on Schedule
5.1(c) (including any tax effect related thereto) and (ii) the
difference between (x) the amount of the accrual associated with
the Deferred Compensation Plan for deferred compensation to be
paid to the employees set forth on Schedule 5.18(c) (which amount
shall accrue at a rate of $98,000 per month) and (y) the amount
that the Company pays or is obligated to pay under the Deferred
Compensation Plan to such employees on the Effective Date (which
amount shall not exceed $1.2 million in the aggregate).
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations thereunder.
"Commission" shall mean the Securities and Exchange
Commission.
"Company" shall mean Chief Auto Parts Inc., a Delaware
corporation.
"Company Common Stock" shall have the meaning set forth
in Recital D.
"Company SEC Documents" shall have the meaning set
forth in Section 5.24 hereof.
"Company Stock Options" shall mean the options to
purchase Company Common Stock issued pursuant to the Company
Stock Option Plans.
"Company Stock Option Plans" shall mean the Company's
1997 Employee Option Plan, as amended, and the Company's 1994
Executive Option Plan, as amended.
"Company Warrants" shall mean the warrants for the
purchase of Company Common Stock issued on June 27, 1994.
"Confidential Information" shall have the meaning set
forth in Section 10.9(b) hereof.
"Constituent Corporations" shall have the meaning set
forth in Section 2.1 hereof.
"Contract" shall mean any agreement, contract, note,
loan, evidence of indebtedness, purchase, order, letter of
credit, indenture, security or pledge agreement, franchise
agreement, covenant not to compete, employment agreement,
license, instrument, obligation or commitment to which the
Company is a party or is bound or to which any of the Assets are
subject, whether oral or written, express or implied, but
excluding all Leases.
"Contract Rights" shall mean all of the rights and
obligations under the Contracts of the Company.
"Copyrights" shall mean registered copyrights,
copyright applications and unregistered copyrights.
"Court Order" shall mean any judgment, award, decision,
consent decree, injunction, ruling, writ or order of any federal,
state or local court or governmental agency, department or
authority that is binding on any person or its property under
applicable law.
"Damages" shall have the meaning set forth in Section
9.2(a)(iii) hereof.
"Default" shall mean (i) a breach of or default under
any Contract or Lease, (ii) the occurrence of an event that with
the passage of time or the giving of notice or both would
constitute a breach of or default under any Contract or Lease, or
(iii) the occurrence of an event that with or without the passage
of time or the giving of notice or both would give rise to a
right of termination, renegotiation or acceleration under any
Contract or Lease.
"Deferred Compensation Plan" shall mean the Company's
1994 Executive Target Bonus Plan.
"Delaware Law" shall have the meaning set forth in
Recital B.
"Dissenting Shares" shall mean Shares held by any
Stockholder who becomes entitled to the payment of the fair value
for his/her/its Shares under the Delaware Law if the Delaware Law
provides for such payment in connection with the Merger.
"Effective Date" shall have the meaning set forth in
Section 2.1 hereof.
"Employee Benefit Plan" means any employee benefit
plan, as defined in Section 3(3) of ERISA.
"Employee Plans" shall have the meaning set forth in
Section 5.18(a) hereof.
"Encumbrance" shall mean any claim, lien, pledge,
option, charge, easement, security interest, deed of trust,
mortgage, right-of-way, encroachment, building or use
restriction, conditional sales agreement, encumbrance or other
right of third parties, whether voluntarily incurred or arising
by operation of law, and includes, without limitation, any
agreement to give any of the foregoing in the future, and any
contingent sale or other title retention agreement or lease in
the nature thereof.
"Environmental Condition" shall mean the existence of,
or introduction into the environment of, any Hazardous Substance
under any Facility or any asset currently or previously owned,
leased or operated by the Company during the period the Company
owned, operated or leased such Facility or asset, which
constitutes a violation of Environmental Law as in effect on the
date of this Agreement, regardless of when such event occurred,
as a result of which the Company has or may become liable to any
Person or has or may become responsible for any environmental
remediation, or by reason of which any Facility or any asset
currently owned, leased or operated by the Company has or may
become subject to any Encumbrance under any Environmental Law.
"Environmental Laws" shall mean all Regulations which
regulate or relate to the protection, clean-up and restoration of
the environment; the use, treatment, storage, transportation,
generation, manufacture, processing, distribution, handling or
disposal of, or emission, discharge or other release or
threatened release of Hazardous Substances; the preservation or
protection of waterways, groundwater, drinking water, air,
wildlife, plants or other natural resources, or the health and
safety of persons or property; and compensation for personal
injury, property damage or damages to natural resources resulting
from a release or threatened release of Hazardous Substances.
Environmental Laws shall include RCRA, CERCLA, the Clean Water
Act, Safe Drinking Water Act, Atomic Energy Act, Toxic Substances
Control Act, Clean Air Act, Oil Pollution Act of 1990, and the
Hazardous Materials Transportation Act, and all other analogous
or related Regulations, each as amended.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"ERISA Affiliate" shall have the meaning set forth in
Section 5.18 hereof.
"Escrow Agreement" shall mean that certain Escrow
Agreement dated as of the Effective Date by and among the
Company, the Purchaser, the Parent, the Majority Holders, the
Stockholders Representatives and the Escrow Agent, substantially
in the form of Exhibit A attached hereto.
"Escrow Account" shall mean the account maintained by
the Escrow Agent for the deposit of funds described in Section
2.3 pursuant to the terms of the Escrow Agreement.
"Escrowed Funds" shall have the meaning ascribed to
such term in the Escrow Agreement.
"Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated
thereunder.
"Facilities" shall mean all of the plants, offices,
manufacturing facilities, stores, warehouses, improvements,
administration buildings, and all real property and related
facilities of the Company as identified or listed on Schedule
5.6(a) or Schedule 5.6(b).
"Facility Leases" shall mean all of the leases of
Facilities listed on Schedule 5.6(a).
"Financial Statements" shall mean the Fiscal Year-End
Financial Statements and the Interim Financial Statements.
"Fiscal Year-End Balance Sheet" shall mean each of the
audited balance sheets of the Company dated December 28, 1997,
December 29, 1996 and December 31, 1995, together with notes
thereon, prepared in accordance with GAAP and previously
delivered to the Purchaser and the Parent and attached hereto as
Schedule 1.1(a).
"Fiscal Year-End Financial Statements" shall mean the
Fiscal Year-End Balance Sheets and the audited statements of
operations and income, changes in stockholders' equity and cash
flow of the Company for each of the periods ended December 28,
1997, December 29, 1996 and December 31, 1995, prepared in
accordance with GAAP and previously delivered to the Purchaser
and attached hereto as Schedule 1.1(a).
"Fixtures and Equipment" shall mean all of the
furniture, fixtures, furnishings, machinery, automobiles, trucks,
spare parts, supplies, equipment, tooling, molds, patterns, dies
and other tangible personal property owned by the Company,
wherever located and including any such Fixtures and Equipment in
the possession of any supplier of the Company, including all
warranty rights with respect thereto.
"Fully Diluted Number" means the sum of (i) the number
of Shares, (ii) the number of shares of Company Common Stock
issuable upon the exercise of Outstanding Options and (iii) the
number of shares of Company Common Stock issuable upon the
exercise of Outstanding Warrants.
"GAAP" shall mean generally accepted accounting
principles in the United States of America, as in effect from
time to time, consistently applied.
"Hazardous Substance" shall mean any quantity of
asbestos in any form, urea formaldehyde, PCB's, radon gas, crude
oil or any fraction thereof, all forms of natural gas, petroleum
products or by-products, any radioactive substance, any toxic,
infectious, reactive, corrosive, ignitable or flammable chemical
or chemical compound defined as a hazardous substance, material
or waste for purposes of any Environmental Law, whether solid,
liquid or gas.
"Holder" means a Stockholder, a holder of record of
Outstanding Options on the Effective Date or a holder of record
of Outstanding Warrants on the Effective Date.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder.
"Indemnity Basket" shall mean $1,000,000.
"Initial Merger Consideration" shall mean (A) the sum
of (i) $66,819,250 plus (ii) the aggregate exercise or strike
price of all Outstanding Options and Outstanding Warrants plus
(iii) the aggregate cash proceeds received by the Company from
the date of this Agreement to (but not including) the Effective
Date upon the exercise of Company Stock Options and Company
Warrants plus (iv) the aggregate cash proceeds received by the
Company in respect of the principal or interest owing on the
promissory note(s) payable to the Company by the Promissory Note
Stockholders from the date of this Agreement to and including the
Effective Date divided by (B) the Fully Diluted Number, rounded
up to the nearest cent ($0.01).
"Insurance Policies" shall mean the insurance policies
related to the Company or the Assets as listed on Schedule
5.7(a)(xiii).
"Interim Balance Sheet" shall mean the unaudited
balance sheet of the Company dated the Interim Balance Sheet
Date, together with notes thereon, prepared in accordance with
GAAP and previously delivered to the Purchaser and the Parent and
attached hereto as Schedule 1.1(a).
"Interim Balance Sheet Amount" shall mean Total Assets,
as set forth on the Interim Balance Sheet, less Total
Liabilities, as set forth on the Interim Balance Sheet.
"Interim Balance Sheet Date" shall mean March 29, 1998.
"Interim Financial Statements" shall mean the Interim
Balance Sheet and the unaudited statements of operations and
income, changes in stockholders' equity and cash flow of the
Company for the thirteen weeks ended on the Interim Balance Sheet
Date, prepared in accordance with GAAP and previously delivered
to the Purchaser and attached hereto as Schedule 1.1(a).
"Inventory" shall mean (a) all of the inventories of
the Company within the Facilities of the Company held for resale
in the ordinary course of the Business to the customers of the
Company, (b) all office supplies and similar materials of the
Company located in the Facilities of the Company, and (c) all of
the raw materials, work in process, spare parts, finished
products, wrapping, supply and packaging items, employee uniforms
and similar items of the Company, in the Facilities of the
Company or wherever otherwise located.
"knowledge" or any similar phrase herein with respect
to the Company shall mean, as of the date of this Agreement, the
actual knowledge of the persons listed on Schedule 1.1(b) after
reasonable diligence and shall mean, after the date of this
Agreement, the actual knowledge of the persons listed in Schedule
1.1(c) after reasonable diligence.
"Landlord Consent" shall have the meaning set forth in
Section 7.7 hereof.
"Leased Real Property" shall mean all property leased
by the Company pursuant to the Facility Leases.
"Leasehold Estates" shall mean all of the rights and
obligations of the Company as lessee under the Leases listed on
Schedule 5.6(a).
"Leasehold Improvements" shall mean all leasehold
improvements situated in or on the Leased Real Property leased
under the Leases.
"Leases" shall mean all of the existing leases with
respect to the personal or real property of the Company as listed
on Schedules 5.5 and 5.6(a) and all other leases relating to the
Assets that are not required to be scheduled pursuant to this
Agreement.
"Liabilities" shall mean any direct or indirect
liability, indebtedness, obligation, commitment, expense, claim,
deficiency, guaranty or endorsement of or by any person of any
type, whether accrued, absolute, contingent, matured, unmatured
or other.
"Majority Holders" shall mean TCW Special Credits Fund
V - The Principal Fund, a California limited partnership, TCW
Special Credits Fund IV, a California limited partnership, TCW
Special Credits Plus Fund, a California limited partnership, TCW
Special Credits Trust IV, TCW Special Credits Trust IV-A, David
H. Eisenberg, Thomas A. Hough, Mary M. Mahon, William V. Pantuso,
Larry L. Buresh, Harold S. Eastman and Redon Forest.
"Material Adverse Effect" or "Material Adverse Change"
shall mean any material adverse effect or change in the condition
(financial or other), Liabilities or operations of the Company,
the Business and/or the Assets or on the ability of the Company
or the Stockholders to consummate the Transactions, or any event
or condition which would, with the passage of time, constitute a
"Material Adverse Effect" or "Material Adverse Change."
"Material Contract" shall have the meaning set forth in
Section 5.7 hereof.
"Merger" shall have the meaning set forth in Recital B.
"Net Worth Adjustment" shall mean zero ("0"), if the
Closing Balance Sheet Amount equals or exceeds the Interim
Balance Sheet Amount, and otherwise shall mean the amount by
which the Interim Balance Sheet Amount exceeds the Closing
Balance Sheet Amount.
"Net Worth Basket" shall mean $3,000,000.
"Ordinary course of business" or "ordinary course" or
any similar phrase shall mean the ordinary course of the Business
and consistent with the past practice of the Company.
"OSHA" shall mean the Federal Occupational Safety &
Health Act.
"Outstanding Options" shall have the meaning set forth
in Section 2.6(a) hereof.
"Outstanding Warrants" shall have the meaning set forth
in Section 2.6(b) hereof.
"Owned Real Property" shall mean all real property
owned in fee by the Company, including without limitation all
rights, easements and privileges appertaining or relating
thereto, all buildings, Fixtures and Equipment, and improvements
located thereon and all Facilities thereon, if any.
"Parent" shall mean AutoZone, Inc., a Nevada
corporation.
"Patents" shall mean all patents and patent
applications and registered design and registered design
applications.
"Paying Agent" shall mean the bank or trust company
designated by the Parent to serve as the agent of the Parent for
providing cash in exchange for the Shares.
"Permits" shall mean all licenses, permits, franchises,
approvals, authorizations, consents or orders of, or filings
with, any governmental authority, whether foreign, federal, state
or local, or any other person, necessary for the past, present or
anticipated conduct of, or relating, to the operation of the
Business.
"Permitted Encumbrances" shall mean: (x) with respect
to any personal property, minor liens or Encumbrances that in the
aggregate are not substantial in amount relative to the value and
use of such personal property, do not materially detract from the
value of the personal property subject thereto or interfere with
the present use and have not arisen other than in the ordinary
course of business, and (y) with respect to any real property,
(i) materialmen's, mechanics', carriers', workmen's, repairmen's
or other like liens arising in the ordinary course of business
for amounts not yet due or which are being contested in good
faith by appropriate proceedings; (ii) liens for current taxes
not yet due or any taxes being contested in good faith by
appropriate proceedings; and (iii) any other Encumbrances and
other matters affecting title to such real property, which do not
(A) breach any covenant, representation or warranty of the
Company in this Agreement, (B) adversely affect the use or value
of such real property, (C) render title to such real property
unmarketable, (D) constitute an Encumbrance in the nature of a
mortgage, deed of trust, UCC financing statement or other similar
lien or (E) constitute a lease, sublease or other occupancy
agreement that gives any third party any right to occupy or use
all or any portion of such real property.
"Personal Property Leases" shall mean all personal
property leases listed on Schedule 5.5.
"Personnel" shall have the meaning set forth in Section
5.4(b) hereof.
"Pro Rata Portion" shall mean, with respect to any
Holder in connection with the distribution of any Escrowed Funds,
(A) the sum of (i) the number of Shares owned of record by such
Holder on the Effective Date, (ii) the number of shares of
Company Common Stock issuable upon the exercise of Outstanding
Options held of record by such Holder on the Effective Date and
(iii) the number of shares of Company Common Stock issuable upon
the exercise of Outstanding Warrants held of record by such
Holder on the Effective Date multiplied by (B) the amount of
Escrowed Funds to be distributed divided by (C) the Fully Diluted
Number, rounded up to the nearest whole cent ($0.01).
"Promissory Note Stockholders" shall mean those
stockholders of the Company listed on Schedule 5.1(c).
"Proposed Acquisition Transaction" shall have the
meaning set forth in Section 7.2(a) hereof.
"Proprietary Rights" shall mean all of the Copyrights,
Patents, Trademarks, technology rights and licenses, computer
software (including without limitation any source or object codes
therefor or documentation relating thereto), trade secrets,
franchises, know-how, inventions, designs, specifications, plans,
drawings and intellectual property rights of the Company.
"Purchaser" shall mean Orange Sub, Inc., a Delaware
corporation.
"Purchaser Common Stock" shall mean the Common Stock,
$.01 par value per share, of the Purchaser.
"RCRA" shall mean the Resource Conservation & Recovery
Act (42 U.S.C. 6901 et seq.).
"Refund Request" shall have the meaning set forth in
Section 2.4 hereof.
"Regulations" shall mean any laws, statutes,
ordinances, code, regulations, rules, notice requirements, court
decisions, agency guidelines, principles of law and orders of any
foreign, federal, state or local government and any other
governmental department or agency, including without limitation
Environmental Laws, energy, motor vehicle safety, public utility,
zoning, building and health codes, occupational safety and health
and laws respecting employment practices, employee documentation,
terms and conditions of employment and wages and hours.
"Release" shall mean and include any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, migrating within the environment or
disposing into the environment or the workplace of any Hazardous
Substance, and otherwise as defined in any Environmental Law.
"Representative" shall mean any officer, director,
principal, attorney, agent, employee or other representative.
"Seagoville Facility" shall mean the Company's
distribution center located at 1515 Wade Drive, Seagoville,
Texas.
"Securities Act" shall mean the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder.
"Severance Plan" shall mean the Company's Severance
Plan in the Event of a Change of Control.
"Shares" shall mean all of the shares of Company Common
Stock issued and outstanding immediately prior to the Effective
Date.
"Shearson Tax Sharing Agreement" shall mean the Tax
Sharing Agreement made as of the 1st day of January, 1988 by and
between Shearson Lehman Brothers Holdings, Inc., a Delaware
corporation, and the Company.
"Stockholders" shall mean the record holders of Shares
on the Effective Date.
"Stockholders Agreement" shall have the meaning set
forth in Recital D.
"Stockholders Consent" shall have the meaning set forth
in Section 2.7 hereof.
"Stockholders Meeting" shall have the meaning set forth
in Section 2.7 hereof.
"Stockholders Representatives" shall mean Stephen A.
Kaplan and Richard Masson.
"Subsidiary" shall mean (a) any corporation in an
unbroken chain of corporations beginning with the Company if each
of the corporations other than the last corporation in the
unbroken chain then owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the
other corporations in such chain, (b) any partnership in which
the Company is a general partner, or (c) any partnership in which
the Company possesses a 50% or greater interest in the total
capital or total income of such partnership.
"Surviving Corporation" shall have the meaning set
forth in Section 2.1 hereof.
"Tax" or "Taxes" means any federal, state, local, or
foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Section 59A), custom
duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property,
personal property, sales, use, service, transfer, registration,
value added, alternative or add-on minimum, estimated, ad
valorum, net worth or other tax, fee, tariff or assessment of any
kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
"Tax Return" means any return, declaration, report,
claim for refund, or information return or statement relating to
Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
"Total Assets" shall mean the sum of current assets (
including cash, cash equivalents, trade accounts receivable,
other accounts receivable less allowance for doubtful accounts,
income tax refund receivable, merchandise inventories, deferred
income taxes, prepaid and other current assets), property and
equipment (less accumulated depreciation and amortization),
goodwill, deferred income taxes and other assets.
"Total Liabilities" shall mean the sum of current
liabilities (including accounts payable, current portion of long-
term debt, current portion of obligations under capital leases,
trade accounts payable, accrued salaries, benefits and related
taxes, accrued taxes excluding payroll and other accrued current
liabilities), long-term debt (less current portion), obligations
under capital leases (less current portion) and other noncurrent
liabilities.
"Trademarks" shall mean registered trademarks,
registered service marks, trademark and service mark applications
and unregistered trademarks and service marks.
"Transaction Documents" shall mean this Agreement, the
Escrow Agreement, the Stockholders Agreement and the letter
agreement among the parties hereto dated as of the date of this
Agreement.
"Transactions" shall mean the Merger and the other
transactions contemplated by the Transaction Documents.
ARTICLE II.
THE MERGER
2.1. The Merger
As soon as is practicable after the satisfaction or
waiver of the conditions contained herein, the parties hereto
will cause the Merger to be consummated by filing with the
Secretary of State of the State of Delaware the Certificate of
Merger (the time of such filing being the "Effective Date"). At
the Effective Date, in accordance with this Agreement and the
Delaware Law, the Purchaser shall be merged with and into the
Company, the separate existence of the Purchaser (except as may
be continued by operation of law) shall cease, and the Company
shall continue as the surviving corporation under the corporate
name it possesses immediately prior to the Effective Date. The
Purchaser and the Company are sometimes referred to herein as the
"Constituent Corporations," and the Company is sometimes referred
to herein as the "Surviving Corporation."
2.2. Effect of the Merger.
(a) Except for Dissenting Shares and except as set
forth in the last sentence of this paragraph (a), each Share
shall automatically be converted into the right to receive the
Initial Merger Consideration, subject to possible adjustment as
provided in Article III hereof. Notwithstanding the foregoing
sentence, the Shares held of record by each Promissory Note
Stockholder shall be converted without any action on the part of
such Promissory Note Stockholder into the right to receive an
amount equal to the greater of $0 or the following amount: (A)
the product of (i) the number of Shares held of record by such
Promissory Note Stockholder and (ii) the Initial Merger
Consideration (the foregoing product is referred to herein as the
"Clause A Amount") minus (B) the sum of (i) the aggregate
principal amount owing to the Company under the outstanding
promissory note(s) of such Promissory Note Stockholder plus (ii)
the accrued interest owing with respect to such promissory
note(s) as of the Effective Date (the foregoing sum is referred
to herein as the "Clause B Amount").
(b) Each Share held in treasury by the Company or
owned by the Purchaser, the Parent or any direct or indirect
subsidiary of the Purchaser, the Parent or the Company, shall be
canceled and retired, and no payment shall be made with respect
thereto.
(c) Each share of Purchaser Common Stock issued and
outstanding immediately prior to the Effective Date shall be
converted into and become one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation.
(d) At and after the Effective Date, the Surviving
Corporation shall possess all the rights, privileges, powers and
franchises of a public as well as of a private nature, and be
subject to all the restrictions, disabilities and duties of each
of the Constituent Corporations; and all and singular rights,
privileges, powers and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed, and all
debts due to either the Constituent Corporations on whatever
account, as well as for stock subscriptions and all other things
in action or belonging to each of the Constituent Corporations,
shall be vested in the Surviving Corporation, and all property,
rights, privileges, powers and franchises, and all and every
other interest shall be thereafter as effectually the property of
the Surviving Corporation as they were of the Constituent
Corporations, and the title to any real estate vested by deed or
otherwise, in either of the Constituent Corporations, shall not
revert or be in any way impaired; but all rights of creditors and
all liens upon any property of either of the Constituent
Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the Constituent Corporations shall
thenceforth attach to the Surviving Corporation, and may be
enforced against it to the same extent as if said debts and
liabilities had been incurred by it.
2.3. Dissenting Shares.
The holders of Dissenting Shares, if any, shall be
entitled to payment for such Shares only to the extent permitted
by and in accordance with the provisions of Section 262 of the
Delaware Law. Notwithstanding the foregoing, if, in accordance
with such Section of the Delaware Law, any holder of Dissenting
Shares shall forfeit such right to payment of the fair value of
such Shares, such Shares shall thereupon be deemed to have been
converted into and to have become exchangeable for, as of the
Effective Date, the right to receive the Initial Merger
Consideration that such holder would have received under Section
2.2(a) hereof. In such event, such holder of Dissenting Shares
shall, as of the later of the Effective Date or the occurrence of
such event, deliver his certificate or certificates representing
such Dissenting Shares to the Company, and upon surrender of such
certificate or certificates, the Company shall issue and deliver
to such holder the Initial Merger Consideration that such holder
would have been entitled under Section 2.2(a) hereof.
2.4. Paying Agent and Surrender of Shares
From and after the Effective Date, each holder of a
certificate which immediately prior to the Effective Date
represented outstanding Shares (the "Certificates") shall be
entitled to receive in exchange therefor cash in the amount equal
to the product of the number of Shares represented by the
Certificate or Certificates and the Initial Merger Consideration.
As soon as practicable (and in no event later than 10 days after
the Effective Date), the Paying Agent shall mail to each
Stockholder: (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to
such Stockholder's Certificates shall pass, only upon delivery of
such Certificates to the Paying Agent and shall be in such form
and have such other provisions as the Paying Agent may reasonably
specify) and (ii) instruments for use in effecting the surrender
of such Certificates in exchange for that portion of the Initial
Merger Consideration into which the Shares represented by such
Certificates have been converted. Upon surrender of a
Certificate to the Paying Agent, together with such letter of
transmittal, duly executed, the holder of such Certificate shall
be entitled to receive in exchange therefor, cash (in the form of
a bank or certified check) in the amount equal to the product of
the number of Shares represented by the Certificate or
Certificates and the Initial Merger Consideration. No interest
will be paid or accrued on the cash payable upon the surrender of
the Certificates. If the payment is to be made to a person other
than the person in whose name a surrendered Certificate is
registered, it shall be a condition of payment that (x) the
Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that (y) the person
requesting payment shall pay any transfer or other taxes required
by reason of the payment to a person other than the registered
holder of the Certificate surrendered or establish to the
satisfaction of the Parent or the Paying Agent that such tax has
been paid or is not applicable. After the Effective Date, until
surrendered in accordance with the provisions of this Section
2.4, a Certificate shall represent only the right to receive the
Initial Merger Consideration in cash multiplied by the number of
Shares represented by such Certificate, without any interest
thereon. On or after the 30th day following the Effective Date,
the Surviving Corporation may by written request require the
Paying Agent to remit to the Surviving Corporation (on terms
reasonably satisfactory to the Paying Agent) (a "Refund Request")
any funds deposited by the Parent that (i) have not been applied
prior to any Refund Request to make payments in respect of
Certificates, Company Stock Options or Company Warrants, or (ii)
are not required at the time of such Refund Request to permit the
Paying Agent to make payment to the holders of any Certificates
that have been surrendered by the date of such Refund Request or
in respect of any Company Stock Options or Company Warrants for
which payment is pending, but with respect to which no such
payment has yet been made at the time of such Refund Request;
provided however, that notwithstanding the repayment of any funds
pursuant to a Refund Request, the Surviving Corporation shall
make available to the Paying Agent any and all additional funds
sufficient from time to time to make payments required pursuant
to Sections 2.4 and 2.6.
2.5. Stockholders to Have No Further Rights
At and after the Effective Date, the holder of a
Certificate shall cease to have any rights as a stockholder of
the Company, except for (i) the right to surrender such
Certificate in exchange for the amount of Initial Merger
Consideration to which such holder is entitled under this
Agreement and (ii) the rights available under Delaware Law for
Dissenting Shares. In no event shall the holder of a Certificate
have any rights as a stockholder of the Surviving Corporation.
2.6. Company Stock Options and Company Warrants
(a) Subject to the second sentence of this paragraph
(a), each of the Company Stock Options that are outstanding as of
the Effective Date (the "Outstanding Options"), shall be
converted without any action on the part of the holder thereof
into the right to receive, as of the Effective Date, an amount
equal to the product of (i) the number of shares of Company
Common Stock subject to such Outstanding Option (irrespective of
whether such Outstanding Option is then exercisable) and (ii) the
amount by which the Initial Merger Consideration exceeds the
exercise or strike price per share of Company Common Stock
subject to such Outstanding Option immediately prior to the
Effective Date. Notwithstanding the foregoing, if any holder of
Outstanding Options is a Promissory Note Stockholder, and if the
Shares held of record by such Promissory Note Stockholder were
converted into the right to receive $0 pursuant to Section 2.2(a)
hereof, then the amount that such Promissory Note Stockholder
shall be entitled to receive pursuant to the foregoing sentence
shall be decreased by the amount by which such Promissory Note
Stockholder's Clause B Amount exceeds such Promissory Note
Stockholder's Clause A Amount. The Company shall use
commercially reasonable efforts to cause all holders of
Outstanding Options to surrender to the Paying Agent their option
award agreements for cancellation, and thereupon such holders
shall receive the requisite cash consideration (if any), subject
to applicable withholding taxes, if any.
(b) Subject to the second sentence of this paragraph
(b), each of the Company Warrants that remain outstanding as of
the Effective Date (the "Outstanding Warrants"), shall be
converted without any action on the part of the holder thereof
into the right to receive, as of the Effective Date, an amount
equal to the product of (i) the number of shares of Company
Common Stock subject to such Outstanding Warrant (irrespective of
whether such Outstanding Warrant is then exercisable) and
(ii) the amount by which the Initial Merger Consideration exceeds
the exercise or strike price per share of Company Common Stock
subject to such Outstanding Warrant immediately prior to the
Effective Date. Notwithstanding the foregoing, if any holder of
Outstanding Warrants is a Promissory Note Stockholder, and if the
Shares held of record by such Promissory Note Stockholder were
converted into the right to receive $0 pursuant to Section 2.2(a)
hereof, then the amount that such Promissory Note Stockholder
shall be entitled to receive pursuant to the foregoing sentence
shall be decreased by the amount by which such Promissory Note
Stockholder's Clause B Amount exceeds such Promissory Note
Stockholder's Clause A Amount. The Company shall use
commercially reasonable efforts to cause all holders of
Outstanding Warrants to surrender to the Paying Agent their
warrant agreements for cancellation, and thereupon such holders
shall receive the requisite cash consideration (if any), subject
to applicable withholding taxes, if any.
2.7. Stockholders Meeting or Stockholders Consent
The Company shall take all action necessary, in
accordance with applicable law and the Fourth Restated
Certificate of Incorporation and Bylaws of the Company, to call a
special meeting of the holders of Company Common Stock (the
"Stockholders Meeting") or to seek a written consent of the
requisite holders of Company Common Stock (the "Stockholders
Consent") as promptly as practicable for the purpose of
considering and taking action to authorize this Agreement
(including without limitation Section 9.2 hereof), the Merger and
the Escrow Agreement contemplated hereby pursuant to the Delaware
Law. Subject to its fiduciary duties, as determined by the
directors of the Company after consultation with and based upon
the advice of outside legal counsel (who may be the Company's
regularly engaged outside legal counsel), in connection with the
receipt by the Company of a Proposed Acquisition Transaction that
the Board of Directors of the Company reasonably determines in
good faith will be more favorable to its stockholders than the
Merger and is supported by committed financing that the Board of
Directors reasonably believes can be funded, as committed, the
Board of Directors of the Company will recommend that holders of
Company Common Stock vote in favor of and approve the Merger,
this Agreement (including without limitation Section 9.2 hereof)
and the Escrow Agreement at the Stockholders Meeting or pursuant
to the Stockholders Consent, as applicable. At the Stockholders
Meeting or pursuant to the Stockholders Consent, as applicable,
all of the shares of Company Common Stock then owned by the
Parent, the Purchaser or any other subsidiary of the Parent, or
with respect to which the Parent, the Purchaser or any other
subsidiary of the Parent holds the power to direct the voting,
will be voted in favor of approval of the Merger, this Agreement
(including without limitation Section 9.2 hereof) and the Escrow
Agreement. The vote required for approval of the Merger, this
Agreement (including without limitation Section 9.2 hereof) and
the Escrow Agreement is the affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock. The
Company shall take all action, in accordance with applicable law
and the Fourth Restated Certificate of Incorporation and Bylaws
of the Company, to provide written notice to holders of Company
Common Stock who did not vote in favor of the Merger, this
Agreement (including without limitation Section 9.2 hereof) or
the Escrow Agreement of the results of the vote obtained pursuant
to the Stockholders Meeting or Stockholders Consent, as
applicable.
2.8. Closing of the Company's Transfer Books
After the close of business on the Effective Date,
the stock transfer books of the Company shall be closed and no
transfer of Shares shall be made thereafter. In the event that,
after the Effective Date, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for
the Initial Merger Consideration as provided in Section 2.4.
2.9. Charter Documents; Directors; Officers
Upon the Effective Date, (i) the Certificate of
Incorporation and the Bylaws of the Purchaser shall be the
Certificate of Incorporation and Bylaws of the Surviving
Corporation, until thereafter amended as provided therein and
under the Delaware Law, (ii) the directors of the Purchaser
immediately prior to the Effective Date will be the initial
directors of the Surviving Corporation, until their successors
are elected and qualified, and (iii) the officers of the Company
immediately prior to the Effective Date will be the initial
officers of the Surviving Corporation, until their successors are
elected and qualified.
ARTICLE III.
ESCROW AGREEMENT; NET WORTH ADJUSTMENT
3.1. Escrow Agreement
In order to establish a procedure for the
satisfaction of any claims by the Parent or Purchaser for payment
pursuant to Section 3.2 hereof, for indemnification pursuant to
Section 9.2 hereof and/or for payment pursuant to the letter
agreement among the parties dated as of the date of this
Agreement, the Company, the Majority Holders and the Stockholders
Representatives shall enter into the Escrow Agreement with the
Purchaser and the Parent, pursuant to which the Aggregate Escrow
Amount shall be held in escrow for a period of eighteen months
(unless extended pursuant to the terms of the Escrow Agreement in
connection with a pending Claim) from the Effective Date.
If any Escrowed Funds are to be distributed to Holders
in accordance with the provisions of Section 7 of the Escrow
Agreement, each Holder shall receive that portion of the Escrowed
Funds equal to such Holder's Pro Rata Portion in accordance with
the provisions of Section 7 of the Escrow Agreement.
3.2. Net Worth Adjustment
(a) Preparation of Closing Balance Sheet. As promptly
as practicable after the Effective Date, the Company will prepare
and deliver to the Stockholders Representatives the Closing
Balance Sheet and a calculation of the Net Worth Adjustment. The
Company will use all reasonable efforts to have such Closing
Balance Sheet and calculation of the Net Worth Adjustment
prepared and delivered within 60 days following the Effective
Date.
(b) Calculation of Net Worth Adjustment. In the event
the Stockholders Representatives dispute the calculation of the
Net Worth Adjustment that arises within 29 days of the delivery
of the Closing Balance Sheet pursuant to the foregoing paragraph
(a) of this Section, such calculation shall be determined by
Deloitte & Touche LLP (the "Accounting Firm"). The Accounting
Firm shall calculate the Net Worth Adjustment within 30 days of
the notification by the Stockholders Representatives of a dispute
in such calculation by the Parent. In the event that there is a
difference in the Net Worth Adjustment, as calculated by the
Parent, and the Net Worth Adjustment, as calculated by the
Accounting Firm, then the Net Worth Adjustment, shall be equal to
that calculated by the Accounting Firm.
(c) Payments to be Made. Within 30 business days of
the date of delivery of the Closing Balance Sheet to the
Stockholders Representatives pursuant to paragraph (a) of this
Section (or, in the event of a dispute described in paragraph (b)
of this Section, within 10 business days of the date of
calculation of the Net Worth Adjustment by the Accounting Firm),
the following shall occur:
(i) if the Net Worth Adjustment exceeds the Net Worth
Basket and does not exceed the Net Worth Basket by more than the
Escrowed Funds, the Escrow Agent shall pay the amount by which
the Net Worth Adjustment exceeds the Net Worth Basket to the
Purchaser by wire transfer of immediately available funds from
the Escrow Account to an account designated by the Purchaser;
(ii) if the Net Worth Adjustment exceeds the Net Worth
Basket by more than the Escrowed Funds, the Escrow Agent shall
pay all of the Escrowed Funds to the Purchaser by wire transfer
of immediately available funds from the Escrow Account to an
account designated by the Purchaser; or
(iii) if the Net Worth Adjustment is less than or
equal to the Net Worth Basket, no amounts shall be paid by the
Escrow Agent from the Escrow Account in connection with any Net
Worth Adjustment.
ARTICLE IV.
CLOSING
4.1. Closing
Upon the terms and subject to the conditions set
forth herein, the Closing shall be held at 7:00 a.m. local time
on the Effective Date at the offices of Latham & Watkins, 633
West Fifth Street, Suite 4000, Los Angeles, California 90071,
unless the parties hereto otherwise agree.
4.2. Deliveries at Closing
At the Closing the following actions shall be taken:
(a) Delivery of Initial Merger Consideration. The
Parent will deposit with the Paying Agent the aggregate Initial
Merger Consideration.
(b) Delivery of Aggregate Escrow Amount. The Parent
will deposit the Aggregate Escrow Amount with the Escrow Agent.
(c) Certificate of Merger. The Certificate of Merger
will be filed with the Secretary of State of the State of
Delaware.
(d) Escrow Agreement. The Company, the Parent, the
Escrow Agent, the Majority Holders and the Stockholders
Representatives and the Escrow Agent will enter into the Escrow
Agreement.
(e) Company Certificates; Opinions. The Company will
deliver the certificates, opinions of counsel and other items
described in Article VIII or as otherwise reasonably required by
the Purchaser and the Parent and such other evidence of the
performance of all the covenants and the satisfaction of all
conditions required of the Company by this Agreement and as the
Purchaser and the Parent shall reasonably require.
(f) Purchaser and Parent Certificates; Opinions. The
Purchaser and the Parent will deliver the certificates, opinions
of counsel and other items described in Article VIII or as
otherwise reasonably required by the Company and such other
evidence of the performance of all the covenants and the
satisfaction of all conditions required of the Purchaser and the
Parent by this Agreement and as the Company shall reasonably
require.
4.3. Closing Costs
(a) The Company. The Company shall pay the following
fees and costs of the Company: (i) one-half of any escrow fees
and costs; and (ii) the legal, professional, accounting and
consulting fees incurred by the Company related to the
negotiation and consummation of the transactions contemplated
hereby. The Company shall not pay or become obligated to pay any
fees or costs incurred by the Company's stockholders in
connection with the Transactions.
(b) The Parent. The Parent shall pay (i) one-half of
any escrow fees and costs; (ii) documentary transfer Taxes, if
any; (iii) the fees and costs of recording or filing any
conveyancing instruments; (iv) all costs of applying for new
Permits, if any; (v) the due diligence, legal, other professional
and consultant fees incurred by the Parent and the Purchaser; and
(vi) the cost of the filing(s) required of the parties under the
HSR Act.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the
Purchaser and the Parent that the following representations and
warranties are, as of the date hereof, and will be, as of the
Effective Date, true and correct:
5.1. Organization of the Company
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware. The Company has full corporate power and authority
to conduct the Business as it is presently being conducted and to
own and lease its properties and Assets. The Company is duly
qualified to do business as a foreign corporation and in good
standing in each jurisdiction where the character of its
properties owned or leased or the nature of its activities make
such qualification necessary, except where the failure to be so
qualified or in good standing would not have a Material Adverse
Effect. Schedule 5.1(a) contains a true, correct and complete
list of all jurisdictions in which the Company is qualified to do
business as a foreign corporation. Copies of the Fourth Restated
Certificate of Incorporation and Bylaws of the Company and all
amendments thereto, heretofore delivered to the Purchaser are
accurate and complete as of the date hereof.
(b) The capitalization of the Company is set forth on
Schedule 5.1(b) hereto. All of the outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully
paid and non-assessable. Except for the Company Stock Options
and the Company Warrants listed on Schedule 5.1(b), there are no
other outstanding subscriptions, calls, commitments, warrants or
options for the purchase of shares of any capital stock or other
securities of the Company or any securities convertible into or
exchangeable for shares of capital stock or other securities
issued by the Company, or any other commitments of any kind for
the issuance of additional shares of capital stock or other
securities issued by the Company. Schedule 5.1(c) hereto lists
all outstanding notes or other obligations of stockholders of the
Company and of holders of Company Stock Options and Company
Warrants that are payable to the Company, including the principal
and interest owing as of the date of such schedule.
5.2. Subsidiaries
The Company has no Subsidiaries and has no direct or
indirect stock or other equity or ownership interest (whether
controlling or not) in any corporation, association, partnership,
joint venture or other entity other than ownership of all of the
outstanding capital stock of Cap Merger Sub, Inc., a Delaware
corporation which has never conducted any business and has never
had any assets or liabilities.
5.3. Authorization
The Company has all requisite corporate power and
authority to own, lease and operate the Assets, to conduct the
Business as it is presently being conducted and to execute and
deliver the Transaction Documents. The Company has all requisite
power and authority to consummate the Transactions and to perform
its obligations under the Transaction Documents, and no other
corporate proceedings on the part of the Company are necessary to
authorize the Transaction Documents and the Transactions. The
execution and delivery of the Transaction Documents by the
Company and the consummation by the Company of the Transactions
have been duly approved by the Board of Directors of the Company
and its stockholders. The Agreement has been duly executed and
delivered by the Company and, assuming due execution and delivery
by the Parent and the Purchaser, is a legal, valid and binding
obligation of the Company enforceable against it in accordance
with its terms, and each of the other Transaction Documents will
be, as of the Effective Date, duly executed and delivered by the
Company and, assuming due execution and delivery by the Parent,
the Purchaser and the Escrow Agent, as applicable, will be a
legal, valid and binding obligation of the Company enforceable
against it in accordance with its terms, in each case except as
such enforceability may be limited by (i) bankruptcy, insolvency,
moratorium, reorganization and other similar laws affecting
creditors' rights generally and (ii) the general principals of
equity, regardless of whether asserted in a proceeding in equity
or at law. The Stockholders Agreement is, and the Escrow
Agreement will be, assuming due execution and delivery by the
Parent, the Purchaser and the Escrow Agent, as applicable, a
legal, valid and binding obligation of the Majority Holders,
enforceable against the Majority Holders in accordance with its
terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium, reorganization and other
similar laws affecting creditors' rights generally and (ii) the
general principals of equity, regardless of whether asserted in a
proceeding in equity or at law. The Majority Holders
beneficially own and own of record at least 85% of the
outstanding shares of Company Common Stock, and on and as of the
date of the Stockholders Meeting or the Stockholders Consent, as
applicable, will beneficially own and will own of record at least
85% of the outstanding shares of Company Common Stock on and as
of such date.
5.4. Absence of Certain Changes or Events
Except as set forth on Schedule 5.4 and as
contemplated by the Transactions, since the Interim Balance Sheet
Date, there has not been any:
(a) Material Adverse Change;
(b) (i) increase in the compensation payable or to
become payable by the Company to any of its current or former
officers, or, except for normal periodic increases in the
ordinary course of business, to any of its current or former
employees or agents (collectively, "Personnel"), (ii) grant,
payment or accrual (contingent or otherwise) for or to the credit
of any current or former officer or, except in the ordinary
course of business and, in the case of a payment, which has been
accrued for, of any other employee or agent of the Company with
respect to any bonus, incentive compensation, service award or
other like benefit, (iii) adoption, creation or amendment of any
Employee Benefit Plan, Benefit Arrangement or Employee Plan by
the Company, (iv) employment agreement (written or verbal) made
by the Company to which the Company is a party, except agreements
for employment created through offer letters in the ordinary
course of business to new employees which employment is "at
will," or (v) other change in employment terms for any of the
officers of the Company or, except in the ordinary course of
business, of any of the employees or agents of the Company;
(c) sale, lease, assignment or transfer of any of the
Assets, other than (i) (x) to persons that are not Affiliates,
(y) for fair consideration and (z) in the ordinary course of
business or (ii) (w) to persons that are not Affiliates, (x) for
fair consideration, (y) outside of the ordinary course of
business and (z) not in excess of $1,000,000 in the aggregate;
(d) cancellation, compromise, waiver or release of any
rights or claims (or series of related rights or claims) either
(i) involving an Affiliate of the Company, (ii) involving a
concession by the Company of more than $1,000,000 per fiscal
quarter in the aggregate; or (iii) outside the ordinary course of
business and involving a concession by the Company of more than
$500,000 in the aggregate;
(e) amendment, cancellation or termination of any
Contract (i) involving an Affiliate of the Company,
(ii) involving payments in excess of $1,000,000 in the aggregate,
or (iii) that are otherwise material to the Company;
(f) capital expenditure or the execution of any Lease
(other than a Facility Lease), Contract, license, sublease or
sublicense (or series of related Contracts, Leases (other than a
Facility Lease), subleases, licenses and sublicenses) or any
incurring of liability therefor (i) involving an Affiliate of the
Company, (ii) in the ordinary course of business and involving
payments in excess of $500,000 individually, or (iii) outside the
ordinary course of business of the Company and involving payments
in excess of $500,000 in the aggregate;
(g) the execution of any Facility Lease (or a series
of Facility Leases) or any incurring of Liability therefor
(i) involving an Affiliate of the Company, (ii) outside of the
ordinary course of business, or (iii) with respect to more than
25 new locations (including relocations but excluding renewals)
during any fiscal quarter;
(h) delay or failure to repay when due any material
obligation of the Company;
(i) failure to operate the Business in the ordinary
course of business so as to use commercially reasonable efforts
to preserve the business intact, to keep available to the Company
the services of Personnel, and to preserve for the Company the
goodwill of the suppliers, customers, distributors and others
having business relations with the Company;
(j) material change in accounting methods or practices
by the Company, other than as required by GAAP;
(k) material revaluation by the Company of any of the
Assets, other than as required by GAAP, including without
limitation, writing off notes or accounts receivable other than
in the ordinary course of business;
(l) damage, destruction or loss (whether or not
covered by insurance) that has a Material Adverse Effect or that
may reasonably be expected to have a Material Adverse Effect;
(m) material mortgage, pledge or other encumbrance of
any of the Assets, other than in the ordinary course of business
and not in excess of $500,000 in the aggregate;
(n) any declaration, setting aside for payment or
payment of any dividend or distribution in respect of any capital
stock of the Company or any redemption, purchase, or other
acquisition of the Company's equity securities or any bonus, fee
or other payment, or any other transfer of the Assets to or on
behalf of any stockholders of the Company, any Affiliate of the
Company or any Affiliate of any stockholders of the Company,
including, but not limited to, any payment of principal of or
interest on any debt owed to any stockholder or Affiliate of the
Company or any payment of a bonus, fee or other payment to any
stockholder or Affiliate of the Company as an employee of the
Company, except in the ordinary course of business;
(o) issuance by the Company of, or commitment of the
Company to issue, any shares of stock or other equity securities
or obligations or securities convertible into or exchangeable for
shares of stock or other equity securities, except for the
issuance of Company Common Stock pursuant to the exercise of
outstanding Company Stock Options and Company Warrants in
accordance with the terms thereof and except as provided for in
Schedule 7.5(h);
(p) indebtedness incurred by the Company for borrowed
money or any commitment to borrow money entered into by the
Company, or any loans or guarantees made or agreed to be made by
the Company, except (i) to non-Affiliates in the ordinary course
of business as permitted by the 1997 Indenture or (ii) to non-
Affiliates outside of the ordinary course of business not in
excess of $500,000 in the aggregate;
(q) Liabilities incurred involving $500,000 or more or
otherwise material to the Business except in the ordinary course
of business, or any material increase or material change in any
assumptions underlying or methods of calculating any bad debt,
contingency or other reserves;
(r) payment, discharge or satisfaction of any material
Liabilities other than the payment, discharge or satisfaction in
the ordinary course of business of Liabilities reflected or
reserved against on the Interim Balance Sheet (other than debt
principal repayment or interest payment) or incurred in the
ordinary course of business since the Interim Balance Sheet Date
(other than debt principal or interest repayment);
(s) capital investment in, any loan to, or any
acquisition of the securities or assets of any other person (i)
involving an Affiliate of the Company, (ii) involving more than
$1,000,000 in the aggregate, or (iii) outside the ordinary course
of business of the Company;
(t) grant of any license or sublicense of any rights
under or with respect to any Proprietary Rights of the Company
except in the ordinary course of business and not in excess of
$100,000 in the aggregate;
(u) loan to, or other agreement with any Personnel
outside the ordinary course of business giving rise to any claim
or right on its part against the person or on the part of the
person against it;
(v) charitable or other capital contribution made or
pledged by the Company, except in the ordinary course of business
and not in excess of $250,000 in the aggregate;
(w) agreement by the Company or any of its Personnel
having apparent authority to bind the Company to do any of the
foregoing;
(x) agreement for the payment of any underwriting or
financial advisory fees; or
(y) other event or condition of any character that
individually or in the aggregate has a Material Adverse Effect,
or any event or condition (other than events or conditions
affecting the economy generally) known to the Company that it is
reasonable to expect will, individually or in the aggregate, have
a Material Adverse Effect in the future.
Notwithstanding the foregoing provisions of this Section 5.4,
since the Interim Balance Sheet Date, there has not been an
agreement to sell, lease, assign, transfer or otherwise dispose
of the Seagoville Facility or to refinance any of the Company's
indebtedness set forth on the Interim Balance Sheet.
5.5. Personal Property Leases
Schedule 5.5 contains a complete and accurate list
of each Lease pursuant to which the Company leases personal
property (x) providing for lease payments in excess of $1,000,000
and (y) not cancelable (without Liability) within 60 calendar
days (the "Personal Property Leases"). Except as set forth on
Schedule 5.5, the Company owns free and clear of any
Encumbrances, except for Permitted Encumbrances, or leases or has
rights to use, all Assets used in the Business that constitute
personal property.
5.6. Facilities: Owned and Leased
Schedule 5.6(a) contains a complete and accurate
list of all Leases pursuant to which the Company leases real
property. Schedule 5.6(b) contains a complete and accurate list
of all Owned Real Property. The Company has made available to
the Parent and the Purchaser with accurate and complete copies of
title reports covering the Owned Real Property in its possession.
The Company has good and marketable fee simple title to all Owned
Real Property free and clear of all Encumbrances, except for
Permitted Encumbrances. The Company enjoys peaceful and
undisturbed possession of all Owned Real Property, subject to
Permitted Encumbrances.
(a) Actions. There are no pending or, to the
knowledge of the Company, threatened (in writing), condemnation
proceedings, administrative proceeding, or other Actions that are
material to the Company relating to any Facility or any Owned
Real Property.
(b) Leases or Other Agreements. Except for Facility
Leases listed on Schedule 5.6(b) and as contemplated by the
Transactions, there are no material leases, subleases, licenses,
occupancy agreements, options, rights, concessions or other
agreements, written or oral, granting to any person the right to
purchase, use or occupy any Facility or any Owned Real Property.
(c) Facility Leases and Leased Real Property. Except
as contemplated by the Transactions, with respect to each
Facility Lease, the Company has, and upon consummation of the
Merger, the Company will have at the Closing, an unencumbered
interest in the Leasehold Estate. The Company enjoys peaceful
and undisturbed possession of all the Leased Real Property,
subject to the rights of the fee owners and sublessees, the
Company has in all material respects performed all the
obligations required to be performed by it through the date
hereof under the Facility Leases.
(d) Certificate of Occupancy. All Facilities
currently operating have received all required material approvals
of governmental authorities (including without limitation
material Permits and certificates of occupancy or other similar
certificates permitting lawful occupancy of the Facilities)
required in connection with the operation thereof and have been
operated and maintained in all material respects in accordance
with applicable Regulations.
(e) Utilities. All Facilities currently operating are
supplied with utilities (including without limitation water,
sewage, disposal, electricity, gas and telephone) and other
material services necessary for the operation of such Facilities
as currently operated, and, to the knowledge of the Company,
there is no condition which would reasonably be expected to
result in the termination of the present access from any Facility
to such utility services.
(f) Improvements, Fixtures and Equipment. The
improvements constructed on the Facilities, including without
limitation all Leasehold Improvements, and all Fixtures and
Equipment and other tangible assets owned, leased or used by the
Company at the Facilities are (i) structurally sound with no
known material defects, (ii) in acceptable operating condition
and repair in all material respects, subject to ordinary wear and
tear, (iii) not in need of maintenance, repair or correction
except for ordinary routine maintenance and repair, the cost of
which would not be material, and (iv) in conformity, in all
material respects, with all applicable Regulations. None of the
improvements (separate from the Facility) is subject to any
commitment or other agreement for their sale or use by any
Affiliate of the Company or third parties.
(g) No Special Assessment. The Company has received
no notice and is not aware of any material special assessment
relating to any Facility or any portion thereof and, to the
knowledge of the Company, there is no pending or threatened (in
writing) material special assessment.
5.7. Contracts and Commitments
(a) Contracts. Except for Contracts listed on
Schedule 5.7 or listed as exhibits to the Company's Annual Report
on Form 10-K for the year ended December 28, 1997 (the foregoing
contracts are referred to herein as the "Material Contracts"),
the Company is not a party to, or bound by, any Contract of any
kind to be performed after the date of this Agreement which are
of the following types:
(i) Contracts involving expenditures or
Liabilities (other than Facility Leases or Personal Property
Leases) (x) entered into in the ordinary course of business in
excess of $1,000,000 individually or (y) entered into outside of
the ordinary course of business in excess of $500,000
individually;
(ii) Employment contracts, severance agreements or
other contracts involving employment other than "at will"
employment or involving annual salary and/or bonus payments,
severance payments or the creation of any Liability to make
payments in excess of $75,000 or material to the Business, to
which any current or former Personnel or stockholder of the
Company is a party;
(iii) Labor or union contracts;
(iv) any agreement (or group of related
agreements) for the purchase or sale of Inventory, including,
without limitation, any customer or vendor contracts, (x) in
excess of $250,000 individually for agreements (other than
purchase orders) entered into on or prior to the date of this
Agreement or entered into outside of the ordinary course of
business after the date of this Agreement, (y) in excess of
$750,000 individually for agreements (other than purchase orders)
entered into in the ordinary course of business or (z) in excess
of $3,000,000 individually for purchase orders entered into after
the date of this Agreement in the ordinary course of business;
(v) Distribution, franchise, license, technical
assistance, commission, consulting, agency or advertising
contracts related to the Assets or the Business, except for those
providing for payments of less than (x) $250,000 individually for
those contracts entered into on or prior to the date of this
Agreement or outside of the ordinary course of business or (y)
$750,000 individually for those contracts entered into in the
ordinary course of business after the date of this Agreement;
(vi) Options with respect to any real property
with respect to which the Company is the grantor thereunder or
options with respect to any personal property with respect to
which the Company is the grantor thereunder having a book value
in excess of $250,000 individually;
(vii) Promissory notes, loans, agreements,
indentures, evidences of indebtedness, letters of credit,
guarantees, or other instruments relating to an obligation to pay
money of the Company, (x) in excess of $500,000 individually for
those instruments entered into on or prior to the date of this
Agreement, whether the Company shall be the borrower, lender or
guarantor thereunder or whereby any Assets are pledged (excluding
credit provided by the Company in the ordinary course of business
to purchasers of its products), (y) other than to non-Affiliates
in the ordinary course of business after the date of this
Agreement as permitted by the 1997 Indenture or (z) other than to
non-Affiliates outside of the ordinary course of business after
the date of this Agreement not in excess of $500,000 in the
aggregate;
(viii) other than as contemplated by the
Transactions, Contracts containing covenants limiting the freedom
of the Company or any officer, director or stockholders of the
Company, to (i) engage in any line of business which is
competitive with the Business, or (ii) compete with any person;
(ix) any agreement (or group of related
agreements) concerning a partnership or joint venture with any
other person;
(x) any agreement of the Company with any of its
directors, officers, stockholders or employees or any member of
any such person's immediate family (x) providing for the
furnishing of material services by, (y) providing for the rental
of material real or personal property from, or (z) otherwise
requiring material payments to (other than for services as
officers, directors or employees of the Company), any such person
or any corporation, partnership, trust or other entity in which
any such person has a substantial interest as a stockholders,
officer, director, trustee or partner;
(xi) any Contract with the United States, any
state or local government or any agency or department thereof,
other than standard data subscription or licensing agreements in
the ordinary course of business (except for employment training
contracts);
(xii) any other agreement (or group of related
agreements) under which the consequences of a default or
termination could reasonably be expected to have a Material
Adverse Effect; and
(xiii) any insurance policy.
Notwithstanding the foregoing provisions of this Section 5.7,
there are no Contracts for the sale, lease, assignment, transfer
or other disposition of the Seagoville Facility or to refinance
any of the Company's indebtedness set forth on the Interim
Balance Sheet.
The Company has delivered to the Parent true, correct and
complete copies of all of the Contracts listed on Schedule 5.7,
including all amendments and supplements thereto.
5.8. Absence of Breaches and Defaults.
All of the Material Contracts, Facility Leases and
Personal Property Leases to which the Company is party are valid,
binding and enforceable against the Company in accordance with
their terms (except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium, reorganization and other
similar laws affecting creditor's rights generally and (ii) the
general principles of equity, regardless of whether asserted in a
proceeding in equity or at law). The Company has fulfilled, or
taken all action necessary to enable it to fulfill when due, all
of its material obligations under each Material Contract,
Facility Lease and Personal Property Lease. To the Company's
knowledge, (w) all parties to such Material Contracts, Facility
Leases and Personal Property Leases have complied in all material
respects with the provisions thereof, (x) no party is in material
Default thereunder and (z) no written notice of any claim of
material Default has been given to the Company. The Company has
no reason to believe that the products and services called for by
any unfinished Material Contract cannot be supplied in all
material respects in accordance with the terms of such Contract,
including time specifications, and has no reason to believe that
any unfinished Material Contract will, upon performance by the
Company, result in a material loss to the Company. With respect
to any Facility Lease, the Company has not received any notice of
cancellation or termination under any material option or right
reserved to the lessor, nor any written notice of material
Default, thereunder, except for Defaults that might result from
the consummation of the Transactions.
5.9. Permits, Consents and Approvals
(a) There are no material Permits used in the
operation of the Business or otherwise held by the Company. The
Company has, and at all times has had, all Permits required under
any Regulation (including Environmental Laws) in the operation of
the Business or in the ownership of its Assets, and owns or
possesses such Permits free and clear of all Encumbrances, except
such Permits the failure of which to obtain would not have a
Material Adverse Effect. The Company is not in Default, nor has
the Company received any notice of any claim of Default, with
respect to any such material Permit. Except as otherwise
governed by law, all such Permits are renewable by their terms or
in the ordinary course of business without the need to comply
with any special qualification procedures or to pay any amounts
other than routine filing fees and except as set forth on
Schedule 5.9, will not be materially and adversely affected by
the completion of the Transactions. No present or former
stockholders, director, officer or employee of the Company or any
Affiliate thereof, or any other person, firm, corporation or
other entity, owns or has any proprietary, financial or other
interest (direct or indirect) in any Permit which the Company
owns, possesses or uses.
(b) Other than in connection with or in compliance
with the provisions of the HSR Act, and except as disclosed on
Schedule 5.9 hereto, no notice to, declaration, filing or
registration with, or Permit from, any domestic or foreign
governmental or regulatory body or authority, or any other person
or entity (other than approval by the Stockholders), is required
to be made or obtained by the Company in connection with the
execution, delivery or performance of this Agreement and the
consummation of the Transactions. Except as set forth on
Schedule 5.9, (a) none of the rights of the Company in the
Material Contracts, the Personal Property Leases or material
Permits will be impaired by reason of the consummation of the
Transactions, and (b) except as contemplated by the Transactions,
all of the rights of the Company in the Material Contracts and
the Personal Property Leases will be enforceable by the Company
after the Closing to the same extent as if such Transactions had
not been consummated.
5.10. No Conflict or Violation
Except as set forth on Schedule 5.10, neither the
execution, delivery or performance of this Agreement nor the
consummation of the Transactions, nor compliance by the Company
with any of the provisions hereof, will (a) violate or conflict
with any provision of the Fourth Restated Certificate of
Incorporation or Bylaws of the Company, (b) violate, conflict
with, or result in or constitute a Default under, or result in
the termination of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result
in the creation of any Encumbrance upon any of the Assets under,
any of the terms, conditions or provisions of any Contract,
indebtedness, note, bond, indenture, security or pledge
agreement, commitment, license, Lease (except for Facility
Leases), franchise, Permit, agreement, or other instrument or
obligation (i) to which the Company is a party or (ii) by which
the Assets are bound, (c) violate any Regulation or Court Order,
(d) impose any Encumbrance on the Assets or the Business, except
in the case of each of clauses (b), (c) and (d) above, for such
violations, Defaults, terminations, accelerations or creations of
Encumbrances which, in the aggregate would not have a Material
Adverse Effect.
5.11. Financial Statements
The Financial Statements (a) are in accordance with
the books and records of the Company, (b) have been prepared in
accordance with GAAP throughout the periods covered thereby, and
(c) fairly and accurately present the Assets, Liabilities
(including all reserves), financial position, stockholders'
equity, cash flow and results of operations of the Company as of
the respective dates thereof and the results of operations and
changes in cash flows for the periods then ended. The Fiscal
Year-End Financial Statements have been examined by Price
Waterhouse LLP, independent certified public accountants, whose
report thereon is included with such Fiscal Year-End Financial
Statements.
5.12. Litigation
Except as set forth on Schedule 5.12 or except for
such Actions described in Section 7.1 hereof, there are no
Actions pending, or to the knowledge of the Company, threatened
(in writing) (a) against, related to or affecting (i) the
Company, the Business or the Assets (including with respect to
Environmental Laws), (ii) any Employee Plan of the Company or any
trust or other funding instrument, fiduciary or administrator
thereof, (iii) any officers or directors of the Company as such,
or (v) the Transactions or before or by any federal, state,
municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, any of
the foregoing of which would reasonably be expected to result in
Damage to the Company in excess of $1.0 million individually or
in the aggregate, (b) seeking to delay, limit or enjoin the
Transactions, (c) that involve the risk of criminal liability of
the Company, or (d) in which the Company is a plaintiff,
including any derivative suits brought by or on behalf of the
Company which involve claims in excess of $500,000 individually
or in the aggregate, except for collection suits which involve
claims in excess of $1,000,000 individually or $2,000,000 in the
aggregate. The Company is not in Default with respect to or
subject to any Court Order, and there are no material unsatisfied
judgments against the Company, the Business or the Assets.
Except as set forth on Schedule 5.12, there are no Court Orders
or agreements with, or liens by, any governmental authority or
quasi-governmental entity relating to any Environmental Law which
regulate, obligate, bind or in any way affect the Company or any
Facility.
5.13. Labor Matters
Except as set forth on Schedule 5.13, the Company is
not a party to any labor agreement with respect to its employees
with any labor organization, union, group or association and
there are no employee unions (nor any other similar labor or
employee organizations). Except as set forth on Schedule 5.13,
in the past five years, the Company has not experienced any
attempt by organized labor or its representatives to make the
Company conform to demands of organized labor relating to its
employees or to enter into a binding agreement with organized
labor that would cover the employees of the Company. Except as
set forth on Schedule 5.13, there is no labor strike or labor
disturbance pending or, to the knowledge of Company, threatened
against the Company nor is any grievance currently being
asserted, and in the past five years the Company has not
experienced a work stoppage or other labor difficulty. Except as
set forth on Schedule 5.13, there is no unfair labor practice
charge or complaint against the Company pending before the
National Labor Relations Board or any other domestic or foreign
governmental agency and, to the knowledge of the Company, there
are no facts or information which would give rise thereto.
5.14. Books and Records
The Company has made and kept Books and Records and
accounts, which, in reasonable detail, accurately and fairly
reflect the activities of the Company. The minute books of the
Company accurately and adequately reflect all action previously
taken by the stockholders, board of directors and committees of
the board of directors of the Company. The copies of the stock
book records of the Company heretofore delivered to the Purchaser
and the Parent are true, correct and complete, and accurately
reflect all transactions effected in the stock of the Company
through and including the date hereof.
5.15. Compliance with Law
Except as set forth on Schedule 5.15, neither the
Company nor the conduct of the Business have violated or have
failed or are failing to be in compliance with all Regulations
and Court Orders relating to the Assets or the Business or
operations of the Company, except where the violation or failure
to comply, individually or in the aggregate, would not have a
Material Adverse Effect. Except as set forth on Schedule 5.15,
the Company, in the conduct of the Business, is in conformity
with all energy, public utility, zoning, building and health
codes, regulations and ordinances, OSHA and Environmental Laws
and all other foreign, federal, state, and local governmental and
regulatory requirements applicable to the conduct of the
Business, except where such violation or failure to comply,
individually or in the aggregate, would not have a Material
Adverse Effect. Except as set forth on Schedule 5.15, the Company
has received no notice to the effect that, or otherwise been
advised in writing that, the Company is not in compliance with
any such Regulations or Court Orders which non-compliance could,
individually or in the aggregate, have a Material Adverse Effect.
The Company has no reason to anticipate that any existing
circumstances are likely to result in violations of any of the
foregoing which failure or violation could, individually or in
the aggregate, have a Material Adverse Effect.
5.16. No Other Agreements to Sell Assets or Capital
Stock of the Company
None of the Company, its officers, directors or
Affiliates nor, to the knowledge of the Company, its
Stockholders, have any commitment or legal obligation, absolute
or contingent, to any other person or firm, other than as
contemplated by the Transactions, to sell, assign, transfer or
effect a sale of any of the Assets (other than inventory or real
property in the ordinary course of business), to sell or effect a
sale of the capital stock of the Company other than Company Stock
Options and Company Warrants, to effect any merger,
consolidation, liquidation, dissolution or other reorganization
of the Company, or to enter into any agreement or cause the
entering into of an agreement with respect to any of the
foregoing.
5.17. Proprietary Rights
(a) Proprietary Rights. Schedule 5.17 lists all of
the Copyrights and Trademarks of the Company. Schedule 5.17 also
sets forth: (i) for each registered Trademark, the application
serial number or registration number, the class of goods covered
and the expiration date for each country in which a Trademark has
been registered, (ii) for each registered Copyright, the number
and date of filing for each country in which a Copyright has been
filed, and (iii) for each registered service mark, the service
mark serial number or the service mark registration number, the
service mark class of goods covered and the service mark
expiration date for each country in which a service mark has been
registered. There are no Patents or pending patent applications
owned, controlled, created or used by or on behalf of the Company
in which the Company has any interest.
(b) Royalties and Licenses. Schedule 5.17 identifies
any Proprietary Rights that any third party owns and that the
Company uses or proposes to use in the Business, and specifies
whether such use is or will be pursuant to license, sublicense,
agreement or permission.
(c) Ownership. Except as disclosed on Schedule 5.17,
the Company owns or possesses adequate and enforceable licenses
or otherwise has the sole right to use all of the Proprietary
Rights used by or on behalf of the Company without any conflict
with or infringement of the rights of others. All of the
Proprietary Rights are valid and enforceable rights of the
Company and, upon the Closing will be valid and enforceable
rights of the Company, and will not cease to be valid and in full
force and effect by reason of the execution, delivery and
performance of this Agreement or the consummation of the
Transactions. All registered designs and Trademarks listed on
Schedule 5.17 have been duly issued and all of the other
Proprietary Rights exist, are registered and are subsisting.
None of the Proprietary Rights is involved in any pending or
threatened (in writing) litigation. Except as disclosed on
Schedule 5.17, to the Company's knowledge, no other firm,
corporation, partnership, association, business organization or
person (i) has the right to use any of the Trademarks or other
such Proprietary Rights of the Company on the goods on which they
are now being used either in identical form or in such near
resemblance thereto as to be likely, when applied to the goods of
any such person, to cause confusion with such Trademarks or other
Proprietary Rights or to cause a mistake or to deceive, (ii) has
notified the Company that it is claiming any ownership of or
right to use such Proprietary Rights, or (iii) is infringing upon
any Proprietary Rights in any way. The use of the Proprietary
Rights by the Company does not and, upon the consummation of the
Transactions, the use of the Proprietary Rights by the Company
will not, conflict with, infringe upon or otherwise violate the
rights of any third party in or to such Proprietary Rights, and
no Action has been instituted against or notices received by the
Company that are presently outstanding alleging that the
Company's use of the Proprietary Rights infringes upon or
otherwise violates any rights of a third party in or to such
Proprietary Rights. There are not any restrictions on the rights
of the Company, and it is reasonably expected that after the
Closing there will not be, any restrictions on the Company's
right, to sell products or services provided, by the Company in
connection with the Business. No breach of the provisions of
this Section 5.17(c) shall constitute a breach of this Agreement
unless all such breaches are reasonably likely to result in
Damages to the Company or the Parent in excess of $500,000.
5.18. Employee Benefit Plans
(a) Schedule 5.18(a) sets forth a true and complete
list of all Employee Benefit Plans and all Benefit Arrangements
(i) which are maintained, contributed to or required to be
contributed to by the Company or any entity that, together with
the Company as of the relevant measuring date under ERISA, is or
was required to be treated as a single employer under Section 414
of the Code ("ERISA Affiliate") or under which the Company or any
ERISA Affiliate may incur any liability, and (ii) which cover the
employees, former employees, directors or former directors of the
Company or any ERISA Affiliate ("Employee Plans").
(b) A true and complete copy of each written Employee
Plan that covers employees or former employees of the Company,
including each amendment thereto and any trust agreement,
insurance contract, collective bargaining agreement, or other
funding or investment arrangements for the benefits under such
Employee Plan, has been made available to Purchaser. In
addition, with respect to each such Employee Plan that is an
Employee Benefit Plan, the Company has made available to
Purchaser the three most recently filed Federal Forms 5500, the
most recent summary plan description (including any summaries of
material modifications), the most recent IRS determination
letter, if applicable, and all other material employee
communications with respect to each such Employee Benefit Plan.
(c) Except as set forth on Schedule 5.18(c):
(i) neither the Company nor any ERISA Affiliate
sponsors or, since January 1, 1993, has sponsored, maintained,
contributed to or incurred an obligation to contribute to any
Employee Benefit Plan regulated under Title IV of ERISA,
including any "multiemployer plan," as defined in Sections 3(37)
and 4001(a)(3) of ERISA, and neither the Company nor any ERISA
Affiliate has any Liability under or pursuant to any Employee
Benefit Plan regulated under Title IV of ERISA;
(ii) neither the Company nor any ERISA Affiliate
sponsors or has previously sponsored, maintained, contributed to
or incurred an obligation to contribute to any Employee Benefit
Plan that provides or will provide benefits described in Section
3(1) of ERISA to any former employee or retiree of the Company or
any ERISA Affiliate, except as required under Part 6 of Title I
of ERISA and Section 4980B of the Code;
(iii) there has been no "prohibited
transaction," as defined in Section 406 of ERISA or Section 4975
of the Code (other than any such transaction which is exempt
under Section 408 of ERISA or 4975 of the Code, respectively),
with respect to any Employee Plan, which could result, directly
or indirectly, in any material liability of the Company or any of
the ERISA Affiliates;
(iv) all Employee Plans that cover or have covered
employees or former employees of the Company have been maintained
and operated, and currently are, in compliance in all material
respects with their terms, the requirements prescribed by any and
all applicable laws (including ERISA and the Code), orders, or
governmental rules and regulations in effect with respect
thereto, and the Company and its ERISA Affiliates have performed
all material obligations required to be performed by them under,
are not in any material respect in default under or in violation
of, and have no knowledge of any default or violation by any
other party to, any of the Employee Plans;
(v) each Employee Plan that covers or has covered
employees or former employees of the Company and is intended to
qualify under Section 401(a) of the Code and each trust
established pursuant to each such Employee Plan that is intended
to qualify under Section 501(a) of the Code is the subject of a
favorable determination letter from the IRS, a copy of which has
been delivered to Purchaser, and nothing has occurred which may
reasonably be expected to impair such determination or otherwise
adversely affect the tax-qualified status of such Employee Plan;
(vi) the Company and its ERISA Affiliates have
made full and timely payment of all amounts required to be
contributed under the terms of each Employee Plan and applicable
law or required to be paid as expenses under such Employee Plan;
(vii) there is no contract, agreement,
Employee Benefit Plan or Benefit Arrangement covering any former
employee, director or agent of the Company that provides for the
payment by the Company of any amount that would not be deductible
under Section 162(a)(1) or 404 of the Code or that would be an
"excess parachute payment," within the meaning of Section 280G of
the Code;
(viii) no employee, former employee, director
or agent of the Company will accrue or receive additional
benefits, service or accelerated rights to payments of benefits
under any Employee Plan or become entitled to severance,
termination allowance or similar payments as a direct result of
the transactions contemplated by this Agreement (Schedule 5.18(c)
sets forth, for each employee or director, the maximum amount of
such benefit, payment or allowance payable to such employee or
director pursuant to the Company's Severance Plan which amount
shall not exceed $4,156,000 in the aggregate for all employees
and directors plus additional severance payments payable pursuant
to the Company's Severance Plan to such employees and directors
as a result of normal and customary salary increases after the
date of such schedule in the ordinary course of business payable
to such employees and directors);
(ix) other than claims for benefits in the
ordinary course, there is no material claim, suit, action,
dispute, arbitration or legal, administrative or other
proceeding, including any governmental investigation or audit or
voluntary compliance resolution or closing agreement program
proceeding, pending, or, to the knowledge of the Company,
threatened, alleging any breach of the terms of any Employee Plan
or of any fiduciary duty thereunder or violation of any
applicable law with respect to any such Employee Plan;
(x) with respect to any Employee Plan that is
self-funded (in whole or in part), no material claims have been
made that have not yet been paid and, to the best knowledge of
the Company, no injury, illness or other medical condition has
been incurred with respect to which material claims may be made
pursuant to such Employee Plan;
(xi) the Company does not maintain or have any
obligation to contribute to any "voluntary employees' beneficiary
association," within the meaning of Section 501(c)(9) of the
Code.
5.19. Tax Matters
(a) Filing of Tax Returns. The Company and any
affiliated group of which the Company is now or was a common
parent or member have timely filed with the appropriate taxing
authorities all Tax Returns and information returns required to
be filed. Such Tax Returns and information returns as filed are
complete and accurate in all material respects. Except as
specified on Schedule 5.19, none of the Company or any group of
which the Company is now or was a member has requested any
extension of time within which to file Tax Returns in respect of
any Taxes. The Company has made available to Purchaser true and
complete copies of (i) the federal, state, local and foreign Tax
Returns of the Company for the years ended December 28, 1997,
December 29, 1996 and December 31, 1995, and (ii) all examination
reports and statements of deficiencies assessed against or agreed
to by the Company since January 1, 1990.
(b) Payment of Taxes. All material Taxes due from the
Company, or for which it could be liable, in respect of periods
beginning before the Effective Date have been or will be timely
paid or an adequate reserve has been established therefor, as set
forth on Schedule 5.19 or the Interim Financial Statements of the
Company, and the Company has no material Liability for Taxes in
excess of the amounts so paid or reserves so established. All
Taxes that the Company is required by law to withhold or collect
have been duly withheld or collected and have been timely paid
over to the appropriate governmental authorities to the extent
due and payable.
(c) Audits, Investigations or Claims. Except as set
forth on Schedule 5.19, (i), no deficiencies for Taxes for which
the Company is or may be liable have been claimed, proposed or
assessed by any taxing or other governmental authority;
(ii) there are no pending or threatened audits, assessments or
other Actions for or relating to any Liability in respect of
Taxes for which the Company is or may be liable; (iii) there are
no matters under discussion with any governmental authorities, or
known to the Company, with respect to such Taxes that are likely
to result in an additional material Liability of the Company for
Taxes; and (iv) no extension of a statute of limitations relating
to Taxes is in effect with respect to the Company. Audits of
federal, state, local and foreign Tax Returns by the relevant
taxing authorities have been completed for the periods set forth
on Schedule 5.19 and, except as set forth in such Schedule, the
Company has not been notified that any taxing authority intends
to audit a Tax return for any other period.
(d) Liens. There are no Encumbrances for Taxes (other
than for current Taxes not yet due and payable) on any of the
Assets.
(e) Tax Elections. Except as set forth on
Schedule 5.19, the Company (i) has not consented at any time
under Section 341(f)(1) of the Code to have the provisions of
Section 341(f)(2) of the Code apply to any disposition of any the
Assets; (ii) has not agreed, nor is it required, to make any
adjustment under Section 481(a) of the Code by reason of a change
in accounting method or otherwise; (iii) has not made an
election, nor is it required, to treat any of the Assets as owned
by another Person pursuant to the provisions of Section 168(f) of
the Internal Revenue Code of 1954, as in effect immediately
before the enactment of the Tax Reform Act of 1986 or as tax-
exempt bond financed property or tax-exempt use property within
the meaning of Section 168 of the Code; or (iv) has not made any
of the foregoing elections, nor is it required, to apply any of
the foregoing rules under any comparable state, local or foreign
Tax provision. The Company does not own any property of a
character, the indirect transfer of which pursuant to this
Agreement would give rise to any material documentary, stamp or
other transfer Tax.
(f) Prior Affiliated Groups. Except as set forth on
Schedule 5.19, the Company is not nor has it ever been a member
of an affiliated group of corporations within the meaning of
Section 1504 of the Code.
(g) Tax Sharing Agreements. Except as set forth on
Schedule 5.19, the Company is not nor has it ever been a party to
any Tax-sharing agreement or similar arrangement (including any
indemnity arrangement) with respect to or involving the Company,
and after the Effective Date, the Company will not be bound by
any such Tax-sharing agreement or similar arrangement entered
into prior to the Effective Date or have any Liability thereunder
for amounts due in respect of periods prior to the Effective
Date.
(h) Partnerships. Except as set forth on Schedule
5.19, the Company has no interest in nor is it subject to any
joint venture, partnership, or other arrangement or contract
which is treated as a partnership for federal income tax
purposes, and the Company is not a successor to any other Person
by way of merger, reorganization or similar transaction.
(i) U.S. Real Property Holding Corporations. The
Company is not, and was not on any "determination date" as
defined in Treasury Regulation Section 1.897-2(c) during the five-
year period ending on the Effective Date, a United States real
property holding corporation as defined in Section 897(c)(2) of
the Code.
(j) Federal Income Tax Refund. The federal income tax
refund of $4.5 million included as an asset on the Interim
Balance Sheet has been paid in full by the Internal Revenue
Service, and the Company is entitled to retain the full amount of
such refund.
5.20. Purchase Commitments and Outstanding Bids
There are no orders or commitments for the purchase
of supplies by the Company not made in the ordinary course of
business. As of the date of this Agreement, there are no claims
against the Company to return material amounts of merchandise by
reason of alleged overshipments, defective merchandise or
otherwise, or of merchandise in the hands of customers under an
understanding that such merchandise would be returnable. There
is no outstanding bid, proposal, Contract or unfilled order which
relates to the Assets which will or would, if accepted, have a
Material Adverse Effect, individually or in the aggregate.
5.21. Payments
To its knowledge, the Company has not (i) directly
or indirectly, paid or delivered any fee, commission or other sum
of money or item or property, however characterized, to any
finder, agent, client, customer, supplier, government official or
other party, in the United States or any other country, which is
in any manner related to the Business, Assets or operations of
the Company, which is illegal under any federal, state or local
laws of the United States (including without limitation the U.S.
Foreign Corrupt Practices Act) or any other country having
jurisdiction, (ii) participated, directly or indirectly, in any
boycotts or other similar practices affecting any of its actual
or potential customers, (iii) established or maintained any
unrecorded fund or asset for any purpose or made any false
entries on the Books and Records of the Company for any reason.
5.22. Compliance With Environmental Laws
Except as set forth on Schedule 5.22:
(a) there are no Hazardous Substances being used,
generated, treated, stored, transported or disposed on, under,
about or from any Facility or any asset currently or previously
owned, leased or operated by the Company during the period the
Company owned, operated or leased such Facility or asset, other
than lubricants and small quantities of other Hazardous
Substances constituting inventory or supplies used in the
ordinary course of the operation of the Facilities and such
assets, and then only in compliance with all Environmental Laws,
nor have Hazardous Substances been used, generated, treated,
stored, transported or disposed of on, under, about or from any
Facilities or assets previously owned, operated or leased by the
Company during the period the Company owned, operated or leased
such Facilities or assets which would create an Environmental
Condition likely to result in a Material Adverse Effect;
(b) each of the Facilities, any assets currently or
previously owned, leased or operated by the Company, have at all
times when owned, leased or operated by the Company been owned,
leased and operated in substantial compliance with all
Environmental Laws and in a manner that will not give rise to any
material liability on the part of the Parent or the Company under
any Environmental Law;
(c) to the Company's knowledge, (i) no prior owner,
lessee or operator of any Facility or any assets currently or
previously owned, leased or operated by the Company, operated any
of such assets in a manner that would give rise to any material
Liability under any Environmental Law; and (ii) except as
provided in Section 5.26(a) above, there has been no Hazardous
Substance used, generated, treated, stored, transported, disposed
of or otherwise located on, about or from any Facility or any
asset currently or previously owned, leased or operated by the
Company;
(d) true, complete and correct copies of all
environmental assessments, audits, reports, surveys and
engineering and/or soil tests, including any drafts, in the
Company's possession or control which have been conducted with
respect to any of the Facilities or any assets currently or
previously owned, leased or operated by the Company have
previously been made available to the Parent;
(e) the Company has not received any uncured notice
that it or any other Person is or was claimed to be in violation
of, or in non-compliance with, the conditions of any Permit
relating to, or the provisions of, any Environmental Law with
respect to any Facility or any assets currently or previously
owned, leased or operated by the Company nor is the Company aware
of any information which could provide the basis for such notice;
(f) there is no pending or threatened Action against
the Company under any Environmental Law, nor any basis for any
such Action likely to result in a Material Adverse Effect;
(g) the Company has not released any other Person from
any claim with respect to the Facilities or any assets currently
or previously owned, leased or operated by the Company under any
Environmental Law nor has it waived any rights concerning any
Environmental Condition;
(h) there are no consent decrees, judgments, judicial
or administrative orders or arguments with, or liens by, any
governmental authority or quasi-governmental authority relating
to any Environmental Law which regulate, obligate, bind or in any
way affect the Company's operations;
(i) the Company does not manufacture or distribute any
product in the state of California which requires the warning
mandated by the California Safe Drinking Water and Toxic
Enforcement Act of 1986, also known as Proposition 65, California
Health & Safety Code 25249.5 et seq.;
(j) there are no Environmental Conditions in any way
relating to the Facilities or any assets currently or previously
owned, leased or operated by the Company likely to result in a
Material Adverse Effect;
(k) to the knowledge of the Company, there is not now
nor has there ever been in the past, any underground or
aboveground storage tanks or associated piping at any Facility or
asset where the installation, use, maintenance, repair, testing,
closure or removal of such tank or pipeline was not in compliance
with all Environmental Laws and there has been no release from
any such tank or pipeline;
(l) the Company is not, singularly or collectively, a
party, whether as a direct signatory or as successor, assign or
third party beneficiary, or otherwise bound, to any Lease or
other Contract under which the Company is obligated by or
entitled to the benefits of, directly or indirectly, any
representation, warranty, indemnification, covenant, restriction
or other undertaking concerning Environmental Conditions; and
(m) to the knowledge of the Company, the Company has
given all notices and warnings, made all reports, and has kept
and maintained all records required by and in compliance with all
Environmental Laws as to all matters the failure of which is
likely to result in a Material Adverse Effect.
5.23. Banking Relationships
As soon as practicable after the date of this
Agreement (but in no event later than 20 days thereafter), the
Company will provide to the Parent Schedule 5.23 which will set
forth a complete and accurate description of all arrangements
that the Company has with any banks, savings and loan
associations or other financial institutions providing for
checking accounts, safe deposit boxes, borrowing arrangements,
and certificates of deposit or otherwise, indicating in each case
account numbers, if applicable, and the person or persons
authorized to act or sign on behalf of the Company in respect of
any of the foregoing.
5.24. SEC Documents; Undisclosed Liabilities
The Company has been subject to the reporting
requirements of Section 13 of the Exchange Act for at least 90
days and has timely filed all required reports, schedules, forms,
statements and other documents required to be filed under the
Securities Act and the Exchange Act with the Commission since
May 28, 1997 (the "Company SEC Documents"). As of their
respective dates, the Company SEC Documents complied in all
material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and
regulations of the Commission promulgated thereunder applicable
to such Company SEC Documents. Except to the extent that
information contained in any Company SEC Document has been
revised or superseded by a later filed Company SEC Document, none
of the Company SEC Documents contains any untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. The historical financial statements the
Company included in the Company SEC Documents comply as to form
in all material respects with applicable accounting requirements
and the published rules and regulations of the SEC with respect
thereto.
5.25. Material Misstatements Or Omissions
No representation or warranty by the Company in this
Agreement (including without limitation the Schedules and all
exhibits hereto), the other Transaction Documents and all
certificates and other documents to be delivered to the Parent or
Purchaser at Closing pursuant to the Transaction Documents
contains or will contain any untrue statement of a material fact,
or omits or will omit to state any material fact necessary to
make the statements or facts contained therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF
THE PARENT AND THE PURCHASER
The Purchaser and the Parent hereby represent and
warrant to the Company that, the following representations and
warranties are, as of the date hereof, and will be, as of the
Effective Date, true and correct:
6.1. Organization
Each of the Parent and the Purchaser is a
corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation. The Parent has
full corporate power and authority to conduct its business as it
is presently being conducted and to own and lease its properties.
6.2. Authorization
The Parent and the Purchaser have all requisite
corporate power and authority to execute and deliver the
Transaction Documents. Each of the Parent and the Purchaser has
all requisite power and authority to consummate the Transactions
and to perform its obligations under the Transaction Documents
and no other corporate proceedings on the part of the Parent or
the Purchaser are necessary to authorize the Transaction
Documents and the Transactions. The execution and delivery of
the Transaction Documents by the Parent and the Purchaser and the
consummation by the Parent and the Purchaser of the Transactions
have been duly approved by the board of directors of each of the
Parent and the Purchaser and the stockholder of the Purchaser.
This Agreement has been duly executed and delivered by the Parent
and the Purchaser and is a legal, valid and binding obligation of
the Parent and the Purchaser enforceable against them in
accordance with its terms, and each of the other Transaction
Documents will be, as of the Effective Date, duly executed and
delivered by the Parent and the Purchaser and will be a legal,
valid and binding obligation of the Parent and the Purchaser
enforceable against them in accordance with its terms, in each
case except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium, reorganization and other
similar laws affecting creditors' rights generally and (ii) the
general principals of equity, regardless of whether asserted in a
proceeding in equity or at law.
6.3. Consents and Filings
Other than in connection with or in compliance with
the provisions of the HSR Act, no notice to, declaration, filing
or registration with, or permit from, any domestic or foreign
governmental or regulatory body or authority, or any other person
or entity, is required to be made or obtained by the Parent or
the Purchaser in connection with the execution, delivery or
performance of this Agreement and the consummation of the
Transactions.
6.4. No Conflict or Violation
Neither the execution, delivery or performance of
this Agreement by the Parent or the Purchaser nor the
consummation of the Transactions, nor compliance by the Parent or
the Purchaser with any of the provisions hereof, will (a) violate
or conflict with any provision of the Articles of Incorporation
or Bylaws of the Parent or the Certificate of Incorporation or
Bylaws of the Purchaser, (b) violate, conflict with, or result in
or constitute a Default under, or result in the termination of,
or accelerate the performance required by, or result in a right
of termination or acceleration under, or result in the creation
of any Encumbrance upon any of the assets of the Parent under,
any of the terms, conditions or provisions of any contract,
indebtedness, note, bond, indenture, security or pledge
agreement, commitment, license, lease, franchise, permit,
agreement, or other instrument or obligation (i) to which the
Parent or the Purchaser is a party or (ii) by which the Parent's
assets are bound, (c) violate any Regulation or Court Order, (d)
impose any Encumbrance on the Parent's assets, except in the case
of each of clauses (b), (c) and (d) above, for such violations,
Defaults, terminations, accelerations or creations of
Encumbrances which, in the aggregate would not have a material
adverse effect on the financial condition or results of
operations of the Parent and its subsidiaries, taken as a whole.
ARTICLE VII.
ADDITIONAL AGREEMENTS AND COVENANTS OF THE COMPANY,
THE PURCHASER AND THE PARENT
7.1. Further Assurances
Upon the terms and subject to the conditions
contained herein, each of the parties hereto agree: (a) to
cooperate with one another in determining whether any filings are
required to be made with or Consents or Permits required to be
obtained from, any governmental authority in any jurisdiction
under any Regulation or any lender, lessor or other third party
in connection with the Contracts, the Proprietary Rights and
Leases, or otherwise, prior to the Effective Date in connection
with the consummation of the Transactions and cooperate in making
any such filings promptly and in seeking timely to obtain any
such Consents and Permits; (b) to make their respective filings
promptly and any other required or requested submissions under
the HSR Act; (c) use all commercially reasonable efforts to
defend all Actions challenging this Agreement or the consummation
of the Transactions and use all commercially reasonable efforts
to lift or rescind any injunction or restraining order or other
Court Order adversely affecting the ability of the parties to
consummate the Transactions; and (d) to use all commercially
reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective the Transactions.
7.2. No Solicitation
(a) No Solicitation. From the date hereof through the
Effective Date or the earlier termination of this Agreement, the
Company shall not, directly or indirectly (whether on its own or
through its Representatives), enter into, solicit, initiate or
continue any discussions or negotiations with, or encourage or
respond to any inquiries or proposals by, or participate in any
negotiations with, or provide any information to, or otherwise
cooperate in any other way with, any corporation, partnership,
person or other entity or group, other than the Purchaser, the
Parent and their respective Representatives, concerning any sale
of all or a portion of the Assets (except in the ordinary course
of business) or the Business, or of any shares of capital stock
of the Company, or any merger, consolidation, liquidation,
dissolution or similar transaction involving the Company (each
such transaction being referred to herein as a "Proposed
Acquisition Transaction"); provided, however, that consistent
with its fiduciary obligations under applicable law as advised by
outside legal counsel, the Company may participate in any
discussions or negotiations regarding, and may furnish to any
other person information with respect to, any of the foregoing.
The Company hereby represents that it is not now engaged in
discussions or negotiations with any party other than the
Purchaser and the Parent with respect to any of the foregoing.
The Company shall notify the Purchaser and the Parent promptly
(orally and in writing) if any such written offer, or any inquiry
or contact with any person with respect thereto, is made and
shall provide the Purchaser and the Parent with a copy of such
offer and shall keep the Purchaser and the Parent informed on the
status of any negotiations regarding such offer. The Company
agrees not to release any third party from, or waive any
provision of, any confidentiality or standstill agreement to
which the Company is a party.
(b) Notification. The Company will immediately notify
the Purchaser and the Parent if any discussions or negotiations
are sought to be initiated, any inquiry or proposal is made, or
any information is requested with respect to any Proposed
Acquisition Transaction and notify the Purchaser and the Parent
of the terms of any proposal which it may receive in respect of
any such Proposed Acquisition Transaction, including without
limitation the identity of the prospective purchaser or
soliciting party. The Company shall also provide the Purchaser
and the Parent with a copy of any offer and shall keep the
Purchaser and the Parent informed on the status of any
negotiations regarding such offers. The Company agrees not to
release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which the Company is a
party.
7.3. Notification of Certain Matters
From the date hereof through the Closing, the
Company shall give prompt notice to the Purchaser and the Parent
of (a) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation
or warranty contained in this Agreement or in any exhibit or
schedule hereto to be untrue or inaccurate in any material
respect and (b) any material failure of the Company or any of its
Affiliates, or of any of their respective stockholders or
Representatives, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it
under this Agreement or any exhibit or schedule hereto; provided,
however, that such disclosure shall not be deemed to cure any
breach of a representation, warranty, covenant or agreement or to
satisfy any condition. If the senior officers of Purchaser or
the Parent are or become aware of any event listed in (a) or (b)
above, the Parent and the Purchaser shall give prompt written
notice thereof to the Company; it being understood that such
senior officers' awareness of such event shall not limit, reduce
or affect any Liability or obligation the Company may have to the
Purchaser or the Parent as a result of such event. The Company
shall promptly notify the Purchaser and the Parent of any
Default, the threat or commencement of any Action, or any
development that occurs before the Closing that could in any way
result in a Material Adverse Change.
7.4. Access to Information
From the date hereof through the Effective Date, the
Purchaser and the Parent intend to conduct a review of the
business and financial condition of the Company. In connection
with such review:
(a) The Company shall, and shall cause its
Representatives to afford the Purchaser's and the Parent's
Representatives complete access at all reasonable times to the
Assets for the purpose of inspecting the same (including physical
and engineering inspections of the improvements on or which
constitute a portion of any Facility, but not including "Phase I"
or "Phase II" inspections), and to the officers, employees,
agents, attorneys, accountants, properties, Books and Records,
Leases and Contracts of the Company, and shall furnish the
Purchaser, the Parent and their Representatives all financial,
operating and other data and information as the Purchaser, the
Parent or their Affiliates, through their respective
Representatives, may reasonably request, including an unaudited
balance sheet and the related statements of income, retained
earnings and cash flow for each month from the date hereof
through the Effective Date within 30 calendar days after the end
of each month which financial statements shall (a) be true,
correct and complete, (b) be in accordance with the books and
records of the Company and (c) accurately and materially set
forth the Assets, Liabilities and financial condition, results of
operations and other information purported to be set forth
therein in accordance with GAAP.
(b) The Parent shall have the right to (i) review any
"Phase I Reports," "Phase II Reports" or other reports on each
Facility that have been prepared prior to the date of this
Agreement or that may be prepared after the date of this
Agreement and (ii) inspect records, reports, Permits,
applications, monitoring results, studies, correspondence, data
and any other information or documents relevant to Environmental
Conditions regarding each Facility.
The Parent's and the Purchaser's right to have access,
as more fully described in the foregoing paragraphs (a) and (b),
shall be conducted at the Parent's sole cost and expense; it
being understood that the Parent shall, for example, pay the
salaries, fees and expenses of its employees, consultants and
other Representatives but shall not, for example, be required to
pay any salaries, fees or costs of any employees, consultants or
other Representatives retained by the Company to monitor,
accompany or assist the Parent in such access.
7.5. Conduct of Business
From the date hereof through the Closing, the
Company shall, except as contemplated by the Transactions, or as
consented to by the Purchaser and the Parent in writing, operate
the Business in the ordinary course and will not take any action
inconsistent with this Agreement or with the consummation of the
Transactions. Without limiting the generality of the foregoing,
the Company shall not, except as specifically contemplated by
this Agreement or as consented to by the Purchaser and the Parent
in writing:
(a) change or amend the Fourth Restated Certificate of
Incorporation or Bylaws of the Company;
(b) acquire by merger or consolidation with, or merge
or consolidate with, or purchase substantially all of the assets
of, or otherwise acquire any material assets or business of any
corporation, partnership, association or other business
organization or division thereof;
(c) declare, set aside, make or pay any dividend or
other distribution in respect of the capital stock of the
Company;
(d) enter into, renew, modify or revise any agreement
or transaction with any of its Affiliates;
(e) make any loans or advances to any partnership,
firm or corporation, or, except for expenses incurred in the
ordinary course of business, any individual;
(f) other than as provided in Schedule 5.15, fail to
comply in any material respect with all Regulations applicable to
the Company, the Assets and the Business;
(g) intentionally do any other act which would cause
any representation or warranty of the Company in this Agreement
to be or become untrue in any material respect;
(h) issue, repurchase or redeem or commit to issue,
repurchase or redeem, any shares of the capital stock of the
Company, any options or other rights to acquire such stock or any
securities convertible into or exchangeable for such stock,
except for the issuance of Company Common Stock pursuant to the
exercise of outstanding Company Stock Options and Company
Warrants in accordance with the terms thereof other than as set
forth in Schedule 7.5(h);
(i) make any payment of any kind to or on behalf of
any Affiliate or any officer or director of such Affiliate or
become obligated to make any such payment, pursuant to any
agreement between the Company and such Affiliate or otherwise;
provided, however, that the Company shall be entitled to make or
become obligated to make (i) salary payments pursuant to
agreements in effect on the date of this Agreement or
reimbursement of expenses in the ordinary course of business,
(ii) deferred compensation payments pursuant to the Company's
Deferred Compensation Plan to the employees set forth on Schedule
5.18(c) and not in excess of the respective individual amounts
set forth on such schedule which amounts shall not exceed $1.2
million in the aggregate; and (iii) severance payments in
accordance with statement set forth in the parenthetical
contained in paragraph (viii) of Section 5.18(c); and, provided,
further, that the Company shall be entitled to become obligated
to make payments (but shall not be permitted to make any such
payments until the earlier of the Effective Date and February 28,
1999) under its Staff Incentive Plan so long as such obligations
(or payments with respect thereto) do not exceed $2.0 million in
the aggregate;
(j) enter into any agreement, or otherwise become
obligated, to do any action prohibited hereunder; and
(k) enter into any agreement or become obligated to
pay any underwriting or financial advisory fees.
7.6. Books and Records; Tax Matters
(a) Books and Records. Each party agrees that it will
cooperate with and make available to the other parties, during
normal business hours, the Books and Records, information and
employees (without substantial disruption of employment) retained
and remaining in existence after the Effective Date which are
necessary or useful in connection with any tax inquiry, audit,
investigation or dispute, any litigation or investigation or any
other matter requiring any such Books and Records, information or
employees for any reasonable business purpose. The party
requesting any such Books and Records, information or employees
shall bear all of the out-of-pocket costs and expenses, including
attorneys' fees, but excluding reimbursement for salaries and
employee benefits, reasonably incurred in connection with
providing such Books and Records, information or employees. All
information received pursuant to Section 7.6(a) shall be subject
to the terms of Section 10.9 hereof.
(b) Tax Elections. The Company shall make no new
elections with respect to Taxes that affect the Company or the
Assets or any changes in current elections with respect to Taxes
affecting the Company or the Assets, without, in each instance,
the prior written consent of the Parent, which consent shall not
be unreasonably withheld.
(c) Termination of Existing Tax-Sharing Agreements.
All Tax-sharing agreements or similar agreements or arrangements
with respect to or involving the Company shall be terminated
prior to the Effective Date except for the Shearson Tax Sharing
Agreement.
(d) Conveyance Taxes. The Parent and the Company
shall cooperate in the preparation, execution and filing of all
returns, questionnaires, applications or other documents
regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees, and any similar
taxes which become payable in connection with the Transactions
that are required or permitted to be filed on or before the
Effective Date.
7.7. Facility Leases
The Company shall use commercially reasonable efforts
to obtain all consents, waivers, assignments and approvals from
the landlords party to each Facility Lease that are necessary for
the consummation of the Transactions in order for the Company to
continue to conduct its Business at each Facility governed by
such Facility Lease after the Effective Date in the same manner
as such Business is conducted by the Company prior to the
Effective Date and in order to obtain the full benefits of each
Facility Lease (each, a "Landlord Consent"). The Parent shall
use commercially reasonable efforts to cooperate in obtaining
such Landlord Consents.
7.8. First Quarter 1998 Form 10-Q
The Company shall timely file with the Commission
its Quarterly Report on Form 10-Q for the quarter ended on the
Interim Balance Sheet Date. The financial statements (other than
the footnotes set forth therein) contained in such Form 10-Q
shall be the same as the Interim Financial Statements (other than
the footnotes set forth therein); the footnotes set forth in such
financial statements shall be the same as the footnotes set forth
in the Interim Financial Statements in all material respects; and
such Form 10-Q shall not contain any information with respect to
any events subsequent to the Interim Balance Sheet Date that are
not included in the Interim Financial Statements, other than
information, if any, with respect to the parties' execution of
this Agreement.
ARTICLE VIII.
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY,
THE PARENT AND THE PURCHASER
8.1. Conditions to Each Party's Obligation to Effect the
Transactions
The respective obligations of the Company, the
Purchaser and the Parent to consummate the Transactions are
subject to the satisfaction, on or prior to the Effective Date,
of each of the following conditions:
(a) HSR Act. Any waiting period (and any extension
thereof) applicable to the consummation of the Merger under the
HSR Act shall have expired or been terminated.
(b) No Proceedings or Litigation. No Action by any
governmental authority or other person shall have been instituted
or threatened which questions the validity or legality of the
Transactions and which could reasonably be expected to materially
damage any party hereto, if the Transactions are consummated.
There shall not be any Regulation or Court Order instituted or
threatened that prevents or enjoins the Transactions.
(c) Regulatory Compliance and Approval. All material
Permits, consents, approvals and waivers from governmental
authorities necessary to the consummation of the Transactions and
for the operation of the Business by the Company after the
consummation of the Transactions and the ownership of the Assets
by the Company after the consummation of the Transactions shall
have been obtained. Each party hereto shall be satisfied that
all material approvals required to be obtained by any other party
hereto under any Regulations to carry out the Transactions shall
have been obtained by such other party and that each other party
hereto shall have materially complied with all Regulations
applicable to the Transactions.
8.2. Conditions to the Parent's and the Purchaser's
Obligations to Effect the Transactions
The obligation of each of the Parent and the
Purchaser to consummate the Transactions are subject to the
satisfaction, on or prior to the Effective Date, of each of the
following conditions:
(a) Representations, Company Warranties and
Performance of Obligations. All representations and warranties
made in this Agreement by the Company that are qualified as to
materiality shall be true and correct at and as of the date of
this Agreement and at and as of the Effective Date, and all
representations and warranties made in this Agreement by the
Company that are not qualified as to materiality shall be true
and correct in all material respects at and as of the date of
this Agreement and at and as of the Effective Date. The Company
shall have performed and complied with in all material respects
each agreement, covenant and obligation required by this
Agreement to be so performed or complied with at or prior to
Closing.
(b) Assignments and Consents. Except for Landlord
Consents, all consents, approvals, assignments and waivers from
third parties necessary to the consummation of the Transactions
and for the operation of the Business by the Company after the
consummation of the Transactions and the ownership of the Assets
by the Company after the consummation of the Transactions shall
have been obtained. Each of the Parent and the Purchaser shall
be satisfied that all approvals required to be obtained by the
Company from third parties (other than Landlords Consents) to
carry out the Transactions shall have been obtained.
(c) Material Adverse Change. There shall have been no
Material Adverse Change since the Interim Balance Sheet Date.
(d) Dissenting Shares. None of the Parent, the
Company nor the Purchaser shall be obligated to pay cash to all
holders of Dissenting Shares in an amount in excess of 10% of the
aggregate Initial Merger Consideration provided to all other
Stockholders pursuant to Section 2.2(a) hereof.
(e) Company Opinion. The Purchasers and the Parent
shall have received an opinion from Gibson, Dunn & Crutcher LLP,
counsel to the Company, dated the Effective Date and
substantially in the form of Exhibit B attached hereto, and from
the General Counsel of the Company, dated the Effective Date and
substantially in the form of Exhibit C attached hereto.
(f) Tax Certificates. The Company shall have
delivered the certificate described in Treasury Regulation
Section 1.1445-5(b)(4)(iii), and any other certificates required
under Code Section 1445 or similar state law or regulations to
eliminate any obligation of the Parent or the Purchaser to
withhold any portion of the Initial Merger Consideration or
Aggregate Escrow Amount.
(g) Minutes, Transfer Records, Etc. The Company shall
have made available to the Parent and the Purchaser the originals
of the minutes of all meetings of the Board of Directors of the
Company, of any committees thereof and of the stockholders of the
Company since January 1, 1993 and shall have made available to
the Parent and the Purchaser originals of the stock transfer
records of the Company.
(h) Officers' and Secretary's Certificates. The Chief
Executive Officer and Chief Financial Officer of the Company
shall have certified, as of the Effective Date, to the reasonable
satisfaction of the Parent and the Purchaser, that the conditions
to the Parent's and the Purchaser's obligations in Sections 8.1
and 8.2 have been satisfied on and as of the Effective Date. The
Secretary or Assistance Secretary of the Company shall have
certified, as of the Effective Date, to the reasonable
satisfaction of the Parent and the Purchaser, as to (i) the
Fourth Restated Certificate of Incorporation of the Company, (ii)
the Bylaws of the Company, (iii) the resolutions of the Company
and its stockholders with respect to the Transactions, (iv) the
incumbency of the officers executing each of the Transaction
Documents on behalf of the Company and (v) the full legal name,
address and number of shares of Company Common Stock held of
record by each Stockholder and the full legal name, address, and
number of shares of Company Common Stock issuable upon the
exercise of Outstanding Options and Outstanding Warrants held by
each holder of Company Stock Options and Company Warrants, as
applicable.
8.3. Conditions to the Company's Obligations to Effect the
Transactions
The obligation of the Company to consummate the
Transactions are subject to the satisfaction, on or prior to the
Effective Date, of each of the following conditions:
(a) Representations, Purchaser and Parent Warranties
and Performance of Obligations. All representations and
warranties made in this Agreement by the Purchaser and the Parent
that are qualified as to materiality shall be true and correct at
and as of the date of this Agreement and at and as of the
Effective Date, and all representations and warranties made in
this Agreement by the Purchaser and the Parent that are not
qualified as to materiality shall be true and correct in all
material respects at and as of the date of this Agreement and at
and as of the Effective Date. The Purchaser and the Parent shall
have performed and complied with in all material respects each
agreement, covenant and obligation required by this Agreement to
be so performed or complied with at or prior to Closing.
(b) Parent and Purchaser Opinions. The Company shall
have received an opinion from Latham & Watkins, counsel to the
Parent and the Purchaser, dated the Effective Date and
substantially in the form of Exhibit D attached hereto, and from
the General Counsel of the Parent and/or Schreck Morris, the
Parent's special Nevada counsel, dated the Effective Date and
substantially in the form of Exhibit E attached hereto.
(c) Officers' and Secretary's Certificates. The Chief
Executive Officer and Chief Financial Officer of the Parent shall
have certified, as of the Effective Date, to the reasonable
satisfaction of the Company, that the conditions to the Company's
obligations set forth in Sections 8.1 and 8.3 have been satisfied
on and as of the Effective Date. The Secretary or Assistant
Secretary of each of the Parent and the Purchaser shall have
certified, as of the Effective Date, to the reasonable
satisfaction of the Company, as to (i) the Articles of
Incorporation of the Parent and the Purchaser, as applicable,
(ii) the Bylaws of the Parent and the Purchaser, as applicable,
(iii) the resolutions of the Parent and the Purchaser, as
applicable, with respect to the Transactions, and (iv) the
incumbency of the officers executing each of the Transaction
Documents on behalf of the Parent and the Purchaser, as
applicable.
ARTICLE IX.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATIONS
9.1. Survival of Representations, Etc.
All statements contained in any Schedule or in any
certificate, schedule, exhibit or instrument or conveyance
delivered by or on behalf of the parties pursuant to this
Agreement or in connection with the Transactions shall be deemed
to be representations and warranties by the parties hereunder.
The representations, warranties, covenants and agreements of the
Company, the Purchaser and the Parent contained herein shall
survive the consummation of the Transactions and the Effective
Date, without regard to any investigation made by any of the
parties hereto, for a period of eighteen months following the
Effective Date.
9.2. Indemnifications
(a) (i) The Holders. The Holders shall indemnify,
save and hold harmless the Purchaser and the Parent and their
respective Affiliates and Representatives from and against any
and all Damages arising from (A) any breach of any representation
or warranty or the inaccuracy of any representation made by the
Company in or pursuant to the Transaction Documents (including
without limitation any a breach or inaccuracy of any
representation or warranty relating to CERCLA, any equivalent
state statute or any other Environmental Law); and (B) any breach
of any covenant or agreement made by the Company in or pursuant
to the Transaction Documents; provided, however, that the Parent
and the Purchaser shall not be entitled to assert a claim on
account of the indemnity contained in clauses (i) and (ii) of
this paragraph unless and until the aggregate amount of Damages
with respect to all claims asserted under such clauses (i) and
(ii) exceeds the Indemnity Basket (in which case the Holders
shall be liable to the Parent and the Purchaser for Damages in
excess of the Indemnity Basket that have accrued).
Notwithstanding the foregoing provisions of this Section
9.2(a)(i), in no instance shall the Holders be liable for
payments pursuant to Section 3.2, Damages on account of the
indemnity contained in this Section 9.2(a)(i) and for payments
pursuant to the letter agreement among the parties dated as of
the date of this Agreement in the aggregate in excess of the
Escrowed Funds. The parties hereby acknowledge and agree that
the Escrowed Funds constitutes the sole remedy, at law or in
equity, that the Parent or the Purchaser may have against the
Holders pursuant to Sections 3.2, 9.2(a)(i) and pursuant to the
letter agreement among the parties dated as of the date of this
Agreement.
(ii) By the Purchaser and the Parent. The
Purchaser and the Parent, jointly and severally, shall indemnify
and save and hold harmless the Holders and their respective
Affiliates and Representatives from and against any and all
Damages incurred in connection with, arising out of, resulting
from or incident to (A) any breach of any representation or
warranty or the inaccuracy of any representation made by the
Purchaser or the Parent in or pursuant to the Transaction
Documents; or (B) any breach of any covenant or agreement made by
the Purchaser or the Parent in or pursuant to the Transaction
Documents; provided, however, that the Holders shall not be
entitled to assert a claim on account of the indemnity contained
in clauses (i) and (ii) of this paragraph unless and until the
aggregate amount of Damages with respect to all claims asserted
under such clauses (i) and (ii) exceeds the Indemnity Basket (in
which case the Purchaser and the Parent shall be liable to the
Holders for Damages in excess of the Indemnity Basket that have
accrued). Notwithstanding the foregoing provisions of this
Section 9.2(a)(ii), in no instance shall the Purchaser and/or the
Parent be liable for Damages on account of the indemnity
contained in this Section 9.2(a)(ii) in the aggregate in excess
of $6,000,000.
(iii) For purposes of this Agreement,
"Damages" shall mean any and all costs, losses, Taxes,
Liabilities, obligations, damages, lawsuits, deficiencies,
claims, demands and expenses (whether or not arising out of
third-party claims), including interest, penalties, costs of
mitigation, losses in connection with any Environmental Law
(including any clean-up or remedial action), lost profits,
diminution in value and other losses resulting from any shutdown
or curtailment of operations, damages to the environment,
reasonable attorneys' fees and all reasonable amounts paid in
investigation, defense or settlement of any of the foregoing.
"Damages" are not limited to matters asserted by third parties
against the Holders, the Company, the Purchaser or the Parent,
but include Damages incurred or sustained by the Holders, the
Company, the Purchaser or the Parent in the absence of third
party claims.
(b) Cooperation. Each indemnified party shall
cooperate in all reasonable respects with each indemnifying party
and its Representatives (including without limitation its
attorneys) in the investigation, trial and defense of any lawsuit
or action and any appeal arising therefrom; provided, however,
that such indemnified party may, at its own cost, participate in
negotiations, arbitrations and the investigation, trial and
defense of such lawsuit or action and any appeal arising
therefrom. The parties shall cooperate with each other in any
notifications to insurers.
(c) Defense of Claims. If a claim for Damages (a
"Claim") is to be made by a party entitled to indemnification
hereunder against the indemnifying party, the party claiming such
indemnification shall, subject to Section 9.1 hereof, give
written notice (a "Claim Notice") to the indemnifying party as
soon as practicable after the party entitled to indemnification
becomes aware of any fact, condition or event which may give rise
to Damages for which indemnification may be sought under this
Section 9.2. Such Claim Notice shall specify the nature and
amount of the Claim asserted, if actually known to the party
entitled to indemnification hereunder. If any lawsuit or
enforcement action is filed against any party entitled to the
benefit of indemnity hereunder, written notice thereof shall be
given to the indemnifying party as promptly as practicable (and
in any event within fifteen (15) calendar days after the service
of the citation or summons). The failure of any indemnified
party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the
indemnifying party demonstrates actual damage caused by such
failure. After such notice, if the indemnifying party shall
acknowledge in writing to the indemnified party that the
indemnifying party shall be obligated under the terms of its
indemnity hereunder in connection with such lawsuit or action,
then the indemnifying party shall be entitled, if it so elects at
its own cost, risk and expense, (i) to take control of the
defense and investigation of such lawsuit or action, (ii) to
employ and engage attorneys of its own choice to handle and
defend the same unless the named parties to such action or
proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and the indemnified
party has been advised in writing by counsel that there may be
one or more legal defenses available to such indemnified party
that are different from or additional to those available to the
indemnifying party, in which event the indemnified party shall be
entitled, at the indemnifying party's cost, risk and expense, to
separate counsel of its own choosing, and (iii) to compromise or
settle such Claim, which compromise or settlement shall be made
only with the written consent of the indemnified party, such
consent not to be unreasonably withheld. If the indemnifying
party fails to assume the defense of such Claim within fifteen
(15) calendar days after receipt of the Claim Notice, the
indemnified party against which such Claim has been asserted will
(upon delivering notice to such effect to the indemnifying party)
have the right to undertake, at the indemnifying party's cost and
expense, the defense, compromise or settlement of such claim on
behalf of and for the account and risk of the indemnifying party;
provided, however, that such Claim shall not be compromised or
settled without the written consent of the indemnifying party,
which consent shall not be unreasonably withheld. In the event
the indemnified party assumes the defense of the Claim, the
indemnified party will keep the indemnifying party reasonably
informed of the progress of any such defense, compromise or
settlement. The indemnifying party shall be liable for any
settlement of any action effected pursuant to and in accordance
with this Section 9.2 and for any final judgment (subject to any
right of appeal), and the indemnifying party agrees to indemnify
and hold harmless an indemnified party from and against any
Damages by reason of such settlement or judgment.
(d) Brokers and Finders. No agent, broker, investment
banker, financial advisor or other person or entity is or will be
entitled to any broker's or finder's fee or any other commission
or similar fee in connection with any of the Transactions. Each
party hereto agrees to hold the other parties hereto harmless
from and against any and all claims, liabilities or obligations
with respect to any such fee or commission or expenses related
thereto asserted by any person or entity with respect to any such
fee or commission or expenses related thereto asserted by any
entity or person on the basis of any act or statement alleged to
have been made by any party hereto or any of their respective
Representatives or Affiliates.
(e) Representatives. No individual Representative of
any party shall be personally liable for any Damages under the
provisions contained in this Section 9.2. Nothing herein shall
relieve either party of any Liability to make any payment
expressly required to be made by such party pursuant to this
Agreement.
ARTICLE X.
MISCELLANEOUS
10.1. Termination
(a) Termination. This Agreement may be terminated at
any time prior to Closing:
(i) By mutual written consent of the Purchaser,
the Parent and the Company;
(ii) By the Purchaser or the Parent if there is
(A) a material breach of any representation or warranty set forth
in Article V hereof or any covenant or agreement to be complied
with or performed by the Company pursuant to the terms of this
Agreement, or (B) the failure of a condition set forth in Section
8.1 or 8.2 hereof to be satisfied (and such condition is not
waived in writing by the Purchaser and the Parent) on or prior to
February 11, 1999 (and, in the case of Section 8.1(c), in which
the ability to satisfy such condition is controlled by the
Company), or the occurrence of any event which results or would
result in the failure of a condition set forth in Section 8.1 or
8.2 hereof to be satisfied on or prior to such date (and, in the
case of Section 8.1(c), in which the ability to satisfy such
condition is controlled by the Company); provided that the
Purchaser and the Parent may not terminate this Agreement prior
to such date if (x) the Company has not had an adequate
opportunity to cure such failure or (y) the Company has the right
to terminate this Agreement under clause (iii) of this Section
10.1(a); or
(iii) By the Company if there is (A) a
material breach of any representation or warranty set forth in
Article VI hereof or of any covenant or agreement to be complied
with or performed by the Purchaser or the Parent pursuant to the
terms of this Agreement, or (B) the failure of a condition set
forth in Section 8.1 or 8.3 hereof to be satisfied (and such
condition is not waived in writing by the Company) on or prior to
February 11, 1999 (and in, the case of Section 8.1(c), in which
the ability to satisfy such condition is controlled by the Parent
or the Purchaser), or the occurrence of any event which results
or would result in the failure of a condition set forth in
Section 8.1 or 8.3 hereof to be satisfied on or prior to such
date (and in, the case of Section 8.1(c), in which the ability to
satisfy such condition is controlled by the Parent or the
Purchaser); provided that, the Company may not terminate this
Agreement prior to such date if (x) the Purchaser or the Parent
has not had an adequate opportunity to cure such failure or (y)
the Purchaser or the Parent has the right to terminate this
Agreement under clause (ii) of this Section 10.1(a).
(b) In the Event of Termination. In the event of
termination of this Agreement:
(i) Each party will redeliver all documents, work
papers and other material of any other party relating to the
Transactions, whether so obtained before or after the execution
hereof, to the party furnishing the same;
(ii) This Agreement shall be void, except for the
provisions of this Section 10.1 and of Section 10.9 hereof which
shall continue in full force and effect; and
(iii) Notwithstanding the foregoing any
willful or intentional breach of any representation, warranty,
covenant or agreement set forth in this Agreement by any party to
this Agreement, prior to the Effective Date, shall not limit or
restrict the availability of specific performance or other
injunctive relief to the extent that specific performance or such
other relief would otherwise be available to a party hereunder.
10.2. Assignment
Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the
prior written consent of the other party; except that the
Purchaser or the Parent may, without such consent, assign all
such rights and obligations to a wholly owned subsidiary (or a
partnership controlled by the Purchaser or the Parent) or
subsidiaries of the Purchaser or the Parent or to a successor in
interest to the Purchaser or the Parent which shall assume all
obligations of the Purchaser or the Parent, as the case may be,
under this Agreement. Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, and
no other person shall have any right, benefit or obligation under
this Agreement as a third party beneficiary or otherwise.
10.3. Notices
All notices, requests, demands and other
communications which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been
duly given when received if personally delivered; when
transmitted if transmitted by telecopy, electronic or digital
transmission method; the day after it is sent, if sent for next
day delivery to a domestic address by recognized overnight
delivery service (e.g., Federal Express); and upon receipt, if
sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
If to the Company, addressed to:
Chief Auto Parts Inc.
One Lincoln Centre, Suite 200
5400 LBJ Freeway
Dallas, Texas 75240-6223
Attention: Mary M. Mahon, Esq.
Telecopy No.: (972) 341-2317
With a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166-0193
Attention: Conor D. Reilly, Esq.
Telecopy No.: (212) 351-5247
If to the Purchaser or the Parent, addressed to:
AutoZone, Inc.
123 South Front Street
Memphis, Tennessee 38103
Attention: Harry L. Goldsmith, Esq.
Telecopy No.: (901) 495-8316
With a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Eva Herbst Davis, Esq.
Telecopy No.: (213) 891-8763
or to such other place and with such other copies as either party
may designate as to itself by written notice to the others.
10.4. Entire Agreement; Amendments; Extensions and Waivers
This Agreement, together with all exhibits and
Schedules hereto (including the other Transaction Documents), and
the letter agreement among the parties hereto dated as of the
date of this Agreement constitute the entire agreement among the
parties pertaining to the subject matter hereof and supersedes
all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. This
Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. No amendment,
extension, supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by the party to be
bound thereby. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly
provided.
10.5. Multiple 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.
10.6. Invalidity
In the event that any one or more of the provisions
contained in this Agreement, the other Transaction Documents or
in any other instrument referred to herein, shall, for any
reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such
invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement, the other Transaction
Documents or any other such instrument.
10.7. Titles
The titles, captions or headings of the Articles and
Sections herein are for convenience of reference only and are not
intended to be a part of or to affect the meaning or
interpretation of this Agreement.
10.8. Publicity
Except as required by law, no party hereto shall
issue any press release or make any public statement regarding
the Transactions, without prior written approval of the other
party; provided, however, that in the case of announcements,
statements, acknowledgments or revelations which either party is
required by law to make, issue or release, the making, issuing or
releasing of any such announcement, statement, acknowledgment or
revelation by the party so required to do so by law shall not
constitute a breach of this Agreement if such party shall have
given, to the extent reasonably possible, not less than two (2)
business days prior notice to the other party, and shall have
attempted, to the extent reasonably possible, to clear such
announcement, statement, acknowledgment or revelation with the
other party. Each party hereto agrees that it will not
unreasonably withhold any such consent or clearance. The Parent
may, at its discretion, issue or make a press release or public
announcement after the Closing.
10.9. Confidential Information
(a) No Disclosure. The parties acknowledge that the
Transactions are of a confidential nature and shall not be
disclosed except to consultants, advisors and Affiliates, or as
required by law, until such time as the parties make a public
announcement regarding the Transactions as provided in Section
10.8 hereof.
(b) Preservation of Confidentiality. In connection
with the negotiation of this Agreement, the preparation for the
consummation of the Transactions, and the performance of
obligations hereunder, the Purchaser and Parent acknowledge that
they will have access to confidential information relating to the
Company, the Company acknowledges that it will have access to
confidential information relating to the Purchaser, in each case,
including technical, manufacturing or marketing information,
ideas, methods, developments, improvements, business plans, trade
secrets, statistical data, diagrams, drawings, specifications or
other proprietary information relating thereto, together with all
analyses, compilations, studies or other documents, records or
data prepared by the Company, the Purchaser, or the Parent, as
the case may be, or their respective Representatives which
contain or otherwise reflect or are generated from such
information ("Confidential Information"). The term "Confidential
Information" does not include information received by one party
in connection with the Transactions which (i) is or becomes
generally available to the public other than as a result of a
disclosure by such party or its Representatives, (ii) which such
party can demonstrate was within such party's possession prior to
its being furnished to such party by or on behalf of the other
party in connection with the Transactions; provided that the
source of such information was not known by such party to be
bound by a confidentiality agreement with or other contractual,
legal or fiduciary obligation of confidentiality to the other
party or any other Person with respect to such information or
(iii) becomes available to such party on a non-confidential basis
from a source other than the other party or any of their
respective Representatives; provided that such source is not
bound by a confidentiality agreement with or other contractual,
legal or fiduciary obligation of confidentiality to the other
party or any other Person with respect to such information.
(c) Each party shall treat all Confidential
Information of the other party as confidential, preserve the
confidentiality thereof and not disclose any such Confidential
Information, except to its Representatives who need to know such
Confidential Information in connection with the Transactions.
Each party shall use all reasonable efforts to cause its
Representatives to treat all such Confidential Information of the
other party as confidential, preserve the confidentiality thereof
and not disclose any such Confidential Information. Each party
shall be responsible for any breach of this Agreement by any of
its Representatives. If, however, Confidential Information is
disclosed, the party responsible for such disclosure shall
immediately notify the other party in writing and take all
reasonable steps required to prevent further disclosure.
(d) Until the Closing or the termination of this
Agreement, all Confidential Information shall remain the property
of the party who originally possessed such information. In the
event of the termination of this Agreement for any reason, each
party shall, and shall cause its Representatives to, return to
the other party all Confidential Information (including all
copies, summaries and extracts thereof) furnished to such party
by the other party in connection with the Transactions.
(e) If one party or any of its Representatives is
requested or required (by oral questions, interrogatories,
requests for information or documents in legal proceedings,
subpoena, civil investigative demand or other similar process) or
is required by operation of law to disclose any Confidential
Information, such party shall provide the other party with prompt
written notice of such request or requirement, which notice
shall, if practicable, be at least 48 hours prior to making such
disclosure, so that the other party may seek a protective order
or other appropriate remedy and/or waive compliance with the
provisions of this Agreement. If, in the absence of a protective
order or other remedy or the receipt of such a waiver, such party
or any of its Representatives are nonetheless, in the opinion of
counsel, legally compelled to disclose Confidential Information,
then such party may disclose that portion of the Confidential
Information which such counsel advises is legally required to be
disclosed; provided that such party uses its reasonable efforts
to preserve the confidentiality of the Confidential Information,
whereupon such disclosure shall not constitute a breach of this
Agreement.
(f) This Section 10.9 shall survive termination of
this Agreement and shall remain in effect for eighteen months
after the date hereof.
10.10. Cumulative Remedies
All rights and remedies of either party hereto are
cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of
one or more rights or remedies shall not prejudice or impair the
concurrent or subsequent exercise of other rights or remedies.
10.11. Governing Law; Jurisdiction
IT IS THE PARTIES' INTENT THAT THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW), EXCEPT WITH RESPECT TO MATTERS OF LAW
CONCERNING THE INTERNAL CORPORATE AFFAIRS OF ANY CORPORATE ENTITY
WHICH IS A PARTY TO OR THE SUBJECT OF THIS AGREEMENT, AND AS TO
THOSE MATTERS THE LAW OF THE JURISDICTION UNDER WHICH THE
RESPECTIVE ENTITY DERIVES ITS POWERS SHALL GOVERN.
(Signature Page Follows)
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first written above.
"COMPANY"
CHIEF AUTO PARTS INC.,
a Delaware corporation
By /s/ David H. Eisenberg
-----------------------------
Name: David H. Eisenberg
Title: President and Chief Executive Officer
"PURCHASER"
ORANGE SUB, INC.
a Delaware corporation
By /s/ Timothy D. Vargo
---------------------------------
Name: Timothy D. Vargo
Title: President
By /s/ Harry L. Goldsmith
--------------------------------
Name: Harry L. Goldsmith
"PARENT"
AUTOZONE, INC.,
a Nevada corporation
By /s/ Timothy D. Vargo
-----------------------------
Name: Timothy D. Vargo
Title: President
By /s/ Harry L. Goldsmith
-----------------------------
Name: Harry L. Goldsmith
Title: Sr. Vice President
INDEX OF EXHIBITS AND SCHEDULES
[Note: Exhibits and schedules have been omitted from this copy
of this Agreement filed with the Securities and Exchange
Commission pursuant to Rule 601(b)(2) of Regulation S-K.
Schedules and exhibits will be provided supplementally to the
Commission upon request.]
EXHIBITS
- -------------
Exhibit A Form of Escrow Agreement between the Company, the
Purchaser, the Parent, the Majority Holders, the
Stockholders Representatives and the Escrow Agrent.
Exhibit B Form of opinion from Gibson, Dunn & Crutcher LLP,
counsel to the Company.
Exhibit C Form of opinion from General Counsel of the Company.
Exhibit D Form of opinion from Latham & Watkins, counsel to the
Parent and Purchaser.
Exhibit E Form of opinion from General Counsel of the Parent
and/or Schreck Morris, the Parent's special Nevada
counsel.
SCHEDULES
- -----------------
Schedule 1.1(a) Audited Balance Sheets of the Company dated
December 28, 1997, December 29, 1996, and
December 31, 1995.
Schedule 1.1(b) Company personnel with knowledge prior to
execution of agreement.
Schedule 1.1(c) Company personnel with knowledge after
execution of agreement.
Schedule 5.1(a) States in which Company is qualified to do
business
Schedule 5.1(b) Capitalization of the Company; Company
Outstanding Stock Options and/or Company Warrants
Schedule 5.1(c) Outstanding Stockholder Notes
Schedule 5.4 Certain Changes or Events
Schedule 5.5 Personal Property Leases
Schedule 5.6(a) Leased Facilities
Schedule 5.6(b) Owned Facilities
Schedule 5.7 Material Contracts
Schedule 5.9 Permits, Consents and Approvals
Schedule 5.10 Conflicts or Violations
Schedule 5.12 Litigation
Schedule 5.13 Labor Matters
Schedule 5.15 Compliance with Law
Schedule 5.17 Proprietary Rights
Schedule 5.18(a) Employee Benefit Plans and Benefit
Arrangements
Schedule 5.18(c) Deferred Compensation Plan Accrual; ERISA Matters
Schedule 5.19 Tax Matters
Schedule 5.22 Environmental Matters
Schedule 5.23 Banking Matters
Schedule 7.5(h) Issuance of Company Stock Options and Warrants
EXHIBIT 99.1
[AUTOZONE LOGO]
123 S. FRONT STREET, MEMPHIS, TN 38103-3607, (901) 495-6500,
FAX: (901) 495-8300
NEWS: FINANCIAL CONTACT: EMMA JO KAUFFMAN
FOR IMMEDIATE RELEASE (901) 495-7005
MEDIA CONTACT: ERIC EPPERSON
(901) 495-7307
AUTOZONE SURPASSES 2,500 STORES;
FINALIZES ACQUISITION OF CHIEF AUTO PARTS
MEMPHIS, Tenn (June 29, 1998) - AutoZone, Inc. has finalized its
acquisition of Chief Auto Parts, John C. Adams Jr., chairman and CEO of
AutoZone (NYSE symbol: AZO), announced today.
Chief has 561 stores, primarily in California and Texas. The stores will
eventually be converted to AutoZone stores.
"This newest chapter in our remarkable history comes less than one week
before AutoZone's 19th anniversary, which we'll celebrate on July 4," said
Adams. "Now, over 5,000 talented new AutoZoners will be a part of this
milestone, and I'm thrilled to have them on the team that will write our
history going forward."
AutoZone sells auto and light truck parts, chemicals and accessories
through 2,562 stores in 38 states. This includes 2,001 AutoZone stores as
of May 9, 1998, plus 561 Chief stores. AutoZone also sells heavy-duty truck
parts through 43 TruckPro stores in 14 states and automotive diagnostic and
repair software through ALLDATA.
Certain statements contained in this press release are forward-looking
statements. These statements discuss, among other things, expected growth,
store development and expansion strategy, business strategies, future
revenues and future performance. The forward-looking statements are subject
to risks, uncertainties and assumptions including, but not limited to,
competitive pressures, demand for the company's products, the market for
auto parts, the economy in general, inflation, consumer debt levels and the
weather. Actual results may materially differ from anticipated results
described in these forward-looking statements.
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