EXHIBIT 99.2
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of December 7,
2001, by and among CSK Auto Corporation, a Delaware corporation, with
headquarters located at 000 X. Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx
00000 (the "Company"), and the investors listed on the Schedule of Buyers
attached hereto (individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act").
B. The Company has authorized the issuance of up to $50 million
principal amount of its 7% Convertible Debentures (plus such additional amount
as may be added to such principal amount pursuant to the second paragraph
thereof) due on the five year anniversary of the first date of issuance of such
Debentures (collectively, the "Debentures"), which shall be convertible into
shares of the Company's common stock, par value $0.01 per share (the "Common
Stock") (as converted, the "Conversion Shares"), in accordance with the terms of
the Debentures.
C. The Buyers severally wish to purchase, upon the terms and conditions
stated in this Agreement, (i) an aggregate of up to $50 million principal amount
of Debentures on the Closing Date (as defined below), such Debentures to be in
the form attached hereto as Exhibit A (the "Debentures") in the respective
amounts set forth opposite each Buyer's name on the Schedule of Buyers and (ii)
warrants (the "Make-Whole Warrants") to purchase shares of Common Stock (as
exercised collectively, the "Warrant Shares"), such Make-Whole Warrants to be
substantially in the form attached hereto as Exhibit B.
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit C (the "Registration Rights
Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
E. The location of defined terms in this Agreement is set forth on the
Index of Terms attached hereto.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF DEBENTURES AND WARRANTS.
a. Purchase of Debentures and Make-Whole Warrants. Subject to the
satisfaction or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to each Buyer, and each Buyer severally agrees
to purchase from the Company, the respective principal amount of Debentures,
together with the related Make-Whole Warrants, set forth opposite such Buyer's
name on the Schedule of Buyers (the "Closing").
b. The Closing. The date and time of the Closing (the "Closing
Date") shall be 10:00 a.m., New York City time, on December 21, 2001 or such
later date on or before December 31, 2001 (the "Closing Deadline"), which,
unless otherwise agreed by the Company and the Buyers, shall be within five (5)
Business Days following the date on which the Company certifies in writing to
each Buyer that each of the conditions set forth in Section 7 hereof has been
satisfied (or, with respect to those conditions to be satisfied on the Closing
Date, will be satisfied on the Closing Date). The Closing shall occur on the
Closing Date at the offices of Xxxxxx, Xxxx & Xxxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000. The failure by any Buyer to purchase the Debentures to be
purchased by such Buyer on the Closing Date shall not affect or impair any other
Buyer's right to purchase (acknowledging that pursuant to the terms of this
Agreement, such Buyer is then not obligated to so purchase) the Debentures to be
purchased by such Buyer at the Closing.
c. Form of Payment. On the Closing Date, (A) each Buyer shall pay
the Company for the Debentures and the related Make-Whole Warrants to be issued
and sold to such Buyer on the Closing Date, by wire transfer of immediately
available funds in accordance with the Company's written wire instructions and
(B) the Company shall deliver to each Buyer Debentures (in the denominations as
such Buyer shall reasonably request) representing the principal amount of
Debentures which such Buyer is then purchasing hereunder, along with warrants
representing the related Make-Whole Warrants, duly executed on behalf of the
Company and registered in the name of such Buyer.
d. Failure to Close. In the event that the Closing shall not have
occurred with respect to a Buyer on or before the Closing Deadline (other than
by reason of such Buyer's refusal to purchase the Debentures and Make-Whole
Warrants to be purchased at the Closing by such Buyer in violation of the terms
of this Agreement), then, with respect to each such Buyer other than Investcorp
CSK Holdings L.P. and its affiliates, the Company shall on or before January 2,
2002, at the option of the Company, (i) pay to such Buyer, by wire transfer of
immediately available funds in accordance with such Buyer's written wire
instructions, a non-refundable fee in an amount equal to the product derived by
multiplying (A) .035 by (B) the principal amount of Debentures to be purchased
at the Closing by such Buyer, as set forth on the Schedule of Buyers or (ii)
cause the Company's transfer agent to, by delivery of the Break-Up Share
Issuance Notice substantially in the form attached hereto as Exhibit D, issue
and promptly thereafter deliver to such Buyer at the address listed on the
Schedule of Buyers a number of fully paid and nonassessable shares (rounded up
or down to the nearest whole share) of Common Stock equal to the amount
calculated pursuant to subclause (i) of this paragraph divided by the arithmetic
average of the Closing Sale Price (as defined in the Debentures) of the Common
Stock for the five (5) trading days ended December 31, 2001 (collectively, the
"Break-up Shares").
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e. Post-Closing Deadline Purchase of Debentures and Make-Whole
Warrants.
In the event that the Closing shall not have occurred with respect
to a Buyer on or before the Closing Deadline (other than by reason of such
Buyer's refusal to purchase the Debentures and Make-Whole Warrants to be
purchased at the Closing by such Buyer in violation of the terms of this
Agreement), such Buyer (a "Participating Buyer") shall, upon three (3) Business
Days' prior written notice by such Participating Buyer to the Company (with a
copy of such notice to each other Buyer) (a "Post-Closing Buyer Participation
Notice"), have the right (the "Post-Closing Buyer Participation Right") at any
time, but not more than one time, during the 90 day period immediately following
the Closing Deadline (the "Post-Closing Participation Period") to require the
Company to issue and sell to such Participating Buyer all but not less than all
of the Debentures and related Make-Whole Warrants that such Participating Buyer
was scheduled to purchase prior to the Closing Deadline as set forth on the
Schedule of Buyers, upon and subject to the terms and conditions of this
Agreement and the other Transaction Documents (as defined herein) and the
satisfaction or waiver of the conditions set forth in Sections 6 and 7 hereof.
Each of the Company and the Participating Buyer shall use its reasonable best
efforts to effectuate the purchase of Debentures and related Make-Whole Warrants
pursuant to this Section 1(e). Each purchase of Debentures and related
Make-Whole Warrants by a Participating Buyer under this Section 1(e) shall be
treated for all purposes under this Agreement and the other Transaction
Documents as if it occurred on the Closing Date.
f. (i) Notwithstanding Section 9(e), at the election of the
Company on or prior to December 15, 2001, this Agreement shall be amended to add
Xxxxxxxxxxx Capital Fund or one or more of its affiliates ("Xxxxxxxxxxx") as a
party, and the Schedule of Buyers shall be amended to reflect the addition of
Xxxxxxxxxxx as a Buyer purchasing up to $10 million aggregate principal amount
of Debentures and Make-Whole Warrants and, with respect to each of the existing
Buyers, a pro rata reduction (based on the principal amount of Debentures set
forth on the Schedule of Buyers) of the principal amount of Debentures and
Make-Whole Warrants to be purchased by such existing Buyers.
(ii) Notwithstanding Section 9(e), at the election of the Company on
or prior to the Closing Date, this Agreement shall be amended to add The Carmel
Trust or one or more of its affiliates ("Carmel"), and the Schedule of Buyers
shall be amended to reflect the addition of Carmel as a Buyer purchasing up to
$10.5 million aggregate principal amount of Debentures and Make-Whole Warrants
and, with respect to Investcorp CSK Holdings L.P., an equivalent reduction of
the principal amount of Debentures and Make-Whole Warrants to be purchased by
Investcorp CSK Holdings L.P.
(iii) In the event of such amendment, each new party to this
Agreement will be entitled to the rights provided to Buyers under Section 1(d)
with respect to all of the principal amount of Debentures to be purchased at
Closing by such party, as set forth on the amended Schedule of Buyers.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself that:
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a. Investment Purpose. Such Buyer (i) is acquiring the Debentures
and the Make-Whole Warrants, (ii) upon conversion of the Debentures owned by it,
will acquire the Conversion Shares then issuable, (iii) upon exercise of the
Make-Whole Warrants held by it, will acquire the Warrant Shares issuable upon
exercise thereof, (iv) upon issuance of any Interest Shares (as defined in the
Debentures), will acquire the Interest Shares and (v) if applicable, is
acquiring the Break-Up Shares (the Debentures, the Conversion Shares, the
Interest Shares, the Make-Whole Warrants, the Warrant Shares and the Break-Up
Shares collectively are referred to herein as the "Securities") for its own
account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, such Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time, provided further, however, that such
disposition shall be in accordance with or pursuant to a registration statement
or an exemption under the 1933 Act and in accordance with any applicable state
securities laws.
b. Accredited Investor Status. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D under the
1933 Act.
c. Reliance on Exemptions. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of the United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire the Securities.
d. Information. Such Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by such Buyer and which such Buyer considers necessary
or appropriate for deciding whether to purchase the Securities. Such Buyer and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigations
conducted by such Buyer or its advisors, if any, or its representatives shall
modify, amend or affect such Buyer's right to rely on the Company's
representations and warranties contained in this Agreement.
e. No Governmental Review. Such Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. Transfer or Resale. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall
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have delivered to the Company an opinion of counsel, in substantially the form
attached hereto as Exhibit F, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration, or (C) such Buyer provides the Company with
reasonable assurance that such Securities can be sold, assigned or transferred
pursuant to Rule 144 promulgated under the 1933 Act (or a successor rule
thereto) ("Rule 144"); (ii) any sale of the Securities made in reliance on Rule
144 may be made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of the Securities under circumstances in
which the seller (or the person through whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the 0000 Xxx) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register the Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder. The Securities may be pledged in connection with a bona
fide margin account or other loan secured by the Securities.
g. Legends. Such Buyer understands that the Debentures and
Make-Whole Warrants and, until such time as the sale of the Conversion Shares,
the Interest Shares and the Warrant Shares have been sold or transferred
pursuant to a registration statement under the 1933 Act as contemplated by the
Registration Rights Agreement, the stock certificates representing the
Conversion Shares, the Interest Shares and the Warrant Shares, except as set
forth below, shall bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of such Debentures,
Make-Whole Warrants and stock certificates):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF
COUNSEL, IN SUBSTANTIALLY THE FORM ATTACHED HERETO AS
EXHIBIT A, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II)
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE
SECURITIES.
The legend set forth above shall be removed and the Company shall issue the
relevant securities without such legend to the holder of the Securities upon
which it is stamped, if, (i) such Securities are sold or transferred pursuant to
a registration statement under the 1933 Act, (ii) in
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connection with a sale transaction, such holder provides the Company with an
opinion of counsel, in substantially the form attached hereto as Exhibit F, to
the effect that a public sale, assignment or transfer of the Securities may be
made without registration under the 1933 Act, or (iii) such holder provides the
Company with reasonable assurances that the Securities can be sold pursuant to
Rule 144 without any restriction as to the number of securities acquired as of a
particular date that can then be immediately sold.
h. Authorization; Enforcement; Validity. Such Buyer has the
requisite power and authority to enter into and perform its obligations under
the Agreement and the Registration Rights Agreement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of such Buyer and are valid and binding agreements of
such Buyer enforceable against such Buyer in accordance with their terms,
subject as to enforceability to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that country or state
specified in its address on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns 25% or more of the capital stock or
other equity or similar interests or owns capital stock or holds an equity or
similar interest which ownership entitles the Company to elect 25% or more of
the board of directors or similar governing body of such entity) are
corporations or limited liability companies duly organized and validly existing
in good standing under the laws of the jurisdiction in which they are
incorporated or organized, and have the requisite corporate or other power and
authorization to own their properties and to carry on their business as now
being conducted. Each of the Company and its Subsidiaries is duly qualified as a
foreign corporation or limited liability company to do business and is in good
standing in every jurisdiction in which its ownership of property or the nature
of the business conducted by it makes such qualification necessary, except to
the extent that the failure to be so qualified or be in good standing would not
reasonably be expected to have a Material Adverse Effect. As used in this
Agreement, "Material Adverse Effect" means any material adverse effect on the
business, assets, operations, results of operations, prospects or condition
(financial or otherwise) of the Company and its Subsidiaries, if any, taken as a
whole, or on the transactions contemplated hereby or by the agreements and
instruments to be entered into in connection herewith, or on the authority or
ability of the Company to perform its obligations under the Transaction
Documents (as defined below). A complete list of entities in which the Company,
directly or indirectly, owns capital stock or holds an equity or similar
interest is set forth on Schedule 3(a).
b. Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this
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Agreement, the Debentures, the Make-Whole Warrants, the Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section 5)
and the Voting Agreement (collectively, the "Transaction Documents"), and to
issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Debentures, the reservation
for issuance and the issuance of the Conversion Shares issuable upon conversion
thereof, the reservation for issuance and the issuance of the Interest Shares,
the issuance of the Make-Whole Warrants, the reservation for issuance and the
issuance of the Warrant Shares issuable upon exercise of the Make-Whole
Warrants, and the reservation for issuance and the issuance of the Break-Up
Shares have been duly authorized by the Company's Board of Directors and no
further consent or authorization is required by the Company, its Board of
Directors or its stockholders (except to the extent that stockholder approval
may be required pursuant to the Rule 312.00 of the NYSE (as defined below) (the
"Stockholder Approval Rule")). The Transaction Documents have been duly executed
and delivered by the Company. The Transaction Documents constitute the valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
c. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of 50,000,000 shares of Common Stock, of which as
of October 31, 2001 27,847,778 shares are issued and outstanding, no shares are
held in treasury, 3,378,341 shares are reserved for issuance pursuant to the
Company's stock option and purchase plans, and 4,524,886 shares are issuable and
reserved for issuance pursuant to securities (other than the Debentures and the
Make-Whole Warrants) exercisable or exchangeable for, or convertible into,
shares of Common Stock. All of such outstanding shares have been, or upon
issuance will be, validly issued and are fully paid and nonassessable. Except as
disclosed in Schedule 3(c), as of the date hereof, (A) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights (arising under Delaware law, Arizona law, the Company's Certificate of
Incorporation or By-laws or any agreement or instrument to which the Company is
a party) or any liens or encumbrances granted or created by the Company; (B)
there are no outstanding options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries; (C) except as
set forth in the SEC Documents, there are no outstanding debt securities, notes,
credit agreements, credit facilities or other agreements, documents or
instruments evidencing indebtedness in excess of $1,000,000 of the Company or
any of its Subsidiaries or by which the Company or any of its Subsidiaries is or
may become bound; (D) except as set forth in the SEC Documents, there will be no
amounts due upon termination of, any credit agreement or credit facility of the
Company or any of its Subsidiaries; (E) except as set forth in the SEC
Documents, there are no agreements or arrangements under which the Company or
any of its Subsidiaries is obligated to register the sale of any of their
securities under the 1933 Act (except the Registration Rights Agreement); (F)
except as set forth in the SEC documents, there are no outstanding securities or
instruments of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (G) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement; (H) the Company does not have any
stock appreciation rights or "phantom" stock plans or agreements or any similar
plan or agreement; (I) to the knowledge of the Company, since February 4, 2001,
no officer, director or beneficial owner of 5% or more of the Company's
outstanding capital stock has pledged shares of the Company's capital stock in
connection with a margin account or other loan secured by such capital stock;
and (J) the Company and its Subsidiaries have no liabilities or obligations
required to be disclosed in the SEC Documents (as defined herein) but not so
disclosed in the SEC Documents, other than those incurred in the ordinary course
of the Company's or its Subsidiaries' respective businesses since February 4,
2001 and which, individually or in the aggregate, do not or would not have a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
The Company has made available to each Buyer, or the SEC Documents contain, true
and correct copies of the Company's Certificate of Incorporation, as amended and
as in effect on the date hereof (the "Certificate of Incorporation"), and the
Company's By-laws, as amended and as in effect on the date hereof (the
"By-laws"), and the terms of all securities convertible into or exercisable or
exchangeable for Common Stock and the material rights of the holders thereof in
respect thereto except for stock options granted under any benefit plan or stock
option plan of the Company approved by the Board of Directors of the Company.
d. Issuance of Securities. The Securities are duly authorized
and, upon issuance in accordance with the terms of the applicable Transaction
Documents, shall be (i) validly issued, fully paid and non-assessable and (ii)
free from all taxes, liens and charges with respect to the issuance thereof, and
shall not be subject to pre-emptive rights or other similar rights of
shareholders of the Company. As of the Closing, at least 12.7 million shares of
Common Stock (subject to adjustment pursuant to the Company's covenant set forth
in Section 4(f) below) will have been duly authorized and reserved for issuance
upon conversion of the Debentures, issuance of any Interest Shares and exercise
of the Make-Whole Warrants. As of the date hereof, at least 150,000 shares of
Common Stock (subject to adjustment pursuant to the Company's covenant set forth
in Section 4(f) below) will have been duly authorized and reserved for issuance
upon issuance of any Break-Up Shares. Upon conversion or issuance in accordance
with the Debentures, this Agreement or the Make-Whole Warrants, as applicable,
the Conversion Shares, the Interest Shares, the Warrant Shares and the Break-Up
Shares, as the case may be, will be validly issued, fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issue thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. Based, in part, on reliance on the representations and
warranties of each of the Buyers in the Transaction Documents, the issuance by
the Company of the Securities is exempt from registration under the 1933 Act.
e. No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
reservation for issuance and issuance of the Conversion Shares, the Interest
Shares, the Warrant Shares and the
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Break-Up Shares) will not (i) result in a violation of the Certificate of
Incorporation or the By-laws; (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which the
Company or any of its Subsidiaries is a party; or (iii) result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Principal Market (as defined below)) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected except for such violations as would not
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor its Subsidiaries is in violation of any term of or in default under its
Certificate of Incorporation, By-laws or their organizational charter or
by-laws, respectively. Neither the Company nor any of its Subsidiaries is in
violation of any term of or in default under any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any statute,
rule or regulation applicable to the Company or its Subsidiaries, except where
such violations and defaults would not result, either individually or in the
aggregate, in a Material Adverse Effect. The business of the Company and its
Subsidiaries is not being conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
Except as specifically contemplated by this Agreement, as required under the
1933 Act to register such Securities, as required by Blue Sky filings or as
required by the Stockholder Approval Rule, the Company is not required to obtain
any consent, authorization or order of, or make any filing or registration with,
any court or governmental agency or any regulatory or self-regulatory agency in
order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents. The Company is not in violation of
the listing requirements of the Principal Market, and has no actual knowledge of
any facts which would reasonably lead to delisting or suspension of the Common
Stock by the Principal Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since February 4, 2001,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
Documents"). As of the date of filing of such SEC Documents, such SEC Documents,
as they may have been subsequently amended by filings made by the Company with
the SEC prior to the date hereof, complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents. None of the SEC
Documents, as of the date filed and as of the date they may have been
subsequently amended by filings made by the Company with the SEC prior to the
date hereof, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as
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may be otherwise indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
the Buyers which is not included in the SEC Documents, when considered in
conjunction with the information contained in the SEC Documents, including,
without limitation, information referred to in Section 2(d), contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they are or were made, not misleading. Other than information required to
be made publicly available pursuant to Sections 4(h) and 4(t) hereof, neither
the Company nor any of its Subsidiaries has provided the Buyers with any
material, nonpublic information. As of the date hereof, the Company meets the
requirements for use of Form S-3 for registration of the resale of Registrable
Securities (as defined in the Registration Rights Agreement) and does not have
any actual knowledge of any fact which would reasonably result in its not
meeting such requirements. Except as set forth on Schedule 3(f), the Company is
not required to file and will not be required to file any agreement, note,
lease, mortgage, deed or other instrument entered into prior to the date hereof
and to which the Company is a party or by which the Company is bound which has
not been previously filed as an exhibit to its reports filed with the SEC under
the 1934 Act. Except for the issuance of the Debentures and the Make-Whole
Warrants contemplated by this Agreement, no event, liability, development or
circumstance has occurred or exists, or is currently contemplated to occur, with
respect to the Company or its Subsidiaries or their respective business,
properties, operations or financial condition, that would be required to be
disclosed by the Company at the time of such event, liability, development or
circumstance and prior to the date hereof under applicable securities laws and
which has not been publicly disclosed.
g. Absence of Certain Changes. Except as disclosed in the
Company's Annual Report on Form 10-K for the fiscal year ended February 4, 2001,
the Quarterly Reports on Form 10-Q for the quarters ended May 6, 2001 and August
5, 2001 or any Current Reports on Form 8-K filed by the Company since February
4, 2001 (the "Designated SEC Documents") or as disclosed in the Company's press
releases issued on November 29, 2001, there has been no change or development
that has had or would reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect. The Company has not taken any steps,
and does not currently expect to take any steps, to seek protection pursuant to
any bankruptcy law nor does the Company or any of its Subsidiaries have any
actual knowledge that its creditors intend to initiate involuntary bankruptcy
proceedings. Except as disclosed in the Designated SEC Documents, since February
4, 2001, the Company has not declared or paid any dividends, and as of the date
hereof, has not sold any assets, individually or in the aggregate, in excess of
$100,000 outside of the ordinary course of business (which shall include sales
of stores that are not, individually or in the aggregate, material to the
business of the Company or any of its Subsidiaries) or had capital expenditures,
individually or in the aggregate, in excess of $5,000,000.
h. Absence of Litigation. Except as disclosed in the SEC
Documents or as would not reasonably be expected to result in a Material Adverse
Effect, there is no action,
10
suit, proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the Subsidiaries or any of the
Company's or the Subsidiaries' officers or directors in their capacities as
such. To the knowledge of the Company, none of the directors or officers of the
Company have been a party to any securities related litigation during the past
five years.
i. No General Solicitation. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Securities.
j. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
issuance by the Company of any of the Securities under the 1933 Act or cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable stockholder approval
provisions, including, without limitation, under the rules and regulations of
any exchange or automated quotation system on which any of the securities of the
Company are listed or designated, nor will the Company or any of its
Subsidiaries take any action or steps that would require registration of the
issuance by the Company of any of the Securities under the 1933 Act or cause the
offering of the Securities to be integrated with other offerings.
k. Employment Matters; ERISA Matters. (i) Neither the Company nor
any of its Subsidiaries is involved in any union labor dispute nor, to the
knowledge of the Company or any of its Subsidiaries, is any such dispute
threatened which would reasonably be expected to result in a Material Adverse
Effect. No executive officer (as defined in Rule 501(f) of the 0000 Xxx) has
notified the Company that such officer intends to leave the Company or otherwise
terminate such officer's employment with the Company.
(ii) The Company and its Subsidiaries are in compliance with all
federal, state, local and foreign laws and regulations respecting employment and
employment practices, terms and conditions of employment and wages and hours,
except where failure to be in compliance would not, either individually or in
the aggregate, have a Material Adverse Effect.
l. Intellectual Property Rights. The Company and its Subsidiaries
own or possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights necessary
to conduct their respective businesses as now conducted, except where the
failure to own or possess such rights would not result, either individually or
in the aggregate, in a Material Adverse Effect. None of the Company's
trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets or other intellectual property rights
have expired or terminated, or are expected to expire or terminate within two
years from the date of this Agreement, except where such expiration or
termination would not result, either individually or
11
in the aggregate, in a Material Adverse Effect. Except as would not have a
Material Adverse Effect, the Company and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries of trademarks,
trade names, service marks, service xxxx registrations, service names, patents,
patent rights, copyrights, inventions, licenses, trade secrets or other
intellectual property rights of others, or of any development of similar or
identical trade secrets or technical information by others and except as would
not have a Material Adverse Effect, there is no claim, action or proceeding
being made or brought against, or to the knowledge of the Company, being
threatened against, the Company or its Subsidiaries regarding its trademarks,
trade names, service marks, service xxxx registrations, service names, patents,
patent rights, copyrights, inventions, licenses, trade secrets, or infringement
of other intellectual property rights. The Company and its Subsidiaries have
taken reasonable security measures to protect the secrecy, confidentiality and
value of all of their intellectual properties.
m. Title. Except as would not reasonably be expected to result in
a Material Adverse Effect, the Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them. Except as would not reasonably be
expected to result in a Material Adverse Effect, any real property and
facilities held under lease by the Company and any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases.
n. Environmental Laws. (i) The Company and its Subsidiaries (A)
are in compliance with any and all Environmental Laws, (B) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses, and (C) are in
compliance with all terms and conditions of any such permit, license or
approval, except in each case where the failure of the Company and its
Subsidiaries would not, either individually or in the aggregate, have a Material
Adverse Effect. The term "Environmental Laws" means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(ii) Except as would not reasonably be expected to result in a
Material Adverse Effect, other than those that are or were stored, used or
disposed of in compliance with applicable law, to the knowledge of the Company,
no Hazardous Materials are contained on or about any real property currently
owned, leased or used by the Company or any of its Subsidiaries, and no
Hazardous Materials were released on or about any real property previously
owned, leased or used by the Company or any of its Subsidiaries during the
period the property was owned, leased or used by the Company or any of its
Subsidiaries.
(iii) Except as would not reasonably be expected to result in a
Material Adverse Effect, to the knowledge of the Company, there are no
underground storage tanks on or
12
under any real property owned, leased or used by the Company or any of its
Subsidiaries that are not in compliance with applicable law.
o. Insurance. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any
reason to believe that it will not be able to remain so insured as may be
necessary to continue its business at a cost that would not have a Material
Adverse Effect.
p. Regulatory Permits. Except for Permits (as defined below) the
absence of which would not result, either individually or in the aggregate, in a
Material Adverse Effect, the Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses (the "Permits"), and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such Permit.
q. Dilutive Effect. The Company understands and acknowledges that
the number of Conversion Shares and the Warrant Shares issuable upon conversion
of the Debentures and the exercise of the Make-Whole Warrants, respectively,
will increase in certain circumstances. The Company further acknowledges that
its obligation to issue Conversion Shares upon conversion of the Debentures and
the Warrant Shares upon exercise of the Make-Whole Warrants, in accordance with
this Agreement and the respective terms of the Debentures and the Make-Whole
Warrants is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company.
r. No Materially Adverse Contracts, Etc. Except for laws, rules
and regulations of general applicability (including those relating to corporate
taxes and the environment), neither the Company nor any of its Subsidiaries is
subject to any charter, corporate or other legal restriction, or any judgment,
decree, order, rule or regulation which in the judgment of the Company's
officers has or is reasonably expected in the future to have a Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement which in the judgment of the Company's officers has or is
reasonably expected to have a Material Adverse Effect.
s. Tax Status. The Company and each of its Subsidiaries (i) has
made or filed all federal and state income and all other material tax returns,
reports and declarations required by any jurisdiction to which it is subject
except where the filing date for such return has been validly extended by the
proper jurisdiction, (ii) has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and for which the Company has made appropriate reserves for on its books, and
(iii) has set aside on its books provisions reasonably adequate for the payment
of all taxes for periods subsequent to the periods to which such returns,
reports or declarations (referred to in clause (i) above) apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
13
t. Application of Takeover Protections. The Company and its board
of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation, the laws of the
state of its incorporation or the laws of any other state which is or could
become applicable to the Buyers, and that would be adverse to Buyers, as a
result of the transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Securities and the Buyers' ownership
of the Securities.
u. Investment Company Status. The Company is not, and upon
consummation of the sale of the Securities will not be, an "investment company,"
a company controlled by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended.
v. Solvency. The Company individually and together with its
Subsidiaries on a consolidated basis (both before and after giving effect to the
transactions contemplated by the Transaction Documents) is solvent (i.e., its
assets have a fair market value in excess of the amount required to pay its
probable liabilities on its existing debts as they become absolute and matured)
and currently the Company has no information that would lead it to reasonably
conclude that the Company would not have, nor does it intend to take any action
that would impair, its ability to pay its debts from time to time incurred in
connection therewith as such debts mature.
w. Registration Rights Waiver. Each affiliate of Investcorp S.A.
that is a stockholder of the Company ("Investcorp") and The Carmel Trust and
each of its affiliates that are stockholders of the Company has waived in
writing any piggyback registration rights they may have with respect to any
Company securities they hold in connection with the registration of Securities
pursuant to the Registration Rights Agreement and each of Investcorp and Carmel
has agreed not to exercise any demand registration rights until the registration
of the Registrable Securities (as defined in the Registration Rights Agreement)
issuable to Xxxxxx has been declared effective by the SEC. True and complete
copies of such waivers and agreement (the "Registration Rights Waiver
Agreement") have been provided to each Buyer.
4. COVENANTS.
a. Reasonable Best Efforts. Each party shall use its reasonable
best efforts to timely satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
b. Form D and Blue Sky. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to qualify the
Securities for, sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the Buyers on
or prior to the Closing Date. The Company shall make all filings and reports
relating to the offer and sale of the Securities
14
required under applicable securities or "Blue Sky" laws of the states of the
United States following the Closing Date.
c. Reporting Status. Until the earlier of (i) the date which is
one year after the date as of which the Investors (as that term is defined in
the Registration Rights Agreement) may sell all of the Conversion Shares, the
Interest Shares, the Warrant Shares and the Break-Up Shares without restriction
pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto)
and (ii) the date on which (A) the Investors shall have sold all the Conversion
Shares, the Interest Shares, the Warrant Shares and the Break-Up Shares and (B)
none of the Debentures or Make-Whole Warrants is outstanding (the period from
the date hereof until the earlier of the dates specified in clauses (i) and
(ii), the "Reporting Period"), the Company shall timely file all reports
required to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
d. Use of Proceeds. The Company will use the proceeds from the
sale of the Debentures and the Make-Whole Warrants for substantially the same
purposes and in substantially the same amounts as indicated in Schedule 4(d).
e. Financial Information. The Company agrees to send the
following to each Investor during the Reporting Period: (i) within five (5)
Business Days after the filing thereof with the SEC, a copy of its Annual
Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on
Form 8-K and any registration statements (other than on Form S-8) or amendments
filed pursuant to the 1933 Act, and (ii) copies of any notices and other
information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders; provided, that the Company shall not be required to send any such
report, registration statement, amendment, notice or other information if it is
filed with the SEC through XXXXX and is generally available via XXXXX.
f. Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved shares of Common Stock
for the purpose of issuance of the Conversion Shares, the Interest Shares and
the Warrant Shares (to the extent such issuances may occur), which shall
initially be no less than 12.7 million shares of Common Stock. The Company shall
take all action necessary to have authorized and reserved shares of Common Stock
for the purpose of issuance of the Break-Up Shares (to the extent such issuances
may occur), which shall initially be no less than 150,000 shares of Common
Stock.
g. Listing. The Company shall promptly secure the listing of all
of the Registrable Securities (as defined in the Registration Rights Agreement)
upon each national securities exchange and automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official notice of
issuance) and, subject to Section 4(i) below, shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents. So long as $1,000,000 of Securities of the Buyers are outstanding and
other than in connection with Organic Changes (as defined in the Debentures)
constituting a Change of Control (as
15
defined in the Debentures), the Company shall maintain the Common Stock's
authorization for quotation on listing on The New York Stock Exchange, Inc. (the
"NYSE") or the Nasdaq National Market (as applicable, the "Principal Market").
Until the later of five (5) years from the date of this Agreement and 90 days
following the Maturity Date (as defined in the Debentures) and other than in
connection with Organic Changes (as defined in the Debentures), neither the
Company nor any of its Subsidiaries shall take any action which would be
reasonably expected to result in the delisting or suspension of the Common Stock
from the Principal Market. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(g).
h. Filing of Form 8-K. On or before the second Business Day
following the date of this Agreement, the Company shall file a Current Report on
Form 8-K with the SEC including as exhibits to such Current Report on Form 8-K
the press release required by Section 4(t), this Agreement, the form of
Debenture, the form of Make-Whole Warrants and the Registration Rights
Agreement, and the schedules hereto and thereto in the form required by the 1934
Act. "Business Day" means any day other than Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or required by law
to remain closed.
i. Proxy Statement. Unless the Company shall have provided the
Buyers with evidence reasonably satisfactory to the Buyers that the Stockholder
Approval is not required by the Principal Market in connection with the
Stockholder Approval Rule, the Company shall provide each stockholder entitled
to vote at the next meeting of stockholders of the Company, which meeting shall
occur on or before June 30, 2002 (the "Stockholder Meeting Deadline"), a proxy
statement, which has been previously reviewed by the Buyers and a counsel of
their choice, soliciting each such stockholder's affirmative vote at such
stockholder meeting for approval of the Company's issuance of all of the
Securities as described in the Transaction Documents in accordance with
applicable law and the rules and regulations of the Principal Market (such
affirmative approval being referred to herein as the "Stockholder Approval"),
and the Company shall use its best efforts to solicit its stockholders' approval
of such issuance of the Securities and to cause the Board of Directors of the
Company to recommend to the stockholders that they approve such proposal.
j. Corporate Existence. So long as a Buyer beneficially owns any
Debentures, the Company shall maintain its corporate existence and shall not
sell all or substantially all of the Company's assets, except in the event of a
merger or consolidation or sale of all or substantially all of the Company's
assets, with respect to which the Company is in compliance with the terms of the
Debentures.
k. Pledge of Securities. The Company acknowledges and agrees that
the Securities may be pledged in compliance with applicable securities laws by
an Investor in connection with a bona fide margin agreement or other loan
secured by the Securities. The pledge of Securities shall not be deemed to be a
transfer, sale or assignment of the Securities hereunder, and no Investor
effecting a pledge of Securities shall be required to provide the Company with
any notice thereof or otherwise make any delivery to the Company pursuant to
this Agreement or any other Transaction Document, including, without limitation,
Section 2(f) of this Agreement; provided that an Investor and its pledgee shall
be required to comply with the provisions of Section 2(f) hereof in order to
effect a sale, transfer or assignment of Securities to
16
such pledgee. The Company hereby agrees to execute and deliver such reasonable
documentation as a pledgee of the Securities may reasonably request in
connection with a pledge of the Securities to such pledgee by an Investor.
l. Expenses. On the date hereof, the Company shall pay an expense
allowance of $125,000 to LBI Group Inc. (collectively with its affiliates,
"Xxxxxx").
m. Good Standing. At the Closing, the Company shall deliver a
good standing certificate to each of the Buyers, certifying the Company's
qualification to do business and its good standing in the State of Delaware and
the State of Arizona as certified by the Secretary of State of the State of
Delaware and the Secretary of State of the State of Arizona, respectively.
n. Additional Debentures. For so long as any Buyer beneficially
owns any Securities, the Company will not issue any Debentures other than to the
Buyers as contemplated hereby and the Company shall not issue any other
securities that would cause a breach or default under the Debentures.
o. Transactions With Affiliates. So long as any Debentures are
outstanding, the Company will not, and will not permit any of its Subsidiaries
to, sell, lease, transfer or otherwise dispose of any of its properties or
assets to, or purchase any property or assets from, or enter into or make any
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Subsidiary than those that would have been obtained
in a comparable transaction by the Company or such Subsidiary with an unrelated
person and (ii) the Company delivers to each holder of Debentures (A) with
respect to any Affiliate Transaction entered into after the Closing Date
involving aggregate consideration in excess of $500,000, a resolution of the
Board of Directors set forth in an officers' certificate signed by the Chief
Executive Officer of the Company certifying that such Affiliate Transaction
complies with clause (i) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Company's Board of
Directors and (B) with respect to any Affiliate Transaction involving aggregate
consideration in excess of $3 million, an opinion as to the fairness to the
Company or such Subsidiary of such Affiliate Transaction from a financial point
of view issued by an investment banking firm of national standing; provided that
this clause (ii) shall not apply to transactions under the agreement dated on or
about the Closing Date (the "Real Estate Agreement") among one or more
Affiliates of the Carmel Trust and the Company in accordance with the terms of
such Real Estate Agreement as in effect on the Closing Date and any amendments,
modifications, restatements, renewals or supplements thereto; provided that any
such amendment, modification, restatement, renewal or supplement to the Real
Estate Agreement contains provisions that are no less favorable to the holders
of the Debentures than those contained in the Real Estate Agreement as in effect
on the Closing Date and has been approved by a majority of the disinterested
members of the Board of Directors as evidenced by a resolution of the Board of
Directors set forth in an officers' certificate signed by the Chief Executive
Officer of the Company delivered to each holder of Debentures. In addition, the
following will not be deemed to be Affiliate Transactions: (1) the provision of
administrative or management services by the Company or any of its officers to
any of its Subsidiaries in the
17
ordinary course of business, (2) any employment agreement, collective bargaining
agreement, employee benefit plan or any similar arrangement heretofore or
hereafter entered into by the Company or any of its Subsidiaries in the ordinary
course of business of the Company or such Subsidiary, (3) transactions between
or among the Company and/or its wholly owned subsidiaries, (4) payment of
reasonable and customary compensation to employees, officers or directors in the
ordinary course of business and consistent with the Company's practices prior to
the Closing Date, (5) maintenance in the ordinary course of business of benefit
programs, or arrangements for employees, officers or directors, including
vacation plans, health and life insurance plans, deferred compensation plans,
and retirement or savings plans and similar plans. "Affiliate" for purposes
hereof means, with respect to any person or entity, another person or entity
that, directly or indirectly, (i) has a 5% or more equity interest in that
person or entity, (ii) has 5% or more common ownership with that person or
entity, (iii) controls that person or entity, or (iv) shares common control with
that person or entity. "Control" or "controls" for purposes hereof means that a
person or entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.
p. Acquisitions. Until the delivery by the Company to the Buyer
of all shares of Common Stock upon conversion of the Debentures or all sums of
cash upon redemption or repayment of the Debentures, as applicable, such that
after such delivery upon any such conversion, redemption or repayment no more
than $1,000,000 in principal amount of the Debentures remain outstanding, other
than in connection with business acquisitions where the aggregate cash
consideration paid for all such transactions does not exceed $3,000,000, the
Company covenants and agrees that it will not enter into or complete any
business acquisitions, whether in the form of one or more stock and/or asset
transactions.
q. No Violation of Law. The business of the Company and its
Subsidiaries will not be conducted in violation of any law, ordinance or
regulation of any governmental entity, except where such violations would not
result, either individually or in the aggregate, in a Material Adverse Effect.
r. Additional Issuances of Securities.
(i) Right of Participation. For so long as any Debentures
remain outstanding, if at any time and from time to time, the Company shall
desire to effect a Dilutive Issuance (as defined in the Debenture), then the
Company shall first comply with the terms of this Section 4(r) (collectively,
"Future Offerings").
(ii) Notice Requirements. The Company shall notify, or cause
to be notified, the Buyers, by certified mail return receipt requested, not more
than five (5) nor less than three (3) Business Days prior to the time the
Company intends to consummate such Future Offering (the "Future Offering
Notice"). Once the Company has delivered a Future Offering Notice, the Company
shall either consummate or abandon the transaction described therein within five
(5) Business Days after the date of delivery of such Future Offering Notice
unless the Buyers consent to extend such five (5) Business Day period. The
Future Offering Notice shall describe the proposed Future Offering, including
the purchaser and the detailed terms and conditions thereof and description of
the securities to be issued and providing each
18
Buyer an option to purchase up to its Pro Rata Portion (as defined in the
Debentures) of the securities to be issued in such Future Offering.
(iii) Exercise of Right of Participation. A Buyer can exercise
its option to participate in a Future Offering by delivering written notice to
the Company of such Buyer's interest in participating within three (3) Business
Days after receipt of a Future Offering Notice, which notice shall state the
quantity of the Anti-Dilution Threshold (as defined in the Debentures), and that
number of securities it is willing to purchase in excess of its Anti-Dilution
Threshold. In the event that one or more Buyers fail to elect to purchase up to
each such Buyer's Anti-Dilution Threshold, then each Buyer which has indicated
that it is willing to purchase a number of securities in such Future Offering in
excess of its Anti-Dilution Threshold shall be entitled to purchase its pro rata
portion (determined in the same manner as described in the definition of Pro
Rata Portion) of the securities in the Future Offering which one or more of the
Buyers have not elected to purchase.
(iv) Right to Issue Securities. In the event the Buyers fail
to elect to fully participate in the Future Offering within the periods
described in this Section 4(r), the Company shall have two (2) Business Days
thereafter to sell the securities of the Future Offering not subscribed for by
the Buyers upon terms and conditions no more favorable to the purchasers thereof
than specified in the Future Offering Notice. In the event the Company has not
sold such securities of the Future Offering during such two (2) Business Day
period, the Company shall not thereafter issue or sell such securities without
first offering such securities to the Buyers in the manner provided in this
Section 4(r).
(s) Registration Rights. Until the Registration Statement (as
defined in the Registration Rights Agreement) is declared effective by the SEC,
the Company will not grant registration rights with respect to the Common Stock
to any stockholder which are preferential to the rights of the Buyers under the
Registration Rights Agreement.
(t) Press Release. Immediately following execution of this
Agreement or, if trading is not then being executed on the NYSE, in any event
prior to the next commencement of trading on the NYSE, the Company shall issue a
press release announcing the terms of the transactions contemplated by this
Agreement and the other Transaction Documents in a press release in the form
attached hereto as Exhibit G.
(u) HSR. If deemed necessary by the Company or any holder of
Debentures or Make-Whole Warrants, in order for such holder to exercise the
Debenture or Make-Whole Warrant, as applicable, to file a notification of the
transactions contemplated by the Transaction Documents (an "HSR Filing")
pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder ("HSR"), the Company and such
holder of Debentures will use its best efforts to cooperate with such holder in
seeking early termination of the waiting period under HSR. In addition, the
Company agrees to pay the HSR filing fees incurred by such holder in making such
HSR filing, unless such filing requirement is caused by the purchase of Common
Stock following the date hereof.
19
(v) Registration Rights Waiver. Without the prior written consent
of Xxxxxx, the Company shall not modify, amend, terminate or waive any of its
rights under the Registration Rights Waiver Agreement.
(w) The Company shall, simultaneously with the Closing or prior
thereto, cause all of the Company's 7% Convertible Subordinated Notes due
September 1, 2006 that are currently outstanding to be converted into shares of
Common Stock.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agents, and any subsequent transfer agent, to issue certificates or credit
shares to the applicable balance accounts at DTC, registered in the name of each
Buyer or its respective nominee(s), for the Conversion Shares, the Interest
Shares, the Break-Up Shares and Warrant Shares in such amounts as specified from
time to time upon conversion of the Debentures, issuance of any Interest Shares,
issuance of any Break-Up Shares or exercise of the Make-Whole Warrants, as
applicable (the "Irrevocable Transfer Agent Instructions"), a form of which is
attached as Exhibit H hereto. Prior to registration and sale pursuant to such
registration statement of the Conversion Shares, the Interest Shares, the
Break-Up Shares and the Warrant Shares under the 1933 Act, all such certificates
shall bear the restrictive legend specified in Section 2(g) of this Agreement.
The Company warrants that no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section 5 and stop transfer instructions
to give effect to Section 2(f) hereof (in the case of the Conversion Shares, the
Interest Shares, the Break-Up Shares and the Warrant Shares, prior to
registration and sale pursuant to such registration statement of the Conversion
Shares, the Interest Shares, the Break-Up Shares and the Warrant Shares under
the 0000 Xxx) will be given by the Company to its transfer agent and that the
Securities shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement, the Debentures, the
Make-Whole Warrants and the Registration Rights Agreement. If a Buyer provides
the Company with an opinion of counsel, in substantially the form attached
hereto as Exhibit F, to the effect that a public sale, assignment or transfer of
Securities may be made without registration under the 1933 Act or the Buyer
provides the Company with reasonable assurances that the Securities can be sold
pursuant to Rule 144 without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold, the Company
shall permit the transfer, and, in the case of the Conversion Shares, the
Break-Up Shares, the Interest Shares and the Warrant Shares, promptly instruct
its transfer agent to issue one or more certificates, or credit shares to one or
more balance accounts at DTC, in such name and in such denominations as
specified by such Buyer and without any restrictive legend. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
20
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company to issue and sell the Debentures and
the Make-Whole Warrants to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company.
(ii) Such Buyer shall have delivered to the Company the
purchase price for the Debentures and the Make-Whole Warrants being
purchased by such Buyer at the Closing, by wire transfer of immediately
available funds pursuant to the wire instructions provided by the Company.
(iii) The representations and warranties of such Buyer shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that
speak as of a specific date (which shall be true and correct as of such
date)), and such Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required
by the Transaction Documents to be performed, satisfied or complied with
by such Buyer at or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Debentures
and the Make-Whole Warrants from the Company at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion by providing the
Company with prior written notice thereof:
(i) The Company shall have executed each of the Transaction
Documents and delivered the same to such Buyer.
(ii) The Common Stock (x) shall be designated for quotation or
listed on the Principal Market and (y) shall not have been suspended by
the SEC or the Principal Market from trading on the Principal Market nor
shall suspension by the SEC or the Principal Market have been threatened
either (A) in writing by the SEC or the Principal Market or (B) by falling
below the minimum listing maintenance requirements of the Principal
Market; and, subject to Stockholder Approval, the Conversion Shares
issuable upon conversion of the Debentures (without regard to any
limitations on conversions), the Warrant Shares issuable upon exercise of
the Make-Whole Warrants (without regard to any limitations on exercises)
and the Interest Shares shall be approved for listing (subject to official
notice of issuance) upon the Principal Market.
(iii) The representations and warranties of the Company shall
be true and correct as of the date when made and as of the Closing Date as
though made at
21
that time (except for representations and warranties set forth in Sections
3(c), (f) and (h) that shall be updated as set forth below) and the
Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the
Company at or prior to the Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated
as of the Closing Date, to the foregoing effect and an update as of the
Closing Date regarding the representations contained in Section 3(c), (f)
and (h) above.
(iv) Such Buyer shall have received the opinion of
Xxxxxx Xxxx & Xxxxxxxx LLP, dated as of the Closing Date, in the form of
Exhibit E, attached hereto.
(v) The Company shall have executed and delivered to
such Buyer the Debentures and the Make-Whole Warrants (in such
denominations as such Buyer shall request) being purchased by such Buyer
at the Closing.
(vi) The Company and the holders of a majority of the
outstanding Common Stock (including Common Stock issuable upon conversion
of the Company's 7% Convertible Subordinated Notes due September 1, 2006)
of the Company shall have entered into a Voting Agreement (the "Voting
Agreement") for the benefit of the Buyers in the form attached hereto as
Exhibit I.
(vii) As of the Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Debentures, the issuance of the
Interest Shares and the exercise of the Make-Whole Warrants 12.7 million
shares of its Common Stock.
(viii) The Irrevocable Transfer Agent Instructions, in
the form of Exhibit H attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(ix) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company
and each Subsidiary in such entity's state of incorporation or
organization issued by the Secretary of State of such state of
incorporation or organization as of a date within ten (10) days of the
Closing Date.
(x) The Company shall have delivered to such Buyer a
certified copy of the Certificate of Incorporation as certified by the
Secretary of State of the State of Delaware as of a date within ten (10)
days of the Closing Date.
(xi) The Company shall have delivered to such Buyer a
secretary's certificate, dated as of the Closing Date, certifying as to
(A) resolutions consistent with Section 3(b) above, (B) the Certificate of
Incorporation and (C) the By-laws, each as in effect at the Closing.
22
(xii) The Company shall have made all filings under all
applicable federal and state securities laws necessary to consummate the
issuance of the Securities pursuant to this Agreement in compliance with
such laws.
(xiii) The Company shall have delivered to such Buyer a
letter from the Company's transfer agent certifying the number of shares
of Common Stock outstanding as of a date within five days of the Closing
Date.
(xiv) Each Buyer shall have received evidence
satisfactory to it that the Company has completed a Refinancing (as
defined in the Debentures).
(xv) Since the date of this Agreement, there shall have
been no Material Adverse Change (as defined below). The Company shall have
delivered to each Buyer a certificate, dated as of the Closing Date and
signed by the Chief Executive Officer and the Chief Financial Officer of
the Company to the foregoing effect. A "Material Adverse Change" shall
mean any event, change, circumstance or effect that individually or when
taken together with all other such events, changes, circumstances or
effects is or could reasonably be expected to result in a Material Adverse
Effect.
(xvi) The Company shall have received all consents and
waivers necessary to give effect to the rights of the Buyers contained in
the Registration Rights Agreement.
(xvii) The Company shall have delivered to each Buyer
such other documents relating to the transactions contemplated by the
Transaction Documents as such Buyer or their counsel may reasonably
request.
(xviii) Each Buyer shall have received evidence
satisfactory to it that each other Buyer has purchased and paid for the
Debentures and related Make-Whole Warrants that such Buyer is required to
purchase under this Agreement, as set forth on the Schedule of Buyers.
(xix) The Company shall have paid (by wire transfer)
Xxxxxx Brothers, Inc. its fees as placement agent in connection with the
sale of the Debentures and the Make-Whole Warrants.
8. INDEMNIFICATION. In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Buyer and each other holder of the Securities and all of their stockholders,
officers, directors, employees and direct or indirect investors and any of the
foregoing persons' agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is
23
sought), and including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby
(provided that, except with respect to the representations provided in Section
3(b), the first and last sentences of Section 3(c), in clauses (A), (B), (G) and
(H) of the third sentence of Section 3(c), in Section 3(d), in Section 3(e), in
Section 3(q) or in Section 3(t), such claim for indemnification is made on or
prior to the 60th day following the filing of the Company's Annual Report on
From 10-K for the year ended January 31, 2003 or, with respect to Section 3(s),
prior to termination of all applicable statute of limitations), (b) any breach
of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, (c) any cause of action, suit or claim brought
or made against such Indemnitee (other than a cause of action, suit or claim
which is (x) brought or made by the Company and (y) is not a shareholder
derivative suit) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities or (iii) the
status of such Buyer or holder of the Securities as an investor in the Company.
To the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. Except as otherwise set forth herein, the mechanics and
procedures with respect to the rights and obligations under this Section 8 shall
be the same as those set forth in Sections 6(a) and (d) of the Registration
Rights Agreement, including, without limitation, those procedures with respect
to the settlement of claims and the Company's rights to assume the defense of
claims.
9. MISCELLANEOUS.
a. Governing Law; Jurisdiction; Jury Trial. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. Each party hereby irrevocably submits to the non-exclusive jurisdiction of
the state and federal courts sitting in The City of New York, Borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE
24
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement supersedes all
other prior oral or written agreements between each Buyer, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended or waived other than by an instrument in writing signed
by the Company and (A) the holders of at least 75% of the outstanding principal
amount of the Debentures or Conversion Shares, as applicable, and (B) Xxxxxx,
for so long as Xxxxxx holds not less than $10 million in principal amount of
Debentures or Conversion Shares attributable to such Debentures, as applicable.
No such amendment shall be effective to the extent that it applies to less than
all of the holders of the Debentures then outstanding. No consideration shall be
offered or paid to any person to amend or consent to a waiver or modification of
any provision of any of the Transaction Documents unless the same consideration
also is offered to all of the parties to the Transaction Documents or holders of
the Conversion Shares, as the case may be.
f. Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one (1) Business Day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
CSK Auto Corporation
000 X. Xxxxxxxx Xxxxxx, Xxxxx 000
00
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxx Xxxxxx, Chief Financial Officer
With a copy to:
Xxxxxx Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxx
If to the Transfer Agent:
Mellon Investor Services LLC
000 Xxxxx Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxx
If to a Buyer, to it at the address and facsimile number set
forth on the Schedule of Buyers, with copies to such Buyer's representatives as
set forth on the Schedule of Buyers, or at such other address and/or facsimile
number and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a nationally recognized overnight
delivery service shall be rebuttable evidence of personal service, receipt by
facsimile or receipt from a nationally recognized overnight delivery service in
accordance with clause (i), (ii) or (iii) above, respectively.
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Securities. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of (A) the holders of at least 75% of the outstanding principal
amount of the Debentures or Conversion Shares, as applicable, and (B) Xxxxxx,
for so long as Xxxxxx holds not less than $10 million in principal amount of
Debentures or Conversion Shares attributable to such Debentures, as applicable,
including by merger or consolidation, except pursuant to a merger or
consolidation with respect to which the Company is in compliance with the terms
of the Debentures. A Buyer may assign some or all of its rights hereunder
without the consent of the Company; provided, however, that the transferee has
agreed in writing to be bound by the applicable provisions of this Agreement.
Any Buyer shall be entitled to pledge the Securities in connection with a bona
fide margin account or other loan secured by the Securities.
26
h. No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. Survival. Unless this Agreement is terminated under Section
9(k), the representations and warranties of the Company and the Buyers contained
in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and
9, and the indemnification provisions set forth in Section 8, shall survive the
Closing; provided that the representations and warranties of the Company
contained in Section 3 shall expire (except with respect to the representations
provided in Section 3(b), the first and last sentences of Section 3(c), in
clauses (A), (B), (G) and (H) of the third sentence of Section 3(c), in Section
3(d), in Section 3(e), in Section 3(q) or in Section 3(t)) on the 60th day
following the filing of the Company's Annual Report on From 10-K for the year
ended January 31, 2003 or, with respect to Section 3(s), prior to termination of
all applicable statute of limitations and the representations and warranties of
each Buyer contained in Section 2 shall expire (except with respect to the
representations provided in Section 2(h)) one year following the Closing Date.
Each Buyer shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.
j. Publicity. The Company and each Buyer shall have the right
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to make
any press release or other public disclosure with respect to such transactions
in the form as is required by applicable law and regulations (although each
Buyer shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).
k. Termination. (i) In the event that the Closing shall not
have occurred with respect to a Buyer on or before December 31, 2001 due to the
Company's failure to satisfy the conditions set forth in Sections 7 above (and
such Buyer not having waived such unsatisfied condition(s)), such Buyer
(provided that it is not in breach) shall have the option to terminate this
Agreement, subject to the survival of this Agreement pending possible
application of Sections 1(d) and 1(e) hereof, without liability to any other
party; provided, however, that if this Agreement is terminated pursuant to this
Section 9(k)(i), the Company shall remain obligated to reimburse any
nonbreaching Buyer for the expenses described in Section 4(l) above and the
Company shall remain obligated under Section 1(d) and Section 1(e) hereof and,
if any Buyer's rights are exercised under Section 1(e), the provisions of this
Agreement shall continue to apply.
(ii) In the event that the Closing shall not have occurred
with respect to a Buyer on or before March 31, 2002 due to the expiration of
such Buyer's rights under Section 1(e) or such Buyer's failure to satisfy the
conditions set forth in Section 6 above (and the Company not having waived such
unsatisfied conditions(s)), the Company (provided that it is not in breach)
shall have the option to terminate this Agreement with respect to such Buyer,
without liability to any other party; provided, however, that if this Agreement
is terminated pursuant to this Section 9(k)(ii), the Company shall remain
obligated to reimburse any nonbreaching Buyer for the expenses described in
Section 4(l) above and, if applicable, to make any payment or issuance of
Break-Up Shares required under Section 1(d).
27
l. Placement Agent. The Company shall be responsible for the
payment of placement agent's fees, financial advisory fees, or brokers'
commissions for persons engaged by or on behalf of the Company relating to or
arising out of the transactions contemplated hereby. The Company shall pay, and
hold each Buyer harmless against, any liability, loss or expense (including,
without limitation, attorney's fees and out-of-pocket expenses) arising in
connection with any such claim. Each Buyer shall bear responsibility for the
payment of any placement agent's fees, financial advisory fees, or brokers'
commissions for persons engaged by or on behalf of such Buyer relating to or
arising out of the transactions contemplated hereby.
m. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
n. Remedies. Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents and
all rights and remedies which such holders have been granted at any time under
any other agreement or contract and all of the rights which such holders have
under any law. Any person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
o. Payment Set Aside. To the extent that the Company makes a
payment or payments to any Buyer hereunder or pursuant to any of the other
Transaction Documents, or the Buyers enforce or exercise their rights hereunder
or thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, by a
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
p. Independent Nature of Buyers' Obligations and Rights. The
obligations of each Buyer are several and not joint with the obligations of the
other Buyers hereunder, and no Buyer shall be responsible in any way for the
performance of the obligations of any other Buyer hereunder. Nothing contained
herein or in any other agreement or document delivered at any closing, and no
action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, association, joint venture or any other
kind of entity, or create a presumption that the Buyers are in any way acting in
concert with respect to such obligations or the transactions contemplated by
this Agreement. Each Buyer shall be entitled to protect and enforce its rights,
including without limitation the rights arising out of this
28
Agreement or out of the Transaction Documents, and it shall not be necessary for
any other Buyer to be joined as an additional party in any proceeding for such
purpose.
[signature page follows]
29
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
CSK AUTO CORPORATION LBI GROUP INC.
By: /s/ Xxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxxx
------------------------- -------------------------------
Name: Xxx X. Xxxxxx Name: Xxxxx X. Xxxxxx
Title: Senior Vice President Title: Vice President
[Additional Buyers Signature Page(s) Follow(s)]
30
[Additional Buyers Signature Page to Securities Purchase Agreement]
INVESTCORP CSK HOLDINGS L.P.
By: /s/ Xxxxxxx X. Xxxxxxx
-------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Authorized Representative
SCHEDULE OF BUYERS
Principal Investor's
Investor Address Amount Number of Representatives'
Investor and Facsimile of Make-Whole Address
Name Number Debentures Warrants and Facsimile Number
---- ------ ---------- -------- --------------------
LBI Group Xxxxxx Brothers Inc. $20,000,000 1 Xxxxxx Brothers Inc.
x/x Xxxxxxxx Xxxxxxxxx Xxxxx x/x Xxxxxxxx Xxxxxxxxx Hotel
000 0xx Xxxxxx 000 0xx Xxxxxx
Room 809 Room 809
NY, NY 10019 XX, XX 00000
fax: (000)-000-0000 fax: (000)-000-0000
Attention: Xxxxx phone: (000)-000-0000
Genirs, LBI Group Inc. Attention: Xxxxx Xxxxxx,
LBI Group Inc.
Investcorp CSK Investcorp Bank E.C. $30,000,000 1 Investcorp Bank E.C.
Holdings L.P. Investcorp House Investcorp House
X.X. Xxx 0000 X.X. Xxx 0000
Xxxxxx, Xxxxxxx Xxxxxx, Xxxxxxx
Fax: 000-000-000-000 Fax: 000-000-000-000
Attention: Xxxx X. Xxxx Attention: Xxxx X. Xxxx
TABLE OF CONTENTS
Page
----
1. PURCHASE AND SALE OF DEBENTURES AND WARRANTS............................ 2
2. BUYER'S REPRESENTATIONS AND WARRANTIES.................................. 3
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................... 6
4. COVENANTS............................................................... 14
5. TRANSFER AGENT INSTRUCTIONS............................................. 20
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.......................... 21
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE....................... 21
8. INDEMNIFICATION......................................................... 23
9. MISCELLANEOUS........................................................... 24
SCHEDULES
Schedule 3(a) - Subsidiaries
Schedule 3(c) - Capitalization
Schedule 3(f) - SEC Documents
Schedule 4(d) - Use of Proceeds
EXHIBITS
Exhibit A - Form of Debentures
Exhibit B - Form of Make-Whole Warrant
Exhibit C - Form of Registration Rights Agreement
Exhibit D - Form of Break-Up Share Issuance Notice
Exhibit E - Form of Company Counsel Opinion
Exhibit F - Form of Transfer Opinion
Exhibit G Form of Press Release
Exhibit H - Form of Irrevocable Transfer Agent Instructions
Exhibit I Form of Voting Agreement
INDEX
Page
----
1933 Act ............................................................... 1
1934 Act ............................................................... 9
accredited investor .................................................... 4
Affiliate .............................................................. 18
Affiliate Transaction .................................................. 17
Agreement .............................................................. 1
Break-Up Shares ........................................................ 2
Business Day ........................................................... 16
Buyer .................................................................. 1
Buyers ................................................................. 1
By-laws ................................................................ 8
Carmel ................................................................. 3, 14
Certificate of Incorporation ........................................... 8
Closing ................................................................ 2
Closing Date ........................................................... 2
Closing Deadline ....................................................... 2
Common Stock ........................................................... 1
Company ................................................................ 1
Conversion Shares ...................................................... 1
Debentures ............................................................. 1
Designated SEC Documents ............................................... 10
Environmental Laws ..................................................... 12
Future Offering Notice ................................................. 19
Future Offerings ....................................................... 18
Hazardous Materials .................................................... 12
HSR .................................................................... 20
HSR Filing ............................................................. 20
Indemnified Liabilities ................................................ 24
Indemnitees ............................................................ 24
Interest Shares ........................................................ 4
Investcorp ............................................................. 14
Irrevocable Transfer Agent Instructions ................................ 20
Xxxxxx ................................................................. 17
Make-Whole Warrants .................................................... 1
Material Adverse Change ................................................ 23
Material Adverse Effect ................................................ 6
NYSE ................................................................... 16
Xxxxxxxxxxx ............................................................ 3
Participating Buyer .................................................... 3
Permits ................................................................ 13
Post Closing Buyer Participation Notice ................................ 3
Page
----
Post-Closing Buyer Participation Right ................................. 3
Post-Closing Participation Period ...................................... 3
Principal Market ....................................................... 16
Real Estate Agreement .................................................. 17
Registration Rights Agreement .......................................... 1
Regulation D ........................................................... 1
Reporting Period ....................................................... 15
Rule 144 ............................................................... 5
SEC .................................................................... 1
SEC Documents .......................................................... 9
Securities ............................................................. 4
Stockholder Approval ................................................... 16
Stockholder Approval Rule .............................................. 7
Stockholder Meeting Deadline ........................................... 16
Subsidiaries ........................................................... 6
Transaction Documents .................................................. 7
Voting Agreement ....................................................... 22
Warrant Shares ......................................................... 1
-ii-
SECURITIES PURCHASE AGREEMENT
SCHEDULE 3.a.
CSK AUTO, INC.
XXXXXXX.XXX, INC.
AUTOMOTIVE INFORMATION SYSTEMS, INC.
SECURITIES PURCHASE AGREEMENT
SCHEDULE 3.c.
(A) Stockholders' Agreement dated October 30, 1996, by and between
the Investcorp Group (as defined therein), the Carmel Group (as defined
therein), and the Companies, as thereafter amended (the "Stockholders'
Agreement")
(B) (i) Stock Options pursuant to the Company's approved
Stock Option Plans as follows:
1996 Executive Stock Option Plan
1996 Associate Stock Option Plan
1999 Employee Stock Option Plan
(ii) Convertible securities pursuant to agreements between
the Company and Xxxxxxxxxxx Capital Income Fund (7% Convertible
Subordinated Note, Registration Rights Agreement, Note Purchase
Agreement) ("Xxxxxxxxxxx Transaction")
(C) Xxxxxxxxxxx Transaction
(E) (i) Stockholders' Agreement
(ii) Xxxxxxxxxxx Transaction
SECURITIES PURCHASE AGREEMENT
SCHEDULE 3.f.
Convertible securities pursuant to agreements between the Company and
Xxxxxxxxxxx Capital Income Fund (7% Convertible Subordinated Note, Registration
Rights Agreement, Note Purchase Agreement) ("Xxxxxxxxxxx Transaction")
Severance and Retention Agreements for the following senior executive
officers of the Company: Xxxxxx Xxxxxx, Xxx Xxxxxx, Xxxxx Xxxxxx, Xxxxx Xxxxx,
Xxxx Xxxxx, Xxx Xxxxxx, and Xxxx Xxxx
SECURITIES PURCHASE AGREEMENT
SCHEDULE 4.d.
Net proceeds, after payment of fees and expenses associated with the
transactions contemplated under this Securities Purchase Agreement and
the agreements attached as exhibits thereto, from the sale of the
Debentures and the Make-Whole Warrants will be used for CSK Auto,
Inc.'s repayment of borrowings under its existing senior credit
facility and for working capital.
EXHIBIT A TO SECURITIES PURCHASE AGREEMENT
EXECUTION COPY
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF
COUNSEL, IN SUBSTANTIALLY THE FORM ATTACHED HERETO AS EXHIBIT A, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS
OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
THE SECURITIES. THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS DEBENTURE
MAY BE LESS THAN THE AMOUNT STATED ON THE FACE HEREOF PURSUANT TO SECTION 5(E)
HEREIN.
No. 1 $________(1)
CSK AUTO CORPORATION
7% CONVERTIBLE SUBORDINATED DEBENTURE DUE [DECEMBER __, 2006](2)
THIS DEBENTURE (this "Debenture") is one of a duly authorized
issue of Debentures of CSK AUTO CORPORATION, a corporation duly organized and
existing under the laws of the State of Delaware (the "Company"), designated as
its 7% Convertible Debentures Due December __, 2006, in an aggregate principal
amount of up to Fifty Million U.S. Dollars (U.S. $50,000,000), plus such
additional amount as may be added to such principal amount pursuant to the
fourth sentence of the next paragraph(the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to
________________, the holder hereof, or its order (the "Holder"), the principal
sum of _____ Million Dollars ($_________), plus such additional principal sum as
shall result from the application of the third sentence succeeding this sentence
(the "Outstanding Principal Amount"), on December __, 2006 (the "Original
Maturity Date") and to pay interest ("Interest Payments") on the principal sum
outstanding from time to time under this Debenture, at the rate of 7% per annum
which shall be cumulative, accrue daily from the date of issuance of this
Debenture and be due and payable on the first day of each Calendar Quarter
commencing April 1, 2002 (each, an "Interest Payment Date"). If an Interest
Payment Date is not a Business Day, then the Interest Payment shall be due and
payable on the Business Day immediately following such Interest Payment Date.
Interest Payments shall be payable, subject to any applicable limitations on the
number of shares of
----------
(1) Insert principal amount of Debenture.
(2) Insert date five years from the date issued.
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Common Stock that may be issued to the Holder, in shares of Common Stock
("Interest Shares") or, at the option of the Company, in cash (each such cash
Interest Payment being referred to herein as a "Cash Interest Payment"),
provided that the Interest Payments which accrue during any period shall be
payable in cash only if the Company provides written notice ("Interest Payment
Election Notice") to each holder of Debentures at least ten (10) Business Days
prior to the Interest Payment Date. Interest Payments made in Interest Shares
shall be paid in a number of fully paid and nonassessable shares (rounded up or
down to the nearest whole share) of Common Stock equal to the quotient of (a)
the amount of the Interest Payment due on the applicable Interest Payment Date
divided by (b) the arithmetic average of the Closing Sale Price of the Common
Stock for the period commencing on and including the fifth Trading Day
immediately preceding the applicable Interest Payment Date and ending on the
date on and including the date immediately preceding the applicable Interest
Payment Date (the "Interest Share Conversion Rate"); provided, however, that if
any limitations on issuance of such Interest Shares in the Debentures would
prevent such issuance, then such Interest Payment shall be payable by adding the
Interest Payment to the Outstanding Principal Amount. The Company shall deliver
a notice, substantially in the form of Exhibit B hereto, to the Transfer Agent
(as defined in Section 4(f)(i)) and to the holders of Debentures promptly
following the applicable Interest Payment Date. Notwithstanding the foregoing,
the Company shall be required to make Cash Interest Payments if any event
constituting an Event of Default (as defined in Section 17), or an event that
with the passage of time and without being cured would constitute an Event of
Default, has occurred and is continuing on the Interest Payment Date or any date
which is within 10 Business Days prior to the Interest Payment Date, unless
otherwise consented to in writing by the Holder entitled to receive such
Interest Payment. If any Interest Payments are not paid, or, if Interest Shares,
if required, are not delivered, within five (5) Business Days of such accrued
and unpaid Interest Payments' Interest Payment Date, then the amount of such
Interest Payment shall, to the maximum extent permitted by law, bear interest at
the rate of 12.0% per annum from such Interest Payment Date until the same is
paid in full; provided, however, that such rate shall be increased by an
additional two percent (2%) per annum commencing on the first day of each of the
second and third thirty (30) day periods (or part thereof) following such
default until such overdue interest is duly paid; provided that in no event
shall the rate of interest exceed the lower of 16% or the highest rate permitted
by applicable law (the "Default Interest"). Interest Payments will be paid to,
or, in the case of Interest Shares will be issued in the name of, the person in
whose name this Debenture (or one or more predecessor Debentures) is registered
on the records of the Company regarding registration and transfers of the
Debentures (the "Debenture Register"). Interest Payments shall not accrue on
Debentures that remain outstanding following the date on which conversion of
such Debenture would have occurred had the provisions in Section 4(c) or Section
12 not applied.
This Debenture is subject to the following additional
provisions:
1. Exchange. The Debentures are exchangeable for an
equal aggregate principal amount of Debentures of different denominations, as
reasonably requested by the Holder surrendering the same. No service charge will
be charged to the Holder for such registration transfer or exchange.
2. Transfers. This Debenture has been issued subject to
investment representations of the original purchaser hereof and may be
transferred or exchanged in the
X-0
Xxxxxx Xxxxxx only in compliance with the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws. Prior to due presentment for
transfer of this Debenture, the Company may treat the person in whose name this
Debenture is duly registered on the Company's Debenture Register as the owner
hereof for the purpose of receiving payment as herein provided and all other
purposes, whether or not this Debenture be overdue, and the Company shall not be
affected by notice to the contrary.
3. Definitions. For purposes of this Debenture, the
location of defined terms in this Debenture is set forth on the Index of Terms
attached hereto and the following terms shall have the following meanings:
"Anti-Dilution Threshold" shall mean, with respect to
any Person, (i) during the period commencing on the Closing Date and ending on
the day which is ninety (90) days following the Closing Date, zero; (ii) during
the period commencing ninety one (91) days following the Closing Date and ending
one hundred eighty (180) days following the Closing Date, 25% of such Person's
Pro Rata Portion of the Dilutive Issuance or Variable Price Issuance, as
applicable; (iii) during the period commencing one hundred eighty one (181) days
following the Closing Date and ending two hundred seventy (270) days following
the Closing Date, 50% of such Person's Pro Rata Portion of the Dilutive Issuance
or Variable Price Issuance, as applicable; (iv) during the period commencing two
hundred seventy one (271) days after the Closing Date and ending three hundred
sixty five (365) days after the Closing Date, 75% of such Person's Pro Rata
Portion of the Dilutive Issuance or Variable Price Issuance, as applicable; and
(v) during the period commencing three hundred sixty six (366) days following
the Closing Date and thereafter, 100% of such Person's Pro Rata Portion of the
Dilutive Issuance or Variable Price Issuance, as applicable.
"Approved Stock Plan" shall mean any stock option
plan, restricted stock plan or employee benefit plan which has been approved by
the Board of Directors of the Company, pursuant to which the Company's
securities may be issued to any employee, officer, consultant or director for
services provided to the Company.
"Bloomberg" shall mean Bloomberg Financial Markets
and any successor thereto.
"Business Day" shall mean any day other than
Saturday, Sunday or other day on which commercial banks in The City of New York
are authorized or required by law to remain closed.
"Calendar Quarter" means each of the following
periods: the period beginning on and including January 1 and ending on and
including March 31; the period beginning on and including April 1 and ending on
and including June 30; the period beginning on and including July 1 and ending
on and including September 30; and the period beginning on and including October
1 and ending on and including December 31.
"Closing Bid Price" shall mean, for any security as
of any date, the last closing bid price for such security on the Principal
Market as reported by Bloomberg, or if the Principal Market begins to operate on
an extended hours basis, and does not designate the closing bid price, then the
last bid price at 4:00 p.m., New York City time, as reported by
A-3
Bloomberg, or if the foregoing do not apply, the last closing bid price of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price is reported
for such security by Bloomberg, the last closing trade price for such security
as reported by Bloomberg, or, if no last closing trade price is reported for
such security by Bloomberg, the average of the bid prices of any market makers
for such security as reported in the "pink sheets" by the National Quotation
Bureau, Inc. If the Closing Bid Price cannot be calculated for such security on
such date on any of the foregoing bases, the Closing Bid Price of such security
on such date shall be the fair market value as determined in good faith by the
Board of Directors of the Company; provided, however, that promptly following
such determination, the Company provides each of the holders of the Debentures
then outstanding with written notice setting forth in reasonable detail the
basis for the Company's determination of such fair market value. The holders of
at least 25% of the Outstanding Principal Amount of the Debentures then
outstanding and Xxxxxx for so long as Xxxxxx holds not less than $10 million in
principal amount of Debentures or shares of Common Stock received upon
conversion of such Debentures ("Objecting Holders") shall have the right to
object to the Company's determination of fair market value within ten (10)
Business Days of receipt of such notice. In the event the Company fails to
provide the holders of the Debentures then outstanding with the notice required
herein or in the event the Objecting Holders provides the Company with a notice
of its objection, then, the fair market value shall be resolved pursuant to
Section 4(f)(iii) below with the term "Closing Bid Price" being substituted for
the term "Closing Sale Price". All such determinations shall be appropriately
adjusted for any stock dividend, stock split or other similar transaction during
such period.
"Closing Date" shall mean the first date on which
Debentures are issued pursuant to the Securities Purchase Agreement.
"Closing Sale Price" shall mean, for any security as
of any date, the last closing trade price for such security on the Principal
Market as reported by Bloomberg, or if the Principal Market begins to operate on
an extended hours basis, and does not designate the closing trade price, then
the last trade price at 4:00 p.m., New York City Time, as reported by Bloomberg,
or if the foregoing do not apply, the last closing trade price of such security
in the over-the-counter market on the electronic bulletin board for such
security as reported by Bloomberg, or, if no last closing trade price is
reported for such security by Bloomberg, the last closing ask price of such
security as reported by Bloomberg, or, if no last closing ask price is reported
for such security by Bloomberg, the average of the highest bid price and the
lowest ask price of any market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Sale Price cannot
be calculated for such security on such date on any of the foregoing bases, the
Closing Sale Price of such security on such date shall be the fair market value
as determined in good faith by the Board of Directors of the Company; provided,
however, that promptly following such determination, the Company provides each
of the holders of the Debentures then outstanding with written notice setting
forth in reasonable detail the basis for the Company's determination of such
fair market value. The Objecting Holders shall have the right to object to the
Company's determination of fair market value within ten (10) Business Days of
receipt of such notice. In the event the Company fails to provide the holders of
the Debentures then outstanding with the notice required herein or in the event
the Objecting Holders provide the Company with a notice of its objection, then,
the fair market value
A-4
shall be resolved pursuant to Section 4(f)(iii) below. All such determinations
shall be appropriately adjusted for any stock dividend, stock split or other
similar transaction during such period.
"Common Stock" shall mean the Common Stock, par value
$0.01 per share, of the Company.
"Common Stock Deemed Outstanding" shall mean at any
given time, the number of shares of Common Stock actually outstanding at such
time, plus the number of shares of Common Stock deemed to be outstanding
pursuant to Sections 6(a)(i) and 6(a)(ii) but only to the extent such Options or
Convertible Securities are actually exercisable and are in-the-money at such
time, but in all events excluding any shares of Common Stock owned or held by or
for the account of the Company or issuable upon conversion of the Debentures.
"Conversion Failure" shall mean that for any reason
(other than the limitations set forth in Section 4(c) and Section 12) the Holder
has not received all of the shares of Common Stock to which the Holder is
entitled prior to the tenth (10th) Business Day after the Share Delivery Date
(as defined in Section 4(f)(ii)) with respect to a conversion of this Debenture.
"Conversion Price" shall mean (A) as of any
Conversion Date (as defined in Section 4(f)(ii)) or other date of determination
during the period beginning on the Issuance Date and ending on and including the
day immediately preceding the Original Maturity Date (as defined below), the
Standard Conversion Price, (B) as of the Original Maturity Date if the Company
has paid any and all required payments of the Maturity Date Redemption Price on
any remaining portion of this Debenture in a timely manner, the Maturity
Conversion Price, and (C) as of any date of determination after the Original
Maturity Date if the Company has failed, in a timely manner as described in
Section 5, to pay any and all required payments of the Maturity Date Redemption
Price or has failed to issue all the shares of Common Stock required to be
issued as a result of the Company's election of a Maturity Date Mandatory
Conversion, the Default Conversion Price, each in effect as of such date and
subject to adjustment as provided herein.
"Convertible Securities" shall mean any stock or
securities (other than Options) directly or indirectly convertible into or
exchangeable or exercisable for Common Stock.
"Default" shall mean any Event of Default and any
event or occurrence that, with or without notice, with the passage of time would
be an Event of Default.
"Default Conversion Price" shall mean as of any
Conversion Date or other date of determination, in each case on or after
_________(3), the product of (x) 95% and (y) the lower of (1) the lowest Closing
Bid Price during the three (3) Trading Days ending on and including the
Conversion Date or other date of determination and (2) the Standard Conversion
Price.
----------
(3) Insert date five years from the date issued.
A-5
"Floor Price" has the meaning set forth in Section
6(j).
"Investcorp" shall mean Investcorp CSK Holdings L.P.
and its affiliates.
"Issuance Date" shall mean, with respect to each
Debenture, the date of issuance of the applicable Debenture.
"Xxxxxx" shall mean LBI Group Inc. and its
affiliates.
"Make-Whole Average" means the arithmetic average of
the Closing Sale Prices for the Common Stock on the Trading Days during the
period beginning on the Closing Date and ending on and including the Trading Day
immediately preceding the Make-Whole Date; provided, however, that if the
Make-Whole Date is prior to November __, 2002, such arithmetic average shall be
calculated as if the Make-Whole Date were November __, 2002 and the Closing Sale
Price for the Common Stock for each Trading Day in the period beginning on the
date of the first public announcement of the Change of Control (the
"Announcement Date") and ending on the Trading Day immediately preceding
November ____, 2002 shall be deemed to be the arithmetic average of the Closing
Sale Prices for each day during the ten (10) Trading Days ending on the day
immediately preceding the Announcement Date.
"Make-Whole Date" means the earlier of (i) the date
on which a Change of Control is consummated and (ii) November ___, 2002.
"Maturity Conversion Price" shall mean the arithmetic
average of the Closing Sale Price of the Common Stock on each Trading Day during
the 120 consecutive Trading Days immediately preceding the Original Maturity
Date.
"Maturity Date" shall mean, with respect to a
Debenture, the date which is December ___, 2006, unless extended pursuant to
Section 5.
"Nasdaq" shall mean the Nasdaq National Market
System.
"NYSE" shall mean The New York Stock Exchange, Inc.
"Options" shall mean any rights, warrants or options
to subscribe for or purchase Common Stock or Convertible Securities.
"Person" shall mean an individual, a limited
liability company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
"Principal Market" shall mean NYSE, or if the Common
Stock is not traded on the NYSE, then the principal securities exchange or
trading market for the Common Stock.
"Pro Rata Portion" shall mean, with respect to any
Person, the quotient obtained by dividing the number of shares of Common Stock
(and Common Stock which may be acquired upon conversion of Convertible
Securities (including Debentures) owned by such
A-6
Person, subject to any applicable limitations on conversion in the Debentures)
owned by such Person as of the date of the Dilutive Issuance or Variable Price
Issuance, as applicable, by the total number of shares of Common Stock Deemed
Outstanding (which shall, notwithstanding the definition above, include in all
events Common Stock which may be acquired upon conversion of Convertible
Securities and exercise of Options held by such Person) as of the date of the
Dilutive Issuance or Variable Price Issuance, as applicable.
"Refinancing" means (i) the repayment in full of all
indebtedness outstanding under the Third Amended and Restated Credit Agreement,
dated as of September 30, 1999, as amended, among CSK Auto, Inc., The Chase
Manhattan Bank, DLJ Capital Funding, Inc., Xxxxxx Commercial Paper Inc. and the
lenders referred to therein (including the irrevocable termination of all
commitments thereunder) and (ii) if the Company incurs new indebtedness after
the Closing Date in replacement of the indebtedness identified under clause (i)
above, then either (A) such new indebtedness shall be incurred on terms
substantially as set forth in the Term Sheet attached hereto as Exhibit C or (B)
no principal payments on such indebtedness shall be required, and such
indebtedness shall not mature, before the three year anniversary of the Closing
Date and the rate of interest applicable to any such indebtedness shall not
exceed 18% per annum.
"Registration Rights Agreement" shall mean that
certain registration rights agreement between the Company and the initial
holders of the Debentures relating to the filing of a registration statement
covering the resale of the shares of Common Stock issuable upon conversion of
the Debentures and exercise of the Warrants, as such agreement may be amended
from time to time as provided in such agreement.
"Securities Purchase Agreement" shall mean that
certain securities purchase agreement between the Company and the initial
holders of the Debentures, as such agreement may be amended from time to time as
provided in such agreement.
"Standard Conversion Price" shall mean $8.69, subject
to adjustment from time to time as provided herein .
"Strategic Financing" shall mean the issuance of
Common Stock or warrants to purchase Common Stock at a purchase price or an
exercise price, as the case may be, that is not less than the Closing Bid Price
of the Common Stock on the date of issuance of such Common Stock or warrant, in
connection with any strategic investors, vendors, financial institutions or
other lenders in connection with secured financing arrangements, lessors,
customers or suppliers, the primary purpose of which is not to raise equity
capital, provided that the aggregate number of shares of Common Stock which the
Company may issue pursuant to this definition shall not exceed 2,000,000 shares
(subject to adjustment for stock splits, stock dividends, stock combination and
similar transactions).
"Trading Day" shall mean Business Days on which the
Principal Market is open for trading and trading in the Common Stock is not
suspended.
"Warrants" shall mean the warrants to purchase shares
of Common Stock issued by the Company pursuant to the Securities Purchase
Agreement.
A-7
4. Conversion. This Debenture shall be convertible as follows:
(a) Holder's Right to Convert. Subject to Sections 4(c)
and 12, at any time or times after the date which is fifteen (15) Trading Days
after the Closing Date, this Debenture is convertible, at the option of the
Holder hereof, into fully paid, validly issued and nonassessable shares of
Common Stock in accordance with Section 4(f) at the Conversion Rate (as defined
below). Holders of Debentures surrendered for conversion shall not be entitled
to receive any interest accrued on such Debentures for the period from the
immediately preceding Interest Payment Date or Closing Date, as applicable, and
the Company shall not be obligated to pay such interest; provided, however, that
to remove any doubt, interest accrued since the last date on which interest was
paid will be added to the principal and converted if the date requested for
conversion in the related Conversion Notice is an Interest Payment Date or the
Maturity Date, as applicable. If this Debenture remains outstanding on the
Maturity Date, then, pursuant and subject to Section 5, this Debenture shall be
converted at the Conversion Rate as of such date in accordance with Section 5 or
redeemed by the Company in accordance with Section 5.
(b) Company's Right to Convert. Subject to Sections 4(c)
and 12, at any time on or after the Closing Date within the 30-day period
commencing on the first day after (i) the Company has completed a Refinancing
and (ii) no Mandatory Conversion Blockage (as defined below) has occurred and is
continuing, the Company may deliver a written notice to the Holder and the
Transfer Agent (the "Mandatory Conversion Notice"), indicating that the Company
is requiring the Holder and all other holders of outstanding Debentures to
convert (a "Mandatory Conversion") all, but not less than all, of the then
Outstanding Principal Amount of the Debentures plus accrued interest thereon to
the date fixed for conversion into fully paid, validly issued and nonassessable
shares of Common Stock in accordance with Section 4(f) at the Conversion Rate
(as defined in Section 4(e)) as of the Mandatory Conversion Date (as defined
below); provided, however, that such 30-day period shall be tolled for any
period in which a Mandatory Conversion Blockage occurs and is continuing. A
"Mandatory Conversion Blockage" shall occur if (i) an event constituting a
Default shall have occurred at any time prior to the Mandatory Conversion Date
and is continuing, or (ii) Xxxxxxx Xxxxxxx is no longer an executive of the
Company in a position and with responsibilities substantially similar to those
held on the Closing Date or has announced his intention to leave such position
or change such responsibilities, unless replaced within 45 days by a person
reasonably acceptable to (A) the holders of no less than 75% of the Outstanding
Principal Amount of the Debentures then outstanding and (B) Xxxxxx for so long
as Xxxxxx holds not less than $10 million in principal amount of Debentures or
shares of Common Stock attributable to conversion of such Debentures, or (iii)
both Xxxxxx Xxxxxx and Xxx Xxxxxx are no longer executives of the Company in
positions and with responsibilities substantially similar to those held on the
Closing Date or have announced their intention to leave such positions or change
such responsibilities, unless replaced within 45 days by persons reasonably
acceptable to the holders of (A) no less than 75% of the Outstanding Principal
Amount of the Debentures then outstanding and (B) Xxxxxx for so long as Xxxxxx
holds not less than $10 million in principal amount of Debentures or shares of
Common Stock attributable to conversion of such Debentures, or (iv) the
Registration Statement (as defined in the Registration Rights Agreement) has not
been declared effective by the SEC. At any time on or prior to December 31,
2001, should the Company propose to the holders of Debentures to amend the
definition of "Refinancing," each holder of Debentures shall negotiate
A-8
in good faith with the Company to reach agreement on the terms of such
amendment. The Mandatory Conversion Notice shall be sent by facsimile and
overnight courier to the Holder and shall indicate (X) the date fixed for
conversion, which shall be not be less than ten (10) days nor more than thirty
(30) days after the Holder's receipt of the Mandatory Conversion Notice (the
"Mandatory Conversion Date"), (Y) the Conversion Price and (Z) the number of
shares of Common Stock to be issued to the Holder as of the Mandatory Conversion
Date. Subject to Section 4(c) and Section 12, if the Company has elected a
Mandatory Conversion, the mechanics of conversion set forth in Section 4(f)
shall apply, to the extent applicable, as if the Company and the Transfer Agent
had received from the Holder on the Mandatory Conversion Date a Conversion
Notice (as defined below) with respect to the entire Outstanding Principal
Amount of the Debenture and the interest accrued thereon as of the Mandatory
Conversion Date. Promptly following the Mandatory Conversion Date, the Holder
shall surrender this Debenture to the Company or the Transfer Agent. If, on the
Mandatory Conversion Date, the Company is not permitted to issue shares of
Common Stock to any holder of Debentures as a result of the limitations set
forth in Section 4(c) or Section 12, the Debentures held by such holder from and
after the Mandatory Conversion Date shall represent the right to receive such
shares of Common Stock (subject to such limitations) but such Debentures shall
otherwise cease to accrue interest or be outstanding from and after the
Mandatory Conversion Date. Such holder shall notify the Company in writing as
promptly as reasonably practicable after becoming aware of facts or
circumstances that, pursuant to such right, would permit the issuance of 100,000
shares or more (or if less then 100,000 shares remain issuable pursuant hereto,
of such lesser number of shares) and the number of such permitted shares. On the
first Business Day after receiving such notice, the Company shall issue such
shares to such holder or its designee.
(c) Limitations on Number of Conversion Shares.
Notwithstanding anything to the contrary contained herein, the Company shall not
issue and shall not be obligated to issue any shares of Common Stock upon
conversion of the Debentures or otherwise (i) to holders of Debentures other
than Investcorp and other affiliates of the Company, if the issuance of such
shares of Common Stock would exceed that number of shares of Common Stock which
the Company may issue upon conversion of the Debentures or otherwise without
breaching the Company's obligations under the rules or regulations of the
Principal Market, or the market or exchange where the Common Stock is then
traded (the "Exchange Cap"), (ii) to Investcorp or any other affiliate of the
Company, in any event, or (iii) in violation of any applicable law, except that
the limitations set forth in subclauses (i) and (ii) shall not apply in the
event that the Company (A) obtains Stockholder Approval (as defined in the
Securities Purchase Agreement), or (B) obtains a written opinion from outside
counsel to the Company that such approval is not required, which opinion shall
be reasonably satisfactory to (A) the holders of at least 75% of the Outstanding
Principal Amount of the Debentures then outstanding and (B) Xxxxxx for so long
as Xxxxxx holds not less than $10 million in principal amount of Debentures or
shares of Common Stock attributable to conversion of such Debentures. Except for
Investcorp (which until such Stockholder Approval is obtained shall not be
entitled to convert any Debentures), until such approval or written opinion is
obtained, no purchaser of Debentures pursuant to the Securities Purchase
Agreement (the "Purchasers") shall be issued, upon conversion of Debentures,
shares of Common Stock in an amount greater than the product of (i) the Exchange
Cap amount multiplied by (ii) a fraction, the numerator of which is the
aggregate principal amount of Debentures issued to such Purchaser pursuant to
the Securities Purchase Agreement and the
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denominator of which is the aggregate principal amount of all the Debentures
issued to the Purchasers pursuant to the Securities Purchase Agreement (the "Cap
Allocation Amount"). In the event that any Purchaser shall sell or otherwise
transfer any portion of the principal amount of such Purchaser's Debentures, the
transferee shall be allocated a pro rata portion of such Purchaser's Cap
Allocation Amount. In the event that any holder of Debentures shall convert all
of such holder's Debentures into a number of shares of Common Stock which, in
the aggregate, is less than such holder's Cap Allocation Amount, then the
difference between such holder's Cap Allocation Amount and the number of shares
of Common Stock actually issued to such holder shall be allocated to the
respective Cap Allocation Amounts of the remaining holders of Debentures on a
pro rata basis in proportion to the aggregate principal amount of the Debentures
then held by each such holder.
(d) Partial Conversion of Debenture. If this Debenture is
converted in part, the remaining portion of this Debenture not so converted
shall remain entitled to the conversion rights provided herein.
(e) Conversion Price for Holder Converted Shares. The
Outstanding Principal Amount of this Debenture that is converted into shares of
Common Stock shall be convertible into the number of shares of Common Stock
which results from application of the following formula:
P
------------------------------
Conversion Price
P = Outstanding Principal Amount of this Debenture submitted for
conversion
The number of shares of Common Stock into which this Debenture
hereto may be converted pursuant to the foregoing formula is hereafter referred
to as the "Conversion Rate."
(f) Mechanics of Conversion. The conversion of this Debenture
shall be conducted in the following manner:
(i) Holder's Delivery Requirements. To convert this
Debenture (in whole or in part) into full shares of Common Stock on any date,
the Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt
on or prior to 11:59 p.m., New York City Time, on such date, a copy of a
properly completed notice of conversion executed by the Holder in the form
attached hereto as Exhibit D (the "Conversion Notice") to the Company and the
Company's designated transfer agent (the "Transfer Agent") and (B) if required
by Section 5(e), surrender to a common carrier for delivery to the Company as
soon as practicable following such date this Debenture.
(ii) Company's Response. Upon receipt by the Company of a
copy of a Conversion Notice, the Company shall (A) as soon as practicable, but
in any event within two (2) Business Days, send, via facsimile, a confirmation
of receipt of such Conversion Notice to the Holder and the Transfer Agent, which
confirmation shall constitute an instruction to the Transfer Agent to process
such Conversion Notice in accordance with the terms herein and (B) on or before
the second (2nd) Business Day following the date of receipt by the Company of
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such Conversion Notice (the "Share Delivery Date"), (x) issue and deliver to the
address as specified in the Conversion Notice, a certificate, registered in the
name of the Holder or its designee, for the number of shares of Common Stock to
which the Holder shall be entitled, or (y) provided the Transfer Agent is
participating in The Depository Trust Company ("DTC") Fast Automated Securities
Transfer Program, upon the request of the Holder, credit such aggregate number
of shares of Common Stock to which the Holder shall be entitled to the Holder's
or its designee's balance account with DTC through its Deposit Withdrawal Agent
Commission system. If the specified principal amount submitted for conversion,
as may be required pursuant to Section 5(e), is less than the then Outstanding
Principal Amount of this Debenture, then the Company shall, as soon as
practicable and in no event later than three Business Days after receipt of the
Debenture (the "Debenture Delivery Date") and at its own expense, issue and
deliver to the Holder a new Debenture representing the Outstanding Principal
Amount not converted. The effective date of conversion (the "Conversion Date")
shall be deemed to be the date on which the Company receives by facsimile the
Conversion Notice, and the Person or Persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on such date.
(iii) Dispute Resolution. In the case of a dispute as to
the determination of the Closing Sale Price or the arithmetic calculation of the
Conversion Rate, the Company shall instruct the Transfer Agent to issue to the
Holder the number of shares of Common Stock that is not disputed and shall
transmit an explanation of the disputed determinations or arithmetic
calculations to the Holder via facsimile within three (3) Business Days of
receipt of the Holder's Conversion Notice or other date of determination. If the
Holder and the Company are unable to agree upon the determination of the Closing
Sale Price or arithmetic calculation of the Conversion Rate within five (5)
Business Days of such disputed determination or arithmetic calculation being
transmitted to the Holder, then the Company shall within one (1) Business Day
submit via facsimile (A) the disputed determination of the Closing Sale Price to
an independent, reputable investment bank selected by the Company and reasonably
acceptable to the holders of at least 75% of the Outstanding Principal Amount of
the Debentures then outstanding and Xxxxxx for so long as Xxxxxx holds not less
than $10 million in principal amount of Debentures or shares of Common Stock
received upon conversion of such Debentures or (B) the disputed arithmetic
calculation of the Conversion Rate to the Company's independent, outside
accountant. The Company shall use its reasonable best efforts to cause the
investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the holders of the
results no later than two (2) Business Days from the time it receives the
disputed determinations or calculations. Such investment bank's or accountant's
determination or calculation, as the case may be, shall be binding upon all
parties absent manifest error.
(iv) Company's Failure to Timely Convert.
(A) Subject to the limitations on conversion
pursuant to Section 4(c) and Section 12, if (x) within five (5) Business
Days after the Company's receipt of the facsimile copy of a Conversion
Notice the Company has failed to issue and deliver a certificate to the
Holder or credit the Holder's balance account with DTC for the number of
shares of Common Stock to which the Holder is entitled upon the Holder's
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conversion of this Debenture or (y) within five (5) Business Days of the
Company's receipt of this Debenture the Company has failed to issue and
deliver a Debenture representing the principal amount of this Debenture
not so converted, then in addition to all other available remedies which
the Holder may pursue hereunder and under the Securities Purchase
Agreement (including indemnification pursuant to Section 8 thereof), the
Company shall pay additional damages to the Holder for each day after the
Share Delivery Date that such conversion is not timely effected and/or
each day after the Debenture Delivery Date that this Debenture is not
delivered (but in neither case extending beyond the day immediately prior
to the day on which there occurs an Event of Default) in an amount equal
to 0.05% of the product of (I) the sum of the number of shares of Common
Stock not issued to the Holder on or prior to the Share Delivery Date and
to which the Holder is entitled as set forth in the applicable Conversion
Notice and, in the event the Company has failed to deliver a Debenture to
the Holder on or prior to the Debenture Delivery Date, the number of
shares of Common Stock issuable upon conversion of this Debenture as of
the Debenture Delivery Date and (II) the Closing Sale Price of the Common
Stock on the Share Delivery Date, in the case of the failure to deliver
Common Stock, or the Debenture Delivery Date, in the case of failure to
deliver a Debenture. If the Company fails to pay the additional damages
set forth in this Section 4(f)(iv)(A) within five Business Days of the
date incurred, then the Holder shall have the right at any time, so long
as the Company continues to fail to make such payments, to require the
Company, upon written notice, to immediately issue, in lieu of such cash
damages, the number of shares of Common Stock equal to the quotient of (X)
the aggregate amount of the damages payments described herein divided by
(Y) the Conversion Price in effect on such Conversion Date as specified by
the Holder in the Conversion Notice.
(B) If for any reason the Holder has not received
all of the shares of Common Stock to which the Holder is entitled prior to
the tenth (10th) Business Day after the Share Delivery Date with respect
to a conversion of this Debenture, then the Holder, upon written notice to
the Company, with a copy to the Transfer Agent, may void its Conversion
Notice; provided that the voiding of the Holder's Conversion Notice shall
not affect the Company's obligations to make any payments which have
accrued prior to the date of such notice pursuant to Section 4(f)(iv)(A)
or otherwise.
(v) Pro Rata Conversion. Except for the limitations on
conversions arising pursuant to Section 4(c) and Section 12 with respect to any
holder of Debentures, in the event the Company receives a Conversion Notice from
more than one holder of Debentures for the same Conversion Date and the Company
can convert some, but not all, of such Debentures, the Company shall convert
from each holder of Debentures electing to have Debentures converted at such
time a pro rata amount of such holder's Debentures submitted for conversion
based on the Outstanding Principal Amount of Debentures submitted for conversion
on such date by such holder relative to the Outstanding Principal Amount of all
Debentures submitted for conversion on such date (excluding in each case, such
Debentures which are not entitled to be converted as a result of the limitations
on the issuance of Common Stock set forth in Section 4(c) or Section 12).
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(g) No Fractional Shares. The Company shall not issue any
fraction of a share of Common Stock upon any conversion. If the issuance would
result in the issuance of a fraction of a share of Common Stock, the Company
shall round such fraction of a share of Common Stock up or down to the nearest
whole share.
5. Mandatory Redemption or Conversion at Maturity.
(a) If this Debenture remains outstanding on the Original
Maturity Date, the Company shall either (i) convert the Outstanding Principal
Amount of this Debenture at the Conversion Rate as of the Original Maturity Date
without the Holder being required to give a Conversion Notice on such Original
Maturity Date (a "Maturity Date Mandatory Conversion"), or (ii) redeem the
Outstanding Principal Amount of this Debenture for an amount in cash (the
"Maturity Date Mandatory Redemption") equal to 100% of the portion of the
Outstanding Principal Amount of the Debenture for which the redemption option
has been elected plus accrued interest (a "Maturity Date Redemption Price "). On
or prior to the date six months prior to the Original Maturity Date, the Company
shall deliver written notice to the Holder (a "Maturity Date Election Notice"),
which Maturity Date Election Notice shall state (i) the portion of the
Outstanding Principal Amount of this Debenture that the Company has elected to
convert on the Original Maturity Date pursuant to a Maturity Date Mandatory
Conversion and (ii) the portion of the Outstanding Principal Amount of this
Debenture that the Company has elected to redeem on the Original Maturity Date
pursuant to a Maturity Date Mandatory Redemption. If the Company has elected
both the Maturity Date Mandatory Conversion and Maturity Date Mandatory
Redemption with respect to more than one (1) holder of Debentures on the
Original Maturity Date, then the Company shall redeem the Outstanding Principal
Amount of the Debenture and/or convert the Outstanding Principal Amount of the
Debenture pro rata from the holders of all Debentures then outstanding (based on
the principal amount of the Debentures issued to the Holder on the Closing Date
relative to the aggregate principal amount of the Debentures issued to all
holders of Debentures on the Closing Date (such relative amount being referred
to herein as each such holder's "Maturity Allocation Percentage")). If the
Company fails to deliver to the Holder a Maturity Date Election Notice on or
prior to __________(4), then the Company shall be deemed to have elected a
Maturity Date Mandatory Redemption.
(b) If the Company elects or is deemed to have elected a
Maturity Date Mandatory Redemption, then on the Original Maturity Date the
Company shall pay to the Holder, by wire transfer of immediately available funds
to an account designated in writing by the Holder, an amount equal to the
Maturity Date Redemption Price.
(c) If the Company elects or is deemed to have elected a
Maturity Date Mandatory Redemption and fails to redeem the entire portion of the
Outstanding Principal Amount selected for redemption which was outstanding on
the Original Maturity Date by payment of the Maturity Date Redemption Price,
then in addition to any remedy the Holder may have under this Debenture, the
Securities Purchase Agreement and the Registration Rights Agreement, (i)
notwithstanding Section 17, the applicable Maturity Date Redemption Price
payable in respect of such unredeemed Outstanding Principal Amount shall bear
interest at the rate of 1.5% per month, prorated for partial months, until paid
in full, and (ii) the Holder shall
----------
(4) Insert date 6 months prior to the Original Maturity Date.
A-13
have the option to require the Company to convert any or all of the Outstanding
Principal Amount that the Company elected to redeem under this Section 5 and for
which the Maturity Date Redemption Price (together with any interest thereon)
has not been paid into shares of Common Stock equal to the number which results
from dividing the Maturity Date Redemption Price (together with any interest
thereon) by the Default Conversion Price.
(d) If the Company has elected a Maturity Date Mandatory
Conversion then that portion of the Outstanding Principal Amount with respect to
which the Company has elected a Maturity Date Mandatory Conversion which remains
outstanding on the Original Maturity Date shall be converted at the Conversion
Rate on such Original Maturity Date. Promptly following the Original Maturity
Date, the Holder shall surrender this Debenture to the Company or the Transfer
Agent. If the Company has elected a Maturity Date Mandatory Conversion and the
Holder has not received all of the shares of Common Stock to which the Holder is
entitled on or prior to the Trading Day following the Original Maturity Date or
the Company has failed to pay the Maturity Date Redemption Price in a timely
manner as described above in clauses (b) and (c), then the Debenture shall
remain convertible at the election of the Holder and the Maturity Date shall be
automatically extended until the date the Holder receives such shares of Common
Stock or Maturity Date Redemption Price and this Debenture shall further remain
convertible for as long as (i) the conversion of this Debenture would violate
the provisions of Section 12, (ii) an Event of Default shall have occurred and
be continuing, or (iii) an event (other than the failure to deliver all of the
shares of Common Stock to which the Holder is entitled or the failure to pay the
Maturity Date Redemption Price in a timely manner) shall have occurred and be
continuing which with the passage of time and the failure to cure would result
in an Event of Default. Notwithstanding anything to the contrary in this Section
5, the Holder may convert such Outstanding Principal Amount (including the
portion of the Outstanding Principal Amount with respect to which the Company
has elected a Maturity Date Mandatory Conversion or has elected a Maturity Date
Mandatory Redemption), but subject to Section 4(c) and Section 12, into shares
of Common Stock pursuant to Section 4 on or prior to the date immediately
preceding the Maturity Date. In the event the Holder delivers a Conversion
Notice to the Company after the Holder's receipt of a Maturity Date Election
Notice with respect to the Outstanding Principal Amount covered by such
Conversion Notice and the Company has elected in such Maturity Date Election
Notice both the Maturity Date Mandatory Conversion and Maturity Date Mandatory
Redemption with respect to such Outstanding Principal Amount, then the
Outstanding Principal Amount shall be reduced, first, from the portion of the
Outstanding Principal Amount, if any, designated by the Company as being subject
to a Maturity Date Mandatory Conversion in the Maturity Date Election Notice,
and then from the portion of the Outstanding Principal Amount designated by the
Company as being subject to a Maturity Date Mandatory Redemption in such
Maturity Date Election Notice.
(e) Book-Entry. Notwithstanding anything to the contrary
set forth herein, upon conversion of this Debenture in accordance with the terms
hereof, the Holder shall not be required to physically surrender the Debenture
to the Company unless the entire Outstanding Principal Amount is being
converted. The Holder and the Company shall maintain records showing the
principal amount so converted and the dates of such conversions or shall use
such other method, reasonably satisfactory to the Holder and the Company, so as
not to require physical surrender of the Debenture upon each such conversion. In
the event of any dispute or
A-14
discrepancy, such records of the Company establishing the then Outstanding
Principal Amount shall be controlling and determinative in the absence of
manifest error. Notwithstanding the foregoing, if the principal amount
represented by the Debenture is converted as aforesaid, the Holder may not
transfer the Debenture unless the Holder first physically surrenders the
Debenture to the Company, whereupon the Company will forthwith issue and deliver
upon the order of the Holder a new Debenture of like tenor, registered as the
Holder may request, representing in the aggregate the Outstanding Principal
Amount represented by such Debenture. The Holder and any assignee, by acceptance
of a Debenture, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of any portion of the Debenture, the Outstanding
Principal Amount of the Debenture may be less than the amount stated on the face
hereof. Each Debenture shall bear the following legend:
THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS DEBENTURE
MAY BE LESS THAN THE AMOUNT STATED ON THE FACE HEREOF PURSUANT TO SECTION 5(E)
HEREIN.
6. Anti-dilution Adjustments to Conversion Price. The Conversion
Price will be subject to adjustment from time to time as provided in this
Section 6:
(a) Anti-dilution Adjustment of Standard Conversion Price
upon Issuance of Common Stock. If and whenever on or after the Closing Date, the
Company issues or sells, or in accordance with this Section 6(a) is deemed to
have issued or sold, any shares of Common Stock (but excluding shares of Common
Stock: (v) in an aggregate amount not exceeding 35,000 shares (subject to
adjustment for stock splits, stock dividends, stock combination and similar
transactions); (w) deemed to have been issued by the Company in connection with
an Approved Stock Plan; (x) deemed to have been issued upon issuance of the
Debentures or Warrants or issued upon conversion of the Debentures or exercise
of the Warrants; (y) issued upon exercise of Options or Convertible Securities
which are outstanding on the date immediately preceding the Closing Date (as may
be amended), provided that such issuance of shares of Common Stock upon exercise
of such Options or Convertible Securities does not exceed the number of shares
that would have been issued pursuant to the terms of such Options or Convertible
Securities in effect on the date immediately preceding the Closing Date and that
the exercise price provided under the terms of the Options or Convertible
Securities in effect on the date immediately preceding the Closing Date has not
been amended to a new exercise price which is lower than the exercise price in
effect on the date immediately preceding the Closing Date; and (z) issued
pursuant to a Strategic Financing (all of the foregoing (v)-(z), "Excluded
Securities")) for a consideration per share (the "New Securities Issuance
Price") less than a price (the "Applicable Price") equal to the Standard
Conversion Price in effect immediately prior to such time (each such sale or
issuance, a "Dilutive Issuance"); and provided that (1) the Company has complied
with its obligations under Section 4(r) of the Securities Purchase Agreement and
(2) the Holder has purchased a number of securities issued in such Dilutive
Issuance equal to the Anti-Dilution Threshold, then immediately after such
Dilutive Issuance, the Standard Conversion Price then in effect shall be reduced
to an amount equal to the New Securities Issuance Price. If, for any reason, the
Company fails to fully comply with the requirements of Section 4(r) of the
Securities Purchase Agreement, then the Holder shall be deemed to have satisfied
the Anti-Dilution Threshold and the Standard Conversion Price then in effect
shall be reduced to an amount equal to the New Securities Issuance Price. If and
whenever on or after the Closing
A-15
Date, the Company issues or sells, or in accordance with this Section 6(a) is
deemed to have issued or sold, any shares of Common Stock (other than Excluded
Securities) in a Dilutive Issuance and the Holder has not purchased a number of
securities issued in such Dilutive Issuance equal to the applicable
Anti-Dilution Threshold, the Standard Conversion Price then in effect shall be
reduced to an amount equal to the product of (x) the Standard Conversion Price
in effect immediately prior to such issue or sale and (y) the quotient of (1)
the sum of (I) the product derived by multiplying such Applicable Price by the
number of shares of Common Stock Deemed Outstanding immediately prior to such
issue or sale plus (II) the consideration, if any, received by the Company upon
such issue or sale, divided by (2) the product derived by multiplying (I) such
Applicable Price by (II) the number of shares of Common Stock Deemed Outstanding
immediately after such issue or sale. Notwithstanding the foregoing,
transactions described in Sections 6(b) and (c) shall not be deemed to be
Dilutive Issuances for purposes of this Section 6(a).
For purposes of determining the adjusted Standard Conversion
Price under this Section 6(a), the following shall be applicable:
(i) Issuance of Options. If the Company in any
manner grants or sells any Options and the lowest price per share for
which one share of Common Stock is issuable upon the exercise of any
such Option or upon conversion, exchange or exercise of any Convertible
Securities issuable upon exercise of such Option is less than the
Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time
of the granting or sale of such Option for such price per share. For
purposes of this Section 6(a)(i), the "lowest price per share for which
one share of Common Stock is issuable upon the exercise of any such
Option or upon conversion, exchange or exercise of any Convertible
Securities issuable upon exercise of such Option" shall be equal to the
sum of the lowest amounts of consideration (if any) received or
receivable by the Company with respect to any one share of Common Stock
upon granting or sale of the Option, upon exercise of the Option and
upon conversion, exchange or exercise of any Convertible Security
issuable upon exercise of such Option. No further adjustment of the
Standard Conversion Price shall be made upon the actual issuance of
such Common Stock or of such Convertible Securities upon the exercise
of such Options or upon the actual issuance of such Common Stock upon
conversion, exchange or exercise of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the
Company in any manner issues or sells any Convertible Securities and
the lowest price per share for which one share of Common Stock is
issuable upon such conversion, exchange or exercise thereof is less
than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the
Company at the time of the issuance of sale of such Convertible
Securities for such price per share. For the purposes of this Section
6(a)(ii), the "lowest price per share for which one share of Common
Stock is issuable upon such conversion, exchange or exercise" shall be
equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with
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respect to any one share of Common Stock upon the issuance or sale of
the Convertible Security and upon the conversion, exchange or exercise
of such Convertible Security. No further adjustment of the Standard
Conversion Price shall be made upon the actual issuance of such Common
Stock upon conversion, exchange or exercise of such Convertible
Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of
the Standard Conversion Price had been or are to be made pursuant to
other provisions of this Section 6(a), no further adjustment of the
Standard Conversion Price shall be made by reason of such issue or
sale.
(iii) Change in Option Price or Rate of
Conversion. If the purchase or exercise price provided for in any
Options, the additional consideration, if any, payable upon the issue,
conversion, exchange or exercise of any Convertible Securities, or the
rate at which any Convertible Securities are convertible into or
exchangeable or exercisable for Common Stock changes at any time, the
Standard Conversion Price in effect at the time of such change shall be
adjusted to the Standard Conversion Price which would have been in
effect at such time had such Options or Convertible Securities provided
for such changed purchase price, additional consideration or changed
conversion rate, as the case may be, at the time initially granted,
issued or sold. For purposes of this Section 6(a)(iii), if the terms of
any Option or Convertible Security that was outstanding as of the date
of issuance of the Debentures are changed in the manner described in
the immediately preceding sentence, then such Option or Convertible
Security and the Common Stock deemed issuable upon exercise, conversion
or exchange thereof shall be deemed to have been issued as of the date
of such change. No adjustment shall be made if such adjustment would
result in an increase of the Standard Conversion Price then in effect.
(iv) Calculation of Consideration Received. In
case any Option is issued in connection with the issue or sale of other
securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to such
Options by the parties thereto, the Options will be deemed to have been
issued for consideration of fair value as determined in good faith by
the Board of Directors of the Company; provided, however, that promptly
following such determination, the Company provides each of the holders
of the Debentures then outstanding with written notice setting forth in
reasonable detail the basis for the Company's determination of such
fair value. The Objecting Holders shall have the right to object to the
Company's determination of fair value within ten (10) Business Days of
receipt of such notice. In the event the Company fails to provide the
holders of the Debentures then outstanding with the notice required
herein or in the event the Objecting Holders provide the Company with a
notice of its objection, then, the fair market value shall be
determined jointly by the Company and (A) the holders of at least 75%
of the Outstanding Principal Amount of the Debentures then outstanding
and (B) Xxxxxx for so long as Xxxxxx holds not less than $10 million in
principal amount of Debentures. If any Common Stock, Options or
Convertible Securities are issued or sold or deemed to
A-17
have been issued or sold for cash, the consideration received therefor
will be deemed to be the gross amount received by the Company therefor.
If any Common Stock, Options or Convertible Securities are issued or
sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company will be the fair
value of such consideration, except where such consideration consists
of marketable securities, in which case the amount of consideration
received by the Company will be the arithmetic average of the Closing
Sale Prices of such securities during the ten (10) consecutive Trading
Days ending on the date of receipt of such securities. The fair value
of any consideration other than cash or securities will be determined
in good faith by the Board of Directors of the Company; provided,
however, that promptly following such determination, the Company
provides each of the holders of the Debentures then outstanding with a
notice setting forth in reasonable detail the basis for the Company's
determination of such fair value. The Objecting Holders shall have the
right to object to the Company's determination of fair value within ten
(10) Business Days of receipt of such notice. In the event the Company
fails to provide the holders of the Debentures then outstanding with
the notice required herein or in the event the Objecting Holders
provides the Company with a notice of its objection, then, the fair
market value shall be determined jointly by the Company and (A) the
holders of at least 75% of the Outstanding Principal Amount of the
Debentures then outstanding and (B) Xxxxxx for so long as Xxxxxx holds
not less than $10 million in principal amount of Debentures or shares
of Common Stock received upon conversion of such Debentures. If such
parties are unable to reach agreement within ten (10) days after the
occurrence of an event requiring valuation (the "Valuation Event")
under this subsection (iv), the fair value of such consideration will
be determined within five (5) Business Days after the tenth (10th) day
following the Valuation Event by an independent, reputable appraiser
selected by the Company and (A) the holders of at least 75% of the
Outstanding Principal Amount of the Debentures then outstanding and (B)
Xxxxxx for so long as Xxxxxx holds not less than $10 million in
principal amount of Debentures or shares of Common Stock received upon
conversion of such Debentures. The determination of such appraiser
shall be deemed binding upon all parties absent manifest error and the
fees and expenses of such appraiser shall be borne by the Company.
(v) Record Date. If the Company takes a record
of the holders of Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock,
Options or Convertible Securities or (B) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record date
will be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or the date of
the granting of such right of subscription or purchase, as the case may
be. Nothing in this Section 6(a)(v) shall limit or affect the rights,
if any, of the Holder under Section 4(r) of the Securities Purchase
Agreement.
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(b) Adjustment of Standard Conversion Price upon
Subdivision or Combination of Common Stock. If the Company at any time
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
its outstanding shares of Common Stock into a greater number of shares, (1)(A)
the Standard Conversion Price and (B) the Floor Price in each case in effect
immediately prior to such subdivision and (2) the Closing Sale Price for each
Trading Day during the period beginning on the Closing Date and ending on and
including the Trading Day immediately prior to such subdivision will be
proportionately reduced. If the Company at any time combines (by combination,
reverse stock split or otherwise) its outstanding shares of Common Stock into a
smaller number of shares and (1)(A) the Standard Conversion Price and (B) the
Floor Price in each case in effect immediately prior to such combination and (2)
the Closing Sale Price for each Trading Day during the period beginning on the
Closing Date and ending on and including the Trading Day immediately prior to
such combination will be proportionately increased.
(c) Distributions. If the Company shall declare or make
any dividend (other than ordinary cash dividends) or other distribution of its
assets (or rights to acquire its assets) to holders of Common Stock, by way of
return of capital or otherwise (including, without limitation, any distribution
of cash, stock or other securities, property or options by way of a dividend,
spin off, reclassification, corporate rearrangement or other similar
transaction) (a "Distribution"), then, in each such case (1)(A) the Standard
Conversion Price and (B) Floor Price, in each case in effect immediately prior
to such Distribution, and (2) the Closing Sale Price for each Trading Day during
the period beginning on the Closing Date and ending immediately prior to such
Distribution will be multiplied by a fraction of which (A) the numerator shall
be the Closing Sale Price of the Common Stock on the Trading Day immediately
preceding such record date minus the value of the Distribution (as determined in
good faith by the Company's Board of Directors) applicable to one share of
Common Stock, and (B) the denominator shall be the Closing Sale Price of the
Common Stock on the Trading Day immediately preceding such record date.
(d) Purchase Rights. If at any time the Company grants or
issues any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "Purchase Rights"), then (1) the Floor Price in
effect immediately prior to distribution of such Purchase Rights, and (2) the
Closing Sale Price for each Trading Day during the period beginning on the
Closing Date and ending immediately prior to the record date for determining
holders entitled to receive such Purchase Rights will be multiplied by a
fraction of which (A) the numerator shall be the Closing Sale Price of the
Common Stock on the Trading Date immediately preceding such record date minus
the value of the Purchase Rights (as determined in good faith by the Company's
Board of Directors) applicable to one share of Common Stock, and (B) the
denominator shall be the Closing Sale Price of the Common Stock on the Trading
Day immediately preceding such record date.
(e) Holder's Right of Alternative Conversion Price
Following Issuance of Convertible Securities. If the Company in any manner
issues or sells any Options or Convertible Securities after the Closing Date
that are convertible into or exchangeable or exercisable for Common Stock at a
price which varies or may vary with the market price of the Common Stock,
including by way of one or more reset(s) to a fixed price, but exclusive of such
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formulations reflecting customary anti-dilution provisions (each of the
formulations for such variable price being herein referred to as, the "Variable
Price") (a "Variable Price Issuance"), the Company shall provide written notice
thereof via facsimile and overnight courier to the Holder (the "Variable
Notice") in accordance with the provisions of Section 4(r) of the Securities
Purchase Agreement. From and after the date of a Variable Price Issuance, the
Holder shall have the right, but not the obligation, in its sole discretion to
substitute the Variable Price for the Conversion Price upon conversion of any
Debentures held by it by (i) electing in accordance with the provisions of
Section 4(r) of the Securities Purchase Agreement to purchase a number of such
Options or Convertible Securities issued in such Variable Price Issuance equal
to not less than its Anti-Dilution Threshold and (ii) designating in the
Conversion Notice delivered following the consummation of such purchase and upon
conversion of such Debentures that solely for purposes of such conversion the
Holder is relying on the Variable Price rather than the Conversion Price then in
effect. The Holder's election to rely on a Variable Price for a particular
conversion of Debentures shall not obligate the Holder to rely on a Variable
Price for any future conversions of Debentures.
(f) Other Events. If any event occurs of the type
contemplated by the provisions of this Section 6 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate adjustment in the
Conversion Price so as to protect the rights of the holders of the Debentures;
provided that no such adjustment will increase the Conversion Price as otherwise
determined pursuant to this Section 6.
(g) Delayed Adjustment. No adjustment in the Conversion
Price shall be required unless such adjustment (plus any adjustments no
previously made by reason of this Section 6(g)) would require an increase or
decrease of at least one-half percent (0.5%); provided, however, that any
adjustments which by reason of this Section 6(g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 6 shall be made to the nearest cent or to
the nearest one-hundredth of a share, as the case may be.
(h) Notices.
(i) Immediately upon any adjustment of the
Conversion Price, Closing Sale Price or Floor Price pursuant to this
Section 6, the Company will give written notice thereof to the holders
of the Debentures, setting forth in reasonable detail, and certifying,
the calculation of such adjustment. In the case of a dispute as to the
determination of such adjustment, then such dispute shall be resolved
in accordance with the procedures set forth in Section 24.
(ii) The Company will give written notice to the
holders of the Debentures at least ten (10) Business Days prior to the
date on which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the Common Stock, (B) with
respect to any pro rata subscription offer to holders of Common Stock
or (C) for determining rights to vote with respect to any Organic
Change (as defined in Section 8(a)), dissolution or
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liquidation, provided that such notice shall not be required before
such information is made known to the public.
(iii) The Company will also give written notice to
the holders of the Debentures at least ten (10) Business Days prior to
the date on which any Organic Change, dissolution or liquidation will
take place, provided that such notice shall not be required before such
information is made known to the public.
(i) Taxes. The Company shall pay any and all documentary,
stamp, transfer (but only in respect of the registered holder thereof) and other
similar taxes that may be payable with respect to the issuance and delivery of
Common Stock upon the conversion of Debentures.
(j) Make-Whole Provision. In addition to any other
adjustment to the Standard Conversion Price provided for in this Debenture, in
the event that, on the Make-Whole Date, the Make-Whole Average is less than the
then applicable Standard Conversion Price, then the Standard Conversion Price
for the Debentures shall be automatically adjusted on the Make-Whole Date to an
amount equal to such Make-Whole Average; provided, however, that,
notwithstanding the results of the foregoing calculation, such automatically
adjusted Standard Conversion Price shall in no event be more than the then
applicable Standard Conversion Price nor less than $4.94 (as appropriately
adjusted as provided in Sections 6(b), (c) or (d), the "Floor Price").
7. [Intentionally Deleted].
8. Other Rights of Holders.
(a) Reorganization, Reclassification, Consolidation,
Merger or Sale. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale or transfer of all or substantially all of the
Company's assets to another Person or other transaction which is effected in
such a way that holders of Common Stock are entitled to receive (either directly
or upon subsequent liquidation) stock, securities or assets with respect to or
in exchange for Common Stock is referred to herein as "Organic Change. " Prior
to the consummation of any Organic Change following which the Company is not a
surviving entity and which would not result in a Change of Control (as defined
in Section 8(b)), the Company will secure from the Person purchasing such assets
or the successor, or, if applicable, the parent of the successor, resulting from
such Organic Change (in each case, the "Acquiring Entity") a written agreement
(in form and substance reasonably satisfactory to (A) the holders of at least
75% of the Outstanding Principal Amount of the Debentures then outstanding and
(B) Xxxxxx for so long as Xxxxxx holds not less than $10 million in principal
amount of Debentures or shares of Common Stock received upon conversion of such
Debentures) to deliver to each holder of Outstanding Principal Amount of the
Debentures in exchange for such securities, a security of the Acquiring Entity
evidenced by a written instrument substantially similar in form and substance to
the Debentures, including, without limitation, having a principal amount equal
to the Outstanding Principal Amount and being of rank equal to the Debentures
held by such holder, and reasonably satisfactory to (A) the holders of at least
75% of the Outstanding Principal Amount of the Debentures then outstanding and
(B) Xxxxxx for so long as Xxxxxx holds not less than $10
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million in principal amount of Debentures or shares of Common Stock received
upon conversion of such Debentures. Prior to the consummation of any other
Organic Change, the Company shall make appropriate provision (in form and
substance reasonably satisfactory to (A) the holders of at least 75% of the
Outstanding Principal Amount of the Debentures then outstanding and (B) Xxxxxx
for so long as Xxxxxx holds not less than $10 million in principal amount of
Debentures or shares of Common Stock received upon conversion of such
Debentures) to insure that each of the holders of the Debentures will thereafter
have the right to acquire and receive in lieu of or in addition to (as the case
may be) the shares of Common Stock immediately theretofore acquirable and
receivable upon the conversion of such holder's Debentures such shares of stock,
securities or assets that would have been issued or payable in such Organic
Change with respect to or in exchange for the number of shares of Common Stock
which would have been acquirable and receivable upon the conversion of such
holder's Debentures as of the date of such Organic Change (without taking into
account any limitations or restrictions on the convertibility of the
Debentures).
(b) Optional Put Upon Change of Control. In addition to
the rights of the holders of Debentures, upon a Change of Control (as defined
below) of the Company each holder of Debentures shall have the right, at such
holder's option, to require the Company, or the successor entity (which shall
include any entity to which are sold all or substantially all of the assets of
the Company) as the case may be, to purchase all or a portion of such holder's
Debentures (the "Put Right") at a price equal to 125.0% of the Outstanding
Principal Amount if such Change of Control occurs prior to the first anniversary
of the Closing Date or 112.5% of the Outstanding Principal Amount if such Change
of Control occurs thereafter, plus, in each case, accrued and unpaid interest
("Change of Control Put Price"). No sooner than consummation of the Change of
Control, and not later than the fifth (5th) Business Day following consummation
of such Change of Control, the Company, or the successor entity, shall deliver
written notice thereof via facsimile and overnight courier (a "Notice of Change
of Control") to each holder of Debentures. At any time during the period
following such Change of Control and ending on the thirtieth (30th) Business Day
after receipt by such holders of a Notice of Change of Control (the "Put Date"),
any holder of the Debentures then outstanding may require the Company, or the
successor entity, to purchase all or a portion of the holder's Debentures then
outstanding by delivering written notice thereof via facsimile and overnight
courier (a "Notice of Put Upon Change of Control") to the Company, or the
successor entity, which Notice of Put Upon Change of Control shall indicate (i)
the principal amount of the Debentures that such holder is submitting for
purchase by the Company, or the successor entity, pursuant to the Put Right, and
(ii) the applicable Change of Control Put Price, as calculated pursuant to this
Section 8(b). Upon the Company's, or the successor entity's, receipt of a
Notice(s) of Put Upon Change of Control from any holder of Debentures, the
Company, or the successor entity, shall promptly, but in no event later than one
(1) Business Day following such receipt, notify each holder of Debentures by
facsimile of the Company's, or the successor entity's, receipt of such Notice(s)
of Put Upon Change of Control. The Company, or the successor entity, shall
deliver the applicable Change of Control Put Price within two (2) Business Days
following receipt of such Notice of Put Upon Change of Control; provided that,
if required by Section 5(e), a holder's Debentures shall have been so delivered
to the Company, or the successor entity. Payments provided for in this Section
8(b) shall have priority to payments by the Company to other debtholders (except
for (i) Senior Indebtedness (as defined in Section 18(k)) and (ii) pari passu
Indebtedness (as defined in Section
A-22
18(k)) then due and payable) and the stockholders of the Company in connection
with a Change of Control. For purposes of this Debenture, "Change of Control"
means (i) the consolidation, merger, sale or transfer of all or substantially
all of the Company's assets, or other business combination of the Company with
or into another Person (other than (A) a consolidation, merger, sale or transfer
of all or substantially all of the Company's assets, or other business
combination in which holders of the Company's voting power immediately prior to
the transaction continue after the transaction to hold, directly or indirectly,
the voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent if other
than a corporation) of such entity or entities, or (B) pursuant to a migratory
merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company) or (ii) a purchase, tender or exchange offer made
to and accepted by the holders of more than 50% of the aggregate voting power of
the outstanding Common Stock.
(c) Company's Redemption Right Upon a Change of Control.
The Company, or the successor entity as the case may be, shall have the right,
at its sole option and election made in accordance with this Section 8(c), to
redeem all or a portion of the Debentures (the "Redemption Right"), at any time
on or after the Put Date, at a price equal to 125% of the Outstanding Principal
Amount if such Change of Control occurs prior to the first anniversary of the
Closing Date or 112.5% of the Outstanding Principal Amount if such Change of
Control occurs thereafter, plus, in each case, accrued and unpaid interest (the
"Change of Control Redemption Price"). No sooner than 60 days nor later than 20
days prior to the date of such redemption (the "Redemption Date"), the Company
shall deliver written notice thereof via facsimile and overnight courier (a
"Notice of Exercise of Redemption Right") to each holder of Debentures, which
Notice of Exercise of Redemption Right shall indicate (i) the principal amount
of the Debentures that the Company is redeeming, (ii) the applicable Change of
Control Redemption Price, as calculated pursuant to this Section 8(c), and (iii)
the Redemption Date, which in no event shall be earlier than the Put Date.
Thereafter, on the Redemption Date (and provided such Debenture has not
previously been converted at the election of the Holder), the Company shall
deliver the applicable Change of Control Redemption Price; provided that, if
required by Section 5(e), the Holder's Debentures shall have been so delivered
to the Company. Payments provided for in this Section 8(c) shall have priority
to payments by the Company to other debtholders (except for (i) Senior
Indebtedness and (ii) pari passu Indebtedness then due and payable) and the
stockholders of the Company in connection with a Change of Control.
(d) Right to Convert on an Organic Change or Change of
Control or Agreement of the Parties. In addition to the foregoing, following the
announcement of any Change of Control or other Organic Change following which
the Company is not the surviving entity or otherwise upon the mutual agreement
of the Company and (A) holders of at least 75% of the Outstanding Principal
Amount of all Debentures and (B) Xxxxxx for so long as Xxxxxx holds not less
than $10 million in principal amount of Debentures or shares of Common Stock
received upon conversion of such Debentures, notwithstanding the limitations on
conversion set forth in Section 4 hereof or in any other provision of this
Debenture, the Holder shall have the right to convert the entire principal
amount of this Debenture at the then prevailing Conversion Rate in lieu of
receiving any Change of Control Put Price or any Change of Control Redemption
Price.
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9. Reservation of Stock Issuable Upon Conversion.
The Company shall, so long as any of the Debentures are
outstanding, take all action necessary to reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversions of the Debentures, such number of shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all of the
Debentures then outstanding; provided that the number of shares of Common Stock
so reserved shall at no time be less than 150% of the number of shares of Common
Stock needed to provide for the issuance of the shares of Common Stock upon
conversion of all of the outstanding Debentures (without regard to any
limitations on conversion). The initial number of shares of Common Stock
reserved for conversions of the Debentures and each increase in the number of
shares so reserved shall be allocated pro rata among the holders of the
Debentures based on the Outstanding Principal Amount of the Debentures held by
each holder at the time of issuance of the Debentures or increase in the number
of reserved shares, as the case may be. In the event a holder shall sell or
otherwise transfer any portion of the principal amount of such holder's
Debentures, each transferee shall be allocated a pro rata portion of the number
of reserved shares of Common Stock reserved for such transferor. Any shares of
Common Stock reserved and allocated to any Person which ceases to hold any
Debentures shall be allocated to the remaining holders of Debentures, pro rata
based on the Outstanding Principal Amount of Debentures then held by such
holders.
10. No Reissuance of Debentures. No Debentures acquired by the Company
by reason of redemption, purchase, conversion or otherwise shall be reissued,
and all such Debentures shall be retired. No additional Debentures (other than
the Debentures issued pursuant to the Securities Purchase Agreement) shall be
authorized or issued without the consent of (A) the holders of at least 75% of
the Outstanding Principal Amount of the Debentures and (B) Xxxxxx for so long as
Xxxxxx holds not less than $10 million in principal amount of Debentures or
shares of Common Stock received upon conversion of such Debentures.
11. No Impairment. The Company shall not intentionally take any action
which would impair the rights and privileges of the Debentures set forth herein
or the holders thereof.
12. Limitation on Beneficial Ownership. With respect to holders of
Debentures (other than Investcorp) that are beneficial owners as of the Closing
Date of less than ten (10) percent of the Common Stock outstanding, the Company
shall not effect and shall have no obligation to effect any conversion of
Debentures or otherwise issue any Common Stock, and no holder of Debentures
shall have the right to convert any Debentures or otherwise require the issuance
of Common Stock, to the extent that after giving effect to such conversion or
other issuance, the beneficial owner of such shares (together with such Person's
affiliates) would have acquired, through conversion of Debentures or otherwise,
beneficial ownership of a number of shares of Common Stock that exceeds 9.99% of
the number of shares of Common Stock outstanding immediately after giving effect
to such conversion; provided, however, that the Holder may waive this
restriction upon not less than sixty-one (61) days' prior written notice to the
Company. For purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by a Person and its affiliates shall be determined in
good faith in accordance with applicable securities laws by the holder of
Debentures. For Purposes of this Section,
A-24
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended. For purposes of this Section 12, in
determining the number of outstanding shares of Common Stock, a holder of
Debentures may rely on the number of outstanding shares of Common Stock as
reflected in (1) the Company's most recent Form 10-Q, Form 10-K or other public
filing with the SEC, as the case may be, (2) a more recent public announcement
by the Company, or (3) any other notice by the Company or its transfer agent
setting forth the number of shares of Common Stock outstanding. Upon the written
request of the Holder, the Company shall promptly, but in no event later than
one (1) Business Day following the receipt of such notice, confirm in writing to
the Holder the number of shares of Common Stock then outstanding. In any case,
the number of outstanding shares of Common Stock shall be determined after
giving effect to conversions of Debentures by the Holder and its affiliates
since the date as of which such number of outstanding shares of Common Stock was
reported.
13. Obligations Absolute. No provision of this Debenture shall alter
or impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, and interest on, this Debenture at the time, place and
rate, and in the manner, herein prescribed.
14. Waivers of Demand, Etc. The Company hereby expressly waives demand
and presentment for payment, notice of nonpayment, protest, notice of protest,
notice of dishonor, notice of acceleration or intent to accelerate, bringing of
suit and diligence in taking any action to collect amounts called for hereunder
and will be directly and primarily liable for the payment of all sums owing and
to be owing hereon, regardless of and without any notice, diligence, act or
omission as or with respect to the collection of any amount called for
hereunder.
15. Replacement Debentures. In the event that any holder of Debentures
notifies the Company that its Debenture(s) have been lost, stolen or destroyed,
replacement Debenture(s) identical in all respects to the original Debenture(s)
(except for registration number and Outstanding Principal Amount, if different
than that shown on the original Debenture(s)) shall be issued by the Company to
such holder, provided that such holder executes and delivers to the Company an
agreement reasonably satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such Debenture(s).
16. Payment of Expenses. The Company agrees to pay all reasonable
expenses, including reasonable attorneys' fees, which may be incurred by the
Holder in enforcing the provisions of this Debenture and/or collecting any
amount due under this Debenture, the Securities Purchase Agreement or the
Registration Rights Agreement.
17. Defaults. The following shall constitute "Events of Default":
(a) Any Event of Default under clauses (b) - (p) of the
definition of Event of Default under the Debentures held by any holder of
any of the other Debentures; or
(b) Any money judgment (including any arbitration award, but only
if reduced to a judgment), writ or warrant of attachment, or similar
process in excess of One Million Dollars ($1,000,000) in the aggregate
(exclusive of amounts covered by
A-25
insurance and for which no notice of reservation of rights has been
delivered by the insurance carrier) shall be entered or filed against the
Company, its subsidiaries or any of their properties or other assets and
which shall remain unpaid, unvacated, unbonded or unstayed for a period of
sixty (60) days; or
(c) The Company shall default in the payment of (i) interest on
this Debenture, and such default shall continue for five (5) Business Days
after the due date thereof, or (ii) the Outstanding Principal Amount of
this Debenture; or
(d) Any of the representations or warranties made by the Company
herein, in the Securities Purchase Agreement, the Warrants, the
Registration Rights Agreement or in any certificate or financial or other
statements heretofore or hereafter furnished by or on behalf of the Company
in connection with the execution and delivery of this Debenture, the
Securities Purchase Agreement, the Warrants or the Registration Rights
Agreement shall be false or misleading in any material respect at the time
made and such condition (to the extent capable of being cured) shall
continue uncured for a period of ten (10) Business Days after notice from
any holder of Debentures of such condition; or
(e) The Company shall fail to perform or observe in any material
respect any covenant or agreement in the Securities Purchase Agreement, the
Warrants, or this Debenture, including, without limitation, the failure to
honor any Conversion Notice and deliver shares pursuant thereto, and such
failure shall continue uncured for a period of ten (10) Business Days after
notice from any holder of Debentures of such failure; or
(f) The Company shall (i) become insolvent; (ii) admit in writing
its inability to pay its debts generally as they mature; (iii) make an
assignment for the benefit of creditors or commence proceedings for its
dissolution; or (iv) apply for or consent to the appointment of a trustee,
liquidator or receiver for it or for a substantial part of its property or
business; or
(g) A trustee, liquidator or receiver shall be appointed for the
Company or for a substantial part of its property or business without its
consent and shall not be discharged within sixty (60) days after such
appointment; or
(h) Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency shall assume
custody or control of the whole or any substantial portion of the
properties or assets of the Company and shall not be dismissed within sixty
(60) days thereafter; or
(i) The Company shall fail to pay any debt for borrowed money or
other similar obligation or liability (excluding Indebtedness evidenced by
the Debentures) of the Company, or any interest or premium thereon, when
due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), in an outstanding principal amount equal to or in
excess of $1,000,000, singly or in the aggregate and such failure shall
continue after the applicable grace period, if any, specified in the
agreement
A-26
or instrument relating to such Indebtedness, or any such Indebtedness of
the Company shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), prior to
the stated maturity thereof; or
(j) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings, or relief under any bankruptcy law or any
law for the relief of debt shall be instituted by or against the Company
and, if instituted against the Company, shall not be dismissed within sixty
(60) days after such institution or the Company shall by any action or
answer approve of, consent to, or acquiesce in any such proceedings or
admit to any material allegations of, or default in answering a petition
filed in any such proceeding; or
(k) Suspension from trading or failure of the Common Stock to be
listed on NYSE or Nasdaq for a period of five (5) consecutive Trading Days
or for more than an aggregate of ten (10) Trading Days in any 365-day
period; or
(l) The Company's notice or the Transfer Agent's notice, at the
Company's direction, to any holder of Debentures, including by way of
public announcement, at any time, of its intention not to comply, as
required, with a request for conversion of any Debentures into shares of
Common Stock that is tendered in accordance with the provisions of the
Debentures; or
(m) Conversion Failure; or
(n) Failure of the Company to hold a stockholder meeting on or
before the Stockholder Meeting Deadline (as defined in the Securities
Purchase Agreement) if required under Section 4(i) of the Securities
Purchase Agreement; or
(o) Failure of the Company to obtain the Stockholder Approval (as
defined in the Securities Purchase Agreement) by the Stockholder Meeting
Deadline if required under Section 4(i) of the Securities Purchase
Agreement and such failure results in the Company being unable to issue
shares of Common Stock in accordance with a Conversion Notice delivered in
accordance with the terms of this Debenture; or
(p) The Company takes any action or fails to take any action
following the Stockholder Meeting Deadline resulting in the Company being
unable to issue shares of Common Stock in accordance with a Conversion
Notice delivered in accordance with the terms of this Debenture because of
a failure to obtain Stockholder Approval.
Upon the occurrence and during the continuance of an Event of Default, unless
such Event of Default shall have been waived in writing by the Holder (which
waiver shall not be deemed to be a waiver of any subsequent default), at the
option of and (except in the case of clause (h) above) on notice by the Holder
and in the Holder's sole discretion, the Holder may consider this Debenture
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived, anything herein or in any
other instruments contained to the contrary notwithstanding, and the Holder may
immediately, and without expiration of any period of grace, enforce any and all
of the Holder's rights and remedies
A-27
provided herein or any other rights or remedies afforded by law. In such event
this Debenture shall be redeemed at a redemption price equal to 105% of the
Outstanding Principal Amount of the Debenture, plus accrued interest on this
Debenture. In addition to the foregoing, and notwithstanding any waiver by
Holder with respect to an Event of Default, upon the occurrence and during the
continuance of an Event of Default, the rate of interest on this Debenture,
shall, to the maximum extent of the law, be increased by five percent (5%) per
annum (i.e., from 7% to 12% per annum) commencing on the first day of such
thirty (30) day period (or part thereof) following the Event of Default; an
additional two percent (2%) per annum commencing on the first day of each of the
second and third such thirty (30) day periods (or part thereof) thereafter;
provided that in no event shall the rate of interest exceed the lower of 16% or
the highest rate permitted by applicable law. Any such interest which is not
paid when due shall, to the maximum extent permitted by law, accrue interest
until paid at the rate from time to time applicable to interest on the
Debentures as to which the Event of Default has occurred. The Company shall
within one (1) Business Day notify each Holder of Debentures of the occurrence
of any Event of Default (whether or not waived by any other Holder of
Debentures) or of any action taken by any Holder of Debentures with respect to
the occurrence of any Event of Default.
18. Subordination.
(a) Indebtedness evidenced by this Debenture is expressly made
pari passu with the Indebtedness incurred pursuant to (i) the 7.0% Convertible
Subordinated Note dated as of August 14, 2001 issued by the Company in favor of
Xxxxxxxxxxx Capital Income Fund in the original principal amount of $30,000,000
and (ii) any other Debentures.
(b) In any bankruptcy, insolvency, reorganization, receivership,
composition, assignment for benefit of creditors or other similar proceeding
initiated by or against the Company or any dissolution or winding up or total or
partial liquidation or reorganization of the Company (being hereinafter referred
to as a "Proceeding"), upon payment or distribution to creditors of assets of
the Company of any kind or character, whether in cash, property or securities,
all Senior Indebtedness (as defined below) shall first be paid in full in cash
before any holders of the Debentures shall be entitled to receive or, if
received, to retain any payment or distribution on account of the Debentures,
and upon any such Proceeding, any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which any holders of the Debentures would be entitled except for the provisions
of this Section 18 shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, or by any holders of the Debentures who shall have received such
payment or distribution, directly to the holders of the Senior Indebtedness (pro
rata to each such holder on the basis of the respective amounts of such Senior
Indebtedness held by such holder) or their representatives to the extent
necessary to pay all such Senior Indebtedness in full after giving effect to any
concurrent payment or distribution to or for the holders of such Senior
Indebtedness, before any payment or distribution is made to any holders of the
Debentures.
(c) The provisions of this Section 18 are intended solely for the
purposes of defining the relative rights of the holders of the Debentures and
the holders of Senior Indebtedness and nothing in this Section 18 shall impair,
as between the Company and any holders of the Debentures, the obligation of the
Company, which is unconditional and absolute,
A-28
to pay to the holders of the Debentures the principal thereof and interest
thereon, in accordance with the terms of the Debentures.
(d) The Holder agrees that (i) the Junior Debt (as defined below)
is hereby expressly made subordinate and subject in right of payment to the
prior payment in full in cash of all Senior Indebtedness, (ii) the subordination
is for the benefit of the holders of the Senior Indebtedness, and (iii) the
holders of Senior Indebtedness shall conclusively be deemed to have extended or
acquired the Senior Indebtedness, whether now outstanding or hereafter created,
incurred, assumed or guarantied, in reliance upon the provisions of this Section
18.(e) Upon the maturity of any Senior Indebtedness, by lapse of time,
acceleration or otherwise, all principal, premium, interest and other amounts
constituting or payable with respect to Senior Indebtedness shall first be paid
in full in cash before any direct or indirect payment or distribution is made by
the Company on account of principal, interest, premium or other amounts
constituting or payable with respect to Junior Debt.
(f) During the existence of a Senior Default or Senior Event of
Default with respect to the payment of any principal, premium, interest or other
amount constituting or payable with respect to Senior Indebtedness (a "Payment
Default"), no direct or indirect payment or distribution shall be made by the
Company or any subsidiary on account of principal, premium, interest or other
amounts constituting or payable with respect to Junior Debt.
(g) During the existence of any Senior Default or Senior Event of
Default, other than a Payment Default (a "Non-Payment Default"), upon written
notice thereof given to the Company by the Senior Agent (a "Payment Blockage
Notice"), no direct or indirect payment or distribution shall be made by the
Company or any subsidiary on account of principal, premium, interest or other
amounts constituting or payable with respect to Junior Debt, unless and until
the Senior Agent shall have provided written notice to the Holder that the
holders of the Senior Indebtedness have waived the application of this Section
18(g) to such Non-Payment Default; provided, however, that (A) the holders of
Senior Indebtedness shall have the right to withhold such consent in their
discretion, (B) this Section 18(g) shall not prevent the making of any payment
or distribution for more than 179 days after a Payment Blockage Notice shall
have been given (the period during which a Payment Blockage Notice is in effect
being the "Payment Blockage Period"), unless the Senior Indebtedness in respect
of which such Senior Default or Senior Event of Default exists shall have been
declared due and payable in its entirety, in which case no payment or
distribution may be made unless and until such acceleration has been rescinded
or annulled, and (C) not more than one Payment Blockage Notice shall be given
within a period of 360 consecutive days, and there shall be a period of at least
181 consecutive days in each 360-day period when no Payment Blockage Period
exists.
(h) In the event that any payment or distribution is made by the
Company on account of the Junior Debt in contravention of the provisions of this
Section 18 before all Senior Indebtedness is paid in full in cash, each such
payment or distribution shall be held by the Holder in trust for the benefit of
the holders of Senior Indebtedness and shall be paid over or delivered to the
Senior Agent for application to the payment in full in cash of all Senior
Indebtedness remaining unpaid after giving effect to any concurrent payments or
distributions with respect to the Senior Indebtedness to or for the benefit of
the holders of Senior Indebtedness.
A-29
(i) Until the payment in full in cash of all Senior Indebtedness,
the Holder shall not have, and shall not directly or indirectly exercise, any
rights that it may acquire by way of subrogation, by any payment or distribution
to the holders of Senior Indebtedness hereunder or otherwise.
(j) Notwithstanding any of the foregoing set forth in this
Section 18 or elsewhere, holders of Debentures may receive and retain (i) Common
Stock and all warrants, options or other rights to acquire Common Stock or (ii)
debt securities of the Company that are subordinated to all Senior Indebtedness
and any debt securities issued or exchanged for Senior Indebtedness to
substantially the same extent as, or to a greater extent than, the Debentures
are subordinated to Senior Indebtedness.
(k) For purposes of this Debenture:
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (a) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, and (b) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures, or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing capital lease obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing indebtedness (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with generally accepted accounting
principles, as well as all indebtedness of others secured by a lien on any asset
of such Person (whether or not such indebtedness is assumed by such Person) and,
to the extent not otherwise included, the guarantee by such Person of any
indebtedness of any other Person.
"Junior Debt" means all indebtedness and liabilities now or hereafter
owed by the Company to the Holder pursuant to this Debenture, and whether due or
to become due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, including all principal, all interest accrued thereon, all fees,
and all other amounts payable by the Company to the Holder hereunder.
"Senior Default" means any event or condition that with the giving of
notice, the passage of time, or both, would be a Senior Event of Default.
"Senior Event of Default" means any "Event of Default" under the
Senior Loan Documents.
"Senior Indebtedness"" means all Indebtedness, including any
principal, interest, fees, premiums, indemnities and other amounts (and
including without limitation any interest accruing after commencement of
insolvency proceedings, regardless of whether a claim for such
A-30
amounts is allowed in such proceedings) unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to this Debenture. Anything to the contrary in
the foregoing notwithstanding, "Senior Indebtedness" shall not include (a) any
liability for federal, state, local or other taxes owed or owing by the Company,
(b) any Indebtedness of the Company to any of its subsidiaries or other
affiliates (other than the guarantee by the Company of the senior notes issued
by CSK Auto, Inc. on or about the Closing Date), (c) any trade payables, (d) any
Indebtedness described in Section 18(a) or (e) any other Indebtedness to the
extent that, at the time of the incurrence of such Indebtedness, the aggregate
amount of Senior Indebtedness then outstanding exceeds $650,000,000. Without
limiting the foregoing, Senior Indebtedness shall include all obligations under
the Credit Agreement, dated as of the Closing Date (the "Credit Agreement"), by
and among the Company, the lenders from time to time a party thereto, and XX
Xxxxxx Xxxxx Bank (the "Senior Agent"), the [Loan Documents] (as defined in the
Credit Agreement) and all promissory notes, reimbursement agreements,
guaranties, security agreements, pledge agreements, deeds of trust, mortgages
and other instruments, agreements and documents executed at any time pursuant
thereto or in connection therewith, in each case as amended, restated,
supplemented, refinanced, replaced, or otherwise modified from time to time.
"Senior Loan Documents" means any and all documents, agreements, and
instruments evidencing any Senior Indebtedness.
19. Savings Clause. In case any provision of this Debenture is held by
a court of competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be adjusted rather than voided, if
possible, so that it is enforceable to the maximum extent possible, and the
validity and enforceability of the remaining provisions of this Debenture will
not in any way be affected or impaired thereby.
20. Entire Agreement, Amendments. This Debenture and the agreements
referred to in this Debenture constitute the full and entire understanding and
agreement between the Company and the Holder with respect to the subject hereof.
No amendment or waiver of any provision of this Debenture, the Securities
Purchase Agreement, the Registration Rights Agreement, or any other document,
agreement or instrument executed in connection herewith or therewith (this
Debenture, the Securities Purchase Agreement, the Registration Rights Agreement
and all such other documents, agreements and instruments being referred to
herein as the "Transaction Documents"), and no consent shall be effective,
unless in writing and signed by the Company and (A) the holders of not less than
75% of the outstanding principal amount of the Debentures then outstanding and
(B) Xxxxxx for so long as Xxxxxx holds not less than $10 million in principal
amount of Debentures or shares of Common Stock attributable to conversion of
such Debentures, and then any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless in writing and
signed by the affected holder of such Debenture and the Company, do any of the
following: (a) postpone or delay any date fixed by the Debentures for any
mandatory redemption or purchase (pursuant to a Put Right) of the Debentures or
any payment of principal, interest, fees or other amounts due to any such holder
under the Transaction Documents; (b) reduce the amount payable upon redemption
or purchase (pursuant to a Put Right) or the principal of, or the rate of
interest accruing on, the indebtedness evidenced by the Debentures, or any fees
or other amounts payable hereunder or under any other
A-31
Transaction Document; (c) except as contemplated by provisions concerning
consolidation, merger, conveyance, transfer or sale or all or substantially all
of the property and assets of the Company, adversely affect the right of any
holder of Debentures to convert any of the Debentures or to require the Company
to redeem any Debentures other than as provided in the Debentures; (d) modify
the subordination provisions in a manner adverse to such holder; (e) change the
percentage of the outstanding principal amount of the Debentures which is
required for the holders of the Debentures or any of them to take any action
hereunder; (f) amend Sections 4(c) or 12 of this Debenture in a manner adverse
to the Holders of the Debentures, or (g) amend this Section or any provision of
this Debenture or any other Transaction Document providing for consent or other
action by all holders of the Debentures. If any fees are paid to the holders of
the Debentures as consideration for amendments, waivers or consents with respect
to any Transaction Document, such fees may be paid only to those holders of the
Debentures that agree to such amendments, waivers or consents within the time
specified for submission thereof.
21. Assignment, Etc. The Holder may, subject to compliance with the
Securities Purchase Agreement and to applicable federal and state securities
laws and the legend set forth on this Debenture, transfer or assign this
Debenture or any interest herein and may pledge, encumber or transfer any of its
rights or interest in and to this Debenture or any part hereof and, without
limitation, each assignee, transferee and pledgee (which may include any
affiliate of the Holder) shall have the right to transfer or assign its
interest. Each such assignee, transferee and pledgee shall have all of the
rights of the Holder under this Debenture. Notwithstanding the foregoing, such
transfer, assignment or pledge shall not be effective unless and until the
Company receives notice of such transfer, assignment or pledge and the Company
acknowledges no prior effective transfer, assignment or pledge has occurred,
such acknowledgement to be deemed made if no contrary notice is given by the
Company within one (1) Business Day of receipt of such notice. The Company
agrees that, subject to compliance with the Securities Purchase Agreement, after
receipt by the Company of written notice of assignment from the Holder or from
the Holder's assignee, all principal, interest and other amounts which are then,
and thereafter become, due under this Debenture shall be paid to such assignee,
transferee or pledgee at the place of payment designated in such notice. This
Debenture shall be binding upon the Company and its successors and assigns and
shall inure to the benefit of the Holder and its successors and assigns.
22. No Waiver. No failure on the part of the Holder to exercise, and
no delay in exercising, any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Holder of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to the Holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time.
23. Miscellaneous. Unless otherwise provided herein, any notice or
other communication to a party hereunder shall be sufficiently given if in
writing and personally delivered or sent by facsimile with copy sent in another
manner herein provided or sent by courier (which for all purposes of this
Debenture shall include Federal Express, UPS or other recognized overnight
courier) or mailed to said party by certified mail, return receipt requested, at
its address provided for in the Securities Purchase Agreement or such other
address as either
A-32
may designate for itself in such notice to the other and communications shall be
deemed to have been received when delivered personally, on the scheduled arrival
date when sent by next day or 2-day courier service or if sent by facsimile upon
receipt of transmittal confirmation or if sent by mail then three days after
deposit in the mail. Whenever the sense of this Debenture requires, words in the
singular shall be deemed to include the plural and words in the plural shall be
deemed to include the singular. Paragraph headings are for convenience only and
shall not affect the meaning of this document.
24. Choice of Law and Venue; Waiver of Jury Trial. THIS DEBENTURE
SHALL BE CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW (OTHER THAN SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW). All questions concerning the
construction, validity, enforcement and interpretation of this Debenture shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Debenture and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS DEBENTURE OR ANY TRANSACTION CONTEMPLATED HEREBY.
25. Rule 144. With a view to making available to the Holder the
benefits of Rule 144 promulgated under the Act ("Rule 144") and any other rule
or regulation of the SEC that may at any time permit the Holder to sell the
underlying stock of the Company issuable upon conversion or exercise of the
Debentures and the Warrants to the public without registration, the Company
agrees to use its reasonable best efforts to:
(i) make and keep public information available, as those
terms are understood and defined in Rule 144, at all times;
(ii) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); and
A-33
(iii) furnish to any Holder, forthwith upon request, a
written statement by the Company (provided true at the time) that it has
complied with the applicable reporting and filing requirements of the Act
and the Exchange Act, a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents so filed by the
Company as may be reasonably requested to permit any such Holder to take
advantage of any rule or regulation of the SEC permitting the selling of
any such securities without registration.
26. Restriction on Redemption, Stock Repurchases and Cash Dividends.
Unless all of the Debentures have been converted, purchased (pursuant to a Put
right) or redeemed as provided herein, the Company shall not, directly or
indirectly, redeem, repurchase (whether by way of open market purchases, tender
offers, private transactions or otherwise) or declare or pay any cash dividend
or distribution on, its capital stock without the prior express written consent
of (A) the holders of not less than 75% of the Outstanding Principal Amount of
the Debentures then outstanding and (B) Xxxxxx for so long as Xxxxxx holds not
less than $10 million in principal amount of Debentures, other than repurchases
or redemptions of capital stock, Options, or Convertibles Securities held by
employees, officers, and directors of the Company in an aggregate amount not to
exceed $3 million per year pursuant to the terms of contracts or agreements
which require such repurchases or redemptions.
A-34
IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed by an officer thereunto duly authorized.
Dated: December ___, 2001
CSK AUTO CORPORATION
By:
-------------------------------------
Name:
Title:
Print Address:
Telephone:
Facsimile:
ATTEST
------------------------------
Name:
Title:
A-35
Defined Terms
Page
----
Acquiring Entity............................................................ 22
Act......................................................................... 3
Announcement Date........................................................... 6
Anti-Dilution Threshold..................................................... 3
Applicable Price............................................................ 16
Approved Stock Plan......................................................... 3
Bloomberg................................................................... 3
Business Day................................................................ 3
Calendar Quarter............................................................ 4
Cap Allocation Amount....................................................... 10
Cash Interest Payment....................................................... 2
Change of Control........................................................... 23
Change of Control Redemption Price.......................................... 23
Change of Control Put Price................................................. 22
Closing Bid Price........................................................... 4
Closing Date................................................................ 4
Closing Sale Price.......................................................... 4
Common Stock................................................................ 5
Common Stock Deemed Outstanding............................................. 5
Company..................................................................... 1
Conversion Date............................................................. 12
Conversion Failure.......................................................... 5
Conversion Notice........................................................... 11
Conversion Price............................................................ 5
Conversion Rate............................................................. 11
Convertible Securities...................................................... 6
Credit Agreement............................................................ 32
Debenture................................................................... 1
Debenture Delivery Date..................................................... 12
Debenture Register.......................................................... 2
Debentures.................................................................. 1
Default Conversion Price.................................................... 6
Default Interest............................................................ 2
Dilutive Issuance........................................................... 16
DTC......................................................................... 11
Events of Default........................................................... 26
Exchange Act................................................................ 34
Exchange Cap................................................................ 10
Excluded Securities......................................................... 16
Hedging Obligations......................................................... 31
Holder...................................................................... 1
Indebtedness................................................................ 31
Interest Payment Date....................................................... 2
Interest Payment Election Notice............................................ 2
Interest Payments........................................................... 2
Interest Share Conversion Rate.............................................. 2
Interest Shares............................................................. 2
Investcorp.................................................................. 6
Issuance Date............................................................... 6
Junior Debt................................................................. 31
Xxxxxx...................................................................... 6
Make-Whole Average.......................................................... 6
Make-Whole Date............................................................. 6
Mandatory Conversion........................................................ 9
Mandatory Conversion Blockage............................................... 9
Mandatory Conversion Date................................................... 9
Mandatory Conversion Notice................................................. 9
Maturity Allocation Percentage.............................................. 14
Maturity Conversion Price................................................... 6
Maturity Date............................................................... 7
Maturity Date Election Notice............................................... 14
Maturity Date Mandatory Conversion.......................................... 14
Maturity Date Mandatory Redemption ......................................... 14
Maturity Date Redemption Price.............................................. 14
Nasdaq...................................................................... 7
New Securities Issuance Price............................................... 16
Non-Payment Default......................................................... 30
Notice of Change of Control................................................. 22
Notice of Exercise of Redemption Right...................................... 23
Notice of Put Upon Change of Control........................................ 23
NYSE........................................................................ 7
Objecting Holders........................................................... 4
Options..................................................................... 7
Organic Change.............................................................. 22
Original Maturity Date...................................................... 1
Outstanding Principal Amount................................................ 1
Payment Blockage Notice..................................................... 30
Payment Blockage Period..................................................... 30
Payment Default............................................................. 30
Person...................................................................... 7
Principal Market............................................................ 7
Pro Rata Portion............................................................ 7
Proceeding.................................................................. 29
Purchasers.................................................................. 10
Put Date.................................................................... 23
Put Right................................................................... 22
Redemption Date............................................................. 23
Redemption Right............................................................ 23
Refinancing................................................................. 7
Registration Rights Agreement............................................... 7
Rule 144.................................................................... 34
Securities Purchase Agreement............................................... 8
Senior Agent................................................................ 32
Senior Default.............................................................. 31
Senior Event of Default..................................................... 31
Senior Indebtedness......................................................... 31
Senior Loan Documents....................................................... 32
Share Delivery Date......................................................... 11
Standard Conversion Price................................................... 8
Strategic Financing......................................................... 8
Trading Day................................................................. 8
Transaction Documents....................................................... 32
Transfer Agent.............................................................. 11
Valuation Event............................................................. 19
Varable Price Issuance...................................................... 20
Variable Notice............................................................. 20
Variable Price.............................................................. 20
Warrants.................................................................... 8
EXHIBIT A TO DEBENTURE
OPINION OF COUNSEL FORM
[Date]
CSK Auto Corporation
Attention: General Counsel
Ladies and Gentlemen:
We are counsel for [___________________] (the "Seller") and have been
requested to furnish to CSK Auto Corporation (the "Company") an opinion with
respect to certain "restricted securities" owned by the Seller.
[The bracketed, numbered items are applicable only to a Rule 144 opinion.]
As a basis for this opinion, we have received and reviewed copies of the
following documents:
1. A letter from the Seller dated [___________], 200[ ] providing
information related to the securities owned by the Seller.
2. [The Notice on Form 144 filed by the Seller with the Securities and
Exchange Commission [and any applicable securities exchange] on
[___________], 200[ ].]
3. [A letter from [_____________] (the "Broker") dated [__________], 200[
] certifying that the proposed sale will be made in "brokers'
transactions" as defined in Rule 144 promulgated under the Securities
Act of 1933, as amended (the "Act").]
We have been notified that the Seller proposed to sell [[_______] shares
(the "Shares") of the Common Stock/$[_________] principal amount of the 7%
Convertible Subordinated Debentures due December __, 2006 (the
"Debentures")/Warrants to purchase [_________] shares of the Common Stock (the
"Warrants")] of the Company in a private transaction, and that the Seller will
deliver to the [Broker/Company's transfer agent/Company] [certificate number
[__] representing [________] shares of the Common Stock/Debenture number [____]
representing $[__________] principal amount of the Debentures/Warrant number
[___] representing Warrants to purchase [_________] shares of the Common Stock]
of the Company registered in the name of the Seller.
On the basis of the foregoing and assuming the accuracy of the
representations of the Seller [and the Broker], it is our opinion that the
proposed sale of the [Shares/Debentures/ Warrants] by the Seller, if effected in
accordance with the terms and provisions set forth in the above-specified
documents, will comply with [Rule 144/Section 4(2) of the Act] and that the
[Shares/Debentures/Warrants] may be transferred without compliance with the
registration requirements of the Act.
The Company and/or its counsel may rely on this opinion in rendering an
opinion to the Company's transfer agent regarding the Seller's transfer of the
[Shares/Debentures/Warrants]. Any questions concerning the foregoing opinion
should be communicated to [________] of this firm.
A-A-1
EXHIBIT B TO DEBENTURE
INTEREST SHARE ISSUANCE NOTICE
TO BE EXECUTED BY CSK AUTO CORPORATION
CSK Auto Corporation hereby notifies the Transfer Agent that _______
shares of Common Stock (the "Interest Shares") of CSK Auto Corporation, a
Delaware corporation (the "Company") will be issued to _________________ (the
"Buyer").
1. Delivery of Interest Shares.
2. Delivery Information
Number of shares of Common Stock to be issued:
Tax ID Number (If applicable): _________________________________________
Please issue the Common Stock and, if applicable, any check drawn on an
account of the Company in the following name and to the following address:
Issue to:_______________________________________
_______________________________________
Address: _______________________________________
Telephone Number: ______________________________
Facsimile Number: ______________________________
Authorization: _________________________________
By:_____________________________________________
Title:__________________________________________
Dated:__________________________________________
Account Number (if electronic book entry transfer):_______________________
Transaction Code Number (if electronic book entry transfer):________
Date: _______________ __, ____
__________________________________
CSK Auto Corporation
By:_______________________________
Name:_____________________________
Title:_____________________________
A-B-1
ACKNOWLEDGMENT
The undersigned buyer (the "Buyer") hereby acknowledges this
Interest Share Issuance Notice and hereby directs Transfer Agent to issue the
above indicated number of shares of Common Stock in accordance with the
Irrevocable Transfer Agent Instructions dated December ___, 2001 from the
Company and acknowledged and agreed to by Transfer Agent.
1. Delivery of Interest Shares. The holder of these Interest
Shares has sold or will sell the shares of common stock issuable pursuant to
this Notice pursuant to a registration statement or an exemption from
registration under the Securities Act of 1933, as amended.
2. Private Placement Representations. The undersigned confirms
that the representations and warranties contained in Section 2(a) and (b) of the
Securities Purchase Agreement entered into in connection with the initial
issuance of the Debentures are true and correct as to the undersigned as of the
date hereof.
3. Buyer Information. The Buyer acknowledges the information
with respect to Buyer set forth above is accurate.
Name of Registered Buyer
By:
Name:
Title:
A-B-2
EXHIBIT C TO DEBENTURE
CSK AUTO, INC.
SENIOR SECURED CREDIT FACILITIES
Summary of Terms and Conditions
November 27, 2001
----------------------
(a) PARTIES TO THE SENIOR CREDIT FACILITIES
Borrower: CSK Auto, Inc., an Arizona corporation (the
"Company").
Guarantors: CSK Auto Corporation ("Holdings") and each of the
Company's direct and indirect domestic subsidiaries
(the "Guarantors" the Company and the Guarantors,
collectively, the "Credit Parties").
Joint Lead Arrangers and X.X. Xxxxxx Securities Inc. ("JPMorgan") and Credit
Joint Book Managers: Suisse First Boston ("CSFB"), as the exclusive joint
lead arrangers and joint book managers (the "Lead
Arrangers").
Administrative Agent: JPMorgan Chase Bank ("JPMorgan Chase Bank", in such
capacity, the "Administrative Agent").
Syndication Agent: Credit Suisse First Boston ("Syndication Agent").
Documentation Agent: UBS AG, Stamford Branch ("UBS").
Collateral Agent: JPMorgan Chase Bank (in such capacity, the
"Collateral Agent").
Lenders: JPMorgan Chase Bank, CSFB, UBS and such other
financial institutions as shall be selected in the
syndication (collectively the "Lenders").
(b) AMOUNT AND TERMS OF THE SENIOR CREDIT FACILITIES
(a) Term Facilities
Type of Facility: Term Facilities (the "Term Facilities") in
an aggregate amount of $100,000,000 (the
loans thereunder, the "Term Loans").
A-C-1
Availability: The Term Loans shall be made in a single
drawing on the Closing Date (as defined
below).
Maturity: The Term Loans will mature on the third
anniversary of the Closing Date. The
aggregate principal amount of the Term
Loans will be repayable at maturity.
(b) Revolving Facility
Type of Facility: Revolving loans, swing line loans and
letters of credit, in an aggregate principal
amount of $225,000,000 (the "Revolving
Facility" together with the Term Facilities,
the "Senior Credit Facilities").
Availability: Revolving loans (the "Revolving Loans") and
swing line loans (the "Swing Line Loans"
together with the Term Loans and the
Revolving Loans, the "Loans") may be made,
and letters of credit (the "Letters of
Credit") in an aggregate face amount at any
one time outstanding not to exceed
$15,000,000 may be issued, under the
Revolving Facility, at any time during the
period between the Closing Date and the
third anniversary of the Closing Date (the
"Revolving Termination Date"); provided
that no Letter of Credit shall have an
expiration date after the Revolving
Termination Date. No standby Letter of
Credit shall have an expiry date more than
365 days after its date of issuance, and no
commercial Letter of Credit shall have an
expiry date more than 120 days after its
date of issuance.
In addition, a portion of the Revolving
Facility not in excess of $15,000,000 will
be available during the period from the
Closing Date to the Revolving Termination
Date as Swing Line Loans from JPMorgan Chase
Bank on same-day notice. Each other
Revolving Lender will be irrevocably and
unconditionally obligated to purchase its
pro rata share in any Swing Line Loan not
repaid by the Company.
A-C-2
Borrowing Base: From the Closing Date through the end of
the third quarter of 2002, the amount from
time to time available under the Revolving
Facility will be equal to a Borrowing Base
plus an overadvance of up to $25 million.
The borrowing base shall be required to
cover both the outstandings under the
Revolving Facility and the outstandings
under the Term Loan and shall not exceed
percentages to be finalized by JPMorgan
Chase Bank in its sole reasonable
discretion of the eligible accounts
receivable and eligible inventory (each of
which terms shall be defined in the Credit
Documentation (as defined below) in the
sole reasonable discretion of JPMorgan
Chase Bank and in consultation with, and
with input from, the Company). On and
after the end of the third quarter of 2002,
the overadvance will no longer be included
in the amount available to the Borrower.
The Borrowing Base will provide for (A) a
75% preliminary advance rate against
eligible accounts receivable and (B)
preliminary advance rates against eligible
inventory of (i) 65% for inventory located
at depots or distribution centers, (ii) 60%
for inventory located in stores and (iii)
25% for slow-moving inventory. Such
percentages shall be finalized and
definitions shall be established upon the
completion of a collateral review
satisfactory to JPMorgan Chase Bank and may
be adjusted from time to time by it in its
sole reasonable discretion, provided that
any increase in any such percentages above
the original level shall be subject to the
consent of the Supermajority Lenders (as
defined below), and provided further that,
prior to the effectiveness of any changes,
a reasonable notice period shall have
occurred. Payments on account of inventory
and accounts receivable will be required to
be made through, or deposited in, the cash
management system referred to below. From
and after a date after the Closing Date to
be agreed, inventory located at a leased
location not covered by a landlord's waiver
in reasonably satisfactory form may be
subject to an appropriate deduction or
limitation on inventory to be determined
and agreed with the Company, based on
customary calculations of appropriate
limitations or deductions.
A-C-3
Borrowing Base Monitoring: The Company's accounts receivable and
inventory will be monitored by the
Collateral Agent. The Company will deliver
borrowing base certificates accompanied by
supporting documentation and supplemental
reporting presenting the Company's
computation of the borrowing base within 16
calendar days after the end of each month
and such reports will form a basis for
determinations of the borrowing base which,
in any event, shall be made in the sole
reasonable discretion of the Collateral
Agent.
Collateral Cash Management: The Company shall establish a cash
management system reasonably acceptable to
the Collateral Agent which will include (1)
on the Closing Date, the establishment of a
collateral proceeds account at the
Collateral Agent into which funds received
in applicable lockbox and depository
accounts shall be transferred on a daily
basis and as to which the Collateral Agent
shall have the right to stop subsequent
transfers or to cause transfers therefrom
to the Collateral Agent upon the occurrence
of an event of default and (2) within 90
days of the Closing Date, arrangements for
substantially all remittances to be
directed into lockbox and depository
accounts held at banks which have executed
agreements reasonably acceptable to the
Collateral Agent, providing, among other
things, that deposits therein shall be
automatically transferred to such
collateral proceeds account.
Maturity: The Revolving Termination Date.
(c) GENERAL PROVISIONS
Purpose: The proceeds of the Term Loans will be used in
connection with the refinancing of the Third Amended
and Restated Credit Agreement, dated as of September
30, 1999, as amended to date, (the "Existing Credit
Agreement"), for the Company (the "Refinancing").
A portion of the proceeds of the Revolving Loans will
be used for the Refinancing and the balance may be
used for general corporate purposes of the Company and
its subsidiaries.
Interest Rate: Alternate Base Rate and, at the Company's option,
Eurodollar loans will be available, as follows:
A-C-4
A. Alternate Base Rate
Interest shall be at the Alternate Base Rate of
JPMorgan Chase Bank plus the applicable interest
margin, calculated on the basis of the actual number
of days elapsed in a year of 365 days, if determined
by reference to the prime commercial lending rate of
JPMorgan Chase Bank, or in a year of 360 days,
otherwise. The Alternate Base Rate is defined as the
highest of (i) the Federal Funds Rate, as published by
the Federal Reserve Bank of New York, plus -1/2 of 1%,
(ii) the secondary market rate for three-month
certificates of deposit of money center banks,
adjusted for reserves and assessments, plus 1% or
(iii) the prime commercial lending rate of JPMorgan
Chase Bank.
B. Eurodollar Rate
The Company may elect that all or a portion of the
Loans bear interest at a rate (grossed-up for any
reserve requirements) equal to the average interest
rate at which eurodollar deposits for one, two, three
or six months or (if and when available to all of the
relevant Lenders) nine or twelve months (as selected
by the Company) appearing on Page 3750 of the Telerate
screen, plus the applicable interest margin.
Interest Margins: The interest margin for (a) Revolving Loans which are
Alternate Base Rate Loans shall be 2.25% and for
Revolving Loans which are Eurodollar Loans shall be
3.25% and (b) for Term Loans which are Alternate Base
Rate Loans shall be 2.25% and for Term Loans which
are Eurodollar Loans shall be 3.25%. The foregoing
margins shall be subject to reduction by amounts to
be agreed upon based on the achievement of
performance targets to be determined and provided
that no event of default is in existence; provided
that the interest margin for (i) Alternate Base Rate
Loans shall in no event be less than 1.75% and (ii)
Eurodollar Loans shall in no event be less than 2.75%.
Issuing Bank: The issuing bank for the Letters of Credit shall be
JPMorgan Chase Bank (in such capacity, the "Issuing
Bank").
Letter of Credit Fees: A percentage per annum equal to the interest margin
for Revolving Loans which are Eurodollar Loans then
in effect of the amount available to be drawn of each
letter of credit, payable quarterly in arrears. Of
such fees, the Issuing Bank shall receive, for its
own account, a fee of 0.25% per annum of the face
amount of such letter of credit. Customary
administrative, issuance, amendment, payment and
negotiation charges will be payable to the Issuing
Bank for its own account.
A-C-5
Collateral: The Senior Credit Facilities, any interest rate
protection agreements with any Lender or any
affiliate thereof and any overdrafts and related
liabilities owing to any Lender or any affiliate
thereof arising from treasury, depository and cash
management services and in connection with automated
clearinghouse transfer of funds, will, subject to
specified permitted encumbrances and other exceptions
to be agreed upon, be secured by a perfected first
priority security interest in (a) all of the capital
stock of the Company and each of its direct and
indirect domestic subsidiaries, (b) all of the
inventory, equipment and accounts receivable of the
Company and each of its direct and indirect domestic
subsidiaries and (c) all other tangible and
intangible assets (including, without limitation,
deposit accounts, trademarks and tradenames but not
including certain real property) of the Company and
such subsidiaries, subject to only existing purchase
money or capitalized lease obligations incurred in
the ordinary course of business and other exceptions
to be agreed upon.
Guarantees: All obligations of the Company under the Credit
Documentation (as defined below) will be
unconditionally guaranteed by each of the Guarantors.
Interest Payment Dates: In the case of Loans bearing interest based upon the
Alternate Base Rate, quarterly in arrears.
In the case of Loans bearing interest based upon the
Eurodollar Rate, on the last day of each relevant
interest period and, in the case of any interest
period longer than three months, on each successive
date three months after the first day of such interest
period.
Default Rate: Overdue principal, interest, fees and other amounts
owing to the Administrative Agent, the Lead Arrangers
or any Lender will bear interest at 2% over the rate
otherwise applicable thereto. Overdue Eurodollar
Loans may be converted to Alternate Base Rate Loans
at the end of the then current interest period with
respect thereto.
A-C-6
Reserve Requirements; The definitive financing agreements will contain
Yield Protection: customary provisions relating to increased costs,
capital adequacy protection, Eurodollar Rate
unavailability, withholding and other taxes and
illegality. If the Company is required to pay any
amounts to any Lender pursuant to such provisions, the
Company will have the right to cause the Lender
seeking such payment to sell all of its Loans and
commitments at par plus accrued interest and fees to a
bank or other financial institution which is or agrees
to become a Lender.
Commitment Fee: .50% per annum from the Closing Date for each Lender
on the average daily unused portion of its commitment
under the Revolving Facility.
Fee Basis: 365 days for actual days elapsed.
Mandatory Prepayments (a) So long as no default or event of default has
and Commitment occurred and is continuing, the Loans shall be
Reductions: prepaid (and the Letters of Credit shall be cash
collateralized or replaced) with:
(i) 100% of the net proceeds of any sale or other
disposition by the Company or any of its
subsidiaries of any assets, other than usual
and customary exceptions to be agreed upon,
including, without limitation, (A) any sale of
inventory in the ordinary course of business,
(B) any sale of obsolete or worn-out property
and (C) any sale of a store or equipment
therein to a third party pursuant to a
sale-leaseback or similar transaction of up to
an amount to be determined;
(ii) 100% of the net proceeds of incurrences by the
Company of indebtedness after the Closing Date
(other than permitted indebtedness);
(iii) 50% of the net proceeds of issuances of equity
by Holdings or the Company after the Closing
Date (excluding any equity provided by the
Investors or their affiliates); provided,
however, notwithstanding the foregoing, as long
as the ratio of consolidated senior funded
indebtedness to Consolidated EBITDA for the four
fiscal quarters most recently ended for which
financial information is available shall be
equal to or less than 3.25 to 1, the Company may
retain 100% of the net proceeds of issuances of
equity; and
(iv) If the Company issues in excess of $225,000,000
of Senior Unsecured Notes, 100% of the proceeds
of such excess issuance of Senior Secured Notes
above $25,000,000.
A-C-7
(b) The Revolving Loans and Swing Line Loans shall be
prepaid, and, to the extent necessary, the Letters of
Credit shall be cash collateralized or replaced and,
to the extent necessary, the Term Loans shall be cash
collateralized or replaced, to the extent extensions
of credit exceed the then-current Borrowing Base.
Voluntary Prepayments: Permitted in whole or in part, with prior
written notice but without premium or penalty, subject
to limitations as to minimum amounts of prepayments
and customary indemnification for breakage costs in
the case of prepayment of Eurodollar Loans other than
on the last day of an interest period.
Application of Mandatory prepayments (other than pursuant to (b)
Prepayments: above) and voluntary prepayments of the Loans shall
be applied pro rata to the Term Loans and the
Revolving Loans and Letters of Credit shall be cash
collateralized (with a concurrent reduction in the
Revolving Facility).
A-C-8
EXHIBIT D TO DEBENTURE
(To be Executed by Registered Holder in order to Convert Debenture)
CONVERSION NOTICE FOR
7% CONVERTIBLE SUBORDINATED DEBENTURE DUE DECEMBER__, 2006
The undersigned, as Buyer of the 7% Convertible Subordinated
Debenture Due December __, 2006 of CSK AUTO CORPORATION (the "Company"), No. _,
in the outstanding principal amount of $_______ (the "Debenture"), hereby elects
to convert $_______ of the outstanding principal amount of the Debenture into
shares of Common Stock, par value $0.01 per share (the "Common Stock"), of the
Company according to the conditions of the Debenture, as of the date written
below. The undersigned confirms that the representations and warranties
contained in Sections 2(a), (b), (f) and (g) of the Securities Purchase
Agreement entered into in connection with the initial issuance of the Debentures
are true and correct as to the undersigned as of the date hereof.
Date of Conversion:
Principal Amount of Debentures to be converted:
Tax ID Number (If applicable):
Please confirm the following information:
Conversion Price:
Number of shares of Common Stock to be issued:
Please issue the Common Stock into which the Debentures are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:
Issue to:
Address:
Telephone Number:
Facsimile Number:
Authorization:
By:
A-D-1
Title:
Dated:
Account Number (if electronic book entry transfer):
Transaction Code Number (if electronic book entry transfer):
[NOTE TO BUYER -- THIS FORM MUST BE SENT CONCURRENTLY TO TRANSFER AGENT]
A-D-2
ACKNOWLEDGMENT
The Company hereby acknowledges this Conversion Notice and hereby
directs [_____] to issue the above indicated number of shares of Common Stock in
accordance with the Irrevocable Transfer Agent Instructions dated December __,
2001 from the Company and acknowledged and agreed to by [_____].
CSK AUTO CORPORATION
By:___________________________
Name:
Title:
A-D-3
EXHIBIT B TO SECURITIES PURCHASE AGREEMENT
EXECUTION COPY
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B)
AN OPINION OF COUNSEL, IN SUBSTANTIALLY THE FORM ATTACHED HERETO AS EXHIBIT A,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. THE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED
BY THE SECURITIES.
CSK AUTO CORPORATION
FORM OF MAKE-WHOLE WARRANT TO PURCHASE COMMON STOCK
Warrant No.: [ ]
Date of Issuance: December [ ], 2001
CSK Auto Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for Ten United States Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, ____________, the registered holder hereof or its permitted
assigns, is entitled, subject to the terms set forth below, to receive from the
Company upon the Cashless Exercise (as defined herein) of this Warrant, on the
Make-Whole Date (as defined herein) (or such other date as provided herein) the
Net Number (as defined herein) of fully paid nonassessable shares of Common
Stock (as defined herein) of the Company; provided, however, that, with respect
to holders of Warrants (other than Investcorp (as defined below)) that are
beneficial owners as of the date hereof of less than ten percent of the Common
Stock outstanding, the Company shall not effect and shall have no obligation to
effect the exercise of this Warrant and no holder of this Warrant shall have the
right to exercise this Warrant to the extent that after giving effect to such
exercise, such Person (together with such Person's affiliates) would have
acquired, through exercise of this Warrant or otherwise, beneficial ownership of
a number of shares of Common Stock that, when added to the number of shares of
Common Stock beneficially owned by such Person (together with such Person's
affiliates) exceeds 9.99% of the number of shares of Common Stock outstanding
immediately after giving effect to such exercise; provided, further however,
that the holder may waive this restriction upon not less than sixty-one (61)
days' prior written notice to the Company. For purposes of the foregoing
sentence, the aggregate number of shares of Common Stock beneficially owned by
such Person and its affiliates shall be determined in good faith in accordance
with applicable securities laws by the holder of this Warrant For purposes of
this paragraph, beneficial ownership shall be calculated in accordance with
Section 13(d) of the
B-1
Securities Exchange Act of 1934, as amended. Upon the written request of any
holder, the Company shall promptly, but in no event later than one (1) Business
Day following the receipt of such notice, confirm in writing to any such holder
the number of shares of Common Stock then outstanding. In any case, the number
of outstanding shares of Common Stock shall be determined after giving effect to
conversions of Convertible Debentures (as defined below) and exercise of
Warrants (as defined below) by such holder and its affiliates. In the event the
exercise of this Warrant is limited with respect to any portion of shares of
Common Stock otherwise issuable pursuant to this Warrant by virtue of the
foregoing provisions or the provisions contained in Section 13, the holder shall
notify the Company in writing as promptly as reasonably practicable after
becoming aware of facts or circumstances that would result in the issuance of
100,000 shares or more (or if less then 100,000 shares remain issuable pursuant
hereto, of such lesser number of shares) no longer being prohibited by such
provisions and the number of such shares whose issuance is no longer prohibited.
No later than sixty one (61) days after receiving such notice, the Company shall
issue such shares to the holder of this Warrant or its designee. Subject to the
limitations on exercise set forth in this Warrant, the remaining portion of this
Warrant shall be deemed to have been exercised pursuant to the Cashless Exercise
provisions of Section 2(e) of this Warrant on the Make-Whole Date.
Section 1.
(a) SECURITIES PURCHASE AGREEMENT. This Warrant (as defined herein)
is one of the Make-Whole Warrants issued pursuant to that certain Securities
Purchase Agreement dated as of December __, 2001, among the Company and the
Persons referred to therein (the "Securities Purchase Agreement").
(b) DEFINITIONS. The location of definitions used in this Warrant is
set forth on the Index of Terms attached hereto and the following words and
terms as used in this Warrant shall have the following meanings:
(i) Reserved.
(ii) "Bloomberg" means Bloomberg Financial Markets and any
successor thereto.
(iii) "Business Day" means any day other than Saturday, Sunday
or other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
(iv) "Closing Bid Price" means, for any security as of any
date, the last closing bid price for such security on the Principal Market (as
defined below) as reported by Bloomberg, or if the Principal Market begins to
operate on an extended hours basis, and does not designate the closing bid
price, then the last bid price at 4:00 p.m., New York City Time, as reported by
Bloomberg, or if the foregoing do not apply, the last closing bid price of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price is reported
for such security by Bloomberg, the last closing trade price for such security
as reported by Bloomberg, or, if no last closing trade price is reported for
such security by Bloomberg, the average of the bid prices of any market
B-2
makers for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such
security on such date on any of the foregoing bases, the Closing Bid Price of
such security on such date shall be the fair market value as determined in good
faith by the Board of Directors of the Company; provided, however, that promptly
following such determination, but in no event later than two (2) Business Days
following the date of such determination, the Company provides each of the
holders of the Warrants then outstanding with written notice setting forth in
reasonable detail the basis for the Company's determination of such fair market
value. The holders of at least 25% of the shares of Common Stock obtainable upon
exercise of all Warrants then outstanding and LBI Group Inc. and its affiliates
("Xxxxxx") for so long as Xxxxxx holds not less than $10 million in principal
amount of Debentures or shares of Common Stock attributable to conversion of
such Debentures ("Objecting Holders") shall have the right to object to the
Company's determination of fair market value within ten (10) Business Days of
receipt of such notice. In the event the Company fails to provide the holders of
the Warrants then outstanding with the notice in the time and manner required
herein or in the event the Objecting Holders provide the Company with a notice
of objection, then the fair market value shall be determined pursuant to Section
2(a) of this Warrant. All such determinations shall be appropriately adjusted
for any stock dividend, stock split or other similar transaction during such
period. All fees and expenses of such determinations shall be borne solely by
the Company.
(v) "Closing Sale Price" means, for any security as of any
date, the last closing trade price for such security on the Principal Market as
reported by Bloomberg, or if the Principal Market begins to operate on an
extended hours basis, and does not designate the closing trade price, then the
last trade price at 4:00 p.m., New York City Time, as reported by Bloomberg, or
if the foregoing do not apply, the last closing trade price of such security in
the over-the-counter market on the electronic bulletin board for such security
as reported by Bloomberg, or, if no last closing trade price is reported for
such security by Bloomberg, the last closing ask price of such security as
reported by Bloomberg, or, if no last closing ask price is reported for such
security by Bloomberg, the average of the highest bid price and the lowest ask
price of any market makers for such security as reported in the "pink sheets" by
the National Quotation Bureau, Inc. If the Closing Sale Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Closing Sale Price of such security on such date shall be the fair market value
as determined in good faith by the Board of Directors of the Company; provided,
however, that promptly following such determination, but in no event later than
two (2) Business Days following the date of such determination, the Company
provides each of the holders of the Warrants then outstanding with written
notice setting forth in reasonable detail the basis for the Company's
determination of such fair market value. The Objecting Holders shall have the
right to object to the Company's determination of fair market value within ten
(10) Business Days of receipt of such notice. In the event the Company fails to
provide the holders of the Warrants then outstanding with the notice in the time
and manner required herein or in the event the Objecting Holders provides the
Company with a notice of objection, then the fair market value shall be
determined pursuant to Section 2(a) of this Warrant. All such determinations
shall be appropriately adjusted for any stock dividend, stock split or other
similar transaction during such period. All fees and expenses of such
determinations shall be borne solely by the Company.
B-3
(vi) "Common Stock" means (i) the Company's common stock, par
value $0.01 per share, and (ii) any capital stock into which such Common Stock
shall have been changed or any capital stock resulting from a reclassification
of such Common Stock and all other stock of any class or classes (however
designated) of the Company the holders of which have the right, without
limitation as to amount, either to all or to a share of the balance of current
dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference.
(vii) "Convertible Debentures" means the Company's 7%
Convertible Debentures Due December __, 2006 issued pursuant to the Securities
Purchase Agreement.
(viii) "Convertible Securities" means any stock or securities
(other than Options) directly or indirectly convertible into or exchangeable or
exercisable for Common Stock.
(ix) "Exercise Number" means: (A) if no conversion of the Convertible Debentures
pursuant to Section 4(b) thereof has occurred prior to the Make-Whole Date (a
"Mandatory Conversion") or if the Standard Conversion Price (as defined in the
Convertible Debentures and without giving effect to any ex post facto
adjustments for which there is not a concurrent adjustment to the Make-Whole
Average and Floor Price) on the date of such Mandatory Conversion is less than
an amount (the "Adjusted Conversion Price") equal to the greater of (i) the
Make-Whole Average (as defined in the Convertible Debentures) and (ii) the Floor
Price (as defined in the Convertible Debentures) (each appropriately adjusted
(without duplication)as provided in Sections 6(b), (c) and (d) of the
Convertible Debentures), zero (0) shares of Common Stock; or (B) if a Mandatory
Conversion has occurred prior to the Make-Whole Date and the Standard Conversion
Price on the date of such Mandatory Conversion is greater than the Adjusted
Conversion Price, the number of shares of Common Stock equal to (i) the quotient
determined by dividing (A) the Make-Whole Amount by (B) the Adjusted Conversion
Price, minus (ii) the number of shares of Common Stock actually issued to such
holder of Convertible Debentures upon conversions of such Holder's Convertible
Debentures prior to the Make-Whole Date.
(x) "Make-Whole Amount" means the Outstanding Principal Amount
of the Convertible Debentures of the holder of this Warrant as of the date of
issuance of such Convertible Debentures plus such additional principal sum as
shall result from the application of the fourth sentence of the second paragraph
of the Debenture minus the Outstanding Principal Amount of such Convertible
Debenture on the Make-Whole Date.
(xi) "Make-Whole Date" means the earlier of (i) the date on
which a Change of Control is consummated and (ii) November _, 2002.
(xii) "Option" means any rights, warrants or options to
subscribe for or purchase or otherwise acquire Common Stock or Convertible
Securities.
(xiii) "Outstanding Principal Amount" shall have the
meaning set forth in the Convertible Debentures.
B-4
(xiv) "Person" means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
(xv) "Principal Market" means The New York Stock Exchange,
Inc. ("NYSE") or if the Common Stock is not traded on the NYSE then the
principal securities exchange or trading market for the Common Stock.
(xvi) "Registration Rights Agreement" means that registration
rights agreement dated December __, 2001 by and among the Company and the
Persons referred to therein.
(xvii) "Securities Act " means the Securities Act of
1933, as amended.
(xviii) "Trading Day" means Business Days on which the
Principal Market is open for trading and trading in the Common Stock is not
suspended.
(xix) "Warrant" means the warrants to purchase shares of
Common Stock issued pursuant to the Securities Purchase Agreement and all
warrants issued in exchange, transfer or replacement thereof.
(xx) "Warrant Exercise Price" shall be equal to $0.01.
(xxi) "Warrant Shares" means all shares of Common Stock
issuable upon exercise of the Warrants.
Section 2. EXERCISE OF WARRANT.
(a) Subject to the terms and conditions hereof, this Warrant shall
be deemed to have been exercised pursuant to the "Cashless Exercise" provisions
of Section 2(e) of this Warrant on the Make-Whole Date, without any action on
the part of the holder of this Warrant. If the Company is provided written
notice that Warrant Shares are to be issued in any name other than that of the
registered holder of this Warrant, such issuance shall be deemed a transfer and
the provisions of Section 7 shall be applicable. In the event of any exercise of
the rights represented by this Warrant in compliance with this Section 2(a), the
Company shall on the Make-Whole Date (or if such date is not a Business Day, on
the next following Business Day) deliver written notice, in the form set forth
as Exhibit B hereto, to the holder of this Warrant and the Company's designated
transfer agent of the Cashless Exercise of this Warrant and of the number of
Warrant Shares to be issued to the registered holder of this Warrant pursuant to
such Cashless Exercise. In the event of any exercise of the rights represented
by this Warrant in compliance with this Section 2(a), the Company shall on the
second (2nd) Business Day (the "Warrant Share Delivery Date") following receipt,
from the holder of this Warrant, of this Warrant (or an indemnification
undertaking or other form of security reasonably satisfactory to the Company
with respect to this Warrant in the case of its loss, theft or destruction) and,
for purposes of determining any limitation on exercise of this Warrant, a
confirmation in writing to the Company of the number of shares of Common Stock
beneficially held by such holder (the "Exercise Delivery Documents"), (A)
provided the Transfer Agent is participating in The Depository Trust Company
("DTC") Fast Automated Securities Transfer Program and provided
B-5
that the holder is eligible to receive shares through DTC, at the holder's
request, credit such aggregate number of shares of Common Stock to which the
holder shall be entitled to the holder's or its designee's balance account with
DTC through its Deposit Withdrawal Agent Commission system or (B) issue and
deliver to the last designated address of the holder on the books and records of
the Company, a certificate or certificates in such denominations as may be
requested by the holder, registered in the name of the holder or its designee,
for the number of shares of Common Stock to which the holder shall be entitled
upon such exercise. In the event of any exercise of the rights represented by
this Warrant in compliance with this Section 2(a), the holder of this Warrant,
subject to the limitations set forth in the first paragraph and Section 13 of
this Warrant, shall be deemed for all corporate purposes to have become the
holder of record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date of delivery of this Warrant as required
above or the certificates evidencing such Warrant Shares. In the case of a
dispute as to the determination of the Closing Bid Price or Closing Sale Price
of a security or the arithmetic calculation of the number of Warrant Shares, the
Company shall promptly issue to the holder the number of shares of Common Stock
that is not disputed and shall submit the disputed determinations or arithmetic
calculations to the holder via facsimile within three (3) Business Days of
receipt of the holder's notice of such dispute. If the holder and the Company
are unable to agree upon the determination of the Closing Bid Price or Closing
Sale Price or arithmetic calculation of the number of Warrant Shares within one
(1) Business Day of such disputed determination or arithmetic calculation being
submitted to the holder, then the Company shall immediately submit via facsimile
(i) the disputed determination of the Closing Bid Price or Closing Sale Price to
an independent, reputable investment banking firm selected by the Company and
reasonably acceptable to the holder or (ii) the disputed arithmetic calculation
of the number of Warrant Shares to its independent, outside accountant. The
Company shall use its reasonable best efforts to cause the investment banking
firm or the accountant, as the case may be, to perform the determinations or
calculations and notify the Company and the holder of the results no later than
two (2) Business Days from the time it receives the disputed determinations or
calculations. Such investment banking firm's or accountant's determination or
calculation, as the case may be, shall be deemed conclusive absent manifest
error.
(b) Unless the rights represented by this Warrant shall have expired
or shall have been fully exercised, the Company shall, as soon as practicable
and in no event later than five (5) Business Days after any exercise (the
"Warrant Delivery Date") and at its own expense, issue a new Warrant identical
in all respects to this Warrant exercised except it shall represent rights to
purchase the number of Warrant Shares purchasable immediately prior to such
exercise under this Warrant, less the number of Warrant Shares with respect to
which such Warrant is exercised.
(c) No fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Common Stock issued
upon exercise of this Warrant shall be rounded up or down to the nearest whole
number.
(d) If the Company shall fail for any reason or for no reason to
issue to the holder within five (5) Business Days of receipt of the Exercise
Delivery Documents a certificate for the number of shares of Common Stock to
which the
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holder is entitled or to credit the holder's balance account with DTC for such
number of shares of Common Stock to which the holder is entitled upon exercise
of this Warrant or a new Warrant for the number of shares of Common Stock to
which such holder is entitled pursuant to Section 2(b) hereof, the Company
shall, in addition to any other remedies under this Warrant or the Securities
Purchase Agreement or otherwise available to such holder, including any
indemnification under Section 8 of the Securities Purchase Agreement, pay as
additional damages in cash to such holder on each day after the Warrant Share
Delivery Date such exercise is not timely effected and/or each day after the
Warrant Delivery Date such Warrant is not delivered, as the case may be, in an
amount equal to 0.05% of the product of (I) the sum of the number of shares of
Common Stock not issued to the holder on or prior to the Warrant Share Delivery
Date and to which such holder is entitled and, in the event the Company has
failed to deliver a Warrant to the holder on or prior to the Warrant Delivery
Date, the number of shares of Common Stock issuable upon exercise of the Warrant
as of the Warrant Delivery Date and (II) the Closing Bid Price of the Common
Stock on the Warrant Share Delivery Date, in the case of the failure to deliver
Common Stock, or the Warrant Delivery Date, in the case of failure to deliver a
Warrant, as the case may be. The foregoing notwithstanding, the damages set
forth in this Section 2(d) shall be stayed with respect to the number of shares
of Common Stock and, if applicable, the Warrant for which there is a good faith
dispute being resolved pursuant to, and within the time periods provided for in,
Section 2(a), pending the resolution of such dispute.
(e) In the event of any exercise of the rights represented by this
Warrant in compliance with this Section 2(a), the holder, subject to the
limitations set forth in the first paragraph and Section 13 of this Warrant,
shall receive upon such exercise the "Net Number" of shares of Common Stock
determined according to the following formula (a "Cashless Exercise"):
Net Number = (A x B) - (A x C)
---------------------
B
For purposes of the foregoing formula:
A= the Exercise Number (or such other number of shares as may
apply arising from the limitations imposed in the first
paragraph or Section 13 of this Warrant).
B= the Closing Sale Price of the Common Stock on the Trading
Day immediately preceding the date of the exercise of this
Warrant.
C= the Warrant Exercise Price then in effect for the
applicable Warrant Shares at the time of such exercise.
Section 3. COVENANTS AS TO COMMON STOCK. The Company hereby
covenants and agrees as follows:
(a) This Warrant is, and any Warrants issued in substitution for or
replacement of this Warrant will upon issuance be, duly authorized and validly
issued.
(b) All Warrant Shares which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued, fully
paid and nonassessable
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and free from all taxes, liens and charges created by or through the Company
with respect to the issue thereof.
(c) During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved the number of shares of Common Stock needed to provide for the exercise
of the rights then represented by this Warrant and the par value of said shares
will at all times be less than or equal to the applicable Warrant Exercise
Price.
(d) The Company shall not later than the Make-Whole Date secure the
listing of the shares of Common Stock issuable upon exercise of this Warrant
upon each national securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all shares of Common
Stock from time to time issuable upon the exercise of this Warrant; and the
Company shall so list on each national securities exchange or automated
quotation system, as the case may be, and shall maintain such listing of, any
other shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
(e) The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder. Without limiting the generality of the
foregoing, the Company (i) will not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Warrant
Exercise Price then in effect, (ii) will take all such actions as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the exercise of this
Warrant and (iii) will not take any action which results in any adjustment of
the Exercise Number if the total number of shares of Common Stock issuable after
the action upon the exercise of all of the Warrants would exceed the total
number of shares of Common Stock then authorized by the Company's Certificate of
Incorporation and available for the purpose of issue upon such exercise.
(f) The Company will, at the time of each exercise of this Warrant,
upon the request of the holder hereof, acknowledge in writing its continuing
obligation to afford to such holder all rights to which such holder shall
continue to be entitled after such exercise in accordance with the terms of this
Warrant, provided, that if the holder of this Warrant shall fail to make any
such request, such failure shall not affect the continuing obligation of the
Company to afford such rights to the holder.
Section 4. TAXES. The Company shall pay any and all documentary,
stamp, transfer and other similar taxes which may be payable with respect to the
issuance and delivery of Warrant Shares upon exercise of this Warrant; provided,
however, that the Company shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issue or delivery of Common
Stock or other securities or property in a name other than that of the
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registered holder of this Warrant to be exercised and such holder shall pay such
amount, if any, to cover any applicable transfer or similar tax.
Section 5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as
otherwise specifically provided herein, no holder, as such, of this Warrant
shall be entitled to vote or receive dividends or be deemed the holder of shares
of the Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the holder of this Warrant of the Warrant Shares which he, she, or
it is then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as imposing any
liabilities on such holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.
Notwithstanding this Section 5, the Company will provide the holder of this
Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
Section 6. REPRESENTATIONS OF HOLDER. The holder of this Warrant, by
the acceptance hereof, represents that it is acquiring this Warrant and the
Warrant Shares for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution of
this Warrant or the Warrant Shares, except pursuant to sales registered or
exempted under the Securities Act; provided, however, that by making the
representations herein, the holder does not agree to hold this Warrant or any of
the Warrant Shares for any minimum or other specific term and reserves the right
to dispose of this Warrant and the Warrant Shares at any time in accordance with
or pursuant to a registration statement or an exemption under the Securities
Act. The holder of this Warrant further represents, by acceptance hereof, that,
as of this date, such holder is an "accredited investor" as such term is defined
in Rule 501(a) of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act (an "Accredited Investor").
Section 7. OWNERSHIP AND TRANSFER.
(a) The Company shall maintain at its principal executive offices
(or such other office or agency of the Company as it may designate by notice to
the holder hereof), a register for this Warrant, in which the Company shall
record the name and address of the person in whose name this Warrant has been
issued, as well as the name and address of each transferee. The Company may
treat the person in whose name any Warrant is registered on the register as the
owner and holder thereof for all purposes, notwithstanding any notice to the
contrary, but in all events recognizing any transfers made in accordance with
the terms of this Warrant.
(b) This Warrant may be assigned, pledged and transferred by the
holder hereof without the consent of the Company; provided, however, that such
transfer, assignment or pledge shall not be effective unless and until the
Company receives notice of such transfer, assignment or pledge.
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(c) The Company is obligated to register the Warrant Shares for
resale under the Securities Act pursuant to the Registration Rights Agreement.
The shares of Common Stock issuable upon exercise of this Warrant shall
constitute Registrable Securities (as such term is defined in the Registration
Rights Agreement). Each holder of this Warrant shall be entitled to all of the
benefits afforded to a holder of any such Registrable Securities under the
Registration Rights Agreement and such holder, by its acceptance of this
Warrant, agrees to be bound by and to comply with the terms and conditions of
the Registration Rights Agreement applicable to such holder as a holder of such
Registrable Securities.
Section 8. ADJUSTMENT OF NUMBER OF SHARES. (a) ADJUSTMENTS
GENERALLY. The number of shares of Common Stock issuable upon exercise of this
Warrant shall be adjusted from time to time (without duplication) as required by
the definition of Exercise Number and any related adjustments to the Floor Price
and Make-Whole Average in accordance with the provisions of the Debentures.
(b) NOTICES.
(i) On the Make-Whole Date, the Company shall give
written notice to the holder of this Warrant as to the calculation
of the initial Exercise Number setting forth in reasonable detail,
and certifying, the calculation of such number. Immediately upon any
adjustment of the Exercise Number, the Company will give written
notice thereof to the holder of this Warrant, setting forth in
reasonable detail, and certifying, the calculation of such
adjustment. If a holder objects in writing to the Company within ten
(10) Business Days following receipt of any such notice to the
calculation set forth in such notice and such holder and the Company
are unable to agree upon the initial calculation of the Exercise
Number or any adjustment determination within one (1) Business Day
of the Company's receipt of the holder's objection, then the Company
shall immediately submit via facsimile the disputed calculation or
adjustment to an independent, reputable investment bank selected by
the Company and reasonably acceptable to the holders of at least 75%
of the shares of Common Stock issuable upon exercise of all Warrants
then outstanding and Xxxxxx for so long as Xxxxxx holds shares of
Common Stock attributable to the conversion of not less than $10
million in principal amount of Debentures. The Company shall use its
reasonable best efforts to cause the investment bank to perform the
determinations or calculations and notify the Company and the
holders of the results no later than two (2) Business Days from the
time it receives the disputed determination. Such investment bank's
determination shall be binding upon all parties absent manifest
error.
(ii) The Company will give written notice to the holder
of this Warrant at least ten (10) Business Days prior to the date on
which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the Common Stock, (B)
with respect to any pro rata subscription offer to holders of Common
Stock or (C) for determining rights to vote with respect to any
Organic Change (as defined below), dissolution or liquidation,
provided that
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such notice shall not be required before such information is made
known to the public.
(iii) The Company will also give written notice to the
holder of this Warrant at least ten (10) Business Days prior to the
date on which any Organic Change, dissolution or liquidation will
take place, provided that such notice shall not be required before
such information is made known to the public.
(c) DELAYED ADJUSTMENT. No adjustment in the Exercise Number
shall be required unless such adjustment (plus any adjustments not previously
made by reason of this Section 8(c)) would require an increase or decrease of at
least one-half percent (0.5%); provided, however, that any adjustments which by
reason of this Section 8(c) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Section 8 shall be made to the nearest one-hundredth of a share, as the case may
be.
(d) OTHER EVENTS. If any event occurs of the type contemplated
by the provisions of this Section 8 but not expressly provided for by such
provisions, then the Company's Board of Directors will make an appropriate
adjustment in the Exercise Number.
Section 9. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER
OR SALE. Any recapitalization, reorganization, reclassification, consolidation,
merger, sale or transfer of all or substantially all of the Company's assets to
another Person or other transaction which is effected in such a way that holders
of Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock is referred to herein as "Organic Change." Prior to the
consummation of any Organic Change following which the Company is not a
surviving entity and which would not result in a Change of Control (as defined
in the Convertible Debentures), the Company will secure from the Person
purchasing such assets or the successor resulting from such Organic Change (in
each case, the "Acquiring Entity") written agreement (in form and substance
reasonably satisfactory to the holders of Warrants representing at least 75% of
the shares of Common Stock obtainable upon exercise of all Warrants then
outstanding and Xxxxxx for so long as Xxxxxx holds shares of Common Stock
attributable to conversion of not less than $10 million in principal amount of
Debentures) to deliver to each holder of Warrants in exchange for such Warrants,
a security of the Acquiring Entity or its parent evidenced by a written
instrument substantially similar in form and substance to this Warrant
(including, warrant exercise price and exercisable for a corresponding number of
shares of Common Stock acquirable and receivable upon exercise of the Warrants
(without regard to any limitations on exercises). Prior to the consummation of
any other Organic Change, the Company shall make appropriate provision (in form
and substance reasonably satisfactory to the holders of Warrants representing at
least 75% of the shares of Common Stock obtainable upon exercise of all Warrants
then outstanding and Xxxxxx for so long as Xxxxxx holds shares of Common Stock
attributable to conversion of not less than $10 million in principal amount of
Debentures) to insure that each of the holders of the Warrants will thereafter
have the right to acquire and receive in lieu of or in addition to (as the case
may be) the shares of Common Stock acquirable and receivable upon the exercise
of such holder's Warrants as of the date of consummation of such Organic Change
(without regard to any limitations on exercises), such shares of stock,
securities or assets that would have been issued or payable in such Organic
Change with
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respect to or in exchange for the number of shares of Common Stock which would
have been acquirable and receivable upon the exercise of such holder's Warrant
as of the date of such Organic Change (without taking into account any
limitations or restrictions on the exercisability of this Warrant).
Section 10. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall promptly, on
receipt of an indemnification undertaking or other form of security reasonably
acceptable to the Company (or in the case of a mutilated Warrant, the Warrant),
issue a new Warrant of like denomination and tenor as this Warrant so lost,
stolen, mutilated or destroyed. Notwithstanding the foregoing, if this Warrant
is lost by, stolen from or destroyed by the original holder hereof, the
affidavit of such original holder setting forth the circumstances of such loss,
theft or destruction shall be accepted as satisfactory evidence thereof, and no
indemnification bond or other security shall be required by the Company as a
condition to the execution and delivery by the Company of a new Warrant to such
original holder other than such original holder's unsecured written agreement to
indemnify the Company solely for losses actually incurred by the Company as a
direct consequence of the loss, theft or destruction of the Warrant.
Section 11. NOTICE. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this Warrant
must be in writing and will be deemed to have been delivered: (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business Day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. If notice is to be sent to the
Company, the holder shall use its reasonable best efforts to provide additional
copies to the individuals listed below; provided, however, that the failure of
such holder to send such additional copies shall in no way limit the
effectiveness of any notice sent to the Company as provided for below. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
CSK Auto Corporation
000 X. Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile:
Attention: [ ]
With a copy to:
Xxxxxx Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxx
If to the Transfer Agent:
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Mellon Investor Services LLC
000 Xxxxx Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxx
If to a holder of this Warrant, to it at the address and facsimile
number set forth on the Schedule of Buyers to the Securities Purchase Agreement,
with copies to such holder's representatives as set forth on such Schedule of
Buyers, or at such other address and facsimile as shall be delivered to the
Company upon the issuance or transfer of this Warrant. Each party shall provide
five days' prior written notice to the other party of any change in address or
facsimile number. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
Section 12. AMENDMENTS. This Warrant and any term hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought and shall be binding on such party's
or holder's assignees and transferees; provided; however, that any such change,
waiver, discharge or termination that adversely impacts the holders of any of
the Warrants other than this Warrant may be made only if the Company has
obtained the written consent of the holders of Warrants representing at least
75% of the shares of Common Stock issuable upon exercise of all of the Warrants
then outstanding and Xxxxxx for so long as Xxxxxx holds shares of Common Stock
attributable to conversion of not less than $10 million in principal amount of
Debentures; provided, further, that no such action may increase the Warrant
Exercise Price or decrease the number of shares or class of stock issuable upon
exercise of any Warrants without the written consent of the holder of such
Warrant.
Section 13. LIMITATION ON NUMBER OF WARRANT SHARES. Notwithstanding
anything to the contrary contained herein, the Company shall not issue and shall
not be obligated to issue any Warrant Shares upon exercise of this Warrant (i)
to holders of Warrants other than Investcorp CSK Holdings L.P. or its affiliates
("Investcorp") and other affiliates of the Company, if the issuance of such
Warrant Shares would exceed that number of shares of Common Stock which the
Company may issue upon exercise of this Warrant without breaching the Company's
obligations under the rules or regulations of the Principal Market, or the
market or exchange where the common Stock is then traded (the "Exchange Cap"),
(ii) to Investcorp or any other affiliate of the Company, in any event, or (iii)
in violation of any applicable law, except that the limitations set forth in
subclauses (i) and (ii) shall not apply in the event that the Company (a)
obtains the approval of its stockholders as required by the Principal Market (or
any successor rule or regulation) for issuances of Common Stock in excess of the
Exchange Cap (or, in the case of Investcorp, the limitations under such
applicable rules and regulations on issuances of shares to affiliates of the
Company) or (b) obtains a written opinion
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from outside counsel to the Company that such approval is not required, which
opinion shall be reasonably satisfactory to the holders of Warrants representing
at least 75% of the Warrant Shares then issuable upon exercise of outstanding
Warrants and Xxxxxx for so long as Xxxxxx holds shares of Common Stock
attributable to conversion of not less than $10 million in principal amount of
Debentures. Except for Investcorp (which until such approval or written opinion
is obtained shall not receive any Warrant Shares), until such approval or
written opinion is obtained, the holder of this Warrant shall not be issued,
upon exercise of this Warrant, Warrant Shares in an amount greater than such
holder's Cap Allocation Amount (as such term is defined in the Convertible
Debentures). In the event the Company is prohibited from issuing Warrant Shares
as a result of the operation of this Section 13, on or after the date on which
the Company holds its next stockholders meeting after determining that it is
subject to the Exchange Cap, provided that at such meeting the Company does not
receive the stockholder approval referred to in (a), then the Company shall
redeem for cash those Warrant Shares which cannot be issued, at a price equal to
the excess, if any, of the Closing Sale Price of the Common Stock above the
Warrant Exercise Price of such Warrant Shares as of the date of the attempted
exercise.
Section 14. DATE. The date of this Warrant is December __, 2001 (the
"Warrant Date"). This Warrant, in all events, shall be wholly void and of no
effect from and after the Make-Whole Date (unless extended as provided herein
and except as provided in the penultimate sentence of the first paragraph hereof
and as provided in Section 13 hereof), except that notwithstanding any other
provisions hereof, the provisions of Section 7(c) shall continue in full force
and effect after such date as to any Warrant Shares or other securities issued
upon the exercise of this Warrant.
Section 15. Judicial Proceedings. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in The City of New York, Borough of Manhattan, for the adjudication of
any dispute under this Warrant or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Warrant and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.
Section 16. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive
headings of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The corporate
laws of the State of Delaware shall govern all issues concerning the relative
rights of the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Warrant shall be
governed by the internal laws of the State of New York, without giving effect to
any
B-14
choice of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York.
[* * * *]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by as of the ____ day of December, 2001.
CSK AUTO CORPORATION
By:
---------------------------
Name:
Title:
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EXHIBIT A TO WARRANT
[Date]
CSK Auto Corporation
Attention: General Counsel
Ladies and Gentlemen:
We are counsel for [_____] (the "Seller") and have been requested to furnish to
CSK Auto Corporation (the "Company") an opinion with respect to certain
"restricted securities" owned by the Seller.
[The bracketed, numbered items are applicable only to a Rule 144 opinion] As a
basis for this opinion, we have received and reviewed copies of the following
documents:
1. A letter from the Seller dated [_____], 200[_]
providing information related to the securities owned
by the Seller.
2. [The Notice on Form 144 filed by the Seller with the
Securities and Exchange Commission [and any
applicable securities exchange] on [_____], 200[_].]
3. [A letter from [_____] (the "Broker") dated [_____],
200[_] certifying that the proposed sale will be made
in "brokers' transactions" as defined in Rule 144
promulgated under the Securities Act of 1933, as
amended (the "Act").]
We have been notified that the Seller proposes to sell [[_______] shares (the
"Shares")of the Common Stock/$[_______] principal amount of the 7% Convertible
Subordinated Debentures due December __, 2006 (the "Debentures")/Warrants to
purchase [_______] shares of the Common Stock (the "Warrants")] of the Company
in a private transaction, and that the Seller will deliver to the
[Broker/Company's transfer agent/Company] [certificate number [__] representing
[_____] shares of the Common Stock/Debenture number [__] representing $[______]
principal amount of the Debentures/Warrant number [__] representing Warrants to
purchase [______] shares of the Common Stock] of the Company registered in the
name of the Seller.
On the basis of the foregoing and assuming the accuracy of the representations
of the Seller [and the Broker], it is our opinion that the proposed sale of the
[Shares/Debentures/Warrants] by the Seller, if effected in accordance with the
terms and provisions set forth in the above-specified documents, will comply
with [Rule 144/Section 4(2) of the Act] and that the
B-A-1
[Shares/Debentures/Warrants] may be transferred without compliance with the
registration requirements of the Act.
The Company and/or its counsel may rely on this opinion in rendering an opinion
to the Company's transfer agent regarding the Seller's transfer of the
[Shares/Debentures/Warrants]. Any questions concerning the foregoing opinion
should be communicated to [_____] of this firm.
B-A-2
EXHIBIT B TO WARRANT
WARRANT ISSUANCE NOTICE
TO BE EXECUTED BY CSK AUTO CORPORATION
CSK Auto Corporation hereby notifies the Transfer Agent that
__________ of the shares of Common Stock ("Warrant Shares") of CSK AUTO
CORPORATION, a Delaware corporation (the "Company"), evidenced by the attached
Warrant (the "Warrant") have been automatically exercised pursuant to such
Warrant and should be delivered to the undersigned Buyer. Capitalized terms used
herein and not otherwise defined shall have the respective meanings set forth in
the Warrant.
1. Form of Warrant Exercise Price. The payment of the Warrant
Exercise Price shall be made as:
______ "Cashless Exercise" with respect to ______ Warrant
Shares.
2. Exercise Information
Date of Exercise: _____________________________________________________
Number of shares of Common Stock to be issued: ________________________
Tax ID Number (If applicable): ________________________________________
Please issue the Common Stock for which the Warrants are being exercised
and, if applicable, any check drawn on an account of the Company in the
following name and to the following address:
Issue to:
_____________________________________________________
Address:
_____________________________________________________
Telephone Number:
____________________________________________
Facsimile Number:
___________________________________________
Authorization:
______________________________________________
By:
_____________________________________________________
Title:
_____________________________________________________
Dated:
_____________________________________________________
Account Number (if electronic book entry transfer):
Transaction Code Number (if electronic book entry transfer):______
B-B-1
Date:
-------------
CSK Auto Corporation
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
B-B-2
ACKNOWLEDGMENT
The undersigned buyer (the "Buyer") hereby acknowledges this Warrant
Issuance Notice and hereby directs Transfer Agent to issue the above indicated
number of shares of Common Stock in accordance with the Irrevocable Transfer
Agent Instructions dated November ___, 2001 from the Company and acknowledged
and agreed to by Transfer Agent.
1. Delivery of Warrant Shares. The holder of this warrant has
sold or will sell the shares of common stock issuable pursuant
to this Notice pursuant to a registration statement or an
exemption from registration under the Securities Act of 1933,
as amended.
2. Private Placement Representations. The holder of this Warrant
confirms the continuing validity of the representations set
forth in Section 6 of the Warrant.
3. Buyer Information. The Buyer acknowledges the information with
respect to Buyer set forth above is accurate.
Name of Registered Buyer
By:
-----------------------------
Name:
---------------------------
Title:
---------------------------
---------------------------------
B-B-3
INDEX OF TERMS
Page
Accredited Investor......................................................... 9
Acquiring Entity............................................................ 12
Adjusted Conversion Price................................................... 4
Bloomberg................................................................... 2
Business Day................................................................ 2
Cashless Exercise........................................................... 7
Closing Bid Price........................................................... 2
Closing Sale Price.......................................................... 3
Common Stock................................................................ 4
Company..................................................................... 1
Convertible Debentures...................................................... 4
Convertible Securities...................................................... 4
Distribution................................................................ 10
DTC......................................................................... 6
Exercise Delivery Documents................................................. 6
Exercise Number............................................................. 4
Investcorp.................................................................. 14
Xxxxxx...................................................................... 3
Make-Whole Amount........................................................... 4
Make-Whole Date............................................................. 4
Mandatory Conversion........................................................ 4
Net Number.................................................................. 7
NYSE........................................................................ 5
Objecting Holders........................................................... 3
Option...................................................................... 4
Organic Change.............................................................. 12
Outstanding Principal Amount................................................ 4
Person...................................................................... 5
Principal Market............................................................ 5
Purchase Rights............................................................. 12
Registration Rights Agreement............................................... 5
Securities Act.............................................................. 5
Securities Purchase Agreement............................................... 2
Trading Day................................................................. 5
Warrant..................................................................... 5
Warrant Date................................................................ 15
Warrant Delivery Date....................................................... 6
Warrant Exercise Price...................................................... 5
Warrant Share Delivery Date................................................. 5
Warrant Shares.............................................................. 5
EXHIBIT C TO SECURITIES PURCHASE AGREEMENT
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
December 7, 2001, by and among CSK Auto Corporation, a Delaware corporation,
with headquarters located at 000 X. Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000 (the
"Company"), and the undersigned buyers (each, a "Buyer" and collectively, the
"Buyers").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "Securities Purchase Agreement"),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyers an aggregate of
(i) $50,000,000 of the Company's 7% Convertible Debentures, plus such additional
amount as may be added to such principal amount pursuant to the second paragraph
thereof (the "Convertible Debentures"), which will be convertible into shares of
the Company's common stock, par value $0.01 per share (the "Common Stock") (as
converted, the "Conversion Shares") and (ii) the Company's Make-Whole Warrants
(the "Warrants") to purchase shares of Common Stock (as exercised collectively,
the "Warrant Shares"), or, if required by the Securities Purchase Agreement, to
issue the Break-Up Shares (as defined in the Securities Purchase Agreement;
B. To induce the Buyers to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws; and
C. The location of defined terms in this Agreement is set
forth on the Index of Terms attached hereto.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Buyers hereby agree as follows:
1. Definitions.
As used in this Agreement, the following terms shall have the
following meanings:
a. "Business Day" means any day other than Saturday, Sunday or
other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
C-1
b. "Investor" means a Buyer, any transferee or assignee
thereof to whom a Buyer assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section 9
and any transferee or assignee thereof to whom a transferee or assignee assigns
its rights under this Agreement and who agrees to become bound by the provisions
of this Agreement in accordance with Section 9.
c. "Person" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization and governmental or any department or agency thereof.
d. "register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis ("Rule 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").
e. "Registrable Securities" means (i) the Conversion Shares
issued or issuable upon conversion of the Convertible Debentures, (ii) the
Interest Shares (as defined in the Convertible Debentures) issued or issuable,
(iii) the Warrant Shares issued or issuable upon exercise of the Warrants, (iv)
the Break-Up Shares, if any, issued and (v) any shares of capital stock issued
or issuable with respect to the Conversion Shares, the Convertible Debentures,
the Interest Shares, the Warrant Shares, the Warrants or the Break-Up Shares as
a result of any stock split, stock dividend, recapitalization, exchange or
similar event or otherwise, without regard to any limitations on conversions of
the Convertible Debentures.
f. "Registration Statement" means a registration statement or
registration statements of the Company filed under the 1933 Act covering the
resale of Registrable Securities.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
2. Registration.
a. Mandatory Registration. The Company shall prepare, and, as
soon as practicable but in no event later than thirty (30) days after the
earlier of (i) the Closing Date (as defined in the Securities Purchase
Agreement) or (ii) the Closing Deadline (as defined in the Securities Purchase
Agreement) (the "Closing Filing Deadline"), file with the SEC a Registration
Statement or Registration Statements (as provided for below in this Section
2(a)) on Form S-3 covering the resale of all of the Registrable Securities
(other than the Break-Up Shares) if a closing has occurred on or prior to the
Closing Deadline or the Break-Up Shares if such closing has not occurred. In the
event that Form S-3 is unavailable for such a registration, the Company shall
use such other form as is available for such a registration, subject to the
provisions of Section 2(d). The Registration Statement referenced above shall
register for resale (i) at least 12.7 million shares of Common Stock if a
closing has occurred on or prior to the Closing Deadline or (ii) if Break-Up
Shares are issued, the number of Break-Up Shares. The Company
C-2
shall use its best efforts to have the Registration Statement declared effective
by the SEC as soon as practicable, on or before the date which is one hundred
twenty (120) days after the Closing Filing Deadline (the "Closing Effectiveness
Deadline"). To the extent that a closing occurs during the Post-Closing
Participation Period (as defined in the Securities Purchase Agreement) and the
Registration Statement filed with respect to the Closing Filing Deadline has not
yet been declared effective by the SEC, the Company shall amend such
Registration Statement to include the Convertible Debentures and Warrants be
issued during the Post-Closing Participation Period and at least 125% of the
number of shares then issuable upon conversion of such Convertible Debentures
and exercise of such Warrants assuming a conversion price or exercise price, as
applicable, of 62.5% of the Standard Conversion Price in effect at the time of
issuance (the "Post-Closing Securities"). To the extent that a closing occurs
during the Post-Closing Participation Period and the Registration Statement
filed with respect to the Closing Filing Deadline has already been declared
effective by the SEC without inclusion of the Post-Closing Securities, the
Company shall file a new Registration Statement on Form S-3 covering the resale
of all such securities within thirty (30) days following such closing (the
"Post-Closing Filing Deadline" and collectively with the Closing Filing
Deadline, the "Filing Deadlines"). In the event that Form S-3 is unavailable for
such a registration, the Company shall use such other form as is available for
such a registration, subject to the provisions of Section 2(d). The Company
shall use its best efforts to have such Registration Statement declared
effective by the SEC as soon as practicable, on or before the date which is one
hundred twenty (120) days after the Post-Closing Filing Deadline (the
"Post-Closing Security Effectiveness Deadline" and collectively with the Closing
Effectiveness Deadline, the "Effectiveness Deadlines").
b. Allocation of Registrable Securities. The initial number of
Registrable Securities included in any Registration Statement and each increase
in the number of Registrable Securities included therein shall be allocated pro
rata among the Investors based on the number of Registrable Securities held by
each Investor at the time the Registration Statement covering such initial
number of Registrable Securities or increase thereof is declared effective by
the SEC. Any shares of Common Stock included in a Registration Statement and
which remain allocated to any Person which ceases to hold any Registrable
Securities covered by such Registration Statement shall be allocated to the
remaining Investors, pro rata based on the number of Registrable Securities then
held by such Investors which are covered by such Registration Statement. Without
the prior written consent of Buyers holding at least 75% of the Registrable
Securities and LBI Group Inc and its affiliates ("Xxxxxx") for so long as Xxxxxx
holds not less than $10 million in principal amount of Convertible Debentures
(or shares of Common Stock attributable to conversion of such Convertible
Debentures), the Company shall not (i) include on any Registration Statement
required to be filed pursuant to Section 2(a) any securities other than (A)
Registrable Securities and (B) securities held by Xxxxxxxxxxx Capital Fund
("Xxxxxxxxxxx") and subject to the Registration Rights Agreement dated August
14, 2001 between the Company and Xxxxxxxxxxx, or (ii) file any registration
statement with the SEC (other than a registration statement on Form S-8 or Form
S-4 or any successor form to such forms or a registration statement required
under the registration rights agreement entered into in connection with the
Company's Senior Notes issued on or about the Closing Date) prior to the date on
which the Registration Statement required to be filed pursuant to Section 2(a)
is declared to be effective.
C-3
c. Legal Counsel. Subject to Section 5 hereof, the Buyers
shall have the right to select one legal counsel to review and oversee any
registration pursuant to this Section 2 ("Legal Counsel"), which shall be Fried,
Frank, Harris, Xxxxxxx & Xxxxxxxx or such other counsel as thereafter designated
by the holders of at least 75% of the Registrable Securities and Xxxxxx for so
long as Xxxxxx holds not less than $10 million in principal amount of
Convertible Debentures (or shares of Common Stock attributable to conversion of
such Convertible Debentures). The Company and Legal Counsel shall reasonably
cooperate with each other in performing the Company's obligations under this
Agreement.
d. Ineligibility for Form S-3. In the event that Form S-3 is
not available for the registration of the resale of Registrable Securities
hereunder, the Company shall (i) register the resale of the Registrable
Securities on another appropriate form unless holders of at least 25% of the
Registrable Securities or Xxxxxx for so long as Xxxxxx holds not less than $10
million in principal amount of Convertible Debentures (or shares of Common Stock
attributable to conversion of such Convertible Debentures) reasonably object and
(ii) undertake to register the Registrable Securities on Form S-3 as soon as
such form is available, provided that, subject to Section 3(r), the Company
shall maintain the effectiveness of the Registration Statement then in effect
until such time as a Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the SEC.
e. Sufficient Number of Shares Registered. In the event the
number of shares available under a Registration Statement filed pursuant to
Section 2(a) is insufficient to cover all of the Registrable Securities required
to be covered by such Registration Statement or an Investor's allocated portion
of the Registrable Securities pursuant to Section 2(b), the Company shall amend
the Registration Statement, or file a new Registration Statement (on the short
form available therefor, if applicable), or both, so as to register at least
150% of the number of such Registrable Securities as of the trading day
immediately preceding the date of the filing of such amendment or new
Registration Statement, in each case, as soon as practicable, but in any event
not later than fifteen (15) Business Days after the necessity therefor arises.
The Company shall use its best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof. For purposes of the foregoing provision, the number of shares
available under a Registration Statement shall be deemed "insufficient to cover
all of the Registrable Securities" if at any time the number of Registrable
Securities covered by such Registration Statement is less than 120% of the total
number of shares of Common Stock then constituting Registrable Securities
(excluding such shares no longer owned by the Buyers). The calculation set forth
in the foregoing sentence (i) shall be made without regard to any limitations on
the conversion of the Convertible Debentures or the exercise of the Warrants,
(ii) shall assume that the Convertible Debentures and the Warrants are then
convertible into shares of Common Stock, (iii) shall include a number of
Interest Shares equal to the number that would be issuable in respect of
interest payments during a period of one year on the initial outstanding
principal amount of the Convertible Debentures and (iv) shall assume no
redemptions of the Convertible Debentures prior to the scheduled maturity date.
The foregoing calculations shall further assume that the Registrable Securities
are issuable at the then prevailing Conversion Price (as defined in the
Convertible Debentures), Warrant Exercise Price (as defined in the Warrants) or
Interest Share Conversion Rate (as defined in the Convertible Debentures), as
applicable.
C-4
f. Effect of Failure to File and Obtain and Maintain
Effectiveness of Registration Statement. If (i) a Registration Statement
required to be filed by the Company pursuant to this Agreement is (A) not filed
with the SEC on or before the applicable Filing Deadline or (B) not declared
effective by the SEC on or before the applicable Effectiveness Deadline or (ii)
on any day after such Registration Statement has been declared effective by the
SEC sales of all the Registrable Securities required to be included on such
Registration Statement cannot be made (other than during an Allowable Grace
Period (as defined in Section 3(r)) pursuant to such Registration Statement
(including, without limitation, because of a failure to keep such Registration
Statement effective, to disclose such information as is necessary for sales to
be made pursuant to such Registration Statement or to register sufficient shares
of Common Stock), then, as relief for the damages to any holder by reason of any
such delay in or reduction of its ability to sell the underlying shares of
Common Stock (which remedy shall not be exclusive of any other remedies
available at law or equity), the Company shall pay to each holder of Convertible
Debentures relating to such Registration Statement an amount equal to the
product of (i) the Outstanding Principal Amount (as such term is defined in the
Convertible Debentures) multiplied by (ii) the product of (I) 0.0005 multiplied
by (II) the sum of (x) the number of days after the applicable Filing Deadline
that the Registration Statement is not filed with the SEC, plus (y) the number
of days after the applicable Effectiveness Deadline that the Registration
Statement is not declared effective by the SEC, plus (z) the number of days
after the Registration Statement has been declared effective by the SEC that
such Registration Statement is not available (other than during an Allowable
Grace Period) for the sale of all the Registrable Securities required to be
included on such Registration Statement. The payments to which a holder shall be
entitled pursuant to this Section 2(f) are referred to herein as "Registration
Delay Payments." Registration Delay Payments shall be paid in the form of Common
Stock on the earlier of (I) the last day of the calendar month during which such
Registration Delay Payments are incurred and (II) the third Business Day after
the event or failure giving rise to the Registration Delay Payments is cured.
The number of shares of Common Stock to be issued for any Registration Delay
Payment shall be the amount of such Registration Delay Payment divided by the
average Closing Sale Price (as defined in the Debentures) of the Common Stock
for the five (5) trading days immediately preceding the date of payment. In the
event the Company fails to make Registration Delay Payments in a timely manner,
such Registration Delay Payments shall bear interest at the rate of 1.5% per
month (prorated for partial months) until paid in full.
(g) Incidental Registration.
(i) Right to Include Registrable Securities. If, at any time
or from time to time prior to the effectiveness of a Registration Statement or
during the suspension thereof other than an Allowable Grace Period, the Company
proposes to register any of its securities under the 1933 Act (other than in a
registration on Form S-4 or S-8 or any successor form to such forms or a
registration statement required under the registration rights agreement entered
into in connection with the Senior Notes issued on or about the Closing Date and
other than pursuant to Section 2) whether or not pursuant to registration rights
granted to other holders of its securities and whether or not for sale for its
own account, the Company shall deliver prompt written notice (which notice shall
be given at least thirty (30) days prior to the effectiveness of such proposed
registration) to all holders of Registrable Securities of its intention to
undertake such registration, describing in reasonable detail the proposed
registration
C-5
and distribution (including the anticipated range of the proposed offering
price, if known, the class and number of securities proposed to be registered
and the distribution arrangements) and of such holders' right to participate in
such registration under this Section 2(g) as hereinafter provided. Subject to
the other provisions of this paragraph (i) and paragraph (ii), upon the written
request of any holder of Registrable Securities made within ten (10) days after
the receipt of such written notice (which request shall specify the amount of
Registrable Securities to be registered and the intended method of disposition
thereof), the Company shall effect the registration under the 1933 Act of all
Registrable Securities requested by the holders thereof to be so registered (an
"Incidental Registration"), to the extent requisite to permit the disposition
(in accordance with the intended methods thereof as aforesaid) of the
Registrable Securities so to be registered, by inclusion of such Registrable
Securities in the registration statement which covers the securities which the
Company proposes to register (the "Incidental Registration Statement"). If an
Incidental Registration involves an underwritten public offering, promptly upon
notification to the Company from the underwriter of the price at which such
securities are to be sold, the Company shall so advise each participating holder
of Registrable Securities. The holders of Registrable Securities requesting
inclusion in an Incidental Registration may, at any time prior to the effective
date of the Incidental Registration Statement (and for any reason), revoke such
request by delivering written notice to the Company revoking such requested
inclusion.
If at any time after giving written notice of its intention to
register any securities and prior to the effective date of the Incidental
Registration Statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (A) in
the case of a determination not to register, the Company shall be relieved of
its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the registration expenses
incurred in connection therewith), without prejudice, however, to the rights of
holders to cause such registration to be effected as a registration under
Section 2, and (B) in the case of a determination to delay such registration,
the Company shall be permitted to delay the registration of such Registrable
Securities for the same period as the delay in registering such other
securities; provided, however, that if such delay shall extend beyond one
hundred twenty (120) days from the date the Company received a request to
include Registrable Securities in such Incidental Registration, then the Company
shall again give all holders the opportunity to participate therein and shall
follow the notification procedures set forth in the preceding paragraph. There
is no limitation on the number of such Incidental Registrations pursuant to this
Section 2(g) which the Company is obligated to effect.
The registration rights granted pursuant to the provisions of this
Section 2(g) shall be in addition to the registration rights granted pursuant to
the other provisions of Section 2 hereof.
(ii) Priority in Incidental Registration. If an Incidental
Registration involves an underwritten public offering (on a firm commitment
basis), and the sole or the lead managing underwriter, as the case may be, of
such underwritten public offering shall advise the Company in writing (with a
copy to each holder of Registrable Securities requesting registration) on or
before the date five (5) days prior to the date then scheduled for such offering
that, in its opinion, the amount of securities (including Registrable
Securities) requested to be included in
C-6
such registration exceeds the amount which can be sold in such offering without
materially interfering with the successful marketing of the securities being
offered (such writing to state the basis of such opinion and the approximate
number of such securities which may be included in such offering without such
effect), the Company shall include in such registration, to the extent of the
number which the Company is so advised may be included in such offering without
such effect, (i) in the case of a registration initiated by the Company, (A)
first, the Registrable Securities requested to be included in such registration
by the holders, allocated pro rata in proportion to the number of Registrable
Securities requested to be included in such registration by each of them, (B)
second, the securities that the Company proposes to register for its own
account, and (C) third, other securities of the Company to be registered on
behalf of any other Person, (ii) in the case of a registration initiated by a
Person other than the Company, (A) first, the securities requested to be
included in such registration by any Persons initiating such registration,
allocated pro rata in proportion to the number of securities requested to be
included in such registration by each of them, (B) second, the Registrable
Securities requested to be included in such registration by the holders thereof
and other securities of the company to be registered on behalf of any other
Person, allocated pro rata in proportion to the number of securities requested
to be included in such registration by each of them and (C) third, the
securities that the Company proposes to register for its own account In the
event the Company will not, in accordance with the terms of this Section
2(g)(ii), include in any registration hereunder all of the securities of any
holder requested to be included in such registration, and any such holder
determines not to include any or all of its securities in such registration,
then the holders not so reducing shall be entitled to a corresponding increase
in the amount of securities to be included in such registration.
3. Related Obligations.
At such time as the Company is obligated to file a Registration
Statement with the SEC pursuant to Section 2(a), 2(d), 2(e) or 2(g) (subject to
the second paragraph of clause 2(g)(i)), the Company will use its best efforts
to effect the registration of the Registrable Securities in accordance with the
intended method of disposition thereof and, pursuant thereto, the Company shall
have the following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (but in no
event later than the applicable Filing Deadline) and use its best efforts to
cause such Registration Statement relating to the Registrable Securities
required to be covered thereby to become effective as soon as practicable after
such filing, on or before the applicable Effectiveness Deadline. The Company
shall keep each Registration Statement effective pursuant to Rule 415 at all
times until the earlier of (i) the date as of which the Investors may sell all
of the Registrable Securities covered by such Registration Statement without
restriction pursuant to Rule 144(k) (or successor thereto) promulgated under the
1933 Act or (ii) the date on which the Investors shall have sold all the
Registrable Securities covered by such Registration Statement (the "Registration
Period"), which Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading. The term "best efforts"
C-7
shall mean, among other things, that the Company shall submit to the SEC, within
two (2) Business Days after the Company learns that no review of a particular
Registration Statement will be made by the staff of the SEC or that the staff
has no further comments on the Registration Statement, as the case may be, and
the approval of Legal Counsel pursuant to Section 3(c), a request for
acceleration of effectiveness of such Registration Statement to a time and date
not later than 48 hours after the submission of such request.
b. Subject to Section 3(r), the Company shall prepare and file
with the SEC such amendments (including post-effective amendments) and
supplements to the Registration Statement and the prospectus used in connection
with such Registration Statement, which prospectus is to be filed pursuant to
Rule 424 promulgated under the 1933 Act, as may be necessary to keep such
Registration Statement effective at all times during the Registration Period,
and, during such period, comply with the provisions of the 1933 Act with respect
to the disposition of all Registrable Securities of the Company covered by such
Registration Statement until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement
which are required to be filed pursuant to this Agreement (including pursuant to
this Section 3(b)) by reason of the Company filing a report on Form 10-K, Form
10-Q or Form 8-K or any analogous report under the Securities Exchange Act of
1934, as amended (the "1934 Act"), the Company shall have incorporated such
report by reference into such Registration Statement, if applicable, or shall
file such amendments or supplements with the SEC on the same day on which the
1934 Act report is filed which created the requirement for the Company to amend
or supplement such Registration Statement.
c. The Company shall (A) permit Legal Counsel to review and
comment upon (i) the initial Registration Statement at least five (5) Business
Days prior to its filing with the SEC and (ii) all other Registration Statements
and all amendments and supplements to all Registration Statements (except for
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K and any similar or successor reports) within a reasonable number of
days prior to their filing with the SEC, and (B) not file any Registration
Statement or amendment or supplement thereto in a form to which Legal Counsel
reasonably objects. The Company shall not submit a request for acceleration of
the effectiveness of a Registration Statement under Sections 2(a), (d) or (e) or
any amendment or supplement thereto without the prior approval of Legal Counsel,
which consent shall not be unreasonably withheld. The Company shall furnish to
Legal Counsel, without charge, (i) copies of any correspondence from the SEC or
the staff of the SEC to the Company or its representatives relating to any
Registration Statement, (ii) promptly after the same is prepared and filed with
the SEC, one copy of any Registration Statement and any amendment(s) thereto,
including financial statements and schedules, and if requested by such Legal
Counsel, all documents incorporated therein by reference and all exhibits and
(iii) upon the effectiveness of any Registration Statement, one copy of the
prospectus included in such Registration Statement and all amendments and
supplements thereto. The Company shall reasonably cooperate with Legal Counsel
in performing the Company's obligations pursuant to this Section 3.
C-8
d. The Company shall furnish to each Investor whose
Registrable Securities are included in any Registration Statement, without
charge, (i) promptly after the same is prepared and filed with the SEC, at least
one copy of such Registration Statement and any amendment(s) thereto, including
financial statements and schedules and if requested by an Investor, all
documents incorporated therein by reference all exhibits and each preliminary
prospectus, (ii) upon the effectiveness of any Registration Statement, ten (10)
copies of the prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of copies as such
Investor may reasonably request) and (iii) such other documents, including
copies of any preliminary or final prospectus, as such Investor may reasonably
request from time to time in order to facilitate the disposition of the
Registrable Securities owned by such Investor.
e. Subject to Section 3(r), the Company shall use its
reasonable best efforts, if reasonably requested by an Investor in writing, to
(i) register and qualify, unless an exemption from registration and
qualification applies, the resale by such Investor of the Registrable Securities
covered by the Registration Statement under such other securities or "blue sky"
laws of applicable jurisdictions in the United States, (ii) prepare and file in
those jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary to qualify the Registrable
Securities for sale in such jurisdictions; provided, however, that the Company
shall not be required in connection therewith or as a condition thereto to (x)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(e), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction. The Company shall promptly notify Legal
Counsel and each Investor who holds Registrable Securities of the receipt by the
Company of any notification with respect to the suspension of the registration
or qualification of any of the Registrable Securities for sale under the
securities or "blue sky" laws of any jurisdiction in the United States or its
receipt of actual notice of the initiation or threatening of any proceeding for
such purpose.
f. The Company shall notify Legal Counsel and each Investor in
writing of the happening of any event, as promptly as practicable after becoming
aware of such event, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading (provided that in no event shall such
notice contain any material, nonpublic information), and, subject to Section
3(r), promptly prepare a supplement or amendment to such Registration Statement
to correct such untrue statement or omission, and deliver ten (10) copies of
such supplement or amendment to Legal Counsel and each Investor (or such other
number of copies as Legal Counsel or such Investor may reasonably request). The
Company shall also promptly notify Legal Counsel and each Investor in writing
(i) when a prospectus or any prospectus supplement or post-effective amendment
has been filed, and when a Registration Statement or any post-effective
amendment has become effective (notification of such effectiveness shall be
delivered to Legal Counsel and each Investor by facsimile on the
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same day of such effectiveness and by overnight mail), (ii) of any request by
the SEC for amendments or supplements to a Registration Statement or related
prospectus or related information, and (iii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate.
g. Subject to Section 3(r), the Company shall use its
reasonable best efforts to prevent the issuance of any stop order or other
suspension of effectiveness of a Registration Statement, or the suspension of
the qualification of any of the Registrable Securities for sale in any
applicable jurisdiction and, if such an order or suspension is issued, to obtain
the withdrawal of such order or suspension at the earliest practicable moment
and to notify Legal Counsel and each Investor who holds Registrable Securities
being sold of the issuance of such order and the resolution thereof or its
receipt of actual notice of the initiation or threat of any proceeding for such
purpose.
h. At the reasonable request of any Investor in connection
with an underwritten public offering of Registrable Securities by such Investor,
the Company shall furnish to each underwriter in such underwritten public
offering with a copy to each requesting Investor, on such date as an Investor
may reasonably request (i) a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to such underwriters, and (ii) an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to such underwriters.
i. The Company shall make available for inspection by (i) any
Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents
retained by the Investors (collectively, the "Inspectors"), all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records") at the offices where normally kept,
during normal business hours, as shall be reasonably deemed necessary by each
Inspector, and cause the Company's officers, directors and employees to supply
all information which any Inspector may reasonably request; provided, however,
that each Inspector shall agree to hold in strict confidence and shall not make
any disclosure (except to an Investor) or use of any Record or other information
which the Company determines in good faith to be confidential, and of which
determination the Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in any
Registration Statement or is otherwise required under the 1933 Act, (b) the
release of such Records is ordered pursuant to a final, non-appealable subpoena
or order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
the Inspector has knowledge. Each Investor agrees that it shall, upon learning
that disclosure of such Records is sought in or by a court or governmental body
of competent jurisdiction or through other means, give prompt notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential. Nothing herein (or in any other confidentiality agreement
between
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the Company and any Investor) shall be deemed to limit the Investors' ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
j. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
k. The Company shall use its best efforts either to (i) cause
all the Registrable Securities covered by a Registration Statement to be listed
on each securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) if securities of the same class or series issued by the Company are then
quoted on the Nasdaq National Market, list all of the Registrable Securities
covered by the Registration Statement on the Nasdaq National Market if the
listing of such Registrable Securities is then permitted under the rules of the
National Association of Securities Dealers, Inc. ("NASD"), or (iii) if
securities of the same class or series issued by the Company are not listed on
any exchange or on the Nasdaq National Market, the Company shall use its best
efforts to secure the inclusion for quotation on The Nasdaq SmallCap Market for
such Registrable Securities and, without limiting the generality of the
foregoing, to use its best efforts to arrange for at least two market makers to
register with the NASD as such with respect to such Registrable Securities. The
Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(k).
l. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, facilitate
the timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the Investors may reasonably request and
registered in such names as the Investors may request.
m. If requested by an Investor, the Company shall as soon as
practicable incorporate in a prospectus supplement or post-effective amendment
by filing such prospectus supplement or post-effective amendment or by
supplementing or making amendments to any Registration Statement such
information as an Investor reasonably requests to be included therein relating
to the sale and distribution of Registrable Securities, including, without
limitation, information with respect to the number of Registrable Securities
being offered or sold, the purchase price being paid therefor and any other
terms of the offering of the Registrable Securities to be sold in such offering.
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n. The Company shall use its reasonable best efforts to cause
the Registrable Securities covered by a Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to consummate the disposition of such Registrable Securities.
o. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with, and in the manner provided by, the provisions of Rule 158 under the 0000
Xxx) covering a twelve-month period beginning not later than the first day of
the Company's fiscal quarter next following the effective date of a Registration
Statement.
p. The Company shall use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
q. Within two (2) Business Days after a Registration Statement
which covers Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement)
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit A.
r. Notwithstanding anything to the contrary herein, at any
time after the Registration Statement has been declared effective by the SEC,
the Company may (i) suspend the use of the Registration Statement if an event
occurs and is continuing as a result of which the Registration Statement would,
in the good faith opinion of the Board of Directors of the Company and its
counsel, contain an untrue statement of material fact or omit to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or (ii) delay the
disclosure of material non-public information concerning the Company the
disclosure of which at the time is not, in the good faith opinion of the Board
of Directors of the Company and of counsel to the Company, in the best interests
of the Company (clauses (i) and (ii) together, a "Grace Period"); provided, that
the Company shall promptly (i) notify the Investors in writing of the existence
of such event or of such material non-public information giving rise to a Grace
Period (provided that in each notice the Company will not disclose the content
of such material non-public information to the Investors) and the date on which
the Grace Period will begin, and (ii) notify the Investors in writing of the
date on which the Grace Period ends; and, provided further, that during any
three hundred sixty five (365) day period no more than two such Grace Periods
shall be permitted and such Grace Periods shall not exceed an aggregate of
forty-five (45) days (an "Allowable Grace Period"). For purposes of determining
the length of a Grace Period above, the Grace Period shall begin on and include
the date the Investors receive the notice referred to in clause (i) and shall
end on and include the later of the date the Investors receive the notice
referred to in clause (ii) and the date referred to in such notice. The
provisions of Section 3(g) hereof shall not be applicable during the period of
any Allowable Grace Period. Upon expiration of the Grace Period, the Company
shall again be bound by the first sentence of Section 3(f) with respect to the
information giving rise thereto unless such material non-public information is
no longer applicable. Each Holder agrees, if timely requested by the Company in
writing in an
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underwritten sale of securities of the Company, not to make any public sale or
distribution under the 1933 Act of any Registrable Securities (except as part of
such registration), during the time period reasonably requested by the sole or
lead managing underwriter not to exceed ninety (90) days (the "Black-out
Period"); provided, that all officers and directors of the Company and
beneficial owners of 1% or more of the Company's Common Stock are bound by the
same restriction and no such officer, director or owner is treated more
favorably than the holders of the Registrable Securities with respect to said
lock-up. Notwithstanding the foregoing, in no event shall all Grace Periods
and/or Black-out Periods in any three hundred sixty five (365) day period exceed
a total of ninety (90) days.
4. Obligations Of The Investors.
a. On or before the later to occur of two (2) Business Days
following the Company's receipt of an Investor's written request to have its
Registrable Securities included in a Registration Statement pursuant to this
Agreement in accordance with section 2(g)(i) and seven (7) Business Days prior
to the first anticipated filing date of a Registration Statement, the Company
shall notify each such requesting Investor in writing of the information the
Company requires from each such Investor if such Investor elects to have any of
such Investor's Registrable Securities included in such Registration Statement.
It shall be a condition precedent to the obligations of the Company to complete
the registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company at least three (3) Business Days prior to the anticipated filing date
such information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the effectiveness of the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in the first
sentence of Section 3(f) or Section 3(g), such Investor will immediately
discontinue disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until such Investor's receipt
of the copies of the supplemented or amended prospectus contemplated by the
first sentence of Section 3(f) or receipt of notice that no supplement or
amendment is required or, in the case of Section 3(g), the withdrawal of such
stop order or other suspension. Notwithstanding anything to the contrary, the
Company shall cause its transfer agent to deliver unlegended shares of Common
Stock to a transferee of an Investor in accordance with the terms of the
Securities Purchase Agreement in connection with any sale of Registrable
Securities with respect to which an Investor has entered into a contract for
sale prior to the Investor's receipt of a notice from the Company of the
happening of any event of the kind described in Section 3(g) or the first
sentence of 3(f) and for which the Investor has not yet settled.
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5. Expenses Of Registration.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company shall be paid by the Company.
The Company shall also reimburse the Investors for the fees and disbursements of
Legal Counsel in connection with registration, filing or qualification pursuant
to Sections 2 and 3 of this Agreement which amount shall be limited to $20,000.
In addition, the Company shall pay all of the Investors' reasonable costs
(including legal fees) incurred in connection with the successful enforcement of
the Investors' rights hereunder.
6. Indemnification.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Investor, the
directors, officers, partners, employees, agents, representatives of, and each
Person, if any, who controls any Investor within the meaning of the 1933 Act or
the 1934 Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, reasonable
attorneys' fees, amounts paid in settlement or expenses, joint or several,
(collectively, "Claims") incurred in investigating, preparing or defending any
action, claim, suit, inquiry, proceeding, investigation or appeal taken from the
foregoing by or before any court or governmental, administrative or other
regulatory agency, body or the SEC, whether pending or threatened, whether or
not an indemnified party is or may be a party thereto ("Indemnified Damages"),
to which any of them may become subject insofar as such Claims (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue statement of a
material fact in a Registration Statement or any post-effective amendment
thereto or in any filing made in connection with the qualification of the
offering under the securities or other "blue sky" laws of any jurisdiction in
which Registrable Securities are offered ("Blue Sky Filing"), or the omission or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any material violation
of this Agreement (the matters in the foregoing clauses (i) through (iv) being,
collectively, "Violations"). Subject to Section 6(c), the Company shall
reimburse the Indemnified Persons, promptly as such expenses are incurred and
are due and payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such
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Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(a): (i) shall not apply to
a Claim by an Indemnified Person arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished in writing
to the Company by such Indemnified Person for such Indemnified Person expressly
for use in connection with the preparation of the Registration Statement or any
such amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(d); (ii) with respect to any
preliminary prospectus, shall not inure to the benefit of any such person from
whom the person asserting any such Claim purchased the Registrable Securities
that are the subject thereof (or to the benefit of any person controlling such
person) if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected in the prospectus, as then amended or
supplemented, if such prospectus was timely made available by the Company
pursuant to Section 3(d), and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise to a
violation and such Indemnified Person, notwithstanding such advice, used it or
failed to deliver the correct prospectus as required by the 1933 Act and such
correct prospectus was timely made available pursuant to Section 3(d); (iii)
shall not be available to the extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered the prospectus made available by
the Company, including a corrected prospectus, if such prospectus or corrected
prospectus was timely made available by the Company pursuant to Section 3(d);
and (iv) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld or delayed. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement and each Person, if any,
who controls the Company within the meaning of the 1933 Act or the 1934 Act
(each, an "Indemnified Party"), against any Claim or Indemnified Damages to
which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim or Indemnified Damages arise out of or are
based upon any Violation, in each case to the extent, and only to the extent,
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and, subject to Section 6(c), such
Investor will reimburse any legal or other expenses reasonably incurred by an
Indemnified Party in connection with investigating or defending any such Claim;
provided, however, that the indemnity agreement contained in this Section 6(b)
and the agreement with respect to contribution contained in Section 7 shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld or delayed; provided, further, however, that the Investor
shall be liable under this Section 6(b) for only that amount of a Claim or
Claims or Indemnified Damages as does not exceed the net proceeds to such
Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable
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Securities by the Investors pursuant to Section 9. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for such
Indemnified Person or Indemnified Party to be paid by the indemnifying party,
if, in the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least 75% in interest of
the Registrable Securities included in the Registration Statement to which the
Claim relates and, if Xxxxxx is one of such Investors, Xxxxxx for so long as
Xxxxxx holds not less than $10 million in principal amount of Debentures (or
shares of Common Stock attributable to such Debentures). The Indemnified Party
or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or Claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or Claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its prior written consent, provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnified Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party or Indemnified Person of a release from all liability in
respect to such Claim or litigation. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this
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Section 6, except to the extent that the indemnifying party is prejudiced in its
ability to defend such action.
d. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
e. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. Contribution.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no person involved in the sale of Registrable Securities which person is
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 0000 Xxx) in connection with such sale shall be entitled to contribution
from any person involved in such sale of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (ii) contribution or contributions
by any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities pursuant to such Registration Statement.
8. Reports Under The 1934 Act.
With a view to making available to the Investors the benefits of
Rule 144 promulgated under the 1933 Act or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees
during the Registration Period to:
a. make and keep public information available, as those
terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company, if true, that it has complied with the reporting requirements of Rule
144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and
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documents so filed by the Company, and (iii) such other information as may be
reasonably requested to permit the Investors to sell such securities pursuant to
Rule 144 without registration.
9. Assignment of Registration Rights.
The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of such Investor's
Registrable Securities if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned; (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws;
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein,
evidenced by signing a signature page to this Agreement in its then current
form; and (v) such transfer shall have been made in accordance with the
applicable requirements of the Securities Purchase Agreement.
10. Amendment of Registration Rights.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who then hold at least 75% of the Registrable Securities and
Xxxxxx for so long as Xxxxxx holds not less than $10 million in principal amount
of Convertible Debentures (or shares of Common Stock attributable to conversion
of such Convertible Debentures). Any amendment or waiver effected in accordance
with this Section 10 shall be binding upon each Investor and the Company. No
such amendment shall be effective to the extent that it applies to less than all
of the holders of the Registrable Securities unless such amendment is not
adverse to the remaining holders. No consideration shall be offered or paid to
any Person to amend or consent to a waiver or modification of any provision of
any of this Agreement unless the same consideration also is offered to all of
the parties to this Agreement. Notwithstanding any other provision in this
Agreement, at the election of the Company on or prior to Closing Date, this
Agreement shall be amended to add one or more parties as parties hereto that may
be added as parties to the Securities Purchase Agreement.
11. Miscellaneous.
a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the such record owner of such Registrable Securities.
C-18
b. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business Day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
CSK Auto Corporation
000 X. Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telephone: (000)000-0000
Facsimile: (000) 000-0000
Attention: Xxx Xxxxxx
With a copy to:
Xxxxxx Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx Xxxxxx
If to Legal Counsel:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers attached hereto, with copies to such Buyer's representatives as set forth
on the Schedule of Buyers, or to such other address and/or facsimile number
and/or to the attention of such other person as the recipient party has
specified by written notice given to each other party five (5) days prior to the
effectiveness of such change. Written confirmation of receipt (A) given by the
recipient of such notice, consent, waiver or other communication, (B)
mechanically or electronically generated by the sender's facsimile machine
containing the time, date, recipient facsimile number and an image of the first
page of such transmission or (C) provided by a courier or overnight courier
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
C-19
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the non- exclusive jurisdiction of the state and federal courts
sitting the City of New York, borough of Manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby or discussed herein, and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit,
action or proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
e. The Transaction Documents (as defined in the Securities
Purchase Agreement) and the documents referenced herein and therein constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. The
Transaction Documents supersede all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in identical counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by
C-20
facsimile transmission of a copy of this Agreement bearing the signature of the
party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations required to be made
by the Investors pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by Investors holding at least 75% of the
Registrable Securities and Xxxxxx for so long as Xxxxxx holds not less than $10
million in principal amount of Convertible Debentures (or shares of Common Stock
attributable to conversion of such Convertible Debentures), determined as if all
of the Convertible Debentures held by Investors then outstanding have been
converted into Registrable Securities and all Warrants then outstanding have
been exercised for Registrable Securities without regard to any limitations on
conversion of the Convertible Debentures or on exercise of the Warrants.
k. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent and no rules
of strict construction will be applied against any party.
l. This Agreement is intended for the benefit of the parties
hereto and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.
* * * * * *
C-21
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
CSK AUTO CORPORATION LBI GROUP INC.
By: By:
--------------------- ---------------------
Name: Name:
Its: Title:
C-22
[Additional Buyers Signature Page to Registration Rights Agreement]
INVESTCORP CSK HOLDINGS L.P.
By:
---------------------
Name:
Its:
SCHEDULE OF BUYERS
Investor Address Investor's Representative's Address
Investor and Facsimile Number and Facsimile Number
-------- -------------------- --------------------
LBI Group Inc. Xxxxxx Brothers Inc. Xxxxxx Brothers Inc.
x/x Xxxxxxxx Xxxxxxxxx x/x Xxxxxxxx Xxxxxxxxx Hotel
Hotel 000 0xx Xxxxxx
000 0xx Xxxxxx Room 809
Room 809 NY, NY 10019
XX, XX 00000 fax: (000)-000-0000
Fax: (000)-000-0000 phone: (000)-000-0000
Attention: Xxxxx Xxxxxx, Attention: Xxxxx Xxxxxx, LBI
LBI Group Inc. Group Inc.
Investcorp CSK Holdings Investcorp Bank E.C. Investcorp Bank E.C.
L.P. Investcorp House Investcorp House
X.X. Xxx 0000 X.X. Xxx 0000
Xxxxxx, Xxxxxxx Xxxxxx, Xxxxxxx
Fax: 000-000-000-000 Fax: 000-000-000-000
Attention: Xxxx X. Xxxx Attention: Xxxx X. Xxxx
C-24
EXHIBIT A TO REGISTRATION RIGHTS AGREEMENT
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Transfer Agent]
Attn:
Re: CSK Auto Corporation
Ladies and Gentlemen:
We are counsel to CSK Auto Corporation, a Delaware corporation
(the "Company"), and have represented the Company in connection with that
certain Securities Purchase Agreement (the "Purchase Agreement") entered into by
and among the Company and the buyers named therein on the Schedule of Buyers
(collectively, the "Buyers") pursuant to which the Company issued to the Buyers
its 7% Convertible Debentures due December __, 2006 (the "Debentures")
convertible into shares of the Company's Common Stock, par value $0.01 per share
(the "Common Stock"), warrants exercisable for shares of its Common Stock (the
"Warrants"), shares of Common Stock issued as Interest Shares (as defined in the
Debentures) and shares of Common Stock issued pursuant to Section 1(d) of the
Purchase Agreement (the "Break-Up Shares"). Pursuant to the Purchase Agreement,
the Company also has entered into a Registration Rights Agreement with the
Buyers (the "Registration Rights Agreement") pursuant to which the Company
agreed, among other things, to register the Registrable Securities (as defined
in the Registration Rights Agreement), including the Break-Up Shares, the
Interest Shares and shares of Common Stock issuable upon conversion of the
Debentures and exercise of the Warrants under the Securities Act of 1933, as
amended (the "1933 Act"). In connection with the Company's obligations under the
Registration Rights Agreement, on ____________ ___, 200_, the Company filed a
Registration Statement on Form S-3 (File No. 333-_____________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of the Buyers as
a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member
of the SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:_____________________
CC: [LIST NAMES OF BUYERS C-A-1
INDEX OF TERMS
Page
----
1933 Act 1
1934 Act 8
Agreement 1
Allowable Grace Period 13
Best efforts 8
Black-out Period 13
Blue Sky Filing 15
Business Day 1
Buyer 1
Claims 14
Closing Effectiveness Deadline 3
Closing Filing Deadline 2
Common Stock 1
Company 1
Conversion Shares 1
Convertible Debentures 1
Effectiveness Deadlines 3
Filing Deadlines 3
Grace Period 12
Incidental Registration 6
Incidental Registration Statement 6
Indemnified Damages 14
Indemnified Party 15
Indemnified Person 14
Inspectors 10
Interest Shares 2
Investor 2
Legal Counsel 4
Xxxxxx 3
NASD 11
Xxxxxxxxxxx 3
Person 2
Post-Closing Filing Deadline 3
Post-Closing Securities 3
Post-Closing Security Effectiveness Deadline 3
Records 10
Register 2
Registrable Securities 2
Registration Delay Payments 5
Registration Period 8
Registration Statement 2
Rule 144 17
Rule 415 2
SEC 2
Securities Purchase Agreement 1
Violations 15
Warrant Shares 1
Warrants 1
EXHIBIT D TO SECURITIES PURCHASE AGREEMENT
BREAK-UP SHARE ISSURANCE NOTICE
TO BE EXECUTED BY CSK AUTO CORPORATION
CSK Auto Corporation hereby notifies the Transfer Agent that
_______ shares of Common Stock (the "Break-up Shares") of CSK Auto Corporation,
a Delaware corporation (the "Company") will be issued to _________________ (the
"Buyer").
1. Delivery of Break-up Shares.
2. Delivery Information
Number of shares of Common Stock to be issued:
-------------------------
Tax ID Number (If applicable):
----------------------------------------
Please issue the Common Stock and, if applicable, any check drawn on an
account of the Company in the following name and to the following address:
Issue to:
--------------------------------------------
--------------------------------------------
Address:
---------------------------------------------
Telephone Number:
------------------------------------
Facsimile Number:
------------------------------------
Authorization:
---------------------------------------
By:
--------------------------------------------------
Title:
-----------------------------------------------
Dated:
Account Number (if electronic book entry transfer):
--------------------
Transaction Code Number (if electronic book entry transfer):
-------
Date: ,
--------------- -- ----
----------------------------------
CSK Auto Corporation
D-1
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
D-2
ACKNOWLEDGMENT
The undersigned buyer (the "Buyer") hereby acknowledges this
Break-up Share Issuance Notice and hereby directs Transfer Agent to issue the
above indicated number of shares of Common Stock in accordance with the
Irrevocable Transfer Agent Instructions dated December ___, 2001 from the
Company and acknowledged and agreed to by Transfer Agent.
1. Delivery of Break-up Shares. The holder of these Break-up
Shares has sold or will sell the shares of common stock issuable pursuant to
this Notice pursuant to a registration statement or an exemption from
registration under the Securities Act of 1933, as amended.
2. Private Placement Representations. The undersigned confirms
that the representations and warranties contained in Section 2(a) and (b) of the
Securities Purchase Agreement entered into in connection with the initial
issuance of the Break-up Shares are true and correct as to the undersigned as of
the date hereof.
3. Buyer Information. The Buyer acknowledges the information
with respect to Buyer set forth above is accurate.
Name of Registered Buyer
By:
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
D-3
EXHIBIT E TO SECURITIES PURCHASE AGREEMENT
December __, 2001
(000) 000-0000 C18591-00030
LBI Group
[Address]
Re: CSK Auto Corporation - Securities Purchase Agreement
Ladies and Gentlemen:
We have acted as counsel to CSK Auto Corporation, a Delaware
corporation (the "Company"), in connection with the issuance and sale
of an aggregate principal amount of $50 million of 7% Convertible
Debentures Due December __, 2006 dated as of the date hereof of the
Company dated December __, 2001 (collectively, the "Debentures") and
Warrants dated as of the date hereof (collectively, the "Warrants") to
purchase Common Stock of the Company (the "Warrant Shares") pursuant to
the Securities Purchase Agreement (the "Purchase Agreement"), dated as
of the date hereof, by and among the Company, Investcorp CSK Holdings
L.P. ("Investcorp L.P.") and you. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings assigned to
such terms in the Purchase Agreement. The Purchase Agreement, the
Debentures, the Warrants and the Registration Rights Agreement dated as
of the date hereof (the "Registration Rights Agreement") by and among
the Company, Investcorp L.P. and you are collectively referred to
herein as the "Transaction Documents."
We have assumed without independent investigation that:
a) The signatures on all documents examined by us are
genuine, all individuals executing such documents had
all requisite legal capacity and competency and
(except in the case of documents signed on behalf of
the Company) were duly authorized, the documents
submitted to us as originals are authentic and the
documents submitted to us as certified or
reproduction copies conform to the originals;
b) Each party to the Transaction Documents (other than
the Company) has all requisite power and authority to
execute, deliver and perform its obligations under
each of the Transaction Documents to which it is a
party, the execution and delivery of such Transaction
Documents by such party and performance of its
E-1
LBI Group
December __, 2001
Page 2
obligations thereunder have been duly authorized by
all necessary corporate or other action and do not
violate any law, regulation, order, judgment or
decree applicable to such party, and such Transaction
Documents have been duly executed and delivered by
each such party and are legal, valid and binding
obligations of such party), enforceable against it in
accordance with their respective terms;
c) The execution, delivery and performance of the
Transaction Documents by the Company do not and will
not violate any law, regulation, order, judgment or
decree applicable to the Company, except as expressly
covered by our opinions in paragraphs 6, 7 and 8
below;
d) There are no agreements or understandings between or
among any of the parties to the Transaction Documents
or third parties that would expand, modify or
otherwise affect the terms of the Transaction
Documents or the respective rights or obligations of
the parties thereunder;
In rendering this opinion, we have made such
inquiries and examined, among other things, originals or
copies, certified or otherwise identified to our satisfaction,
of such records, agreements, certificates, instruments and
other documents as we have considered necessary or appropriate
for purposes of this opinion. As to certain factual matters,
we have relied to the extent we deemed appropriate and without
independent investigation upon the representations and
warranties of the Company in the Transaction Documents,
certificates of officers of the Company (collectively, the
"Officers' Certificate") or certificates obtained from public
officials and others.
Except as expressly stated otherwise herein,
whenever an opinion herein with respect to the existence or
absence of facts is stated to be to our knowledge, such
statement is intended to signify that, during the course of
our representation of the Company, as herein described, no
information has come to the attention of the lawyers working
on the transactions contemplated by the Transaction Documents
who are currently partners of or employed by this firm that
would give us actual knowledge of facts contrary to the
existence or absence of the facts indicated. However, we have
not undertaken any independent investigation to determine the
existence or absence of such facts, and no inference as to our
knowledge of the existence or absence of such facts should be
drawn from our representation of the Company or any affiliate
thereof.
Based on the foregoing and in reliance
thereon, and subject to the assumptions, exceptions,
qualifications and limitations set forth herein, we are of the
opinion that:
E-2
LBI Group
December __, 2001
Page 3
1. The Company is a validly existing corporation in
good standing under the laws of its state of incorporation and has all
requisite corporate power and authority to execute, deliver and perform
its obligations under the Transaction Documents to which it is a party.
2. The execution and delivery by the Company of the
Transaction Documents to which it is a party and the performance of its
obligations thereunder have been duly authorized by all necessary
corporate action. Each Transaction Document has been duly executed and
delivered by the Company.
3. Each Transaction Document constitutes a legal,
valid and binding obligation of the Company, enforceable against it in
accordance with its terms.
4. Each of the Purchase Agreement and the
Registration Rights Agreement constitutes a legal, valid and binding
obligation of Investcorp, L.P., enforceable against it in accordance
with its terms.
5. The issuance and sale of the Debentures and the
Warrants has been duly authorized. The issuance and sale of the
Conversion Shares, the Interest Shares and the Warrant Shares has been
duly authorized and all such shares (to the extent described in Section
__ of the Purchase Agreement) have been duly reserved for issuance upon
conversion of the Debentures, payment of interest and exercise of the
Warrants, respectively, in accordance with the terms of the Purchase
Agreement, the Debentures and the Warrants. No stockholder of the
Company or any other person is entitled to any preemptive rights with
respect to the issuance of the Debentures, the Warrants, the Conversion
Shares or the Warrant Shares under the charter of the Company or any
Material Contract (except for rights that have been waived). The
Conversion Shares, the Interest Shares and the Warrant Shares, when
issued and delivered upon conversion of the Debentures, payment of
interest or exercise of the Warrants in accordance with the terms
thereof, will be duly and validly issued, fully paid and nonassessable.
6. Assuming the accuracy of the representations and
warranties of the Company and the Purchasers contained in the Purchase
Agreement, and compliance by them with their respective agreements
included in the Transaction Documents, the issuance and sale of the
Debentures and Warrants, the issuance of the Conversion Shares upon
conversion of the Debentures, the issuance of Interest Shares in
payment of interest and the issuance of the Warrant Shares upon
exercise of the Warrants do not require registration under the 1933
Act.
7. The execution, delivery and performance by the
Company of the Transaction Documents, and the issuance and sale of the
Debentures, the Conversion
E-3
LBI Group
December __, 2001
Page 4
Shares, the Interest Shares, the Warrants or the Warrant Shares as
contemplated by the Transaction Documents, do not and will not
(i) violate (A) the charter or bylaws of the Company, or (B)
based solely upon review of the orders, judgments or decrees
identified to us in the Officers' Certificate as constituting
all orders, judgments or decrees binding on the Company, which
are listed in part I of Schedule A hereto (each, a
"Governmental Order"), any Governmental Order, or
(ii) based solely upon review of the documents identified to
us in the Officers' Certificate as constituting all material
contracts of the Company, which are listed in part II of
Schedule A hereto (each a "Material Contract"), result in a
material breach of or default under any Material Contract.
8. The execution, delivery and performance by the
Company of the Transaction Documents, and the issuance and sale of the
Debentures, the Conversion Shares, the Interest Shares, the Warrants or
the Warrant Shares as contemplated by the Transaction Documents, do not
and will not violate, or require any filing with or approval of any
governmental authority or regulatory body of the State of New York or
the United States of America under, any law or regulation of the State
of New York or the United States of America applicable to the Company
that, in our experience, is generally applicable to transactions in the
nature of those contemplated by the Transaction Documents, or the
Delaware General Corporation Law.
9. The Company is not required to register as an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
10. Schedule B sets forth the number of shares of
each class of authorized capital stock of the Company.
11. To our knowledge, except for matters disclosed in
writing to the Purchasers pursuant to the Purchase Agreement, there is
no action, suit or proceeding that is pending or has been overtly
threatened in writing against the Company or any Subsidiary which could
reasonably be expected to have a Material Adverse Effect.
The foregoing opinions are subject to the following
exceptions, qualifications and limitations:
A. We render no opinion herein as to matters
involving the laws of any jurisdiction other than the State of New York
and the United States of America and, for purposes of paragraphs 1, 2,
5, 7, 8 and 10 above, the Delaware General Corporation
E-4
LBI Group
December __, 2001
Page 5
Law. We are not engaged in practice in the State of Delaware; however,
we are generally familiar with the Delaware General Corporation Law as
presently in effect and have made such inquiries as we consider
necessary to render the opinions contained in paragraphs 1, 2, 5, 7, 8
and 10 above. This opinion is limited to the effect of the present
state of the laws of the State of New York, the United States of
America and, to the limited extent set forth above, the State of
Delaware and the facts as they presently exist. We assume no obligation
to revise or supplement this opinion in the event of future changes in
such laws or the interpretations thereof or such facts. Except as
expressly set forth in paragraph 6 above, we express no opinion
regarding the 1933 Act , or any other federal or state securities laws
or regulations.
B. Our opinions set forth in paragraphs 3 and 4 are
subject to (i) the effect of any bankruptcy, insolvency,
reorganization, moratorium, arrangement or similar laws affecting the
rights and remedies of creditors generally (including, without
limitation, the effect of statutory or other laws regarding fraudulent
transfers or preferential transfers) and (ii) general principles of
equity, including without limitation concepts of materiality,
reasonableness, good faith and fair dealing and the possible
unavailability of specific performance, injunctive relief or other
equitable remedies regardless of whether enforceability is considered
in a proceeding in equity or at law.
C. We express no opinion regarding the effectiveness
of (i) any waiver (whether or not stated as such) under the Transaction
Documents of, or any consent thereunder relating to, unknown future
rights or the rights of any party thereto existing, or duties owing to
it, as a matter of law; (ii) any waiver (whether or not stated as such)
contained in the Transaction Documents of rights of any party, or
duties owing to it, that is broadly or vaguely stated or does not
describe the right or duty purportedly waived with reasonable
specificity; (iii) provisions relating to indemnification, exculpation
or contribution, to the extent such provisions may be held
unenforceable as contrary to public policy or federal or state
securities laws or due to the negligence or willful misconduct of the
indemnified party; (iv) any provision in any Transaction Document
waiving the right to object to venue in any court; (v) any agreement to
submit to the jurisdiction of any Federal Court; (vi) any waiver of the
right to jury trial; (vii) any provisions in the Transaction Documents
that may be construed as imposing penalties or forfeitures; or (viii)
any provision to the effect that every right or remedy is cumulative
and may be exercised in addition to any other right or remedy or that
the election of some particular remedy does not preclude recourse to
one or more others.
D. In rendering our opinions expressed in paragraph 7
insofar as they require interpretation of Material Contracts, we
express no opinion with respect to the compliance by the Company with,
or any financial calculations or data in respect of, financial
covenants included in any Material Contract.
E-5
LBI Group
December __, 2001
Page 6
E. We express no opinion as to the applicability to,
or the effect of noncompliance by, you with any state or federal laws
applicable to the transactions contemplated by the Transaction
Documents because of the nature of your business.
This opinion is rendered to you in connection with
the Transaction Documents and may not be relied upon by any person
other than you or by you in any other context, provided that you may
provide this opinion (i) to regulatory authorities should they so
request in connection with their normal examinations, (ii) to your
independent auditors and attorneys, (iii) pursuant to order or legal
process of any court or governmental agency or (iv) in connection with
any legal action to which you are a party arising out of the
transactions contemplated by the Transaction Documents. This opinion
may not be quoted without the prior written consent of this Firm.
Very truly yours,
E-6
SCHEDULE A - GOVERNMENTAL ORDERS AND MATERIAL CONTRACTS
I.
GOVERNMENTAL ORDERS
II.
MATERIAL CONTRACTS
E-7
SCHEDULE B - AUTHORIZED CAPITALIZATION
E-8
EXHIBIT F TO SECURITIES PURCHASE AGREEMENT
OPINION OF COUNSEL FORM
[Date]
CSK Auto Corporation
Attention: General Counsel
Ladies and Gentlemen:
We are counsel for [___________________] (the "Seller") and have been
requested to furnish to CSK Auto Corporation (the "Company") an opinion with
respect to certain "restricted securities" owned by the Seller.
[The bracketed, numbered items are applicable only to a Rule 144
opinion.] As a basis for this opinion, we have received and reviewed copies of
the following documents:
1. A letter from the Seller dated [___________], 200[ ] providing
information related to the securities owned by the Seller.
2. [The Notice on Form 144 filed by the Seller with the
Securities and Exchange Commission [and any applicable
securities exchange] on [___________], 200[ ].]
[A letter from [_____________] (the "Broker") dated [__________], 200[
] certifying that the proposed sale will be made in "brokers'
transactions" as defined in Rule 144 promulgated under the Securities
Act of 1933, as amended (the "Act").]
We have been notified that the Seller proposed to sell [[_______]
shares (the "Shares") of the Common Stock/$[_________] principal amount of the
7% Convertible Subordinated Debentures due December __, 2006 (the
"Debentures")/Warrants to purchase [_________] shares of the Common Stock (the
"Warrants")] of the Company in a private transaction, and that the Seller will
deliver to the [Broker/Company's transfer agent/Company] [certificate number
[__] representing [________] shares of the Common Stock/Debenture number [____]
representing $[__________] principal amount of the Debentures/Warrant number
[___] representing Warrants to purchase [_________] shares of the Common Stock]
of the Company registered in the name of the Seller.
On the basis of the foregoing and assuming the accuracy of the
representations of the Seller [and the Broker], it is our opinion that the
proposed sale of the [Shares/Debentures/ Warrants] by the Seller, if effected in
accordance with the terms and provisions set forth in the above-specified
documents, will comply with [Rule 144/Section 4(2) of the Act] and that the
[Shares/Debentures/Warrants] may be transferred without compliance with the
registration requirements of the Act.
The Company and/or its counsel may rely on this opinion in rendering an
opinion to the Company's transfer agent regarding the Seller's transfer of the
[Shares/Debentures/Warrants].
F-1
Any questions concerning the foregoing opinion should be communicated to
[________] of this firm.
F-2
EXHIBIT G TO SECURITIES PURCHASE AGREEMENT
CSK AUTO CORPORATION ENTERS INTO PRIVATE PLACEMENT OF CONVERTIBLE SUBORDINATED
DEBENTURES
PHOENIX, Dec. 7 /PRNewswire/ -- CSK Auto Corporation (NYSE: CAO -
news), the parent company of CSK Auto, Inc., a leading specialty retailer in the
automotive aftermarket, today announced it has entered into an agreement with
LBI Group Inc., an affiliate of Xxxxxx Brothers, and Investcorp CSK Holdings
L.P., an affiliate of one of the Corporation's principal stockholders, for the
issuance of $50.0 million aggregate principal amount of 7% convertible
subordinated debentures due December 2006. This subordinated, equity-linked
capital will, when converted to common stock, result in debt reduction and
significantly improve the Company's financial and operating flexibility. This
private placement, expected to close this month, is part of the Company's
refinancing of its capital structure that will include a new, asset-backed
credit facility and a private placement of senior notes. All refinancing
transactions are expected to close concurrently within the next two to three
weeks.
The debentures will be convertible at $8.69 per share, subject to
certain anti-dilution adjustment provisions and other adjustments that may
result in the issuance of additional shares of common stock of CSK Auto
Corporation under certain circumstances. Although the convertible subordinated
debentures are not redeemable other than in the event of a change of control,
CSK Auto Corporation expects to require these investors to convert their
debentures into CSK Auto Corporation common stock following satisfaction of
certain conditions, including completion of a refinancing of our existing credit
facility and the effectiveness of a registration statement covering the shares
of common stock underlying the convertible debentures. If the conditions to
conversion are not satisfied, then the debentures will remain convertible at the
option of the holders. The convertible debentures to be issued to the Investcorp
affiliate are not expected to be convertible into common stock of CSK Auto
Corporation until the issuance of the common stock underlying the debentures has
been approved by the Corporation's shareholders.
CSK Auto Corporation is the parent company of CSK Auto, Inc., a
specialty retailer in the automotive aftermarket. As of November 4, 2001, the
company operated 1,133 stores in 19 states under the brand names Checker Auto
Parts, Xxxxxx'x Auto Supply and Kragen Auto Parts.
Certain statements contained in this release are forward-looking
statements. The forward-looking statements are subject to risks, uncertainties
and assumptions, including, but not limited to, changes in the conditions of
capital markets, competitive pressures, demand for the company's products, the
state of the economy, inflation, consumer debt levels and the weather. Actual
results may differ materially from anticipated results described in these
forward-looking statements.
Contact:
Xxx Xxxxxx
CSK Auto
000-000-0000
G-1
EXHIBIT H TO SECURITIES PURCHASE AGREEMENT
TRANSFER AGENT INSTRUCTIONS
CSK AUTO CORPORATION
December __, 2001
Mellon Investor Services LLC
000 Xxxxx Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
Ladies and Gentlemen:
Reference is made to that certain Securities Purchase Agreement, dated
December 7, 2001 (the "Agreement"), by and among CSK Auto Corporation, a
Delaware corporation (the "Company"), and the Buyers (as defined in the
Agreement), pursuant to which the Company is issuing to the Buyers an aggregate
principal amount of up to $50,000,000 of its 7% Convertible Debentures (plus
such additional amounts as may be added to such principal amount pursuant to the
second paragraph thereof) (the "Debentures"), warrants (the "Warrants") to
purchase shares of Common Stock of the Company, par value $0.01 per share (the
"Common Stock"), shares of Common Stock issued as Interest Shares (as defined in
the Debenture) which may be issued from time to time pursuant to the terms of
the Debenture and, under the circumstances described in Section 1(d) of the
Agreement, additional shares of Common Stock (the "Break-up Shares")
This letter shall serve as our irrevocable authorization and direction
to you (the "Transfer Agent") (provided that you are the Transfer Agent of the
Company at such time):
(i) to issue shares of Common Stock upon conversion of the Debentures
(the "Conversion Shares") to or upon the order of a Buyer from time to time upon
delivery to you of a properly completed and duly executed Conversion Notice, in
the form attached hereto as Exhibit I, which has been acknowledged by the
Company as indicated by the signature of a duly authorized officer of the
Company thereon;
(ii) to issue shares of Common Stock upon the exercise of the Warrants
(the "Warrant Shares") to or upon the order of a Buyer from time to time upon
delivery to you of a properly completed and duly executed Warrant Issuance
Notice, in the form attached hereto as Exhibit II, which has been completed and
executed or acknowledged by the Company as indicated by the signature of a duly
authorized officer of the Company thereon and acknowledged by the Buyer to which
it relates;
(iii) to issue shares of Common Stock as Interest Shares to or upon the
order of a Buyer from time to time upon delivery to you of a properly completed
and duly executed Interest Share Issuance Notice, in the form attached hereto as
Exhibit III, which has been completed and executed or acknowledged by the
Company as indicated by the
H-1
signature of a duly authorized officer of the Company thereon and acknowledged
by the Buyer to which it relates; and
(iv) to issue the Break-up Shares if the Closing (as defined in the
Agreement) shall not have occurred with respect to a Buyer (other than
Investcorp CSK Holdings L.P. and its affiliates) on or before December 31, 2001,
to or upon the order of such Buyer from time to time upon deliver to you of a
properly completed and duly executed Break-up Share Issuance Notice, in the form
attached hereto as Exhibit IV which has been completed and executed or
acknowledged by the Company as indicated by the signature of a duly authorized
officer of the Company thereon and acknowledged by the Buyer to which it
relates.
You acknowledge and agree that so long as you have previously received
(a) written confirmation from counsel to the Company that a registration
statement covering resales of the applicable Conversion Shares, Warrant Shares,
Interest Shares and/or Break-up Shares has been declared effective by the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act") and (b) a copy of such registration statement, then,
provided that you have received the acknowledgement of the Company thereon, you
shall issue, within two (2) business days of your receipt of the Conversion
Notice, Warrant Issuance Notice, Interest Share Issuance Notice or Break-up
Share Issuance Notice, the certificates representing the Conversion Shares,
Warrant Shares, Interest Shares and/or Break-up Shares, as applicable, and such
certificates shall not bear any legend restricting transfer of the Conversion
Shares, the Warrant Shares, Interest Shares and/or the Break-up Shares thereby
and should not be subject to any stop-transfer restriction; provided, however,
that if such Conversion Shares, Warrant Shares, Interest Shares and/or Break-up
Shares are not registered for resale under the 1933 Act, then the certificates
for such Conversion Shares, Warrant Shares, Interest Shares and/or Break-up
Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF
COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD
PURSUANT TO RULE 144
H-2
UNDER SAID ACT. THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES."
A form of written confirmation from counsel to the Company that a
registration statement covering resales of the Conversion Shares, Warrant
Shares, Interest Shares and/or Break-up Shares has been declared effective by
the SEC under the 1933 Act is attached hereto as Exhibit V.
Please be advised that the Buyers are relying upon this letter as an
inducement to enter into the Agreement and, accordingly, each Buyer is a third
party beneficiary to these instructions.
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at [______________].
H-3
IN WITNESS WHEREOF, the parties hereto have caused these Transfer Agent
Instructions to be duly executed as of the date first written above.
Very truly yours,
CSK AUTO CORPORATION
By:
Name:
Title:
THE FOREGOING INSTRUCTIONS ARE
ACKNOWLEDGED AND AGREED TO
this [___] day of December, 2001
Mellon Investor Services LLC
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
Enclosures
cc: LBI Group Inc.
Xxxxx Xxxxx, Esq.
H-4
SCHEDULE 1
Investors:
Xxxxxx Brothers Inc.
c/o Sheraton Manhattan Hotel
000 0xx Xxxxxx
Xxxx 000
XX, XX 00000
fax: (000)-000-0000
phone: (000)-000-0000
Attention: Xxxxx Xxxxxx, LBI Group Inc.
H-5
EXHIBIT I
CONVERSION NOTICE
FOR
7% CONVERTIBLE SUBORDINATED DEBENTURE DUE SEPTEMBER__, 2006
The undersigned, as Buyer of the 7% Convertible Subordinated Debenture
Due December __, 2006 of CSK AUTO CORPORATION (the "Company"), No. _, in the
outstanding principal amount of $_______ (the "Debenture"), hereby elects to
convert $_______ of the outstanding principal amount of the Debenture into
shares of Common Stock, par value $0.01 per share (the "Common Stock"), of the
Company according to the conditions of the Debenture, as of the date written
below. The undersigned confirms that the representations and warranties
contained in Sections 2(a),(b),(f),and (g) of the Securities Purchase Agreement
entered into in connection with the initial issuance of the Debentures are true
and correct as to the undersigned as of the date hereof.
Date of Conversion:
----------------------------------------------
Principal Amount of Debentures to be converted:
-----------------
Tax ID Number (If applicable):
-----------------------------------
Please confirm the following information:
---------------------------------------
Conversion
Price:
--------------------------------------------------------------------------
Number of shares of Common Stock to be issued:
--------------------
Please issue the Common Stock into which the Debentures are
being converted and, if applicable, any check drawn on an account of
the Company in the following name and to the following address:
Issue to:
--------------------------------------------------------
Address:
---------------------------------------------------------
Telephone Number:
------------------------------------------------
Facsimile Number:
------------------------------------------------
Authorization:
---------------------------------------------------
By:
--------------------------------------------------------------
Title:
-----------------------------------------------------------
Dated:
H-6
Account Number (if electronic book entry transfer):
--------------
Transaction Code Number (if electronic book entry transfer):
------
-----------------------------------------------------------------
[NOTE TO BUYER -- THIS FORM MUST BE SENT CONCURRENTLY TO TRANSFER AGENT]
H-7
ACKNOWLEDGMENT
The Company hereby acknowledges this Conversion Notice and hereby
directs [_____] to issue the above indicated number of shares of Common Stock in
accordance with the Irrevocable Transfer Agent Instructions dated December __,
2001 from the Company and acknowledged and agreed to by [_____].
CSK AUTO CORPORATION
By:
--------------------------------------
Name:
Title:
H-8
EXHIBIT II
WARRANT ISSUANCE NOTICE
TO BE EXECUTED BY CSK AUTO CORPORATION
CSK Auto Corporation hereby notifies the Transfer Agent that __________
of the shares of Common Stock ("Warrant Shares") of CSK AUTO CORPORATION, a
Delaware corporation (the "Company"), evidenced by the attached Warrant (the
"Warrant") have been automatically exercised pursuant to such Warrant and should
be delivered to the undersigned Buyer. Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Warrant Exercise Price. The payment of the Warrant
Exercise Price shall be made as:
______ "Cashless Exercise" with respect to ______
Warrant Shares.
2. Exercise Information
Date of Exercise:
------------------------------------------------
Number of shares of Common Stock to be issued:
Tax ID Number (If applicable):
----------------------------------
Please issue the Common Stock for which the Warrants are being
exercised and, if applicable, any check drawn on an account of the
Company in the following name and to the following address:
Issue to:
--------------------------------------------------------
Address:
----------------------------------------------------------
Telephone Number:
-------------------------------------------------
Facsimile Number:
------------------------------------------------
Authorization:
---------------------------------------------------
By:
--------------------------------------------------------------
Title:
-----------------------------------------------------------
Dated:
-----------------------------------------------------------
Account Number (if electronic book entry transfer):
--------------
Transaction Code Number (if electronic book entry transfer):
------
-----------------------------------------------------------------
H-9
Date:
--------------------
CSK Auto Corporation
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
H-10
ACKNOWLEDGMENT
The undersigned buyer (the "Buyer") hereby acknowledges this
Warrant Issuance Notice and hereby directs Transfer Agent to issue the
above indicated number of shares of Common Stock in accordance with the
Irrevocable Transfer Agent Instructions dated December ___, 2001 from the
Company and acknowledged and agreed to by Transfer Agent.
4. Delivery of Warrant Shares. The holder of this warrant has
sold or will sell the shares of common stock issuable
pursuant to this Notice pursuant to a registration
statement or an exemption from registration under the
Securities Act of 1933, as amended.
5. Private Placement Representations. The holder of this
Warrant confirms the continuing validity of the
representations set forth in Section 6 of the Warrant.
6. Buyer Information. The Buyer acknowledges the information
with respect to Buyer set forth above is accurate.
Name of Registered Buyer
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
H-11
EXHIBIT III
INTEREST SHARE ISSUANCE NOTICE
TO BE EXECUTED BY CSK AUTO CORPORATION
CSK Auto Corporation hereby notifies the Transfer Agent that _______
shares of Common Stock (the "Interest Shares") of CSK Auto Corporation, a
Delaware corporation (the "Company") will be issued to _________________ (the
"Buyer").
2. Delivery of Interest Shares.
2. Delivery Information
Number of shares of Common Stock to be issued:
Tax ID Number (If applicable):
------------------------------------
Please issue the Common Stock and, if applicable, any check drawn
on an account of the Company in the following name and to the
following address:
Issue to:
--------------------------------------------------------
Address:
----------------------------------------------------------
Telephone Number:
------------------------------------------------
Facsimile Number:
-------------------------------------------------
Authorization:
----------------------------------------------------
By:
---------------------------------------------------------------
Title:
------------------------------------------------------------
Dated:
Account Number (if electronic book entry transfer):
----------------
Transaction Code Number (if electronic book entry transfer):
-------
Date:
------------- -----, ---
-----------------------------
CSK Auto Corporation
By:_______________________________
Name:_____________________________
Title:______________________________
H-12
ACKNOWLEDGMENT
The undersigned buyer (the "Buyer") hereby acknowledges this Interest
Share Issuance Notice and hereby directs Transfer Agent to issue the above
indicated number of shares of Common Stock in accordance with the Irrevocable
Transfer Agent Instructions dated December ___, 2001 from the Company and
acknowledged and agreed to by Transfer Agent.
1. Delivery of Interest Shares. The holder of these Interest Shares has
sold or will sell the shares of common stock issuable pursuant to this Notice
pursuant to a registration statement or an exemption from registration under the
Securities Act of 1933, as amended.
2. Private Placement Representations. The undersigned confirms that the
representations and warranties contained in Section 2(a) and (b) of the
Securities Purchase Agreement entered into in connection with the initial
issuance of the Debentures are true and correct as to the undersigned as of the
date hereof.
3. Buyer Information. The Buyer acknowledges the information with respect
to Buyer set forth above is accurate.
Name of Registered Buyer
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
H-13
EXHIBIT IV
BREAK-UP SHARE ISSURANCE NOTICE
TO BE EXECUTED BY CSK AUTO CORPORATION
CSK Auto Corporation hereby notifies the Transfer Agent that _______
shares of Common Stock (the "Break-up Shares") of CSK Auto Corporation, a
Delaware corporation (the "Company") will be issued to _________________ (the
"Buyer").
3. Delivery of Break-up Shares.
2. Delivery Information
Number of shares of Common Stock to be issued:
Tax ID Number (If applicable):
-----------------------------------
Please issue the Common Stock and, if applicable, any check drawn
on an account of the Company in the following name and to the
following address:
Issue to:
---------------------------------------------------------
Address:
----------------------------------------------------------
Telephone Number:
------------------------------------------------
Facsimile Number:
------------------------------------------------
Authorization:
----------------------------------------------------
By:
---------------------------------------------------------------
Title:
------------------------------------------------------------
Dated:
Account Number (if electronic book entry transfer):
---------------
Transaction Code Number (if electronic book entry transfer):
------
Date: _______________ __, ____
----------------------------------
CSK Auto Corporation
By:_______________________________
Name:_____________________________
Title:______________________________
H-14
ACKNOWLEDGMENT
The undersigned buyer (the "Buyer") hereby acknowledges this Break-up
Share Issuance Notice and hereby directs Transfer Agent to issue the above
indicated number of shares of Common Stock in accordance with the Irrevocable
Transfer Agent Instructions dated December ___, 2001 from the Company and
acknowledged and agreed to by Transfer Agent.
1. Delivery of Break-up Shares. The holder of these Break-up Shares has
sold or will sell the shares of common stock issuable pursuant to this Notice
pursuant to a registration statement or an exemption from registration under the
Securities Act of 1933, as amended.
2. Private Placement Representations. The undersigned confirms that the
representations and warranties contained in Section 2(a) and (b) of the
Securities Purchase Agreement entered into in connection with the initial
issuance of the Break-up Shares are true and correct as to the undersigned as of
the date hereof.
3. Buyer Information. The Buyer acknowledges the information with respect
to Buyer set forth above is accurate.
Name of Registered Buyer
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
H-15
EXHIBIT V
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[-------------]
Attn:
Re: CSK Auto Corporation
Ladies and Gentlemen:
We are counsel to CSK Auto Corporation, a Delaware corporation (the
"Company"), and have represented the Company in connection with that certain
Securities Purchase Agreement (the "Purchase Agreement") entered into by and
among the Company and the named therein on the Schedule of Buyers (collectively,
the "Buyers") pursuant to which the Company issued to the Buyers its 7%
Convertible Debentures Due December __, 2006 (the "Debentures") convertible into
shares of the Company's Common Stock, par value $0.01 per share (the "Common
Stock"), warrants exercisable for shares of its Common Stock (the "Warrants"),
shares of Common Stock issued as Interest Shares (as defined in the Debentures)
and shares of Common Stock issued pursuant to Section 1(d) of the Purchase
Agreement (the "Break-up Shares"). Pursuant to the Purchase Agreement, the
Company also has entered into a Registration Rights Agreement with the Buyers
(the "Registration Rights Agreement") pursuant to which the Company agreed,
among other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the Break-up Shares, the Interest
Shares and shares of Common Stock issuable upon conversion of the Debentures and
exercise of the Warrants, under the Securities Act of 1933, as amended (the
"1933 Act"). In connection with the Company's obligations under the Registration
Rights Agreement, on ____________ ___, 200_, the Company filed a Registration
Statement on Form S-3 (File No. 333-_____________) (the "Registration
Statement") with the Securities and Exchange Commission (the "SEC") relating to
the Registrable Securities which names each of the Buyers as a selling
stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS], and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC, and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:_____________________
CC: [LIST NAMES OF BUYERS]
H-16
EXHIBIT I TO SECURITIES PURCHASE AGREEMENT
VOTING AGREEMENT
This VOTING AGREEMENT, dated as of December 7, 2001 (this
"Agreement"), is entered into by and among the certain stockholders of CSK Auto
Corporation (the "Company") listed on the signature pages hereto under the
heading "Stockholders" that have executed this Agreement (each, a "Stockholder"
and collectively, the "Stockholders"), the Company, and the investors listed on
the signature pages hereto under the heading "Investors" that have executed this
Agreement, including (i) LBI Group, Inc.; (ii) Investcorp CSK Holdings L.P.; and
(3) additional investors, if any, that become a party to the Securities Purchase
Agreement (as defined below) on or before December 15, 2001 (each, an "Investor"
and collectively, the "Investors").
WHEREAS, the Investors and the Company are contemporaneously
herewith entering into (i) a Securities Purchase Agreement dated as of the date
hereof, pursuant to which, among other things, the Company has agreed to issue
and sell to the Investors, and the Investors have agreed to purchase,
Convertible Debentures of up to an aggregate principal amount of $50 million
plus such additional amounts as may be added to such principal amount pursuant
to the second paragraph of such Convertible Debentures (collectively, the
"Debentures") and Warrants (collectively, the "Warrants") to acquire shares of
common stock of the Company, par value $0.01 per share (together with any
amendments thereto, including any amendments changing the allocation of
Debentures and Warrants among the Investors or adding additional Investors, the
"Securities Purchase Agreement") and (ii) a Registration Rights Agreement, dated
as of the date hereof (together with any amendments thereto, the "Registration
Rights Agreement"), pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"1933 Act") (the transactions contemplated by the Securities Purchase Agreement
and the Registration Rights Agreement are collectively referred to herein as the
"Transaction");
WHEREAS, as of the date hereof, the potential Stockholder
parties own collectively a majority of the total issued and outstanding common
stock of the Company, par value $0.01 per share ("Company Common Stock"),
including the Company Common Stock issuable upon conversion of the Company's 7%
Convertible Subordinated Notes due September 2006; and
WHEREAS, as a condition to the willingness of the Investors to
enter into the Securities Purchase Agreement and the Registration Rights
Agreement and to consummate the Transaction, the Investors have required that
the Stockholders agree, and in order to induce the Investors to enter into the
Securities Purchase Agreement and the Registration Rights Agreement and to
consummate the Transaction, the Stockholders have so agreed, to enter into this
Agreement, which shall apply to (i) all of the shares of Company Common Stock
now owned and which may hereafter be acquired by the Stockholders (the "Shares")
and (ii) any other
I-1
securities of the Company now owned and which may hereafter be acquired by the
Stockholders (the "Other Securities"), in each case that the Stockholders are
entitled to vote at any meeting of stockholders of the Company.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements contained herein, and intending to be legally
bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
PROXY OF THE STOCKHOLDERS
SECTION 1.01. Voting Agreement. Each Stockholder hereby agrees
that during the time this Agreement is in effect, at any meeting of the
stockholders of the Company, however called, and in any action by consent of the
stockholders of the Company, each of the Stockholders shall vote the Shares and
the Other Securities:
(a) in favor of the Transaction, the Securities Purchase
Agreement(in the form executed on the date hereof), the Registration Rights
Agreement (in the form executed on the date hereof), and any of the transactions
contemplated by such agreements or the Debentures or Warrants, including,
without limitation, the issuance of the Debentures, the Warrants, and the shares
of Company Common Stock issuable upon the conversion or exercise thereof;
(b) against any change in the directors of the Company, any
change in the present capitalization of the Company or any amendment to the
Company's Articles of Incorporation or Bylaws, any other material change in the
Company's corporate structure or business, or any other proposal to be
considered by the Company's stockholders, in each such case that would
reasonably be expected to impede, interfere with, delay, postpone or materially
adversely affect the Transaction, the Securities Purchase Agreement, the
Registration Rights Agreement, any of the transactions contemplated by such
agreements or the Debentures or Warrants, or the likelihood of the Transaction
being consummated; and
(c) in favor of any other matter necessary for consummation of
the Transaction, the Securities Purchase Agreement, the Registration Rights
Agreement, and any of the transactions contemplated by such agreements or the
Debentures or Warrants that is considered at any such meeting of shareholders or
proposed in any such consent, and in connection therewith to execute any
documents that are necessary or appropriate in order to effectuate the
foregoing.
SECTION 1.02. Irrevocable Proxy. Until the termination of this
Agreement, each Stockholder hereby irrevocably appoints Xxx Xxxxxx and Xxxxxx
Xxxxxx, or either of them acting alone, as his or its attorney and proxy
pursuant to the provisions of Section 212(c) of the General Corporation Law of
the State of Delaware, each with full power of substitution, to vote and
otherwise act (by written consent or otherwise) with respect to the Shares and
the Other Securities which such Stockholder is entitled to vote at any meeting
of stockholders of the Company (whether annual or special and whether or not an
adjourned or postponed meeting) or consent in lieu of any such meeting or
otherwise, on the matters and in the manner specified in Section 1.01 hereof.
THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND
I-2
COUPLED WITH AN INTEREST. The Stockholders hereby revoke all other proxies and
powers of attorney with respect to the Shares and the Other Securities that they
may have heretofore appointed or granted, and no subsequent proxy or power of
attorney shall be given or written consent executed (and if given or executed,
shall not be effective) by the Stockholders with respect to the matters
specified in Section 1.01 hereof. All authority herein conferred or agreed to be
conferred shall survive the death or incapacity of any Stockholder and any
obligation of any Stockholder under this Agreement shall be binding upon the
heirs, personal representatives and successors or assigns of such Stockholder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder hereby represents and warrants, severally but
not jointly, to the Investors as follows:
SECTION 2.01. Authority Relative to This Agreement. Each
Stockholder has all necessary power and authority to execute and deliver this
Agreement, to perform his or its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by such Stockholder and constitutes a legal, valid and binding
obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms.
SECTION 2.02. No Conflict. (a) The execution and delivery of
this Agreement by such Stockholder do not, and the performance of this Agreement
by such Stockholder shall not (i) conflict with or violate any federal, state or
local law, statute, ordinance, rule, regulation, order, judgment or decree
applicable to such Stockholder or by which the Shares or the Other Securities
owned by such Stockholder are bound or affected or (ii) result in any breach of
or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the Shares or the Other Securities owned by such
Stockholder pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which such Stockholder is a party or by which such Stockholder or the Shares
or Other Securities owned by such Stockholder are bound or affected.
(b) The execution and delivery of this Agreement by such
Stockholder do not, and the performance of this Agreement by such Stockholder
shall not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental entity.
SECTION 2.03. Title to the Shares. As of the date hereof, each
Stockholder is the record and beneficial owner of the number of shares of
Company Common Stock set forth opposite such Stockholder's name on the signature
pages hereto. Such Shares and any Other Securities owned by such Stockholder are
owned free and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on such Stockholder's voting
rights, charges and other encumbrances of any nature whatsoever, except as
provided for in that certain Stockholders' Agreement dated as of October 30,
1996, as amended by that certain Amendment thereto, dated as of June 12, 1998,
as further amended by that certain letter
I-3
agreement, dated December 8, 1998, and as further amended by that certain
amendment, dated the date hereof, relating to the Shares held by certain
stockholders listed on the signature pages hereto under the heading
"Stockholders" (the "Stockholders' Agreement"). Except as provided in this
Agreement, no Stockholder has appointed or granted any proxy, which appointment
or grant is still effective, with respect to the Shares or Other Securities
owned by such Stockholder.
SECTION 2.04. Shares Outstanding. The Company represents that
this Agreement has been executed by a majority of the outstanding shares of
Company Common Stock (including the Company Common Stock issuable upon
conversion of the Company's 7% Convertible Subordinated Notes due September
2006).
ARTICLE III
COVENANTS
SECTION 3.01. No Disposition or Encumbrance of Shares. Each
Stockholder hereby covenants and agrees that, except as contemplated by this
Agreement, such Stockholder shall not directly or indirectly offer or agree to
sell, transfer, tender, assign, hypothecate or otherwise dispose of, grant a
proxy or power of attorney with respect to, or create or permit to exist any
security interest, lien, claim, pledge, option, right of first refusal,
agreement, limitation on any Stockholder's voting rights, charge or other
encumbrance of any nature whatsoever with respect to the Shares or Other
Securities, and shall not initiate, solicit or encourage any person to take
actions which could reasonably be expected to lead to the occurrence of any of
the foregoing; provided, that such Stockholder may take any such action with
respect to the Shares or Other Securities under this Agreement or under the
Stockholders' Agreement so long as any recipient of any such Shares or Other
Securities or rights with respect thereto or party to any such action has
delivered to the Company and each Investor a written agreement in a form
reasonably satisfactory to the Investors that such recipient or party shall be
bound by, and the Shares and/or Other Securities so transferred, assigned or
sold shall remain subject to, this Agreement.
SECTION 3.02. Company Cooperation. The Company hereby
covenants and agrees that, unless the provisions of Section 3.01 have been
complied with, it will not recognize (apart from this Agreement) any sale,
transfer, tender, assignment, hypothecation or other disposal of, grant of proxy
or power of attorney with respect to, or the creation or permission to exist of
any security interest, lien, claim, pledge, option, right of first refusal,
agreement on any of the Shares or Other Securities subject to this Agreement.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. Termination. This Agreement and the proxy
granted hereunder shall terminate and be of no further force and effect upon the
earlier of (i) the conclusion of any shareholder vote approving the Transaction;
(ii) the receipt by the Company of a shareholder consent approving the
Transaction, duly executed by a shareholders of the Company controlling a
majority of the shares entitled to vote to approve the Transaction; (iii) after
the later of (A) the termination of the Securities Purchase Agreement by all of
the Buyers (as defined therein) in
I-4
accordance with Section 9(k)(i) thereof and (B) the expiration of the
Post-Closing Participation Period (as defined in the Securities Purchase
Agreement); or (iv) the termination of the Securities Purchase Agreement by the
Company in accordance with Section 9(k)(ii).
SECTION 4.02. Further Assurances. Each Stockholder will
execute and deliver all such further documents and instruments and take all such
further action as may be necessary in order to consummate the transactions
contemplated hereby.
SECTION 4.03. Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that any Investor
(without being joined by any other Investor) shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or in
equity. Any Investor shall be entitled to its reasonable attorneys' fees in any
action brought to enforce this Agreement in which it is the prevailing party.
SECTION 4.04. Entire Agreement. This Agreement constitutes the
entire agreement between the Investors, the Stockholders and the Company (other
than the Transaction Documents (as defined in the Securities Purchase Agreement)
with respect to the subject matter hereof and supersedes all prior agreements
and understandings, both written and oral, among the Investors, the Stockholders
and the Company with respect to the subject matter hereof.
SECTION 4.05. Amendment. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 4.06. 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 conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of this Agreement is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto 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 terms of this Agreement remain as originally contemplated to the
fullest extent possible.
SECTION 4.07. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware
applicable to contracts executed in and to be performed in that State. All
actions and proceedings arising out of or relating to this Agreement shall be
heard and determined in any Delaware state or federal court.
SECTION 4.08. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the Company and each Stockholder have duly
executed this Agreement as of the date first written above.
THE COMPANY
CSK AUTO CORPORATION
By: ___________________________
Name:__________________
Title:_________________
I-6
STOCKHOLDERS' SIGNATURE PAGES
EQUITY CSKA LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 409,641
Name:_________________
Title:__________________
EQUITY CSKB LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 409,641
Name:_________________
Title:__________________
EQUITY CSKC LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 87,542
Name:_________________
Title:__________________
AUTO EQUITY LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 755,702
Name:_________________
Title:__________________
AUTO PARTS LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 755,702
Name:_________________
Title:__________________
AUTO INVESTMENTS LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 755,702
Name:_________________
Title:__________________
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STOCKHOLDERS' SIGNATURE PAGES (CONTINUED)
CSK INVESTMENTS LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 766,815
Name:_________________
Title:__________________
CSK EQUITY LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 755,702
Name:_________________
Title:__________________
NEW CSK EQUITY LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 377,838
Name:_________________
Title:__________________
INVESTCORP CSK HOLDINGS L.P. Shares of Company Common Stock Owned:
By: ___________________________ 565,040
Name:_________________
Title:__________________
CSK INTERNATIONAL LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 108,101
Name:_________________
Title:__________________
X.X. XXXXXX (SUISSE) SA, AS SUCCESSOR TO
CHASE MANHATTAN PRIVATE BANK (SWITZERLAND) Shares of Company Common Stock Owned:
By: ___________________________ 107,743
Name:_________________
Title:__________________
I-8
STOCKHOLDERS' SIGNATURE PAGES (CONTINUED)
SOUTH BAY LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 121,914
Name:_________________
Title:__________________
BALLET LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 4,957
Name:_________________
Title:__________________
DENARY LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 4,957
Name:_________________
Title:__________________
GLEAM LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 4,957
Name:_________________
Title:__________________
HIGHLANDS LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 4,957
Name:_________________
Title:__________________
NOBLE LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 4,957
Name:_________________
Title:__________________
I-9
STOCKHOLDERS' SIGNATURE PAGES (CONTINUED)
OUTRIGGER LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 4,957
Name:_________________
Title:__________________
QUILL LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 4,957
Name:_________________
Title:__________________
RADIAL LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 4,957
Name:_________________
Title:__________________
SHORELINE LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 4,957
Name:_________________
Title:__________________
ZINNIA LIMITED Shares of Company Common Stock Owned:
By: ___________________________ 4,957
Name:_________________
Title:__________________
INVESTCORP INVESTMENT EQUITY LIMITED Shares of Company Common Stock Owned:
By: ___________________________
Name:_________________ 4,311
Title:__________________
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STOCKHOLDERS' SIGNATURE PAGES (CONTINUED)
CHILTERN TRUSTEES LIMITED, IN ITS
CAPACITY AS TRUSTEE OF Shares of Company Common Stock Owned:
THE CARMEL TRUST
By: ___________________________ 497,282
Name:_________________
Title:__________________
TRANSATLANTIC INVESTMENTS, LLC Shares of Company Common Stock Owned:
By: ___________________________ 544,685
Name:_________________
Title:__________________
GLENELLEN INVESTMENT CO. Shares of Company Common Stock Owned:
By: ___________________________ 4,600,000
Name:_________________
Title:__________________
THE JAB TRUST Shares of Company Common Stock Owned:
By: ___________________________ 259,857
Name:_________________
Title:__________________
By: ___________________________
Name:_________________
Title:__________________
I-11
STOCKHOLDERS' SIGNATURE PAGES (CONTINUED)
XXXXXXXXXXX CAPITAL INCOME FUND Shares of Company Common Stock Owned:
By: ___________________________
Name:_________________ 1,839,300
Title:__________________
THE MILLENIUM INCOME AND GROWTH FUND Shares of Company Common Stock Owned:
By: ___________________________ 20,000
Name:_________________
Title:__________________
I-12
STOCKHOLDERS' SIGNATURE PAGES (CONTINUED)
Shares of Company Common Stock Owned:
By:____________________________ 21,100
XXXXXXX XXXXXXX
Shares of Company Common Stock Owned:
By: ___________________________ 7,795
XXXX XXXXXXX
Shares of Company Common Stock Owned:
By: ___________________________ 4,346
XXXXXX XXXXXX
Shares of Company Common Stock Owned:
By: ___________________________ 31,000
XXXXXXX XXXXXXX
Shares of Company Common Stock Owned:
By: ___________________________ 32,000
XXXXXXXXXXX X'XXXXX
Shares of Company Common Stock Owned:
By: ___________________________ 7,000
XXXXXX XXXXXX
Shares of Company Common Stock Owned:
By: ___________________________ 41,000
XXXXXXXXXXX XXXXXXX
Shares of Company Common Stock Owned:
By: ___________________________ 13,000
XXXXX XXXX
I-13
STOCKHOLDERS' SIGNATURE PAGES (CONTINUED)
Shares of Company Common Stock Owned:
By: ___________________________ 25,256
XXXXXX XXXXXX
Shares of Company Common Stock Owned:
By: ___________________________ 9,024
XXX XXXXXX
I-14
STOCKHOLDERS' SIGNATURE PAGES (CONTINUED)
Agreed and Accepted
as of December __, 2001:
LBI GROUP INC.
By: __________________________
Name:
Title:
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STOCKHOLDERS' SIGNATURE PAGES (CONTINUED)
Agreed and Accepted
as of December __, 2001:
INVESTCORP CSK HOLDINGS L.P.
By: __________________________
Name:
Title:
I-16
STOCKHOLDERS' SIGNATURE PAGES (CONTINUED)
Agreed and Accepted
as of December __, 2001:
XXXXXXXXXXX CAPITAL INCOME FUND
By: __________________________
Name: ________________________
Title: ________________________
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