EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
AMONG
AHC CORPORATION
and
ADVANCE HOLDING CORPORATION
with
FS Equity Partners III, L.P.,
FS Equity Partners IV, L.P. and
FS Equity Partners International, L.P.,
as guarantors.
________
DATED AS OF March 4, 1998
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TABLE OF CONTENTS
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PAGE
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ARTICLE I
DEFINITIONS
1.1 Definitions......................................... 2
ARTICLE II
THE MERGER
2.1 The Merger......................................... 12
2.2 Effective Time..................................... 12
2.3 Effects of the Merger.............................. 12
2.4 Articles of Incorporation and By-Laws.............. 13
2.5 Directors.......................................... 13
2.6 Officers........................................... 13
2.7 Conversion of Shares............................... 13
2.8 Conversion of Investor Common Stock................ 17
2.9 Management Purchase of Common Stock................ 17
2.10 Shareholders' Approval............................. 18
2.11 Exchange of Shares; Payment........................ 18
2.12 Closing............................................ 21
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Organization and Qualification..................... 22
3.2 Capitalization of the Company; Validity
of Shares.......................................... 23
3.3 Authority Relative to this Agreement............... 24
3.4 Consents and Approvals............................. 25
3.5 Non-Contravention.................................. 26
3.6 Environmental Matters.............................. 27
3.7 Licenses and Permits............................... 29
3.8 Compliance with Laws............................... 29
3.9 Financial Statements............................... 30
3.10 Absence of Changes................................. 30
3.11 No Undisclosed Liabilities......................... 31
3.12 Litigation......................................... 32
3.13 Real Property...................................... 33
3.14 Personal Property.................................. 33
3.15 Leases............................................. 33
3.16 Sufficiency of Assets.............................. 34
3.17 Intellectual Property.............................. 35
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3.18 Material Contracts.................................. 35
3.19 Insurance........................................... 38
3.20 Labor Matters....................................... 39
3.21 Employee Benefit Plans.............................. 40
3.22 Tax Matters......................................... 43
3.23 Insider Interests................................... 44
3.24 Finders............................................. 45
3.25 Suppliers........................................... 45
3.26 No Other Representations............................ 46
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTOR AND GUARANTOR
4.1 Organization; Qualification......................... 46
4.2 Authority Relative to this Agreement................ 47
4.3 Consents and Approvals.............................. 48
4.4 Non-Contravention................................... 48
4.5 Financing........................................... 49
4.6 Finders............................................. 50
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Conduct of Business................................. 50
5.2 Forbearances........................................ 51
5.3 Negotiations with Others............................ 56
5.4 Investigation of Business and Properties............ 57
5.5 Confidentiality..................................... 57
5.6 Books and Records................................... 57
5.7 Expenses............................................ 58
5.8 HSR Filings......................................... 59
5.9 Public Announcements................................ 59
5.10 Efforts to Consummate............................... 59
5.11 Indemnification of Officers and Directors........... 62
5.12 Employee Matters.................................... 64
5.13 Special Employee Bonus.............................. 65
5.14 Stockholders' Agreement............................. 65
5.15 Amendment and Termination of Affiliate Leases....... 66
5.16 Consulting and Employment Agreements................ 66
5.17 Option Agreement.................................... 66
5.18 Split of Company Shares............................. 67
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF INVESTOR
6.1 Representations and Warranties...................... 67
6.2 Performance of this Agreement....................... 68
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6.3 Consents and Approvals.............................. 68
6.4 Injunction, Litigation, etc......................... 68
6.5 Legislation......................................... 69
6.6 Proceedings; Certificates........................... 69
6.7 Resignations........................................ 69
6.8 Financing........................................... 69
6.9 Management Purchase of Equity....................... 70
6.10 No Material Adverse Change.......................... 70
6.11 Opinion of Counsel.................................. 70
6.12 Solvency Opinion.................................... 71
6.13 Controlling Shareholder's Agreement................. 71
6.14 Stockholders' Agreement............................. 71
6.15 Election by Shareholders............................ 71
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE COMPANY
7.1 Representations and Warranties...................... 72
7.2 Performance of this Agreement....................... 73
7.3 Consents and Approvals.............................. 73
7.4 Injunction, Litigation, etc......................... 73
7.5 Legislation......................................... 73
7.6 Proceedings; Certificates........................... 74
7.7 Opinion of Counsel.................................. 74
7.8 Solvency Opinion.................................... 74
7.9 Stockholders' Agreement............................. 75
7.10 Employment Agreements............................... 75
7.11 Option Agreement.................................... 75
ARTICLE VIII
TERMINATION
8.1 Termination.......................................... 75
8.2 Procedure: Effect of Termination..................... 76
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices.............................................. 76
9.2 No Survival of Representations and Warranties........ 78
9.3 Interpretation....................................... 78
9.4 Entire Agreement..................................... 79
9.5 Successors and Assigns............................... 79
9.6 Severability......................................... 79
9.7 Amendment............................................ 80
9.8 Extension; Waiver.................................... 80
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9.9 Disclosure Schedules................................. 81
9.10 Counterparts......................................... 82
9.11 Governing Law........................................ 82
9.12 Guarantors........................................... 82
9.13 FS Funds............................................. 84
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SCHEDULES
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2.7 Electing Shares
3.1 Organization and Qualification
3.2 Capitalization
3.4 Consents and Approvals
3.5 Violations, Defaults
3.6 Environmental Matters
3.7 Licenses and Permits
3.8 Compliance with Laws
3.10 Absence of Changes
3.11 Undisclosed Liabilities
3.12 Litigation
3.13 Real Property
3.14 Personal Property
3.15 Leases
3.17 Intellectual Property
3.18 Material Contracts
3.19 Insurance
3.20 Labor Matters
3.21 Employee Benefits
3.22 Taxes
3.23 Insider Interests
4.3 Consents and Approvals
4.6 Finders Fees
5.2 Forbearances
6.3 Required Consents and Approvals
7.3 Required Consents and Approvals
9.3 Company's Executive Officers
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EXHIBITS
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Exhibit A Form of Amended and Restated Articles of Incorporation of the Company
Exhibit B Form of Amended and Restated By-Laws of the Company
Exhibit C Commitment Letter From The Chase Manhattan Bank, DLJ Capital Funding,
Inc., First Union National Bank and Chase Securities, Inc.
Exhibit D Highly Confident Letter From Xxxxxxxxx, Xxxxxx & Xxxxxxxx
Securities Corporation
Exhibit E Highly Confident Letter From Xxxxxxxxx, Lufkin & Xxxxxxxx
Securities Corporation
Exhibit F Form of Stockholders' Agreement
Exhibit G Amendments to Affiliate Leases
Exhibit H Form of Consulting and Non-competition Agreement
with Xxxxxxxx X. Xxxxxxx
Exhibit I Terms of Employment Agreement with Xxxxxxx X. Xxxxx
Exhibit J Form of Option
Exhibit K Form of Opinion of Counsel to the Company
Exhibit L Form of Opinion of Counsel to Investor
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of March 4,
1998, is made among AHC Corporation, a Virginia corporation ("Investor"),
Advance Holding Corporation, a Virginia corporation (the "Company"), FS Equity
Partners III, L.P., a Delaware limited partnership, FS Equity Partners IV, L.P.
a Delaware limited partnership (collectively, "FS Equity Partners"), and FS
Equity Partners International, L.P., a Delaware limited partnership
(collectively with FS Equity Partners, "Guarantor," and each individually, a
"Guarantor").
RECITALS
A. This Agreement provides for the merger (the "Merger") of Investor into
the Company, with the Company as the surviving corporation in such Merger, all
in accordance with the provisions of this Agreement. Capitalized terms used
herein have the meanings set forth in Section 1.1.
B. The respective Boards of Directors of Investor and the Company have
approved the Merger. The Company will submit immediately to its shareholders
the approval of the Merger and the approval and adoption of this Agreement.
C. It is intended that the Merger be recorded as a recapitalization for
financial reporting purposes.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties and agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the following
meanings:
"Action" means any complaint, prosecution, indictment, action, suit,
arbitration or proceeding by or before any Governmental Authority.
"Affiliate" of a Person means a Person who, directly or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, such Person.
"Affiliated Person" has the meaning set forth in Section 3.23.
"ASCI" means Advance Stores Company, Incorporated, a Virginia
corporation and a wholly owned subsidiary of the Company.
"Audited Financial Statements" has the meaning set forth in Section
3.9.
"Benefit Plans" has the meaning set forth in Section 3.21(a).
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"Business" means the retail auto parts distribution business conducted
by the Company and its Subsidiaries taken as a whole.
"Certificate" means a Common Share Certificate or a Preferred Share
Certificate.
"Class A Common Shares" means the Class A Voting Common Stock, par
value $100 per share, of the Company.
"Class B Common Shares" means the Class B Non-Voting Common Stock, par
value $100 per share, of the Company.
"Closing" has the meaning set forth in Section 2.12.
"Closing Date" has the meaning set forth in Section 2.12.
"Common Share Cash Amount" has the meaning set forth in Section
2.7(b)(i).
"Common Share Certificate" has the meaning set forth in Section
2.11(b).
"Common Share Merger Consideration" has the meaning set forth in
Section 2.7(b)(i).
"Common Shares" means the Class A Common Shares and the Class B Common
Shares.
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"Company" has the meaning set forth in the Recitals.
"Company Material Adverse Effect" has the meaning set forth in Section
3.1.
"Confidentiality Letter" has the meaning set forth in Section 5.5.
"Controlling Shareholder" means Xxxxxxxx X. Xxxxxxx.
"Effective Time" has the meaning set forth in Section 2.2.
"Electing Shares" has the meaning set forth in Section 2.7(d).
"Environmental Law" means any statute, law, common law, rule,
regulation, by-law, ordinance, directive or legally binding policy or guideline
of any Governmental Authority dealing with or relating to Hazardous Emissions,
Handling Hazardous Substances, the pollution or protection of natural resources
or the indoor or ambient environment or the protection of public health and
safety or worker health and safety as they may be affected by the environment.
"Environmental Permits" means any permits, licenses and other
authorizations and approvals issued by any Governmental Authority which relate
to any Environmental Law.
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"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"Financing" has the meaning set forth in Section 5.10(c).
"Financing Agreements" has the meaning set forth in Section 5.10(c).
"Financing Documentation" has the meaning set forth in Section 4.5.
"Governmental Authority" means any federal, state or local government,
court or tribunal, regulatory or administrative agency, department, bureau,
authority or commission.
"Guarantor" has the meaning set forth in the Recitals.
"Handling Hazardous Substances" has the meaning set forth in Section 3.6.
"Hazardous Emissions" has the meaning set forth in Section 3.6.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
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"Income Tax" or "Income Taxes" means (a) federal, state, local or foreign
income or capital gains taxes or other taxes measured by reference to income or
capital gains, together with any interest, penalties, charges or fees imposed
with respect thereto, and (b) any obligations under any agreement or
arrangements with respect to Income Taxes described in clause (a) above.
"Income Tax Returns" means federal, state or local Income Tax returns
required to be filed with any Taxing Authority that include the Company or its
Subsidiaries.
"Intellectual Property" means trade names, trademarks and service marks,
patents, patent rights, copyrights, whether domestic or foreign (as well as
applications, registrations or certificates for any of the foregoing),
inventions, trade secrets, proprietary processes, software and other industrial
and intellectual property rights.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Investor" has the meaning set forth in the Recitals.
"Investor Common Stock" has the meaning set forth in Section 2.8.
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"Leases" has the meaning set forth in Section 3.15.
"Licenses and Permits" as used herein means all registrations,
applications, filings, certifications, notices, orders, licenses, permits,
approvals, consents, qualifications, authorizations and waivers of any
Governmental Authority, but does not include Environmental Permits.
"Liens" means all mortgages, liens, security interests, easements,
restrictive covenants, rights-of-way, leases, purchase agreements, options and
other encumbrances.
"Material Contracts" has the meaning set forth in Section 3.18.
"Merger" has the meaning set forth in the Recitals.
"1964 Trust" means the Xxxxxx Xxxxxxx Trust dated July 13, 1964.
"Other Taxes" means all Taxes which are not Income Taxes.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plans" has the meaning set forth in Section
3.21(a).
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"Permitted Encumbrances" means (i) liens for current state and local
property taxes or assessments not yet due or delinquent or which are being
contested in good faith; (ii) mechanics', carriers', workers', repairers' and
other similar liens arising or incurred in the ordinary course of business
relating to obligations as to which there is no default on the part of the
Company or its Subsidiaries; (iii) exceptions shown on the surveys furnished by
the Company to Investor on or before the date hereof and which do not materially
affect the use or occupancy of Real Property; (iv) mortgages on the landlord's
interest in property leased to the Company or the Subsidiaries; (v) liens and
encumbrances reflected in the balance sheet in the Audited Financial Statements;
(vi) liens or encumbrances incurred or created since December 31, 1996 in the
ordinary course of business; and (vii) such other liens, imperfections in title,
charges, easements, restrictions, rights of way, land use ordinances, zoning
plans and encumbrances which do not materially interfere with the current use or
occupancy of such Real Property.
"Person" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a governmental or
political subdivision or an agency or instrumentality thereof.
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"Planned Financing" has the meaning set forth in Section 4.5.
"Preferred Share Certificate" has the meaning set forth in Section 2.11(b).
"Preferred Share Merger Consideration" means the par value of one Preferred
Share together with all cumulated, accrued and unpaid dividends thereon.
"Preferred Shares" means the Preferred Stock, par value $10 per share, of
the Company.
"Proceeding" has the meaning set forth in Section 5.11.
"Real Property" means all real property owned in fee, including the
buildings, structures and other improvements located thereon.
"Returns" means returns, reports and forms required to be filed with any
U.S., state or local Taxing Authority.
"Rollover Share" has the meaning set forth in Section 2.7(b)(i).
"Shareholders" means the holders of outstanding Common Shares and
outstanding Preferred Shares.
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"Single Share Holders" has the meaning set forth in Section 2.7(d).
"Solvency Opinion" has the meaning set forth in Section 6.12.
"Subsidiary" with respect to any of the parties to this Agreement means any
corporation or other business entity, whether or not incorporated, of which at
least 50% of the securities or interests having, by their terms, ordinary voting
power to elect members of the board of directors, or other persons performing
similar functions with respect to such entity, is held, directly or indirectly,
by such party.
"Surviving Corporation" has the meaning set forth in Section 2.1.
"Surviving Corporation Common Stock" means the Class A common stock, par
value $.01 per share, of the Surviving Corporation.
"Tax Law" means the Internal Revenue Code, federal, state or local laws
relating to Taxes and any regulations or official administrative pronouncements
released thereunder.
"Taxes" means (a) all federal, state, local and foreign taxes or
assessments, including Income Taxes and those
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relating to gross receipts, gross income, capital stock, franchise, profits,
employees and payroll withholding, foreign withholding, social security,
unemployment, disability, real property, personal property, intangibles, stamp,
excise, sales, use, transfer, occupation, value added, ad valorem, customs,
premium, windfall profits, alternative minimum or estimated taxes, together with
any interest, penalties or additions to tax or additional amounts with respect
to the foregoing, whether disputed or not and (b) any obligations under any
agreements or arrangements with respect to any Taxes described in clause (a)
hereof.
"Taxing Authority" means any governmental authority including social
security administration, domestic or foreign, having jurisdiction over the
assessment, determination, collection, or other imposition of Tax.
"Voting Trust Agreement" means that certain Voting Trust Agreement dated
January 30, 1997 among Xxxxxxx X. Xxxxxxxx, as Voting Trustee, and the
Shareholders named therein, as the same may be amended from time to time.
"Voting Trustee" means Xxxxxxx X. Xxxxxxxx, as Voting Trustee under the
Voting Trust Agreement.
"VSCA" means the Virginia Stock Corporation Act.
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"Welfare Plans" has the meaning set forth in Section 3.21(a).
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the satisfaction or waiver,
if permissible, of the conditions hereof, and in accordance with the VSCA, at
the Effective Time, Investor shall be merged with and into the Company.
Following the Merger, the separate corporate existence of Investor shall cease
and the Company, under the name "Advance Holding Corporation," shall continue as
the surviving corporation (the "Surviving Corporation") and shall be governed by
the laws of the Commonwealth of Virginia.
2.2 Effective Time. As soon as practicable after the satisfaction or
waiver, if permissible, of all the conditions to the Merger, the parties shall
cause the Merger to be consummated by causing articles of merger with respect to
the Merger to be executed and filed in accordance with the relevant provisions
of the VSCA. The Merger shall become effective at the time of the issuance by
the State Corporation Commission of Virginia of a certificate of merger in
accordance with the relevant provisions of the VSCA (the "Effective Time").
2.3 Effects of the Merger. The Merger shall have the effects set forth in
Section 721 of the VSCA.
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2.4 Articles of Incorporation and By-Laws. The Articles of Incorporation
of the Company, amended and restated in the form attached hereto as Exhibit A,
shall be the Articles of Incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by the VSCA.
The By-Laws of Investor, amended and restated in the form attached hereto
as Exhibit B, shall be the By-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by the VSCA.
2.5 Directors. The directors of Investor immediately prior to the
Effective Time and Xxxxxxxx X. Xxxxxxx shall be the initial directors of the
Surviving Corporation and shall hold office until their respective successors
are duly elected and qualified, or their earlier death, resignation or removal.
2.6 Officers. The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation and
shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
2.7 Conversion of Shares.
(a) Each Preferred Share outstanding immediately prior to the
Effective Time (other than Preferred Shares, if
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any, owned by Investor, the Company or any Subsidiary of the Company or
Investor) shall, by virtue of the Merger and without any action on the part of
the holder thereof, automatically be converted into the right to receive the
Preferred Share Merger Consideration.
(b) (i) Except as otherwise provided herein and subject to Sections
2.7(c) and 2.11(d):
(x) each Electing Share issued and outstanding immediately prior
to the Effective Time as set forth opposite the name of the electing
shareholders on Schedule 2.7 hereto, which also sets forth the number of
Electing Shares (all of which shall be Class A Common Shares), shall remain
outstanding as one fully paid and nonassessable share of Surviving
Corporation Common Stock (a "Rollover Share") which shall remain unaffected
by the Merger, except as expressly provided herein; and
(y) each Common Share issued and outstanding immediately prior to
the Effective Time (other than Electing Shares) ("Nonelecting Shares")
shall be automatically converted into the right to receive in cash the
amount determined by subtracting from $351,000,000 the aggregate amount
payable on the Closing Date for all Preferred Shares (including cumulated,
accrued and unpaid dividends) pursuant to Section 2.7(a) and dividing this
sum by
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22,537,500 (the "Common Share Cash Amount") from the Surviving
Corporation.
As used herein, "Common Share Merger Consideration" means, in the case of each
Common Share issued and outstanding immediately prior to the Effective Time
(other than Common Shares referred to in Section 2.7(c)), the consideration
described with respect to such share in clause (x) or (y) above, as applicable.
(ii) As of the Effective Time, all Nonelecting Shares (other
than Common Shares referred to in Section 2.7(c)) issued and outstanding
immediately prior to the Effective Time shall no longer be outstanding and
shall be automatically canceled and retired and shall cease to exist, and
each holder of a Common Share Certificate shall, to the extent such Common
Share Certificate immediately prior to the Effective Time represented such
Nonelecting Shares, cease to have any rights with respect thereto, except
the right to receive cash (without interest) in accordance with Sections
2.7(b)(i)(y) and 2.11.
(iii) The Rollover Shares and the Surviving Corporation Common
Stock into which shares of Investor Common Stock are converted pursuant to
Section 2.8 will constitute shares of Class A Common Stock of the Company.
Accordingly, after the Effective Time, the holder of each
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Rollover Share and the holder of each share of Surviving Corporation Common
Stock into which shares of Investor Common Stock are converted pursuant to
Section 2.8 shall be entitled to the same relative rights and privileges
under the VSCA and the Articles of Incorporation and By-laws of the
Surviving Corporation.
(c) Each Common Share and each Preferred Share owned by Investor,
the Company or any Subsidiary of the Company or Investor immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, automatically be cancelled and cease to exist at and
after the Effective Time and no consideration shall be paid with respect
thereto.
(d) Each holder of Common Shares has the right to make an unconditional
election to retain whole Common Shares as Rollover Shares, on the basis
hereinafter set forth; provided that the number of Common Shares so elected to
remain outstanding as Rollover Shares ("Electing Shares") shall be 1,750,000 in
the aggregate as set forth on Schedule 2.7 hereto. The Controlling Shareholder
is executing simultaneously herewith an agreement which provides for such
Controlling Shareholder's irrevocable election to retain 1,000,000 Common Shares
as Rollover Shares and the 1964 Trust is executing simultaneously herewith an
agreement which provides for such 1964 Trust's irrevocable
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election to retain 750,000 Common Shares as Rollover Shares. Each of the two
holders of Common Shares other than the Controlling Shareholder and the 1964
Trust, each of whom owns 12,500 Common Shares (the "Single Share Holders"), will
have elected prior to the Effective Time, and in any event no later than March
31, 1998, to receive cash for such Single Share Holder's Common Shares. All
Nonelecting Shares shall be converted, as of the Effective Time, into the right
to receive the Common Share Merger Consideration described in Section
2.7(b)(i)(y).
2.8 Conversion of Investor Common Stock. The shares of common stock, par
value $.01 per share, of Investor ("Investor Common Stock") issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, automatically
be converted into and thereafter represent 10,250,000 validly issued, fully paid
and nonassessable shares of Surviving Corporation Common Stock so that
immediately following the purchase by Management contemplated by Section 2.9 the
shareholders of Investor will be the owners of 10,250,000 shares (representing
82%) of Surviving Corporation Common Stock outstanding at such time.
2.9 Management Purchase of Common Stock. Certain members of management
will purchase immediately following consummation
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of the Merger 500,000 shares of Surviving Corporation Common Stock at a price of
$10 per share, such shares to be validly issued, fully paid and non-assessable,
so that upon such purchase such members of management will be the owners of 4%
of Surviving Corporation Common Stock outstanding at such time.
2.10 Shareholders' Approval. The Company, acting through its Board of
Directors (which shall have recommended approval of the Merger and approval and
adoption of this Agreement to its shareholders), shall, in accordance with
applicable law, use its reasonable best efforts to obtain, immediately following
the signing of this Agreement and in any event no later than March 31, 1998, (a)
the approval of the Merger and the approval and adoption of this Agreement by
its shareholders and (b) the elections of the Shareholders contemplated by
Section 2.7(d), in each case other than Xx. Xxxxxxx and the 1964 Trust, each of
which is executing simultaneously herewith an agreement which provides for such
approval, adoption and election.
2.11 Exchange of Shares; Payment.
(a) At the Effective Time, Investor will pay the aggregate Common Share
Merger Consideration payable pursuant to Section 2.7(b)(i)(y) and the aggregate
Preferred Share Merger Consideration, in immediately available funds to the
holders of the Preferred Shares and the Nonelecting Shares, in the manner set
forth below.
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(b) Each holder of Preferred Shares will surrender to the Company at the
Effective Time a certificate or certificates which immediately prior to the
Effective Time represented all Preferred Shares (each, a "Preferred Share
Certificate") held by such Shareholder, together with a duly executed stock
power, and such Shareholder shall be entitled to receive in exchange therefor an
amount, in immediately available funds, equal to the product of the number of
Preferred Shares represented by such Preferred Share Certificate or Certificates
multiplied by the Preferred Share Merger Consideration. Each holder of Common
Shares will surrender to the Company at the Effective Time a certificate or
certificates which immediately prior to the Effective Time represented all of
the Common Shares held by such Shareholder (each, a "Common Share Certificate"),
together with a duly executed stock power, and such Shareholder shall be
entitled to receive in exchange therefor (i) in the case of each Shareholder
other than holders of Electing Shares, an amount, in immediately available
funds, equal to the product of the number of Common Shares represented by such
Common Share Certificate multiplied by the Common Share Cash Amount, and (ii) in
the case of holders of Electing Shares, a certificate or certificates
representing the Rollover Shares and an amount, in immediately available funds,
equal to the product of the number of Nonelecting Shares represented by such
Common Share Certificate multiplied by the Common Share
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Cash Amount. No interest will be paid or accrued on any amount payable upon the
surrender of a Certificate. If payment is to be made to a Person other than the
Person in whose name a Certificate surrendered is registered, it shall be a
condition of payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the Person requesting
such payment shall pay transfer or other taxes required by reason of the payment
to a Person other than the registered holder of the Certificate surrendered, or
establish to the satisfaction of the Company that such tax has been paid or is
not applicable, or provide assurances satisfactory to the Company that any such
tax will be paid by such Person.
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of Preferred Shares or Common Shares
(other than Rollover Shares and shares issued pursuant to Section 2.8 and
Section 2.9). If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be cancelled and exchanged for the Common
Share Merger Consideration or the Preferred Share Merger Consideration, as the
case may be, as provided in this Agreement.
(d) Notwithstanding anything to the contrary set forth herein, at the
election of any Shareholder, the payment of the Common Share Merger
Consideration payable pursuant to
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Section 2.7(b)(i)(y) and/or the Preferred Share Merger Consideration, as the
case may be, due to such Shareholder, will be made by wire transfer to a bank
account designated by such Shareholder at least two business days prior to the
Closing Date.
2.12 Closing. On the date on which the last of the unsatisfied conditions
set forth in Sections 6.3, 6.8 or 7.3 hereof is satisfied or waived (or such
other time as the parties may mutually agree), a closing (the "Closing") will be
held at the offices of Wachtell, Lipton, Xxxxx & Xxxx (or such other place as
the parties may agree) for the purpose of confirming all of the foregoing,
provided, that nothing herein shall be deemed to affect (i) the conditions to
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the respective parties' obligations hereunder contained in Articles VI and VII
hereof or (ii) Article VIII hereof. The date and time at which such Closing
actually occurs are herein referred to as the "Closing Date." As soon as
practicable after the satisfaction or, if permissible, waiver of the conditions
set forth in Articles VI and VII hereof, the Company and Investor shall execute
in the manner required by the VSCA and deliver to the Clerk of the State
Corporation Commission of Virginia duly executed articles of merger and the
parties shall take such other and further actions as may be required by law to
make the Merger effective.
-21-
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investor and Guarantor that, except
as set forth in the Disclosure Schedule:
3.1 Organization and Qualification.
(a) The Company and each of its Subsidiaries is a corporation or
other entity (as listed in Schedule 3.1) duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization, and has corporate power and authority to own all of its properties
and assets and to carry on its business as now being conducted. The Company and
each of its Subsidiaries is duly qualified and in good standing to transact
business in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be in good standing or to be duly
qualified would not, individually or in the aggregate, have a material adverse
effect on the business, assets, liabilities, financial condition or results of
operations of the Company and its Subsidiaries, taken as a whole (collectively,
a "Company Material Adverse Effect"). Each jurisdiction in which the Company and
each of its Subsidiaries is qualified to do business is set forth in Schedule
3.1. The Company has heretofore delivered or made available to Investor complete
-22-
and correct copies of the Articles of Incorporation and By-laws or equivalent
organizational documents of the Company and each of its Subsidiaries, as
currently in effect.
(b) A complete list of the directors and officers of the Company and
its Subsidiaries is set forth in Schedule 3.1.
3.2 Capitalization of the Company; Validity of Shares.
(a) The authorized capital stock of the Company and the total amount
of such stock which is outstanding and the record and beneficial ownership
thereof by the Shareholders are as set forth in Schedule 3.2 and there are no
Liens, options, agreements, commitments or claims with respect to the record
ownership or beneficial ownership of the capital stock of the Company which will
give rise to claims against the Surviving Corporation. All of the outstanding
Common Shares and Preferred Shares have been duly authorized, are validly
issued, fully paid and nonassessable, were not issued in violation of any
preemptive rights, and are owned beneficially and of record by the Shareholders,
free and clear of any Liens (other than the Voting Trust Agreement and Liens
that will terminate at or before Closing and which are listed on Schedule 3.2).
(b) All of the outstanding shares of capital stock or other equity
interests of the Company's Subsidiaries, as set forth in Schedule 3.2, are duly
authorized, validly issued,
-23-
fully paid and nonassessable, were not issued in violation of any preemptive
rights, and, except as set forth in Schedule 3.2, are owned by the Company or
its Subsidiaries in the amounts set forth in Schedule 3.2, free and clear of any
Liens.
(c) Except as set forth in Schedule 3.2 or as contemplated by this
Agreement, none of the Company or its Subsidiaries has any commitment to issue
or sell any shares of its capital stock or any securities or obligations
convertible into or exchangeable for, or giving any Person any right to acquire
from the Company or its Subsidiaries, any shares of its capital stock and no
such securities or obligations are outstanding.
(d) Except as set forth in Schedule 3.2, none of the Company or the
Subsidiaries directly or indirectly owns any capital stock of or other equity
interest in any corporation, partnership or other entity or other Person.
3.3 Authority Relative to this Agreement. The Company has corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. Pursuant to the Voting Trust Agreement, the
Voting Trustee is duly authorized, and has all the necessary power and
authority, to vote the Common Shares and Preferred Shares in favor of the Merger
and such vote when given is binding on all of the Shareholders. The execution
and delivery of this Agreement by the Company, and the consummation by it of the
transactions
-24-
contemplated hereby, have been duly authorized by the Board of Directors of the
Company and, except for obtaining the requisite approval of the shareholders of
the Company (which shall occur immediately following the signing of this
Agreement), no other corporate proceedings on the part of the Company are
necessary with respect thereto. This Agreement has been duly executed and
delivered by the Company and, assuming that Investor and Guarantor have duly
authorized, executed and delivered this Agreement, this Agreement constitutes a
valid and binding obligation of the Company, enforceable in accordance with its
terms except as such enforceability may be limited by (1) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally or (2) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
3.4 Consents and Approvals. Except as set forth in Schedule 3.4 and
except as may be required under the HSR Act, there is no requirement applicable
to the Company or its Subsidiaries to make any filing with, or to obtain any
permit authorization, consent or approval of any Governmental Authority as a
condition to the lawful consummation of the transactions contemplated by this
Agreement. Except as set forth in Schedule 3.4, there is no requirement that
any party to any contract, Lease
-25-
or loan agreement to which the Company or any of its Subsidiaries is a party or
by which any of them is bound, consent to the execution of this Agreement by the
Company or consummation of the transactions contemplated hereby, except for such
consents, the failure to obtain, individually or in the aggregate, would not
have a Company Material Adverse Effect.
3.5 Non-Contravention. The execution and delivery by the Company of this
Agreement does not, and the consummation of the transactions contemplated hereby
will not (i) violate or result in a breach of any provision of the Articles of
Incorporation, By-laws or similar organizational documents of the Company or any
Subsidiary of the Company, (ii) except as described in Schedule 3.5, result in a
default (or give rise to any right of termination, cancellation or acceleration)
under the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement, lease or other instrument or obligation to which
the Company or its Subsidiaries is a party or by which the Company or its
Subsidiaries are bound, or (iii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company excluding from the
foregoing clauses (ii) and (iii) such requirements, defaults, breaches, rights
or violations (A) that would not singularly, or in the aggregate, have a Company
Material Adverse Effect and would not have a material adverse effect on the
ability of the Company to perform its obligations hereunder or (B) that become
applicable
-26-
as a result of (1) the business or activities in which Investor or any of its
Affiliates is or proposes to be engaged, or (2) any acts or omissions by, or
facts pertaining to, Investor.
3.6 Environmental Matters.
(a) Except as set forth in Schedule 3.6, the Company and its
Subsidiaries have obtained all Environmental Permits required for the conduct of
the Business as it is presently being conducted, including those relating to (i)
emissions, discharges, threatened discharges, releases, threatened releases or
disposal of pollutants, contaminants, hazardous or toxic substances or petroleum
into the air, surface water, ground water or the ocean, or on or into the land
("Hazardous Emissions") and (ii) the manufacture, processing, distribution,
release, use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, hazardous or toxic substances, or petroleum ("Handling Hazardous
Substances"), except for such Environmental Permits which would not reasonably
be expected to have a Company Material Adverse Effect. Schedule 3.6 contains a
complete and correct list of all such Environmental Permits. The Company and its
Subsidiaries are in compliance with the terms and conditions set forth in the
Environmental Permits, except such failures to comply that would not reasonably
be expected to have a Company Material Adverse Effect. Except (x) as set forth
in Schedule 3.6 or (y) as
-27-
would not reasonably be expected to have a Company Material Adverse Effect, the
Company, the Subsidiaries and their respective properties are in compliance with
all Environmental Laws. Neither the Company nor its Subsidiaries' past or
current operations, nor their past or current ownership, operation or use of any
real property (x) interfere with or prevent continued compliance with any of the
Environmental Permits or any Environmental Laws, except for such interference or
prevention that would not reasonably be expected to have a Company Material
Adverse Effect, (y) give rise to any liability (whether based in contract, tort,
implied or express warranty, criminal or civil statute or otherwise) under any
Environmental Law, which liability would reasonably be expected, individually or
in the aggregate, to have a Company Material Adverse Effect, or (z) obligate the
Company or any of its Subsidiaries to clean up, remedy or otherwise restore, by
itself or jointly with others, any Hazardous Emissions which obligation would
reasonably be expected to have a Company Material Adverse Effect.
(b) Except as set forth in Schedule 3.6, there are no Actions pending, or
to the knowledge of the Company, threatened, and, to the knowledge of the
Company, neither the Company nor any of its Subsidiaries has received any notice
and there are no investigations pending or threatened, alleging, warning or
notifying the Company that the Company is, has been or may be in violation of or
non-compliance with any Environmental Law
-28-
which would reasonably be expected to have a Company Material Adverse Effect.
(c) The Company has delivered to Investor, true, correct and complete
copies of all environmental audits, assessments, and studies relating to the
business and the properties of the Company and its Subsidiaries which are in the
Company's possession. None of the matters set forth on Schedule 3.6 would
reasonably be expected, individually or in the aggregate, to have a Company
Material Adverse Effect.
3.7 Licenses and Permits. Except as set forth in Schedule 3.7, the
Company and its Subsidiaries have obtained, and are in substantial compliance
with, all of the Licenses and Permits necessary to conduct the Business as it is
presently being conducted, except for such Licenses and Permits the absence of
which, or failure to comply with, either individually or in the aggregate do
not, and so far as could reasonably be foreseen, would not, individually or in
the aggregate, have a Company Material Adverse Effect. Schedule 3.7 contains a
complete and correct list of all material Licenses and Permits issued or granted
to the Company or its Subsidiaries in connection with the operation of the
Business.
3.8 Compliance with Laws. Except as set forth in Schedule 3.8, and in
addition to the representations and warranties contained in Section 3.6 relating
to environmental matters and
-29-
those contained in Section 3.7 relating to Licenses and Permits, the Company and
its Subsidiaries are being, and since December 27, 1994 have been, operated in
compliance with all laws, regulations, orders, judgments or decrees of any
Governmental Authority applicable to the Company or the Business, except such
failures to comply which, individually or in the aggregate, would not reasonably
be expected to have a Company Material Adverse Effect.
3.9 Financial Statements. Investor has previously been furnished true and
complete copies of the audited consolidated financial statements, including the
notes thereto, of the Company for the three years ended January 3, 1998
(collectively, the "Audited Financial Statements") together with the reports on
such statements of the Company's independent certified public accountants. The
Audited Financial Statements present fairly in all material respects the
consolidated financial position of the Company as of such dates and the results
of operations and cash flows for such periods and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis.
3.10 Absence of Changes. Except (a) as contemplated by this Agreement or
(b) as set forth in Schedule 3.10, since January 3, 1998 (or such other date
provided below):
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(i) the Business has been operated in all material respects in the
ordinary and usual course consistent with past practices;
(ii) there has not been any damage, destruction, loss or abandonment
(whether or not covered by insurance) which, individually or in the aggregate
has resulted or would reasonably be expected to result in a Company Material
Adverse Effect;
(iii) the Company has not through the date hereof taken any action,
which if taken as of the date hereof to and through the Closing, would violate
any of clauses (i)-(xix) of Section 5.2 (and there have not been any changes
required by generally accepted accounting principles referred to in clause (xix)
of Section 5.2);
(iv) since January 1, 1997, there have been no amendments to any
Lease between the Company or its subsidiaries and an Affiliated Person; and
(v) the Company has not entered into any agreement to do any of the
things described in the preceding clauses of this Section 3.10.
3.11 No Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any material liabilities, whether known or unknown, absolute,
accrued, contingent or otherwise,
-31-
except (i) as and to the extent set forth in the balance sheets included in the
Audited Financial Statements or in the notes thereto, (ii) liabilities incurred
after January 3, 1998 (x) in the ordinary course of business consistent with
past practice and not prohibited by this Agreement or (y) which would not have a
Company Material Adverse Effect and (iii) as set forth in Schedule 3.11.
3.12 Litigation. Except as set forth in Schedule 3.12, there are no
Actions pending or, to the knowledge of the Company, threatened, and, to the
knowledge of the Company, there are no investigations pending or threatened,
against the Company or its Subsidiaries or any of their respective properties,
which (i) individually or in the aggregate have or would reasonably be expected
to have a Company Material Adverse Effect or (ii) would reasonably be expected
to prevent, restrict or delay consummation of the transactions contemplated
hereby or fulfillment of any of the conditions of this Agreement. Except as set
forth on Schedule 3.12, there are no judgments, decrees or orders of any court,
arbitrator, governmental department, commission, agency or instrumentality
outstanding against the Company or its Subsidiaries which individually or in the
aggregate have or would reasonably be expected to have a Company Material
Adverse Effect.
-32-
3.13 Real Property. Schedule 3.13 contains a complete and correct list of
all of the Real Property which is owned by the Company or its Subsidiaries.
Except as set forth in the title policies and surveys listed in Schedule 3.13
and except for Permitted Encumbrances, the Company and its Subsidiaries have
good and insurable title in fee simple to all of the Real Property listed in
Schedule 3.13 free and clear of any Liens.
3.14 Personal Property. Except as set forth in Schedule 3.14, the Company
or its Subsidiaries has good and valid title to all of the material personal
property, tangible and intangible, which it owns and which is reflected in the
consolidated balance sheet of the Company at January 3, 1998 or acquired since
such date (except as may be disposed of in the ordinary course of business after
such date), in each case free of liens, security interests or other
encumbrances, except liens, security interests and other encumbrances which
would not, individually or in the aggregate, have a Company Material Adverse
Effect.
3.15 Leases. Schedule 3.15 sets forth a complete list of each agreement
to lease to which the Company or any of its Subsidiaries is a party, whether as
lessor or lessee, which relates to either real or personal property, other than
monthly leases of personal property which (i) may be canceled without material
penalty upon not more than 30 days' notice or (ii)
-33-
require the payment of not more than $5,000 per month. The agreements listed in
Schedule 3.15 are referred to herein as "Leases." Except as set forth in
Schedule 3.15, (i) none of the Company, its Subsidiaries or, to the knowledge of
the Company, any other party is in default under any material provision of the
Leases, (ii) as of the date hereof, no notice has been received by the Company
or any of its Subsidiaries from, or to the knowledge of the Company threatened
by, any landlord under any Lease that the Company or any of its Subsidiaries is
in default thereunder and (iii) the Company or its Subsidiaries has good
leasehold title to its real properties held under the Leases. The leasehold
estate created by the Leases and the Leases themselves are free and clear from
all Liens other than Permitted Encumbrances and Liens that individually or in
aggregate would not have a Company Material Adverse Effect.
3.16 Sufficiency of Assets. The Real Property listed on Schedule 3.13 or
leased pursuant to the Leases listed on Schedule 3.15 and the personal,
intellectual or other property that will be owned, leased or licensed by the
Company and its Subsidiaries on the Closing Date constitute all of the
properties and assets necessary for, or material to, the Business as currently
conducted.
-34-
3.17 Intellectual Property. Schedule 3.17 sets forth a complete and
correct list of all Intellectual Property registrations (or applications
therefor) used or held for use in the conduct of, or otherwise material to, the
Business. Except as set forth in Schedule 3.17, the Company or its Subsidiaries
owns or is licensed or otherwise has the full and exclusive right to use, as
such are currently being used in the conduct of the Business, free and clear of
conditions, adverse claims or other restrictions or any requirement of any past,
present or future royalty payments, all such Intellectual Property. There is as
of the date hereof no Action pending or, to the knowledge of the Company,
threatened, against the Company or any of its Subsidiaries asserting that the
Company or its Subsidiaries' use of any Intellectual Property infringes the
rights of any third party or otherwise contesting its rights with respect to any
Intellectual Property, and, to the knowledge of the Company, there are no
grounds for any such assertion and no third party is infringing upon the rights
of the Company or its Subsidiaries in the Intellectual Property. All material
licenses granted by the Company or its Subsidiaries for use of Intellectual
Property by others are shown on Schedule 3.17.
3.18 Material Contracts. Schedule 3.18 sets forth, as of the date hereof,
a complete and correct list of each contract,
-35-
agreement or commitment of the Company or its Subsidiaries, other than Leases:
(i) which is a material supply, exclusive dealing, requirements or
take-or-pay agreement;
(ii) which provides for aggregate future payments by the Company or
its Subsidiaries of more than $2,000,000, except (x) as set forth in the
capital expenditure budget provided to Investor and (y) for purchase orders
for the purchase of inventory or sales orders arising in the ordinary and
usual course of business, in which case they are listed only if any party
thereto is obligated to make payments pursuant thereto aggregating more
than $25,000,000;
(iii) which extends more than one year from the date hereof and is
not cancelable by either party on 30 days' notice;
(iv) which provides for the sale or lease after the date hereof of
any of the assets of the Company or its Subsidiaries other than in the
ordinary course of business;
(v) which relates to the employment, retirement or termination of
the services of any officer or employee
-36-
or former officer or employee of the Company or its Subsidiaries;
(vi) which establishes a partnership, agency, joint venture or
other similar contract, arrangement or agreement;
(vii) which relates to indebtedness for borrowed money or the
deferred purchase price of property (whether incurred, assumed, guaranteed
or secured by any asset and including letters of credit and sale-leaseback
arrangements);
(viii) which creates or relates to a license of Intellectual
Property, royalty or franchise agreement or agreement in respect of similar
rights granted to or from or held by the Company or its Subsidiaries;
(ix) which provides for future payments that are conditioned, in
whole or in part, on a change in control of the Company or its
Subsidiaries;
(x) which restricts the right of the Company or its Subsidiaries
to compete in any way with any other Person or which contains covenants
pursuant to which any person has agreed not to compete, or otherwise
restricts a person's ability to engage freely, in any part of the Business;
-37-
(xi) under which the Company has, within the three years preceding
the date of this Agreement, acquired any distribution center or made any
acquisitions of multiple stores previously used by other automotive parts
retailers in a single or related series of transactions, other than those
as to which all material obligations of the parties thereunder for the
benefit of the Company or its Subsidiaries have been discharged; or
(xii) any other contract not covered by items (i) through (x) above
that the Company believes is material to the Business.
Each of the foregoing is referred to in this Agreement as a "Material Contract."
Except as set forth in Schedule 3.18, to the knowledge of the Company, neither
the Company nor its Subsidiaries is in default under any Material Contract,
except for such defaults which, individually or in the aggregate, would not have
a Company Material Adverse Effect.
3.19 Insurance. The Company and its Subsidiaries maintain, in coverages
and amounts believed by the Company to be customary in the industry, property
and casualty insurance with respect to the Business. Schedule 3.19 sets forth a
true and complete list, as of the date hereof, showing the insurance company,
insured and other parties, type and amount of coverage
-38-
and deductibles, of all insurance policies to which the Company or any of its
Subsidiaries is a party covering the Company or its Subsidiaries and their owned
or leased properties or employees. To the Company's knowledge, such insurance
policies are in full force and effect. Neither the Company nor its Subsidiaries
has received, any written notice of cancellation or non-renewal of any such
insurance policy which would reasonably be expected to have a Company Material
Adverse Effect.
3.20 Labor Matters.
(a) Except as set forth on Schedule 3.20, there are no labor unions
or other organizations representing, purporting to represent or attempting to
represent any employees of the Company or its Subsidiaries, and there has been
no such attempt since January 1, 1994 which in any such case would reasonably be
expected to have a Company Material Adverse Effect.
(b) There are no controversies pending or, to the knowledge of the
Company, threatened between the Company or its Subsidiaries and any of their
respective employees which has, or would reasonably be expected to have, a
Company Material Adverse Effect or which relates to any specific effort to
prevent, restrict or delay consummation of the transactions contemplated by this
Agreement. Except as set forth in Schedule 3.20, since January 1, 1994, there
has not occurred or, to the
-39-
knowledge of the Company, been threatened, any strike, slowdown, picketing, work
stoppage, concerted refusal to work overtime, grievance, claim of unfair labor
practice or other similar labor activity with respect to employees of the
Company or its Subsidiaries which would reasonably be expected to have a Company
Material Adverse Effect. The Company and its Subsidiaries are in compliance with
the Decision and Order of the National Labor Relations Board dated January 23,
1997, in the matter involving the Company's Gadsden, Alabama Distribution Center
and the United Steelworkers of America, AFL-CIO.
3.21 Employee Benefit Plans.
(a) Schedule 3.21 lists all of the employee benefit plans and
programs, including, without limitation, all retirement, savings and other
pension plans, whether or not tax qualified ("Pension Plans"), all health,
severance, insurance, disability and other employee welfare plans ("Welfare
Plans") and all incentive, vacation, stock option, stock purchase, stock bonus,
severance, and other similar plans that are maintained by the Company or any of
its Subsidiaries or to which the Company or any of its Subsidiaries have
contributed or are now contributing (collectively referred to as "Benefit
Plans"). Neither the Company nor any of its Subsidiaries is a party to any
multiemployer plan as defined in Section 3(37) of ERISA.
-40-
(b) The Company has delivered to Investor a true and complete copy
of:
(i) The plan document for each Benefit Plan;
(ii) The current Summary Plan Description and Summary of Material
Modifications (if applicable) of each Benefit Plan;
(iii) The most recent Internal Revenue Service determination letter
(if applicable) for each Benefit Plan; and
(iv) The most recent Form 5500 that was filed on behalf of each
Benefit Plan, including the actuarial report (if applicable).
(c) Except as set forth in Schedule 3.21, as to each of the Benefit
Plans, the Company and its Subsidiaries have complied, in all material respects,
with all applicable laws and regulations in administering such plans, including
specifically the provisions of Titles I and IV of ERISA and the Internal Revenue
Code. The Internal Revenue Service has issued a favorable determination letter
with respect to each Pension Plan that is intended to qualify under Section
401(a) of the Code, and, to the knowledge of the Company, no event has occurred
(either before or after the date of the letter) that could reasonably be
expected to result in the disqualification of the Pension Plan, unless such
event could be cured without
-41-
any Company Material Adverse Effect. No prohibited transaction, as defined in
Sections 406 through 411 of ERISA, has occurred with respect to any of the
Pension Plans and none of the Pension Plans has incurred any accumulated funding
deficiency, as defined in Section 302 of ERISA, whether or not waived. There has
not been, with regard to any such Pension Plan, any reportable event, as defined
in Section 4043(b) of ERISA, that is required to be reported to the PBGC by law
or regulation.
(d) As to each of the Welfare Plans and other employee benefit plans
and programs (including without limitation the plans listed in Schedule 3.18),
the Company and its Subsidiaries have complied, in all material respects, with
all applicable laws and regulations in the administration thereof including,
without limitation, the provisions of ERISA.
(e) Except as described in Schedule 3.21, since January 1, 1990,
neither the Company nor any of its Subsidiaries has terminated any Pension Plan
or incurred any liability to the PBGC under Section 4001, et seq. of ERISA and,
to the knowledge of the Company, no condition exists that would reasonably be
expected to cause the Company or any of its Subsidiaries to incur any such
liability. All premiums payable to the PBGC with respect to any such Plan have
been paid when due.
(f) No compensation or benefit that is or will be payable as a
result of the transactions contemplated by this
-42-
Agreement will be characterized as an "excess parachute payment" within the
meaning of Section 280G of the Internal Revenue Code.
(g) None of the persons performing services for the Company or for a
Subsidiary have been improperly classified as independent contractors, leased
employees, or as being exempt from the payment of wages or overtime, except for
any such improper classification as would not reasonably be expected to have a
Company Material Adverse Effect.
(h) For purposes of this Section 3.21, the term "Company" shall
include any entity that is aggregated with the Company or with any of its
Subsidiaries under Internal Revenue Code Section 414(b) or (c).
3.22 Tax Matters. (a) The amounts accrued for taxes in the Audited
Financial Statements are sufficient for the payment of all Taxes of the Company
and its Subsidiaries, whether or not disputed, which are properly accruable.
There are no agreements by the Company or any of its Subsidiaries for the
extension of time for the assessment of any taxes, and all federal or state
Taxes due and payable by the Company or any of its Subsidiaries on or before the
date of this Agreement have been paid or provided for, and are not delinquent.
-43-
(b) Except as set forth in Schedule 3.22, no audit, examination or
proceeding is pending or has been threatened in writing by any taxing authority
with respect to the assessment or collection from the Company and its
Subsidiaries of any Taxes, no unresolved claim for assessment or collection of
any Taxes has been asserted in writing against the Company and its Subsidiaries,
and all resolved assessments of Taxes have been paid. The Company and its
Subsidiaries have delivered to Investor complete copies of all audit reports and
other governmental claims asserting Taxes in addition to those Taxes set forth
on the Tax Returns of the Company and its Subsidiaries.
3.23 Insider Interests. Except as disclosed in Schedule 3.23, no
Affiliate of the Company (other than a Subsidiary), or any shareholder, officer
or director of an Affiliate of the Company (other than a Subsidiary), or any
member of their immediate family (an "Affiliated Person," which definition shall
not include the Voting Trustee), (i) has any interest, direct or indirect, in
any property, real or personal, tangible or intangible, including Intellectual
Property, used in or pertaining to the Business or (ii) provides or causes to be
provided to, or receives from, the Company or a Subsidiary any assets, loans,
advances, services or facilities.
-44-
3.24 Finders. Except for Xxxxxxx, Xxxxx & Co., no broker, finder or
investment banker is entitled to any fee or commission for services rendered on
behalf of the Company in connection with the transactions contemplated by this
Agreement. The Shareholders are solely responsible for the fees and expenses of
Xxxxxxx, Sachs & Co. paid from and after October 1, 1997.
3.25 Suppliers. Neither the Company nor its Subsidiaries have received
written notice, and they do not otherwise have knowledge, that any of their
significant suppliers or vendors intends to cancel, terminate or otherwise
materially modify such supplier's or vendor's relationship with the Company or
its Subsidiaries, including with respect to credit terms or any requirement that
the Company or its Subsidiaries provide letters of credit, nor, to the knowledge
of the Company, has any such supplier or vendor threatened such action as a
result of execution of this Agreement or consummation of the transactions
contemplated hereby, which in the case of any of the foregoing would reasonably
be expected have a Company Material Adverse Effect. Except as reflected in the
consolidated balance sheet of the Company at January 3, 1998, the Company is not
and will not be subject to any retroactive billing adjustments, "billbacks,"
additional payment obligations or price increases under any sales or supply
agreement, other than any of the foregoing which would be immaterial.
-45-
3.26 No Other Representations. Except for the representations and
warranties contained in this Article III, neither the Company nor any other
Person makes any express or implied representation or warranty on behalf of the
Company, and the Company disclaims any such representation or warranty, whether
by the Company or any of its respective officers, directors, employees, agents
or representatives or any other Person, with respect to the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby or the Business or assets of the Company and its Subsidiaries,
notwithstanding the delivery or disclosure to Investor, any of its officers,
directors, employees, agents or representatives or any other Person of any
documentation or other information with respect to the foregoing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTOR AND GUARANTOR
Investor represents and warrants to the Company the following, and each
Guarantor represents and warrants to the Company the following only with respect
to itself:
4.1 Organization; Qualification. Investor is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia, and has corporate power and authority to own all of
its properties and assets and to carry on its business as it is presently being
conducted.
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Each Guarantor has been duly formed and is a validly existing limited
partnership under the Delaware Revised Uniform Limited Partnership Act and has
all partnership power and authority to own all its properties and to carry on
its business as it is presently being conducted.
4.2 Authority Relative to this Agreement. Investor has the corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
Investor of this Agreement, and the consummation by it of the transactions
contemplated hereby, has been duly authorized by the Board of Directors of
Investor and by FS Equity Partners IV, L.P. as the sole shareholder of Investor
and no other corporate proceedings on the part of Investor are necessary with
respect thereto. Each Guarantor has all necessary partnership power and
authority, has taken all partnership action necessary to authorize the execution
and delivery of the Agreement and to consummate the transactions contemplated
hereby, and no other partnership proceedings on the part of such Guarantor are
necessary with respect thereto. This Agreement has been duly executed and
delivered by Investor and each Guarantor and, assuming that the Company has duly
authorized, executed and delivered this Agreement, this Agreement constitutes a
valid and binding obligation of Investor and each Guarantor, enforceable in
accordance with its terms except as such enforceability may be limited by (1)
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bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally or (2) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity).
4.3 Consents and Approvals. Except as set forth in Schedule 4.3 and
except as may be required under the HSR Act, there is no requirement applicable
to Investor or a Guarantor to make any filing with, or to obtain any permit,
authorization, consent or approval of any public body in connection with the
consummation of the transactions contemplated by this Agreement. Except as set
forth in Schedule 4.3, there is no requirement that any party to an agreement to
which Investor or a Guarantor is a party or by which either of them is bound
consent to the consummation of the transactions contemplated by this Agreement.
4.4 Non-Contravention. The execution and delivery by Investor and each
Guarantor of this Agreement does not and the consummation of the transactions
contemplated hereby will not (i) violate or result in a breach of any provision
of the Articles of Incorporation or By-laws of Investor or the partnership
agreements of a Guarantor, (ii) result in a default (or give rise to any right
of termination, cancellation or acceleration) under the terms, conditions or
provisions of any note,
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bond, mortgage, indenture, license, agreement, lease or other instrument or
obligation to which Investor or a Guarantor is a party or by which Investor or a
Guarantor, or the business conducted by it may be bound, or (iii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Investor or a Guarantor, or to the businesses conducted by it.
4.5 Financing. Investor has received a commitment letter from The Chase
Manhattan Bank, DLJ Capital Funding, Inc., First Union National Bank and Chase
Securities, Inc. with respect to ASCI's bank financing, a "highly confident"
letter from Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation with respect to
an issuance of senior subordinated notes by ASCI and a "highly confident" letter
from Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation with respect to an
issuance of senior discount notes by the Company, which letters together with a
term sheet setting forth the proposed terms of the senior subordinated notes and
the senior discount notes attached to the "highly confident" letters
(collectively, the "Financing Documentation") are attached to this Agreement as
Exhibits C, D and E, respectively. Upon consummation of the Planned Financing,
ASCI shall pay to the Company a dividend in the amount of at least [$221]
million. If the transactions contemplated by the Financing Documentation (the
"Planned Financing") are consummated and the ASCI dividend is paid, Investor and
the Company will have on the Closing Date sufficient available funds to pay the
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Common Share Merger Consideration and the Preferred Share Merger Consideration
and all fees and expenses required to be paid by the Company and Investor in
connection with the Merger and the transactions contemplated hereby, and to
refinance the existing indebtedness of the Company to financial institutions.
Investor has received a commitment letter from Guarantor, conditional only upon
the occurrence of the Closing, pursuant to which Guarantor will purchase or
cause to be purchased immediately prior to the Closing Common Stock of the
Investor for a cash purchase price of at least $102,500,000 in the aggregate.
The Company may rely on such commitment from Guarantor.
4.6 Finders. Except for fees payable in connection with the Planned
Financing and fees payable to an Affiliate of Guarantor, all as set forth on
Schedule 4.6, no broker, finder or investment banker is entitled to any fee or
commission from Investor for services rendered on behalf of Investor in
connection with transactions contemplated by this Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Conduct of Business. From the date hereof until the earlier of (i)
the Effective Time or (ii) termination under Article VIII, except as
contemplated by this Agreement, the Company will (i) conduct the Business only
in the ordinary and usual course and in a manner consistent with past practices
and
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(ii) use reasonable efforts to preserve intact its present business organization
and keep available its present officers and employees material to the Business.
The Company will notify Investor (i) of any emergency or change in the normal
conduct of the Business, (ii) of any event, occurrence, fact, condition, change
or effect that, individually or in the aggregate, would have or result in a
Company Material Adverse Effect or breach of a representation or warranty set
forth in Article III or a covenant or agreement set forth in this Article V
which would reasonably be expected to have a Company Material Adverse Effect and
(iii) of the threat or initiation of any litigation against the Company or its
Subsidiaries relating to the Merger.
5.2 Forbearances. Except as contemplated by this Agreement or as set
forth on Schedule 5.2, the Company will not, and will cause its Subsidiaries not
to, from the date hereof until the earlier of (i) the Effective Time or (ii)
termination under Article VIII, without the written consent of Investor:
(i) sell, lease or otherwise dispose of any of its assets, including
Intellectual Property, except in the ordinary course of business consistent with
past practice;
(ii) incur any indebtedness for borrowed money except under credit
facilities existing as of the date hereof in the ordinary course of business
consistent with past practice;
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(iii) mortgage, pledge or otherwise encumber, or permit to exist any new
security interest, lien or encumbrance on, any of its assets except in the
ordinary course of business consistent with past practice;
(iv) enter into, amend, modify or cancel any Material Contract or Lease
except in the ordinary course of business consistent with past practice;
(v) make any material investment in, purchase any material securities
of, or merge with, any Person or, except for purchases of inventory and other
assets in the ordinary course of business consistent with past practice,
purchase any material assets;
(vi) assume, guarantee, endorse or otherwise become responsible for the
obligations of any Person (other than the Company or a Subsidiary), or make
loans or advances to any Person except in the ordinary course of business
consistent with past practice;
(vii) increase in any manner the compensation of any of (a) the employees
of the Company or the Subsidiaries or the directors or officers of the
Subsidiaries other than ASCI, other than increases in compensation in the
ordinary course of business consistent with past practice or (b) the directors
and officers of the Company or ASCI;
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(viii) pay or agree to pay any pension or retirement allowance not
required by an existing plan or agreement to any director, officer or employee,
whether past or present, of the Company or its Subsidiaries, or enter into or
amend (except to terminate) any employment agreement or any incentive
compensation, profit sharing, stock purchase, stock option, stock appreciation
rights, savings, consulting, deferred compensation, severance, retirement,
pension or other benefit plan or arrangement with or for the benefit of any of
its directors, officers, employees or of any other person except as may be
required by applicable law or regulation;
(ix) except (A) as set forth in the capital expenditure budget provided
to Investor and (B) for purchase orders for inventory arising in the ordinary
course of business, enter into any contract which will require an expenditure
after the Effective Time of more than $2,000,000 by the Company or the
Subsidiaries;
(x) declare, set aside or pay any dividend in cash or property,
repurchase or otherwise make any distribution, with respect to its capital stock
other than dividends payable on the Preferred Shares;
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(xi) split, combine or otherwise similarly change its capital stock, or
redeem any of its capital stock;
(xii) authorize the creation or issuance of, or issue or sell, any shares
of its or its Subsidiaries' capital stock or any securities or obligations
convertible into or exchangeable for, or giving any person any right to acquire
from it, any shares of its or its Subsidiaries' capital stock;
(xiii) enter into any joint venture, partnership or other similar
arrangement;
(xiv) enter into any agreement which restricts in any way its ability to
compete with any other Person;
(xv) amend its Articles of Incorporation or By-laws, except as
contemplated by Section 2.4 and to increase the number of authorized Common
Shares to effect the stock split referred to in Section 5.18;
(xvi) cancel or compromise, except compromises of current or former short-
term trade receivables or other current assets in the ordinary course of
business consistent with past practice, any indebtedness owed to it;
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(xvii) settle any material litigation or, except in the ordinary course of
business consistent with past practice, waive or relinquish any material right
or benefit, or write-off any material asset except as required by generally
accepted accounting principles;
(xviii) cancel or allow any of its existing insurance policies to lapse;
(xix) alter in any way the manner in which it has regularly and
customarily maintained its books of account and records, or change any of its
accounting principles or the methods by which such principles are applied for
tax or reporting purposes, except as required by law or by generally accepted
accounting principles;
(xx) change or commit to change the business of the Company and its
Subsidiaries from the Business or add new businesses, or change or commit to
change materially the manner in which the Business is currently conducted;
(xxi) except for items in the categories set forth in Schedule 5.2, make
any payment or distribution to, or loan or advance funds or extend credit to,
sell any asset to or purchase any asset from, or assign or convey any right to,
an Affiliated Person, other than payments made under leases at stores or other
facilities owned by
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Affiliated Persons in the ordinary course of business consistent with past
practice, and pursuant to the terms of such leases as currently in effect;
or
(xxii) agree of commit to do any of the things described in clauses
(i) through (xxi) above.
Except as contemplated by this Agreement, no Shareholder shall sell,
transfer, convey, assign, mortgage, pledge, or hypothecate any Common Share or
Preferred Share, or enter into any agreement or commitment to do the same.
5.3 Negotiations with Others. From the date hereof until the earlier of
(i) the Effective Time or (ii) termination under Article VIII, the Company will
not and the Company will cause its Subsidiaries and its and their directors,
officers, employees, agents and representatives not to, directly or indirectly,
without the written consent of Investor, solicit any inquiries or proposals for,
or enter into negotiations with respect to, or enter into any agreement with
respect to, any acquisition of all, or a substantial part, of the assets or
capital stock of the Company or its Subsidiaries, or similar transaction
involving the Business with any Person other than the parties hereto and their
agents and representatives. The Company will notify Investor promptly following
receipt of any written solicitation (or oral solicitation made to the
Controlling Shareholder or,
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to the extent known to the Company, Xxxxxxx, Xxxxx & Co.) relating to any such
proposed transaction.
5.4 Investigation of Business and Properties. From the date hereof until
the earlier of (i) the Effective Time or (ii) termination under Article VIII,
the Company and its Subsidiaries will afford Investor, any financial institution
providing financing to Investor, and their respective attorneys, accountants,
financial advisors and other representatives, reasonable access at all
reasonable times to their properties, to their senior officers, and to such
other officers and employees as the Company and Investor shall agree; provided
--------
that any such access shall be conducted, upon reasonable prior notice, at a
reasonable time and in such a manner as not to interfere unreasonably with the
operation of the Business. Investor acknowledges that it is conducting its own
investigation and is making its own evaluation of the Company, its Subsidiaries
and the Business and that the scope of such investigation has been determined by
Investor.
5.5 Confidentiality. The provisions of the Confidentiality Letter (the
"Confidentiality Letter"), between Xxxxxxx, Spogli & Co. and the Company are
hereby incorporated herein by reference.
5.6 Books and Records. Investor shall retain all of the books and records
of the Company and its Subsidiaries for a
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period of seven years after the Effective Date or such longer time as may be
required by law and shall make such books and records (or copies thereof)
available to the Shareholders or their agents, at reasonable times and upon
reasonable notice, after the Effective Time to the extent reasonably required by
Sellers in connection with preparing tax returns or complying with other legal
requirements imposed upon the Shareholders.
5.7 Expenses. Subject to the first parenthetical contained in the next
sentence of this Section 5.7, the fees and expenses of Xxxxxxx, Xxxxx & Co.,
Wachtell, Lipton, Xxxxx & Xxxx and Xxxxxxx Xxxxxxxx Xxxxx Xxxxxxxxxx & Xxxxxx
relating directly to the sale of the Company pursuant to this Agreement and paid
from and after October 1, 1997, shall be paid by the Shareholders. All fees and
expenses incurred by the Company in connection with this Agreement and the
consummation of the transactions contemplated hereby (which shall include the
fees and expenses of Xxxxxxx, Sachs & Co., Wachtell, Lipton, Xxxxx & Xxxx and
Xxxxxxx Xxxxxxxx Xxxxx Xxxxxxxxxx & Xxxxxx paid prior to October 1, 1997, plus
approximately $10,000 of fees and expenses of Xxxxxxx, Sachs & Co. and
approximately $5,000 of fees and expenses of Flippin Xxxxxxxx Xxxxx Xxxxxxxxxx &
Xxxxxx incurred prior to October 1, 1997 but not theretofore billed or paid),
shall be paid by the Company, and all fees and expenses incurred by Investor,
Guarantor and Xxxxxxx, Spogli & Co., Incorporated (including banking and
accounting fees and expenses
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incurred in connection with the Financing) shall be paid by the Surviving
Corporation or the Investor. If the Closing does not occur, each party hereto
will bear its own costs and expenses.
5.8 HSR Filings. If required by law, the Company and Investor will each
file, or cause to be filed, with the United States Federal Trade Commission and
the Antitrust Division of the United States Department of Justice, pursuant to
the HSR Act, all requisite documents and notifications in connection with the
transactions contemplated by this Agreement.
5.9 Public Announcements. Prior to Closing, except for filings required
by law, neither party will issue any press releases or otherwise make any public
statements with respect to this Agreement and the transactions contemplated
hereby without having first obtained the approval of the other party. Except if
and to the extent required by law, any public announcement shall not disclose
the purchase price. Investor agrees that communications with the employees of
the Company and its Subsidiaries regarding the Merger and communications and
statements made in connection with the Financing are not public announcements
for purposes of this Section 5.9.
5.10 Efforts to Consummate.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use its reasonable
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best efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable to consummate, as promptly as
practicable, the transactions contemplated hereby, including the obtaining of
all necessary consents, waivers, authorizations, orders and approvals of third
parties, whether private or governmental, required of it to enable it to comply
with the conditions precedent to consummating the transactions contemplated by
this Agreement. Each party agrees to cooperate fully with the other party in
assisting it to comply with this Section 5.10.
(b) Investor recognizes that certain consents to the transactions
contemplated hereby may have been or may be required from third parties,
including parties to Material Contracts and Governmental Authorities. Investor
agrees that none of the Company or any of its Affiliates shall have any
liability whatsoever arising out of or relating to the failure to obtain any
such consent or because of termination of any contract, permit, license or
governmental authorization as a result thereof. Investor further agrees that no
representation, warranty, covenant or agreement of the Company herein shall be
breached as a result of (i) the failure to obtain any such consent or any such
termination or (ii) any Action commenced or threatened by or on behalf of any
Person arising out of or relating to the failure to obtain any such consent or
because of any such termination.
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(c) Investor will use its reasonable best efforts to arrange on behalf of
the Company and ASCI the financing needed to effect the transactions
contemplated by this Agreement (the "Financing"). In the event that any portion
of the Planned Financing becomes unavailable, regardless of the reason therefor,
Investor will use its reasonable best efforts to arrange alternative financing
from other sources on and subject to substantially the same terms and conditions
as the portion of the Planned Financing that has become unavailable. Investor
shall use its reasonable best efforts to (i) satisfy on or before the Closing
all requirements of the definitive agreements pursuant to which the Financing
will be obtained (the "Financing Agreements") which are conditions to closing to
be satisfied with respect to all transactions constituting the Financing and to
drawing down the cash proceeds thereunder; (ii) defend all lawsuits or other
legal proceedings challenging the Financing Agreements or the consummation of
the transactions contemplated thereby; and (iii) lift or rescind any injunction
or restraining order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated thereby. Investor shall
keep the Company apprised of all material developments relating to the Planned
Financing. Any fees to be paid by the Company or any other obligations to be
incurred by the Company in connection with the Financing shall be subject to the
occurrence of the Closing. Investor will commence a "road
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show" with respect to the senior subordinated notes of ASCI and the senior
discount notes of the Company contemplated by Section 4.5 as promptly as
reasonably practicable following the elections contemplated by Section 2.7(d)
and the Shareholder approvals contemplated by Section 2.10 having been obtained.
(d) The Company shall, and shall cause ASCI and their respective
officers, employees and representatives to, cooperate with, and use reasonable
best efforts to assist, Investor in connection with its efforts to secure the
Financing, including by making senior executives available to participate in
"road show" investor presentations, and in taking all actions necessary to
authorize the Financing and authorize and cause ASCI to pay the ASCI dividend
contemplated by Section 4.5.
(e) Guarantor agrees that on or prior to the Closing Date it will
purchase or cause to be purchased shares of Investor Common Stock for a cash
purchase price of at least $102,500,000 in the aggregate, subject to the terms
and conditions of, and in accordance with the standards set forth in, the equity
commitment letter of Guarantor dated the date hereof.
5.11 Indemnification of Officers and Directors. The Surviving Corporation
will, and will cause ASCI to, indemnify, defend and hold harmless the present
and former officers and
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directors of the Company and its Subsidiaries against all liabilities incurred
by such individuals arising from any action or inaction by such persons or from
services rendered for or at the request of the Company or any of its
Subsidiaries prior to the Effective Time, to the full extent permitted under
applicable law, including the provisions thereof relating to the advancement of
expenses incurred in the defense of any threatened or pending action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative (a "Proceeding"). Any determination required to be made with
respect to whether the conduct of an individual seeking indemnification has
complied with the standards set forth under applicable law shall be made by
independent counsel mutually acceptable to Investor and such individual. For six
(6) years after the Effective Time, the Surviving Corporation will provide
officers' and directors' liability insurance in respect of acts or omissions
occurring on or prior to the Effective Time covering each such person currently
covered by the Company's officers' and directors' liability insurance policy on
terms no less favorable than those of such policy in effect on the date hereof,
provided that in satisfying its obligation under this Section, the Surviving
Corporation shall not be obligated to pay premiums in excess of 175% of the
amount per annum the Company paid in its last full fiscal year, which amount has
been disclosed to Investor, and if the Surviving Corporation is unable
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to obtain the insurance required by this Section 5.11, it shall obtain as much
comparable insurance as possible for an annual premium equal to such maximum
amount. In the event the Surviving Corporation (or any of its successors or
assigns) consolidates with or merges into any other person, or transfers all or
substantially all of its properties and assets to any person, then proper
provision shall be made so that such successors or assigns of the Business shall
assume the obligations set forth in this Section 5.11.
5.12 Employee Matters. Following the Effective Time, the Surviving
Corporation shall, and shall cause the Subsidiaries to, honor all obligations
under all employee benefit plans and agreements, maintained by the Company or
its Subsidiaries and provide the employees of the Company and its Subsidiaries
with employee benefits which are no less favorable in the aggregate than those
currently provided by the Company. In addition, the Surviving Corporation will,
or will cause the Subsidiaries to (i) waive all limitations as to preexisting
conditions, exclusions and waiting periods with respect to participation and
coverage requirements applicable to the employees of the Company and its
Subsidiaries under any Welfare Plan that such employees may be eligible to
participate in after the Effective Time, other than limitations or waiting
periods that are already in effect with respect to such employees and that have
not been satisfied as of the Effective Time under any Welfare
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Plan maintained for such employees immediately prior to the Effective Time, (ii)
provide each employee of the Company and its Subsidiaries with credit for any
co-payments and deductibles paid prior to the Effective Time in satisfying any
applicable deductible or out-of-pocket requirements under, any Welfare Plan that
such employees may be eligible to participate in after the Effective Time, and
(iii) treat all service with the Company and/or any of its Subsidiaries before
the Closing as service with the Surviving Corporation and its Subsidiaries for
all purposes applicable to employees of the Surviving Corporation and its
Subsidiaries.
5.13 Special Employee Bonus. On or prior to the Closing Date, the Company
shall make special bonus payments in an aggregate amount of $11,500,000 (which
amount shall include the amount of any withholding or deduction required by law)
to the employees of the Company who are designated by the Controlling
Shareholder in the amounts designated by him prior to the Closing.
5.14 Stockholders' Agreement. On or prior to the Closing Date, the
Company, the Controlling Shareholder, the 1964 Trust and Investor's shareholders
shall enter into the Stockholders' Agreement in the form attached hereto as
Exhibit F which includes registration rights for the benefit of the parties
thereto.
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5.15 Amendment and Termination of Affiliate Leases. On or prior to the
Closing Date, the leases of the Company's Subsidiary listed on Exhibit G shall
be amended, and leases of real property by Affiliated Persons to the Company's
Subsidiaries for closed stores shall be terminated on the six month anniversary
of the Closing Date with no further liability to the Company or its
Subsidiaries, all pursuant to the terms set forth on Exhibit G.
5.16 Consulting and Employment Agreements. On or prior to the Closing
Date, the Company and the Controlling Shareholder will enter into a Consulting
and Non-Competition Agreement in the form attached hereto as Exhibit H. On or
prior to the Closing Date, the Company and Xxxxxxx X. Xxxxx, the current
President and Chief Operating Officer of the Company, will enter into an
Employment and Non-Competition Agreement on substantially the terms set forth in
Exhibit I hereto.
5.17 Option. On or prior to the Closing Date, the Company shall have
delivered to each of Xxxxxxxx X. Xxxxxxx and the 1964 Trust an Option in the
form attached hereto as Exhibit J providing for the issuance to Xx. Xxxxxxx of
options to purchase 250,000 shares of Surviving Corporation Common Stock and to
the 1964 Trust of options to purchase 250,000 shares of Surviving Corporation
Common Stock, in each case at an initial exercise price of $10 per share.
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5.18 Split of Company Shares. Prior to the Effective Time, the Company
shall declare and effect a 12,500 for 1 split of the Class A Common Shares and
Class B Common Shares. Accordingly, all references in this Agreement to amounts
of Common Shares reflect such stock split.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF INVESTOR
The obligation of Investor to consummate the transactions contemplated by
this Agreement shall be subject, to the extent not waived, to the following
conditions.
6.1 Representations and Warranties. The representations and warranties of
the Company contained in Article III hereof shall be true and correct in all
material respects as of the Closing Date, except (i) to the extent such
representations and warranties speak as of an earlier date, in which case they
shall be true and correct in all material respects as of such earlier date, (ii)
for such inaccuracies (without giving effect to any materiality or Company
Material Adverse Effect, qualifications or materiality exceptions contained
therein) that do not in the aggregate result in a Company Material Adverse
Effect, and (iii) for inaccuracies in the representation set forth in the first
sentence of Section 3.2(a), which are covered by the indemnification obligation
of the Controlling Shareholder and the 1964 Trust as provided in the letter
dated
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the date hereof, and Investor shall have been delivered a certificate to that
effect signed on behalf of the Company by the President of the Company and the
Chairman of the Board.
6.2 Performance of this Agreement. The Company and its Subsidiaries shall
have, in all material respects, performed all covenants and agreements and
complied with all conditions required by this Agreement to be performed or
complied with by them prior to or on the Closing Date, and Investor shall have
been delivered a certificate to that effect signed on behalf of the Company by
the President of the Company and the Chairman of the Board.
6.3 Consents and Approvals. All registrations, filings, applications,
notices, consents, orders, approvals, qualifications or waivers listed in
Schedule 6.3 and indicated therein as being a condition to the Closing for
Investor shall have been filed, made or obtained and all waiting periods
specified by law with respect thereto shall have expired or been terminated.
6.4 Injunction, Litigation, etc. No order of any court or governmental
agency shall be in effect which restrains or prohibits the consummation of the
transactions contemplated by this Agreement or which would limit or affect the
ability of Investor or Guarantor to own or control the Company, and there
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shall not be pending any action or proceeding by any governmental agency seeking
to prohibit or delay or challenging the validity of the transactions
contemplated by this Agreement which has a reasonable chance of success.
6.5 Legislation. No statute, rule or regulation shall have been proposed
(and reasonably believed will be enacted) or enacted which prohibits the
consummation of the transactions contemplated by this Agreement.
6.6 Proceedings; Certificates. All corporate or other proceedings of the
Company that are required in connection with the transactions contemplated by
this Agreement shall be reasonably satisfactory in form and substance to
Investor and its counsel, and Investor and its counsel shall have received such
evidence of such corporate or other proceedings, certified if required, as may
be reasonably requested and is customary in transactions of the nature
contemplated hereby.
6.7 Resignations. Such directors of the Company and its Subsidiaries as
Investor shall request shall have submitted resignations effective as of the
Closing.
6.8 Financing. Investor shall have received the proceeds of the Financing
on terms substantially consistent with the terms contemplated by the Financing
Documentation or otherwise reasonably acceptable to Investor; provided that this
--------
condition
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shall be deemed to have been satisfied if Investor shall not have complied in
all material respects with all of its covenants under Section 5.10(c).
6.9 Management Purchase of Equity. Members of management of the Company
shall have executed agreements in form and substance reasonably satisfactory to
Investor to purchase $5,000,000 in the aggregate of Surviving Corporation Common
Stock immediately following the Effective Time, at $10 per share, the same price
per common share as Guarantor's investment; provided that Investor shall have
offered to provide loans in the aggregate amount of $2,500,000 to assist members
of management to make such investments.
6.10 No Material Adverse Change. Since January 3, 1998, there shall have
been no material adverse change in the business, assets, liabilities or
financial condition of the Company and its Subsidiaries, taken as a whole.
Since January 3, 1998, the Company or its Subsidiaries shall not have suffered
any loss (whether or not insured) which would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
6.11 Opinion of Counsel. Investor shall have been furnished with the
opinion of Flippin Xxxxxxxx Xxxxx Xxxxxxxxxx &
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Xxxxxx, counsel to the Company, dated the Closing Date, addressed to Investor,
in form and substance reasonably satisfactory to Investor, covering the matters
set forth on Exhibit K.
6.12 Solvency Opinion. Investor shall have been furnished with the
opinion of Valuation Research, independent valuation experts, or of another firm
reasonably acceptable to the Controlling Shareholder, dated the Closing Date,
addressed to Investor, in form and substance reasonably satisfactory to
Investor, with respect to the solvency of ASCI on the date of the dividend
contemplated by Section 4.5 and the solvency of the Surviving Corporation and
its Subsidiaries, taken as a whole on a pro forma basis following the Merger
(the "Solvency Opinion").
6.13 Controlling Shareholder's Agreement. In connection with this
agreement, Controlling Shareholder shall have entered into the Employment and
Non-Competition Agreement referred to in Section 5.16.
6.14 Stockholders' Agreement. The Stockholders' Agreement referred to in
Section 5.14 shall have been executed and delivered by the parties thereto.
6.15 Election by Shareholders. The Shareholders shall have made the
elections contemplated by Section 2.7(d).
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ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE COMPANY
The obligation of the Company to consummate the transactions contemplated
by this Agreement shall be subject, to the extent not waived, to the
satisfaction of each of the following conditions.
7.1 Representations and Warranties. The representations and warranties of
Investor contained in Article IV hereof shall be true and correct in all
material respects as of the Closing Date, except (i) to the extent such
representations and warranties speak as of an earlier date, in which case they
shall be true and correct in all material respects as of such earlier date, and
(ii) for such inaccuracies (without giving effect to any materiality or material
adverse effect qualifications or materiality exceptions contained therein) that
do not in the aggregate result in a material adverse effect upon the business,
assets, liabilities, financial condition or results of operations of Investor
and Guarantors, taken as a whole, or the ability of Investor to consummate the
transactions contemplated by this Agreement, and Investor shall have delivered
to the Company a certificate to that effect signed by the President or Vice
President of Investor.
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7.2 Performance of this Agreement. Investor shall have, in all material
respects, performed all covenants and agreements and complied with all
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date, and Investor shall have delivered to the
Company a certificate to that effect signed by the President or Vice President
of Investor.
7.3 Consents and Approvals. All registrations, filings, applications,
notices, consents, orders, approvals, qualifications or waivers listed in
Schedule 7.3 and indicated therein as being a condition to the Closing for the
Company shall have been filed, made or obtained and all waiting periods
specified by law with respect thereto shall have expired or been terminated.
7.4 Injunction, Litigation, etc. No order of any court or governmental
agency shall be in effect which restrains or prohibits the consummation of the
transactions contemplated by this Agreement, and there shall not be pending any
action or proceeding by or before any such court or governmental agency seeking
to prohibit or delay or challenging the validity of any of the transactions
contemplated by this Agreement which has a reasonable chance of success.
7.5 Legislation. No statute, rule or regulation shall have been proposed
(and reasonably believed will be enacted) or
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enacted which prohibits the consummation of the transactions contemplated by
this Agreement.
7.6 Proceedings; Certificates. All corporate and other proceedings of
Investor and the Guarantors that are required in connection with the
transactions contemplated by this Agreement shall be reasonably satisfactory in
form and substance to the Company and its counsel, and the Company and its
counsel shall have received such evidence of such corporate and other
proceedings, certified if required, as may be reasonably requested and is
customary in transactions of the nature contemplated hereby.
7.7 Opinion of Counsel. Seller shall have been furnished with the opinion
of Hunton & Xxxxxxxx, counsel to Investor, dated the Closing Date, addressed to
Seller, in form and substance reasonably satisfactory to Seller, covering the
matters set forth on Exhibit L.
7.8 Solvency Opinion. The Company, the Board of Directors of ASCI and the
shareholders shall have been furnished with a copy of the Solvency Opinion,
addressed to them, in form and substance reasonably satisfactory to the
Controlling Shareholder.
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7.9 Stockholders' Agreement. The Stockholders' Agreement referred to in
Section 5.14 shall have been executed and delivered by the parties thereto.
7.10 Employment Agreements. The Employment and Non-Competition Agreements
referred to in Section 5.16 shall have been executed and delivered by the
parties thereto.
7.11 Option Agreement. The Options referred to in Section 5.17 shall have
been executed and delivered by the Company.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated at any time prior to
the Closing without further shareholder action:
(i) by the mutual written consent of the Boards of Directors of the
Company and Investor, and the Controlling Shareholder,
(ii) by the Company if the closing condition set forth in Section 6.8
has not been satisfied or waived by 11:59 p.m. on June 2, 1998; or
(iii) by the Company or Investor if the Closing has not occurred by
11:59 p.m. on August1, 1998; provided, that a party may elect to extend the time
periods set forth in clauses (ii) and (iii) in the event the other
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party has materially breached its covenants and agreements hereunder.
8.2 Procedure: Effect of Termination. If this Agreement is terminated as
provided in Section 8.1, written notice thereof shall forthwith be given by the
terminating party to the other party, and this Agreement shall thereupon
terminate and become void and of no further force and effect and there shall be
no further liability or obligation on the part of either party hereto except to
pay such expenses as are required of it and to comply with the confidentiality
provisions of Section 5.5; provided that such termination shall not relieve any
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party of any liability for willful breach of this Agreement.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices required to be given hereunder shall be in
writing and shall be deemed to have been given if (i) delivered personally or by
documented courier or delivery service, (ii) transmitted by facsimile during
normal business hours or (iii) mailed by registered or certified mail (return
receipt requested and postage prepaid) to the following listed persons at the
addresses and facsimile numbers specified below, or to such other persons,
addresses or facsimile numbers as a party entitled to notice shall give, in the
manner hereinabove described, to the others entitled to notice:
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(a) If to the Company to:
Advance Holding Corporation
0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Flippin Xxxxxxxx Xxxxx
Xxxxxxxxxx & Xxxxxx
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
and a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxx
Xxxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
(b) If to Investor to:
AHC Corporation
c/x Xxxxxxx, Spogli & Co. Incorporated
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxx & XxXxxxxx
000 X. Xxxxx Xxx. 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
If given personally or by documented courier or delivery service, or transmitted
by facsimile, a notice shall be deemed to have been given when it is received.
If given by mail, it
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shall be deemed to have been given on the third business day following the day
on which it was posted.
9.2 No Survival of Representations and Warranties. The representations
and warranties, covenants and agreements of the Company contained herein and in
any certificate or other writing of the Company delivered pursuant hereto shall
not survive the Effective Time or the termination of the Agreement, provided,
that covenants and agreements contained herein which by their terms are to be
performed in whole or in part subsequent to the Effective Time shall survive the
Merger in accordance with their terms.
9.3 Interpretation. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. For purposes of this Agreement, the words
"includes" and "including" shall mean "including without limitation." When any
representation or warranty in Article III is made to the knowledge of the
Company, such term shall mean the actual knowledge of the Company's executive
officers identified on Schedule 9.3 hereto. All accounting terms not defined in
this Agreement shall have the meaning determined by generally accepted
accounting principles. All capitalized terms defined herein are equally
applicable to both the singular and plural forms.
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9.4 Entire Agreement. This Agreement, together with the Confidentiality
Letter, and the Schedules and Exhibits hereto, contain the entire agreement
between the parties with respect to the subject matter hereof and there are no
agreements, understandings, representations or warranties between the parties
other than those set forth or referred to herein. This Agreement is not
intended to confer and shall not confer upon any person not a party hereof (and
their successors and assigns permitted by Section 9.5) any rights or remedies
hereunder other than pursuant to Sections 5.11, 5.12, 5.13 and 9.12.
9.5 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided that no party hereto will assign its rights or delete its
--------
obligations under this Agreement without the express prior written consent of
each other party hereto, except that Investor may assign its right, title and
interest under this Agreement to a wholly-owned Subsidiary or any lender in
connection with the Financing; provided, that in the event of such assignment,
--------
Investor shall not be released from any obligations under this Agreement.
9.6 Severability. In the event that this Agreement, or any of its
provisions, or the performance of any provision, is found to be illegal or
unenforceable under applicable law now
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or hereafter in effect, the parties shall be excused from performance of such
portions of this Agreement as shall be found to be illegal or unenforceable
under the applicable laws or regulations without affecting the validity of the
remaining provisions of the Agreement; provided that (i) the remaining
--------
provisions of the Agreement shall in their totality constitute a commercially
reasonable agreement, and (ii) should any method of termination of this
Agreement or a portion thereof be found to be illegal or unenforceable, such
method shall be reformed to comply with the requirements of applicable law so
as, to the greatest extent possible, to allow termination by that method.
Nothing herein shall be construed as a waiver of any party's right to challenge
the validity of such law.
9.7 Amendment. This Agreement may be amended, modified or supplemented at
any time by the parties hereto. This Agreement may be amended only by an
instrument in writing signed by each of the parties hereto.
9.8 Extension; Waiver. At any time prior to the Closing either party to
this Agreement may (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive a breach of a representation
or warranty of the other party hereto, or (iii) waive compliance by the other
party hereto with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid if set
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forth in a written instrument signed by the party giving the extension or
waiver.
9.9 Disclosure Schedules.
(a) Certain of the representations and warranties set forth in this
Agreement contemplate that there will be attached schedules setting forth
information that might be "material" or have a "Company Material Adverse
Effect." The Company may, at its option, include in such schedules items that
are not material or are not likely to have a Company Material Adverse Effect in
order to avoid any misunderstanding, and any such inclusion shall not be deemed
to be an acknowledgment or representation that such items are material or would
have a Company Material Adverse Effect, to establish any standard of materiality
or Company Material Adverse Effect, or to define further the meaning of such
terms for purposes of this Agreement.
(b) From time to time prior to the Closing, the Company will
supplement or amend the Schedules with respect to matters which, if existing or
occurring at or prior to the date of this Agreement, would have required to be
described or set forth in the Schedules or in any representation or warranty of
the Company which has been rendered inaccurate thereby. For purposes of
determining the satisfaction of the conditions set forth in Section 6.1 hereof,
no such supplement or amendment
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shall be given effect. If the Company advises Investor that such supplement or
amendment renders it incapable of providing a certificate to the effect set
forth in Section 6.1 and Investor determines not to waive compliance with such
condition due to the matters set forth in such supplement or amendment, Investor
shall so advise the Company; provided that upon the Closing such condition shall
--------
be deemed waived by Investor in respect of the matters set forth in such
supplement or amendment.
9.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.11 Governing Law. This Agreement shall be governed in all respects by
the laws of the Commonwealth of Virginia without regard to its laws or
regulations relating to choice of laws.
9.12 Guarantors.
(a) Each Guarantor hereby unconditionally and irrevocably guarantees
to the Company and the Shareholders the due and punctual performance of each of
the obligations and the undertakings of Investor under this Agreement when and
to the extent the same are required to be performed and subject to all
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of the terms and conditions hereof; provided, that Guarantor shall have no
liability whatsoever under this Guaranty after the Closing, whether based upon
events occurring prior to or after the Closing. If Investor shall fail to
perform fully and punctually any obligation or undertaking of Investor under
this Agreement when and to the extent the same is required to be performed, each
Guarantor will upon written demand from the Shareholders forthwith perform or
cause to be performed such obligation or undertaking, as the case may be. The
obligations of each Guarantor under this guaranty shall constitute an absolute
and unconditional present and continuing guarantee of performance to the extent
provided herein, and shall not be contingent upon any attempt by the Company or
the Shareholders to enforce performance by Investor.
(b) The obligations of each Guarantor under this guaranty are
absolute and unconditional, are not subject to any counterclaim, setoff,
deduction, abatement or defense based upon any claim a Guarantor may have
against the Company or the Shareholders (except for any defense Investor may
have against the Company or the Shareholders under the terms of this Agreement),
and shall remain in full force and effect without regard to (i) any agreement or
modification to any of the terms of this Agreement or any other agreement which
may hereafter be made relating thereto; (ii) any exercise, non-exercise or
waiver by the Company or the Shareholders of any right, power,
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privilege or remedy under or in respect of this Agreement; (iii) any insolvency,
bankruptcy, dissolution, liquidation, reorganization or the like of Investor at
or prior to the Closing; (iv) absence of any notice to, or knowledge by,
Guarantor of the existence or occurrence of any of the matters or events set
forth in the foregoing clauses (i) through (iii); (v) any transfer of shares of
capital stock of Investor, or any assignment by Investor of its rights and
obligations under this agreement, to a wholly-owned subsidiary of Investor or a
Guarantor; or (vi) any other circumstance, whether similar or dissimilar to the
foregoing.
(c) Each Guarantor unconditionally waives (i) any and all notice of
default, non-performance or non-payment by Investor under this Agreement, (ii)
all notices which may be required by statute, rule of law or otherwise to
preserve intact any rights of the Company or the Shareholders against a
Guarantor, including, without limitation, any demand, presentment or protest, or
proof of notice of non-payment under this Agreement, and (iii) any right to the
enforcement, assertion or exercise by the Company or the Shareholders of any
right, power, privilege or remedy conferred in this Agreement or otherwise.
9.13 FS Funds. By written notice to the Company, FS Equity Partners IV,
L.P., may assume all of the obligations of FS
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Equity Partners III, L.P. and FS Equity Partners International, L.P. as a
Guarantor hereunder, and with respect to the commitment letter issued to
Investor referred to in Section 4.5. Upon receipt by the Company of such notice,
FS Equity Partners III, L.P. and FS Equity Partners International, L.P. shall
have no further liability as a Guarantor, and shall have no further right or
obligation to purchase Investor Common Stock and become a party to the
Stockholders' Agreement.
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IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed and their corporate seals to be hereto affixed and attested by their
duly authorized officers.
AHC Corporation
By: /s/ XXXX X. XXXX
----------------------------------------
Title: President
-------------------------------------
FS Equity Partners III, L.P.
By: FS Capital Partners, L.P.
Its: General Partner
By: FS Holdings, Inc.
Its: General Partner
By: /s/ XXXX X. XXXX
-----------------------------------
Title: Vice President
--------------------------------
FS Equity Partners IV, L.P.
By: FS Capital Partners LLC
Its: General Partner
By: /s/ XXXX X. XXXX
-----------------------------------
Title: Manager
FS Equity Partners International, L.P.
By: FS&Co. International L.P.
Its: General Partner
By: FS International Holdings
Limited
Its: General Partner
By: /s/ XXXX X. XXXX
-----------------------------------
Title: Vice President
--------------------------------
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ADVANCE HOLDING CORPORATION
By: /s/ XXXXXXXX X. XXXXXXX
---------------------------------------
Title: Chairman and Chief Executive
Officer
Xxxxxxx X. Xxxxxxxx, Voting Trustee under a Voting Trust Agreement (the
"Voting Trust Agreement") dated January 30, 1997 among Xxxxxxx X. Xxxxxxxx and
the Shareholders named therein, executes this Agreement to evidence his
agreement to vote all Common Shares and Preferred Shares held by him pursuant to
the Voting Trust Agreement in favor of the transactions contemplated by this
Agreement.
/s/ XXXXXXX X. XXXXXXXX
----------------------------------------
Xxxxxxx X. Xxxxxxxx, Trustee under a
Voting Trust Agreement, dated January
30, 1997, as amended, among Xxxxxxx X.
Xxxxxxxx and the Shareholders named
therein
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