Exhibit (c)(1)
AGREEMENT AND PLAN OF MERGER
AMONG
X'XXXXXX AUTOMOTIVE, INC.
SHAMROCK ACQUISITION, INC.
AND
HI-LO AUTOMOTIVE, INC.
Dated as of December 23, 1997
TABLE OF CONTENTS
AGREEMENT AND PLAN OF MERGER
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ARTICLE I
THE OFFER
Section 1.1 The Offer..................................................... 6
Section 1.2 Hi-Lo Action.................................................. 8
Section 1.3 Directors..................................................... 9
ARTICLE II
THE MERGER
Section 2.1 The Merger.................................................... 11
Section 2.2 Closing....................................................... 11
Section 2.3 Effective Time................................................ 11
Section 2.4 Effects of the Merger......................................... 12
Section 2.5 Certificate of Incorporation.................................. 12
Section 2.6 Directors and Officers........................................ 12
ARTICLE III
MERGER CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER;
DISSENTING SHARES
Section 3.1 Consideration for the Merger; Conversion
or Cancellation of Shares in the Merger....................... 12
Section 3.2 Stockholders Meeting.......................................... 13
Section 3.3 Payment for Shares in the Merger.............................. 15
Section 3.4 Transfer of Shares After the Effective Time................... 16
Section 3.5 Stock Options and Associate Purchase Plan..................... 16
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HI-LO
Section 4.1 Organization, Qualification, Etc.............................. 18
Section 4.2 Capital Stock................................................. 19
Section 4.3 Corporate Authority Relative to this Agreement;
No Violation; No Conflict..................................... 20
Section 4.4 Reports and Financial Statements; Corporate Records........... 21
Section 4.5 No Undisclosed Liabilities.................................... 22
Section 4.6 No Violation of Law........................................... 22
Section 4.7 Environmental Laws and Regulations............................ 23
Section 4.8 Employee Matters; ERISA....................................... 24
Section 4.9 Absence of Certain Changes or Events.......................... 26
Section 4.10 Investigations; Litigation.................................... 27
Section 4.11 Proxy Statement; Offer Documents; Schedule 14D-9; Proxy
Statement..................................................... 27
Section 4.12 Hi-Lo Rights.................................................. 28
Section 4.13 Takeover Laws................................................. 28
Section 4.14 Tax Matters................................................... 28
Section 4.15 Opinion of Financial Advisor.................................. 30
Section 4.16 Required Vote of Hi-Lo Stockholders........................... 30
Section 4.17 Labor Matters................................................. 30
Section 4.18 Certain Agreements............................................ 31
Section 4.19 Title to Assets; Liens........................................ 32
Section 4.20 Insurance..................................................... 32
Section 4.21 Intellectual Property......................................... 33
Section 4.22 Significant Vendor Arrangements............................... 33
Section 4.23 Termination of Discount Agreement............................. 33
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF O'REILLY AND SUB
Section 5.1 Organization, Qualification, Etc.............................. 34
Section 5.2 Corporate Authority Relative to this Agreement; No Violation;
No Conflict................................................... 34
Section 5.3 Financing..................................................... 35
Section 5.4 Offer Documents; Schedule 14D-9; Proxy Statement.............. 35
ARTICLE VI
COVENANTS AND AGREEMENTS
Section 6.1 Conduct of Business by Hi-Lo.................................. 36
Section 6.2 Investigation................................................. 40
Section 6.3 Obligations of O'Reilly and Sub............................... 41
Section 6.4 [Intentionally Omitted]....................................... 41
Section 6.5 Employee Benefit Plans........................................ 41
Section 6.6 Filings; Other Action......................................... 42
Section 6.7 Further Assurances............................................ 43
Section 6.8 No Solicitation............................................... 43
Section 6.9 Public Announcements.......................................... 44
Section 6.10 Indemnification and Insurance................................. 44
Section 6.11 Additional Reports............................................ 45
Section 6.12 [Intentionally Omitted]....................................... 45
Section 6.13 [Intentionally Omitted]....................................... 45
Section 6.14 Amendments to Change of Control Agreements.................... 45
Section 6.15 Notifications................................................. 46
Section 6.16 Indemnifications.............................................. 47
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.... 48
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Page
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ARTICLE VIII
TERMINATION, WAIVER, AMENDMENT AND CLOSING
Section 8.1 Termination or Abandonment.................................... 48
Section 8.2 Effect of Termination......................................... 50
Section 8.3 Amendment or Supplement....................................... 51
Section 8.4 Extension of Time, Waiver, Etc................................ 52
ARTICLE IX
MISCELLANEOUS
Section 9.1 No Survival of Representations and Warranties................. 52
Section 9.2 Expenses...................................................... 52
Section 9.3 Counterparts; Effectiveness................................... 53
Section 9.4 Governing Law................................................. 53
Section 9.5 Notices....................................................... 53
Section 9.6 Assignment; Binding Effect.................................... 54
Section 9.7 Severability.................................................. 54
Section 9.8 Enforcement of Agreement...................................... 54
Section 9.9 Miscellaneous................................................. 55
Section 9.10 Headings...................................................... 55
Section 9.11 Subsidiaries; Affiliates...................................... 55
Section 9.12 Finders or Brokers............................................ 55
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of December 23, 1997 (this
"Agreement"), is among X'XXXXXX AUTOMOTIVE, INC., a Missouri corporation
("O'Reilly"), SHAMROCK ACQUISITION, INC., a Xxxx xxxx corporation and a wholly-
owned subsidiary of O'Reilly ("Sub"), and HI-LO AUTOMOTIVE, INC., a Delaware
corporation ("Hi-Lo").
WHEREAS, the Board of Directors of each of O'Reilly, Sub and Hi-Lo, has,
subject to the conditions set forth in this Agreement, unanimously deter mined
that it is in the best interests of their respective stockholders for Sub to
acquire Hi-Lo on the terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance thereof, it is proposed that Sub shall make a
tender offer (the "Offer") to acquire all of the outstanding shares (the
"Shares") of Common Stock, par value $.01 per share (the "Hi-Lo Common Stock"),
of Hi-Lo, together with the associated Rights (as hereinafter defined), at a
price of $4.35 per share (such amount, or any greater amount per share paid
pursuant to the Offer, being hereinafter referred to as the "Per Share Amount"),
net to the seller in cash, in accordance with the terms and subject to the
conditions of this Agreement; and
WHEREAS, the parties desire to make certain representations, warranties,
covenants and agreements in connection with the Offer and the Merger (as
hereinafter defined) and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
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ARTICLE I
THE OFFER
Section 1.1 The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.1, Sub shall commence, within the meaning of Rule 14d-
2 under the Securities Exchange Act of 1934, as amended (the "Ex change Act"),
the Offer as promptly as practicable (but in no event later than the fifth
business day from and including the date of initial public announcement of this
Agreement). Sub shall accept for payment Shares which have been validly
tendered and not withdrawn pursuant to the Offer following expiration of the
Offer promptly following the time that all conditions to the Offer shall have
been satisfied or waived by Sub (except that the Minimum Condition (as
hereinafter defined) may not be waived). The obligation of Sub to accept for
payment, purchase and pay for Shares tendered pursuant to the Offer shall be
subject only to the conditions set forth in Annex A and to the further condition
that a number of Shares which, together with any Shares beneficially owned by
O'Reilly or Sub, represent not less than a majority of the Shares then
outstanding on a Fully Diluted Basis (as hereinafter defined) shall have been
validly tendered and not withdrawn prior to the final expiration date of the
Offer (the "Minimum Condition"). Unless previously approved by Hi-Lo in
writing, no change in the Offer may be made (i) which decreases the price per
Share payable in the Offer, (ii) which changes the form of consideration to be
paid in the Offer, (iii) which reduces the maximum number of Shares to be
purchased in the Offer or the Minimum Condition, (iv) which imposes conditions
to the Offer in addition to those set forth in Annex A hereto or which modifies
the conditions set forth in Annex A in a manner adverse to the holders of Shares
or (v) which amends any other term of the Offer in a manner adverse to the
holders of the Shares. Notwithstanding the foregoing, Sub shall and O'Reilly
agrees to cause Sub to, if requested by Hi-Lo, extend the Offer from time to
time until 90 days from the commencement of the Offer if and to the extent that,
at the then scheduled expiration date (the initial scheduled expiration date
being 20 business days following commencement of the Offer), any of the
conditions to Sub's obligation to accept for payment and pay for the Shares
shall not be satisfied or waived, until such time as such conditions are
satisfied or waived. If any of the conditions to Sub's obligation to accept for
payment and pay for the Shares are not satisfied or waived upon the expiration
of 90 days after the commencement of the Offer, Sub may, in its sole discretion,
extend the Offer until such time as such conditions are satisfied or waived.
Additionally, notwith standing that all conditions to the Offer are satisfied
as of the expiration date of the
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Offer (as it may have been previously extended), Sub may extend the Offer,
without the consent of Hi-Lo, (a) for a period not to exceed ten business days
if the Shares tendered and not withdrawn pursuant to the Offer equal less than
90% of the out standing Shares and (b) for a period not to exceed five business
days if an Adverse Market Change (as hereinafter defined) shall have occurred,
and be continuing on the scheduled expiration date of the Offer, and at the time
of such extension pursuant to (a) or (b) the Sub waives the satisfaction of the
condition set forth in clause (c) of Annex A and its right to terminate the
Merger Agreement pursuant to Section 8.1(e). Subject to the terms and conditions
of the Offer and this Agreement, Sub shall, and O'Reilly shall cause Sub to, pay
for all Shares validly tendered and not withdrawn pursuant to the Offer that Sub
becomes obligated to purchase pursuant to the Offer as soon as practicable after
the expiration of the Offer.
(b) As used herein, the following terms shall have the meaning set forth
herein:
"Adverse Market Change" shall mean any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange or the
NASDAQ National Market, a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States (whether or not mandatory),
(1) a commencement or escalation of a war, armed hostilities or other
international or national calamity directly involving the United States and
having an adverse effect on the financial markets in the United States, any
material limitation (whether or not mandatory) by any governmental authority,
agency or commission ("Governmental Entity"), on the extension of credit by
banks or other lending institutions in the United States, and in the case of
any of the foregoing existing at the time of the commencement of the Offer, a
material acceleration or worsening thereof;
"Fully Diluted Basis" shall mean as of any time all of the Shares plus all
shares of Hi-Lo Common Stock issuable upon exercise of outstanding options to
acquire Hi-Lo Common Stock minus 587,566 shares of Hi-Lo Common Stock issuable
upon exercise of options which the holder thereof has irrevocably agreed in
writing, in a form satisfactory to O'Reilly, not to exercise.
(c) As soon as practicable on the date of commencement of the Offer,
O'Reilly and Sub shall file with the Securities and Exchange Commission (the
"SEC") a Tender Offer Statement on Schedule 14D-1 with respect to the Offer
(together with any supplement or amendments thereto, the "Schedule 14D-1"). The
Schedule 14D-1 will include, as exhibits, the Offer to Purchase, form of letter
of
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transmittal and summary advertisement (collectively, together with any
amendments and supplements thereto, the "Offer Documents"). The Offer Documents
will comply in all material respects as to form with the requirements of
applicable federal securities laws. O'Reilly, Sub and Hi-Lo each agree promptly
to correct any information provided by them for use in the Offer Documents if
and to the extent that it shall have become false or misleading in any material
respect and O'Reilly and Sub agree to take all steps necessary to cause the
Offer Documents and any amendments or supplements thereto to be filed with the
SEC and to be disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws. Hi-Lo and its counsel
shall be given a reasonable opportunity to review and comment upon the Offer
Documents and any amendments thereto in each case prior to the filing thereof
with the SEC. O'Reilly and Sub agree to provide Hi-Lo and its counsel a written
copy of any comments or other communications (whether written or oral) that
O'Reilly, Sub or their counsel may receive from time to time from the SEC or its
Staff with respect to the Offer Documents as soon as practicable after receipt
thereof.
Section 1.2 Hi-Lo Action.
(a) Hi-Lo hereby approves of and consents to the Offer and represents that
the Board of Directors, including all of the disinterested directors, at a
meeting duly called and held, has, subject to the terms and conditions set forth
herein, (i) approved this Agreement and the transactions contemplated hereby,
including the Offer and the Merger (as defined in Section 2.1) and such approval
constitutes approval of this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, for purposes of Section 203 of the Delaware
General Corporation Law, as amended (the "DGCL"), such that it will not apply to
the transactions contemplated by this Agreement, (ii) unanimously determined
that each of the Offer and the Merger are fair to and in the best interests of
Hi-Lo and Hi-Lo's stockholders, and (iii) resolved to recommend that the
stockholders of Hi-Lo accept the Offer, tender their Shares thereunder to Sub
and approve and adopt this Agreement and the Merger; provided, that such
recommendation may be withdrawn, modified or amended if, Hi-Lo determines in
good faith, based on advice of its outside counsel, that such action is
necessary in order for the Board of Directors of Hi-Lo to comply with its
obligations or duties to Hi-Lo and Hi-Lo's stockholders under applicable law.
Hi-Lo consents to the inclusion of such recommendation and approval in the Offer
Documents, subject to Hi-Lo's right to withdraw, modify or amend its
recommendation.
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(b) Hi-Lo hereby agrees to file with the SEC, concurrently with the
commencement of the Offer, a Solicitation/Recommendation Statement on Schedule
14D-9 (together with any amendments or supplements thereto, the "Schedule 14D-
9") containing the recommendation described in Section 1.2(a). The Schedule
14D-9 will comply in all material respects as to form with the requirements of
applicable federal securities laws. Hi-Lo, O'Reilly and Sub each agree promptly
to correct any information provided by them for use in the Schedule 14D-9 if and
to the extent that it shall have become false or misleading in any material
respect and Hi-Lo further agrees to take all steps necessary to cause the
Schedule 14D-9 and any amendments or supplements thereto to be filed with the
SEC and disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws. Notwithstanding anything to the
contrary in this Agreement, the Board of Directors may withdraw, modify or amend
its recommendation if Hi-Lo reasonably determines in good faith, based on advice
of its outside counsel, that such action is necessary in order for the Board of
Directors of Hi-Lo to comply with its obligations or duties to Hi-Lo and Hi-Lo's
stockholders under applicable law. O'Reilly and its counsel shall be given a
reasonable opportunity to review and comment upon the Schedule 14D-9 and any
amendments thereto in each case prior to the filing thereof with the SEC. Hi-Lo
agrees to provide O'Reilly and Sub and their counsel a written copy of any
comments or other communications (whether written or oral) that Hi-Lo or its
counsel may receive from time to time from the SEC or its Staff with respect to
the Schedule 14D-9 as soon as practicable after receipt thereof.
(c) In connection with the Offer, Hi-Lo will promptly furnish O'Reilly and
Sub with mailing labels, security position listings and any available listing or
computer files containing the names and addresses of the record holders of the
Shares as of a recent date and shall furnish Sub with such additional
information and assistance (including, without limitation, updated lists of
stockholders, mailing labels and lists of securities positions) as Sub or its
agents may reason ably request in communicating, and advocating acceptance of
the Offer to the record and beneficial holders of Shares. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents, O'Reilly and Sub shall hold such listings and
other information in confidence and in accordance with the terms of the Hi-Lo
Confidentiality Agreement (as hereinafter defined), and shall use the
information contained in any such labels, listings and files only in connection
with the Offer and the Merger, and, if this Agreement is terminated, will
deliver to Hi-Lo all copies of such information (and extracts and summaries
thereof) then in their or their agent's or advisor's possession in accordance
with the terms of the Hi-Lo Confidentiality Agreement.
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Section 1.3 Directors.
(a) Promptly upon the purchase of and payment for any Shares by O'Reilly or
any of its Subsidiaries which represent at least a majority of the outstanding
Shares on a fully diluted basis, O'Reilly shall be entitled to designate such
number of directors, rounded up to the next whole number, on the Board of
Directors of Hi-Lo as is equal to the product of the total number of directors
on such Board (giving effect to the directors designated by O'Reilly pursuant to
this sentence) multiplied by the percentage that the number of Shares so
purchased bears to the total number of Shares then outstanding on a fully
diluted basis. In furtherance thereof, Hi-Lo shall, upon request of Sub, use
its best efforts promptly either (at Hi-Lo's election) to increase the size of
its Board of Directors or secure the resignations of such number of its
incumbent directors, or both, as is necessary to enable X'Xxxxxx'x designees to
be so elected to Hi-Lo's Board, and shall take all actions available to Hi-Lo to
cause X'Xxxxxx'x designees to be so elected. At such time, Hi-Lo shall, if
requested by O'Reilly, also cause persons designated by O'Reilly to constitute
at least the same percentage (rounded up to the next whole number) as is on Hi-
Lo's Board of Directors of (i) each committee of Hi-Lo's Board of Directors,
(ii) each board of directors (or similar body) of each Subsidiary (as defined in
Section 9.11) of Hi-Lo and (iii) each committee (or similar body) of each such
board.
(b) Hi-Lo's obligations to appoint designees to the Board of Directors of
Hi-Lo shall be subject to Section 14(f) of the Exchange Act. At the request
and expense of O'Reilly, Hi-Lo shall promptly take all actions required pursuant
to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in
order to fulfill its obligations under Section 1.3(a), including mailing to
stockholders the information required by such Section 14(f) and Rule 14f-1 as is
necessary to enable X'Xxxxxx'x designees to be elected to Hi-Lo's Board of
Directors. O'Reilly or Sub will supply Hi-Lo and be solely responsible for any
information with respect to either of them and their nominees, officers,
directors and affiliates required by such Section 14(f) and Rule 14f-1.
(c) In the event that X'Xxxxxx'x designees are elected or appointed to
Hi-Lo's Board of Directors, until the Effective Time (as defined in Section
2.3), Hi-Lo's Board shall include at least two directors who are directors on
the date hereof (the "Independent Directors"), provided that, in such event, if
the number of Independent Directors shall be reduced below two for any reason
whatsoever, any remaining Independent Directors (or Independent Director, if
there shall be only one remaining) shall be entitled to designate persons to
fill such vacancies who shall be deemed to be Independent Directors for purposes
of this Agreement or, if no Inde-
10
pendent Director then remains, the other directors shall designate two persons
to fill such vacancies who shall not be stockholders, affiliates or associates
of O'Reilly or Sub and such persons shall be deemed to be Independent Directors
for purposes of this Agreement. Notwithstanding anything in this Agreement to
the contrary, in the event that X'Xxxxxx'x designees are elected to Hi-Lo's
Board, after the acceptance for payment of Shares pursuant to the Offer and
prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors shall be required and shall be sufficient to authorize,
any termination of this Agreement by Hi-Lo, any amendment of this Agreement
requiring action by the Board of Directors of Hi-Lo, any extension of time for
the performance of any of the obligations or other acts of O'Reilly or Sub under
this Agreement, any waiver of compliance with any of the agreements or
conditions under this Agreement for the benefit of Hi-Lo, any action to seek to
enforce any obligation of O'Reilly or Sub under this Agreement and any other
action by Hi-Lo's Board of Directors under or in connection with this Agreement.
The Independent Directors shall be appointed as a Special Committee of the Hi-Lo
Board of Directors and shall have full power solely with respect to the matters
set forth in the previous sentence to be approved by the Independent Directors.
In connection herewith, the Independent Directors (in their capacity as the
Special Committee) shall be authorized, on behalf of and at the expense of Hi-
Lo, to retain legal advisors.
ARTICLE II
THE MERGER
Section 2.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, Sub shall be merged
with and into Hi-Lo (the "Merger") at the Effective Time. Following the
Effective Time, the separate corporate existence of Sub shall cease and Hi-Lo
shall be the surviving corporation (the "Surviving Corporation") and shall
succeed to and assume all the rights and obligations of Sub in accordance with
the DGCL.
Section 2.2 Closing. The closing of the Merger (the "Closing") will take
place at a location mutually acceptable to the parties hereto at 10:00 a.m. on
a date to be specified by the parties (the "Closing Date"), which shall be no
later than the first business day after satisfaction or waiver of the conditions
set forth in Article VII, unless another time or date is agreed to by the
parties hereto.
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Section 2.3 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall file a
certificate of merger or other appropriate documents (in any such case, the
"Certificate of Merger") executed in accordance with the relevant provisions
of the DGCL and shall make all other filings or recordings required under the
DGCL. The Merger shall become effective at such time as the Delaware Secretary
of State accepts the Certificate of Merger for record, or at such subsequent
date or time as O'Reilly and Hi-Lo shall agree and specify in the Certificate of
Merger (the time the Merger becomes effective being hereinafter referred to as
the "Effective Time").
Section 2.4 Effects of the Merger. The Merger shall have the effects set
forth in the applicable provisions of the DGCL.
Section 2.5 Certificate of Incorporation. The Certificate of
Incorporation of Sub, as in effect immediately prior to the execution of this
Agreement, shall be the Certificate of Incorporation of the Surviving
Corporation except that Article FIRST thereof shall read as follows: "FIRST: The
name of the corporation is "Hi/Lo Automotive, Inc." and, as so amended, shall be
the certificate of incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation.
(a) The by-laws of Sub, as in effect immediately prior to the execution of
this Agreement, shall be the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
Section 2.6 Directors and Officers. The directors of Sub at the Effective
Time shall be the directors of the Surviving Corporation and the officers of Hi-
Lo at the Effective Time shall be the officers of the Surviving Corporation, in
each case until their respective successors are duly elected and qualified.
ARTICLE III
MERGER CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER;
DISSENTING SHARES
Section 3.1 Consideration for the Merger; Conversion or Cancellation of
Shares in the Merger. At the Effective Time, by virtue of the Merger and
without any action on the part of the holders of any Shares or capital stock of
Sub:
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(a) Each Share, together with any preferred stock purchase rights (the
"Rights"), issued pursuant to the Rights Agreement, dated as of August 28, 1996,
by and between Hi-Lo and ChaseMellon Shareholder Services, L.L.C. as Rights
Agent (the "Rights Agreement"), that are issued and outstanding immediately
prior to the Effective Time (other than Dissenting Shares (as defined in Section
3.6) and Shares (and Rights) owned by O'Reilly, Sub or any direct or indirect
wholly owned subsidiary of O'Reilly (collectively, "O'Reilly Companies") or any
of Hi-Lo's direct or indirect wholly owned subsidiaries or shares held in the
treasury of Hi-Lo) shall, by virtue of the Merger and without any action on the
part of Sub, Hi-Lo or the holder thereof, be cancelled and extinguished and
converted into the right to receive the Per Share Amount in cash (the "Merger
Consideration"), payable to the holder thereof, without interest thereon, less
any applicable withholding of taxes, upon the surrender of the certificate
formerly representing such Share in the manner provided in Section 3.3.
(b) Each Share (and Rights) issued and outstanding and owned by O'Reilly or
any of X'Xxxxxx'x direct or indirect wholly owned subsidiaries or any of Hi-Lo's
direct or indirect wholly owned subsidiaries or authorized but unissued shares
held by Hi-Lo immediately prior to the Effective Time shall cease to be
outstanding, be cancelled and retired without payment of any consideration
therefor and cease to exist.
(c) Each share of common stock of Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one validly issued, fully
paid and non-assessable share of common stock of the Surviving Corporation.
Section 3.2 Stockholders Meeting. Hi-Lo, acting through its Board of
Directors, shall, if required by applicable law in order to consummate the
Merger:
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Stockholders Meeting"), to be held as soon as
practicable after Sub shall have purchased Shares pursuant to the Offer,
for the purpose of considering and taking action upon this Agreement;
(ii) prepare and file with the SEC a preliminary proxy or information
statement relating to the Merger and this Agreement and include in any
preliminary or definitive proxy statement or
13
information statement with respect to the Stockholders' Meeting (the "Proxy
Statement"), the recommendation of the Board of Directors that stockholders
of Hi-Lo vote in favor of the approval of this Agreement and the
transactions contemplated hereby unless the Board of Directors of Hi-Lo
determines in good faith, based on advice of its outside counsel, that not
taking any such action is necessary in order for the Board of Directors of
Hi-Lo to comply with its obligations or duties to Hi-Lo and Hi-Lo's
stockholders under applicable law; and
(iii) use all reasonable efforts to obtain and furnish the
information required to be included by it in the Proxy Statement and, after
consultation with O'Reilly and Sub, respond promptly to any comments made
by the SEC with respect to the Proxy Statement and any preliminary version
thereof and cause the Proxy Statement to be mailed to its stockholders at
the earliest practicable time following the expiration or termination of
the Offer and obtain the necessary approvals by its stockholders of this
Agreement and the transactions contemplated hereby unless the Board of
Directors of Hi-Lo determines in good faith, based on advice of its outside
counsel, that not taking any such action is necessary in order for the
Board of Directors of Hi-Lo to comply with its obligations or duties to Hi-
Lo and Hi-Lo's stockholders under applicable law.
(a) O'Reilly agrees that it will provide Hi-Lo with the information
concerning O'Reilly and Sub required by applicable law to be included in the
Proxy Statement.
Hi-Lo and O'Reilly agree to use commercially reasonable efforts to cause
the Special Meeting to occur within 90 days after the purchase of Shares
pursuant to the Offer. At the Stockholders' Meeting, O'Reilly, Sub and their
affiliates will vote all Shares owned by them in favor of approval of this
Agreement and the transactions contemplated hereby.
(b) Notwithstanding the foregoing, in the event that O'Reilly, Sub and any
of their Subsidiaries shall acquire at least 90% of the then outstanding Shares,
the parties hereto agree subject to Article VII, to take all necessary and
appropriate action to cause the Merger to become effective, in accordance with
Section 253 of the DGCL, as soon as practicable after such acquisition, without
a meeting of the stockholders of Hi-Lo.
14
Section 3.3 Payment for Shares in the Merger. The manner of making
payment for Shares in the Merger shall be as follows:
(a) At or prior to the Effective Time, O'Reilly shall deposit with
ChaseMellon Shareholder Services, L.L.C. (the "Exchange Agent"), or such other
exchange agent selected by O'Reilly and reasonably acceptable to Hi-Lo, for the
benefit of the holders of Shares, the funds necessary to make the payments
contemplated by Section 3.1 (the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the Merger Consideration out of
the Exchange Fund.
(b) As soon as practicable after the Effective Time, but in any event no
later than five (5) business days thereafter, the Exchange Agent shall mail to
each holder of record (other than holders of certificates representing Shares
referred to in Section 3.1(b)) of a certificate or certificates which
immediately prior to the Effective Time represented outstanding Shares (the
"Certificates") a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other customary provisions as O'Reilly and Hi-Lo may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for payment of the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration
without any interest thereon, less any applicable withholding of taxes, and the
Certificate so surrendered shall forthwith be canceled. The Merger
Consideration with respect to the Shares represented thereby may be paid to a
person other than the person in whose name the Certificate so surrendered is
registered if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such issuance shall pay any
transfer or other nonincome taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder or establish
to the satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 3.3, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender thereof, the Merger Consideration
with respect to each of the Shares represented thereby.
15
(c) Any portion of the Exchange Fund which remains undistributed to the
holders of the Certificates as of the date which is one year after the Effective
Time shall be delivered to O'Reilly, upon demand, and any holders of the
Certificates who have not \theretofore complied with this Article III shall
thereafter look only to O'Reilly or the Surviving Corporation for payment of
their claim for Merger Consideration.
(d) None of O'Reilly, Hi-Lo, Sub or the Exchange Agent shall be liable to
any person in respect of any cash from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificate shall not have been surrendered prior to seven years after
the Effective Time (or immediately prior to such earlier date on which any
Merger Consideration, would otherwise escheat to or become the property of any
govern mental body or authority) any such Merger Consideration, to the extent
permitted by applicable law, shall become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
(e) The Exchange Agent shall invest any cash included in the Exchange Fund,
as directed by O'Reilly, on a daily basis. Any interest and other income
resulting from such investments shall be paid to O'Reilly.
(f) If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Surviving Corporation,
the posting by such person of a bond in such reasonable amount as the Surviving
Corporation may direct as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will issue in exchange
for such lost, stolen or destroyed Certificate the Merger Consideration.
Section 3.4 Transfer of Shares After the Effective Time. No transfers of
Shares shall be made on the stock transfer books of Hi-Lo after the Effective
Time.
Section 3.5 Stock Options and Associate Purchase Plan.
(a) Each option granted to a Hi-Lo employee, consultant or director to
acquire shares of Hi-Lo Common Stock ("Option") that is outstanding immediately
prior to the purchase of Shares pursuant to the Offer (irrespective of whether
such Options are then exercisable) shall on the fifth business day after the
purchase by Sub of Shares pursuant to the Offer be cancelled in exchange for a
single
16
lump sum cash payment equal to the product of (i) the number of shares of Hi-Lo
Common Stock subject to such Option and (ii) the excess of the Per Share Amount
over the exercise price per share of such Option.
(b) Except as set forth in Section 3.5(a), each Option that is outstanding
immediately prior to the Effective Time, whether or not then vested or
exercisable, shall, effective as of the Effective Time, be cancelled and no
payments shall be made with respect thereto;
(c) Hi-Lo has taken all actions so that following the purchase of Shares
pursuant to the Offer no holder of employee stock options will have any right to
receive Shares upon exercise of an employee stock option; and
(d) Outstanding purchase rights under Hi-Lo's 1991 Associate Stock Purchase
Plan (the "Associate Purchase Plan") (i) shall be exercised at the next
scheduled date of exercise under the Associate Purchase Plan or (ii) shall be
terminated. No purchase rights shall be granted or exercised under the
Associate Purchase Plan following such exercise date, and the Associate Purchase
Plan shall be terminated as soon as practicable thereafter.
Section 3.6 Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, any Shares which are held by stockholders who did not vote in
favor of the Merger and who comply with all of the relevant provisions of
Section 262 of the DGCL (the "Dissenting Shares") shall not be converted into or
be exchanged for the right to receive the Merger Consideration (but instead
shall be converted into the right to receive payment from the Surviving
Corporation with respect to such Dissenting Shares in accordance with the DGCL),
unless and until such holders shall have failed to perfect or shall have
effectively withdrawn or lost their rights to appraisal under the DGCL. If any
such holder shall have failed to perfect or shall have effectively withdrawn or
lost such right, such holder's Shares shall be entitled to the Merger
Consideration in accordance with Section 3.3. Hi-Lo shall give prompt notice to
Sub and O'Reilly of any demands received by Hi-Lo for appraisal of Shares, and
Sub and O'Reilly shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. Hi-Lo shall not,
except with the prior written consent of Sub and O'Reilly, make any payments
with respect to, or settle or offer to settle, any such demands.
17
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HI-LO
Hi-Lo represents and warrants to O'Reilly and Sub that:
Section 4.1 Organization, Qualification, Etc. Hi-Lo is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to own its properties and
assets and to carry on its business as it is now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the ownership of its properties or the conduct of its business requires such
qualification, except for jurisdictions in which such failure to be so qualified
or to be in good standing would not, individually or in the aggregate, have a
Material Adverse Effect (as hereinafter defined) on Hi-Lo. As used in this
Agreement, any reference to any state of facts, event, change or effect having a
"Material Adverse Effect" on or with respect to Hi-Lo or O'Reilly, as the case
may be, means a material adverse effect on the business, results of operations
or financial condition of Hi-Lo and its Subsidiaries (as defined in Section
9.11), taken as a whole, or O'Reilly and its Subsidiaries, taken as a whole, as
the case may be. Hi-Lo has heretofore furnished, or otherwise made available, to
O'Reilly a complete and correct copy, as applicable, of the Certificate or
Articles of Incorporation, the By-laws, the Certificate of Limited Partnership,
and/or the Limited Partnership Agreement, each as amended to, and in full force
and effect as of, the date hereof, of Hi-Lo and each of its Subsidiaries.
Neither Hi-Lo nor any of its Subsidiaries is in violation of any of the
provisions of its respective Certificate or Articles of Incorporation, By-laws,
Certificate of Limited Partnership, or Limited Partnership Agreement.
(a) Hi-Lo does not own, directly or indirectly, any equity or other
ownership interest in any corporation, partnership, joint venture or other
entity or enterprise, except for the Subsidiaries. Hi-Lo is not subject to any
corporate or contractual obligation or requirement to make any investment, loan
or capital contribution to any corporation, partnership, joint venture or other
entity or enterprise, other than its Subsidiaries. Each of Hi-Lo's
Subsidiaries is duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization, has the corporate
and/or partnership power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction in which the ownership of its property
or the conduct of its business requires such qualification, except for
jurisdictions in which such failure to be so qualified or to be in good
18
standing would not, individually or in the aggregate, have a Material Adverse
Effect on Hi-Lo. All the outstanding shares of capital stock of, or other
ownership interests in, Hi-Lo's Subsidiaries are validly issued, fully paid and
non-assessable and are owned by Hi-Lo, directly or indirectly, free and clear of
all liens, claims, charges or encumbrances, except such as are contained in
credit agreements and similar instruments to which Hi-Lo is a party under
which no event of default exists and no event has occurred which with the giving
of notice or passage of time would constitute an event of default thereunder.
There are no existing subscriptions, options, warrants, rights of first refusal,
preemptive rights, calls, commitments, agreements or conversion rights of any
character relating to the issued or unissued capital stock or other securities
of, or other ownership interests in, any Subsidiary of Hi-Lo.
Section 4.2 Capital Stock. The authorized stock of Hi-Lo consists of
30,000,000 shares of common stock, par value $.01 per share ("Hi-Lo Common
Stock"), and 5,000,000 shares of preferred stock, par value $.01 per share ("Hi-
Lo Preferred Stock"), of which 50,000 shares have been designated as Series A
Junior Participating Preferred Stock ("Hi-Lo Series A Preferred Stock"). As of
December 15, 1997, 10,775,109 shares of Hi-Lo Common Stock and no shares of Hi-
Lo Preferred Stock were issued and outstanding. All the outstanding shares of
Hi-Lo Common Stock have been validly issued and are fully paid and non-
assessable and have not been issued in violation of any preemptive or similar
rights. As of December 15, 1997, there were no outstanding subscriptions,
options, warrants, rights or other arrangements or commitments obligating Hi-Lo
to issue any shares of its capital stock nor are there outstanding any
securities which are convertible into or exchangeable for any shares of capital
stock of Hi-Lo, and Hi-Lo has no obligations of any kind to issue any additional
securities other than:
(i) rights to acquire shares of Hi-Lo Series A Preferred Stock
pursuant to the Rights Agreement; and
(ii) options and other rights to receive or acquire not in excess of
1,094,789 shares of Hi-Lo Common Stock granted on or prior to November 30,
1997, pursuant to employee incentive or benefit plans, programs and
arrangements and non-employee director plans.
(a) Except for the issuance of shares of Hi-Lo Common Stock pursuant to the
options and other rights referred to in Section 4.2(a)(i) and except as
permitted in Section 6.1(i) and (j), since September 30, 1997, no shares of Hi-
Lo Common Stock or Hi-Lo Preferred Stock have been issued.
19
(b) Except as disclosed in the letter so designated and executed by Hi-Lo
dated the date hereof and delivered to O'Reilly on the date hereof ("Hi-Lo's
Disclosure Letter") the issuance and sale of all of the outstanding shares of
capital stock described in Section 4.2 have been in compliance with federal and
state securities laws. Except pursuant to the terms of that certain
Shareholder's Agreement, dated October 7, 1987, as amended, Hi-Lo has not
agreed to register any securities under the Securities Act of 1933, as amended
(the "Securities Act") or under any state securities law or granted registration
rights to any persons or entity. Except as disclosed in Hi-Lo's Disclosure
Letter, there are no outstanding obligations of Hi-Lo or any of Hi-Lo's
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of Hi-Lo and no person has any right to cause Hi-Lo or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of Hi-Lo.
Section 4.3 Corporate Authority Relative to this Agreement; No Violation;
No Conflict. Hi-Lo has the corporate power and authority necessary to enter
into this Agreement and to carry out its obligations hereunder. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of Hi-Lo and, except, with respect to the Merger, for the approval of
its stockholders, no other corporate proceedings on the part of Hi-Lo are
necessary to authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Hi-Lo and,
assuming this Agreement constitutes a valid and binding Agreement of the other
parties hereto, this Agreement constitutes a valid and binding agreement of Hi-
Lo, enforceable against Hi-Lo in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affect ing creditors' rights generally,
or by principles governing the availability of equitable remedies). Other than
in connection with or in compliance with the provisions of the DGCL (including
the approval of the Merger by the stockholders of Hi-Lo), the Exchange Act, the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act")
(collectively, the "Hi-Lo Required Approvals"), no authorization, consent or
approval of, or filing by Hi-Lo with, any governmental body or authority or
other person is necessary for the execution and delivery of this Agreement or
for the consummation by Hi-Lo of the transactions contemplated by this Agreement
except where the failure to obtain such authorizations, consents or approvals or
make such filings is not reasonably likely to have a Material Adverse Effect on
Hi-Lo. Except as disclosed in Hi-Lo's Disclosure Letter, neither the execution
and delivery of this Agreement by Hi-Lo nor the consummation by Hi-Lo
20
of the transactions contemplated by this Agreement will (a) result in a breach
or violation of the organizational documents of Hi-Lo or of any of Hi-Lo's
Subsidiaries, (b) result in a breach or violation of any provision of, or
constitute a default (or an event which, with the giving of notice, the passage
of time or otherwise, would constitute a default), under, or entitle any party
(with the giving of notice, the passage of time or otherwise) to terminate,
accelerate or modify, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Hi-Lo or any of
Hi-Lo's Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, contract, agreement, lease or
other instrument or obligation to which Hi-Lo or any of its Subsidiaries is a
party, (c) subject to the matters set forth in the preceding sentence violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Hi-Lo or any of its Subsidiaries or any of their respective properties or assets
or (d) give any govern mental body the right to revoke, withdraw, suspend,
cancel, terminate or modify any governmental authorization held by Hi-Lo or any
of its Subsidiaries, except as otherwise disclosed in Hi-Lo's Disclosure Letter
or that are not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on Hi-Lo.
Section 4.4 Reports and Financial Statements; Corporate Records. Hi-Lo
has previously made available to O'Reilly true and complete copies of: (i) Hi-
Lo's Annual Reports on Form 10-K filed with the SEC for each of the years ended
December 31, 1994 through 1996 (the "Annual Reports"); (ii) Hi-Lo's Quarterly
Reports on Form 10-Q filed with the SEC for the quarters ended March 31, June 30
and September 30, 1997 (the "Quarterly Reports"); (iii) each definitive proxy
statement filed by Hi-Lo with the SEC from December 31, 1994 until the date of
this Agreement (the "Hi-Lo Proxy Statements"); (iv) each final prospectus filed
by Hi-Lo with the SEC from December 31, 1994 until the date of this Agreement;
and (v) all Current Reports on Form 8-K filed by Hi-Lo with the SEC since the
end of its last fiscal year until the date of this Agreement ("Current
Reports").
(a) All of the Annual Reports, Quarterly Reports, Current Reports, Hi-Lo
Proxy Statements and prospectuses filed with the SEC since December 31, 1994
(collectively, the "Hi-Lo SEC Reports") at the time filed (and in the case of
registration statements and proxy statements, on the dates of their effective
ness and the dates of mailing, respectively) (i) complied in all material
respects with the applicable requirements of the Securities Act, the Exchange
Act and the rules and regulations promulgated thereunder and (ii) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited
21
consolidated interim financial statements included in the Hi-Lo SEC Reports
(including any related notes and schedules) fairly present the financial
position of Hi-Lo and its consolidated Subsidiaries as of the dates thereof and
the results of operations and cash flows for the periods then ended (subject,
where appropriate, to normal year-end adjustments), in each case in accordance
with past practice and generally accepted accounting principles in the United
States ("GAAP") consistently applied during the periods involved (except as
otherwise disclosed in the notes thereto or in the case of unaudited statements,
as permitted by the rules of the SEC or Form 10-Q). Since December 31, 1994,
Hi-Lo has timely filed all material reports, registration statements and other
filings required to be filed by it with the SEC under the Exchange Act, the
Securities Act and the rules and regulations of the SEC.
(b) The minute books of Hi-Lo and each of Hi-Lo's corporate Subsidiaries
contain accurate records of all meetings held of, and corporate action taken by,
the stockholders and the Board of Directors of such companies, and no meeting of
any such stockholders or Board of Directors has been held for which minutes have
not been prepared and are not contained in such minute books except as disclosed
in Hi-Lo's Disclosure Letter.
Section 4.5 No Undisclosed Liabilities. As of the date hereof neither Hi-
Lo nor any of its Subsidiaries has any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, that would be required by GAAP
to be reflected on a consolidated balance sheet of Hi-Lo, except liabilities or
obligations (a) reflected in any of the Hi-Lo SEC Reports filed prior to the
date of this Agreement, (b) incurred in the ordinary course of business since
December 31, 1996, or (c) liabilities or obligations which are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
Hi-Lo.
Section 4.6 No Violation of Law. The businesses of Hi-Lo and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any governmental body or authority or any judgment, decision or
order entered by any governmental authority (provided that no representation or
warranty is made in this Section 4.6 with respect to Environmental Laws (as
hereinafter defined)) except (a) as described in any of the Hi-Lo SEC Reports
filed prior to the date of this Agreement and (b) for violations or possible
violations which are not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on Hi-Lo.
22
Section 4.7 Environmental Laws and Regulations. Except as described in
any of the Hi-Lo SEC Reports filed prior to the date of this Agreement or in
Section 4.7 of Hi-Lo's Disclosure Letter, as of the date hereof (a) Hi-Lo and
each of its Subsidiaries is in compliance with all applicable federal, state,
local and foreign laws and regulations relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) (collectively,
"Environmental Laws"), except for non-compliance which are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
Hi-Lo, which compliance includes, but is not limited to, the possession by Hi-Lo
and its Subsidiaries of material permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof; (b) neither Hi-Lo nor any of its Subsidiaries has received
written notice of, or, to the knowledge of Hi-Lo, is the subject of, any
actions, causes of action, claims, investigations, demands or notices by any
person alleging liability under or non-compliance with any Environmental Law
("Environmental Claims") which are reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on Hi-Lo; and (c) to the knowledge
of Hi-Lo, there are no circumstances that are reasonably likely to prevent or
interfere with such compliance in the future. Except as set forth in Section
4.7 of Hi-Lo's Disclosure Letter, to the knowledge of Hi-Lo, there are no past
or present actions or activities, including, without limitation, the release,
emission, discharge or disposal of any Hazardous Material at any site presently
owned by Hi-Lo or its Subsidiaries in the conduct of their business, that could
form the basis of any claim against Hi-Lo or its Subsidiaries under
Environmental Laws, which claims, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on Hi-Lo. For purposes
of this Section 4.7, "Hazardous Material" means chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum or
petroleum products and any other substance or material regulated as toxic or
hazardous pursuant to Environmental Law.
Section 4.8 Employee Matters; ERISA. Set forth in Hi-Lo's Disclosure
Letter is a true and complete list of all material employee benefit plans
maintained or contributed to as of the date hereof by Hi-Lo or any of its
Subsidiaries covering their present and former employees or directors or their
beneficiaries, or providing benefits to such persons in respect of services
provided to any such entity, including, but not limited to, any employee benefit
plans within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), any deferred compensation, bonuses,
stock options, restricted stock plans, incentive compensation, severance or
change in control agreements and any
23
other material benefit arrangements or payroll practices (collectively, the "Hi-
Lo Benefit Plans").
(a) Except for contributions and other payments that are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
Hi-Lo, all contributions and other payments required to be made by Hi-Lo or any
of its Subsidiaries to or under any Hi-Lo Benefit Plan (or to any person
pursuant to the terms thereof) have been made or the amount of such payment or
contribution obligation has been reflected in the Hi-Lo SEC Reports.
(b) Each of the Hi-Lo Benefit Plans intended to be "qualified" within the
meaning of Section 401(a) of the Code has received a favor able determination
letter from the Internal Revenue Service (the "IRS") as to such qualified
status.
(c) Except as described in any of the Hi-Lo SEC Reports filed prior to the
date of this Agreement, all Hi-Lo Benefit Plans are in compliance with all
applicable provisions of ERISA and the Code, and Hi-Lo and its Subsidiaries do
not have any liabilities or obligations with respect to any Hi-Lo Benefit Plan,
whether or not accrued, contingent or otherwise, except (i) as described in any
of the Hi-Lo SEC Reports or disclosed in writing to O'Reilly in Hi-Lo's
Disclosure Letter and (ii) for instances of non-compliance or liabilities or
obligations that are not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on the Hi-Lo.
(d) With respect to Hi-Lo Benefit Plans, individually and in the aggregate,
no event has occurred and, to Hi-Lo's knowledge, there does not now exist any
condition or set of circumstances that could subject Hi-Lo or any of its
Subsidiaries to any material liability arising under ERISA or the Code
(including, without limitation, any liability to any such plan or the Pension
Benefit Guaranty Corporation (the "PBGC")), or under any indemnity agreement to
which Hi-Lo or any of its Subsidiaries is a party, excluding (1) liability for
benefit claims and funding obligations payable in the ordinary course and (2)
liabilities that are not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on Hi-Lo.
24
(e) Except as disclosed in writing to O'Reilly in Hi-Lo's Disclosure
Letter, none of the Hi-Lo Benefit Plans that are "welfare plans" within the
meaning of Section 3(1) of ERISA provides for any retiree benefits other than
continuation coverage required to be provided under Section 4980B of the Code or
Part 6 of Title I of ERISA.
(f) Except (i) as contemplated in this Agreement, (ii) as provided in the
termination benefit agreements listed and identified as such in Hi-Lo's
Disclosure Letter which are in effect on the date hereof (the "Change of Control
Employment Agreements"), (iii) as described in any of the Hi-Lo SEC Reports or
(iv) as disclosed in writing to O'Reilly in Hi-Lo's Disclosure Letter, the
consummation or announcement of any transaction contemplated by this Agreement
will not (whether alone or upon the occurrence of any additional or further acts
or events) result in any (A) payment (whether of severance pay or otherwise)
becoming due from Hi-Lo or any of its Subsidiaries to any officer, employee,
former employee or director thereof or to the trustee under any "rabbi trust" or
similar arrangement, or (B) benefit under any Hi-Lo Benefit Plan being
established or becoming accelerated, vested or payable. Except as disclosed in
Hi-Lo's Disclosure Letter or as described in any of the Hi-Lo SEC Reports,
neither Hi-Lo nor any of its Subsidiaries is a party to (A) any management,
employment, deferred compensation, severance (including any payment, right or
benefit resulting from a change in control), bonus or other contract for
personal services with any current or former officer, director or employee
(whether or not characterized as a plan for purposes of ERISA), (B) any material
consulting contract with any person who prior to entering into such contract was
a director or officer of Hi-Lo or any of its Subsidiaries, or (C) any plan,
agreement, arrangement or understanding similar to any of the items described in
clause (A) or (B) of this sentence.
(g) The consummation or announcement of any transaction contemplated by
this Agreement will not (either alone or upon the occurrence of any additional
or further acts or events) result in the disqualification of any of the Hi-Lo
Benefit Plans intended to be qualified under, result in a prohibited transaction
or breach of fiduciary duty under, or otherwise violate, ERISA or the Code.
(h) Neither Hi-Lo nor any of its Subsidiaries nor any of their directors,
officers, employees or agents, nor any "party in interest" or "disqualified
person," as such terms are defined in Section 3 of ERISA and Section 4975 of the
Code has, with respect to any Hi-Lo Benefit Plan, engaged in or been a party to
any "prohibited transaction," as such term is defined in Section 4975 of the
Code or Section 406 of ERISA which is not otherwise exempt, which could result
in the
25
imposition of either a penalty assessed pursuant to Section 502(i) of ERISA or a
tax imposed by Section 4975 of the Code or which could constitute a breach of
fiduciary duty, in each case applicable to Hi-Lo and which is reasonably likely
to have a Material Adverse Effect on Hi-Lo.
(i) No Hi-Lo Benefit Plan subject to Section 412 of the Code has incurred
any now existing "accumulated funding deficiency" (as defined in ERISA), whether
or not waived. Neither Hi-Lo nor any of its Subsidiaries has incurred, and none
of such entities reasonably expects to incur, any material liability to the PBGC
with respect to any Hi-Lo Benefit Plan. Neither Hi-Lo nor any of its
Subsidiaries is a party to, and neither has incurred or reasonably expects to
incur, any withdrawal liability with respect to any "multiemployer plan" (as
defined in Section 3(37) of ERISA) for which there is any outstanding liability.
(j) None of the assets of any of Hi-Lo Benefit Plans which hold assets are
invested in securities of Hi-Lo.
(k) Hi-Lo is in material compliance with the notice provisions and all
other provisions of COBRA and the Health Insurance Portability and
Accountability Act of 1996, except for instances of non-compliance that are not
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect on Hi-Lo.
(l) Except as disclosed in writing to O'Reilly in Hi-Lo's Disclosure
Letter or as described in any of the Hi-Lo SEC Reports, since December 31, 1996,
no change has occurred in the base salary of any person who is a party to a
Change of Control Employment Agreement.
Section 4.9 Absence of Certain Changes or Events. Except as disclosed in
the Hi-Lo SEC Reports filed prior to the date of this Agreement or in Hi-Lo's
Disclosure Letter, from December 31, 1996 to the date of this Agreement, the
businesses of Hi-Lo and its Subsidiaries have been conducted in all material
respects in the ordinary course and there has not been any event, occurrence,
development or state of circumstances or facts that has had or is reasonably
likely to have a Material Adverse Effect on Hi-Lo. Since December 31, 1996,
neither Hi-Lo nor any of its Subsidiaries has engaged in any transaction which,
if done after the execution of this Agreement, would violate Sections 6.1(e)
through (k), 6.1(n) through (q), or 6.1(s) through (u) hereof, except as
disclosed in Hi-Lo's SEC Reports filed prior to the date of this Agreement or
disclosed in Hi-Lo's Disclosure Letter.
26
Section 4.10 Investigations; Litigation. As of the date of this Agreement,
except as described in any of the Hi-Lo SEC Reports filed prior to the date of
this Agreement or disclosed in Hi-Lo's Disclosure Letter:
(a) no investigation or review by any governmental body or authority with
respect to Hi-Lo or any of its Subsidiaries is pending nor has any governmental
body or authority notified Hi-Lo in writing of an intention to conduct the same
and, to the knowledge of Hi-Lo no such investigation or review has been
threatened in each case which is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on Hi-Lo; and
(b) there are no actions, suits or proceedings pending (or, to Hi-Lo's
knowledge, threatened) against or affecting Hi-Lo or its Subsidiaries, or any of
their respective properties at law or in equity, or before any federal, state,
local or foreign governmental body or authority, which, individually or in the
aggregate, are reasonably likely to have a Material Adverse Effect on Hi-Lo.
Section 4.11 Proxy Statement; Offer Documents; Schedule 14D-9; Proxy
Statement. None of the Schedule 14D-9, any information supplied in writing by
Hi-Lo specifically for inclusion in the Offer Documents or the information to be
filed by Hi-Lo in connection with the Offer pursuant to Rule 14f-1 promulgated
under the Exchange Act (the "Information Statement"), shall at the respective
times the Schedule 14D-9, the Offer Documents, the Information Statement or any
amendments or supplements thereto are filed with the SEC or are first published,
sent or given to stockholders of Hi-Lo, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they are made, not misleading. The Proxy
Statement and the Information Statement shall not, at the date such document (or
any amendment or supplement thereto) is first mailed to stockholders of Hi-Lo,
with respect to the Information Statement at the time Shares are accepted for
payment in the Offer, and with respect to the Proxy Statement at the time of the
Stockholders' Meeting, be false or misleading with respect to any material fact,
or omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein in the light of the circumstances
under which they are made, not misleading. The Schedule 14D-9, the Information
Statement and the Proxy Statement shall comply in all material respects as to
form with the applicable requirements of the Exchange Act and the applicable
rules and regulations thereunder. Notwithstanding the foregoing, Hi-Lo makes no
representation or warranty with respect to statements
27
made in any of the foregoing documents based on information supplied in writing
by O'Reilly or Sub or any of their representatives specifically for inclusion
therein.
Section 4.12 Hi-Lo Rights. Hi-Lo has taken all action which may be
necessary to amend the Rights Agreement, so that the execution of this Agreement
and any amendments thereto by the parties hereto and the consummation of the
transactions contemplated hereby or thereby shall not cause (i) O'Reilly or Sub
to become an Acquiring Person (as defined in the Rights Agreement) or (ii) a
Distribu tion, or a Shares Acquisition Date (as each such term is defined in the
Rights Agreement) to occur, irrespective of the number of Shares acquired
pursuant to the Offer.
Section 4.13 Takeover Laws. Prior to the date hereof, the Board of
Directors of Hi-Lo has taken all necessary action to exempt under or make not
subject to Section 203 of the DGCL or any other state law that purports to limit
or restrict business combinations or the ability to acquire shares of capital
stock, the execution of this Agreement and the consummation of the transactions
contemplated hereby, including the Offer and the Merger.
Section 4.14 Tax Matters. (a) Except for matters that are not reason ably
likely to have a Material Adverse Effect on Hi-Lo or are disclosed in Hi-Lo's
Disclosure Letter: (i) all Tax Returns, which are required to be filed on or
before the Closing Date by or with respect to Hi-Lo or any of its Subsidiaries
have been or will be duly and timely filed and reflect all tax liabilities of
Hi-Lo and its Subsidiaries required to be shown thereon; (ii) all Taxes which
are shown to be due on any Hi-Lo Tax Returns have been or will be timely paid in
full; (iii) all withholding tax require ments imposed on or with respect to Hi-
Lo or any of its Subsidiaries have been satisfied in full in all respects; (iv)
no action, suit, proceeding, audit, claim assess ment, deficiency or adjustment
has been asserted, assessed or is pending with respect to any Hi-Lo Tax Return
or any of its Subsidiaries; (v) neither Hi-Lo nor any of its Subsidiaries has
any liability for any Taxes in excess of amounts paid or reserves established
therefor; and (vi) there is not in force any extension of time with respect to
the due date for the filing of any Hi-Lo Tax Return or any waiver or agreement
for any extension of time for the assessment or payment of any tax due with
respect to the period covered by any Hi-Lo Tax Return and no requests for such
waivers or agreements are pending. Except as disclosed in Hi-Lo's Disclosure
Letter, neither Hi-Lo nor any of its Subsidiaries is the subject of any
currently ongoing tax audit which is reasonably likely to have a Material
Adverse Effect on Hi-Lo. With respect to any taxable period ended prior to
December 31, 1993, all federal income Hi-Lo
28
Tax Returns have been audited by the Internal Revenue Service or are closed by
the applicable statute of limitations.
(b) There are no material liens with respect to Taxes upon any of the
properties or assets, real or personal, tangible or intangible of Hi-Lo or any
of its Subsidiaries (other than liens with respect to Taxes not yet due). No
material claim made in writing by an authority in a jurisdiction where none of
Hi-Lo or its Subsidiaries files tax returns that Hi-Lo or any of its
Subsidiaries is or may be subject to taxation by that jurisdiction is currently
pending. Hi-Lo has not filed an election under Section 341(f) of the Internal
Revenue Code to be treated as a consenting corporation. Neither Hi-Lo nor any of
its Subsidiaries is obligated by any contract, agreement or other arrangement to
indemnify any other person with respect to any material Taxes.
(c) Except for matters that are disclosed in Hi-Lo's Disclosure Letter:
none of Hi-Lo or any of its Subsidiaries is a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or in the
aggregate, in the payment of (x) any "excess parachute payments" within the
meaning of Section 280G of the Code (without regard to the exceptions set forth
in Section 280G(b)(4) and 280G(b)(5) of the Code) or (y) any amount for which a
deduction would be disallowed under Section 162 of the Code; since January 1,
1993, none of Hi-Lo or any of its Subsidiaries has been a member of a group
filing a consolidated federal income Tax Return (other than a group the common
parent of which was Hi-Lo); no liability has been asserted with respect to Hi-Lo
or any of its Subsidiaries for the Taxes of any Person (other than any of Hi-Lo
or its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any
corresponding provision of state, local or foreign Tax law), as a transferee or
successor, by contract, or otherwise; and none of Hi-Lo or any of its
Subsidiaries has net operating losses or other tax attributes presently subject
(without regard to the transactions contemplated by this Agreement) to
limitation under Sections 382, 383, or 384 of the Code, or the federal
consolidated return regulations.
(d) For purposes of this Agreement: (i) "Taxes" means any and all federal,
state, local, foreign or other taxes of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any taxing authority, including, without limitation,
taxes or other charges on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, occupation, transfers,
premiums, leases, services, capital stock, payroll, employment, social security,
workers' compensation, unemployment compensation, or net worth, environmental
taxes and taxes or other charges
29
in the nature of excise, withholding, customs duties, ad valorem or value added,
and (ii) "Tax Return" means any return, report or similar statement (including
the attached schedules) filed or required to be filed with respect to any Tax,
including, without limitation, any information return, claim for refund or
declaration of estimated Tax (or any amendments to any of the foregoing).
Section 4.15 Opinion of Financial Advisor. The Board of Directors of Hi-Lo
has received the opinion of SBC Warburg Dillon Read Inc., dated the date of this
Agreement, to the effect that, as of such date, the cash consideration to be
received by Hi-Lo's stockholders pursuant to the Offer and the Merger is fair to
such stockholders from a financial point of view. A copy of the written opinion
of SBC Warburg Dillon Read Inc. has been delivered to O'Reilly.
Section 4.16 Required Vote of Hi-Lo Stockholders. The affirmative vote of
the holders of a majority of the outstanding shares of Hi-Lo Common Stock is
required to approve the Merger. No other vote of the stockholders of Hi-Lo is
required by law, the charter or by-laws of Hi-Lo or otherwise to approve this
Agreement and the transactions contemplated hereby.
Section 4.17 Labor Matters. No labor organization or group of employees of
Hi-Lo or any of its Subsidiaries has made a pending demand for recognition or
certification, and there are no representation or certification proceedings or
petitions seeking a representation proceeding presently pending or to the
knowledge of Hi-Lo threatened to be brought or filed, with the National Labor
Relations Board or any other labor relations tribunal or authority except for
demands, proceedings or petitions which are not reasonably likely to have a
Material Adverse Effect on Hi-Lo. There are no strikes, work stoppages,
lockouts, material arbitrations or material grievances, or other material labor
disputes pending or to the knowledge of Hi-Lo threatened against or involving
Hi-Lo or any of its Subsidiaries except such as are not reasonably likely to
have a Material Adverse Effect on Hi-Lo. None of Hi-Lo or any of its
Subsidiaries is a party to or bound by any collective bargaining or similar
agreement with any labor organization.
Section 4.18 Certain Agreements. Except as disclosed in Hi-Lo's Disclosure
Letter or in the Hi-Lo SEC Reports filed prior to the date of this Agreement,
neither Hi-Lo nor any of its Subsidiaries is a party or subject to any oral or
written agreement, contract, policy, license, document, instrument, arrangement
or commitment relating to or constituting (i) Indebtedness (as hereinafter
defined) in an amount exceeding $500,000 other than pursuant to Hi-Lo's
revolving credit facility with the CIT Group which would in no event cause the
aggregate amount outstanding
30
under such facility to exceed $60,000,000, (ii) leases for real or personal
property in which the amounts of payments which Hi-Lo or any Subsidiary is
required to make on an annual basis exceeds $250,000, (iii) agreement, contract,
policy, license document, instrument, arrangement or commitment that limits in
any material respect the freedom of Hi-Lo or any Subsidiary of Hi-Lo to compete
in any line of business or with any person or in any geographical area or which
would so limit the freedom of Hi-Lo or any Subsidiary of Hi-Lo after the
Effective Time, (iv) agreement or contract outside of the ordinary course of
business of Hi-Lo or any of Hi-Lo's Subsidiaries that involves performance of
services or delivery of goods or materials by or to Hi-Lo or any of Hi-Lo's
Subsidiaries of an amount or value in excess of $250,000, (v) joint venture or
partnership agreements involving a sharing of profits, losses, costs, or
liabilities by Hi-Lo or any of Hi-Lo's Subsidiaries with any person other than
Hi-Lo and its Subsidiaries, (vi) power of attorney granted by Hi-Lo or any of
Hi-Lo's Subsidiaries that is currently effective and outstanding, (vii)
agreement or contract entered into other than in the ordinary course of business
that contains or provides for an express undertaking by Hi-Lo or any of Hi-Lo's
Subsidiaries to be responsible for consequential damages, (viii) agreement or
contract for capital expenditures in excess of $200,000, (ix) a written
warranty, guaranty, and/or other similar undertaking with respect to contractual
performance extended by Hi-Lo or any of Hi-Lo's Subsidiaries other than in the
ordinary course of business, or (x) which, after giving effect to the
transactions contemplated by this Agreement, purports to restrict or bind
O'Reilly or any of its Subsidiaries other than the Surviving Corporation and its
Subsidiaries in any respect. "Indebtedness" means any liability in respect of
(A) borrowed money, (B) capitalized lease obligations, (C) the deferred purchase
price of property or services (other than trade payables in the ordinary course
of business) and (D) guarantees of any of the foregoing. Except as disclosed in
Hi-Lo's Disclosure Letter, neither Hi-Lo nor any of its Subsidiaries is in
default (or would be in default with notice or lapse of time, or both) under any
indenture, note, credit agreement, loan document, lease, contract, policy,
license, document, instrument, arrangement or commitment, whether or not such
default has been waived, which default, alone or in the aggregate with other
such defaults, is reasonably likely to have a Material Adverse Effect on Hi-Lo.
Section 4.19 Title to Assets; Liens. Hi-Lo owns or holds through valid
leases, directly or through its Subsidiaries, all of its inventory, accounts
receivable, property, equipment and other assets except where the failure to own
or hold such property is not reasonably likely to have a Material Adverse Effect
on Hi-Lo, and except as disclosed in Hi-Lo's SEC Reports filed prior to the date
of this Agreement, such assets are free and clear of any mortgages, liens,
charges, encumbrances, or title defects of any nature whatsoever, except for
such mortgages, liens,
31
charges, encumbrances or title defects which are not reasonably likely to
adversely affect the value of such property as carried on Hi-Lo's financial
statements contained in Hi-Lo's SEC Reports filed prior to the date of this
Agreement and would not have a Material Adverse Effect on Hi-Lo. Hi-Lo and its
Subsidiaries have valid and enforceable leases for the premises and the
equipment, furniture and fixtures purported to be leased by them, except for
leases, the failure of which to have or be enforceable, are not reasonably
likely to have a Material Adverse Effect on Hi-Lo.
Section 4.20 Insurance. Except as disclosed in Hi-Lo's Disclosure Letter,
Hi-Lo and each of its Subsidiaries are insured, and during each of the past five
calendar years have been insured with insurers whose current rating by A M Best
is at least B+6 against such risks and in such amounts as companies engaged in a
similar business would, in accordance with good business practice, customarily
be insured. Except as disclosed in Hi-Lo's Disclosure Letter, the policies of
fire, theft, liability and other insurance maintained with respect to the assets
or businesses of Hi-Lo and its Subsidiaries (copies of which have been made
available to O'Reilly) (i) provide coverage which Hi-Lo deems to be adequate
coverage against loss, (ii) are sufficient for Hi-Lo and its Subsidiaries to be
in compliance with all legal requirements applicable to Hi-Lo or any of its
Subsidiaries and all agreements and contracts to which Hi-Lo or any of its
Subsidiaries is a party or by which any of them are bound, except where such
insufficiency is not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on Hi-Lo, (iii) will continue (absent affirmative
action by O'Reilly to cancel such policies) in full force and effect following
consummation of the Merger and (iv) do not provide for any retrospective premium
adjustment or other experienced-based liability on the part of Hi-Lo or any of
Hi-Lo's Subsidiaries. Except as disclosed in Hi-Lo's Disclosure Letter, neither
Hi-Lo nor any of its Subsidiaries has received written notice of cancellation or
termination with respect to any material insurance policy of Hi-Lo or its
Subsidiaries or will not be renewed or that the issuer of any material insurance
policy is not willing or able to perform its obligations thereunder. The
insurance policies of Hi-Lo and its Subsidiaries are valid and enforceable
policies. Hi-Lo and Hi-Lo's Subsidiaries have paid all premiums due, and have
otherwise performed all of their respective material obligations, under each
material insurance policy and Hi-Lo and Hi-Lo's Subsidiaries have given notice
to the respective insurer of all material claims that may be insured by any
material insurance policy.
Section 4.21 Intellectual Property. To Hi-Lo's knowledge, neither Hi-Lo nor
any of its Subsidiaries utilizes or has utilized any patent, trademark, trade
name, service xxxx, copyright, software, trade secret or know-how, except for
those which are owned, possessed or lawfully used by Hi-Lo or its Subsidiaries
in their
32
operations, and, to the knowledge of Hi-Lo, neither Hi-Lo nor any of its
Subsidiaries infringes upon or unlawfully or wrongfully uses any patent,
trademark, tradename, service xxxx, copyright or trade secret owned or validly
claimed by another, where such infringement or unlawful or wrongful use is
reasonably likely to have a Material Adverse Effect on Hi-Lo.
Section 4.22 Significant Vendor Arrangements. Except as set forth in a
list which is included as part of Hi-Lo's Disclosure Letter, as of the date of
this Agreement, neither Hi-Lo nor any of its Subsidiaries is a party to any
contract or arrangement with any supplier or vendor which represents a
commitment in excess of $300,000. The list of such contracts and arrangements
which is included as part of Hi-Lo's Disclosure Letter accurately identifies
each such supplier or vendor and the significant terms concerning termination,
term of the agreement, and the amount of up-front vendors' allowances that would
need to be repaid upon early termination as of December 1, 1997.
Section 4.23 Termination of Discount Agreement. Hi-Lo has taken all
action necessary to terminate, and has terminated, the Agreement and Plan of
Merger among Discount Auto Parts, Inc., HLA Acquisition, Inc. and Hi-Lo dated as
of October 17, 1997 in accordance with the terms thereof and has paid the
$4,000,000 termination fee pursuant to Section 7.2(b) thereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF O'REILLY AND SUB
O'Reilly and Sub jointly and severally represent and warrant to Hi-Lo that:
Section 5.1 Organization, Qualification, Etc. Each of O'Reilly and Sub
is a corporation duly organized, validly existing and of active status or in
good standing under the laws of its jurisdiction of organization and has the
corporate power and authority to own its properties and assets and to carry on
its business as it is now being conducted and is duly qualified to do business
and is of active status or in good standing in each jurisdiction in which the
ownership of its properties or the conduct of its business requires such
qualification, except for jurisdictions in which such failure to be so qualified
or to be in good standing would not, individually or in the aggregate, have a
Material Adverse Effect on O'Reilly. The copies of X'Xxxxxx'x and Sub's
Certificate of Incorporation and By-laws which have been made available
33
to Hi-Lo are complete and correct and in full force and effect on the date
hereof. Neither O'Reilly nor Sub is in violation of any of the provisions of its
respective Articles or Certificate of Incorporation or By-laws.
Section 5.2 Corporate Authority Relative to this Agreement; No Violation;
No Conflict. Each of O'Reilly and Sub has the corporate power and authority
necessary to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Boards of Directors of O'Reilly and Sub and no other corporate proceedings
on the part of O'Reilly or Sub are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by O'Reilly and Sub and, assuming this Agreement
constitutes a valid and binding Agreement of the other parties hereto, this
Agreement constitutes a valid and binding agreement of O'Reilly and Sub,
enforceable against each of them in accordance with its terms (except insofar
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally,
or by principles governing the availability of equitable remedies). Other than
in connection with or in compliance with the provisions of the DGCL, the
Securities Act, the Exchange Act or the HSR Act (collectively, the "O'Reilly
Required Approvals"), no authorization, consent or approval of, or filing by
O'Reilly or Sub with, any governmental body or authority or other person is
necessary for the execution and delivery of this Agreement or for the
consummation by O'Reilly or Sub of the transactions contemplated hereby except
where the failure to obtain such authorizations, consents or approvals or make
such filing is not reasonably likely to have a Material Adverse Effect on
O'Reilly. Except as disclosed in X'Xxxxxx'x Disclosure Letter, neither the
execution and delivery of this Agreement by O'Reilly and Sub nor the
consummation by O'Reilly and Sub of the transactions contemplated by this
Agreement will (a) result in a breach or violation of the organizational
documents of O'Reilly or Sub or of any of X'Xxxxxx'x Subsidiaries, (b) result in
a breach or violation of any provision of, or constitute a default (or an event
which, with the giving of notice, the passage of time or otherwise, would
constitute a default), under, or entitle any party (with the giving of notice,
the passage of time or otherwise) to terminate, accelerate or modify, or result
in the creation of any lien, security interest, charge or encumbrance upon any
of the properties or assets of O'Reilly or Sub or any of X'Xxxxxx'x Subsidiaries
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, contract, agreement, lease or other instrument or
obligation to which O'Reilly or Sub or any of its X'Xxxxxx'x Subsidiaries is a
party, or (c) subject to the matters set forth in the preceding sentence
violate any order, writ, injunction, decree, statute, rule or regulation
34
applicable to O'Reilly or Sub or any of X'Xxxxxx'x Subsidiaries or any of their
respective properties or assets or (d) give any governmental body the right to
revoke, withdraw, suspend, cancel, terminate or modify any governmental
authorization held by O'Reilly or any of its Subsidiaries, except for such
violations which would not in the aggregate have a Material Adverse Effect on
O'Reilly.
Section 5.3 Financing. O'Reilly has, or has commitments to obtain,
sufficient funds (through existing credit arrangements or otherwise) to (a) pay
the Per Share Amount pursuant to the Offer, (b) pay the Merger Consideration
pursuant to the Merger, (c) refinance such of Hi-Lo's existing indebtedness as
shall be necessary to consummate the Offer and the Merger and the financing
therefor and provide working capital prior to the Effective Time and (d) pay
related fees and expenses.
Section 5.4 Offer Documents; Schedule 14D-9; Proxy Statement. None of the
Offer Documents nor any of the information supplied by O'Reilly or any of its
Subsidiaries in writing specifically for inclusion in the Schedule 14D-9 shall,
at the respective times the Offer Documents or the Schedule 14D-9 or any
amendments or supplements thereto are filed with the SEC or are first published,
sent or given to stockholders of Hi-Lo, as the case may be, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they are made, not misleading. The
information supplied in writing by O'Reilly specifically for inclusion in the
Proxy Statement or Information Statement shall not, at the date such document
(or any amendment or supplement thereto) is first mailed to stockholders of
Hi-Lo, with respect to the Information Statement at the time Shares are accepted
for payment in the Offer, and with respect to the Proxy Statement at the time of
the Stockholders' Meeting be false or misleading with respect to any material
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein in the light of the
circumstances under which they are made, not misleading. Notwithstanding the
foregoing, O'Reilly and Sub make no representation or warranty with respect to
any of the foregoing documents based on information supplied by Hi-Lo or any of
its representatives. The Offer Documents shall comply in all material respects
as to form with the applicable requirements of the Exchange Act and the
applicable rules and regulations thereunder.
Section 5.5 Lack of Ownership of Shares. Neither O'Reilly nor any of its
Subsidiaries owns any Shares or other securities convertible into Shares.
35
ARTICLE VI
COVENANTS AND AGREEMENTS
It is further agreed as follows:
Section 6.1 Conduct of Business by Hi-Lo. From the date hereof and prior
to the time the directors of O'Reilly have been elected to, and shall constitute
a majority of, the Board of Directors of Hi-Lo pursuant to Section 1.3(a) or the
date, if any, on which this Agreement is earlier terminated pursuant to Section
8.1 (the "Termination Date"), and except as specifically disclosed in Hi-Lo's
Disclosure Letter or as may be agreed to in writing by O'Reilly hereto or as may
be permitted pursuant to this Agreement, Hi-Lo:
(a) shall, and shall cause each of its Subsidiaries to, conduct its
operations in all material respects according to their ordinary and usual course
of business in substantially the same manner as heretofore conducted;
(b) shall use its reasonable best efforts, and cause each of its
Subsidiaries to use its reasonable best efforts, to preserve intact its business
organization in all material respects, keep available the services of its
executive officers and key employees as a group, subject to changes in the
ordinary course, and maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with them;
(c) shall confer at such times as O'Reilly may reasonably request with one
or more representatives of O'Reilly to report material operational matters and
the general status of ongoing operations (in each case to the extent O'Reilly
reasonably requires such information) and to consult with O'Reilly regarding
material operational decisions;
(d) shall promptly notify O'Reilly of any emergency or other change in the
normal course of its or its Subsidiaries' respective businesses or in the
operation of its or its Subsidiaries' respective properties and of any
complaints, investigations or hearings (or communications indicating that the
same may be contemplated) of any governmental body or authority if such
emergency, change, complaint, investigation or hearing is reasonably likely to
have a Material Adverse Effect on Hi-Lo;
36
(e) shall not authorize or pay any dividends on or make any distribution
with respect to its outstanding shares of stock;
(f) shall not, and shall not permit any of its Subsidiaries to, except as
contemplated by Section 6.5 or 6.14 hereof or as may be required by applicable
law, enter into or amend any employment, severance or similar agreements or
arrangements with any of their respective directors or executive officers except
for the Deferral Agreements with directors and officers dated as of the date
hereof;
(g) shall not (subject to the provisions of Section 6.8), and shall not
permit any of its Subsidiaries to, authorize, or announce an intention to
authorize, or enter into an agreement with respect to, any merger, consolidation
or business combination (other than this Agreement and the transactions
contemplated hereby), any acquisition of a material amount of assets or
securities, any disposition of a material amount of assets or securities or any
release or relinquishment of any material contract rights, in each case, not in
the ordinary course of business;
(h) except pursuant to the Merger as provided for in Section 2.5, shall
not propose or adopt any amendments to its corporate charter or by-laws;
(i) shall not, and shall not permit any of its Subsidiaries to, issue any
shares of their capital stock, except upon exercise of rights or options issued
pursuant to existing employee plans, programs or arrangements and non-employee
director plans;
(j) shall not, and shall not permit any of its Subsidiaries to, grant,
confer or award any options, warrants, conversion rights or other rights, not
existing on the date hereof, to acquire any shares of its capital stock;
(k) shall not, and shall not permit any of its Subsidiaries to, purchase
or redeem or offer to purchase or redeem any shares of its stock or any
securities convertible into or exchangeable for shares of stock, except for the
deemed repurchase of options in accordance with Section 3.5 of this Agreement,
or purchases, redemptions and offers to purchase in the ordinary course of
business in connection with employee incentive and benefit plans, programs or
arrangements in existence on the date hereof;
37
(l) shall not, and shall not permit any of its Subsidiaries to, except as
contemplated by this Agreement or as may be required by applicable law, amend in
any material respect the terms of their respective employee benefit plans,
programs or arrangements or any severance or similar agreements or arrangements
in existence on the date hereof, enter into or amend any employment or
consulting agreement, adopt or enter into any new employee benefit plans,
programs or arrangements or any severance or similar agreements or arrangements
or increase the base salary of any person who is a party to a Change of Control
Employment Agreement or make any payments under any Hi-Lo Benefit Plan to any
director, employee, independent contractor or consultant (except in the ordinary
course of business and in amounts and in a manner consistent with past practice
or as other wise required by law or the provisions of such Hi-Lo Benefit Plan);
(m) shall not, and shall not permit any of its Subsidiaries to, (i) enter
into any material loan agreement or incur any indebtedness in excess of an
aggregate of $100,000 other than pursuant to additional draws resulting in not
in excess of an aggregate amount outstanding of $60,000,000 under Hi-Lo's credit
facility with the CIT Group or amend Hi-Lo's credit facility with the CIT Group
to increase the amount that may be borrowed thereunder, (ii) make or enter into
any agreement or contract for capital expenditures in excess of $50,000, (iii)
enter into any lease for any new store site or for real property in excess of
$50,000 or any lease for personal property in excess of $20,000 or (iv) enter
into any agreement or contract outside of the ordinary course of business of Hi-
Lo or any of Hi-Lo's Subsidiaries that involves performance of services or
delivery of goods or materials by or to Hi-Lo or any of Hi-Lo's Subsidiaries of
an amount or value in excess of $50,000;
(n) shall not, and shall not permit any of its Subsidiaries to, make or
change any material Tax election, file any amendment to any federal income Tax
Return unless required by law, enter into any closing agreement, settle or
compromise any material Tax liability;
(o) shall not adjust, split, combine or reclassify its capital stock;
(p) shall not enter into any agreement, understanding or arrangement with
respect to the sale or voting of its capital stock;
(q) shall not, and shall not permit any of its Subsidiaries to, create any
new subsidiaries;
38
(r) except as required by this Agreement, shall not take any action which
could reasonably be expected to adversely affect or delay the ability of any of
the parties hereto to obtain any approval of any governmental or regulatory body
required to consummate the transactions contemplated hereby;
(s) shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly sell, transfer, lease, pledge, mortgage, encumber or otherwise
dispose of any material property or assets other than in the ordinary course of
business;
(t) shall not enter into any financial derivative contracts;
(u) shall not change in any material respect its accounting policies,
methods or procedures except as required by GAAP;
(v) except as may be required by this Agreement or applicable law, shall
not do any act or omit to do any act which would cause a breach of any contract,
commitment or obligation if the result is reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect on Hi-Lo;
(w) except as otherwise permitted by Section 6.8, shall not take any action
with the intent of causing the conditions to the Offer set forth on Annex A
hereto to not be satisfied;
(x) shall not, other than pursuant to this Agreement, take any action to
cause the shares of Hi-Lo Common Stock to cease to be quoted on any of the stock
exchanges on which such shares are now quoted;
(y) shall continue to provide training for employees of Hi-Lo and its
Subsidiaries commensurate with the training provided by Hi-Lo and its
Subsidiaries over the past twelve months;
(z) subject to the limitations contained in this Agreement, shall continue
the level of recruiting activity and process employed by Hi-Lo and its
Subsidiaries over the past twelve months; and
(aa) shall not, and shall not permit any of its Subsidiaries to, agree in
writing or otherwise, to take any of the foregoing actions or take any action
which would make any representation or warranty contained in Article IV
39
hereof (except for representations and warranties made as of a specified date)
untrue and incorrect in any material respect as of the Effective Time.
(bb) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business and
consistent with past practice, of liabilities reflected or reserved against in
the September 30, 1997 balance sheet or subsequently incurred in the ordinary
course of business and consistent with past practice;
(cc) settle or compromise any pending or threatened suit, action or claim
not covered by insurance (without giving effect to deductibles in determining
whether coverage exists) that is material or which relates to the Agreement or
any of the transactions contemplated thereby, including the Offer and the
Merger; or
(dd) shall not modify, amend or waive any terms or provisions of the
Rights Agreement.
Section 6.2 Investigation. Hi-Lo shall afford to O'Reilly and to
X'Xxxxxx'x officers, employees, accountants, counsel and other authorized
representatives full and complete access during normal business hours,
throughout the period prior to the earlier of the Effective Time or the
Termination Date, to its and its Subsidiaries' facilities, properties,
contracts, commitments, books, and records (including but not limited to tax
returns) and any report, schedule or other document filed or received by it
pursuant to the requirements of federal or state securities laws and shall use
its reasonable best efforts to cause its representatives to furnish promptly
such additional financial and operating data and other information as to Hi-Lo's
and its Subsidiaries' respective businesses and properties as may from time to
time be reasonably requested; provided, that nothing herein shall require Hi-Lo
or any of its Subsidiaries to disclose any information to the other that would
cause a violation of any contractual confidentiality obligation. The parties
hereby agree that each of them will treat any such information in accordance
with the Confidentiality Agreement, dated as of November 26, 1997, between Hi-Lo
and O'Reilly (the "Hi-Lo Confidentiality Agreement"). Notwithstanding any
provision of this Agreement to the contrary, no party shall be obligated to make
any disclosure in violation of applicable laws or regulations.
40
Section 6.3 Obligations of O'Reilly and Sub. Neither O'Reilly nor Sub or
any of their Subsidiaries shall take any action which would make any
representation or warranty contained in Article V hereof (except for
representations and warranties made as of a specific date) untrue or incorrect
in any material respect or cause any of the conditions to the Offer set forth in
Annex A or the conditions to the Merger set forth in Article VII not to be
satisfied.
Section 6.4 [Intentionally Omitted]
Section 6.5 Employee Benefit Plans. Simultaneously with the consummation
of the Offer, O'Reilly shall assume each Change of Control Employment Agreement
then in effect and all of Hi-Lo's rights and obligations under each such
agreement.
(a) O'Reilly shall take all actions necessary or appropriate with respect
to employees employed by Hi-Lo or any of its Subsidiaries from and after the
purchase of any Shares pursuant to the Offer (a "Hi-Lo Employee") to either, at
the sole election of O'Reilly, (i) continue to participate from and after the
Closing Date in the employee benefit plans and programs maintained by Hi-Lo
immediately prior to the Closing Date other than the 1990 Stock Option Plan and
the 1991 Associate Stock Purchase Plan or (ii) permit Hi-Lo Employees to
immediately thereafter participate in the employee benefit plans or programs
maintained by O'Reilly or any of its Subsidiaries for their employees generally
(the "O'Reilly Plans") other than X'Xxxxxx'x stock option plans or any employee
stock purchase plan meeting the requirements of Section 423 of the Code;
provided, however, that, if Hi-Lo's group health plan is terminated or
discontinued, O'Reilly shall permit each Hi-Lo Employee and his or her eligible
dependents (including, without limitation, all such Hi-Lo Employee's dependents
covered by Hi-Lo's group health plan as of the time such coverage ceases) to be
covered under a O'Reilly Plan that (i) provides medical and dental benefits to
the Hi-Lo Employee and such eligible dependents effective immediately upon the
cessation of coverage of such individuals under Hi-Lo's group health plan, (ii)
credits such Hi-Lo Employee, for the year during which such coverage under such
O'Reilly Plan begins, with any deductibles and co-payment already incurred
during such year under Hi-Lo's group health plan, and (iii) waives any
preexisting condition restrictions to the extent necessary to provide immediate
coverage. O'Reilly, the Surviving Corporation, their respective Subsidiaries,
and the O'Reilly Plans shall recognize each Hi-Lo Employee's years of service
and level of seniority with Hi-Lo and its Subsidiaries for purposes of terms of
employment and eligibility, vesting and benefit determination under the O'Reilly
Plans. The provisions of this Section 6.5(b) shall be applicable only during an
41
employee's employment with Hi-Lo, O'Reilly or one of their Subsidiaries and
shall not constitute an agreement to employ or continue the employment of any
person.
Section 6.6 Filings; Other Action. Subject to the terms and conditions
herein provided, Hi-Lo and O'Reilly shall (a) as soon as practicable make their
respective filings and thereafter make any other required submissions under the
HSR Act, (b) use reasonable efforts to cooperate with one another in (i)
determining whether any filings are required to be made with, or consents,
permits, authorizations or approvals are required to be obtained from any third
party, governmental or regulatory bodies or authorities of federal, state and
local jurisdictions in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and
thereby, and (ii) timely making all such filings and timely seeking all such
consents, permits, authorizations or approvals, and (c) use reasonable efforts
to take, or cause to be taken, all other actions and do, or cause to be done,
all other things necessary, proper or advisable to consummate and make effective
the transactions contemplated hereby, including, without limitation, taking all
such further action as reasonably may be necessary to resolve such objections,
if any, as the Federal Trade Commission, the Antitrust Division of the
Department of Justice, state antitrust enforcement authorities or any other
person may assert under relevant antitrust or competition laws with respect to
the transactions contemplated hereby.
Section 6.7 Further Assurances. Each of the Parties shall use its
reasonable best efforts to take all action and to do all things necessary,
proper or advisable to consummate the transactions contemplated by this
Agreement (including, without limitation, using its reasonable efforts to
cause the conditions to the consummation of the Offer set forth in Annex A
hereto and the conditions to the Merger set forth in Article VII for which they
are responsible to be satisfied as soon as reasonably practicable and to
prepare, execute and deliver such further instruments and take or cause to be
taken such other and further action as any other party hereto shall reasonably
request).
Section 6.8 No Solicitation. From the date hereof until the termination
of this Agreement, Hi-Lo will not, and shall not authorize or permit, any of its
officers, directors, employees, attorneys, financial advisors, agents or other
representatives or those of any of its Subsidiaries ("Hi-Lo's
Representatives") to, directly or indirectly, (a) solicit, initiate or knowingly
encourage any Takeover Proposal (as hereinafter defined), including without
limitation by disclosure of non-public information, or (b) engage in discussions
or negotiations relating to or accept any Takeover Proposal; provided, however,
that nothing contained in this Section 6.8
42
shall prohibit Hi-Lo and its Board of Directors from (i) taking and disclosing a
position with respect to a tender offer by a third party pursuant to Rules 14d-9
and 14e-2(a) promulgated by the SEC under the Exchange Act, or (ii) at any time
prior to the purchase of Shares pursuant to the Offer, engaging in discussions
or negotiations with, and furnishing information (including non-public
information) concerning Hi-Lo and its Subsidiaries, businesses, properties or
assets to, any third party which makes a Takeover Proposal (without any
solicitation or initiation or knowing encouragement, directly or indirectly, by
Hi-Lo or any of Hi-Lo's Representatives after the date of this Agreement) if the
Board of Directors of Hi-Lo determines in good faith, based on advice of its
outside counsel (who may be its regularly engaged outside counsel), that the
failure to take such action will violate its obligations or duties to Hi-Lo and
Hi-Lo's stockholders under applicable law, or (iii) provided this Agreement is
terminated pursuant to Section 8.1(d), accepting a Superior Proposal. Prior to
furnishing information to or entering into discussions or negotiations with any
person, Hi-Lo shall receive from such person or entity an executed
confidentiality agreement in reasonably customary form on terms not in the
aggregate materially more favorable to such person or entity than the terms
contained in Hi-Lo Confidentiality Agreement (as defined in Section 6.2 hereof)
unless the same terms are granted to O'Reilly under the Hi-Lo Confidentiality
Agreement. Hi-Lo shall immedi ately cease and cause to be terminated any
existing solicitation, initiation, encourage ment, activity, discussion or
negotiation with any person conducted heretofore by Hi-Lo or any Hi-Lo
Representative with respect to any Takeover Proposal existing on the date
hereof. Hi-Lo agrees not to release any third party from, or waive any provision
of, any standstill agreement to which it is a party or any confidentiality
agreement between it and another person who has made, or who may reasonably be
considered likely to make, or who was given access in order to consider making,
a Takeover Proposal, unless its Board of Directors determines in good faith,
based on advice of its outside counsel (who may be its regularly engaged outside
counsel), that failure to take such action will violate its obligations or
duties to Hi-Lo and Hi-Lo's stockholders under applicable law. Hi-Lo shall
notify O'Reilly orally and in writing of any such Takeover Proposal received
(including, without limitation, the terms and conditions of any such proposal
and the identity of the person making it), within 24 hours of the receipt
thereof, and shall keep O'Reilly informed of the general status and any material
changes in the terms and conditions of such Takeover Proposal. Hi-Lo agrees to
promptly provide to O'Reilly any information concerning Hi-Lo, its Subsidiaries,
business, properties or assets furnished to any third party which makes a
Takeover Proposal and which has not previously been provided to O'Reilly. As
used in this Agreement, (i) "Takeover Proposal" shall mean any written proposal
or offer, in each case made prior to the stockholder vote at Hi-Lo Meeting,
other than a proposal or offer by O'Reilly or any of its Subsidiaries, for a
tender offer, recapital-
43
ization, merger, consolidation or other business combination involving, or any
purchase of, all or substantially all of the assets or more than 50% of the
voting securities of, Hi-Lo, and (ii) "Superior Proposal" shall mean a bona fide
Takeover Proposal made by a third party on terms that a majority of the members
of the Board of Directors of Hi-Lo determines in their good faith reasonable
judgment is more favorable to Hi-Lo and to its stockholders than the
transactions contemplated hereby.
Section 6.9 Public Announcements. Hi-Lo and O'Reilly will consult with
each other before issuing any press release relating to this Agreement or the
transactions contemplated herein and shall not issue any such press release
prior to such consultation except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange.
Section 6.10 Indemnification and Insurance. O'Reilly and Sub agree that
all rights to exculpation and indemnification for acts or omissions occurring
prior to the Effective Time now existing in favor of the current or former
directors or officers (the "Indemnified Parties") of Hi-Lo as provided in its
Certificate of Incorporation or by-laws or in any agreement, in each case as in
effect as of the date hereof, shall survive the Merger and shall continue in
full force and effect in accordance with their terms without amendment thereof.
For six years from the Effective Time, O'Reilly shall indemnify the Indemnified
Parties to the same extent as such Indemnified Parties are entitled to
indemnification pursuant to the preceding sentence.
(a) For six years from the Effective Time, O'Reilly shall, maintain in
effect Hi-Lo's current directors' and officers' liability insurance covering
those persons who are currently covered by Hi-Lo's directors' and officers'
liability insurance policies and shall purchase such policy on or prior to the
Closing Date; provided, however, that in no event shall O'Reilly be required to
expend in the aggregate an amount in excess of 200% of the annual premiums
currently paid by Hi-Lo for such insurance, and, provided, further, that if the
aggregate premiums of such insurance coverage exceed such amount, O'Reilly shall
be obligated to obtain a policy with the greatest coverage available for a cost
not exceeding such amount.
Section 6.11 Additional Reports. Hi-Lo shall furnish to O'Reilly copies
of any reports of the type referred to in Section 4.4 which it files with the
SEC on or after the date hereof, and Hi-Lo represents and warrants that as of
the respective dates thereof, such reports will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statement therein, in light of the
circumstances under which they were made, not misleading. Any unaudited
consolidated interim financial statements included in
44
such reports (including any related notes and schedules) will fairly present the
financial position of Hi-Lo and its consolidated Subsidiaries as of the dates
thereof and the results of operations and changes in financial position or other
information included therein for the periods or as of the date then ended
(subject, where appropriate, to normal year-end adjustments), in each case in
accordance with past practice and GAAP consistently applied during the periods
involved (except as otherwise disclosed in the notes thereto).
Section 6.12 [Intentionally Omitted]
Section 6.13 [Intentionally Omitted]
Section 6.14 Amendments to Change of Control Agreements. Hi-Lo has secured
a commitment to amend from each employee who is a party to a Change of Control
Employment Agreement and shall cause to be amended each Change of Control
Employment Agreement to provide that it shall be a condition to the receipt of
any lump sum payment payable thereunder that the employee execute and deliver to
Hi-Lo a general release by the employee of all claims against Hi-Lo, its
predecessors, parents, subsidiaries, divisions, related or affiliated
companies, officers, directors, stockholders, members, employees, heirs,
successors, assigns, representatives, agents and counsel, including without
limitation a release of (i) any and all claims arising out of or relating to the
employee's employment by or service with Hi-Lo and its Subsidiaries and the
employee's termination of employment, (ii) any and all claims of discrimination,
including but not limited to claims of discrimination on the basis of sex, race,
age, national origin, marital status, religion or handicap, including,
specifically, but without limiting the generality of the foregoing, any claims
under the Age Discrimination in Employment Act, as amended, Title VII of the
Civil Rights Act of 1964, as amended, and the Americans with Disabilities Act,
and (iii) any and all claims of wrongful or unjust discharge or breach of any
contract or promise, express or implied, provided that such release shall not
release claims of such person under the Change of Control Agreements or pursuant
to any indemnification rights or under any directors and officers insurance
policies.
Section 6.15 Notifications. Between the date of this Agreement and the
Closing Date, Hi-Lo will promptly notify O'Reilly in writing if Hi-Lo becomes
aware that any of Hi-Lo's representations and warranties were materially untrue
as of the date of this Agreement or if Hi-Lo shall become aware of any fact or
condition that causes any of Hi-Lo's representations or warranties to be
materially untrue as of such date as if made on and as of such date (except for
representations and warranties made as of a specified date, which need be true
only as of such specified date).
45
During the same period, Hi-Lo will promptly notify O'Reilly of the occurrence of
any material breach of any covenant of Hi-Lo in this Article VI or of the
occurrence of any event that may make the satisfaction of the conditions in
Annex A hereto or Article VII impossible or unlikely.
(a) Between the date of this Agreement and the Closing Date, O'Reilly will
promptly notify Hi-Lo in writing if O'Reilly becomes aware that any of
X'Xxxxxx'x representations and warranties were materially untrue as of the date
of this Agreement or if O'Reilly shall become aware of any fact or condition
that causes any of X'Xxxxxx'x representations or warranties to be materially
untrue as of such date as if made on and as of such date (except for
representations and warranties made as of a specified date, which need be true
only as of such specified date). During the same period, O'Reilly will promptly
notify Hi-Lo of the occurrence of any material breach of any covenant of
O'Reilly in this Article VI or of the occurrence of any event that may make the
satisfaction of the conditions in Annex A hereto or Article VII impossible or
unlikely.
Section 6.16 Indemnifications. Neither O'Reilly nor any of its Subsidiaries
or any of their respective officers, directors or employees shall be liable to
Hi-Lo or any of its Subsidiaries for any losses, claims, damages or liabilities
suffered as a result of any actions taken or any omission to take action by Hi-
Lo at the request of O'Reilly or its affiliates provided such request is not
made with willful intent to cause harm to Hi-Lo or its Subsidiaries. Hi-Lo
agrees to indemnify and hold harmless O'Reilly, its subsidiaries and their
respective officers, directors and employees against any losses, claims, damages
or liabilities to which they may become subject to third parties insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of any action or failure to act in connection with the operation of Hi-Lo or its
Subsidiaries after the date of this Agreement and prior to the earlier of the
Termination of this Agreement or the Closing Date hereunder taken or not taken
as the case may be, at the request of O'Reilly; provided, however, that Hi-Lo
shall not be liable in any such case to the extent such loss, claim, damage or
liability arises out of requests by O'Reilly made with willful intent to cause
harm to Hi-Lo or its Subsidiaries.
46
ARTICLE VII
CONDITIONS TO THE MERGER
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) The holders of issued and outstanding shares of Hi-Lo Common Stock
shall have duly approved the Merger in the manner and if required by applicable
law; provided that O'Reilly and Sub shall vote all of their Shares in favor of
the Merger.
(b) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
court or other tribunal or governmental body or authority which prohibits the
consummation of the transactions contemplated herein substantially on the terms
contemplated hereby. In the event any order, decree or injunction shall have
been issued, each party shall use its reasonable efforts to remove any such
order, decree or injunction.
(c) Any waiting periods applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated.
(d) Sub shall have purchased Shares pursuant to the Offer.
ARTICLE VIII
TERMINATION, WAIVER, AMENDMENT AND CLOSING
Section 8.1 Termination or Abandonment. Notwithstanding anything contained
in this Agreement to the contrary, this Agreement may be terminated and
abandoned at any time prior to the Effective Time, whether before or after any
approval of the matters presented in connection with the Merger by the
stockholders of Hi-Lo:
(a) by the mutual written consent of Hi-Lo and O'Reilly;
47
(b) (i) by either Hi-Lo or O'Reilly if Shares shall not have been
purchased pursuant to the Offer on or before June 30, 1998 and (ii) by Hi-Lo if
after 90 days following the commencement of the Offer, the conditions to the
Offer have not been satisfied or waived and Sub shall not have elected to extend
the Offer; provided, that the party seeking to terminate this Agreement pursuant
to this Section 8.1(b) shall not have breached in any material respect its
obligations under this Agreement in any manner that shall have proximately
contributed to the failure to purchase Shares pursuant to the Offer on or before
such date;
(c) by either Hi-Lo or O'Reilly if (i) a statute, rule, regulation or
executive order shall have been enacted, entered or promulgated prohibiting the
purchase of Shares pursuant to the Offer or the consummation of the Merger
substantially on the terms contemplated hereby or (ii) an order, decree, ruling
or injunction shall have been entered permanently restraining, enjoining or
otherwise prohibiting the purchase of Shares pursuant to the Offer or
consummation of the Merger substantially on the terms contemplated hereby and
such order, decree, ruling or injunction shall have become final and non-
appealable; provided, that the party seeking to terminate this Agreement
pursuant to this Section 8.1(c)(ii) shall have used its reasonable best efforts
to remove such injunction, order or decree;
(d) by Hi-Lo prior to the purchase of Shares pursuant to the Offer if the
Board of Directors of Hi-Lo determines in good faith based upon advice of its
outside counsel (i) that a Takeover Proposal constitutes a Superior Proposal and
(ii) that failure to accept such Superior Proposal will violate its obligations
or duties to Hi-Lo and Hi-Lo's stockholders under applicable law, provided, that
this Agreement shall not terminate pursuant to this Section 8.1(d) unless (A)
Hi-Lo has provided O'Reilly with two business day's prior written notice of its
intention to accept such Superior Proposal, together with a detailed description
of the terms and conditions of such Superior Proposal and (B) simultaneously
with such termination Hi-Lo enters into a definitive acquisition, merger or
similar agreement to effect such Superior Proposal and pays the Termination Fee
(as defined in Section 8.2(b)) required pursuant to Section 8.2(b);
(e) by either Hi-Lo or O'Reilly prior to the purchase of any Shares
pursuant to the Offer if the other shall have breached, or failed to comply
with, in any material respect any of its obligations under this Agreement or any
representation or warranty made by such other party shall have been untrue when
made or as of the time of such termination as if made on and as of such time
(except for representations and warranties made as of a specified date, which
need be true
48
only as of the specified date), provided such breach, failure or
misrepresentation is not cured within thirty days after notice thereof from the
other party and with respect to any representation or warranty not qualified by
"Material Adverse Effect," such breaches, failures or misrepresentations,
individually or in the aggregate, results or is reasonably likely to result in a
Material Adverse Effect on Hi-Lo or O'Reilly, as the case may be;
(f) by O'Reilly (i) if the Board of Directors of Hi-Lo or any committee of
the Board of Directors of Hi-Lo, (A) shall withdraw, modify or change in any
adverse manner (including by amendment of the Schedule 14D-9) to O'Reilly or Sub
its approval or recommendation of this Agreement, the Offer or the Merger, (B)
shall approve or recommend any Takeover Proposal in each case, other than by
O'Reilly or an affiliate of O'Reilly, or (C) shall resolve to take any of the
actions specified in clauses (A) or (B) above;
(g) by Hi-Lo if Sub fails to commence the Offer on or prior to five
business days following the date of initial public announcement of the Offer,
provided that Hi-Lo may not terminate this Agreement pursuant to this Section
8.1(g) if Hi-Lo is at such time in breach in any material respect of its
obligations under this Agreement; or
(h) by either of Hi-Lo or O'Reilly if the Offer shall have been
terminated, or the Offer has expired without any Shares being purchased therein;
provided, however that the right to terminate this Agreement under this Section
8.1(g) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
termination of the Offer or the failure of O'Reilly or Sub, as the case may be,
to purchase Shares pursuant to the Offer on or prior to such date;
provided, however, that no termination by Hi-Lo shall be effective pursuant to
Section 8.1(d) under circumstances in which a Termination Fee would be payable
by Hi-Lo under Section 8.2 unless concurrently with such termination, such
Termination Fee is paid in full by Hi-Lo in accordance with the provisions of
Section 8.2.
Section 8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1 hereof, and subject to the provisions of
Section 9.1 hereof, this Agreement (except for the Hi-Lo Confidentiality
Agreement referred to in Section 6.2) shall forthwith become void and there
shall be no liability on the part of any of the Parties, except (i) as set forth
in this Section 8.2 and in
49
Sections 4.11, 5.4, 6.16, 9.2 and 9.12 hereof, and (ii) nothing herein shall
relieve any party from liability for any willful breach hereof.
(a) In the event that
(i) prior to the termination of this Agreement, any person shall have
commenced, publicly proposed or communicated to Hi-Lo a Takeover Proposal
and (w) the Offer shall have remained open for at least 20 business days,
(x) the Minimum Condition shall not have been satisfied, (y) this Agreement
shall have been terminated pursuant to Section 8.1(b)(c)(e) or (g) and (z)
prior to the first anniversary of such termination Hi-Lo shall consummate
such Takeover Proposal; or
(ii) If this Agreement is terminated by Hi-Lo or O'Reilly pursuant to
Section 8.1(d) or Section 8.1(f), respectively;
then in such event, Hi-Lo shall pay to O'Reilly a termination fee of $4,750,000
(the "Termination Fee"), which amount shall be paid by wire transfer of
immediately available funds to an account designated by O'Reilly.
(b) (i) The Termination Fee payable to O'Reilly under Section 8.2(b)(i)
shall be paid promptly but in no event later than one business day after the
specified event shall have occurred; and (ii) the Termination Fee payable to
O'Reilly under Section 8.2(b) (ii) above (A) in the case of a termination by
O'Reilly pursuant to 8.1(f) shall be paid within three business days after
notice of termination, and (B) in the case of a termination by Hi-Lo pursuant to
Sections 8.1(d) shall be paid concurrently with such termination.
(c) Hi-Lo and O'Reilly agree that the agreements contained in Section
8.2(b) above are an integral part of the transactions contemplated by this
Agreement. If Hi-Lo fails to promptly pay to O'Reilly or Sub, respectively any
fee due under such Section 8.2(b), Hi-Lo shall pay the costs and expenses
(including legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment, together
with interest on the amount of any unpaid fee at the publicly announced prime
rate of NationsBank of Texas, N.A. from the date such fee was required to be
paid. In the event O'Reilly receives any fee pursuant to Section 8.2(b),
O'Reilly shall not assert or pursue in any manner, directly or indirectly, any
claim or cause of action against Hi-Lo or any of its affiliates, officers or
directors based in whole or in part upon a breach of this
50
Agreement by them (except for breaches of Section 6.16) or their receipt,
consideration, negotiation, recommendation, or approval of a Takeover Proposal
or the exercise by Hi-Lo of its right of termination under Section 8.1(d).
Section 8.3 Amendment or Supplement. Subject to applicable law, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of Hi-Lo and prior to the Effective Time, this Agreement may
be amended or supplemented in writing by Hi-Lo and O'Reilly with respect to any
of the terms contained in this Agreement, except that following approval by the
stockholders of Hi-Lo, no such amendment or supplement shall reduce the amount
or change the form of the Merger Consideration, without further approval by the
stockholders of Hi-Lo.
Section 8.4 Extension of Time, Waiver, Etc. At any time prior to the
Effective Time, Hi-Lo and O'Reilly may to the extent legally allowed: (a) extend
the time for the performance of any of the obligations or acts of the other
party; (b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered pursuant hereto; or
(c) waive compliance with any of the agreements or conditions of the other
party contained herein.
Notwithstanding the foregoing, no failure or delay by Hi-Lo or O'Reilly in
exercising any right hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right hereunder. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed each of the parties.
ARTICLE IX
MISCELLANEOUS
Section 9.1 No Survival of Representations and Warranties. None of the
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Merger, except
for the agreements set forth in Article I and Article II, the provisions of
Sections 6.5, 6.7 and 6.10 and this Article IX.
Section 9.2 Expenses. Whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the transac-
51
tions contemplated hereby and thereby shall be paid by the party incurring such
expenses, except that the expenses incurred in connection with the printing and
mailing of Schedule 14D-9, and the Offer Documents and the filing fee required
in connection with the premerger notification under the HSR Act and pursuant to
the Securities Act or the Exchange Act shall be shared equally by Hi-Lo and
O'Reilly, provided, however, that in the event Hi-Lo is required to pay a
Termination Fee pursuant to Section 8.2(b) then such expenses shall be borne by
O'Reilly.
Section 9.3 Counterparts; Effectiveness. This Agreement may be executed in
two or more counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered (by telecopy or otherwise) to the other
parties.
Section 9.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of laws thereof.
Section 9.5 Notices. All notices and other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been duly given when received if personally delivered; when
transmitted and the appropriate telecopy confirmation is received if transmitted
by telecopy or similar electronic transmission method; one working day after it
is sent, if sent by recognized expedited delivery service; and five days after
it is sent, if mailed, first class mail, certified mail, return receipt
requested, with postage prepaid. In each case notice shall be sent to:
To Hi-Lo:
Hi-Lo Automotive, Inc.
0000 Xxxx Xxxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: K. Xxxxx Xxxxxxxx
Vice President and
General Counsel
Telecopy: (000) 000-0000
52
With a copy to:
Xxxxxx & Xxxxxx L.L.P.
2300 First City Tower
0000 Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telecopy: (000) 000-0000
To X'Xxxxxx:
Automotive, Inc.
000 Xxxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. X'Xxxxxx
President and Chief Executive Officer
Telecopy: (000) 000-0000
With a copy to:
Skadden, Arps, Slate Xxxxxxx & Xxxx (Illinois)
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx
Telecopy: (000) 000-0000
or to such other address as either party may have specified in writing to the
other using the procedures specified above in this Section 9.5.
Section 9.6 Assignment; Binding Effect. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns.
Section 9.7 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering
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invalid or unenforceable the remaining terms and provisions of this Agreement in
any other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, such provision shall be interpreted to be only so broad as is
enforceable.
Section 9.8 Enforcement of Agreement. The parties hereto agree that money
damages or other remedy at law would not be sufficient or adequate remedy for
any breach or violation of, or a default under, this Agreement by them and that
in addition to all other remedies available to them, each of them shall be
entitled to the fullest extent permitted by law to an injunction restraining
such breach, violation or default or threatened breach, violation or default and
to any other equitable relief, including, without limitation, specific
performance, without bond or other security being required.
Section 9.9 Miscellaneous. This Agreement:
(a) along with the Hi-Lo Confidentiality Agreement constitutes the entire
agreement, and supersedes all other prior agreements and understandings, both
written and oral, between the parties, or any of them, with respect to the
subject matter hereof and thereof; and
(b) except for the provisions of Sections 6.5(a) and 6.10 hereof, is not
intended to confer upon any Person other than the parties hereto any rights or
remedies hereunder.
Section 9.10 Headings. Headings of the Articles and Sections of this
Agreement are for convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
Section 9.11 Subsidiaries; Affiliates. References in this Agreement to
"Subsidiaries" of Hi-Lo or O'Reilly shall mean any corporation or other form of
legal entity of which more than 50% of the outstanding voting securities or
owner ship are on the date hereof directly or indirectly owned by Hi-Lo or
O'Reilly, as the case may be. Hi-Lo's Disclosure Letter contains a full and
complete list of Hi-Lo's Subsidiaries as of the date hereof. References in this
Agreement (except as specifically otherwise defined) to "affiliates" shall
mean, as to any person, any other person which, directly or indirectly,
controls, or is controlled by, or is under common control with, such person. As
used in this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of
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management or policies of a person, whether through the ownership of securities
or partnership of other ownership interests, by contract or otherwise.
References in the Agreement to "person" shall mean an individual, a corporation,
a partnership, an association, a trust or any other entity or organization,
including, without limitation, a governmental body or authority.
Section 9.12 Finders or Brokers. Except for SBC Warburg Dillon Read Inc.
with respect to Hi-Lo and Xxxxxxxxx Xxxxxx & Xxxxxxxx Securities Corporation
with respect to O'Reilly, neither Hi-Lo nor O'Reilly nor any of their respective
Subsidiaries has employed any investment banker, broker, finder or intermediary
in connection with the transactions contemplated hereby who might be entitled to
any fee or any commission in connection with or upon consummation of the Merger.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
HI-LO AUTOMOTIVE, INC.
By: /s/ T. Xxxxxxx Xxxxx
------------------------
Name: T. Xxxxxxx Xxxxx
Title: President and CEO
X'XXXXXX AUTOMOTIVE, INC.
By: /s/ Xxxxx X'Xxxxxx
------------------------
Name: Xxxxx X'Xxxxxx
Title: President and CEO
SHAMROCK ACQUISITION, INC.
By: /s/ Xxxxx X'Xxxxxx
------------------------
Name: Xxxxx X'Xxxxxx
Title: Director
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ANNEX A
Certain Conditions of the Offer
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) Sub's rights to extend the Offer under certain
circumstances (subject to the provisions of the Merger Agreement), Sub shall not
be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to the Sub's obligation to pay for or return tendered Shares promptly after
termination or withdrawal of the Offer), pay for, and may delay the acceptance
for payment of or, subject to other restrictions referred to above, the payment
for, any tendered Shares, and may terminate the Offer and not accept for payment
any Shares, if (i) any applicable waiting period under the HSR Act has not
expired or terminated prior to the expirations of the Offer, (ii) the Minimum
Condition has not been satisfied, or (iii) at any time on or after the date of
the Merger Agreement and before the time of acceptance of Shares for payment
pursuant to the Offer, any of the following events shall have occurred.
(a) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated, or deemed applicable,
pursuant to an authoritative interpretation by or on behalf of a Governmental
Entity, to the Offer or the Merger that (i) prohibits or imposes any limitations
on X'Xxxxxx'x or Sub's ownership or operation (or that of any of their
respective Subsidiaries or affiliates) of all or a portion of their or Hi-Lo's
businesses or assets, or to compel O'Reilly or Sub or their respective
Subsidiaries and affiliates to dispose of or hold separate any portion of the
business or assets of Hi-Lo or O'Reilly and their respective subsidiaries,
which prohibition, limitation, disposition or hold separate obligation could
reasonably be expected to have a Material Adverse Effect on O'Reilly and its
Subsidiaries, (ii) restrain or prohibit the making or consummation of the Offer
or the Merger or the performance of any of the other transactions contemplated
by the Agreement, (iii) imposes material limitations on the ability of Sub, or
render Sub unable, to accept for payment, pay for or purchase some or all of the
Shares pursuant to the Offer and the Merger or (iv) imposes material limitations
on the ability of Sub or O'Reilly effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote the
Shares purchased by it on all matters properly presented to Hi-Lo's
stockholders;
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(b) (i) the Board of Directors of Hi-Lo (or any committee thereof) shall
have withdrawn, modified or changed in any adverse manner to O'Reilly and Sub
its approval or recommendation of the Offer or the Merger or the Agreement, or
shall have endorsed, approved or recommended any other Takeover Proposal or (ii)
Hi-Lo shall have entered into any agreement with respect to any Superior
Proposal in accordance with Section 8.1(d) of the Agreement;
(c) the representations and warranties of Hi-Lo set forth in the Agreement
shall not be true and correct, in each case (i) as of the date referred to in
any representation or warranty which addresses matters as of a particular date,
or (ii) as to all other representations and warranties, as of the date of the
Agreement and as of the scheduled expiration of the Offer, and with respect to
any representations or warranties not qualified by "Material Adverse Effect,"
unless the inaccuracies under such representations and warranties, taking all
the inaccuracies under all such representations and warranties together in their
entirety, do not, individually or in the aggregate, result in a Material Adverse
Effect on Hi-Lo;
(d) Hi-Lo shall have failed to perform any obligation or to comply with
any agreement or covenant to be performed or complied with by it under the
Agreement other than any failure which would not have, either individually or in
the aggregate, a Material Adverse Effect on Hi-Lo; or
(e) the Agreement shall have been terminated by Hi-Lo or O'Reilly or Sub
in accordance with its terms or O'Reilly or Sub shall have reached an agreement
or understanding in writing with Hi-Lo providing for termination or amendment of
the Offer or delay in payment for the Shares;
which, in the reasonable judgment of O'Reilly and Sub, in any such case, and
regardless of the circumstances giving rise to any such conditions, makes it
inadvis able to proceed with the Offer and/or with such acceptance for payment
of or payment for Shares.
The foregoing conditions (other than the Minimum Condition) are for the
sole benefit of O'Reilly and Sub and, subject to the Merger Agreement, may be
asserted by O'Reilly or Sub regardless of the circumstances giving rise to such
condition or may be waived by O'Reilly or Sub in whole or in part at any time
and from time to time in its sole discretion. The failure by O'Reilly or Sub at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right, and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.
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