EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
CSK AUTO CORPORATION,
FASTLANE MERGER CORP.,
XXXXXX'X INC.,
THE SELLERS NAMED HEREIN, AND
X.X. CHILDS ASSOCIATES, L.P. AS SELLER REPRESENTATIVE
DATED AS OF NOVEMBER 30, 2005
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
PAGE
----
ARTICLE I THE MERGER................................................................................. 1
Section 1.1 The Merger........................................................... 1
Section 1.2 Effective Time....................................................... 1
Section 1.3 Effects of the Merger................................................ 2
Section 1.4 Certificate of Incorporation and By-laws; Directors and Officers..... 2
Section 1.5 Conversion of Securities............................................. 2
Section 1.6 Payment of Merger Consideration...................................... 4
Section 1.7 Withholding.......................................................... 5
Section 1.8 Purchase Price Adjustments........................................... 5
Section 1.9 No Further Ownership Rights in Company Common Stock.................. 7
Section 1.10 Closing of Company Transfer Books.................................... 7
Section 1.11 Lost Certificates.................................................... 7
Section 1.12 Further Assurances................................................... 7
Section 1.13 Closing.............................................................. 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB........................................... 10
Section 2.1 Organization, Standing and Power..................................... 10
Section 2.2 Authority............................................................ 10
Section 2.3 Consents and Approvals; No Violation................................. 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................ 11
Section 3.1 Organization, Standing and Power..................................... 11
Section 3.2 Capital Structure.................................................... 12
Section 3.3 Authority............................................................ 13
Section 3.4 Consents and Approvals; No Violation................................. 14
Section 3.5 Financial Statements................................................. 14
Section 3.6 No Default........................................................... 16
Section 3.7 Absence of Certain Changes or Events................................. 16
Section 3.8 Permits and Compliance............................................... 16
Section 3.9 Tax Matters.......................................................... 17
Section 3.10 Actions and Proceedings.............................................. 19
Section 3.11 Certain Agreements................................................... 20
Section 3.12 ERISA................................................................ 22
Section 3.13 Compliance with Worker Safety Laws................................... 24
i
TABLE OF CONTENTS
(CONTINUED)
Page
----
Section 3.14 Insurance............................................................ 24
Section 3.15 Labor Matters........................................................ 24
Section 3.16 Intellectual Property................................................ 25
Section 3.17 Required Vote of Company Shareholders; Business Combination.......... 26
Section 3.18 Environmental Matters................................................ 27
Section 3.19 Suppliers............................................................ 28
Section 3.20 Accounts Receivable.................................................. 29
Section 3.21 Inventories.......................................................... 29
Section 3.22 Transactions with Affiliates......................................... 29
Section 3.23 Title to and Sufficiency of Assets................................... 30
Section 3.24 Brokers.............................................................. 31
Section 3.25 Certain Business Practices........................................... 32
Section 3.26 Accuracy of Information.............................................. 32
Section 3.27 Internal Controls and Procedures..................................... 32
Section 3.28 Company Transaction Expenses and Debt Amount......................... 32
ARTICLE III-A REPRESENTATIONS AND WARRANTIES OF THE SELLERS.......................................... 32
Section 3A.1 Capacity and Authorization of Seller................................. 32
Section 3A.2 Consents and Approvals; No Violations................................ 33
Section 3A.3 Securities........................................................... 34
Section 3A.4 Litigation........................................................... 34
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS................................................. 34
Section 4.1 Conduct of Business by the Company Pending the Merger................ 34
ARTICLE V ADDITIONAL AGREEMENTS...................................................................... 38
Section 5.1 Access to Information................................................ 38
Section 5.2 Fees and Expenses.................................................... 38
Section 5.3 No Solicitation or Negotiation....................................... 39
Section 5.4 Cooperation.......................................................... 39
Section 5.5 Public Announcements................................................. 40
Section 5.6 Notification of Certain Matters...................................... 40
Section 5.7 Taxes................................................................ 41
Section 5.8 Minimum Cash on Hand at the Closing.................................. 41
Section 5.9 Settlement of Litigation............................................. 41
ii
TABLE OF CONTENTS
(CONTINUED)
Page
----
ARTICLE VI INDEMNITY................................................................................. 42
Section 6.1. General Survival..................................................... 42
Section 6.2. Indemnification...................................................... 42
Section 6.3. Manner of Indemnification............................................ 44
Section 6.4 Notice of Claims..................................................... 45
Section 6.5. Third-Party Claims................................................... 45
Section 6.6. Seller Representative................................................ 46
Section 6.7 Waiver of Defenses................................................... 47
Section 6.8 Treatment of Indemnity Payments...................................... 47
Section 6.9. Exclusive Remedy..................................................... 47
Section 6.10. Limitation of Indemnification........................................ 47
ARTICLE VII CONDITIONS PRECEDENT TO THE MERGER....................................................... 47
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger........... 47
Section 7.2 Conditions to Obligation of the Company to Effect the Merger......... 48
Section 7.3 Conditions to Obligations of Buyer and Sub to Effect the Merger...... 49
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER....................................................... 50
Section 8.1 Termination.......................................................... 50
Section 8.2 Effect of Termination................................................ 51
Section 8.3 Amendment............................................................ 51
Section 8.4 Waiver............................................................... 51
ARTICLE IX GENERAL PROVISIONS........................................................................ 52
Section 9.1 Notices.............................................................. 52
Section 9.2 Interpretation....................................................... 53
Section 9.3 Counterparts; Facsimile Signatures................................... 54
Section 9.4 Entire Agreement; No Third-Party Beneficiaries....................... 54
Section 9.5 Governing Law........................................................ 55
Section 9.6 Dispute Resolution................................................... 55
Section 9.7 Waivers.............................................................. 56
Section 9.8 Assignment........................................................... 56
Section 9.9 Severability......................................................... 56
Section 9.10 Performance by Sub................................................... 57
Section 9.11 Descriptive Headings................................................. 57
Section 9.12 Defined Terms........................................................ 57
iii
LIST OF EXHIBITS
Exhibit A - Certificate of Merger.......................................................... Section 1.2
Exhibit B - Certificate of Incorporation of the Surviving Company.......................... Section 1.4
Exhibit C - Form of Escrow Agreement....................................................... Section 1.6(a)
Exhibit D - Form of Opinion of Xxxxxx, Xxxx & Xxxxxxxx LLP................................. Section 7.2(b)
Exhibit E - Form of Opinion of Xxxxxxxx Xxxxxx Xxxxxxxx and Xxxx LLP....................... Section 7.3(c)
iv
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of November 30,
2005 (this "Agreement"), is among
CSK Auto Corporation, a Delaware corporation
("Buyer"), Fastlane Merger Corp., a Delaware corporation and an indirect
wholly-owned subsidiary of Buyer ("Sub"), Xxxxxx'x Inc., a Delaware corporation
(the "Company") (Sub and the Company being hereinafter collectively referred to
as the "Constituent Corporations"), the holders of shares of the Company Common
Stock, Company Stock Options, and the Company Warrant listed on Schedule I to
this Agreement (the "Sellers"), and X.X. Childs Associates, L.P. as Seller
Representative.
RECITALS:
A. The respective Boards of Directors of Buyer, Sub and the Company
have approved and declared advisable the merger of Sub with and into the Company
upon the terms and subject to the conditions of this Agreement (the "Merger"),
and the respective Boards of Directors of Sub and the Company have approved and
adopted this Agreement;
B. The respective Boards of Directors of Sub and the Company have
determined that the Merger is in the best interest of their respective
shareholders; and
C. The Company is a corporation organized under the laws of the state
of Delaware and has authorized 20,000 shares of common stock, $0.01 par value
per share (the "Company Common Stock"), of which 10,024.018 shares are
outstanding and 80,000 shares of preferred stock, $0.01 par value per share (the
"Company Preferred Stock"), of which, no shares are outstanding (the Company
Common Stock and the Company Preferred Stock are collectively referred to as the
"Company Capital Stock").
NOW, THEREFORE, in consideration of the premises,
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the
conditions hereof, and in accordance with the Delaware General Corporations Law
(the "DGCL"), Sub shall be merged with and into the Company at the Effective
Time (as defined in Section 1.2). Following the Merger, the separate corporate
existence of Sub shall cease and the Company shall continue as the surviving
corporation (the "Surviving Company") and shall succeed to and assume all the
rights and obligations of the Company in accordance with the DGCL.
SECTION 1.2 EFFECTIVE TIME. Subject to the terms and
conditions set forth in this Agreement, on the Closing Date: (a) a Certificate
of Merger (the "Certificate of Merger"), substantially in the form of Exhibit A,
shall be duly executed by the Company and Sub and thereafter delivered to the
Secretary of State of the State of Delaware, and (b) the parties shall make such
other filings with the Secretary
of State of the State of Delaware as shall be necessary to effect the Merger.
The Merger shall become effective at 12:01 am on the date of the Closing, or
such later time as Buyer and the Company may agree upon and as may be set forth
in the Certificate of Merger. The time the Merger becomes effective is referred
to herein as the "Effective Time."
SECTION 1.3 EFFECTS OF THE MERGER. The Merger shall have the
effects set forth in this Agreement and Section 251 and other applicable
provisions of the DGCL. Without limiting the generality of the foregoing and
subject thereto, at the Effective Time, all properties, rights, privileges,
powers and franchises of the Company and Sub shall vest in the Surviving
Company, and all debts, liabilities and duties of the Company and Sub shall
become the debts, liabilities and duties of the Surviving Company.
SECTION 1.4 CERTIFICATE OF INCORPORATION AND BY-LAWS;
DIRECTORS AND OFFICERS.
(a) The Certificate of Incorporation of the Surviving
Company in effect at the Effective Time will be amended in its entirety at the
Effective Time to read as set forth in Exhibit B hereto and shall be the
Certificate of Incorporation of the Surviving Company until thereafter changed
or amended as provided therein or by Applicable Law.
(b) The officers and directors of Sub at the
Effective Time shall automatically, and without further action, be the officers
and directors of the Surviving Company, until the earlier of their resignation
or removal or until their successors are duly elected or appointed.
SECTION 1.5 CONVERSION OF SECURITIES. As of the Effective
Time, by virtue of the Merger and without any action on the part of Sub, the
Company or the holders of any capital stock of the Constituent Corporations:
(a) Each issued and outstanding share of capital
stock of Sub shall be converted into one validly issued, fully paid and
nonassessable membership unit of the Surviving Company and shall constitute the
only equity interests in the Surviving Company outstanding immediately after the
Effective Time.
(b) All shares of Company Capital Stock that are held
in the treasury of the Company shall automatically be canceled and retired and
shall cease to exist, and no Merger Consideration or other consideration shall
be delivered in exchange therefor.
(c) Any shares of Company Capital Stock owned by
Buyer, Sub, or any other Subsidiary of Buyer, directly or indirectly, shall
automatically be cancelled and retired and shall cease to exist and no Merger
Consideration or other consideration shall be delivered in exchange therefor.
(d) At the Effective Time, all of the then issued and
outstanding shares of Company Capital Stock (excluding shares described in
Sections
2
1.5(b) and (c)), together with the Company Stock Options and the Company Warrant
shall immediately cease to be outstanding, shall automatically be cancelled and
retired, shall cease to exist and shall be converted into solely the right to
receive, in the aggregate, an amount of cash equal to $170,500,000 plus or
minus, as applicable, the Estimated Adjustment Amount (as defined below),
without any interest thereon (as may be adjusted pursuant to Section 1.8, the
"Merger Consideration"), to be distributed in accordance with Sections 1.5(e),
1.5(f), 1.6, 1.7, and 1.8. At the Effective Time, each holder of Company Capital
Stock and Company Stock Options and the holder of the Company Warrant shall
cease to have any rights with respect to such issued and outstanding shares of
Company Capital Stock (including, without limitation, the right to vote) Company
Stock Options, the Company Warrant, or any shares of Company Capital Stock
underlying the Company Stock Options or the Company Warrant, except in each case
for the right to receive such holder's pro rata portion of the Merger
Consideration as set forth herein.
(e) Each issued and outstanding share of Company
Capital Stock shall be converted into the right to receive an amount of cash
equal to the quotient of (i) the sum of (A) the Merger Consideration plus, (B)
the aggregate exercise price of the Company Stock Options and the Company
Warrant, plus (C) the total amount of principal and interest due and payable
(the "Xxxxxxx Payable Amount") to Xxxxxx'x Discount Auto Stores, Inc. as of the
Closing pursuant to the Promissory Note, dated January 17, 2005, executed by
Xxxxx Xxxxxxx in the original principal amount of $150,000, divided by (ii) the
sum of (A) the aggregate number of shares of Company Capital Stock issued and
outstanding at the Effective Time, but excluding shares described in Sections
1.5(b) and 1.5(c), plus (B) the aggregate number of shares of Company Capital
Stock subject to issuance pursuant to the Company Stock Options and the Company
Warrant (such sum is referred to herein as the "Fully-Diluted Number" and such
quotient is referred to herein as the "Per Share Amount"; provided, however,
that the Xxxxxxx Payable Amount shall be deducted from the portion of the Merger
Consideration otherwise payable to Xxxxx Xxxxxxx.
(f) Each Company Stock Option and the Company Warrant
shall be converted into the right to receive, with respect to each share of
Company Capital Stock issuable pursuant to such Company Stock Option or Company
Warrant, the Per Share Amount, less any amounts that would have been payable by
the holder of such Company Stock Option or Company Warrant to the Company, or
required to be withheld by the Company, upon the exercise of such Company Stock
Option or Company Warrant with respect to such share of Company Capital Stock.
(g) The "Estimated Adjustment Amount" may be a
positive or negative number and shall include:
(i) a negative amount equal to the Debt
Amount as set forth in the Debt Amount Notice;
(ii) a negative amount equal to the Company
Transaction Expenses as set forth in the Company Transaction Expenses Notice;
and
3
(iii) an amount equal to the Estimated
Working Capital Adjustment as set forth in the Preliminary Statement.
(h) Optionee Amount. At the Closing, each Seller
shall be entitled to such Seller's pro rata portion of the Optionee Amount. The
"Optionee Amount" means an amount equal to 39% multiplied by the sum of (i) the
amount of cash to be paid to the holders of Company Stock Options pursuant to
Section 1.5(f) at the Closing (or, in the case of an adjustment made pursuant to
Section 1.8, the amount of the adjustment (whether positive or negative) to the
amount of Merger Consideration paid to the holders of Company Stock Options
pursuant to Section 1.8) and (ii) the amounts withheld from such amounts
pursuant to Section 1.5(f) or Section 1.7.
SECTION 1.6 PAYMENT OF MERGER CONSIDERATION.
(a) Escrow Amount. At the Closing, Buyer shall
deposit $6,000,000 of the Merger Consideration that would have otherwise been
payable to the holders of Company Capital Stock, Company Stock Options and the
Company Warrant pursuant to the terms of this Agreement (the "Escrow Amount") in
an account with the Bank of
New York (the "Escrow Agent") to be held by the
Escrow Agent in accordance with the terms of an Escrow Agreement, substantially
in the form attached hereto as Exhibit C, to be entered into as of the Closing
by and among Buyer, the Escrow Agent and the Seller Representative (the "Escrow
Agreement"). The Escrow Amount shall be used to satisfy any purchase price
adjustments pursuant to Section 1.8 or claims for indemnification by Buyer or
any other Indemnitees determined to be due and payable pursuant to Article VI
hereof in accordance with the terms of the Escrow Agreement and shall be
maintained and used strictly in accordance with the terms of this Agreement and
the Escrow Agreement. The portion of the Escrow Amount that shall be withheld
with respect to each share of Company Capital Stock (including each share of
Company Capital Stock that would have been issuable under each Company Stock
Option and the Company Warrant had they been fully exercised immediately prior
to the Effective Time) shall equal the quotient of (i) the Escrow Amount divided
by (ii) the Fully-Diluted Number (such quotient is referred to herein as the
"Escrow Per Share Amount").
(b) Exchange of Certificates; Payment of Merger
Consideration. At the Closing:
(i) each Seller shall deliver to Buyer any
and all (as applicable) (i) certificates representing the issued and outstanding
shares of Company Capital Stock held by such Seller, duly endorsed in blank or
with duly executed stock powers attached and (ii) the Company Warrant held by
such Seller; and
(ii) Buyer shall pay to each holder of
Company Stock Options, and to each Seller who has delivered certificates, stock
powers, or the Company Warrant as provided in Section 1.6(b)(i) (and has made
such certificates, powers and Company Warrant available for inspection no later
than two business days prior to the Closing), by wire transfer of immediately
available funds to the accounts designated by the Seller Representative not less
than two business days prior to the Closing, an amount
4
equal to (A) the amount payable to such Seller pursuant to Sections 1.5(e)
and/or 1.5(f), and 1.5(h) as applicable, less (B) the product of (I) the Escrow
Per Share Amount multiplied by (II) the number of shares of Company Capital
Stock (including, with respect to each Company Stock Option and the Company
Warrant, each share of Company Capital Stock that would have been issuable
thereunder as of the Effective Time) held by such Seller. Any Seller who has not
provided all of the certificates, powers, or warrant required by Section
1.6(b)(i) above available for inspection not later than two business days prior
to the Closing shall be paid by Buyer within two business days following such
Buyer's receipt of the documents required by Section 1.6(b)(i) above in
satisfactory form.
SECTION 1.7 WITHHOLDING. The Company and each Seller authorize
Buyer to deduct and withhold from the consideration otherwise payable pursuant
to this Agreement to any holder of Company Stock Options such amounts as the
Company or Buyer is required to deduct and withhold with respect to the making
of such payment or exercise of a Company Stock Option under the Internal Revenue
Code of 1986, as amended (the "Code"), any provision of state, local or foreign
tax law, or any option agreement between the Company and such Seller. To the
extent that amounts are so withheld, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the holder of Company
Stock Option in respect of which such deduction and withholding was made by
Buyer.
SECTION 1.8 PURCHASE PRICE ADJUSTMENTS. In addition to the
adjustments to be made to the Merger Consideration pursuant to Section 1.5(g),
following the Closing, the parties will adjust the Merger Consideration as
follows:
(a) Working Capital Adjustment.
(i) "Working Capital" means, as of the
Closing Date, the amount by which the sum of the (A) cash and cash equivalents
after subtracting $1,000,000, (B) accounts receivable, (C) inventory (except for
account #1310 titled "Volume Discounts/Coop - Reserve"), and (D) prepaid
expenses and other current assets (excluding any assets relating to Taxes) of
the Company and its Subsidiaries exceeds the sum of the (x) accounts payable and
(y) current accrued expenses (which shall (I) exclude any Indebtedness and
accrued interest and Company Transaction Expenses set forth in the Company
Transaction Expenses Notice and (II) in the case of Taxes, be limited to the
accrued tax liability net of any current benefit from any tax assets) of the
Company and its Subsidiaries, all as determined in a manner consistent with the
Company's past practices, the Company Balance Sheet, and without taking into
account any adjustments relating to the Merger, including any purchase
accounting adjustments.
(ii) As promptly as practicable following
the Closing, but in no event later than 60 days after the Closing, Buyer and its
representatives will prepare and submit to the Seller Representative a statement
(the "Final Statement") setting forth the Working Capital (the "Final Working
Capital") (including detail of the components of Working Capital as they would
appear on a consolidated balance sheet of the Company prepared in a manner
consistent with the Company Balance Sheet)
5
determined in a manner consistent with the Company's past practices, the Company
Balance Sheet, and without taking into account any adjustments relating to the
Merger, including any purchase accounting adjustments. The Final Statement shall
set forth any adjustment to the Merger Consideration that needs to be made as a
result of any difference between the Final Working Capital and the Estimated
Working Capital pursuant to Section 1.8(a)(iii), as well as any adjustment to
the Optionee Amount as a result of such adjustment to the Merger Consideration.
(iii) If the Final Working Capital less the
Estimated Working Capital is a positive number, the Merger Consideration will be
increased by the amount of such difference and the Optionee Amount will be
increased by a correlative amount (calculated in accordance with Section
1.5(h)). If the Final Working Capital less the Estimated Working Capital is a
negative number, the Merger Consideration will be decreased by the amount of
such difference and the Optionee Amount will be decreased by a correlative
amount (calculated in accordance with Section 1.5(h)).
(b) If the Seller Representative disputes Buyer's
calculation of the Final Working Capital as set forth in the Final Statement,
the Seller Representative will notify Buyer in writing setting forth its
objections in detail within 20 days after delivery of the Final Statement. If
the Seller Representative does not so notify Buyer within such 20-day period,
the Seller Representative, on behalf the Sellers, will be deemed to have
conclusively accepted the Final Statement and the Final Working Capital. If the
Seller Representative does so notify Buyer, Buyer and the Seller Representative
will endeavor in good faith to resolve any dispute over the calculation. Each
party will cooperate with the other party in the determination of the
appropriate calculations and any adjustment in the Merger Consideration to be
made after the Closing Date, including allowing the other party and its
representatives reasonable access after the Closing to the books and records of
the Company and its Subsidiaries, subject to the execution of reasonable
confidentiality agreements. If Buyer and the Seller Representative are unable to
resolve any such dispute within 30 days after the delivery of the Seller
Representative's notice of the dispute to Buyer, such dispute may, upon the
request of Buyer or the Seller Representative, be submitted to a
nationally-recognized accounting firm in the United States as is mutually
acceptable to Buyer and the Seller Representative (the "Independent Accounting
Firm"), which will resolve all such disputes within 30 days from their
submission. Each of Buyer and the Seller Representative will be entitled to
submit a proposal for a revised Final Statement (each such proposal, a "Proposed
Statement"), and the Independent Accounting Firm will be permitted to select one
of the two Proposed Statements, but will be unable to resolve the dispute in any
manner other than the selection of one of the two Proposed Statements. The
decision of the Independent Accounting Firm will be final and binding upon
Buyer, Sub, the Seller Representative and the Sellers. The fees and expenses of
the Independent Accounting Firm shall be paid by the non-prevailing party, and
if the non-prevailing party is the Sellers, up to $50,000 of such amount may be
paid by the Sellers by release of an equal portion of the Escrow Amount to the
Independent Accounting Firm, and any remaining balance shall be paid by the
Sellers, pro rata.
6
(c) Once the calculation of the Final Working Capital
has been agreed upon by Buyer and the Seller Representative or any dispute with
regard thereto has been resolved in accordance with this Section 1.8:
(i) In the event of an increase in the
Merger Consideration and a correlative increase in the Optionee Amount to be
made pursuant to this Section 1.8, Buyer will pay to each Seller, by wire
transfer of immediately available funds, in the amounts and to the accounts
designated by the Seller Representative, its or his respective pro rata amount
of (A) the increase in Merger Consideration, and (B) the increase in the
Optionee Amount resulting from the increase in Merger Consideration.
(ii) Any decrease in the Merger
Consideration and correlative decrease in the Optionee Amount to be made
pursuant to this Section 1.8 will be paid to Buyer from the Escrow Amount and
will also reduce the Escrow Per Share Amount on a pro rata basis. If the
deduction in the Merger Consideration and the Optionee Amount to be made
pursuant to this Section 1.8 exceeds the Escrow Amount, each Seller, severally,
shall pay his or its pro rata share of such shortfall to Buyer.
SECTION 1.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON
STOCK. All amounts paid and to be paid to Sellers in accordance with the terms
hereof shall be deemed to constitute full satisfaction of all rights pertaining
to (a) the shares of Company Capital Stock; (b) the Company Stock Options and
the Company Warrant; and (c) the shares of Company Capital Stock underlying such
Company Stock Options and the Company Warrant.
SECTION 1.10 CLOSING OF COMPANY TRANSFER BOOKS. At the
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of shares of Company Capital Stock shall thereafter be made on the
records of the Company. If, after the Effective Time, certificates representing
shares of Company Capital Stock are presented to the Surviving Company or the
Buyer, such certificates shall be canceled and exchanged as provided in this
Article I.
SECTION 1.11 LOST CERTIFICATES. If any certificate
representing shares of Company Capital Stock shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such certificate to be lost, stolen or destroyed and, if required by Buyer, the
posting by such person of a bond in such reasonable amount as Buyer may direct
as indemnity against any claim that may be made against them with respect to
such certificate, Buyer will pay in exchange for such lost, stolen or destroyed
certificate the amounts to which the holders thereof are entitled pursuant to
this Article I.
SECTION 1.12 FURTHER ASSURANCES. If at any time after the
Effective Time the Surviving Company shall consider or be advised that any
deeds, bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Company its right, title or interest in, to or under
any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (b) otherwise to carry out
7
the purposes of this Agreement, the Surviving Company and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and to do, in the name and on
behalf of either Constituent Corporation, all such other acts and things as may
be necessary, desirable or proper to vest, perfect or confirm the Surviving
Company's right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of such Constituent
Corporation and otherwise to carry out the purposes of this Agreement.
SECTION 1.13 CLOSING. The closing of the transactions
contemplated by this Agreement (the "Closing") and all actions specified in this
Agreement to occur at the Closing shall take place at the offices of Xxxxxx,
Xxxx & Xxxxxxxx LLP, 0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx at
10:00 a.m. local time, on the later of (A) the date that is two days after the
date on which the last of the conditions set forth in Article VII (such
conditions, the "Closing Conditions") has been fulfilled or waived (if
permissible), (B) December 19, 2005, or (C) at such other time and place as
Buyer and the Company shall agree(the "Closing Date"). Notwithstanding the
foregoing, if the last of the Closing Conditions is satisfied on a Friday, then
Buyer will use commercially reasonable efforts to effect the Closing on the
following Monday, but if Buyer, in its sole discretion, deems that a Closing on
that time frame is not reasonably feasible, then the Closing shall take place on
the second Monday following the satisfaction of the Closing Conditions.
Furthermore, if the last of the Closing Conditions is satisfied on a Saturday or
Sunday, then the Closing will occur on the second Monday following such
satisfaction.
(a) Not less than two days prior to the Closing Date,
the Company shall prepare and submit to Buyer a statement (the "Preliminary
Statement") setting forth an estimate of the Working Capital (the "Estimated
Working Capital") (including detail of the components of Working Capital as they
would appear on a consolidated balance sheet of the Company prepared in a manner
consistent with the Company Balance Sheet) determined in a manner consistent
with the Company's past practices, the Company Balance Sheet, and without taking
into account any adjustments relating to the Merger, including any purchase
accounting adjustments. At the Closing, the parties will calculate the
difference between the Estimated Working Capital and $22,000,000 (the "Target
Working Capital"). Such difference shall be the Estimated Working Capital
Adjustment. If the Estimated Working Capital exceeds the Target Working Capital,
then the Estimated Working Capital Adjustment shall be a positive number equal
to the amount of such excess. If the Estimated Working Capital is less than the
Target Working Capital, then the Estimated Working Capital Adjustment shall be a
negative number equal to the amount of such shortfall.
(b) On the day prior to the Closing Date, the Company
shall deliver to Buyer a written notice (the "Company Transaction Expenses
Notice") setting forth and representing in good faith to Buyer the aggregate
Company Transaction Expenses, together with an itemization and description of
such Company Transaction Expenses in reasonable detail and final invoices from
the relevant payees in respect thereof. "Company Transaction Expenses" means any
and all out of pocket expenses
8
incurred by the Company or any Subsidiary of the Company in connection with the
transactions contemplated by this Agreement, to the extent such expenses remain
unpaid as of the Closing, including to the extent payable by the Company or a
Subsidiary of the Company, the fees of legal advisors, accountants, investment
bankers, financial advisors, valuation firms or similar professionals. On the
Closing Date, Buyer, on behalf of the Company, shall pay the Company Transaction
Expenses reflected on the Company Transaction Expenses Notice to the applicable
professionals and other payees reflected on such notice.
(c) On the day prior to the Closing Date, the Company
shall deliver a written notice (the "Debt Amount Notice") setting forth and
representing in good faith to Buyer the total Debt Amount, together with an
itemization and description of such Debt Amount. "Debt Amount" means all
Indebtedness of the Company or its Subsidiaries and all accrued interest related
to such Indebtedness, including Indebtedness associated with the Credit
Agreement listed in Section 3.11(b) of the Company Letter (the "Company Credit
Facility"), the Senior Subordinated Loan Agreement listed in Section 3.11(b) of
the Company Letter (the "Senior Subordinated Loan Agreement"), and leases and
similar arrangements required to be capitalized in accordance with U.S.
generally accepted accounting principles ("GAAP"), other than those capitalized
real estate leases set forth in Section 1.13 of the Company Letter, together
with any breakage costs, prepayment penalties or similar fees or amounts that
would be incurred by the immediate payment of such Indebtedness.
(d) On the Closing Date and simultaneously with the
Closing, Buyer, on behalf of the Company, shall pay or otherwise discharge all
Indebtedness and other amounts due and payable under, and terminate the Company
Credit Facility and the Senior Subordinated Loan Agreement. Concurrent with such
payment or discharge, the Company shall obtain (i) releases of all guarantees by
the Company's Subsidiaries securing the Indebtedness and other obligations under
the Company Credit Facility or other Indebtedness, and (ii) releases of all
Encumbrances on the assets, properties and capital stock of the Company and each
of its Subsidiaries securing the Indebtedness under the Company Credit Facility.
At the Closing, the Company shall provide evidence in writing satisfactory to
Buyer of the Company's performance of the covenants set forth in this Section
1.13(d), including payoff letters in customary form and UCC-3 termination
statements and other customary Encumbrance-release documentation in connection
with the release of guarantees and the release of Encumbrances on the assets,
properties and capital stock of the Company and each of its Subsidiaries.
(e) Between the time of delivery of any notice
required to be given to Buyer pursuant to Sections (a), (b), or (c) of this
Section 1.13 and the Closing, Buyer and the Company shall cooperate to ensure
the accuracy of such notices.
(f) For avoidance of doubt, downward adjustments to
the Merger Consideration made pursuant to Section 1.8, or any Losses incurred as
a result of any inaccuracy in the Company Transaction Expenses Notice or the
Debt Amount Notice shall be made by a claim against the Escrow Amount and shall
be made without regard to
9
the indemnification provisions of Article VI (including the Deductible and the
Cap) of this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF BUYER AND SUB
Buyer and Sub represent and warrant to the Company and the
Sellers as follows:
SECTION 2.1 ORGANIZATION, STANDING AND POWER. Each of Buyer
and Sub is a corporation duly organized, validly existing and in good standing
under the laws of its place of incorporation and has the requisite corporate
power and authority to carry on its business as now being conducted.
SECTION 2.2 AUTHORITY. On or prior to the date of this
Agreement, the respective Boards of Directors of Buyer and Sub have declared the
Merger advisable and have approved and adopted this Agreement in accordance with
the DGCL. Each of Buyer and Sub has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Buyer and Sub and the
consummation by Buyer and Sub of the transactions contemplated hereby have been
duly authorized by all necessary corporate action (including all Board action)
on the part of Buyer and Sub, subject to the filing of appropriate Certificate
of Merger as required by the DGCL. This Agreement has been duly executed and
delivered by Buyer and Sub, and (assuming the valid authorization, execution and
delivery of this Agreement by the Company and the Sellers) this Agreement
constitutes the valid and binding obligation of Buyer and Sub enforceable
against each of them in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization or other
similar laws affecting creditors' rights generally and by general principles of
equity (regardless of whether considered in a proceeding at law or in equity).
SECTION 2.3 CONSENTS AND APPROVALS; NO VIOLATION. Except for
the filings, registrations, authorizations, consents and approvals described in
clauses (i), (ii) and (iii) of the following sentence of this Section 2.3, the
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof will
not, result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give to others a right of termination, cancellation or
acceleration of any obligation or result in the loss of a benefit under, any
provision of (a) the Certificate of Incorporation or the By-laws of Buyer, each
as amended to date, (b) the Certificate of Incorporation and By-laws of Sub,
each as amended to date, (c) any material contract, agreement or arrangement to
which Buyer or Sub is a party or by which any of their respective assets are
bound, or (d) any judgment, order, decree, statute, law, or material ordinance,
rule or regulation, applicable to Buyer or Sub or any of their respective
properties or assets. No filing or registration with, or authorization, consent
or approval of, any domestic (federal and state), foreign or supranational
court, commission, governmental body, regulatory agency, authority or
10
tribunal (a "Governmental Entity") is required by or with respect to Buyer or
Sub in connection with the execution and delivery of this Agreement by Buyer or
Sub or is necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement, except for (i) in connection, or in
compliance, with the provisions of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), (ii) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which the Company is
qualified to do business, or (iii) such filings and consents as may be required
under any environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or by the
transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Each representation and warranty set forth below is qualified
by any exception or disclosures set forth in the letter dated the date hereof
and delivered on the date hereof by the Company to Buyer, which relates to this
Agreement and is designated therein as the Company Letter (the "Company
Letter"), which exceptions specifically reference the Sections to be qualified.
In all other respects, each representation and warranty set out in this Article
III is not qualified in any way whatsoever, will not merge on the Closing, or by
reason of the execution and delivery of any agreement, document or instrument at
the Closing, will remain in force on and after the Closing Date, is given with
the intention that liability is not confined to breaches discovered before
Closing, is separate and independent and is not limited by reference to any
other representation or warranty or any other provision of this Agreement, and
is made and given with the intention of inducing Buyer and Sub to enter into
this Agreement. The Company represents and warrants to Buyer and Sub as follows:
SECTION 3.1 ORGANIZATION, STANDING AND POWER.
(a) Each of the Company and its Subsidiaries is (i) a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation as set forth in Section 3.1(a) of the
Company Letter, and has full corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being conducted
and (ii) duly qualified or licensed as a foreign corporation to do business, and
is in good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except for any such failures to be so
qualified or licensed and in good standing that would not, individually or in
the aggregate, have a Material Adverse Effect. For purposes of this Agreement,
"Material Adverse Change" or "Material Adverse Effect" mean, when used with
respect to the Company or any of its Subsidiaries, any change or effect that is
or could reasonably be expected (as far as can be foreseen at the time) to be
materially adverse to the business, operations, properties, assets, results of
operations or the condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole.
11
(b) The Company has heretofore furnished to Buyer a complete
and correct copy of the certificate of incorporation and bylaws or equivalent
organizational documents, each as amended to date, of the Company and each of
its Subsidiaries. Such certificates of incorporation, bylaws or equivalent
organizational documents are in full force and effect. Neither the Company nor
any of its Subsidiaries is in violation of any of the provisions of its
certificate of incorporation, bylaws or equivalent organizational documents. The
transfer books and minute books of each of the Company and its Subsidiaries that
have been made available for inspection by Buyer prior to the date hereof are
true and complete.
SECTION 3.2 CAPITAL STRUCTURE.
(a) As of the date hereof, the authorized capital stock of the
Company consists of 20,000 shares of Company Common Stock and 80,000 shares of
Company Preferred Stock. As of the date hereof, (i) 10,024.018 shares of Company
Common Stock are issued and outstanding, all of which were validly issued, fully
paid and nonassessable, and free of preemptive rights, (ii) no shares of Company
Preferred Stock are issued and outstanding, (iii) no shares of Company Common
Stock are held in the treasury of the Company, (iv) 1,126.769 shares of Company
Common Stock are reserved for future issuance pursuant to the Company's 2003
Stock Option Plan (the "Company Stock Option Plan"), and (v) 228.00 shares of
Company Common Stock are reserved for issuance pursuant to a warrant to purchase
shares of Company Common Stock issued by the Company (the "Company Warrant"). On
the date hereof, the issued and outstanding shares of Company Common Stock are
held of record by the Persons and in the amounts with the corresponding
certificate numbers set forth in Section 3.2(a) of the Company Letter. Section
3.2(a) of the Company Letter sets forth, for each Subsidiary of the Company, the
amount of its authorized capital stock, the amount of its outstanding capital
stock and the record owners of its outstanding capital stock. There are no
outstanding shares of Company Common Stock, Company Preferred Stock or capital
stock of any Subsidiary of the Company that are not listed in Section 3.2(a) of
the Company Letter. As of the Closing Date, there will be no shares of Company
Capital Stock or capital stock of any Subsidiary of the Company outstanding
other than as listed in Section 3.2(a) of the Company Letter.
(b) Section 3.2 (b) of the Company Letter contains a correct
and complete list as of the date of this Agreement of each outstanding option to
purchase shares of Company Capital Stock issued under the Company Stock Option
Plan (collectively, the "Company Stock Options"), including the holder, date of
grant, exercise price and number of shares of Company Capital Stock subject
thereto. Section 3.2(b) of the Company Letter correctly sets forth for the
Company Warrant, the holder, date and number of shares subject thereto. Except
as set forth on Section 3.2(b) of the Company Letter, there are no options,
warrants, calls, rights or agreements to which the Company or any of its
Subsidiaries is a party or by which it is bound obligating the Company or any of
its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of Company Capital Stock or capital stock of any of the
Company's Subsidiaries, or obligating the Company or any of its Subsidiaries to
grant, extend or enter into any such option, warrant, call, right or agreement.
All Company Stock Options
12
and all shares of Company Capital Stock issued pursuant to the exercise of
options granted under the Company Stock Option Plan have been granted or issued,
respectively, and all shares of Company Common Stock issued pursuant to the
Company Stock Options prior to the Closing, if any, will be issued, in
compliance with the Securities Act.
(c) Except as set forth in Section 3.2(c) of the Company
Letter, there are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any shares of Company Capital Stock or
any capital stock of or any equity interests in the Company. Except as set forth
in Section 3.2(c) of the Company Letter, there are no outstanding contractual
obligations of any Subsidiary of the Company to repurchase, redeem or otherwise
acquire any shares of capital stock or any equity interests in such Subsidiary
of the Company. Except as set forth in Section 3.2 of the Company Letter, the
Company and its Subsidiaries do not have any outstanding bonds, debentures,
notes or other obligations the holders of which have the right to vote (or are
convertible into or exercisable for securities having the right to vote) with
the shareholders of the Company or any of its Subsidiaries on any matter. Except
as set forth on Section 3.2(c) of the Company Letter, as of the date hereof,
neither the Company nor any of its Subsidiaries is party to or bound by (i) any
agreement or commitment pursuant to which the Company or any of its Subsidiaries
is or could be required to register any securities under the Securities Act or
(ii) any debt agreements or instruments which grant any rights to vote
(contingent or otherwise) on matters on which shareholders of the Company may
vote.
(d) Section 3.2(d) of the Company Letter contains a correct
and complete list as of the date of this Agreement of each entity in which the
Company or any of its Subsidiaries owns an equity interest (other than a
Subsidiary), including the number of outstanding shares of the stock of each
such entity, the percentage interest represented by such ownership in the
entity, and the date of acquisition of the ownership interest in any such
entity.
(e) Except as set forth in Section 3.2(e) of the Company
Letter, there are no shareholder agreements, voting trusts or other agreements
or understandings to which the Company or any of its Subsidiaries is a party or
by which it is bound relating to the voting or registration of any shares of
Company Capital Stock.
SECTION 3.3 AUTHORITY.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject to the filing of the Certificate of Merger as required by the
DGCL. This Agreement has been duly and validly executed and delivered by the
Company and (assuming the valid authorization, execution and delivery of this
Agreement by Buyer and Sub and the validity and binding effect of the Agreement
on Buyer and Sub) constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with
13
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws affecting
creditors' rights generally and by general principles of equity (regardless of
whether considered in a proceeding at law or in equity).
(b) Without limiting the generality of the foregoing, on or
prior to the date of this Agreement and as of the Closing, (i) the Board of
Directors of the Company has unanimously (A) declared the Merger advisable and
fair to and in the best interests of the Company and its shareholders, and
approved and adopted this Agreement in accordance with the DGCL, (B) recommended
approval and adoption of this Agreement, the Merger and the other transactions
contemplated hereby by the Company's shareholders, and (C) has not withdrawn or
modified such approval or resolution to recommend; and (ii) the shareholders of
the Company have unanimously approved and adopted this Agreement, the Merger and
the other transactions contemplated hereby and have not withdrawn or modified
such approval and adoption.
SECTION 3.4 CONSENTS AND APPROVALS; NO VIOLATION. Except for the
filings, registrations, authorizations, consents and approvals described in
clauses (i), (ii) and (iii) of the following sentence of this Section 3.4 and
except as set forth in Section 3.4 of the Company Letter, the execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the provisions hereof will not, result
in any violation of, or default (with or without notice or lapse of time, or
both) under, or give to others a right of termination, cancellation or
acceleration of any obligation or result in the loss of a benefit under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company or any of its Subsidiaries
under, any provision of (a) the Certificate of Incorporation of the Company, as
amended from time to time, or the Bylaws of the Company (together, the "Company
Charter"), (b) any Material Contract, or (c) any judgment, order, decree,
statute, law, or any material ordinance, rule or regulation applicable to the
Company or any of its Subsidiaries or any of their respective properties or
assets. No filing or registration with, or authorization, consent or approval
of, any Governmental Entity is required by or with respect to the Company or any
of its Subsidiaries in connection with the execution and delivery of this
Agreement by the Company or is necessary for the consummation of the Merger and
the other transactions contemplated by this Agreement, except for (i) in
connection, or in compliance, with the provisions of the HSR Act, (ii) the
filing of Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other states
in which the Company is qualified to do business, and (iii) such filings and
consents as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or by the transactions contemplated by this Agreement.
SECTION 3.5 FINANCIAL STATEMENTS.
(a) The Company has furnished Buyer with copies of the
following (collectively, the "Financial Statements"): (i) an audited
consolidated balance sheet of the Company and the related audited consolidated
statements of operations,
14
shareholders' equity and cash flows (including any related notes thereto), as of
and for the fiscal years ended December 26, 2004, and December 28, 2003,
together with the report thereon of Ernst & Young LLP, independent certified
public accountants to the Company (the "Audited Financial Statements"), and (ii)
the unaudited consolidated balance sheet, the related unaudited consolidated
statement of income and the related unaudited consolidated statement of cash
flows as of and for the period ended September 25, 2005 (the "Interim Financial
Statements"). The consolidated balance sheet of the Company as of September 25,
2005 is referred to herein as the "Company Balance Sheet" and the date thereof
is referred to herein as the "Company Balance Sheet Date." The Financial
Statements are included as Section 3.5(a) of the Company Letter.
(b) The Audited Financial Statements and the Interim Financial
Statements fairly present, in all material respects, the consolidated financial
position and results of operations, and, in the case of the Audited Financial
Statements, the changes in shareholders' equity, of the Company, together with
its Subsidiaries, as of the respective dates and for the respective periods
presented in such Financial Statements (subject in the case of the Interim
Financial Statements, to normal audit adjustments (the effect of which would
not, individually or in the aggregate, be materially adverse). Except as set
forth in Section 3.5(b) of the Company Letter, the Audited Financial Statements,
including the notes thereto, and the Interim Financial Statements have been
prepared in accordance with GAAP, applied on a consistent basis during the
periods involved (except as disclosed therein and, in the case of the Interim
Financial Statements, for the absence of footnotes (which, if presented, would
not differ materially from those included in the Audited Financial Statements))
and subject in the case of the Interim Financial Statements to normal year-end
adjustments (the effect of which would not, individually or in the aggregate, be
materially adverse). No financial statements of any Person other than the
Company or its Subsidiaries are required by GAAP to be included in the
consolidated financial statements of the Company. The Company maintains and will
until the Closing maintain a standard system of accounting established and
administered in accordance with GAAP.
(c) All financial projections provided by the Company to Buyer
have been produced in good faith based on reasonable assumptions; provided,
however, that such projections are subject to change and are not a guarantee of
any future performance of the Company and its Subsidiaries.
(d) Except as reflected or reserved against in the Financial
Statements (which reserves have been established in accordance with GAAP), or
disclosed in the footnotes thereto and except as set forth in Section 3.5(d) of
the Company Letter, the Company and its Subsidiaries had no liabilities
(including Tax liabilities) at the Company Balance Sheet Date, direct or
indirect, absolute or contingent, of a type required to be recorded on a balance
sheet or disclosed in the notes thereto under GAAP. Except as set forth in
Section 3.5(d) of the Company Letter, the Company does not have any
reimbursement obligations in respect of letters of credit, surety bonds, or
obligations in respect of banker's acceptances, whether or not matured.
15
(e) The line items of cash and cash equivalents, accounts
receivable, inventory, prepaid expenses, accounts payable, and current accrued
expenses on the Company Balance Sheet are identical to those line items on the
balance sheet of Xxxxxx'x Discount Auto Stores, Inc. (excluding intercompany
items that would be eliminated in a consolidated financial statement).
SECTION 3.6 NO DEFAULT. Except as set forth in Section 3.6 of the
Company Letter, neither the Company nor any of its Subsidiaries is in breach,
default or violation (and no event has occurred that with notice or the lapse of
time or both would constitute a breach, default or violation) of any term,
condition or provision of (a) the Company Charter or (b) any order, writ,
injunction or decree applicable to the Company or any of its Subsidiaries or any
of their respective properties or assets.
SECTION 3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth in Section 3.7 of the Company Letter, since the Company Balance Sheet
Date, (a) neither the Company nor any of its Subsidiaries has incurred any
liability or obligation, in each case, in excess of $50,000 (indirect, direct or
contingent), or entered into any written agreement involving rights or
obligations, in each case, in excess of $50,000, that is not in the ordinary
course of business, (b) neither the Company nor any of its Subsidiaries has
sustained any material loss or interference with its business or properties from
fire, flood, windstorm, accident or other calamity (whether or not covered by
insurance), (c) there has been no change in the capital stock of the Company,
(d) there has been no dividend or distribution of any kind declared, paid or
made by the Company on any class of its stock, (e) there has not been (i) any
adoption of a new Company Plan (as hereinafter defined), (ii) any amendment to a
Company Plan increasing benefits thereunder, (iii) any granting by the Company
or any of its Subsidiaries to any executive officer or other key employee of the
Company or any of its Subsidiaries of any increase in compensation, except in
the ordinary course of business consistent with prior practice or as was
required under employment agreements in effect as of the date of the Company
Balance Sheet Date, (iv) any granting by the Company or any of its Subsidiaries
to any such executive officer or other key employee of any increase in severance
or termination agreements in effect as of the Company Balance Sheet Date, or (v)
any entry by the Company or any of its Subsidiaries into any employment,
severance or termination agreement with any such executive officer or other key
employee, and (f) there has been no event causing a Material Adverse Effect on
the Company or any of its Subsidiaries, nor any development that would (as far
as can be foreseen at the time), individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on the Company.
SECTION 3.8 PERMITS AND COMPLIANCE. Except as set forth in Section
3.8 of the Company Letter, (i) the Company and its Subsidiaries are and at all
times have been in possession of all material franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity necessary for the
Company to own, lease and operate their properties or to carry on their
respective businesses as such are now being conducted (the "Company Permits"),
(ii) no notice suspension or cancellation of any of the Company Permits has been
received by the Company or, to the knowledge of the Company, has
16
been threatened, and (iii) the Company and its Subsidiaries are not nor have
they been in violation in any material respect of (A) any Company Permits, or
(B) any Applicable Law, including any consumer protection, equal opportunity,
customs, export control, foreign trade, foreign corrupt practices (including the
Foreign Corrupt Practices Act). Neither the Company nor any of its Subsidiaries
is subject to any consent decree from any Governmental Entity. The Company and
its Subsidiaries have not, and no employee, agent or shareholder of the Company
or its Subsidiaries (in their capacity as such as purporting to act in such
capacity or on behalf of or in connection with the business or affairs of the
Company or its Subsidiaries) has, directly or indirectly has made any payment of
funds of any such entity or received or retained any funds in violation of any
Applicable Law.
SECTION 3.9 TAX MATTERS.
(a) Except as otherwise set forth in Section 3.9 of the
Company Letter,
(i) the Company and its Subsidiaries have timely filed
(taking account of extensions to file that have been properly obtained) all Tax
Returns (as hereinafter defined) required to have been filed by them, and such
Tax Returns are correct and complete in all material respects;
(ii) the Company and its Subsidiaries have timely paid
(taking account of extensions to pay that have been properly obtained) all Taxes
(as hereinafter defined) required to have been paid by them that have been due;
(iii) the Company and its Subsidiaries have complied in
all respects with all rules and regulations relating to the withholding of Taxes
and the remittance of withheld Taxes;
(iv) the Company and its Subsidiaries have not waived
any statute of limitations in respect of its Taxes, which remains open;
(v) no federal, state, local, or foreign audits or
administrative proceedings, of which the Company or any of its Subsidiaries has
notice, are pending with regard to any Taxes or Tax Returns of the Company or
its Subsidiaries and neither the Company nor any of its Subsidiaries has
received a written notice of any proposed audit or proceeding from the Internal
Revenue Service ("IRS") or any other taxing authority;
(vi) no issues have been raised by the relevant taxing
authority in connection with the examination of Tax Returns required to have
been filed by or with respect to the Company or any of its Subsidiaries;
(vii) all deficiencies asserted or assessments made as a
result of any examination of such Tax Returns by any taxing authority have been
paid in full;
17
(viii) neither the Company nor any of its Subsidiaries
has engaged in any transaction that would constitute a "reportable transaction"
within the meaning of Section 6111 or a "tax shelter" within the meaning of
Section 6662 of the Code;
(ix) neither the Company nor any of its Subsidiaries has
submitted a request for a ruling to the IRS or a State tax authority;
(x) neither the Company nor any of its Subsidiaries has
at any time made, changed or rescinded any express or deemed election relating
to Taxes, that is not reflected in any Tax Return, nor has the Company or any of
its Subsidiaries at any time changed any of its methods of reporting income or
deductions for Tax purposes from those employed in the preparation of its Tax
Returns;
(xi) neither the Company nor any of its Subsidiaries has
been a member of an affiliated group of corporations (within the meaning of
Section 1504(a)) filing a consolidated federal income tax return (or a group of
corporations filing a consolidated, combined, or unitary income tax return under
comparable provisions of state, local, or foreign tax law) for any taxable
period, other than the group of which the Company is the common parent;
(xii) neither the Company nor any of its Subsidiaries
has any obligation under any agreement or arrangement, other than pursuant to
Leases (as hereinafter defined) and with regard to employee compensation, with
any other Person with respect to Taxes of such other Person (including pursuant
to Treasury Regulations Section 1.1502-6 or comparable provision of state, local
or foreign tax law) including any liability for Taxes of any predecessor entity;
(xiii) as of the Company Balance Sheet Date, the unpaid
Taxes of the Company and its Subsidiaries did not exceed the reserve for Tax
liability (excluding any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth or included in the
Company Balance Sheet;
(xiv) Section 3.9 of the Company Letter sets forth all
jurisdictions outside of the United States in which the Company and its
Subsidiaries are subject to Tax, engaged in business, or have a permanent
establishment;
(xv) the Company has not constituted either a
"distributing corporation" or a "controlled corporation" in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (i) in the
two years prior to the date of this Agreement, or (ii) in a distribution which
could otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) that includes the Merger;
(xvi) Neither the Company nor a Subsidiary has ever been
a United States real property holding corporation within the meaning of Section
897(c)(2) of the Code, or a stockholder of a "controlled foreign corporation" as
18
defined in Section 957 of the Code (or any similar provision of state, local or
foreign law);
(xvii) Neither the Company nor any Subsidiary has ever
made an election under Section 338 of the Code (or under any similar provisions
of state, local or foreign Law);
(xviii) Neither the Company nor any Subsidiary has been
a "personal holding company" as defined in Section 542 of the Code (or any
similar provision of state, local or foreign law);
(xix) Neither the Company nor any Subsidiary has had a
material Liability with respect to Taxes as a result of being a stockholder of a
"passive foreign investment company" within the meaning of Section 1297 of the
Code;
(xx) Neither the Company nor any Subsidiary has engaged
in a trade or business, had a permanent establishment (within the meaning of an
applicable Tax treaty) or has otherwise become subject to Tax jurisdiction in a
country other than the country of its formation; and
(xxi) Neither the Company nor any of its Subsidiaries is
a party to any agreement, contract or arrangement that could result, separately
or in the aggregate, in the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code.
(b) For purposes of this Agreement: (i) "Taxes" means any
federal, state, local, foreign or provincial income, gross receipts, property,
sales, use, license, franchise, employment, payroll, withholding, alternative or
added minimum, ad valorem, value-added, transfer, excise, capital, or net worth
tax, or other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest thereon or penalty
imposed with respect thereto by any Governmental Entity, whether computed on a
separate, consolidated, unitary, combined, or any other basis, and shall include
any transferee or secondary liability in respect of any tax (whether imposed by
law, contractual agreement, or otherwise), and (ii) "Tax Return" means any
return, report or similar statement (including the attached schedules) required
to be filed with respect to any Tax, including any information return, claim for
refund, amended return or declaration of estimated Tax.
(c) Section 3.5 and this Section 3.9 contain all of the
Company's representations and warranties relating to Taxes, and no other
provision of this Agreement will be deemed to contain any representations and
warranties relating to such matters.
SECTION 3.10 ACTIONS AND PROCEEDINGS. Except as set forth in Section
3.10 of the Company Letter, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against or involving
the Company or any of its Subsidiaries, or against or involving any of the
present or former directors, officers, employees, consultants, agents or
shareholders of the Company or any
19
of its Subsidiaries, as such, any of its or their properties, assets or business
or any Company Plan (as hereinafter defined). Except as set forth in Section
3.10 of the Company Letter, there are no actions, suits or claims or legal,
administrative or arbitrative proceedings or investigations (excluding claims
for workers' compensation for amounts, in each case, less than $25,000) pending
or, to the knowledge of the Company, threatened against or involving the Company
or any of its Subsidiaries or any of their respective present or former
directors, officers, employees, consultants, agents or shareholders, as such, or
any of the Company's or its Subsidiaries' respective properties, assets or
business or any Company Plan.
SECTION 3.11 CERTAIN AGREEMENTS.
(a) Except as set forth in Section 3.11(a) of the Company
Letter, neither the Company nor any of its Subsidiaries is a party to any oral
or written agreement, program, plan or other arrangement relating to the
compensation of employees of the Company or any of its Subsidiaries, including
any employment agreement, severance agreement, stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, pension
plan (as defined in Section 3(2) of ERISA) or welfare plan (as defined in
Section 3(1) of ERISA) (collectively the "Compensation Agreements"), any of the
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement. Section 3.11(a) of the Company Letter sets forth (i) for each
officer, director or employee who is a party to, or will receive benefits under,
any Compensation Agreement as a result of the transactions contemplated herein,
the total amount that each such Person may receive, or is eligible to receive
(other than the portion of the Merger Consideration that such Person, if a
Seller, will receive pursuant to this Agreement), assuming that the transactions
contemplated by this Agreement are consummated on the date hereof, and (ii) the
total amount of indebtedness owed to the Company from each officer, director or
employee of the Company or any of its Subsidiaries.
(b) Set forth in Section 3.11(b) of the Company Letter is a
list of all Material Contracts to which the Company or any of its Subsidiaries
is a party (and has any continuing rights or obligations under) or to which any
of its assets are bound as of the date hereof. Prior to the date hereof, the
Company has provided true and complete copies of all such Material Contracts to
Buyer. "Material Contracts" means any of the following contracts, agreements or
arrangements (other than purchase or sales orders entered into in the ordinary
course), whether written or oral, currently in effect:
(i) any contract or commitment that involves continuing
rights or obligations in excess of $100,000, which is not terminable by the
Company or any of its Subsidiaries on 90 or fewer days notice without penalty;
(ii) any contracts with employees, agents or consultants
(including severance or separation agreements);
20
(iii) any contract with franchisees;
(iv) any partnership or joint venture agreement;
(v) any real estate lease or other occupancy or use
agreements (including all leases for retail store locations), or any options or
rights of first refusal with respect to the acquisition of real estate by the
Company or any of its Subsidiaries;
(vi) any agreements giving any party the right to
renegotiate or require a reduction in price or refund of payments of more than
$35,000 previously made in connection with the business of the Company or any of
its Subsidiaries;
(vii) any agreements for the borrowing or lending of
money with respect to the business of the Company or any of its Subsidiaries and
any guaranty agreement or other evidence of Indebtedness;
(viii) any agreements the primary purpose of which is to
require the Company or any of its Subsidiaries to indemnify any other party
thereto;
(ix) any agreement for the sale of goods or services to
any Governmental Entity in excess of $35,000;
(x) any agreement granting any Person a lien on any of
the assets of the Company or any of its Subsidiaries (other than Permitted
Encumbrances or purchase money security interests);
(xi) any bonus, executive or deferred compensation,
profit sharing, pension or retirement, stock option or stock purchase,
hospitalization, insurance, medical reimbursement or other plan, agreement or
arrangement or practice providing employee or executive benefits to any officer
or employee or former officer or former employee;
(xii) any non-competition, secrecy or confidentiality
agreement relating to the business of the Company or any of its Subsidiaries or
any other contract restricting its right to conduct the business of the Company
or any of its Subsidiaries at any time, in any manner or at any place in the
world, or the expansion thereof to other geographical areas, customers,
suppliers or lines of business;
(xiii) any license agreement granting to the Company or
any of its Subsidiaries the exclusive right to use or practice any rights under
any Intellectual Property and any license agreement under which the Company or
any of its Subsidiaries grants licenses or other rights in or to use or practice
any rights under any Intellectual Property; or
(xiv) any agreement granting the Company or any of its
Subsidiaries any right under or with respect to any Intellectual Property owned
by a third
21
party that is used in connection with the business of the Company and its
Subsidiaries other than any license agreements for commercially available
software applications used generally in the operations of the Company and its
Subsidiaries which (A) relate to desktop applications or (B) involve license
fees (per agreement) of no more than $25,000.
(c) Each Material Contract is a legal, valid and binding
agreement of the Company or its Subsidiary, as applicable. Except as set forth
in Section 3.11(c) of the Company Letter, neither the Company nor any of its
Subsidiaries (or to the knowledge of the Company, any other party thereto) is in
default under any Material Contract, and the Company has not received any notice
of cancellation or default of any such Material Contract. Each Material Contract
is in full force and effect, and no event has occurred which, with the passage
of time or the giving of notice or both, would constitute a default, event of
default or other breach by the Company or one of its Subsidiaries which would
entitle the other party to such Material Contract to terminate the same or
declare a default or event of default thereunder; and neither the Company nor
any of its Subsidiaries is in receipt of any claim of default under any Material
Contract.
SECTION 3.12 ERISA.
(a) Each Company Plan is listed in Section 3.12(a) of the
Company Letter. With respect to each Company Plan, the Company has made
available to Buyer a true and correct copy of (i) the three most recent annual
reports (Form 5500) filed with the applicable government agency, (ii) each such
Company Plan that has been reduced to writing and all amendments thereto, (iii)
each trust agreement, insurance contract or administration agreement relating to
each such Company Plan, (iv) a written summary of each unwritten Company Plan,
(v) the most recent summary plan description or other written explanation of
each Company Plan provided to participants, (vi) the most recent actuarial
report or valuation relating to a Company Plan subject to Title IV of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), (vii) the
most recent determination letter or opinion letter and request therefore, if
any, issued by the IRS with respect to any Company Plan intended to be qualified
under section 401(a) of the Code, (viii) any request for a determination
currently pending before the IRS, (ix) all correspondence with the IRS, the
Department of Labor, or Pension Benefit Guaranty Corporation relating to any
outstanding controversy or with respect to any matter that has been resolved in
the previous three years and (x) all forms and certificate samples used to
comply with Sections 4980, 9801 and 9802 of the Code. Each Company Plan complies
in form and has been operated in material compliance with ERISA, the Code and
all other Applicable Law. Except as set forth in Section 3.12(a) of the Company
Letter, no "reportable event" (within the meaning of Section 4043 of ERISA) has
occurred with respect to any Company Plan for which the 30-day notice
requirement has not been waived. Neither the Company nor any of its Subsidiaries
or any of its ERISA Affiliates (as hereinafter defined) has withdrawn from any
Company Multiemployer Plan (as hereinafter defined) and would not incur any
withdrawal liability if it withdrew from all Company Multiemployer Plans on the
date of this Agreement. No action has been taken, or is currently being
considered, to terminate or withdraw from any Company Plan subject to Title IV
of ERISA and there is no reason to believe the Pension Benefit Guaranty
Corporation would initiate the termination of any such Plan.
22
No Company Plan, nor any trust created thereunder, has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA), whether or not waived.
(b) Except as listed in Section 3.12(b) of the Company Letter
and except for routine contributions due and owing, with respect to the Company
Plans, no event has occurred and there exists no condition or set of
circumstances in connection with which the Company or any of its Subsidiaries or
any ERISA Affiliate or Company Plan fiduciary could be subject to any material
liability under the terms of such Company Plans, ERISA, the Code or any other
Applicable Law. All Company Plans that are intended to be qualified under
Section 401(a) of the Code have been determined by the IRS to be so qualified
through the issuance of a favorable determination letter or an opinion letter,
or a timely application for such determination is now pending and the Company is
not aware of any reason why any such Company Plan is not so qualified in
operation. Neither the Company nor any of its Subsidiaries nor any of its ERISA
Affiliates has been notified by any Company Multiemployer Plan that such Company
Multiemployer Plan is currently in reorganization or insolvency under and within
the meaning of Section 4241 or 4245 of ERISA or that such Company Multiemployer
Plan intends to terminate or has been terminated under Section 4041A of ERISA.
No event has occurred and there exists no condition or set of circumstances that
would result in an increase in the contributions required to be made to any
Company Multiemployer Plan by the Company or any of its Subsidiaries or any
ERISA Affiliate. Except as disclosed in Section 3.12(b) of the Company Letter,
neither the Company nor any of its Subsidiaries nor any of its ERISA Affiliates
has any liability or obligation under any welfare plan to provide benefits after
termination of employment to any employee or dependent other than as required by
Section 4980B of the Code.
(c) As used herein, (i) "Company Plan" means a "pension plan"
(as defined in Section 3(2) of ERISA (including a Company Multiemployer Plan)),
a "welfare plan" (as defined in Section 3(1) of ERISA), and any other written or
oral bonus, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, restricted stock, stock
appreciation right, holiday pay, vacation, severance, medical, dental, vision,
disability, death benefit, sick leave, fringe benefit, personnel policy,
insurance or other plan, program, agreement, arrangement or understanding, in
each case established or maintained by the Company or any of its Subsidiaries or
any of its ERISA Affiliates or as to which the Company or any of its
Subsidiaries or any of its ERISA Affiliates has contributed or otherwise may
have any liability, (ii) "Company Multiemployer Plan" means a "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA) to which the Company or any of
its Subsidiaries or any of its ERISA Affiliates is or has been obligated to
contribute or otherwise may have any liability, and (iii) "ERISA Affiliate"
means any trade or business (whether or not incorporated) which would be
considered a single employer with the Company or any of its Subsidiaries
pursuant to Section 414(b), (c), (m) or (o) of the Code and the regulations
promulgated under those sections or pursuant to Section 4001(b) of ERISA and the
regulations promulgated thereunder.
(d) Section 3.12(d) of the Company Letter contains a list of
all (i) severance and employment agreements with officers and employees of the
Company
23
and each of its Subsidiaries and each ERISA Affiliate, (ii) severance programs
and policies of the Company, each of its Subsidiaries and each ERISA Affiliate
with or relating to its employees and (iii) plans, programs, agreements and
other arrangements of the Company, and each of its Subsidiaries and each ERISA
Affiliate with or relating to its employees containing change of control or
similar provisions.
(e) Except as set forth in Section 3.12(e)of the Company
Letter, neither the Company nor any of its Subsidiaries is a party to any
agreement, contract or arrangement that could result, separately or in the
aggregate, in the payment, acceleration or enhancement of any benefit as a
result of the transactions contemplated hereby.
(f) There is no Company Plan that is subject to the laws of a
foreign government or jurisdiction.
(g) This Section 3.12 and Section 3.8 contain all of the
Company's representations and warranties as to any matter relating to ERISA, and
no other provision of this Agreement will be deemed to contain any
representations and warranties relating to such matters.
SECTION 3.13 COMPLIANCE WITH WORKER SAFETY LAWS. The properties,
assets and operations of the Company and its Subsidiaries are in compliance in
all material respects with all applicable federal, state, local and foreign
laws, rules and regulations, orders, decrees, judgments, permits and licenses
relating to public and worker health and safety (collectively, "Worker Safety
Laws").
SECTION 3.14 INSURANCE. Section 3.14 of the Company Letter contains
a list of all policies of title, property, fire, casualty, liability, life,
business interruption, product liability, sprinkler and water damage, workmen's
compensation, libel and slander, Directors and Officers, and other forms of
insurance of any kind relating to the business and operations of the Company and
its Subsidiaries in each case which are in force as of the date hereof (the
"Insurance Policies"). The Company and its Subsidiaries have made any and all
payments required to maintain the Insurance Policies in full force and effect.
The Company and its Subsidiaries have not received notice of default under any
Insurance Policy and have not received written notice or, to the knowledge of
the Company, oral notice of any pending or threatened termination or
cancellation, coverage limitation or reduction or premium increase with respect
to any Insurance Policy.
SECTION 3.15 LABOR MATTERS. Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or labor contract
nor, to the knowledge of the Company, is there any effort to organize any
employees of the Company. Neither the Company nor any of its Subsidiaries has
engaged in any unfair labor practice with respect to any persons employed by or
otherwise performing services primarily for the Company or any of its
Subsidiaries (the "Company Business Personnel"), and to the knowledge of the
Company, there is no unfair labor practice complaint or grievance filed against
the Company or any of its Subsidiaries by any
24
Person pursuant to the National Labor Relations Act or any comparable state
agency or foreign law pending or threatened in writing with respect to the
Company Business Personnel. There is no labor strike, dispute, slowdown or
stoppage pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries that may interfere with the
respective business activities of the Company or any of its Subsidiaries in any
material respect. The Company and its Subsidiaries have complied in all material
respects with all Applicable Laws relating to the employment of labor.
SECTION 3.16 INTELLECTUAL PROPERTY.
(a) As used herein, the term "Intellectual Property" means all
intellectual property rights arising from or associated with the following,
whether created, protected or arising under the laws of the United States or any
other jurisdiction with respect to the following: (i) trade names, trademarks
and service marks (whether registered or unregistered), domain names and other
internet addresses or identifiers, trade dress and similar rights and
applications (including intent to use applications) to register any of the
foregoing (collectively, "Marks"); (ii) patents and patent applications and
rights in respect of utility models or industrial designs (collectively,
"Patents"); (iii) copyrights (whether registered or unregistered) and
registrations and applications therefor (collectively, "Copyrights"); (iv)
know-how, inventions, discoveries, methods, processes, techniques,
methodologies, formulae, algorithms, technical data, specifications, research
and development information, technology, data bases and other proprietary or
confidential information, including customer lists, in each case that derives
economic value (actual or potential) from not being generally known to other
persons who can obtain economic value from its disclosure, but excluding any
Copyrights or Patents that cover or protect any of the foregoing (collectively,
"Trade Secrets"), and (v) rights of publicity, privacy or related rights.
(b) Registered Intellectual Property. Section 3.16(b)(1) of
the Company Letter sets forth an accurate and complete list of all registered
Marks and applications for registration of Marks owned by or exclusively
licensed to the Company or any of its Subsidiaries (collectively, "Company
Registered Marks"), Section 3.16(b)(2) of the Company Letter sets forth an
accurate and complete list of all Patents owned by or exclusively licensed to
the Company or any of its Subsidiaries (collectively, "Company Patents"),
Section 3.16(b)(3) of the Company Letter sets forth an accurate and complete
list of all the domain names owned or exclusively licensed to the Company or any
of its Subsidiaries (collectively, "Company Domain Names"), and Section
3.16(b)(4) of the Company Letter sets forth an accurate and complete list of all
registered Copyrights and all pending applications for registration of
Copyrights owned by or exclusively licensed to the Company or any of its
Subsidiaries (collectively the "Company Registered Copyrights" and, together
with the Company Registered Marks, the Company Patents, and the Company
Registered Domain Names, the "Company Registered IP"). No Company Registered IP
has been or is now involved in any litigation or administrative proceeding
including any interference, reissue, reexamination, opposition or cancellation
proceeding and, to the knowledge of the Company, no such action is or has been
threatened with respect to any of the Company Registered IP. All
25
Company Registered IP has been registered (or in the case of applications, is in
the process of being registered) or obtained in accordance with all applicable
legal requirements and is currently in compliance in all material respects with
all legal requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal applications) other than any
requirement that, if not satisfied, would not result in a cancellation of any
such Company Registered IP or otherwise materially affect the priority, validity
and enforceability of such Company Registered IP. No notice or claim challenging
the validity or enforceability or alleging the misuse of any of the Company
Registered IP has been received by the Company or any of its Subsidiaries. All
filing, examination, issuance, post registration and maintenance fees, annuities
and the like associated with or required with respect to any of the Company
Registered IP have been timely paid.
(c) Trademarks. To the Company's knowledge, there has been no
prior use of any Company Registered Xxxx by any third party that would confer
upon such third party superior rights in such Company Registered Xxxx. All
Company Registered Marks have been continuously used by the Company or one of
its Subsidiaries in the form appearing in, and in connection with, the goods and
services listed in their respective registration certificates and applications
therefor, respectively.
(d) Ownership. Except as set forth in Section 3.16(d) of the
Company Letter, the Company or its Subsidiaries own exclusively all right, title
and interest to the Company Registered IP and either (i) own exclusively all
right, title and interest or (ii) license, under valid license agreements, all
other Intellectual Property used by the Company. Except as set forth in Section
3.16(d) of the Company Letter, the Company Registered IP is free and clear of
any lien or other adverse claims or interests, and the Company has not created
any lien or other adverse claims or interests in any other Intellectual Property
used by the Company, except for Permitted Encumbrances. Neither the Company nor
any of its Subsidiaries have received any written notice or claim challenging
the Company's or its Subsidiaries' ownership or use of any Intellectual
Property. None of the Intellectual Property owned by the Company and its
Subsidiaries or, to the knowledge of the Company, licensed to the Company or one
of its Subsidiaries is subject to any outstanding order, judgment, or
stipulation restricting the use thereof by the Company or its Subsidiaries. To
the Company's knowledge, no third party has infringed or is infringing the
Company Registered IP or any other Intellectual Property owned by or exclusively
licensed to the Company.
SECTION 3.17 REQUIRED VOTE OF COMPANY SHAREHOLDERS; BUSINESS
COMBINATION.
(a) The affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock is required to approve this
Agreement. No other vote of the security holders of the Company, including
without limitation the holders of Company Preferred Stock (of which no shares
are issued and outstanding), is required by law, the Company Charter or
otherwise in order for the Company to consummate the Merger and the transactions
contemplated hereby.
26
(b) No "fair price," "interested shareholder," "business
combination" or similar provision of any state takeover law is applicable to the
consummation by the Company of the transactions contemplated by this Agreement.
SECTION 3.18 ENVIRONMENTAL MATTERS.
(a) For purposes of this Agreement, the following terms shall
have the following meanings: (i) "Hazardous Substances" means (A) petroleum and
petroleum products, petroleum by-products or breakdown products, radioactive
materials, asbestos and asbestos-containing materials and polychlorinated
biphenyls, and (B) any other chemicals, materials or substances regulated as
toxic or hazardous or as a pollutant, contaminant or waste under any applicable
Environmental Law; (ii) "Environmental Law" means any Applicable Law, past,
present or future (up until the Effective Time) and as amended, and any judicial
or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, or common law, relating to
pollution or protection of the environment, health or safety or natural
resources, including those relating to the use, handling, transportation,
treatment, storage, disposal, release or discharge of Hazardous Substances; and
(iii) "Environmental Permit" means any permit, approval, identification number,
license or other authorization required under any applicable Environmental Law.
"Environmental Law" does not include any Worker Safety Laws.
(b) Except as set forth in Section 3.18(b) of the Company
Letter, the Company and each of its Subsidiaries is and has been in compliance
with all applicable Environmental Laws, possesses all Environmental Permits and
is in compliance with their requirements, and has resolved all known past
non-compliance with Environmental Laws and Environmental Permits without any
pending, on-going or future obligation, cost or liability.
(c) The Company and its Subsidiaries have (i) not placed,
held, located, released, transported or disposed of any Hazardous Substances on,
under, from or at any of their respective properties or any other properties
except in compliance with applicable Environmental Laws, (ii) excluding matters
consistent with the ordinary course of their business and in compliance with
applicable Environmental Law, no knowledge of the presence of any Hazardous
Substances on, under, emanating from, or at any of their respective properties
or any other property but arising from their respective current or former
properties or operations, and (iii) no knowledge nor has it received any written
notice, (A) that the Company or any of its Subsidiaries have violated or have
any liability under any Environmental Laws, (B) of the institution or pendency
of any suit, action, claim, proceeding or investigation by any Governmental
Entity or any third party in connection with any such violation or liability,
(C) requiring that the Company or any of its Subsidiaries investigate, respond
to or remediate Hazardous Substances at or arising from any of their respective
current or former properties or operations or any other properties, (D) alleging
noncompliance by the Company or any of its Subsidiaries with the terms of any
Environmental Permit in any manner reasonably likely to require significant
expenditures or to result in liability or (E) demanding payment by the Company
or any of its Subsidiaries for response to or remediation of Hazardous
27
Substances at or arising from any of their respective current or former
properties or operations or any other properties.
(d) To the knowledge of the Company, no Environmental Law
imposes any obligation upon the Company or any of its Subsidiaries arising out
of or as a condition to any transaction contemplated by this Agreement,
including any requirement to modify or to transfer any permit, any requirement
to file any notice or other submission with any Governmental Entity, the
placement of any notice, acknowledgment or covenant in any land records, or the
modification of or provision of notice under any agreement, consent order or
consent decree.
(e) True and correct copies of all environmental assessments
or audit reports or other similar studies or analyses in the possession or
control of the Company or its Subsidiaries relating to any real property
currently or formerly owned, leased or occupied by the Company or its
Subsidiaries have been made available to Buyer.
(f) Except as set forth in Section 3.18(f) of the Company
Letter, to the knowledge of the Company, no underground storage tanks,
asbestos-containing material, or polychlorinated biphenyls have ever been
located on property or properties presently or formerly owned or operated by the
Company or any of its Subsidiaries.
(g) Except as set forth in Section 3.18(g) of the Company
Letter, neither the Company nor any of its Subsidiaries has agreed to assume,
undertake or provide indemnification for any liability of any other person under
any Environmental Law, including any obligation for corrective or remedial
action.
(h) The Company and its Subsidiaries are not presently
required, nor do the Company or its Subsidiaries expect over the next five years
to be required, to make any capital or other expenditures to comply with any
Environmental Law nor to the Company's knowledge is there any reasonable basis
on which any Governmental Entity could take action that would required such
capital or other expenditures.
(i) This Section 3.18 and Section 3.8 contain all of the
Company's representations and warranties as to any matter relating to Hazardous
Substances or arising under Environmental Law, and no other provision of this
Agreement will be deemed to contain any representations and warranties relating
to such matters.
SECTION 3.19 SUPPLIERS. Neither the Company nor any of its
Subsidiaries has received any notice, oral or written, nor have they any reason
to believe that any significant supplier, including without limitation any sole
source supplier, will not sell supplies, merchandise and other goods to the
Surviving Company or its Subsidiaries at any time after the Effective Time on
terms and conditions substantially similar to those used in its current sales to
the Company and its Subsidiaries, subject only
28
to general and customary price increases, unless comparable supplies,
merchandise, or other goods are readily available from other sources on
comparable terms and conditions.
SECTION 3.20 ACCOUNTS RECEIVABLE. All of the accounts and notes
receivable of the Company and its Subsidiaries set forth on the books and
records of the Company (net of the applicable reserves reflected on the books
and records of the Company and in the Financial Statements) (i) represent sales
actually made or transactions actually effected in the ordinary course of
business for goods or services delivered or rendered to unaffiliated customers
in bona fide arm's length transactions, (ii) except as set forth on Section
3.20(ii) of the Company Letter, constitute valid claims, and (iii) except as set
forth on Section 3.20(iii) of the Company Letter, are good and collectible at
the aggregate recorded amounts thereof (net of such reserves) without right of
recourse, defense, deduction, return of goods, counterclaim, or offset.
SECTION 3.21 INVENTORIES. Except as set forth in Section 3.21 of the
Company Letter, all inventories of the Company and its Subsidiaries, whether or
not reflected in the balance sheet included with the Audited Financial
Statements or the balance sheet included in the Interim Financial Statements,
consist of a quality and quantity usable and salable in the ordinary course of
business, except for obsolete items and items of sub-standard quality, all of
which have been written-down or written-off to net realizable value in the
balance sheet included with the Audited Financial Statements or the balance
sheet included in the Interim Financial Statements or the accounting records of
the Company as of the Closing Date, as the case may be. All inventories not
written-off have been priced at the lower of cost or market on a first in, first
out basis. The quantities of each item of inventory are not excessive, but are
reasonable in the present circumstances of the Company and its Subsidiaries.
SECTION 3.22 TRANSACTIONS WITH AFFILIATES.
(a) For purposes of this Section 3.22, the term "Affiliated
Person" means (i) any holder of more than 5% of the Company Capital Stock, (ii)
any director, officer or senior executive of the Company or any of its
Subsidiaries, (iii) any member of the immediate family of any of such persons,
or (iv) any Person that is controlled by any of the foregoing.
(b) Except as set forth in Section 3.22(b) of the Company
Letter, since the Company Balance Sheet Date, neither the Company nor any of its
Subsidiaries has, in the ordinary course of business or otherwise, (i)
purchased, leased or otherwise acquired any property or assets or obtained any
services from, (ii) sold, leased or otherwise disposed of any property or assets
or provided any services to (except with respect to remuneration for services
rendered in the ordinary course of business as director, officer or employee of
the Company or any of its Subsidiaries), (iii) entered into or modified in any
manner any contract with, or (iv) borrowed any money from, or made or forgiven
any loan or other advance (other than expenses or similar advances made in the
ordinary course of business) to, any Affiliated Person, other than the issuance
of the PIK Notes to JWC Equity Funding, III, Inc. ("JWC") pursuant to the Senior
Subordinated Loan Agreement.
29
(c) Except as set forth in Section 3.22(c) of the Company
Letter, (i) the contracts of the Company and its Subsidiaries do not include any
obligation or commitment between the Company or one of its Subsidiaries on the
one hand, and any Affiliated Person on the other hand, (ii) the assets of the
Company and its Subsidiaries do not include any receivable or other obligation
or commitment from an Affiliated Person to the Company or its Subsidiaries, and
(iii) the liabilities of the Company and its Subsidiaries do not include any
payable or other obligation or commitment from the Company or one of its
Subsidiaries to any Affiliated Person.
(d) Except as set forth in Section 3.22(d) of the Company
Letter, to the knowledge of the Company, no Affiliated Person of any of the
Company or one of its Subsidiaries is a party to any contract with any customer
or supplier of the Company or its Subsidiaries that affects in any manner the
business, financial condition or results of operation of the Company.
SECTION 3.23 TITLE TO AND SUFFICIENCY OF ASSETS.
(a) The Company and its Subsidiaries hold good and valid title
to or a valid leasehold interest in all of their assets constituting personal
property, including all of the personal property assets reflected on the Company
Balance Sheet or acquired in the ordinary course of business since the Company
Balance Sheet Date, except those sold or otherwise disposed of for fair value
since the date of the Balance Sheet in the ordinary course of business
consistent with past practice. The personal property assets owned or leased by
the Company and its Subsidiaries constitute all of the personal property
necessary for the Company to carry on its business as currently conducted.
Except as set forth in Section 3.23(a) of the Company Letter, none of the
personal property assets owned or leased by the Company or any of its
Subsidiaries is subject to any Encumbrance, other than (i) liens for current
taxes and assessments not yet delinquent, (ii) mechanics', workmen's,
repairmen's, warehousemen's and carriers' liens arising in the ordinary course
of business of the Company or such Subsidiary consistent with past practice that
are not overdue or which are being contested in good faith by appropriate
proceedings (and for which adequate reserves are maintained on the Financial
Statements), and (iii) any such matters of record, Encumbrances and other
imperfections of title that do not, individually or in the aggregate, materially
impair the continued ownership, use and operation of the assets to which they
relate in the business of the Company and its Subsidiaries as currently
conducted (collectively, "Permitted Encumbrances").
(b) All of the tangible personal property of the Company and
its Subsidiaries has been maintained in all material respects in accordance with
past practice and generally accepted industry practice. Each item of personal
property of the Company and its Subsidiaries is in good operating condition and
repair, ordinary wear and tear excepted, and is adequate for the uses to which
it is being put. All leased personal property of the Company and its
Subsidiaries is in the condition required of such property by the terms of the
lease applicable thereto.
30
(c) Neither the Company nor any of its Subsidiaries owns any
real property.
(d) Section 3.23(d)(i) of the Company Letter sets forth a true
and complete list of all real property and interests in real property leased by
the Company or any of its Subsidiaries (such leased real property, together
with, to the extent leased by the Company or any of its Subsidiaries, all
buildings and other structures, facilities or improvements located thereon, all
fixtures, systems and equipment of the Company or any of its Subsidiaries
attached or appurtenant thereto and all easements, licenses, rights and
appurtenances relating to the foregoing are referred to herein collectively as
the "Leased Real Property"). With respect to each Leased Real Property, Section
3.23(d)(i) of the Company Letter sets forth (i) the street address of such
parcel of Leased Real Property, (ii) the date of the lease or sublease agreement
with respect to such parcel of Leased Real Property (as the same may have been
amended or modified prior to the date hereof, collectively, the "Leases"), and
(iii) a list of all amendments or modifications to such Leases. Except as set
forth in Section 3.23(d)(ii) of the Company Letter, each of the Company and its
Subsidiaries has good and marketable title to all Leased Real Property, free and
clear of all Encumbrances except Permitted Encumbrances.
(e) To the knowledge of the Company, (i) no parcel of Leased
Real Property is subject to any governmental decree or order to be sold or is
being condemned, expropriated or otherwise taken by any public authority with or
without payment of compensation therefore, nor has any such condemnation,
expropriation or taking been proposed and (ii) there are no zoning, building
code, occupancy restriction or other land-use regulation proceedings or any
proposed change in any Applicable Laws, which could materially adversely affect
the use or operation of Leased Real Property.
(f) To the knowledge of the Company, (i) there are no
contractual or legal restrictions that preclude or restrict the ability to use
any Leased Real Property for the purposes for which it is currently being used
and (ii) there are no latent defects or adverse physical conditions affecting
any Leased Real Property or the improvements thereon. All plants, warehouses,
distribution centers, structures and other buildings of the Company and each of
its Subsidiaries are adequately maintained consistent with the standards
generally followed in the industry and are in good operating condition and
repair for the requirements of the business of the Company and its Subsidiaries
as currently conducted.
(g) Either the Company or one of its Subsidiaries, as the case
may be, owns, leases or has the legal right to use all the properties and assets
used in the conduct of the business or otherwise owned, leased or used by the
Company or such Subsidiary.
SECTION 3.24 BROKERS. Except as disclosed in Section 3.24 of the
Company Letter, no broker, investment banker or other Person is entitled to any
broker's, finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or any of its Subsidiaries.
31
SECTION 3.25 CERTAIN BUSINESS PRACTICES. None of the Company or any
of its Subsidiaries, or to the knowledge of the Company, any directors,
officers, agents or employees of the Company or its Subsidiaries has (a) used
any funds for unlawful contributions, gifts, entertainment or other unlawful
expenses, (b) made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns
or violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended, or (c) made any payment in the nature of criminal bribery.
SECTION 3.26 ACCURACY OF INFORMATION. This Agreement (including the
Company Letter and the certificates to be delivered by the Company pursuant to
Article VII in connection with the Closing) does not contain an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements contained herein, in light of the circumstances under which they
are made, not misleading.
SECTION 3.27 INTERNAL CONTROLS AND PROCEDURES. There are no
significant deficiencies, including material weaknesses, in the design or
operation of the Company's internal controls that adversely affect the Company's
ability to record, process, summarize, and report financial data. The officers
of the Company have identified for the Company's auditors any material
weaknesses in internal controls and any fraud, whether or not material, that
involves management or other employees who have a significant role in the
Company's internal controls.
SECTION 3.28 COMPANY TRANSACTION EXPENSES AND DEBT AMOUNT. As of the
Closing Date, the Company Transaction Expenses Notice will set forth a true,
complete and correct statement of the Company Transaction Expenses. As of the
Closing Date, the Debt Amount Notice will set forth a true, complete and correct
statement of the Debt Amount.
ARTICLE III-A
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller hereby severally, and not jointly, represents and warrants to
Buyer and Sub as follows:
SECTION 3A.1 CAPACITY AND AUTHORIZATION OF SELLER. Such Seller is
either (a) a natural person with legal capacity to execute and deliver this
Agreement and to perform his or her obligations hereunder or (b) an existing
partnership, corporation, limited liability company, trust or other entity with
all requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement has been duly authorized by
all necessary corporate, partnership, limited liability company, trust or other
action of such Seller and this Agreement constitutes the valid and legally
binding obligation of such Seller, enforceable against such Seller in accordance
with its terms and conditions, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
affecting
32
creditors' rights generally and by general principles of equity (regardless of
whether considered in a proceeding at law or in equity).
SECTION 3A.2 CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) Neither the execution and delivery of this Agreement by
such Seller, nor the consummation by such Seller of the transactions
contemplated hereby does or will violate, conflict with or result in the breach
of any provision of the Certificate of Incorporation or Bylaws (or other
comparable charter, organizational or governing documents, including any
applicable trust agreement) of such Seller.
(b) No filing or registration with, or authorization, consent
or approval of, any Governmental Entity is required by or with respect to such
Seller in connection with the execution and delivery of this Agreement by such
Seller or is necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement, except for (i) in connection, or in
compliance, with the provisions of the HSR Act, (ii) the filing of Certificate
of Merger with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which the Company is
qualified to do business, and (iii) such filings and consents as may be required
under any environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or by the
transactions contemplated by this Agreement.
(c) Neither the execution and delivery of this Agreement by
such Seller, nor the consummation by such Seller of the transactions
contemplated hereby does or will result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination or cancellation) under, any of the terms,
conditions or provisions of any indenture, mortgage, note, bond, financing
commitment, loan agreement, encumbrance, license, government registration,
Material Contract or other instrument or obligation to which such Seller is a
party or by which any of such Seller's property or assets may be bound, except
such violations, breaches and defaults which, individually or in the aggregate,
would not reasonably be expected to (A) restrict in any manner the ability of
such Seller to perform its obligations hereunder and to consummate the Merger
and the other transactions contemplated by this Agreement, (B) establish any
materially burdensome condition to the consummation of the Merger or the other
transactions contemplated hereby or (C) result in the creation or imposition of
any Encumbrance upon or with respect to any of the assets or properties owned or
used by, or any of the capital stock of, the Company or its Subsidiaries (any of
the foregoing, a "Seller Material Adverse Effect").
(d) Neither the execution and delivery of this Agreement by
such Seller, nor the consummation by such Seller of the transactions
contemplated hereby violate any judgment, order, decree, statute, law, or
material ordinance, rule or regulation, applicable to such Seller, except such
violations which, individually or in the aggregate, would not reasonably be
expected to have a Seller Material Adverse Effect.
33
SECTION 3A.3 SECURITIES. Such Seller does now, and will as of the
Closing Date, own good title to the Company Capital Stock, Company Stock Options
or Company Warrant (as applicable) listed opposite his, her or its name on
Schedule I to this Agreement, free and clear of all Encumbrances, except as set
forth in Section 3A.3 of the Company Letter and for restrictions on transfer
arising under applicable Federal and state securities laws, in the case of the
Company Stock Options, the Stock Option Plan and applicable grant agreement, and
in the case of the Company Warrant, the applicable warrant agreement. Except as
set forth in Section 3A.3 of the Company Letter, such Seller does now, and will
as of the Closing Date, have full and unrestricted power to sell, assign,
transfer and deliver such Securities pursuant to the terms of this Agreement.
Except as set forth in Section 3A.3 of the Company Letter, such Seller is not
now, and will not as of the Closing Date be, a party to any option, warrant,
purchase right or other contract or commitment that could (including upon the
occurrence of any contingency or event) require such Seller to sell, transfer or
otherwise dispose of any such Company Capital Stock, Company Stock Options or
Company Warrant (as applicable) listed opposite his, her or its name on Schedule
I to this Agreement, or any interest therein, other than this Agreement. Except
as set forth in Section 3A.3 of the Company Letter, such Seller is not a party
to any voting trust, proxy or other agreement or understanding with respect to
its ownership, voting or transfer of, or otherwise relating to, the capital
stock of the Company, the Company Stock Options or the Company Warrant, other
than in the case of the Company Stock Options, the Stock Option Plan and
applicable grant agreement, and in the case of the Company Warrant, the
applicable warrant agreement.
SECTION 3A.4 LITIGATION. There is no claim, suit, litigation, or
action pending or, to the actual knowledge of such Seller, threatened, against
or involving such Seller by or before any court or other Governmental Entity
which would reasonably be expected, individually or in the aggregate, if
determined in a manner adverse to such Seller, to have a Seller Material Adverse
Effect.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.
Except as expressly permitted by clauses (a)(i) through (xxiii) of this Section
4.1, during the period from the date of this Agreement through the Effective
Time, the Company shall, and shall cause each of its Subsidiaries to, carry on
its business in the ordinary course of its business as currently conducted and,
to the extent consistent therewith, use its commercially reasonable efforts to
preserve intact its current business organizations, keep available the services
of its current officers and employees and preserve its relationships with
suppliers and others having business dealings with it to the end that its
goodwill and ongoing business shall be unimpaired at the Effective Time. Without
limiting the generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement or as set forth in the Company Letter (with
specific reference to the applicable subsection below), prior to the Effective
Time:
(a) The Company shall not, and shall cause its Subsidiaries
not to, without the prior written consent of Buyer (which consent, in the case
of clauses (v),
34
(vi), (viii), (ix), (xii), (xiv), (xv), (xvi), (xix), and (xxi) shall not be
unreasonably withheld):
(i) (A) declare, set aside or pay any dividends on, or
make any other actual, constructive or deemed distributions in respect of, any
of its capital stock, or otherwise make any payments to its shareholders in
their capacity as such, (B) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock or (C) purchase,
redeem or otherwise acquire any shares of capital stock of the Company or any
other securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or
otherwise encumber any shares of its capital stock, any other voting securities
or equity equivalent or any securities convertible into, or any rights, warrants
or options (including options under the Company Stock Option Plan) to acquire
any such shares, voting securities, equity equivalent or convertible securities,
other than the issuance of shares of Company Common Stock upon the exercise of
Company Stock Options or the Company Warrant outstanding on the date of this
Agreement in accordance with their current terms;
(iii) amend their certificate of incorporation, bylaws
or other organizational documents or agreements, or alter through merger,
liquidation, reorganization, restructuring or any other fashion, their corporate
structure;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of or
equity in, or by any other manner, any business or any corporation, limited
liability company, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets;
(v) sell, lease or otherwise dispose of, or agree to
sell, lease or otherwise dispose of, any of its assets, other than in the
ordinary course of business consistent with past practice;
(vi) incur any indebtedness for borrowed money other
than pursuant to the Company Credit Facility, guarantee any such indebtedness or
make any loans, advances or capital contributions to, or other investments in,
any other Person (other than (A) among the Company and its Subsidiaries or (B)
the issuance of PIK Notes to JWC pursuant to the Senior Subordinated Loan
Agreement);
(vii) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization (other than the Merger) or otherwise permit its corporate
existence, or any of the rights or franchises or any material license, permit or
authorization under which the business operates to be suspended, lapsed or
revoked;
35
(viii) enter into or adopt any, or amend any existing,
severance plan, agreement or arrangement or enter into or amend any Company
Plan, employment, or any consulting agreement;
(ix) hire additional employees, officers, consultants or
other independent contractors receiving compensation in excess of $100,000 per
year, increase the compensation payable or to become payable to its directors,
officers or employees (except for increases in compensation in the ordinary
course of business consistent with past practice in salaries or wages of
employees of the Company or its Subsidiaries who are not officers of the Company
or its Subsidiaries), or grant any severance or termination pay to, or enter
into any employment or severance agreement with, any director or officer of the
Company or its Subsidiaries, or establish, adopt, enter into, or, except as may
be required to comply with Applicable Law, amend in any material respect or take
action to enhance in any material respect or accelerate any rights or benefits
under, any labor, collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer or
employee;
(x) knowingly violate or knowingly fail to perform any
obligation or duty imposed upon it by any Applicable Law;
(xi) make any change to accounting policies or
procedures (other than actions required to be taken by generally accepted
accounting principles);
(xii) prepare or file any Tax Return inconsistent with
its past practice in preparing or filing similar Tax Returns in prior periods
or, on any such Tax Return, take any position, make any election, or adopt any
method that is inconsistent with positions taken, elections made or methods used
in preparing or filing similar Tax Returns in prior periods;
(xiii) fail to file in a timely manner any Tax Returns
that become due or fail to pay any Taxes that become due;
(xiv) make or rescind any express or deemed election
relating to Taxes or change any of its methods of reporting income or deductions
for Tax purposes;
(xv) commence any litigation or proceeding with respect
to any material Tax liability or refund or settle or compromise any material Tax
liability or commence any other litigation or proceedings or settle or
compromise any other material claims or litigation;
(xvi) except as set forth in Section 4.1(a)(xvi) of the
Company Letter and except for sales and purchases in the ordinary course of
business and the hiring of employees, officers or consultants in the ordinary
course of business as
36
permitted in subsection (ix), enter into, renew, terminate or amend any Material
Contract; or purchase or lease any real property;
(xvii) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction of any Indebtedness or the payment,
discharge or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent financial statements
(or the notes thereto) of the Company included in the Financial Statements or
incurred in the ordinary course of business consistent with past practice;
(xviii) create or form any Subsidiary or make any other investment in
another Person;
(xix) except as set forth in Section 4.1(a)(xix) of the Company Letter and
make or authorize any new capital expenditure or expenditures that individually
is in excess of $50,000 or in the aggregate are in excess of $250,000;
(xx) sell or license to any third party any of its Intellectual Property
other than non-exclusive licenses in the ordinary course of business;
(xxi) allow any insurance policy relating to the Company's or any of its
Subsidiaries' business to be amended or terminated without replacing such policy
with a policy providing at least equal coverage, insuring comparable risks and
issued by an insurance company financially comparable to the prior insurance
company;
(xxii) enter into any contract, agreement, commitment or arrangement with
any Affiliated Person (other than the issuance of PIK Notes to JWC pursuant to
the Senior Subordinated Loan Agreement); or
(xxiii) authorize, recommend, propose or announce an intention to do any of
the foregoing, or enter into any contract, agreement, commitment or arrangement
to do any of the foregoing.
(b) The Company shall, and shall cause its Subsidiaries to:
(i) maintain its material assets and properties in the ordinary course of
business in the manner historically maintained, reasonable wear and tear, damage
by fire and other casualty excepted;
(ii) promptly repair, restore or replace all assets and properties in the
ordinary course of business consistent with past practice;
(iii) upon any damage, destruction or loss to any of its material assets or
properties, apply any and all insurance proceeds, if any, received with respect
thereto to the prompt repair, replacement and restoration thereof;
37
(iv) comply in all material respects with all Applicable Laws;
(v) take all actions necessary to be in compliance with all Material
Contracts and to maintain the effectiveness of all Company Permits;
(vi) notify Buyer in writing of the commencement of any material action,
suit, claim, investigation or other like proceeding by or against the Company or
any of its Subsidiaries; and
(vii) pay accounts payable and pursue collection of its accounts receivable
in the ordinary course of business, consistent with past practices.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 ACCESS TO INFORMATION.
(a) The Company and its Subsidiaries shall afford to the Buyer and its
Subsidiaries and each of their accountants, counsel, financial advisors and
other representatives of Buyer reasonable access, and permit them to make such
inspections as they may reasonably require of, during the period from the date
of this Agreement through the Effective Time, all of their respective
properties, books, contracts, commitments and records (including engineering
records and Tax Returns and the work papers of independent accountants, if
available and subject to the consent of such independent accountants) and,
during such period, the Company shall, and shall cause its Subsidiaries to
promptly make available to Buyer all personnel of the Company and its
Subsidiaries knowledgeable about matters relevant to such inspections as
reasonably requested by Buyer. No investigation pursuant to this Section 5.1
shall affect any representation or warranty in this Agreement of any party
hereto or any condition to the obligations of the parties hereto. All
information obtained by Buyer pursuant to this Section 5.1 shall be kept
confidential in accordance with the Confidentiality Agreement, dated February 2,
2005 between Buyer and the Company, and the Letter of Intent dated October 20,
2005 between Buyer and the Company (together, the "Confidentiality Agreement").
(b) The Company agrees to provide Buyer and its agents and representatives
with reasonable access to its employees during normal working hours following
the date of this Agreement, and after consultation with the Company to, among
other things, deliver offers of continued employment contingent upon Closing and
to provide information to such employees about Buyer.
SECTION 5.2 FEES AND EXPENSES. Whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Agreement in accordance
with its terms and the transactions contemplated hereby, including the fees and
disbursements of counsel, financial advisors and accountants, shall be paid by
the party incurring such costs and expenses, except as provided in Section
1.13(a).
38
SECTION 5.3 NO SOLICITATION OR NEGOTIATION. Between the date hereof and the
earlier of the termination of this Agreement and the Closing Date, the Company
and its Subsidiaries will not (nor will the Company permit any of its or its
Subsidiaries' officers, directors, employees, agents, representatives or
affiliates to), directly or indirectly, take any of the following actions with
any Person other than Buyer and Sub: (i) solicit, initiate, entertain or
encourage any proposals or offers from, or conduct discussions with or engage in
negotiations with any Person relating to any possible acquisition of the Company
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise), any portion of its capital stock or any other equity interest in the
Company or any material part of its (tangible or intangible) assets; (ii)
provide information with respect to it to any Person, other than Buyer and Sub,
relating to, or otherwise cooperate with, facilitate or encourage any effort or
attempt by any such Person with regard to, any possible acquisition of the
Company (whether by way of merger, purchase of capital stock, purchase of assets
or otherwise), any portion of its capital stock or any other equity interest in
the Company or any material part of its (tangible or intangible) assets; or
(iii) enter into any agreement with any Person providing for the possible
acquisition of the Company (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise), any portion of its capital stock or any other
equity interest in the Company or any material part of its (tangible or
intangible) assets. In the event the Company receives any communication from a
third party expressing an interest in such a transaction, the Company will
immediately notify Buyer and provide Buyer with a copy of any written
communications and a detailed summary of any oral communications.
SECTION 5.4 COOPERATION.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use all commercially reasonable efforts to take or
cause to be taken all actions and to do or cause to be done all things
reasonably necessary, proper or advisable under Applicable Law to consummate and
make effective the transactions contemplated by this Agreement, including using
all reasonable efforts to do the following: (i) cooperate in the preparation and
filing of any filings or notifications that must be made under the HSR Act or
otherwise to any Governmental Entities; (ii) obtain consents of all third
parties and Governmental Entities necessary, proper, advisable or reasonably
requested by Buyer or the Company, for the consummation of the transactions
contemplated by this Agreement; (iii) contest any legal proceeding relating to
the Merger; (iv) cooperate in undertaking any actions, and in preparing and
executing all materials and documents, necessary to repay all Indebtedness of
the Company and its Subsidiaries at the Effective Time; and (v) execute any
additional instruments reasonably necessary to consummate the transactions
contemplated hereby. The Company agrees to use all reasonable efforts to
encourage its employees to accept any offers of employment extended by Buyer. If
at any time after the Effective Time any further action is necessary to carry
out the purposes of this Agreement, the proper officers and directors of Buyer
and the Surviving Company shall take all such necessary action.
(b) Buyer and the Company will consult and cooperate with one another, and
consider in good faith the views of one another, in connection with any
39
analyses, appearances, presentations, letters, white papers, memoranda, briefs,
arguments, opinions or proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to any federal or state
antitrust, competition, or fair trade law. In this regard but without
limitation, each party hereto shall promptly inform the other of any
communication between such party and the Federal Trade Commission, the Antitrust
Division of the United States Department of Justice, or any other federal or
state antitrust or competition Governmental Entity regarding the transactions
contemplated herein.
(c) Notwithstanding any provision of this Agreement or otherwise, in
connection with the compliance by the parties hereto with any Applicable Law
(including the HSR Act and similar merger notification laws or regulations of
any foreign Governmental Entity) and obtaining the consent or approval of any
Governmental Entity whose consent or approval may be required to consummate the
transactions contemplated by this Agreement, Buyer shall not be required, or be
construed to be required, to proffer to, or agree to: (i) sell or hold separate,
or agree to sell or hold separate, before or after the Effective Time, any
assets, businesses or any interests in any assets or businesses, of Buyer, the
Company or any of their respective affiliates (or to consent to any sale, or
agreement to sell, by Buyer or the Company of any assets or businesses, or any
interests in any assets or businesses), or any change in or restriction on the
operation by Buyer or the Company of any assets or businesses, (ii) enter into
any agreement or be bound by any obligation that, in Buyer's good faith
judgment, would likely have an adverse effect on the benefits to Buyer of the
transactions contemplated by this Agreement, or (iii) take any other action
that, in Buyer's good faith judgment, would be adverse to Buyer.
(d) Prior to the Closing, the Company shall use its commercially reasonable
efforts to obtain the permits and approvals described in Section 3.18(b) of the
Company Letter.
SECTION 5.5 PUBLIC ANNOUNCEMENTS. Buyer and the Company will not issue any
press release with respect to the transactions contemplated by this Agreement or
otherwise issue any verbal or written public statements with respect to such
transactions without prior approval of the other party, except as may be
required by Applicable Law or by obligations pursuant to any listing agreement
with or rules of any national securities exchange. Buyer will file a Current
Report on Form 8-K following the execution of this Agreement announcing the
execution of this Agreement. The parties will cooperate in the preparation and
delivery of any internal or external communications.
SECTION 5.6 NOTIFICATION OF CERTAIN MATTERS. Buyer shall use its best
efforts to give prompt notice to the Company, and the Company shall use its best
efforts to give prompt notice to Buyer, of: (a) the occurrence, or
non-occurrence, of any event the occurrence, or non-occurrence, of which it is
aware and which would be reasonably likely to cause (i) any representation or
warranty contained in this Agreement and made by it to be untrue or inaccurate
in any material respect or (ii) any covenant, condition or agreement contained
in this Agreement and made by it not to be complied with or satisfied in all
material respects, (b) any failure of Buyer or the Company, as the
40
case may be, to comply in a timely manner with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder, or (c)
any change or event which would be reasonably likely to have a Material Adverse
Effect on Buyer or the Company, as the case may be; provided, however, that the
delivery of any notice pursuant to this Section 5.6 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
SECTION 5.7 TAXES.
(a) Tax Returns. Buyer will prepare, or cause to be prepared, all Tax
Returns of the Company that are due after the Effective Date. All such Tax
Returns covering periods ending on or prior to the Closing Date shall be
prepared, to the extent permitted by applicable law, in accordance with past
custom and practice of the Company. Buyer will submit the federal income tax
return of the Company for the period ending on the Closing Date to the Seller
Representative for review and comment at least 30 days before the due date of
such Tax Return (including any extensions thereof), and agrees to consider, in
good faith, the comments on such Tax Return received from the Seller
Representative. Unless otherwise required by Applicable Law, Buyer will neither
cause nor allow any Tax Return of the Company to be amended in a manner that
would result in any additional liability of the Sellers to the Buyer under
Article VI hereunder without the approval of the Seller Representative, which
shall not be unreasonably withheld.
(b) Payment to Holders of Stock Options. The parties agree that for
purposes of Section 1.1502-76(b)(1)(ii)(B) of the Treasury Regulations, the
payment to the holders of Company Stock Options pursuant to Section 1.5(f)
hereunder shall be treated as having been made on the day following the Closing
Date. The parties shall report such payment consistent with this Agreement.
SECTION 5.8 MINIMUM CASH ON HAND AT THE CLOSING. In order to ensure the
continuing operation of the business, at the Closing, the Company will have at
least $1,000,000 of cash on the Closing Date.
SECTION 5.9 SETTLEMENT OF LITIGATION.
(a) In the event that there is a Final Decision with respect to all claims
in the litigation captioned "Xxxxxx'x Discount Auto Stores, Inc. v. USRP Texas,
L.P., et al., Case No. 2002GH-10881, Circuit Court of Xxxx County, Illinois"
(the "Chicago Store Dispute") that occurs after the Closing, any cash payment
received by Buyer, the Surviving Company or any of their respective affiliates
in connection with such Final Decision (the "Cash Settlement Amount") will be
treated as follows:
(i) An amount equal to the legal costs and expenses incurred by Buyer, the
Surviving Company or any of their respective affiliates in connection with
investigating, defending, prosecuting, settling or satisfying the Chicago Store
Dispute after the Closing will be retained from the Cash Settlement Amount by
Buyer (the "Dispute Expenses"); and
41
(ii) Any Cash Settlement Amount in excess of the Dispute Expenses shall be,
within 20 days after the receipt thereof by Buyer, the Surviving Company or any
of their respective affiliates, paid to the Sellers (in the amounts and to the
accounts designated by the Seller Representative), pro rata.
(b) A "Final Decision" means a settlement agreement, decision, order,
judgment or decree of an arbitrator, mediator, or court of competent
jurisdiction that has been finally affirmed on appeal or that by lapse of time,
agreement or otherwise is no longer subject to appeal.
ARTICLE VI
INDEMNITY
SECTION 6.1. GENERAL SURVIVAL. The parties agree that, regardless of any
investigation made by the parties, the representations and warranties of the
parties contained in this Agreement shall survive the execution and delivery of
this Agreement for a period beginning on the Closing Date and ending at 5:00
p.m.,
New York time, on the same day of the month as the Closing in the month
that is fifteen months after the Closing Date (the "Indemnification Termination
Date"), except that (a) the representations and warranties in Section 3.9 and,
to the extent related to Taxes, Section 3.5, shall survive the execution and
delivery of this Agreement until ninety days after the expiration of the
applicable statute of limitations, if any, (b) the representations and
warranties in Section 3.18 shall survive until the third anniversary of the
Closing, (c) the representations and warranties in Section 3.2 (Capital
Structure) shall survive the execution and delivery of this Agreement until the
fifth anniversary of the Closing.
SECTION 6.2. INDEMNIFICATION.
(a) Buyer Indemnification. Subject to Section 6.1, from and after the
Effective Time, Buyer, Sub and the Surviving Company and their respective
affiliates, officers, directors, shareholders, representatives and agents
(collectively the "Buyer Indemnitees") shall be indemnified and held harmless by
each Seller, who shall be liable severally (pro rata) and not jointly, from and
against and in respect of any and all Losses (as defined below) incurred by,
resulting from, arising out of, relating to, imposed upon or incurred by Buyer,
Sub, the Surviving Company or any other Buyer Indemnitee by reason of any
inaccuracy in or breach of any of the Company's or any of such Seller's
representations and warranties contained in this Agreement or any of the other
Transaction Documents (as hereinafter defined) to which it is a party.
Notwithstanding anything to the contrary contained herein, for purposes of this
Section 6.2 only, the representations and warranties of the Company regarding
the inventories of the Company as set forth in the Financial Statements shall be
read without regard to materiality or Material Adverse Effect qualifiers.
(b) Seller Indemnification. Subject to Section 6.1, from and after the
Effective Time, Sellers and their respective affiliates, officers, directors,
shareholders, representatives, agents, heirs and estates, as applicable
(collectively, the "Seller Indemnitees", and together with the Buyer
Indemnitees, each an "Indemnitee")
42
shall be indemnified and held harmless by Buyer, the Sub and the Surviving
Company, jointly and severally, from and against and in respect of any and all
Losses incurred by, resulting from, arising out of, relating to, imposed upon or
incurred by any Seller or any Seller Indemnitee by reason of any inaccuracy in
or breach of any representations and warranties of Buyer or Sub contained in
this Agreement or any of the other Transaction Documents to which it is a party.
(c) Definitions. For purposes of this Agreement, the term, "Losses" means
(A) any and all deficiencies, judgments, settlements, demands, claims, suits,
actions or causes of action, assessments, liabilities, losses, damages (but
excluding any consequential damages or the like), interest, fines and penalties,
and (B) costs, expenses (including reasonable legal, accounting and other costs
and expenses of professionals) incurred in connection with investigating,
defending, prosecuting, settling or satisfying any and all demands, claims,
actions, causes of action, suits, proceedings, assessments, judgments or
appeals, and in seeking indemnification therefor. For purposes of this
Agreement, the term "Transaction Documents" means, this Agreement, the
Confidentiality Agreement, the Escrow Agreement and the certificates required to
be delivered pursuant to Sections 7.2(a), 7.2(c), 7.3(a), 7.3(c), and 7.3(d).
(d) Limitations. Except as provided in the next sentence, no Buyer
Indemnitee shall be entitled to indemnification for any Losses arising under
this Section 6.2 until the aggregate amount of all Losses under all claims of
all Buyer Indemnitees for all such inaccuracies or breaches shall exceed
$1,500,000 (the "Deductible"), at which time only such Losses incurred in excess
of the Deductible shall be subject to indemnification. All amounts due to Buyer
Indemnitees related to Losses for (i) a breach of or inaccuracy in the
representations and warranties in Section 3.9, and to the extent related to
Taxes, Section 3.5 and (ii) a breach of or inaccuracy in the representations and
warranties in Section 3.2, shall not be subject to the provisions of this
Section 6.2(d) and shall be paid in full without any regard to the Deductible,
but shall be subject to the Cap as provided below.
(e) Cap on Indemnification.
(i) No Buyer Indemnitee shall be entitled to indemnification for any Losses
arising under this Section 6.2 to the extent that the aggregate amount of all
Losses paid to Buyer Indemnitees under this Section 6.2 exceed $13,000,000 (the
"Cap").
(ii) The Cap shall not apply to: (A) any claims for fraud or intentional
misrepresentation, or (B) any claims based on a breach of or inaccuracy in the
representations in Sections 3.1 (Organization, Standing and Power), 3.2 (Capital
Structure), and 3.3 (Authority). Each Seller's liability for indemnification
pursuant to Section 6.2(a) for claims of the type described in clauses (A) and
(B), when combined with all other claims for which such Seller is liable for
indemnification pursuant to this Article VI, shall not exceed the amount of the
Merger Consideration, as finally adjusted pursuant to Section 1.8, received by
such Seller.
43
SECTION 6.3. MANNER OF INDEMNIFICATION.
(a) Claims of indemnification made under this Article VI (an
"Indemnification Claim"), may be made only in accordance with the provisions of
this Article VI and, if applicable, the Escrow Agreement. To provide a fund
against which a Buyer Indemnitee may first assert an Indemnification Claim, the
Escrow Amount shall be deposited with the Escrow Agent in accordance with
Section 1.6.
(b) If it is determined that a Buyer Indemnitee is entitled to be
indemnified for Losses pursuant to Section 6.2(a), the obligation to pay the
amount of indemnification owing thereunder shall first be satisfied from the
Escrow Amount, and then by payment by each Seller pro rata. In the event an
Indemnification Claim arises and the amount of Loss in respect thereof has not
yet been determined, the corresponding portion of the Escrow Amount shall be
retained until the amount of Loss has been determined, and shall then be applied
or distributed as provided for in the Escrow Agreement.
(c) Notwithstanding anything to the contrary herein, in no event shall any
Seller be liable with respect to any inaccuracy in or breach of any of the
representations or warranties of any other Seller contained in this Agreement or
any of the Transaction Documents.
(d) If any payment is made from the Escrow Amount to any Buyer
Indemnitee(s) with respect to an Indemnification Claim resulting from, arising
out of or relating to an inaccuracy in or breach of any representation or
warranty by any Seller (the "Affected Seller") contained in this Agreement or
any of the other Transaction Documents, then the Seller Representative shall
promptly deliver to the Affected Seller a demand for contribution, and the
Affected Seller shall, within ten days after delivery of such demand, pay to
each other Seller, by wire transfer (upon receipt of written wire transfer
instructions of the recipient), an amount in cash equal such other Seller's
proportionate share of the excess of the amount of the payment made from the
Escrow Amount over the Affected Seller's pro rata share of such payment (the
"Contribution Amount"). For purposes of this Section 6.3(d), a Seller's
"proportionate share" of the Contribution Amount shall be an amount equal to the
product of the Contribution Amount times a fraction, the numerator of which
shall be such Seller's pro rata share and the denominator of which shall be the
aggregate pro rata shares of all of the Sellers other than such Affected Seller.
The obligations of each Affected Seller under this Section 6.3(d) are absolute
and unconditional and are not subject to any counterclaim, set-off, deduction or
defense of any kind and will not be terminated, released, discharged or in any
way affected with respect to any Affected Seller by any circumstance or
condition whatsoever that might constitute a legal or equitable discharge or
defense. In the event any Affected Seller fails to make any payment to any other
Seller when due pursuant to this Section 6.3(d), such payment will bear interest
at an annual rate equal to the prime rate (as published in the Wall Street
Journal, eastern edition, on the date such obligation becomes due) plus 3% or,
if less, the highest rate permitted by applicable law. If any suit or action is
instituted or attorneys are employed to collect any such payment or any part
44
thereof, such Affected Seller shall pay all costs of collection, including
reasonable attorneys' fees and court costs.
(e) To the extent that any part of the Losses underlying an Indemnification
Claim would be covered by an "occurrence-based" (rather than a "claims
made-based") insurance policy of the Surviving Company, then Buyer, Sub or the
Surviving Company, as applicable, shall be required to submit a claim for such
coverage to the relevant insurance carrier and to the extent such entity
actually receives payment of such claim, any claim under this Article VI shall
be reduced by such amount.
SECTION 6.4 NOTICE OF CLAIMS.
(a) Any Indemnitee seeking indemnification hereunder shall give a notice (a
"Claim Notice") to the party from whom indemnification is sought (either the
Seller Representative (in the case of a Buyer Indemnitee) or Buyer (in the case
of a Seller Indemnitee), the "Indemnifying Party"), specifying in reasonable
detail the facts giving rise to any Indemnification Claim and shall include in
such Claim Notice (if then known) the amount or the method of computation of the
amount of such Indemnification Claim, and a reference to the provision of this
Agreement or any agreement, certificate or instrument executed pursuant hereto
or in connection herewith upon which such Indemnification Claim is based;
provided, that a Claim Notice in respect of any action at law or suit in equity
by or against a third Person as to which indemnification will be sought shall be
given promptly after the action or suit is commenced; and provided further, that
failure to give such notice shall not relieve any Indemnifying Party of its
obligations hereunder except to the extent it shall have been prejudiced by such
failure.
(b) The Indemnifying Party shall have thirty days after the giving of any
Claim Notice pursuant hereto to provide such Indemnitee with notice that it
disagrees with the amount or method of determination set forth in the Claim
Notice (the "Disagreement Notice"). If a timely Disagreement Notice is not
received or to the extent an item is not objected to in the Disagreement Notice,
the Claim Notice shall be deemed to have been accepted and final and binding on
the parties, absent manifest error. If the Indemnifying Party delivers a timely
Disagreement Notice, the parties shall resolve such conflict in accordance with
the procedures set forth in Section 6.4(c).
(c) If the Indemnifying Party shall have provided a Disagreement Notice,
the parties will attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims. If the parties should so
agree, a memorandum setting forth such agreement will be prepared and signed by
Buyer and the Seller Representative. In the event the parties shall fail to
reach an agreement within thirty days after the date on which the Indemnifying
Party provided a Disagreement Notice, the dispute shall be submitted to
arbitration in accordance with the provisions of Section 9.6.
SECTION 6.5. THIRD-PARTY CLAIMS. If a Buyer Indemnitee becomes aware of a
third-party claim that such Buyer Indemnitee believes, in good faith, may result
in a demand by it for indemnification pursuant to this Article VI, such Buyer
45
Indemnitee shall notify the Seller Representative of such claim, and the Seller
Representative shall be entitled to participate in any defense of such claim.
Notwithstanding the immediately preceding sentence, Buyer shall conduct and
control such defense in good faith but shall not settle any such claim without
the consent of the Seller Representative, which consent will be granted where
reasonable; provided, however, that, if the consent of the Seller Representative
is so obtained, neither the Seller Representative nor any other Seller shall
have any power or authority to object under any provision of this Article VI to
the amount of any demand by Buyer for indemnification with respect to such
settlement.
SECTION 6.6. SELLER REPRESENTATIVE. The Sellers, without any further action
on the part of any Seller, consent to the appointment of X.X. Childs Associates,
L.P. as the representative of the Sellers (the "Seller Representative"), as the
attorney-in-fact for and on behalf of each such Seller, and the taking by the
Seller Representative of any and all actions and the making of any decisions
required or permitted to be taken by him under this Agreement, including the
exercise of the power to (i) authorize delivery to Buyer and Sub of the Escrow
Amount, or any portion thereof, in satisfaction of an adjustment to the Merger
Consideration pursuant to Section 1.8 or any Indemnification Claims, (ii)
defend, agree to, negotiate, enter into settlements and compromises of and
comply with orders of courts and awards of arbitrators with respect to any
Indemnification Claims, (iii) resolve any Indemnification Claims, and (iv) take
all actions necessary in the judgment of the Seller Representative for the
accomplishment of the foregoing and all of the other terms, conditions and
limitations of this Agreement. Accordingly, the Seller Representative has
unlimited authority and power to act on behalf of each Seller with respect to
this Agreement, the Escrow Agreement and the disposition, settlement or other
handling of all Indemnification Claims, rights or obligations arising from and
taken pursuant to this Agreement. The Sellers will be bound by all actions taken
by the Seller Representative in connection with this Agreement, and Buyer and
Sub shall be entitled to rely on any action or decision of the Seller
Representative. The Seller Representative will incur no liability with respect
to any action taken or suffered by him in reliance upon any notice, direction,
instruction, consent, statement or other document believed by him to be genuine
and to have been signed by the proper Person (and shall have no responsibility
to determine the authenticity thereof), nor for any other action or inaction,
except his own willful misconduct or gross negligence. In all questions arising
under this Agreement, the Seller Representative may rely on the advice of
counsel, and the Seller Representative will not be liable to Sellers for
anything done, omitted or suffered in good faith by the Seller Representative
based on such advice. The Seller Representative will not be required to take any
action involving any expense unless the payment of such expense is made or
provided for in a manner satisfactory to him. The Seller Representative shall be
entitled to retain counsel and to incur such expenses as the Seller
Representative deems to be necessary or appropriate in connection with its
performance of its obligations under this Agreement, and all such fees and
expenses (including reasonable attorneys' fees and expenses) incurred by the
Seller Representative shall be borne by the Sellers pro rata. In order to cover
the potential payment of such fees and expenses, the Seller Representative shall
be entitled in its discretion to withhold up to $500,000 from the Merger
Consideration otherwise payable to the Sellers at the Closing and to hold such
amount in an account established by the Seller Representative
46
with a commercial bank or other financial institution. The Seller Representative
shall be entitled to collect all amounts due to Sellers pursuant to this
Agreement and shall promptly distribute such amounts to Sellers as allocated
pursuant to this Agreement. At any time prior to the Indemnification Termination
Date, holders of a majority of the shares of Company Capital Stock as of the
date of this Agreement can appoint a new Seller Representative by written
consent by sending notice and a copy of the written consent appointing such new
Seller Representative signed by such holders. Such appointment will be effective
upon the later of the date indicated in the consent or the date such consent is
received by Buyer.
SECTION 6.7 WAIVER OF DEFENSES. To the maximum extent
permitted by law, each Indemnifying Party waives any claim or defense that the
indemnity provided for herein is unenforceable under any provision of Applicable
Law.
SECTION 6.8 TREATMENT OF INDEMNITY PAYMENTS. All indemnity
payments made to Buyer will be, and will be treated as, an adjustment to the
Merger Consideration.
SECTION 6.9. EXCLUSIVE REMEDY. If the Closing occurs, except
in the case of fraud or intentional misrepresentation, the indemnification
provisions of this Article VI shall serve as the exclusive remedy of the parties
in connection with any claim arising from or in connection with a breach of a
representation or warranty contained in this Agreement.
SECTION 6.10. LIMITATION OF INDEMNIFICATION. If the Closing
occurs, each of X.X. Childs Associates, Inc., X.X. Childs Equity Partners, III,
L.P. and JWC Fund III Co-Invest, LLC (the "Releasing Parties") hereby waives,
and releases each of Xxxxxx'x Discount Auto Stores, Inc. and MDAS Inc. from, any
and all claims that such Releasing Party or other "Indemnitees" (as such term
is defined in Section 9.1(iii) of the Senior Subordinated Loan Agreement) may
have pursuant to (A) Section 9.1(iii)(b) and 9.1(iii)(c) of the Senior
Subordinated Loan Agreement or (B) the Subordinated Guaranty dated February 17,
2005 by MDAS, Inc. in favor of JWC Equity Funding, Inc., to be defended,
protected, indemnified or held harmless by Xxxxxx'x Discount Auto Stores, Inc.
or MDAS Inc. with respect to any liability imposed on the Releasing Party as a
Seller pursuant to this Article VI.
ARTICLE VII
CONDITIONS PRECEDENT TO THE MERGER
SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligations of each party to effect the Merger shall
be subject to the fulfillment at or prior to the Effective Time of each of the
following conditions:
(a) HSR Approvals. The waiting period (and any
extension thereof) applicable to the consummation of the Merger under the HSR
Act shall have expired or been terminated.
47
(b) No Order. No court or other Governmental
Entity having jurisdiction over the Company or Buyer, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of, directly or indirectly, restraining, prohibiting or restricting
the Merger or any of the transactions contemplated hereby; provided, however,
that the provisions of this Section 7.1(b) shall not be available to any party
whose failure to fulfill its obligations pursuant to Section 5.4 shall have been
the cause of, or shall have resulted in, the enforcement or entering into of any
such law, rule, regulation, executive order, decree, injunction or other order.
SECTION 7.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT
THE MERGER. The obligation of the Company to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of each of the following
additional conditions:
(a) Performance of Obligations; Representations
and Warranties. (i) Each of Buyer and Sub shall have performed in all material
respects each of its agreements and covenants contained in this Agreement
required to be performed on or prior to the Effective Time, (ii) each of the
representations and warranties of Buyer and Sub contained in this Agreement that
is qualified by materiality shall have been true and correct when made, and
shall be true and correct on and as of the Effective Time as if made on and as
of such date (other than representations and warranties which address matters
only as of a certain date other than the date hereof, which shall be true and
correct as of such certain date), and (iii) each of the representations and
warranties that is not so qualified shall have been true and correct in all
material respects when made, and shall be true and correct in all material
respects on and as of the Effective Time as if made on and as of such date
(other than representations and warranties which address matters only as of a
certain date which shall be true and correct in all material respects as of such
certain date). The Company shall have received certificates signed on behalf of
each of Buyer and Sub by one of its officers to such effect.
(b) Opinion of Counsel. The Sellers shall have
received an opinion of counsel from Xxxxxx, Xxxx & Xxxxxxxx LLP, counsel to
Buyer and Sub, dated the Closing Date, in substantially the form attached hereto
as Exhibit D.
(c) Secretary's Certificate. The Sellers shall
have received a certificate of the Secretary of each of Buyer and Sub
certifying, in each case, that (i) attached thereto are true, correct and
complete copies of the certificate of incorporation or similar charter documents
for such entity, as amended as of the date hereof, the date of the resolutions
referenced in (iii) below, and as of the Closing Date and as certified by the
Secretary of State of the state of Delaware, (ii) attached thereto are true,
correct and complete copies of such entity's bylaws or similar organizational
document as amended as of the date hereof, the date of the resolutions
referenced in (iii) below, and as of the Closing Date, (iii) attached thereto
are true, correct and complete copies of the resolutions duly adopted the board
of directors or other similar governing body approving the execution and
delivery of this Agreement and the consummation of the transactions
48
contemplated hereby, and (iv) as to the incumbency of certain officers of Buyer
and Sub executing this Agreement and other agreements, certificates or other
documents in connection with the consummation of the transactions contemplated
by this Agreement.
SECTION 7.3 CONDITIONS TO OBLIGATIONS OF BUYER AND SUB TO
EFFECT THE MERGER. The obligations of Buyer and Sub to effect the Merger shall
be subject to the fulfillment at or prior to the Effective Time of each of the
following additional conditions:
(a) Performance of Obligations; Representations
and Warranties. (i) The Company shall have performed in all material respects
each of its covenants and agreements contained in this Agreement required to be
performed on or prior to the Effective Time, (ii) each of the representations
and warranties of the Company contained in this Agreement that is qualified by
materiality shall have been true and correct when made, and shall be true and
correct on and as of the Effective Time as if made on and as of such date (other
than representations and warranties which address matters only as of a certain
date other than the date hereof, which shall be true and correct as of such
certain date), and (iii) each of the representations and warranties that is not
so qualified shall have been true and correct in all material respects when
made, and shall be true and correct in all material respects on and as of the
Effective Time as if made on and as of such date (other than representations and
warranties which address matters only as of a certain date which shall be true
and correct in all material respects as of such certain date). Buyer shall have
received a certificate signed on behalf of the Company by its Chief Executive
Officer or its Chief Financial Officer to such effect.
(b) Opinion of Counsel. Buyer shall have
received an opinion of counsel from Xxxxxxxx Xxxxxx Xxxxxxxx and Xxxx LLP,
counsel to the Company, dated the Closing Date, in substantially the form
attached hereto as Exhibit E.
(c) Consent. In obtaining any approval or
consent required to consummate any of the transactions contemplated herein, no
Governmental Entity shall have imposed or shall have sought to impose any
condition, penalty or requirement which, in the reasonable opinion of Buyer,
individually or in aggregate would have a Material Adverse Effect on the Company
or Buyer.
(d) Material Adverse Change. Since the date of
this Agreement, there shall have been no Material Adverse Change with respect to
the Company. Buyer shall have received a certificate signed on behalf of the
Company by the Chief Executive Officer or the Chief Financial Officer of the
Company to such effect.
(e) Secretary's Certificate. Buyer shall have
received a certificate of the Secretary of the Company and each of its
Subsidiaries certifying, in each case, that (i) attached thereto are true,
correct and complete copies of the certificate of incorporation, as amended as
of the date hereof, the date of the resolutions referenced in (iii) below, and
as of the Closing Date and as certified by the Secretary of State (or other
applicable agency) of its state of incorporation, (ii) attached thereto are
true, correct and complete copies of such entity's bylaws as amended as of the
date hereof, the date of the
49
resolutions referenced in (iii) below, and as of the Closing Date, (iii)
attached thereto are true, correct and complete copies of the resolutions duly
adopted the board of directors approving the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, and (iv)
as to the incumbency of certain officers of the Company executing this Agreement
and other agreements, certificates or other documents in connection with the
consummation of the transactions contemplated by this Agreement.
(f) Director and Officer Resignations. All of
the directors of the Company and any officers thereof designated by Buyer, shall
have tendered their resignations in form and substance satisfactory to Buyer.
(g) Management Agreement. The Management
Agreement dated August 8, 2003, by and between X.X. Childs Associates, L.P. and
Xxxxxx'x Discount Auto Stores, Inc., (as amended by any amendments thereto)
shall have been irrevocably terminated, on or before the Closing.
(h) Warrant Agreement. Buyer shall have received
from Canterbury Mezzanine Capital II, L.P. a fully executed Release and Waiver
with respect to the Warrant Agreement date August 8, 2003, by and between
Xxxxxx'x Inc. and Canterbury Mezzanine Capital II, L.P., in form and substance
acceptable to Buyer.
(i) Releases of Indebtedness. Buyer shall have
received the releases of guarantees and indebtedness provided in Section
1.13(c).
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 TERMINATION. This Agreement may be terminated at
any time prior to the Effective Time:
(a) by mutual written consent of Buyer and the
Company;
(b) by either Buyer or the Company if the other
party shall have failed to comply in any material respect with any of its
covenants or agreements contained in this Agreement required to be complied with
prior to the date of such termination, which failure to comply has not been
cured within five business days following receipt by such other party of written
notice of such failure to comply;
(c) by Buyer if there has been a breach of a
representation or warranty of the Company that gives rise to a failure of the
fulfillment of a condition of the Buyer's and Sub's obligations to effect the
Merger pursuant to Section 7.3(a)(ii) or (iii) or by Company if there has been a
breach of a representation or warranty of the Buyer or Sub that gives rise to a
failure of the fulfillment of a condition of the Company's obligations to effect
the Merger pursuant to Section 7.2(a)(ii) or (iii), in each case, which breach
has not been cured within five business days following receipt by the breaching
party of written notice of the breach; or
50
(d) by either Buyer or the Company if: (i) the
Merger has not been effected on or prior to the close of business on January 31,
2006; provided, however, that the right to terminate this Agreement pursuant to
this Section 8.1(d)(i) shall not be available to any party whose failure to
fulfill any of its obligations contained in this Agreement has been the primary
cause of, or resulted in, the failure of the Merger to have occurred on or prior
to the aforesaid date; or (ii) any court or other Governmental Entity having
jurisdiction over a party hereto shall have issued an order, decree or ruling or
taken any other action (which order, decree, ruling or other action the parties
shall have used their reasonable efforts to resist, resolve or lift, as
applicable, subject to the provisions of Section 5.4) permanently enjoining,
restraining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become final
and nonappealable.
The right of any party hereto to terminate this Agreement
pursuant to this Section 8.1 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto, any
Person controlling any such party or any of their respective officers or
directors, whether prior to or after the execution of this Agreement.
SECTION 8.2 EFFECT OF TERMINATION. In the event of termination
of this Agreement by either Buyer or the Company, as provided in Section 8.1,
this Agreement shall forthwith become void, and there shall be no liability
hereunder on the part of the Company, Buyer, Sub or their respective officers or
directors (except for the last sentence of Section 5.1(a) and the entirety of
Section 5.2, which shall survive the termination).
SECTION 8.3 AMENDMENT. This Agreement may not be amended
except by an instrument in writing signed on behalf of Buyer, the Company and
the Seller Representative.
SECTION 8.4 WAIVER. At any time prior to the Effective Time,
the parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein for the benefit of such party which
may legally be waived. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. No delay on the part of any party hereto in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party hereto of any right,
power or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder. Unless otherwise
provided herein (including Section 6.9), the rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies that the parties
hereto may otherwise have at law or in equity. The failure of any party to this
Agreement
51
to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of those rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given when delivered
personally, one business day after being delivered to an overnight courier or
when sent by facsimile on a business day (if not sent on a business day, then on
the next succeeding business day) with a confirmatory copy sent by overnight
courier, to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) if to Buyer or Sub, to:
CSK Auto Corporation
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: General Counsel
Facsimile: (000) 000-0000
with copies to:
Xxxxxx Xxxx & Xxxxxxxx LLP
0000 Xxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
(b) if to the Company or to the Sellers, to:
Xxxxxx'x Inc.
0000 Xxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
X.X. Childs Associates, L.P.
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attn: Xxxx Xxxxxxxx and Xxxxx Xxxx
Facsimile: (000) 000-0000
and
52
Xxxxxxxx Xxxxxx Xxxxxxxx and Xxxx LLP
2290 First National Building
000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
party hereto may give any notice, request, demand, claim or other communication
hereunder using any other means (including ordinary mail or electronic mail),
but no such notice, request, demand, claim or other communication shall be
deemed to have been duly given unless and until it actually is received by the
individual for whom it is intended.
SECTION 9.2 INTERPRETATION.
(a) When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." This Agreement has been negotiated
by the parties and their respective counsel in good faith and will be fairly
interpreted in accordance with its terms and without any strict construction in
favor of or against any party. Prior drafts of this Agreement shall not be used
in order to interpret or construe any provisions or terms of this Agreement.
(b) Each of the Company, Buyer, Sub and the
Seller Representative acknowledges that each party to this Agreement has been
represented by counsel in connection with this Agreement and the transactions
contemplated by this Agreement. Accordingly, any rule of law or any legal
decision that would require the interpretation of any claimed ambiguities in
this Agreement against the drafting party has not application and is expressly
waived.
(c) "Subsidiary" means any corporation,
partnership, limited liability company, joint venture or other legal entity of
which Buyer or Company, as the case may be (either alone or through or together
with any other Subsidiary), owns or controls, directly or indirectly, 50% or
more of the stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation, partnership, limited liability company, joint venture
or other legal entity.
(d) "Person" means any individual, corporation,
partnership, limited partnership, limited liability company, trust, association
or entity or Governmental Entity or authority.
53
(e) "Applicable Laws" or "Applicable Law" means,
with respect to any Person, any federal, state or local statute, law, ordinance,
rule, regulation, order, writ, injunction, judgment, decree or other requirement
of any Governmental Entity existing as of the date hereof or as of the Closing
applicable to such Person or any of its properties, assets, officers, directors,
employees, consultants or agents, as such.
(f) "Indebtedness" means (i) all obligations for
borrowed money, (ii) all obligations to pay the deferred purchase price of
property or services, except trade accounts payable and accrued commercial or
trade liabilities arising in the ordinary course of business, (iii) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired (even though the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), and (iv) all
capital lease obligations (as determined in accordance with GAAP); provided,
however, that "Indebtedness" shall not include any intercompany obligation
between or among the Company and its Subsidiaries or any letters of credit,
surety bonds or obligations in respect of bankers acceptances.
(g) "Encumbrance" means any charge, claim,
limitation, condition, equitable interest, mortgage, lien, option, pledge,
security interest, easement, encroachment, right of first refusal, adverse claim
or restriction of any kind, including any restriction on or transfer or other
assignment, as security or otherwise, of or relating to use, quiet enjoyment,
voting, transfer, receipt of income or exercise of any other attribute of
ownership.
(h) "To the knowledge of the Company" or any
similar phrase means the actual knowledge of Xxxxx Xxxxxxx, Xxxxxx XxXxxx and
Xxxx Xxxxxx or, with respect to any fact or matter, the knowledge with respect
thereto that any reasonably diligent person holding their position with the
Company and its Subsidiaries would reasonably be expected to have.
(i) "pro rata" means in proportion to the
respective share of the Merger Consideration to be received by each Seller
pursuant to this Agreement.
SECTION 9.3 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement
may be executed in counterparts, all of which shall be considered one and the
same agreement, and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties. A
facsimile signature of this Agreement or any Transaction Document shall be valid
and have the same force and effect as a manually signed original.
SECTION 9.4 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.
This Agreement and the Confidentiality Agreement constitute the entire agreement
and supersedes all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof. The parties
stipulate and agree that no prior drafts, memoranda, notes or discussions
relating to this Agreement shall be used at any time by either party in any
arbitration, trial or hearing, or be used or discoverable in
54
the discovery process pertaining thereto, to prove or evidence in any way the
intention or understanding of either party with respect to any provision or part
of this Agreement. This Agreement is not intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
SECTION 9.5 GOVERNING LAW. Except to the extent that the laws
of the State of Delaware are mandatorily applicable to the Merger, this
Agreement shall be governed by, and construed in accordance with, the laws of
the State of
New York, without regard to the conflicts of laws provisions
thereof that would apply the laws of any other state.
SECTION 9.6 DISPUTE RESOLUTION.
(a) Any and all disputes, controversies, or
claims arising out of, or relating to this Agreement or any of the Transaction
Documents or the validity, interpretation, breach or termination thereof (a
"Dispute"), shall be resolved in accordance with the procedures set forth in
this Agreement. If a dispute cannot be resolved between the Seller
Representative and the Chief Executive Officer of Buyer, either party may submit
such Dispute to binding arbitration conducted in Chicago, Illinois, or such
other location upon which the parties may mutually agree in writing, before a
single neutral arbitrator in an arbitration by JAMS under its Streamlined
Arbitration Rules and Procedures (revised version adopted April 2003) ("JAMS
Streamlined Rules"), which rules can be viewed at xxx.xxxxxxx.xxx. The JAMS
Streamlined Rules will govern all aspects of the arbitration except as modified
by this Section 9.6.
(b) If a party (the "Notifying Party") wishes to
submit a Dispute to JAMS, the Notifying Party shall deliver a written notice (a
"Dispute Notice") together with a copy of this Section 9.6 to the other party
(the "Responding Party") and to JAMS. In the event that either party commences a
dispute by delivering a Dispute Notice, the other party may assert any counter
claims it may have. Following receipt by the Responding Party of the Dispute
Notice, if any, the parties shall promptly meet (but in no event later than ten
business days from the date of receipt by the Responding Party of the Dispute
Notice) to agree on the rights of the respective parties with respect to each of
such claims identified by the Dispute Notice. If the parties should so agree on
a resolution of such dispute or disputes, a written memorandum (the
"Memorandum"), setting forth such agreement, shall be prepared and signed by
both parties. If the parties are unable to come to an agreement, the dispute
shall be resolved by the binding arbitration procedures set forth in this
Section 9.6.
(c) The sole arbitrator, who shall be selected
in accordance with the JAMS Streamlined Rules, shall be a retired or former
judge of any Federal court appointed under Article III of the United States
Constitution or any trial court of general jurisdiction or higher court.
Eligible arbitrator candidates shall not be limited to those candidates who are
listed on the JAMS "List of Neutrals". The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. Sections 1-16. The arbitrator shall
apply
New York substantive law to the proceeding.
55
(d) In addition to the exchange of information
and discovery authorized by JAMS Streamlined Rule 13, each party may take up to
three 7-hour long depositions before the Arbitration Hearing.
(e) Unless the parties agree otherwise, the
Arbitration Hearing under JAMS Streamlined Rule 17 will commence within 60 days
of the date of the JAMS Commencement Letter described in Streamlined Rule 5, and
the Arbitration Hearing will not last more than four 7-hour days (with the
hearing time equally divided between the parties). The Arbitrator will issue the
Award under Streamlined Rule 19(a) within 7 calendar days of the last day of the
Arbitration Hearing (rather than the 30 calendar days provided for under JAMS
Streamlined Rule 19(a)).
(f) The arbitrator shall prepare in writing and
provide to the parties an award including factual findings and the reasons on
which the decision is based. The award and decision of the arbitrator shall be
final and binding and may be submitted to any court having jurisdiction solely
for the purpose of confirmation of the award and entry of judgment. The
arbitrator shall have the right to award or include in his award only
compensatory damages (with interest on unpaid amounts from the date due until
paid), and shall not have the right to award specific performance, injunctive
relief or exemplary or punitive damages. Any controversy concerning whether a
Dispute is an arbitrable dispute shall be determined by the arbitrator. The
parties intend that this agreement to arbitrate be valid, specifically
enforceable and irrevocable.
(g) The provisions of this Section 9.6 shall
survive the expiration or early termination of this Agreement indefinitely.
(h) Each party shall be responsible for its own
attorneys' fees and other costs of the arbitration.
SECTION 9.7 WAIVERS. Each of the parties hereby irrevocably
waives all right to trial by jury in any action, proceeding or counterclaim
(whether based on contract, tort or otherwise) arising out of or relating to
this Agreement or any other Transaction Document or the transactions
contemplated hereby or thereby. Each of the parties hereby further irrevocably
waives any right to specific performance, injunctive relief or exemplary or
punitive damages.
SECTION 9.8 ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors or assigns.
SECTION 9.9 SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other terms, conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic and legal substance of the transactions contemplated hereby are not
affected in any manner materially adverse to
56
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated by this Agreement may be consummated as originally
contemplated to the fullest extent possible.
SECTION 9.10 PERFORMANCE BY SUB. Buyer hereby agrees to cause Sub to
comply with its obligations hereunder and to cause Sub to consummate the Merger
as contemplated herein and whenever this Agreement requires Sub to take any
action, such requirement shall be deemed to include an undertaking of Buyer to
cause Sub to take such action.
SECTION 9.11 DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.12 DEFINED TERMS. Each of the following terms is defined in
the Section identified below:
Affected Seller............................................................................Section 6.3(d)
Affiliated Person.........................................................................Section 3.22(a)
Agreement........................................................................................Preamble
Applicable Law.............................................................................Section 9.2(e)
Applicable Laws............................................................................Section 9.2(e)
Audited Financial Statements..................................................................Section 3.5
Buyer............................................................................................Preamble
Buyer Indemnitees..........................................................................Section 6.2(a)
Cap........................................................................................Section 6.2(e)
Cash Settlement Amount........................................................................Section 5.9
Certificate of Merger.........................................................................Section 1.2
Chicago Store Dispute.........................................................................Section 5.9
Claim Notice...............................................................................Section 6.4(a)
Closing......................................................................................Section 1.13
Closing Conditions...........................................................................Section 1.13
Closing Date.................................................................................Section 1.13
Code..........................................................................................Section 1.7
Company..........................................................................................Preamble
Company Balance Sheet.........................................................................Section 3.5
Company Balance Sheet Date....................................................................Section 3.5
Company Business Personnel...................................................................Section 3.15
Company Capital Stock............................................................................Recitals
Company Charter...............................................................................Section 3.4
Company Common Stock.............................................................................Recitals
Company Credit Facility...................................................................Section 1.13(c)
Company Domain Names......................................................................Section 3.16(b)
Company Letter....................................................................Preamble to Article III
57
Company Multiemployer Plan................................................................Section 3.12(c)
Company Patents...........................................................................Section 3.16(b)
Company Permits...............................................................................Section 3.8
Company Plan..............................................................................Section 3.12(c)
Company Preferred Stock..........................................................................Recitals
Company Registered Copyrights.............................................................Section 3.16(b)
Company Registered IP.....................................................................Section 3.16(b)
Company Registered Marks..................................................................Section 3.16(b)
Company Stock Option Plan..................................................................Section 3.2(a)
Company Stock Options......................................................................Section 3.2(b)
Company Transaction Expenses..............................................................Section 1.13(b)
Company Transaction Expenses Notice.......................................................Section 1.13(b)
Company Warrant............................................................................Section 3.2(a)
Compensation Agreements...................................................................Section 3.11(a)
Confidentiality Agreement.....................................................................Section 5.1
Constituent Corporations.........................................................................Preamble
Contribution Amount........................................................................Section 6.3(d)
Copyrights................................................................................Section 3.16(a)
Debt Amount...............................................................................Section 1.13(c)
Debt Amount Notice........................................................................Section 1.13(c)
Deductible.................................................................................Section 6.2(d)
DGCL..........................................................................................Section 1.1
Disagreement Notice........................................................................Section 6.4(b)
Dispute....................................................................................Section 9.6(a)
Dispute Expenses..............................................................................Section 5.9
Dispute Notice.............................................................................Section 9.6(b)
Effective Time................................................................................Section 1.2
Encumbrance................................................................................Section 9.2(g)
Environmental Law.........................................................................Section 3.18(a)
Environmental Permit......................................................................Section 3.18(a)
ERISA.....................................................................................Section 3.12(a)
ERISA Affiliate...........................................................................Section 3.12(c)
Escrow Agent...............................................................................Section 1.6(a)
Escrow Agreement...........................................................................Section 1.6(a)
Escrow Amount..............................................................................Section 1.6(a)
Escrow Per Share Amount....................................................................Section 1.6(a)
Estimated Adjustment Amount................................................................Section 1.5(g)
Estimated Working Capital.................................................................Section 1.13(a)
Estimated Working Capital Adjustment......................................................Section 1.13(a)
Final Decision................................................................................Section 5.9
Final Statement............................................................................Section 1.8(a)
Final Working Capital......................................................................Section 1.8(a)
Financial Statements..........................................................................Section 3.5
Fully-Diluted Number.......................................................................Section 1.5(e)
GAAP......................................................................................Section 1.13(c)
58
Governmental Entity...........................................................................Section 2.3
Hazardous Substances......................................................................Section 3.18(a)
HSR Act.......................................................................................Section 2.3
Indebtedness...............................................................................Section 9.2(f)
Indemnification Claim......................................................................Section 6.3(a)
Indemnification Termination Date..............................................................Section 6.1
Indemnifying Party.........................................................................Section 6.4(a)
Indemnitees................................................................................Section 6.2(b)
Independent Accounting Firm................................................................Section 1.8(b)
Insurance Policies...........................................................................Section 3.14
Intellectual Property.....................................................................Section 3.16(a)
Interim Financial Statements..................................................................Section 3.5
IRS........................................................................................Section 3.9(a)
JAMS Streamlined Rules.....................................................................Section 9.6(a)
JWC.......................................................................................Section 3.22(b)
Leased Real Property......................................................................Section 3.23(d)
Leases....................................................................................Section 3.23(d)
Losses.....................................................................................Section 6.2(c)
Xxxxxxx Payable Amount.....................................................................Section 1.5(e)
Marks.....................................................................................Section 3.16(a)
Material Adverse Change...................................................................Section 3.1 (a)
Material Adverse Effect...................................................................Section 3.1 (a)
Material Contracts.......................................................................Section 3.11 (b)
Memorandum.................................................................................Section 9.6(b)
Merger...........................................................................................Recitals
Merger Consideration.......................................................................Section 1.5(d)
Notifying Party............................................................................Section 9.6(b)
Optionee Amount............................................................................Section 1.5(h)
Patents...................................................................................Section 3.16(a)
Per Share Amount...........................................................................Section 1.5(e)
Permitted Encumbrances....................................................................Section 3.23(a)
Person.....................................................................................Section 9.2(d)
Preliminary Statement.....................................................................Section 1.13(a)
pro rata...................................................................................Section 9.2(i)
Proposed Statement.........................................................................Section 1.8(b)
Releasing Parties............................................................................Section 6.10
Responding Party...........................................................................Section 9.6(b)
Seller Indemnitees.........................................................................Section 6.2(b)
Seller Material Adverse Effect...............................................................Section 3A.3
Seller Representative.........................................................................Section 6.6
Sellers..........................................................................................Preamble
Senior Subordinated Loan Agreement........................................................Section 1.13(c)
59
Sub..............................................................................................Preamble
Subsidiary.................................................................................Section 9.2(c)
Surviving Company.............................................................................Section 1.1
Target Working Capital....................................................................Section 1.13(a)
Tax Return.................................................................................Section 3.9(b)
Taxes......................................................................................Section 3.9(b)
To the knowledge of the Company............................................................Section 9.2(h)
Trade Secrets.............................................................................Section 3.16(a)
Transaction Documents......................................................................Section 6.2(c)
Worker Safety Laws...........................................................................Section 3.13
Working Capital............................................................................Section 1.8(a)
60
IN WITNESS WHEREOF, Buyer, Sub, the Company, the Sellers, and
the Seller Representative have caused this Agreement to be signed by their
respective officers thereunto duly authorized (to the extent applicable) all as
of the date first written above.
CSK AUTO CORPORATION
A DELAWARE CORPORATION
By:
---------------------------------
Name:
Title:
FASTLANE MERGER CORP.
A DELAWARE CORPORATION
By:
---------------------------------
Name:
Title:
XXXXXX'X INC.
A DELAWARE CORPORATION
By:
---------------------------------
Name:
Title:
SELLER REPRESENTATIVE
X.X. CHILDS ASSOCIATES, L.P.,
A DELAWARE LIMITED PARTNERSHIP
By: X.X. CHILDS ASSOCIATES, INC.,
General Partner
By:
---------------------------------
Name:
Title:
SIGNATURE PAGES TO AGREEMENT AND PLAN OF MERGER
SELLERS
-------------------------------------
Xxxx X. Xxxxxx III
-------------------------------------
Xxxxxx X. Xxxxxxxx
CANTERBURY MEZZANINE CAPITAL II, L.P., a
Delaware limited partnership
By: Canterbury Capital II, L.L.C.,
General Partner
By:
---------------------------------
Name:
Title:
-------------------------------------
Xxx Xxxxxx
-------------------------------------
Xxxxxxx X. Xxxxx
-------------------------------------
Xxxxxx X. Xxxxxxx
-------------------------------------
Xxxxx X. Xxxxx
SIGNATURE PAGES TO AGREEMENT AND PLAN OF MERGER
X.X. CHILDS EQUITY PARTNERS III, L.P., a
Delaware limited partnership
By: X.X. Childs Advisors III, L.P.,
General Partner
By: X.X. Childs Associates, L.P.,
General Partner
By: X.X. Childs Associates, Inc.,
General Partner
By:
---------------------------------
Name:
Title:
JWC FUND III CO-INVEST, LLC, a
Delaware limited liability company
By: X.X. Childs Associates, L.P.,
Manager
By:
---------------------------------
Name:
Title:
-------------------------------------
Xxxxxxx X.X. Xxxxx
-------------------------------------
Xxxxx Xxxxxxx
-------------------------------------
Xxxxx Xxxxxxxxxx
-------------------------------------
Xxxxxx XxXxxx
SIGNATURE PAGES TO AGREEMENT AND PLAN OF MERGER
XXXXXX X. XXXX REVOCABLE LIVING TRUST
By:
---------------------------------
Name: Xxxxxx X. Xxxx
Title: Trustee
-------------------------------------
Xxxxx X. Xxxxxxx
-------------------------------------
Xxxxx X. Xxxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxxxxx
-------------------------------------
Xxxx X. Xxxxxx
-------------------------------------
Xxxxxxx X. Xxxxx
-------------------------------------
Xxxxx Xxxxxxxxx
-------------------------------------
Xxxxxxxx Xxxxx
SIGNATURE PAGES TO AGREEMENT AND PLAN OF MERGER
