EXHIBIT 10.11
LETTER OF CREDIT AND
REIMBURSEMENT AGREEMENT
by and among
ADVANCE STORES COMPANY, INCORPORATED,
ADVANCE HOLDING CORPORATION
and
FIRST UNION NATIONAL BANK
Dated as of December 1, 1997
INDEX
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Page
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ARTICLE I DEFINITIONS.................................................... 2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE BORROWERS ............... 13
Section 2.1 Organization and Good Standing ................ 13
Section 2.2. Corporate and Governmental Authorization;
Contravention ................................. 13
Section 2.3. Binding Effect ................................ 13
Section 2.4. Financial Information ......................... 13
Section 2.5. Litigation .................................... 14
Section 2.6. ERISA ......................................... 14
Section 2.7. Taxes ......................................... 14
Section 2.8. Subsidiaries .................................. 14
Section 2.9. Investment Company Act ........................ 14
Section 2.10. Ownership of Property; Liens .................. 14
Section 2.11. No Default .................................... 14
Section 2.12. Full Disclosure ............................... 15
Section 2.13. Representations Upon Requests for Advances .... 15
Section 2.14. Use of Proceeds: Margin Stock ................. 15
Section 2.15. Insider ....................................... 15
Section 2.16. Environmental ................................. 16
Section 2.17. Survival of Representations and Warranties .... 16
ARTICLE III REIMBURSEMENT AND OTHER PAYMENTS .............................. 17
Section 3.1. Letter of Credit .............................. 17
Section 3.2. Reimbursement and Other Payments .............. 17
Section 3.3. Tender Advances ............................... 17
Section 3.4. [Intentionally Left Blank] .................... 19
Section 3.5. Commission and Fees ........................... 19
Section 3.6. Increased Costs Due to Change in Law .......... 19
Section 3.7. Computation ................................... 19
Section 3.8. Payment Procedure ............................. 20
Section 3.9. Business Days ................................. 20
Section 3.10. Reimbursement of Expenses ..................... 20
Section 3.11. Extension of Expiration Date .................. 20
Section 3.12. Obligations Absolute .......................... 20
ARTICLE IV INSURANCE; NET PROCEEDS ....................................... 22
Section 4.1. Insurance ..................................... 22
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Section 4.2. Application of Net Proceeds of Insurance
and Eminent Domain ............................. 22
ARTICLE V AFFIRMATIVE COVENANTS ......................................... 23
Section 5.1. Financial Statements, Reports and Documents .... 23
Section 5.2. Maintenance of Existence ....................... 24
Section 5.3. Notice of Default .............................. 24
Section 5.4. Inspection of Property, Books and Records ...... 24
Section 5.5. Compliance with Laws;
Payment of Taxes ............................... 25
Section 5.6. Maintenance of Property ........................ 25
Section 5.7. Environmental Matters .......................... 25
Section 5.8 Certificate of Occupancy ....................... 25
ARTICLE VI NEGATIVE COVENANTS ............................................ 26
Section 6.1. Negative Pledge ................................ 26
Section 6.2. Ratio of Consolidated Funded Debt to
Total Capitalization ........................... 26
Section 6.3. Minimum Consolidated Tangible Net Worth ........ 26
Section 6.4. Ratio of Consolidated Current Assets ........... 26
Section 6.5. Fixed Charge Coverage .......................... 26
Section 6.6. Accounting Method .............................. 26
Section 6.7. Loans or Advances .............................. 26
Section 6.8. Dissolution .................................... 27
Section 6.9. Consolidations, Mergers and Sales of Assets .... 27
Section 6.10. Acquisitions ................................... 27
Section 6.11. Dividends ...................................... 27
ARTICLE VII CONDITIONS TO ISSUANCE OF LETTER OF CREDIT .................... 28
Section 7.1. Conditions on Issuance ......................... 28
Section 7.2. Additional Conditions Precedent to
Issuance of the Letter of Credit ............... 28
Section 7.3. Conditions Precedent to Each Tender Advance .... 29
ARTICLE VIII DEFAULT ....................................................... 30
Section 8.1. Events of Default .............................. 30
Section 8.2. No Remedy Exclusive ............................ 32
Section 8.3. Anti-Marshaling Provisions ..................... 32
ARTICLE IX MISCELLANEOUS ................................................. 33
Section 9.1. Indemnification ................................ 33
Section 9.2. Transfer of Letter of Credit ................... 34
Section 9.3. Reduction of Letter of Credit .................. 34
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Section 9.4. Liability of the Bank .......................... 34
Section 9.5. Successors and Assigns ......................... 35
Section 9.6. Notices ........................................ 35
Section 9.7. Amendment ...................................... 35
Section 9.8. Effect of Delay and Waivers .................... 35
Section 9.9. Counterparts ................................... 36
Section 9.10. Severability ................................... 36
Section 9.11. Cost of Collection ............................. 36
Section 9.12. Set Off ........................................ 36
Section 9.13. Governing Law .................................. 36
Section 9.14. References ..................................... 36
Section 9.15. Taxes, Etc ..................................... 36
Section 9.16. Consent to Jurisdiction, Venue;
Waiver of Jury Trial ........................... 37
Section 9.17 Assignment and Pledge of Agreement ............. 37
Exhibit A - Irrevocable Letter of Credit Relating to the Bonds
Exhibit B - Form of Opinion of Counsel to the Borrowers
Exhibit C - Litigation
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LETTER OF CREDIT AND
REIMBURSEMENT AGREEMENT
THIS AGREEMENT, dated as of December 1, 1997, by and among ADVANCE STORES
COMPANY, INCORPORATED, a Virginia corporation (the "Company"), ADVANCE HOLDING
CORPORATION, a Virginia corporation (the "Parent", and together with the
Company, the "Borrowers") and FIRST UNION NATIONAL BANK, a national banking
association organized and existing under the laws of the United States with an
office located at Roanoke, Virginia (the "Bank");
W I T N E S S E T H:
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WHEREAS, arrangements have been made pursuant to a Trust Indenture of even
date herewith (the "Indenture") between the Development Authority of McDuffie
County (the "Issuer"), Branch Banking and Trust Company, as credit facility
trustee (the "Credit Facility Trustee") and First Union National Bank, Richmond,
Virginia, as trustee (the "Trustee") for the issuance and sale by the Issuer of
its Taxable Industrial Development Revenue Bonds (Advance Stores Company,
Incorporated Project), Series 1997 in the aggregate principal amount of
$10,000,000 (the "Bonds"); and
WHEREAS, the proceeds from the sale of the Bonds will be used to finance,
in whole or in part, the cost of the acquisition, construction, installation and
equipping of an industrial facility to be located in McDuffie County, Georgia
(the "Project");
WHEREAS, the proceeds of the Bonds will be made available to the Company
pursuant to a Lease Agreement of even date herewith between the Issuer and the
Company (the "Lease Agreement"); and
WHEREAS, in order to enhance the marketability of the Bonds, the Borrowers
have requested that the Bank issue an irrevocable direct pay letter of credit in
the form attached hereto as Exhibit "A" (such letter of credit or any successor
or substitute letter of credit issued by the Bank herein called the "Letter of
Credit") in an aggregate amount not exceeding $10,201,370 of which (a)
$10,000,000 shall support the payment of principal or portion of the purchase
price corresponding to principal of the Bonds and (b) $201,370 shall support the
payment of up to 49 days interest or portion of the purchase price corresponding
to interest on the Bonds at an assumed interest rate of 15% per annum;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, including the covenants, terms and conditions
hereinafter appearing, and to induce the Bank to issue the Letter of Credit, the
Borrowers do hereby covenant and agree with the Bank as follows:
ARTICLE I
DEFINITIONS
All words and terms defined in Article I of the Lease Agreement shall have
the same meanings in this Agreement, unless otherwise specifically defined
herein. The terms defined in this Article I have, for all purposes of this
Agreement, the meanings specified hereinabove or in this Article, unless defined
elsewhere herein or the context clearly requires otherwise.
1.1. "Accountant" means an independent certified public accountant or a
firm thereof as approved by the Borrowers. Initially, the Borrowers have
designated and approved Arthur Andersen & Co. as the Accountant.
1.2. "Affiliate" means any other Person directly or indirectly,
controlling, controlled by, or under common control with, the first Person; or
any other Person which directly or indirectly owns or controls at least five
percent (5%) of the Voting Stock, partnership or other equity interests of, or
at least five percent (5%) of its Voting Stock, partnership or other equity
interests are owned or controlled by, directly or indirectly, the first Person.
1.3. "Agreement" means this Letter of Credit and Reimbursement Agreement,
as the same may from time to time be amended, modified or supplemented in
accordance with the terms hereof.
1.4. "Alternate Credit Facility" means any irrevocable direct pay letter
of credit, insurance policy or similar credit enhancement or support facility
for the benefit of the Trustee, the terms of which Alternate Credit Facility
shall in all respects material to the registered owners of the Bonds be the same
(except for the term set forth in such Alternate Credit Facility) as those of
the Letter of Credit.
1.5. "Bank" means First Union National Bank, a national banking
association.
1.6. "Bankruptcy Code" means 11 U.S.C. (S) 101 et seq., as amended.
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1.7. "Bondholder" or "Bondholders" means the initial and any future
registered owners of the Bond or Bonds as registered on the books and records of
the Bond Registrar pursuant to Section 2.4 of the Indenture.
1.8. "Bond Documents" means, collectively, the Lease Agreement, the
Security Instruments, the Indenture, the Bonds, the Remarketing Agreement, the
Tender Agency Agreement, the Private Placement Memorandum and the Placement
Letter, as the same may be amended, modified or supplemented from time to time
in accordance with their respective terms.
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1.9. "Bonds" means the Development Authority of McDuffie County Taxable
Industrial Development Revenue Bonds (Advance Stores Company, Incorporated
Project), Series 1997, in the original aggregate principal amount of
$10,000,000.
1.10. "Borrowers" mean the Company and the Parent.
1.11. "Capital Stock" means any capital stock of the Parent or any
Consolidated Subsidiary (to the extent issued to a Person other than the
Parent), whether common or preferred.
1.12. "CERCLA" means Comprehensive, Environmental, Response, Compensation
and Liability Act of 1980, as amended from time to time, and all rules and
regulations from time to time promulgated thereunder.
1.13. "Code" means the Internal Revenue Code of 1986, as amended.
1.14. "Closing Date" means the date of issuance of the Bonds.
1.15. "Consistent Basis" means, in reference to the application of GAAP
applied on a basis consistent with that of the preceding year, that the
accounting principles observed in the period referred to are comparable in all
material respects to those applied in the preceding period, except as to any
changes consented to by the Bank.
1.16. "Company" means Advance Stores Company, Incorporated, a Virginia
corporation, and its successors and assigns.
1.17. "Consolidated Current Assets" and "Consolidated Current Liabilities"
mean, at any time, all assets or liabilities, respectively, of the Parent and
its Consolidated Subsidiaries that, in accordance with GAAP on a Consistent
Basis, should be classified as current assets or current liabilities,
respectively, on a consolidated balance sheet of the Parent and its Consolidated
Subsidiaries.
1.18. "Consolidated Fixed Charges" for any period means the sum of (i)
Consolidated Interest Expense for such period, and (ii) all payment obligations
of the Parent and its Consolidated Subsidiaries for such period under all
operating leases and rental agreements on any of the Properties.
1.19. "Consolidated Funded Debt" means at any date, without duplication,
all short-term obligations for borrowed money, all long-term obligations for
borrowed money, all private placement debt and all capital leases made in
connection with industrial development bond financings of the Parent or any of
its Consolidated Subsidiaries.
1.20. "Consolidated Interest Expense" for any period means interest,
whether expensed or capitalized, in respect of Debt of the Parent or any of its
Consolidated
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Subsidiaries outstanding during such period.
1.21. "Consolidated Liabilities" means the sum of all liabilities that, in
accordance with GAAP on a Consistent Basis, should be classified as liabilities
on a consolidated balance sheet of the Parent and its Consolidated Subsidiaries.
1.22. "Consolidated Net Income" means, for any period, the Net Income of
the Parent and its Consolidated Subsidiaries determined on a consolidated basis
in accordance with GAAP, but excluding (i) extraordinary items and (ii) any
equity interests of the Parent or any Subsidiary in the unremitted earnings of
any Person that it not a Subsidiary.
1.23. "Consolidated Operating Profits" means, for any period, the
Operating Profits of the Parent and its Consolidated Subsidiaries determined on
a consolidated basis in accordance with GAAP.
1.24. "Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which, in accordance with GAAP, would be consolidated
with those of the Parent in its consolidated financial statements as of such
date.
1.25. "Consolidated Tangible Net Worth" means, at any time, Stockholder's
Equity, less the sum of the value, as set forth or reflected on the most recent
consolidated balance sheet of the Parent and its Consolidated Subsidiaries,
prepared in accordance with GAAP on a Consistent Basis, of
(A) Any surplus resulting from any write-ups of assets subsequent to
December 31, 1994;
(B) All assets which would be treated as intangibles under GAAP,
including without limitation goodwill (whether representing the excess of
cost over book value of assets acquired, or otherwise), trademarks, trade
names, copyrights, patents and technologies, and unamortized debt discount
and expense;
(C) To the extent not included in (B) of this Section, any amount at
which shares of capital stock of the Parent appear as an asset on the
balance sheet of the Parent and its Consolidated Subsidiaries; and
(D) To the extent not included in (B) of this Section, deferred
expenses.
1.26. "Consolidated Total Assets" means, at any time, the total assets of
the Parent and its Consolidated Subsidiaries, determined on a consolidated
basis, as set forth or reflected on the most recent consolidated balance sheet
of the Parent and its Consolidated Subsidiaries, prepared in accordance with
GAAP on a Consistent Basis.
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1.27. "Controlled" or "controlling" or "under common control with" means,
with respect to any Person, the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of Voting
Stock, by agreement or otherwise.
1.28. "Controlled Group" means (i) the controlled group of corporations as
defined in Section 1563 of the Code, or (ii) the group of trades or businesses
under common control as defined in Section 414(c) of the Code, of which the
Borrowers are a part or may become a part.
1.29. "Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee under capital leases in
connection with industrial development revenue bonds, (v) all obligations of
such Person to reimburse any bank or other Person in respect of amounts payable
under a banker's acceptance, (vi) all obligations of such Person to reimburse
any bank or other Person in respect of amounts paid under a letter of credit or
similar instrument, (vii) all Debt of others secured by a Lien on any asset of
such Person, whether or not such Debt is assumed by such Person, to the extent
of the fair market value of such assets and (viii) all Debt of others Guaranteed
by such Person to the extent of the Debt which has been Guaranteed; provided,
however, the term "Debt" shall not include trade indebtedness of the Company.
1.30. "Debtor Laws" means all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization,
fraudulent transfer or similar laws from time to time in effect affecting the
rights of creditors generally and general principles of equity.
1.31. "Default" means an event or condition the occurrence of which would,
with the lapse of time or the giving of notice, or both become an Event of
Default.
1.32. "Environmental Claim" means any accusation, allegation, notice of
violation, claim, demand, abatement order, or other order or direction
(conditional or otherwise) by any governmental authority or any Person for any
damage, including, without limitation, personal injury (including sickness,
disease, or death), tangible or intangible property damage, contribution,
indemnity, direct or consequential damages, damage to the environment, nuisance,
pollution, contamination, or other adverse effects on the environment, or for
fines, penalties, or restrictions, in each case relating to, resulting from, or
in connection with Hazardous Materials and relating to the Borrowers, or any
property leased, owned, operated, or used by the Borrowers.
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1.33. "Environmental Laws" means any and all federal, state, local, or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, or requirements of any governmental authority regulating, relating to
or imposing liability or standards of conduct concerning, any Hazardous
Materials or environmental protection or health and safety, as now or may at any
time hereafter be in effect, including without limitation: the Clean Water Act
also known as the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C.
Section 1251 et seq.; the Clean Air Act ("CAA"), 42 U.S.C. Section 7401 et seq.;
-- --- -- ---
the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), 7 U.S.C.
Section 136 et seq.; the Surface Mining Control and Reclamation Act ("SMCRA"),
-- ---
30 U.S.C. Section 1201 et seq.; the Comprehensive Environmental Response,
-- ---
Compensation, and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq.; the
-- ---
Superfund Amendment and Reauthorization Act of 1986 ("SARA"), Public Law 99-499,
100 Stat. 1613; the Emergency Planning and Community Right to Know Act
("ECPCRKA"), 42 U.S.C. Section 11001 et seq.; the Resource Conservation and
-- ---
Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et seq.; and the Occupational
-- ---
Safety and Health Act as amended ("OSHA"), 29 U.S.C. Section 655 and Section
657; together, in each case, with any amendment thereto, and the regulations
adopted and publications promulgated thereunder and all substitutions thereof.
1.34. "ERISA" means the Employee Retirement Income Security Act of 1974,
as it may be amended from time to time, and all regulations promulgated under
that Act.
1.35. "Event of Default" has the meaning specified in Section 8.1 hereof.
1.36. "Fiscal Quarter" means any fiscal quarter of the Parent.
1.37. "Fiscal Year" means any fiscal year of the Parent.
1.38. "Generally Accepted Accounting Principles" or "GAAP" means those
generally accepted accounting principles and practices which are recognized as
such by the American Institute of Certified Public Accountants acting through
its Accounting Principles Board or the Financial Accounting Standards Board or
through other appropriate boards or committees thereof and which are
consistently applied for all periods after the date hereof so as to reflect the
financial condition, results of operations and changes in financial position of
any Person, except that any accounting principle or practice required to be
changed by such Accounting Principles Board or Financial Accounting Standards
Board (or other appropriate board or committee of such Boards) in order to
continue as a generally accepted accounting principle or practice may so be
changed, as provided in Section 1.02(c) thereof. After any change in GAAP that
affects any covenants of this Agreement, the Bank and the Borrowers will
negotiate in good faith to revise those covenants in order to make them
consistent with GAAP then in effect.
1.39. "Governmental Authority" means any government (or any political
subdivision or jurisdiction thereof), court, bureau, agency, department or other
governmental
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subdivision having jurisdiction over the Borrowers, any Affiliate of the
Borrowers or any of their respective businesses, operations or properties.
1.40. "Guarantee" of any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of ) such Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or other services, to provide collateral security, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the obligee of such
Debt or other obligation of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part), provided that the term
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Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has the
corresponding meaning.
1.41. "Hazardous Materials" means any flammable materials, explosives,
radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic
substances, or similar materials defined as such in any Environmental Claim.
1.42. "Income Available for Fixed Charges" for any period means the sum of
(i) Consolidated Net Income, (ii) taxes on income and (iii) Consolidated Fixed
Charges, all determined with respect to the parent and its Consolidated
Subsidiaries on a consolidated basis for such period and in accordance with GAAP
on a Consistent Basis.
1.43. "Indemnities" has the meaning assigned in Section 9.1 hereof.
1.44. "Indemnified Matters" has the meaning assigned in Section 9.1
hereof.
1.45. "Indenture" means the Trust Indenture, dated as of December 1, 1997,
among the Issuer, the Credit Facility Trustee and the Trustee, as from time to
time supplemented and amended.
1.46. "Lease Agreement" means that Lease Agreement, dated as of December
1, 1997 between the Issuer and the Company, as supplemented and amended from
time to time.
1.47. "Letter of Credit" means the Letter of Credit, dated December 31,
1997 issued by the Bank relating to the Bonds for the account of the Borrowers
pursuant hereto and the Bond Documents.
1.48. "Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For purposes of this
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Agreement, the Borrowers or any Subsidiary shall be deemed to own subject to a
Lien any asset which they have acquired or hold subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
1.49. "Material Adverse Effect" means any (i) material adverse effect upon
the validity, performance or enforceability of this Agreement or any of the
Security Instruments or any of the transactions contemplated hereby or thereby,
(ii) material adverse effect upon the properties, business, prospects or
condition financial or otherwise) of the Borrowers, or (iii) material adverse
effect upon the ability of the Borrowers or any other Person to fulfill any
obligation under this Agreement or any of the Security Instruments.
1.50. "Multiemployer Plan" means the multiemployer plan as set forth in
Section 4001(a)(3) of ERISA.
1.51. "Obligations" means all loans and all other advances, debts,
liabilities, obligations, covenants and duties owing, arising, due or payable
from the Borrowers to the Bank, whether or not evidenced by any note, guaranty
or other instrument, whether arising under this Agreement or any of the other
Bond Documents or Security Instruments or otherwise, whether direct or indirect
(including those acquired by assignment), joint, several, absolute or
contingent, primary or secondary, due or to become due, now existing or
hereafter arising and however acquired. The term includes, without limitation,
all interest, charges, expenses, fees, attorney's fees and any other sums
chargeable to the Borrowers under any of the Bond Documents or Security
Instruments.
1.52. "Parent" means Advance Holding Corporation, a Virginia corporation,
and its successors and assigns.
1.53. "PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or any of the Pension Benefit Guaranty Corporation's functions
under ERISA.
1.54. "Permitted Encumbrances" means (i) any Lien existing on any asset of
any corporation at the time such corporation becomes a Consolidated Subsidiary
and not created in contemplation of such event; (ii) any Lien on any asset
securing Debt incurred or assumed for the purpose of financing all or any part
of the cost of acquiring or constructing such asset, provided that such Lien
attaches to such asset concurrently with or within 18 months after the
acquisition or completion of construction thereof; (iii) any Lien on any asset
of any corporation existing at the time such corporation is merged or
consolidated with or into the Parent or a Consolidated Subsidiary and not
created in contemplation of such event; (iv) any Lien existing on any asset
prior to the acquisition thereof by the Parent or a Consolidated Subsidiary and
not created in contemplation of such event; (v) Liens securing Debt owing by any
Subsidiary to the Parent; (vi) any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt secured by any Lien permitted by any
of the foregoing clauses of this Section, provided that (a) such Debt
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is not secured by any additional assets, and (b) the amount of such Debt secured
by any such Lien is not increased; (vii) Liens incidental to the conduct of the
Borrowers' businesses or the ownership of their assets which (a) do not secure
Debt and (b) do not in the aggregate materially detract from the value of their
assets or materially impair the use thereof in the operation of their
businesses; (viii) any Lien on Margin Stock; and (ix) Liens not otherwise
permitted by the foregoing clauses of this Section securing Debt (other than
indebtedness represented hereunder) in an aggregate principal amount at any time
outstanding not to exceed 10% of Consolidated Tangible Net Worth.
1.55. "Person" means an individual, partnership, corporation, trust,
unincorporated organization, association, joint venture or a government or
agency or political subdivision or instrumentality thereof.
1.56. "Placement Letter" means the Placement Agent Agreement, dated
December 31, 1997 by and among the Company, the Issuer and First Union National
Bank, Charlotte, North Carolina, as Placement Agent for the Bonds.
1.57. "Plan" means an employee benefit plan or other plan maintained for
employees of the Borrowers and covered by Title IV of ERISA, or subject to the
minimum funding standards under Section 412 of the Code and is either (i)
maintained by a member of the Controlled Group or (ii) maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contribution and to which a member of the Controlled Group is
then making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions.
1.58. "Pledge Agreement" means the Pledge Agreement dated as of even date
herewith from the Company to the Bank relating to the Bonds.
1.59. "Private Placement Memorandum" means the Private Placement
Memorandum dated December 31, 1997 relating to the Bonds.
1.60. "Prohibited Transaction" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended
from time to time.
1.61. "Project" shall mean the financing, in whole or in part, of the
acquisition, construction, installation and equipping of an industrial facility
to be located in McDuffie County. Georgia.
1.62. "Project Fund" means the trust fund so designated and established
under the Indenture.
1.63. "Property" or "Properties" means all real property owned, leased or
otherwise used or occupied by the Borrowers or any Subsidiary, wherever located.
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1.64. "RCRA" means the Resource Conservation and Recovery Act, as amended
from time to time, and all rules and regulations from time to time promulgated
thereunder.
1.65. "Release" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching, or migration of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, the abandonment or disposal of any
barrels, containers, or other closed receptacles containing any Hazardous
Materials), or into or out of any property owned, leased, operated, or used by
the Borrowers or any subsidiaries (if any), including the movement of any
Hazardous Material through the air, soil, surface water, groundwater, or
property.
1.66. "Remarketing Agreement" means the Remarketing Agreement, dated as of
December 1, 1997, by and between the Company and First Union National Bank, as
Remarketing Agent, as supplemented and amended from time to time.
1.67. "Reportable Event" means any of the events set forth in Section
4043(b) of Title V of ERISA.
1.68. "SARA" means the Superfund Reauthorization and Amendments Act of
1986, as amended from time to time, and all rules and regulations promulgated
thereunder.
1.69. "Security Instruments" means, collectively, the Pledge Agreement,
any Swap Agreement, and any and all other agreements or instruments relating to
the Project now or hereafter executed and delivered by any of the Borrowers or
any other Person in connection with, or as security for the payment or
performance of, the Letter of Credit or this Agreement or any other obligations
of any of the Borrowers to the Bank as described therein, as such agreements may
be amended, modified or supplemented from time to time in accordance with their
respective terms.
1.70. "Solvent" means, as to any Person, that such Person has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage and is able to pay its debts as they
mature and owns property having a value, both at fair valuation and at present
fair saleable value, greater than the amount required to pay its debts.
1.71. "State" means the State of Georgia.
1.72. "Stated Expiration Date" means November 1, 2000.
1.73. "Stated Termination Date" means November 1, 2000, the expiration
date of the Letter of Credit, as such date may be extended in accordance with
terms of Section 3.11 hereof.
10
1.74. "Stockholders' Equity" means, at any time, the shareholders' equity
of the Parent and its Consolidated Subsidiaries, as set forth or reflected on
the most recent consolidated balance sheet of the Parent and its Consolidated
Subsidiaries prepared in accordance with GAAP on a Consistent Basis,
shareholders' equity would generally include, but not limited to (i) the par or
stated value of all outstanding Capital Stock, (ii) capital surplus, (iii)
retained earnings, and (iv) various deductions such as (A) purchases of treasury
stock, (B) valuation allowances, (C) receivables due from an employee stock
ownership plan, (D) employee stock ownership plan debt guarantees, and (E)
translation adjustments for foreign currency transactions.
1.75. "Subsidiary" means any corporation, more than fifty percent (50%) of
the outstanding Voting Stock of which is at the time, directly or indirectly,
owned by the Borrowers and/or one or more Subsidiaries (irrespective of whether,
at the time, capital stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency).
1.76. "Swap Agreement" means (A) an agreement (including teams and
conditions incorporated by reference therein) which is a rate swap agreement,
basis swap, forward rate agreement, commodity swap, interest rate option,
forward foreign exchange agreement, spot foreign exchange agreement, rate cap
agreement, rate floor agreement, rate collar agreement, currency swap agreement,
cross-currency rate swap agreement, currency option, any other similar agreement
(including any option to enter into any of the foregoing); (B) any combination
of the foregoing; or (C) a master agreement for any of the forgoing together
with all supplements.
1.77. "Tender Advance" has the meaning assigned to that term in Section
3.3 of this Agreement.
1.78. "Tender Agency Agreement" means the Tender Agency Agreement dated as
of December 1, 1997 by and between the Company and the Trustee, as Tender Agent,
as amended, from time to time thereunder.
1.79. "Tender Draft" has the meaning assigned to that term in the Letter
of Credit.
1.80. "Termination Date" means the last day a drawing is available under
the Letter of Credit.
1.81. "Total Capitalization" means at any date the sum of Consolidated
Funded Debt plus Consolidated Tangible Net Worth.
1.82. "Trustee" means any Person or group of Persons at the time serving
as trustee under the Indenture.
11
1.83. "UCC" means the Uniform Commercial Code in effect in jurisdictions
where assets of the Borrowers are located at anytime during the term hereof, as
the same may be amended from time to time.
1.84. "Voting Stock" of any corporation means shares of any class or
classes (however designated) of capital stock of such corporation having
ordinary voting power for the election of at least a majority of the members of
the board of directors (or other governing bodies) of such corporation, other
than shares having such power only by reason of the happening of a contingency.
12
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
The Borrowers represent and warrant to the Bank (which representations and
warranties shall survive the delivery of the documents mentioned herein and the
issuance of the Letter of Credit) that:
Section 2.1. Organization and Good Standing. The Borrowers are each a
------------------------------
Virginia corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of their incorporation, are each duly qualified to
transact business in every jurisdiction where, by the nature of its business,
such qualification is necessary, and each has all corporate powers and
governmental licenses, authorizations, consents and approvals required to carry
on their businesses as now conducted.
Section 2.2. Corporate and Governmental Authorization; Contravention.
-------------------------------------------------------
The execution, delivery and performance by the Borrowers of this Agreement, the
Security Instruments and Bond Documents to which the Borrowers are a party, (i)
are within the Borrowers' corporate powers, (ii) have been duly authorized by
all necessary corporate action, (iii) require no action by or in respect of, or
filing with, any governmental body (except for the validation of the Bonds),
agency or official, (iv) do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the certificate of incorporation
or by-laws of the Borrowers or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Borrowers or any of their
Subsidiaries, and (v) do not result in the creation or imposition of any Lien on
any asset of the Borrowers or any of their Subsidiaries.
Section 2.3. Binding Effect. This Agreement, the Bond Documents and
--------------
Security Instruments to which the Borrowers are a party constitute valid and
binding agreements of the Borrowers enforceable in accordance with their terms,
provided, that the enforceability hereof and thereof are limited by Debtor Laws.
Section 2.4. Financial Information. (a) The consolidated balance sheet
---------------------
of the Parent and its Consolidated Subsidiaries as of December 28, 1996 and the
related consolidated statements of income, shareholders' equity and cash flows
for the Fiscal Year then ended, reported by the Accountant, copies of which have
been delivered to the Bank, fairly present, in conformity with GAAP, the
consolidated financial position of the Parent and its Consolidated Subsidiaries
as of such date and their consolidated results of operations and cash flows for
such Fiscal Year.
(b) Since the date of the financial statements referred to above, there has
been no Material Adverse Change in the business, financial position, results of
operations or prospects of the Parent and its Consolidated Subsidiaries.
13
Section 2.5. Litigation. Except as disclosed in Exhibit C attached
----------
hereto, there is no action, suit or proceeding pending, or to the knowledge of
the Borrowers threatened, against or affecting the Borrowers or any of their
Subsidiaries before any court or arbitrator or any governmental body, agency or
official which could have a Material Adverse Effect on the business,
consolidated financial position or consolidated results of operations of the
Parent and its Consolidated Subsidiaries, considered as a whole.
Section 2.6. ERISA. (a) Except as previously disclosed in writing to the
-----
Bank, the Borrowers and each member of the Controlled Group have fulfilled their
obligations under minimum funding standards of ERISA and the Code with respect
to each Plan and are in compliance in all material respects with the presently
applicable provisions of ERISA and the Code, and have not incurred any liability
to the Pension Benefit Guaranty Corporation (or any successor thereto)
established under ERISA or a Plan under Title IV of ERISA.
(b) Neither the Borrowers nor any member of the Controlled Group is or ever
has been obligated to contribute to any Multiemployer Plan.
Section 2.7. Taxes. There have been filed on behalf of the Borrowers and
-----
its Subsidiaries all federal, state and local income and other tax returns which
are required to be filed by them and all taxes due pursuant to such returns or
pursuant to any assessment received by or on behalf of the Borrowers or any
Subsidiary have been paid. The charges, accruals and reserves on the books of
the Borrowers and their subsidiaries in respect of taxes or other governmental
charges are, in the opinion of the Borrowers, adequate.
Section 2.8. Subsidiaries. Each of the Borrowers' Subsidiaries is a
------------
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, and has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
Section 2.9. Investment Company Act. The Borrowers are not an
----------------------
"investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended, and is not controlled by such
company.
Section 2.10. Ownership of Property, Liens. Each of the Parent and its
----------------------------
Consolidated Subsidiaries has title to its Properties sufficient for the conduct
of its business, and none of such Property is subject to any Lien except for
Permitted Liens.
Section 2.11. No Default. Except as previously disclosed in writing to the
----------
Bank, neither the Parent nor any of its Consolidated Subsidiaries is in default
under or with respect to any agreement, instrument or undertaking to which it is
a party or by which it or any of its property is bound which will have a
Material Adverse Effect to the business, operations, property or financial or
other condition of the Parent or any of its Consolidated Subsidiaries,
considered as a whole, or which will have a Material Adverse Effect to the
14
Company to perform its obligations under the Bond Documents. No Default has
occurred and is continuing.
Section 2.12. Full Disclosure. There is no material fact which is known
---------------
or which should be known by the Borrowers or any Affiliate that the Borrowers
have not disclosed to the Bank which could have a Material Adverse Effect.
Neither this Agreement nor any agreement, document, certificate or statement
delivered by the Borrowers or any Affiliate of the Borrowers to the Bank,
contains any untrue statement of a material fact or omits to state any material
fact which is known or which should be known by the Borrowers necessary to keep
the other statements from being misleading.
Section 2.13. Representations Upon Requests for Advances. Every draw
------------------------------------------
under the Letter of Credit shall constitute, without the necessity of
specifically containing a written statement, a representation and warranty by
the Borrowers that no Default or Event of Default exists and that all
representations and warranties by the Borrowers contained in this Agreement, the
Bond Documents and Security Instruments are true and correct as of the date the
advance is to be made.
Section 2.14. Use of Proceeds: Margin Stock. The proceeds of the Bonds
-----------------------------
will be used by the Borrowers only for the purposes set forth herein and in the
Bond Documents. The Borrowers' uses of the proceeds are, and continue to be,
legal and proper corporate uses, and the uses are and will be consistent with
all applicable laws and regulations, as in effect from time to time. None of
the proceeds of the Bonds will be used for the purpose of purchasing or carrying
any "margin stock" as defined in Regulation U, Regulation X, or Regulation G of
the Code of Federal Regulations, Parts 221, 224 and 207, respectively, or for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry "margin stock," or for any other purpose which
might cause this transaction to be deemed a "purpose credit" within the meaning
of Regulation U, Regulation X or Regulation G. The Borrowers are not engaged in
the business of extending credit for the purpose of purchasing or carrying
margin stocks. The Borrowers, or any Person acting on behalf of the Borrowers,
have not taken or will take any action which might cause any violation of
Regulation U, Regulation X, or Regulation G or any other regulations of the
Board of Governors of the Federal Reserve System or any violation of Section 8
of the Securities Exchange Act of 1934 or any rule or regulation thereunder as
now or hereafter in effect.
Section 2.15. Insider. The Borrowers are not, and no Person having
-------
"control" (as that term is defined in 12 U.S.C. (S) 375(b)(5) or in regulations
promulgated pursuant thereto) of such Person is, an "executive officer",
"director", or "principal shareholder" (as those terms are defined in 12 U.S.C.
(S) 375(b) or in regulations promulgated pursuant thereto) of the Bank, of a
bank holding COMPANY of which the Bank is a subsidiary, or of any subsidiary of
a bank holding COMPANY of which the Bank is a subsidiary, or of any bank at
which the Bank maintains a "correspondent account" (as such term is defined in
15
such statute or regulations), or of any bank which maintains a correspondent
account with the Bank.
Section 2.16. Environmental. Except as previously disclosed in writing to
-------------
the Bank, the Borrowers and their Subsidiaries are to the best of their
knowledge, in compliance with the provisions of the Environmental Laws
Section 2.17. Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties by the Borrowers shall survive delivery of this
Agreement, the Bond Documents and the Security Instruments. Any investigation
at any time made by or on behalf of the Bank will not diminish the Bank's right
to rely on the representations and warranties.
16
ARTICLE III
REIMBURSEMENT AND OTHER PAYMENTS
Section 3.1. Letter of Credit. The Bank agrees, on the terms and
----------------
conditions hereinafter set forth, to issue and deliver the Letter of Credit in
favor of the Credit Facility Trustee in substantially the form of Exhibit A
---------
attached hereto upon fulfillment of the applicable conditions set forth in
Article VII hereof. The Bank agrees that any and all payments under the Letter
of Credit will be made with the Bank's own funds.
Section 3.2. Reimbursement and Other Payments. Except as otherwise
--------------------------------
provided in Section 3.3 below, the Borrowers shall pay to the Bank:
(a) on or before 3:00 P.M. (prevailing Eastern time), but after the
honoring of a draw by the Bank, on the date that any amount is drawn under
the Letter of Credit, a sum together with interest on such sum equal to
such amount so drawn under the Letter of Credit, plus to the extent
permitted by applicable law, any and all reasonable charges and expenses
that the Bank may pay or incur relative to the Letter of Credit which have
not been previously paid by or on behalf of the Borrowers; provided,
further, the Borrowers and the Bank acknowledge that such amounts due under
this subparagraph (a) shall be due and payable and subject to interest
thereon (at a fluctuating interest rate per annum equal at all times to the
rate applicable to the Bonds plus two percent (2%) even though no Event of
Default has occurred under Section 8.1 hereof;
(b) on demand, interest on any and all amounts remaining unpaid by the
Borrowers when due hereunder from the date such amounts become due until
payment thereof in full, at a fluctuating interest rate per annum equal at
all times to the rate applicable to the Bonds plus two percent (2%);
(c) on demand, any and all reasonable expenses incurred by the Bank in
enforcing any rights under this Agreement and the other Security
Instruments which have not been previously paid by or on behalf of the
Borrowers; and
(d) on demand all charges, commissions, costs and expenses set forth
in Sections 3.4, 3.5 and 3.9 hereof which have not been previously paid by
or on behalf of the Borrowers.
Section 3.3. Tender Advances.
---------------
(a) If the Bank shall make any payment of that portion of the purchase
price corresponding to principal and interest of the Bonds drawn under the
Letter of Credit pursuant to a Tender Draft and the conditions set forth in
Section 7.3 shall have been fulfilled, such payment shall constitute a tender
advance made by the Bank to the
17
Borrowers on the date and in the amount of such payment (a "Tender Advance");
provided that if the conditions of said Section 7.3 have not been fulfilled, the
amount so drawn pursuant to the Tender Draft shall be payable in accordance with
the terms of Section 3.2(a) above. Notwithstanding any other provision hereof,
the Borrowers shall repay the unpaid amount of each Tender Advance, together
with all unpaid interest thereon, on the earlier to occur of (i) such date as
any Bonds purchased pursuant to a Tender Draft are resold as provided in
paragraph 3.3(d) hereof, (ii) on the date one year and one day following the
date of such Tender Advance, or (iii) the Termination Date. The Borrowers may
prepay the outstanding amount of any Tender Advance in whole or in part,
together with accrued interest to the date of such prepayment on the amount
prepaid. The Borrowers shall notify the Bank prior to 11:00 A.M. (prevailing
Eastern time) on the date of such prepayment of the amount to be prepaid.
(b) The Borrowers shall pay interest on the unpaid amount of each
Tender Advance from the date of such Tender Advance until such amount is paid in
full, payable monthly, in arrears, on the first day of each month during the
term of each Tender Advance and on the date such amount is paid in full, at a
fluctuating interest rate per annum in effect from time to time equal to the
rate applicable to the Bonds, provided that the unpaid amount of any Tender
Advance which is not paid when due shall bear interest at the rate applicable to
the Bonds plus two percent (2%), payable on demand and on the date such amount
is paid in full.
(c) Pursuant to the Pledge Agreement, the Company has agreed that, in
accordance with the terms of the Indenture, Bonds purchased with proceeds of any
Tender Draft shall be delivered by the Tender Agent to the Bank or its designee
(or otherwise in the manner provided in the Pledge Agreement, as applicable) to
be held by the Bank or its designee in pledge as collateral securing the
Borrowers' payment obligations to the Bank hereunder. Bonds so delivered to the
Bank or its designee shall be registered in the name of the Bank, or its
designee, as pledgee of the Company, as provided for in the Pledge Agreement, as
applicable.
(d) Prior to or simultaneously with the resale of Pledged Bonds, the
Borrowers shall prepay the then outstanding Tender Advances (in the order in
which they were made) by paying to the Bank an amount equal to the sum of (a)
the amounts advanced by the Bank pursuant to the corresponding Tender Drafts
relating to such Bonds, plus (b) the aggregate amount of accrued and unpaid
interest on such Tender Advances. Such payment shall be applied by the Bank in
reimbursement of such drawings (and as prepayment of Tender Advances resulting
from such drawings in the manner described below), and, upon receipt by the Bank
of a certificate completed and signed by the Credit Facility Trustee in
substantially the form of Annex F to the Letter of Credit, the Borrowers
irrevocably authorize the Bank to rely on such certificate and to reinstate the
Letter of Credit in accordance therewith. Funds held by the Tender Agent as a
result of sales of the Pledged Bonds by the Remarketing Agent shall be paid to
the Bank by the Tender Agent to be applied to the amounts owing by the Borrowers
to the Bank pursuant to this
18
paragraph (d). Upon payment to the Bank of the amount of such Tender Advance to
be prepaid, together with accrued interest on such Tender Advance to the date of
such prepayment on the amount to be prepaid, the principal amount outstanding of
Tender Advances shall be reduced by the amount of such prepayment and interest
shall cease to accrue on the amount prepaid.
Section 3.4. [Intentionally Left Blank].
--------------------------
Section 3.5. Commission and Fees.
-------------------
(a) The Borrowers shall pay to the Bank a commission at the rate of
.30% per annum on the undrawn amount available to be drawn under the Letter of
Credit (computed on the date that such commission is payable) from and including
the date of issuance of the Letter of Credit until the Stated Termination Date,
payable annually in advance on the date of issuance of the Letter of Credit and
on each anniversary of the issuance of the Letter of Credit, subject to
adjustment upon demand by the Bank due to any event that may increase the cost
to the Bank of issuing or maintaining the Letter of Credit.
(b) The Borrowers shall pay to the Bank, upon each drawing under the
Letter of Credit in accordance with the terms, a fee of $100 per drawing.
(c) The Borrowers shall pay to the Bank, upon transfer of the Letter
of Credit in accordance with its terms, a transfer fee of $1,000.
Section 3.6. Increased Costs Due to Change in Law. In the event of any
------------------------------------
change in any existing or future law, regulation, ruling or other interpretation
affecting the Bank which shall either (a) impose, modify or make applicable any
reserve, special deposit, capital requirement, assessment or similar requirement
against the Letter of Credit or (b) impose on the Bank any other condition
regarding the Letter of Credit, and the result of any event referred to in
clause (a) or (b) above shall be to increase the cost (including a reasonable
allocation of resources) or decrease the yield to the Bank of issuing or
maintaining the Letter of Credit (which increase in cost shall be the result of
the Bank's reasonable allocation of the aggregate of such cost increases or
yield decreases resulting from such events), then, upon demand by the Bank, the
Borrowers shall immediately pay to the Bank, from time to time as specified by
the Bank, additional amounts which shall be sufficient to compensate the Bank
for such increased cost or decreased yield. A statement of charges submitted by
the Bank, shall be conclusive, absent manifest error, as to the amount owed.
Section 3.7. Computation. All payments of interest, commission and other
-----------
charges under this Agreement shall be computed on the per annum basis, based on
a 360-day year days calculated for the actual number of days elapsed.
19
Section 3.8. Payment Procedure. All payments made by the Borrowers under
-----------------
this Agreement shall be made to the Bank in lawful currency of the United States
of America and in immediately available funds at the Bank's offices in Roanoke,
Virginia, or at another location as designated in writing by the Bank to the
Borrowers, before 12:00 Noon (prevailing Eastern time) on the date when due,
except for payments made pursuant to Section 3.2(a).
Section 3.9. Business Days. If the date for any payment hereunder falls
-------------
on a day which is not a Business Day, then for all purposes of this Agreement
the same shall be deemed to have fallen on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of
payments of interest or commission, as the case may be.
Section 3.10. Reimbursement of Expenses. The Borrowers will pay all
-------------------------
reasonable legal fees (computed without regard to any statutory presumption)
incurred by the Bank in connection with the preparation, execution and delivery
of this Agreement, the Letter of Credit, the Security Instruments, any and all
other agreements and transactions contemplated hereby and thereby and by the
Bond Documents (including any amendments hereto or thereto or consents or
waivers hereunder or thereunder) and will also pay all fees, charges or taxes
for the recording or filing of Security Instruments. The Borrowers will also
pay for all reasonable out-of-pocket expenses of the Bank in connection with the
administration of the Letter of Credit, this Agreement and the Security
Instruments consisting of filing fees, if any. The Borrowers will, upon
request, promptly reimburse the Bank for all amounts expended, advanced or
incurred by the Bank to collect or satisfy any obligation of the Borrowers under
this Agreement or any Security Instrument, or to enforce the rights of the Bank
under this Agreement, or any Security Instrument, which amounts will include,
without limitation, all court costs, reasonable attorneys' fees, fees of
auditors and accountants and out-of-pocket investigation expenses incurred by
the Bank in connection with any such matters.
Section 3.11. Extension of Expiration Date. Except as hereinafter
----------------------------
provided, the Letter of Credit will expire on the Stated Expiration Date. The
Letter of Credit shall automatically be extended for an additional one-year
period from the then applicable Stated Termination Date, unless the Bank shall
have notified the Borrowers and the Trustee in writing at least 90 days prior
to the Stated Termination Date that the Bank will not extend such applicable
Stated Termination Date for an additional one-year period from the then
applicable Stated Termination Date.
Section 3.12. Obligations Absolute. The Obligations of the Borrowers
--------------------
under this Agreement shall be joint, several, absolute, unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement, under all circumstances whatsoever, including, without limitation,
the following circumstances:
20
(a) any lack of validity or enforceability of the Letter of Credit,
the Bonds, any of the other Bond Documents, any of the Security Instruments
or any other agreement or instrument related thereto;
(b) any amendment or waiver of or any consent to departure from the
terms of the Letter of Credit, the Bonds, any of the other Bond Documents,
any of the Security Instruments or any other agreement or instrument
related thereto;
(c) the existence of any claim, set off, defense or other right which
either the Borrowers or the Issuer may have at any time against the
Trustee, any beneficiary or any transferee of the Letter of Credit (or any
Person for whom the Trustee, any such beneficiary or any such transferee
may be acting), the Bank or any other Person, whether in connection with
this Agreement, the Security Instruments, the Letter of Credit, the Bond
Documents, the Project or any unrelated transaction;
(d) any statement, draft or other document presented under the Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect, or any statement therein being untrue or inaccurate in any respect
whatsoever;
(e) the surrender, exchange or impairment of any security for the
performance or observance of any of the terms of this Agreement; or
(f) any other circumstance which might otherwise constitute a defense
available to, or a discharge of the Borrowers, except subject to the
qualification that obligations may be reinstated upon bankruptcy,
notwithstanding payment in full of the Borrowers' obligations to the Bank.
21
ARTICLE IV
INSURANCE; NET PROCEEDS
Section 4.1. Insurance. The Borrowers will maintain, and will cause
---------
each of its Subsidiaries to maintain (either in the name of the Borrowers or in
such Subsidiary's own name), with financially sound and reputable insurance
companies, insurance on all its Property in at least such amounts and against at
least such risks as are usually insured against in the same general area by
companies of established repute engaged in the same or similar business.
Section 4.2. Application of Net Proceeds of Insurance and Eminent
----------------------------------------------------
Domain. Except as provided in the Lease Agreement or the Indenture, the Net
- ------
Proceeds of the insurance carried hereunder shall be applied by the Borrowers
toward extinguishment of the defect or claim or satisfaction of the liability
with respect to which such insurance proceeds may be paid. "Net Proceeds" when
used with respect to any insurance proceeds or award resulting from, or other
amount received in connection with, eminent domain, shall mean the gross
proceeds from such proceeds, award or other amount, less all expenses
(including attorneys' fees) incurred in the realization thereof.
22
ARTICLE V
AFFIRMATIVE COVENANTS
Section 5.1. Financial Statements, Reports and Documents. The Borrowers
-------------------------------------------
will deliver the following to the Bank:
(a) Annual Statements. As soon as available and in any event
-----------------
within 120 days after the end of each Fiscal Year, a consolidated balance sheet
of the Parent and its Consolidated Subsidiaries as of the end of such Fiscal
year and the related consolidated statements of income, shareholders' equity and
cash flows for such Fiscal Year, setting forth in each case in comparative form
the figures for the previous Fiscal Year, all certified by the Accountant or
independent public accountants of nationally recognized standing.
As soon as available and in any event within 120 days after the end
of each Fiscal Year, a consolidated balance sheet of the Company and its
consolidated Subsidiaries as of the end of such Fiscal year and the related
consolidated statements of income, shareholders' equity and cash flows for such
Fiscal Year, setting forth in each case in comparative form the figures for the
previous Fiscal Year, all certified by the Accountant or independent public
accountants of nationally recognized standing.
(b) Quarterly Reports. As soon as available and in any event
-----------------
within 45 days after the end of each of the first three quarters of each Fiscal
Year, a consolidated balance sheet of the Parent and its Consolidated
Subsidiaries as of the end of such quarter and the related statements of income
and cash flows for the portion of the Fiscal Year ended at the end of such
quarter setting forth in each case in comparative form the figures for the
corresponding quarter and the corresponding portion of the previous Fiscal Year,
all certified (subject to normal year-end adjustments) as to fairness and
presentation, GAAP and consistency by the chief financial officer or chief
accounting officer of the Parent.
As soon as available and in any event within 45 days after the end
of each of the first three quarters of each Fiscal Year, a consolidated balance
sheet of the Company and its consolidated Subsidiaries as of the end of such
quarter and the related statements of income and cash flows for the portion of
the Fiscal Year ended at the end of such quarter setting forth in each case in
comparative form the figures for the corresponding quarter and the corresponding
portion of the previous Fiscal Year, all certified (subject to normal year-end
adjustments) as to fairness and presentation, GAAP and consistency by the chief
financial officer or chief accounting officer of the Company.
(c) Compliance Certificate. Simultaneously with the delivery of
----------------------
each set of financial statements referred to in clauses (a) and (b) above, a
certificate of the chief financial officer or the chief accounting officer of
the Parent (i) setting forth in reasonable
23
detail the calculations required to establish whether the Parent was in
compliance with the requirements of Sections 6.2 through 6.5 (inclusive) hereof,
on the date of such financial statements and (ii) stating whether any Default or
Event of Default exists on the date of such certificate and, if any Default or
Event of Default then exists, setting forth the details thereof and the action
which the Parent is taking or proposes to take with respect thereto.
(d) Proxy Statements. Promptly upon the mailing thereof to the
----------------
shareholders of the Parent generally, copies of all financial statements,
reports, proxy statement so mailed, provided that copies of financial statements
--------
and other reports delivered solely to shareholders who are also officers or
employees of the Parent in their capacities as such need not be delivered
hereunder unless included within the scope of a request for additional
information made pursuant to Section 5.1 (g) hereof.
(e) SEC Reports. Promptly upon filing thereof, copies of all
-----------
registration statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and annual, quarterly or monthly
reports which the Parent shall have filed with the Securities Exchange
Commission.
(f) ERISA. If and when any member of the Controlled Group (i)
-----
gives or is required to give notice to the PBGC of any Reportable Event with
respect to any Plan which might constitute grounds for a termination of such
Plan under Title IV of ERISA, or knows that the plan administrator of any Plan
has given or is required to give notice of any such Reportable Event, a copy of
the notice of such Reportable Event given or required to be given to the PBGC;
(ii) receives notice of complete or partial withdrawal liability under Title IV
of ERISA, a copy of such notice; or (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate or appoint a trustee to administer
any Plan, a copy of such notice.
(g) Additional Information. From time to time, such additional
----------------------
information regarding the financial position or business of the Borrowers and
their Subsidiaries as the Bank may reasonably request.
Section 5.2. Maintenance of Existence. The Borrowers shall, and shall
------------------------
cause each Subsidiary to, maintain their corporate existence and carry on their
businesses in substantially the same manner and in substantially the same fields
as such businesses are now carried on and maintained.
Section 5.3. Notice of Default. The Borrowers will furnish to the Bank
-----------------
within five (5) days of becoming aware of a Default or Event of Default written
notice specifying the nature and period of existence of the Default or Event of
Default and the action which the Borrowers are taking or proposes to take to
remedy the Default or Event of Default.
Section 5.4. Inspection of Property, Books and Records. The Borrowers
-----------------------------------------
will keep, and will cause each Subsidiary to keep, proper books of record and
account in which full,
24
true and correct entries in conformity with GAAP shall be made of all dealings
and transactions in relation to their businesses and activities; and will
permit, and will cause each Subsidiary to permit, representatives of the Bank at
the Bank's expense prior to the occurrence of an Event of Default and at the
Borrowers' expense after the occurrence of an Event of Default to visit and
inspect any of their respective properties, to examine and make abstracts from
any of their respective books and records and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants. The Borrowers agree to cooperate and assist in
such visits and inspections, in each case at such reasonable times and as often
as may reasonably be desired.
Section 5.5. Compliance with Laws; Payment of Taxes. The Borrowers will,
--------------------------------------
and will cause each of its Subsidiaries and each member of the Controlled Group
to, comply with applicable laws (including but not limited to ERISA, the Code,
and all other applicable Federal and State laws), regulations and similar
requirements of Governmental Authorities (including but not limited to PBGC),
except where the necessity of such compliance is being contested in good faith
through appropriate proceedings. The Borrowers will, and will cause each of its
Subsidiaries to, pay promptly when due all taxes, assessments, governmental
charges, claims for labor, supplies, rent and other obligations which, if
unpaid, might become a Lien against the Property of the Borrowers or any
Subsidiary, except liabilities being contested in good faith and against which
the Borrowers shall have established reserves consistent with GAAP.
Section 5.6. Maintenance of Property. The Borrowers shall, and shall
-----------------------
cause each Subsidiary to, maintain all of its Properties and assets in good
condition, repair and working order, ordinary wear and tear excepted.
Section 5.7. Environmental Matters. The Borrowers shall, and shall cause
---------------------
each Subsidiary to: (i) be and remain in compliance with the provisions of any
Environmental Laws, (ii) notify the Bank immediately of any notice of a Release
of any Hazardous Materials, (iii) notify the Bank immediately of a Release of
any Hazardous Materials from or affecting any of their properties, (iv)
immediately contain and remove any Release in compliance with all applicable
laws, (v) promptly pay any fine or penalty assessed in connection with any
Release, (iv) permit the Bank to inspect any such affected properties, to
conduct tests thereon and to inspect any such affected properties; and (vii) at
the Bank's request and the Borrowers' expense, provide a report of a qualified
environmental engineer, satisfactory in scope, form and content to the Bank, and
such other and further assurances reasonably satisfactory to the Borrowers,
confirming that any such condition has been corrected.
Section 5.8. Certificate of Occupancy. The Borrowers shall provide a copy
------------------------
of a certificate of occupancy to the Bank upon the completion of the Project.
25
ARTICLE VI
NEGATIVE COVENANTS
Until all the Obligations to be performed and paid shall have been
performed and paid in full, and for so long as the Letter of Credit shall be
outstanding, unless the Bank shall otherwise consent in writing:
Section 6.1. Negative Pledge. The Borrowers and its Subsidiaries will
---------------
not create, incur, permit or suffer to exist any Lien upon any asset, now owned
or hereafter acquired, except for Permitted Encumbrances.
Section 6.2. Ratio of Consolidated Funded Debt to Total Capitalization.
---------------------------------------------------------
The ratio of Consolidated Funded Debt to Total Capitalization will not at any
time exceed .60 to 1.0 prior to November 30, 1997 or .55 to 1.0 at any time
thereafter.
Section 6.3. Minimum Consolidated Tangible Net Worth. Consolidated
---------------------------------------
Tangible Net Worth will at no time be less than $110,000,000 plus 50% of the
cumulative Reported Net Income of the Parent and its Consolidated Subsidiaries
during any period after December 28, 1996 (taken as one accounting period)
calculated quarterly.
Section 6.4. Ratio of Consolidated Current Assets to Consolidated Current
------------------------------------------------------------
Liabilities. The ratio of Consolidated Current Assets to Consolidated Current
- -----------
Liabilities will not be less than 1.25 to 1.00 at any time during the course of
any Fiscal Year.
Section 6.5. Fixed Charge Coverage. At the end of each of the following
---------------------
Fiscal Quarter (commencing with the Fiscal Quarter ending January 3, 1998),
Income Available for Fixed Charges for the twelve months then ended, expressed
as a multiple of Consolidated Fixed Charges for the twelve months then ended,
shall not have been less than 1.50.
Section 6.6. Accounting Method. The Borrowers will not change their
-----------------
method of accounting, without the consent of the Bank, which consent shall not
be unreasonably or untimely withheld, except as permitted in the Bond Documents.
Section 6.7. Loans or Advances. Neither the Borrowers nor any of their
-----------------
Subsidiaries shall make loans or advances to any Person except: (i) loans or
advances to employees not exceeding $2,000,000 in the aggregate outstanding made
in the ordinary course of business and consistent with practices existing on
December 1, 1994, (ii) deposits required by government agencies or public
utilities, (iii) loans by the Borrowers to a Subsidiary, and (iv) loans by a
Subsidiary to the Borrowers or to another Subsidiary; provided that after giving
effect to the making of any loans, advances or deposits permitted
26
by clauses (i) through (iv) of this Section, the Borrowers will be in full
compliance with all the provisions of this Agreement.
Section 6.8 Dissolution. Neither the Borrowers nor any of their
-----------
Subsidiaries shall suffer or permit dissolution or liquidation either in whole
or in part or redeem or retire any shares of their own stock or that of any
Subsidiary, except through corporate reorganization to the extent permitted by
Section 6.9 hereof.
Section 6.9. Consolidations, Mergers and Sales of Assets. The Borrowers
-------------------------------------------
will not, nor will they permit any Subsidiary to, consolidate or merge with or
into, or sell, lease or otherwise transfer all or any substantial part of their
assets to, any other Person, or discontinue or eliminate any business line or
segment provided that
--------
(a) the Borrowers may merge with another Person if (i) such Person was
organized under the laws of the United States of America or one of its states,
(ii) the Borrowers are the corporation surviving such merger and (iii)
immediately after giving effect to such merger, no Default shall have occurred
and be continuing,
(b) Subsidiaries of the Borrowers may merge with one another,
(c) the Company shall do business under the name Advance Auto Parts, and
(d) the foregoing limitation on the sale, lease or other transfer of assets
and on the discontinuation or elimination of a business line or segment shall
not prohibit, during any Fiscal Quarter, a transfer of assets or the
discontinuance or elimination of a business line or segment (in a single
transaction or in a series of related transactions) unless the aggregate assets
to be so transferred or utilized in a business line or segment to be so
discontinued, when combined with all other assets transferred, and all other
assets utilized in all other business lines or segments discontinued, during
such Fiscal Quarter and the immediately preceding seven Fiscal Quarters, either
(x) constituted more than 15% of the Consolidated Total Assets at the end of the
eight Fiscal Quarters immediately preceding such Fiscal Quarter, or (y)
contributed more than 15% of Consolidated Operating Profits during the eight
Fiscal Quarters immediately preceding such Fiscal Quarter.
Section 6.10. Acquisitions. The Borrowers will give the Bank prior
------------
written notice before consummating any acquisition by one of the Borrowers in
which the purchase price is $10,000,000 or more. Such notice shall include pro
forma financial statements of such Borrower for the three years following such
acquisition.
Section 6.11 Dividends. The Parent will not pay dividends in excess of
---------
$10,000,000 in any Fiscal Year (computed on a non-cumulative basis).
27
ARTICLE VII
CONDITIONS TO ISSUANCE OF LETTER OF CREDIT
Section 7.1. Conditions on Issuance. On or prior to the Closing Date,
----------------------
the Borrowers shall have furnished to the Bank, in form satisfactory to the
Bank, the following:
(a) two executed counterparts of this Agreement and the executed
counterparts of the Security Instruments;
(b) executed counterparts of each of the Bond Documents (except
for the Bonds, as to which a specimen copy may be furnished);
(c) opinion of Bond Counsel in form and substance acceptable to
the Bank;
(d) opinion of counsel for the Borrowers dated the date hereof
addressed to, and substantially in the form attached hereto as Exhibit B
---------
otherwise in form and substance acceptable to the Bank;
(e) the Certificates of the Borrowers including references to
(i) articles of incorporation and by-laws of the Borrowers, (ii)
resolutions authorizing the execution, delivery and performance of the
appropriate Bond Documents, this Agreement and the Security Instruments,
(iii) incumbency and specimen signatures of officers, and (iv) such other
matters as the Bank may require;
(f) a copy of the Articles of Incorporation and By-Laws of the
Borrowers;
(g) copies of all governmental approvals required in connection
with this transaction, including resolution of the Issuer authorizing the
issuance of the Bonds;
(h) evidence of payment to the Bank of the initial annual letter
of credit commission pursuant to Section 3.4 of this Agreement;
(i) such other documents, instruments and certifications as the
Bank may require.
Section 7.2. Additional Conditions Precedent to Issuance of the Letter of
------------------------------------------------------------
Credit.
- ------
(a) The obligation of the Bank to issue the Letter of Credit
shall be subject to the further conditions precedent that on the date of
issuance the following statements shall be true and the Bank shall have received
a certificate signed by an authorized officer of the Borrowers, dated the date
of issuance, stating that:
28
(i) The representations and warranties contained in Article II
of this Agreement, Section 6 of the Pledge Agreement and Section 2.02 of
the Lease Agreement are correct on and as of the date of issuance of the
Letter of Credit as though made on and as of such date; and
(ii) No event has occurred or would result from the issuance of
the Letter of Credit, which constitutes an Event of Default or would
constitute an Event of Default but for the requirement that notice be given
or time elapse or both; and
(b) there shall have been no introduction of or change in, or in
the interpretation of, any law or regulation that would make it unlawful or
unduly burdensome for the Bank to issue the Letter of Credit, no outbreak or
escalation of hostilities or other calamity or crisis affecting the Bank, no
suspension of or material limitation on trading on the New York Stock Exchange
or any other national securities exchange, no declaration of a general banking
moratorium by United States or Georgia or Virginia banking authorities, and no
establishment of any new restrictions on transactions in securities or on banks
materially affecting the free market for securities or the extension of credit
by banks.
Section 7.3. Conditions Precedent to Each Tender Advance. Each payment
-------------------------------------------
made by the Bank under the Letter of Credit pursuant to a Tender Draft shall
constitute a Tender Advance hereunder only if on the date of such payment the
---- --
following statements shall be true:
(i) The representations and warranties contained in Article II
of this Agreement, Section 6 of the Pledge Agreement and Section 2.02 of
the Lease Agreement are correct on and as of the date of such Tender
Advance as though made on and as of such date; and
(ii) No event has occurred or would result from such Tender
Advance, which constitutes an Event of Default or would constitute an Event
of Default but for the requirement that notice be given or time elapse or
both.
Unless the Borrowers shall have previously advised the Bank in writing or the
Bank has actual knowledge that one or more of the above statements is no longer
true, the Borrowers shall be deemed to have represented and warranted, on the
date of payment by the Bank under the Letter of Credit pursuant to a Tender
Draft, that on the date of such payment the above statements are true and
correct.
29
ARTICLE VIII
DEFAULT
Section 8.1. Events of Default. Each of the following shall constitute
-----------------
an Event of Default under this Agreement, whereupon all Obligations of the
Borrowers hereunder, whether then owing or contingently owing, will, at the
option of the Bank or its successors or assigns, immediately become due and
payable by the Borrowers without presentation, demand, protest or notice of any
kind, all of which are hereby expressly waived, and the Borrowers will pay the
reasonable attorneys' fees incurred by the Bank, or its successors or assigns,
in connection with such Event of Default or recourse against any collateral held
by the Bank, or its successors or assigns, as security for the Obligations:
(a) Failure of the Borrowers to pay when due any payment of
principal, interest, commission, charge or expense referred to in Article
III hereof within 10 business days after such payment shall become due; or
(b) The occurrence of an "Event of Default" under any of the
Security Instruments or any of the Bond Documents; or
(c) Default shall occur in the performance of any of the
covenants in Sections 6.2 to 6.5 of this Agreement, inclusive, which
failure shall not have been fully cured within 30 days after the occurrence
thereof
(d) Default shall occur in the performance of any of covenant
(not covered by clause (c) above) and such Default shall continue for 30
days after written notice thereof has been given to the Borrowers by the
Bank;
(e) Any representation or warranty made under this Agreement,
the Bond Documents, Security Instruments, or in any certificate or
statement furnished or made to the Bank pursuant hereto or in connection
herewith or with the Letter of Credit hereunder, oral or written, shall
prove to be untrue or inaccurate in any material respect as of the date on
which such representation or warranty is made;
(f) an Event of Default shall occur under that certain Credit
Agreement, dated as of December 5, 1994, by and between the Parent and the
Bank, as amended.
(g) This Agreement or any of the Security Instruments or the
Bond Documents to which the Borrowers is a party shall cease to be legal,
valid and binding agreements enforceable against the Person executing the
same in accordance with the respective terms thereof, except as may be
limited by Debtor Laws, or shall in any way be terminated or become or be
declared ineffective or inoperative or shall in any way whatsoever cease to
give or provide the respective
30
liens, security interests, rights, titles, interests, remedies, powers or
privileges intended to be created thereby, except as may be limited by
Debtor Laws;
(h) The Borrowers or any Subsidiary shall (i) apply for or
consent to the appointment of a receiver, trustee, custodian, intervenor or
liquidator of itself or of all or a substantial part of its assets, (ii)
file a voluntary petition in bankruptcy, (iii) admit in writing that it is
unable to pay its debts as they become due or generally not pay its debts
as they become due, (iv) make a general assignment for the benefit of
creditors, (v) file a petition or answer seeking reorganization or an
arrangement with creditors or to take advantage of any bankruptcy or
insolvency laws, (vi) file an answer admitting the material allegations of,
or consent to, or default in answering, a petition filed against it in any
bankruptcy, reorganization or insolvency proceeding, or (vii) take
corporate action for the purpose of effecting any of the foregoing;
(i) An involuntary petition or complaint shall be filed against
the Borrowers or any Subsidiary seeking bankruptcy relief or reorganization
or the appointment of a receiver, custodian, trustee, intervenor or
liquidator of such Person, or all or substantially all of its assets, and
such petition or complaint shall not have been dismissed within ninety (90)
days of the filing thereof; or an order, order for relief, judgment or
decree shall be entered by any court of competent jurisdiction or other
competent authority approving or ordering any of the foregoing actions;
(j) one or more judgments or orders for the payment of money in
an aggregate amount in excess of $2,000,000 shall be rendered against the
Parent or any Subsidiary and such judgment or order shall continue
unsatisfied and unstayed for a period of 30 days;
(k) a federal tax lien shall be filed against the Parent under
Section 6323 of the Code or a lien of PBGC shall be filed against the
Parent under Section 4068 of ERISA and in either case such lien shall
remain undischarged for a period of 25 days after the date of filing;
(l) controlling ownership of the Parent shall be held
beneficially by any Person or Persons other than Nicholas F. Taubman and
his spouse or issue acquiring ownership by will, trust or gift (as used
herein, "controlling ownership" means beneficial ownership by any Person or
two or more Persons acting in concert(within the meaning of Rule 13d-3 of
the Securities Exchange Commission under the Securities Exchange Act of
1934, as amended) sufficient to influence or control, directly or
indirectly, the decisions of the Parent's Board of Directors or to elect a
majority of such board);
31
then upon the occurrence of an Event of Default and at any time thereafter, the
Bank may (a) pursuant to Section 9.1 of the Indenture, advise the Trustee that
an Event of Default has occurred and instruct the Trustee to declare the
principal of all Bonds then outstanding and interest thereon to be immediately
due and payable, and (b) proceed hereunder, and under any of the Security
Instruments and, to the extent therein provided, under the Bond Documents, in
such order as it may elect and the Bank shall have no obligation to proceed
against any Person or exhaust any other remedy or remedies which it may have and
without resorting to any other security, whether held by or available to the
Bank.
Upon the occurrence of an Event of Default, any obligation of the Borrowers
to an Affiliate shall be subordinated to the Obligations.
Section 8.2. No Remedy Exclusive. No remedy herein conferred upon or
-------------------
reserved to the Bank is intended to be exclusive of any other available remedy
or remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder, under the Security Instruments,
or now or hereafter existing at law or in equity or by statute.
Section 8.3. Anti-Marshaling Provisions. The right is hereby given by
--------------------------
the Borrowers to the Bank to make releases (whether in whole or in part) of all
or any part of the collateral under the Security Instruments agreeable to the
Bank without notice to, or the consent, approval or agreement of other parties
and interests, including junior lienors, which releases shall not impair in any
manner the validity of or priority of the liens and security interest in the
remaining collateral conferred under such documents, nor release the Borrowers
from liability for the obligations hereby secured. Notwithstanding the
existence of any other security interest in the collateral held by the Bank, the
Bank shall have the right to determine the order in which any or all of the
collateral shall be subjected to the remedies provided herein, or in the
Security Instruments. The Borrowers hereby waive any and all right to require
the marshaling of assets in connection with the exercise of any of the remedies
permitted by applicable law or provided herein or therein.
32
ARTICLE IX
MISCELLANEOUS
Section 9.1. Indemnification.
---------------
(a) The Borrowers hereby indemnify and hold the Bank and its
Affiliates and all of their respective officers, directors, employees,
attorneys, consultants and agents (collectively, the "Indemnities") harmless
from and against any and all claims, damages, losses, liabilities, costs or
expenses whatsoever which the Bank may incur (or which may be claimed against
the Bank by any Person) (i) by reason of or in connection with the execution and
delivery or transfer of, or payment or failure to pay under, the Letter of
Credit, provided that the Borrowers shall not be required to indemnify the Bank
for any claims, damages, losses, liabilities, costs or expenses to the extent,
but only to the extent, caused by (a) the gross negligence or willful misconduct
of the Bank in connection with paying drafts presented under the Letter of
Credit or (b) the Bank's wrongful failure to pay under the Letter of Credit
(other than in connection with a court order) after the presentation to it by
the Credit Facility Trustee or a successor corporate fiduciary under the
Indenture of a sight draft and certificate strictly complying with the terms and
conditions of the Letter of Credit; or (ii) by reason of or in connection with
the execution, delivery or performance of any of this Agreement, the Bond
Documents, the Security Instruments or any transaction contemplated by any
thereof.
(b) The Borrowers hereby indemnify and hold the Bank harmless from
and against any and all damages, penalties, fines, claims, liens, suits,
liabilities, costs (including cleanup costs), judgments and expenses (including
attorneys', consultants' or experts' fees and expenses) of every kind and nature
suffered by or asserted against the Bank as a direct or indirect result of any
warranty or representation made by the Borrowers herein, being false or untrue
in any material respect or any requirement under any law, regulation or
ordinance, local, state, or federal, which requires the elimination or removal
of any hazardous materials, substances, wastes or other environmentally
regulated substances.
(c) The Borrowers' obligations hereunder to the Bank (collectively,
the "Indemnified Matters") shall not be limited to any extent by the term of
this Agreement, and, as to any act or occurrence prior to the termination of
this Agreement which gives rise to liability hereunder, shall continue, survive
and remain in full force and effect notwithstanding the termination of the
Bank's obligations hereunder.
Anything herein to the contrary notwithstanding, nothing in this
Section 9.1 is intended or shall be construed to limit the Borrowers'
reimbursement obligations contained in Article IV hereof. Without prejudice to
the survival of any other obligation of the Borrowers, the indemnities and
obligations of the Borrowers contained in this Section 9.1 shall survive the
payment in full of amounts payable pursuant to Article IV and the Termination
Date.
33
Section 9.2. Transfer of Letter of Credit. The Letter of Credit may be
----------------------------
transferred and assigned in accordance with the terms of the Letter of Credit.
Section 9.3. Reduction of Letter of Credit.
-----------------------------
(a) The Letter of Credit is subject to reduction pursuant to its
terms.
(b) If the amount available to be drawn under the Letter of
Credit shall be permanently reduced in accordance with the terms thereof, then
the Bank shall have the right to require the Credit Facility Trustee to
surrender the Letter of Credit to the Bank and to issue on such date, in
substitution for such outstanding Letter of Credit, a substitute irrevocable
letter of credit, substantially in the form of the Letter of Credit but with
such changes therein as shall be appropriate to give effect to such reduction,
dated such date, for the amount to which the amount available to be drawn under
the Letter of Credit shall have been reduced.
Section 9.4. Liability of the Bank. The Borrowers, to the extent
---------------------
permitted by applicable law, assume all risks of the acts or omissions of the
Credit Facility Trustee and any beneficiary or transferee of the Letter of
Credit with respect to its use of the Letter of Credit. Neither the Bank nor
any of its officers, directors, employees, agents or consultants shall be liable
or responsible for:
(a) the use which may be made of the Letter of Credit or for any
acts or omissions of the Credit Facility Trustee or any beneficiary or
transferee in connection therewith;
(b) the validity, sufficiency or genuineness of documents, or of
any endorsement(s) thereon, even if such documents should in fact prove to
be in any or all respects invalid, insufficient, inaccurate, fraudulent or
forged;
(c) payment by the Bank against presentation of documents which
do not comply with the terms of the Letter of Credit, including failure of
any documents to bear any reference or adequate reference to the Letter of
Credit; or
(d) any other circumstances whatsoever in any way related to the
making or failure to make payment under the Letter of Credit;
except only that the Borrowers shall have a claim against the Bank, and the Bank
shall be liable to the Borrowers, to the extent but only to the extent, of any
direct, as opposed to consequential, damages suffered by the Borrowers which the
Borrowers prove were caused by (i) willful misconduct or gross negligence of the
Bank in determining whether documents presented under the Letter of Credit
complied with the terms of the Letter of Credit or (ii) wrongful failure of the
Bank to pay under the Letter of Credit after the presentation to it by the
Credit Facility Trustee or a successor trustee under the Indenture of a sight
draft and certificate strictly complying with the terms and conditions of the
Letter
34
of Credit. In furtherance and not in limitation of the foregoing, the Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
Section 9.5. Successors and Assigns. This Agreement shall be binding
----------------------
upon the Borrowers and their successors and assigns and all rights against the
Borrowers arising under this Agreement shall be for the sole benefit of the
Bank, its successors and assigns, all of whom shall be entitled to enforce
performance and observance of this Agreement to the same extent as if they were
parties hereto.
Section 9.6. Notices. All notices, requests and demands to or upon the
-------
respective parties hereto shall be deemed to have been given or made when hand
delivered or mailed first class, certified or registered mail, postage prepaid,
or by overnight courier service, addressed as follows or to such other address
as the parties hereto shall have been notified pursuant to this Section 9.6:
The Bank: First Union National Bank
201 South Jefferson Street
Roanoke, Virginia 24011
Attention: R. Grayson Goldsmith
The Borrowers: Advance Holding Corporation
Post Office Box 2710
5673 Airport Road
Roanoke, Virginia 24012
Attention: Chief Financial Officer
except in cases where it is expressly herein provided that such notice, request
or demand is not effective until received by the party to whom it is addressed,
in which event said notice, request or demand shall be effective only upon
receipt by the addressee. Any change in notice addresses shall be effective
upon the giving of such new address to the respective party.
Section 9.7. Amendment. This Agreement may be amended, modified or
---------
discharged only upon an agreement in writing of the Borrowers and the Bank.
Section 9.8. Effect of Delay and Waivers. No delay or omission to
---------------------------
exercise any right or power accruing upon any default, omission or failure of
performance hereunder shall impair any such right or power or shall be construed
to be a waiver thereof, but any such right and power may be exercised from time
to time and as often as may be deemed expedient. In order to entitle the Bank
to exercise any remedy now or hereafter existing at law or in equity or by
statute, it shall not be necessary to give any notice, other than such notice as
may be herein expressly required. In the event any provision contained in this
Agreement should be breached by any party and thereafter waived by the other
party so empowered to act, such waiver shall be limited to the particular breach
hereunder. No
35
waiver, amendment, release or modification of this Agreement shall be
established by conduct, custom or course of dealing, but solely by an instrument
in writing duly executed by the parties thereunto duly authorized by this
Agreement.
Section 9.9. Counterparts. This Agreement may be executed simultaneously
------------
in several counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 9.10. Severability. The invalidity or unenforceability of any one
------------
or more phrases, sentences, clauses or Sections contained in this Agreement
shall not affect the validity or enforceability of the remaining portions of
this Agreement, or any part thereof.
Section 9.11. Cost of Collection. The Borrowers shall be liable for the
------------------
payment of all fees and out-of-pocket expenses, including reasonable attorneys'
fees (computed without regard to any statutory presumption), incurred in
connection with the enforcement of this Agreement.
Section 9.12. Set Off. Upon the occurrence of an Event of Default
-------
hereunder, the Bank is hereby authorized, without notice to the Borrowers, to
set off, appropriate and apply any and all monies, securities and other
properties of the Borrowers hereafter held or received by or in transit to the
Bank from or for the Borrowers, against the obligations of the Borrowers
irrespective of whether the Bank shall have made any demand hereunder or under
any Security Instrument although such obligations may be contingent or
unmatured; provided, however, that the Bank hereby waives any such right, and
-------- -------
any other right which it may have at law or otherwise to set off and apply such
deposits at any time held, if, when and after there shall be a drawing under the
Letter of Credit during the pendency of any proceeding by or against the
Borrowers or the Issuer seeking to adjudicate it as bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of either of them or either of their debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, custodian, trustee or other similar official for either of them or for
any substantial part of either of their property.
Section 9.13. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Virginia. The Borrowers
hereby acknowledge that the Letter of Credit shall be governed by and construed
in accordance with Uniform Customs and Practice for Documentary Credits (1993
Revisions), International Chamber of Commerce Publication No. 500.
Section 9.14. References. The words "herein", "hereof", "hereunder" and
----------
other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular article, section or subsection.
36
Section 9.15. Taxes, Etc. Any taxes (excluding income taxes) payable or
-----------
ruled payable by federal or state authority in respect of the Letter of Credit,
this Agreement or the Security Instruments shall be paid by the Borrowers upon
demand by the Bank, together with interest and penalties, if any.
Section 9.16. Consent to Jurisdiction, Venue; Waiver of Jury Trial. In the
----------------------------------------------------
event that any action, suit or other proceeding is brought against the Borrowers
by or on behalf of the Bank to enforce the observance or performance of any of
the provisions of this Agreement or of any of the Security Instruments,
including without limitation the collection of any amounts owing thereunder, the
Borrowers hereby (i) irrevocably consent to the exercise of jurisdiction over
the Borrowers and to the extent permitted by applicable laws, its property, by
any United States District Court or State Court of Virginia, and (ii)
irrevocably waive any objection they might now or hereafter have or assert to
the venue of any such proceeding in any court described in clause (i) above, and
(iii) constitute and appoint the Secretary of State of Virginia (and, so long as
the Borrowers shall appoint and maintain any other qualified Person located
within the State of Virginia as agent for service of process and shall give
notice (effective upon receipt) thereof to the Bank, then such other Person) for
service of process upon it in connection with any such proceeding.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWERS HEREBY IRREVOCABLY
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OF THE SECURITY INSTRUMENTS OR THE ACTIONS OF THE BANK IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
Section 9.17 Assignment and Pledge of Agreement. Nothing herein or in
----------------------------------
any other Bond Document shall prohibit the Bank from pledging or assigning the
obligations hereunder including the Collateral therefor, to any Federal Reserve
Bank in accordance with applicable law. The Borrowers hereby consent to any
such pledge or assignment pursuant to this Section.
37
IN WITNESS WHEREOF, the Borrowers and the Bank have caused this Agreement
to be executed in their respective names and their respective seals to be
hereunto affixed and attested by their duly authorized representatives, all as
of the date first above written.
THE BORROWERS:
-------------
ADVANCE STORES COMPANY,
INCORPORATED
By: /s/ J. O'Neil Leftwich
--------------------------
Title: Assistant Secretary and Assistant
Treasurer
ATTEST:
/s/ Garnett E. Smith
- --------------------------
Title: President and Chief Executive
Officer
ADVANCE HOLDING CORPORATION
By: /s/ J. O'Neil Leftwich
--------------------------
Title: Assistant Secretary and Assistant
Treasurer
ATTEST:
/s/ Garnett E. Smith
- --------------------------
Title: President and Chief Operating
Officer
[Execution Page - Reimbursement Agreement]
38
THE BANK:
--------
FIRST UNION NATIONAL BANK
ATTEST: By: /s/
___________________________
Title: Vice President
__________________
/s/
____________________________
Title: SVP
(Corporate Seal)
[Execution Page - Reimbursement Agreement]
39
EXHIBIT A
---------
IRREVOCABLE LETTER OF CREDIT
----------------------------
RELATING TO THE BONDS
---------------------
DATE: DECEMBER 31, 1997
LETTER OF CREDIT NO.: S141130
Branch Banking and Trust Company,
as Credit Facility Trustee
223 West Nash Street
Wilson, North Carolina 27893
Attention: Corporate Trust Department
Ladies and Gentlemen:
We hereby issue to you, Branch Banking and Trust Company, as Credit
Facility Trustee under the Trust Indenture, dated as of December 1, 1997 (the
"Indenture"), by and between the Development Authority of McDuffie County (the
"Issuer"), First Union National Bank, Richmond, Virginia, as Trustee and you,
pursuant to which $10,000,000 aggregate principal amount of Taxable Industrial
Development Bonds (Advance Stores Company, Incorporated Project), Series 1997
(the "Bonds"), are being issued, this irrevocable Letter of Credit No. S141130
(the "Letter of Credit") for the account of Advance Stores Company, Incorporated
and Advance Holding Corporation (collectively, the "Borrowers") in the amount of
$10,201,370 (the "Initial Stated Amount" and, as from time to time reduced and
reinstated as hereinafter provided, the "Amount Available"), of which (i)
subject to the provisions below reducing amounts available hereunder,
$10,000,000 (as from time to time reduced and reinstated as hereinafter
provided, the "Principal Amount Available") shall be available for the payment
of principal or the portion of the purchase price corresponding to principal of
the Bonds and (ii) subject to the provisions below reducing amounts available
hereunder, $201,370 (as from time to time reduced and reinstated as hereinafter
provided, the "Interest Amount Available") shall be available for the payment of
up to 49 days' interest or the portion of the purchase price corresponding to
interest on the Bonds at an assumed rate of 15% per annum (computed on the basis
of a year of 365 days). Subject to such aggregate limits and to the conditions
set forth herein, funds may be drawn upon hereunder (i) with respect to payment
of the unpaid principal amount or the portion of purchase price corresponding to
the principal of the Bonds and (ii) with respect to payment of up to 49 days'
interest accrued and payable or the portion of purchase price corresponding to
interest accrued on the Bonds on or prior to their stated maturity date. This
Letter of Credit is effective immediately and expires at 3:00 p.m. (prevailing
Eastern
1
time) at our Presentation Office (as hereinafter defined) on November 1, 2000
(as may be extended from time to time as hereinafter described, the "Stated
Termination Date") or earlier as hereinafter provided. This Letter of Credit
shall automatically be extended for an additional one-year period from the then
applicable Stated Termination Date unless we give you, or any successor Credit
Facility Trustee, written notice of our election not to renew this Letter of
Credit at least 90 days prior to the then applicable Stated Termination Date by
U.S. certified mail, return receipt requested. All drawings under this Letter of
Credit will be paid with our own funds.
We hereby irrevocably authorize you to draw on us, in an aggregate amount
not to exceed the Amount Available and in accordance with the terms and
conditions and subject to the reductions in amount as hereinafter set forth, (1)
in a single drawing (subject to the provisions contained in the next following
paragraph) by your draft drawn on us at sight, presented for payment on a day on
which banks are not required or authorized to close in Charlotte, North Carolina
(a "Business Day") and referring therein to the number of this Letter of Credit,
and accompanied by your written and completed certificate signed by you in the
form of Annex A attached hereto (such draft accompanied by such certificate
being your "Interest Draft"), an amount not exceeding the Interest Amount
Available on the date of such drawing; (2) in one or more drawings by one or
more of your drafts drawn on us at sight, presented for payment on a Business
Day and referring therein to the number of this Letter of Credit, and
accompanied by your written completed certificate signed by you in the form of
Annex B attached hereto (any such draft accompanied by such certificate being
your "Tender Draft"), an aggregate amount not exceeding the Amount Available on
the date of such drawing; (3) in one or more drawings by one or more of your
drafts drawn on us at sight, presented for payment on a Business Day and
referring therein to the number of this Letter of Credit, and accompanied by
your written and completed certificate signed by you in the form of Annex C
attached hereto (any such draft accompanied by such certificate being your
"Partial Redemption Draft"), an aggregate amount not exceeding the Amount
Available on the date of such drawing; (4) in a single drawing by your draft
drawn on us at sight presented for payment on a Business Day and referring
therein to the number of this Letter of Credit, and accompanied by your written
and completed certificate signed by you in the form of Annex D hereto (any such
draft accompanied by such certificate being your "Conversion Draft"), an amount
not exceeding the Amount Available on the date of such drawing; and (5) in a
single drawing by your draft drawing on us at sight, presented for payment on a
Business Day and referring therein to the number of this Letter of Credit, and
accompanied by your written and completed certificate signed by you in the form
of Annex E attached hereto (such draft accompanied by such certificate being
your "Final Draft"), an amount not exceeding the Amount Available on the date of
such drawing.
If you shall draw on us by an Interest Draft and you shall not have
received from us within ten (10) calendar days from the date of our payment in
respect of such drawing a notice to the effect that we have not been reimbursed
for such drawing and that the interest portion of the Letter of Credit will not
be reinstated, then (x) your right to draw on us in a single drawing by your
Interest Draft under clause (1) of the immediately preceding
2
paragraph shall be automatically reinstated and (y) effective as of the eleventh
(11th) calendar day from the date of our payment in respect of such drawing, you
shall again be authorized to draw on us by your Interest Draft in accordance
with said clause (1). The provisions of this paragraph providing for the
reinstatement of your right to draw on us by your Interest Draft in a succeeding
single drawing shall be applicable to each successive drawing by your Interest
Draft under clause (1) of the immediately preceding paragraph so long as this
Letter of Credit shall not have terminated as set forth below.
Upon our honoring any Tender Draft presented by you hereunder, the Amount
Available under this Letter of Credit shall be automatically reduced by the
amount drawn under such Tender Draft, the Principal Amount Available to be drawn
hereunder by you shall be automatically reduced by an amount equal to the
principal component of such Tender Draft and the Interest Amount Available to be
drawn hereunder by you shall be automatically reduced by an amount equal to the
amount of the interest component of such Tender Draft.
Upon our honoring any Partial Redemption Draft presented by you hereunder,
the Amount Available under this Letter of Credit shall be automatically and
permanently reduced by the amount drawn under any such Partial Redemption Draft,
the Principal Amount Available to be drawn hereunder by you shall be
automatically and permanently reduced by an amount equal to the principal
component of such Partial Redemption Draft honored by us hereunder and the
Interest Amount Available to be drawn hereunder by you shall be automatically
and permanently reduced by an amount equal to the amount of the interest
component of any such Partial Redemption Draft honored by us hereunder.
Upon our honoring any Conversion Draft presented by you hereunder, the
Amount Available under this Letter of Credit shall be automatically and
permanently reduced by the amount drawn under any such Conversion Draft, the
Principal Amount Available to be drawn hereunder by you shall be automatically
and permanently reduced by an amount equal to the principal component of such
Conversion Draft honored by us hereunder, and the Interest Amount Available to
be drawn hereunder by you shall be automatically and permanently reduced by an
amount equal to the amount of the interest component of any such Conversion
Draft honored by us hereunder.
The Amount Available, the Principal Amount Available and the Interest
Amount Available to be drawn under this Letter of Credit with respect to any
Tender Draft shall be reinstated as provided in this paragraph to the extent,
but only to the extent, that we are reimbursed by or on behalf of the Company in
immediately available funds delivered to us at the Presentation Office on or
before 3:00 P.M. (Prevailing Eastern time) on a Business Day for any amount
drawn in respect of principal and interest under any Tender Draft. If we
receive such reimbursement by or on behalf of the Company, all in strict
conformity with the terms and conditions of this Letter of Credit after 3:00
P.M. (Prevailing Eastern time) on a Business Day prior to the termination
hereof, such reimbursement will be honored as stated above as if received on the
next succeeding Business Day. Any amount received by us from or on behalf of
the Company in reimbursement of amounts drawn hereunder
3
by a Tender Draft shall, if accompanied by your completed certificate signed by
you in the form of Annex F attached hereto, be applied to the extent of the
amount received by us and indicated therein to reimburse us for amounts drawn
hereunder by your Tender Drafts and we will confirm to you the amount of the
Principal Amount Available and the Interest Amount Available increased by such
reimbursement by delivering to you the executed and completed acknowledgment
accompanying the form of Annex F delivered by you in connection with such
reimbursement. The Amount Available, the Principal Amount Available and the
Interest Amount Available shall be increased only in compliances with the
provisions of this paragraph.
Each draft and certificate (other than a draft or certificate in the form
of Annex A, C or E) presented hereunder shall be dated the date of its
presentation and each such draft and certificate shall be presented at our
office located at 301 South Tryon Street, M7, Charlotte, North Carolina 28288-
0742, Attention: International Operations (or at any other office in the State
of North Carolina or Georgia which may be designated by us by written notice
delivered to you at least three Business Days prior to a date on which interest
is payable on the Bonds) (the "Presentation Office") and shall be presented on a
Business Day. Notwithstanding the foregoing, all drawings hereunder may be made
by telefax copy to (704) 383-6984 and promptly confirmed by written certificate.
If we receive any of your drafts and certificates (other than a draft or
certificate in the form of Annex A, C or E) at such office, all in strict
conformity with the terms and conditions of this Letter of Credit, not later
than 11:00 A.M. (Prevailing Eastern time) on a Business Day on or prior to the
termination hereof, we will honor the same by initiating the wiring of funds by
2:30 P.M. (Prevailing Eastern time) on the same day in accordance with your
payment instructions. If we receive any of your drafts and certificates (other
than a draft or certificate in the form of Annex A, C or E) at such office, all
in strict conformity with the terms and conditions of this Letter of Credit,
after 11:00 A.M. (Prevailing Eastern time) on a Business Day prior to the
termination hereof, we will honor the same on the next succeeding Business Day
in accordance with your payment instructions. If requested by you, payment
under this Letter of Credit may be made by wire transfer of Federal Reserve Bank
of Richmond, Virginia (or such other federal reserve bank as applicable) funds
to your account in a bank on the Federal Reserve wire system or by deposit of
same day funds into a designated account that you maintain with us.
Each draft and certificate in the form of Annex A, C or E presented
hereunder shall be dated the date of its presentation and each such draft and
certificate in the form of Annex A, C or E shall be presented at the
Presentation Office and shall be presented on a Business Day. If we receive any
of your drafts and certificates in the form of Annex A, C or E at such office,
all in strict conformity with the terms and conditions of this Letter of Credit,
not later than 9:30 A.M. (Prevailing Eastern time) on a Business Day on or prior
to the termination hereof, we will honor the same by initiating the wiring of
funds by 10:30 A.M. (Prevailing Eastern time) on the same day in accordance with
your payment instructions. If we receive any of your drafts and certificates in
the form of Annex A, C or E at such office, all in strict conformity with the
terms and conditions of this Letter of Credit, after 9:30 A.M. (Prevailing
Eastern time) on a Business Day prior to the termination hereof,
4
we will honor the same on the next succeeding Business Day by initiating the
wiring of funds by 9:30 A.M. (Prevailing Eastern time) in accordance with your
payment instructions. If requested by you, payment under this Letter of Credit
may be made by wire transfer of Federal Reserve Bank of Richmond, Virginia (or
such other federal reserve bank as applicable) funds to your account in a bank
on the Federal Reserve wire system or by deposit of same day funds into a
designated account that you maintain with us.
In connection with the presentation of any Tender Draft or Conversion
Draft, Bonds in aggregate principal amount equal to the principal amount of such
Tender Draft or Conversion Draft shall be delivered to the First Union National
Bank (the "Bank") or its designee as promptly as practicable, and in any event
within five Business Days after such presentation, registered in the name of the
Bank, or its designee, as pledgee of the Company, pledged to the Bank pursuant
to the Pledge Agreement, dated as of December 1, 1997 (the "Pledge Agreement"),
between Advance Stores Company, Incorporated and the Bank relating to the Bonds.
With respect to any Tender Draft, the Bank agrees that it shall not release any
Bonds pledged to it until the Letter of Credit shall have been reinstated so
that the Amount Available, as so reinstated, shall equal or exceed the aggregate
principal and 49 days' interest calculated at an assumed rate of 15% per annum
on all Bonds for which drawings are available hereunder after giving effect to
such release.
Upon the earliest of (i) our honoring your Final Draft presented hereunder,
(ii) the second day following the date on which we receive a certificate signed
by you stating that the interest rate on the Bonds has been converted to a fixed
interest rate, (iii) the date on which we receive a certificate signed by you
stating that the Company has provided and you have accepted an Alternate Credit
Facility in accordance with the terms of the Indenture which is effective the
date of such certificate, or (iv) the Stated Termination Date, this Letter of
Credit shall terminate.
Notwithstanding anything in Article 48 of the Uniform Customs hereinafter
referred to, to the contrary, this Letter of Credit is transferable more than
once, only in its entirety to any transferee whom you certify to us has
succeeded you as Credit Facility Trustee under the Indenture, and may be
successively transferred. Transfer of the Amount Available under this Letter of
Credit to such transferee shall be effected by the presentation to us of this
Letter of Credit accompanied by a certificate in the form of Annex G attached
hereto and payment of the transfer commission referred to therein. Upon such
presentation we shall forthwith transfer the same to your transferee or, if so
requested by your transferee, issue a letter of credit to your transferee with
provisions therein consistent with this Letter of Credit.
This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited by
reference to any document, instrument or agreement referred to herein
(including, without limitation, the Bonds or the Indenture), except only the
certificates and the drafts referred to herein which are hereby incorporated by
reference; and any such reference shall not be deemed to incorporate
5
herein by reference any document, instrument or agreement except for such
certificates and such drafts.
Except as otherwise provided herein, this Letter of Credit shall be
governed by and construed in accordance with the Uniform Customs and Practice
for Documentary Credits (1993 Revisions), International Chamber of Commerce
Publication No. 500 (the "UCP") and, to the extent not inconsistent therewith,
the laws of the State of North Carolina. Communications with respect to this
Letter of Credit other than presentations of drafts and certificates hereunder
shall be in writing and shall be addressed to us at 301 South Tryon Street, M7,
Charlotte, North Carolina 28288-0742, Attention: International Operations,
specifically referring to the number of the Letter of Credit.
Very truly yours,
FIRST UNION NATIONAL BANK
By ___________________________
Title: Vice President
6
Annex A
-------
[Form of Certificate for Interest Draft]
CERTIFICATE FOR DRAWING IN CONNECTION WITH THE PAYMENT
OF UP TO 49 DAYS' INTEREST
Irrevocable Letter of Credit No. S141130
----------------------------------------
The undersigned, a duly authorized officer of the undersigned Credit
Facility Trustee (the "Credit Facility Trustee"), hereby certifies to First
Union National Bank (the "Bank"), with reference to Irrevocable Letter of Credit
No. S141130 (the "Letter of Credit; the terms defined therein and not otherwise
defined herein being used herein as therein defined) issued by the Bank in favor
of the Credit Facility Trustee, as follows:
(1) The Credit Facility Trustee is the Credit Facility Trustee under the
Indenture for the holders of the Bonds.
(2) The Credit Facility Trustee is making a drawing under the Letter of
Credit with respect to a payment of interest on the Bonds, which payment is due
and payable on a regular Interest Payment Date. On the record date for such
Interest Payment Date, none of such Bonds for which interest is drawn pursuant
to the draft were held of record by the Company, or by the Bank, or its
designee, as pledgee of the Company.
(3) [The Interest Draft accompanying this Certificate is the first Interest
Draft presented by the Credit Facility Trustee under the Letter of Credit.]*
[The Interest Draft last presented by the Credit Facility Trustee under the
Letter of Credit was honored and paid by the Bank on _____________________,
______, and the Credit Facility Trustee had not received a notice within ten
days of presentation of such Interest Draft from the Bank that the Bank has not
been reimbursed.]**
(4) The amount of the Interest Draft accompanying this Certificate is
$_______. It was computed in compliance with the terms and conditions of the
Bonds and the Indenture and does not exceed the Interest Amount Available to be
drawn by the Credit Facility Trustee under the Letter of Credit.
(5) Upon receipt by the undersigned of the amount demanded hereby, (a) the
undersigned will apply the same directly to the payment when due of the interest
amount owing on account of the Bonds pursuant to the Indenture, (b) no portion
of said amount shall be applied by the undersigned for any other purpose, and
(c) no portion of said amount shall be commingled with other funds held by the
undersigned.
7
IN WITNESS WHEREOF, the Credit Facility Trustee has executed and delivered
this Certificate as of the ______ day of _________________, 19__.
BRANCH BANKING AND TRUST COMPANY,
as Credit Facility Trustee
By: __________________________
Name: ___________________
Title: ___________________
________________
* To be used in the Certificate relating to the first Interest
Draft only.
**To be used in each Certificate relating to each Interest Draft
other than the first Interest Draft.
8
Annex B
-------
[Form of Certificate for Tender Draft]
CERTIFICATE FOR DRAWING IN CONNECTION WITH THE PAYMENT
OF PRINCIPAL PURCHASE PRICE AND PORTION OF PURCHASE PRICE
CORRESPONDING TO INTEREST OF BONDS TENDERED
Irrevocable Letter of Credit No. S141130
----------------------------------------
The undersigned, a duly authorized officer of the undersigned Credit
Facility Trustee (the "Credit Facility Trustee"), hereby certifies to First
Union National Bank (the "Bank"), with reference to Irrevocable Letter of Credit
No. S141130 (the "Letter of Credit"; the terms defined herein and not otherwise
defined herein being used herein as therein defined) issued by the Bank in favor
of the Credit Facility Trustee, as follows:
(1) The Credit Facility Trustee is the Credit Facility Trustee under
the Indenture for the registered owners of the Bonds.
(2) The Credit Facility Trustee is making a drawing under the Letter
of Credit with respect to a payment, upon a tender of all or less than all
of the Bonds, which are Outstanding (as defined in the Indenture), or the
unpaid principal amount of the Bonds and accrued interest thereon to be
purchased as a result of such tender pursuant to the terms of Article III
of the Indenture (other than Bonds, presently held of record by the
Company, or by the Bank, or its designee, as pledge of the Company) which
payment is due on the date on which this Certificate and the Tender Draft
it accompanies are being presented to the Bank.
(3) The amount of the Tender Draft accompanying this Certificate is
equal to the sum of (i) $_________ being drawn in respect of the payment of
unpaid principal of Bonds (other than Bonds presently held of record by the
Company or by the Bank, or its designee, as pledgee of the Company) to be
purchased as a result of a tender, which amount does not exceed the
Principal Amount Available under the Letter of Credit, and (ii) $__________
being drawn in respect of the payment of ________ days' [not to exceed 49
days'] accrued and unpaid interest on such Bonds constituting a portion of
the purchase price of such Bonds being purchased as a result of a tender,
which amount does not exceed the Interest Amount Available under the Letter
of Credit.
9
(4) The Credit Facility Trustee shall register or cause to be
registered in the name of the Bank, or its designee, as pledgee of the
Company, pursuant to Section 3 of the Pledge Agreement, and shall deliver
or cause to be delivered to the Bank or its designee Bonds in the principal
amount of the Tender Draft accompanying this Certificate as promptly as
practicable, and in any event within five Business Days after presentation
of the Tender Draft accompanying this Certificate.
(5) Upon receipt of the undersigned of the amount demanded hereby, (a)
the undersigned will apply the same directly to the payment when due of the
purchase price of Bonds tendered pursuant to the Indenture, (b) no portion
of said amount shall be applied by the undersigned for any other purpose,
and (c) no portion of said amount shall be commingled with other funds held
by the undersigned.
(6) The amount of the Tender Draft accompanying this Certificate was
computed in compliance with the terms and conditions of the Bonds and the
Indenture and does not exceed the Amount Available under the Letter of
Credit.
The Credit Facility Trustee acknowledges that, pursuant to the terms of the
Letter of Credit, upon the Bank's honoring of the Tender Draft accompanying this
Certificate, (i) the Amount Available under the Letter of Credit shall be
automatically reduced by the aggregate amount of such Tender Draft, (ii) the
Principal Amount Available under the Letter of Credit shall be automatically
reduced by an amount equal to the amount of the principal component of such
draft set forth in paragraph 3 above, and (iii) the Interest Amount Available
under the Letter of Credit shall be automatically reduced by an amount equal to
the amount of the interest component of such draft set forth in paragraph 3
above, subject to reinstatement as set forth in the Letter of Credit.
IN WITNESS WHEREOF, the Credit Facility Trustee has executed and delivered
this Certificate as of the ____ day of _______________, _____.
BRANCH BANKING AND TRUST COMPANY, as Credit
Facility Trustee
By:_________________________
Name:____________________
Title:_____________________
10
Annex C
-------
[Form of Certificate for Partial Redemption Draft]
CERTIFICATE FOR DRAWING IN CONNECTION WITH THE PAYMENT
OF PRINCIPAL AND UP TO 49 DAYS' INTEREST UPON
PARTIAL REDEMPTION
Irrevocable Letter of Credit No. S141130
----------------------------------------
The undersigned, a duly authorized officer of the undersigned Credit
Facility Trustee (the "Credit Facility Trustee"), hereby certifies to First
Union National Bank (the "Bank"), with reference to Irrevocable Letter of Credit
No. S141130 (the "Letter of Credit"; the terms defined therein and not otherwise
defined herein being used herein as therein defined) issued by the Bank in favor
of the Credit Facility Trustee, as follows:
(1) The Credit Facility Trustee is the Credit Facility Trustee under
the Indenture for the registered owners of the Bonds.
(2) The Credit Facility Trustee is making a drawing under the Letter
of Credit with respect to a payment, upon redemption of less than all of
the Bonds which are Outstanding (as defined in the Indenture), of the
unpaid principal amount of, and up to 49 days' accrued and unpaid interest
on, the Bonds to be redeemed pursuant to the Indenture (other than Bonds
presently held of record by the Company, or by the Bank, or its designee,
as pledgee of the Company).
(3) The amount of the Partial Redemption Draft accompanying this
Certificate is $__________ and is equal to the sum of (i) $________ being
drawn in respect of the payment of unpaid principal of Bonds (other than
Bonds presently held of record by the Company or by Bank, or its designee,
as pledgee of the Company) to be redeemed, which amount does not exceed the
Principal Amount Available under the Letter of Credit and (ii) $__________
being drawn in respect of the payment of ____ days' [not to exceed 49
days'] accrued and unpaid interest on such Bonds, which amount does not
exceed the Interest Amount Available under the Letter of Credit.
(4) The amount of the Partial Redemption Draft accompanying this
Certificate was computed in accordance with the terms and conditions of the
Bonds and the Indenture and does not exceed the Amount Available under the
Letter of Credit.
11
(5) This Certificate and the Partial Redemption Draft it accompanies
are dated, and are being presented to the Bank on, the date on which the
unpaid principal amount of, and accrued and unpaid interest on, Bonds to be
redeemed are due and payable under the Indenture upon redemption of less
than all of the Bonds which are Outstanding (as defined in the Indenture).
(6) Upon receipt by the undersigned of the amount demanded hereby, (a)
the undersigned will apply the same directly to the payment when due of the
principal amount of and accrued and unpaid interest on the Bonds pursuant
to the Indenture, (b) no portion of said amount shall be applied by the
undersigned for any other purpose and (c) no portion of said amount shall
be commingled with other funds held by the undersigned.
The Credit Facility Trustee acknowledges that, pursuant to the terms of
Letter of Credit, upon the Bank's honoring the Partial Redemption Draft
accompanying this Certificate, (i) the Amount Available under the Letter of
Credit shall be permanently reduced by the aggregate amount of such Partial
Redemption Draft, (ii) the Principal Amount Available under the Letter of Credit
shall be permanently reduced by an amount equal to the amount of the principal
component of such draft set forth in paragraph 3 above and (iii) the Interest
Amount Available under the Letter of Credit shall be permanently reduced by
$_________, which is equal to an amount of interest which would accrue on an
amount of principal equal to the principal component set forth in paragraph 3
above for a period of forty-nine (49) days at a maximum rate of fifteen percent
(15%) per annum.
IN WITNESS WHEREOF, the Credit Facility Trustee has executed and delivered
this Certificate as of the ____ day of _______________, 19__.
BRANCH BANKING AND TRUST COMPANY, as Credit
Facility Trustee
By:________________________
Name:___________________
Title:____________________
12
Annex D
-------
[Form of Certificate for Conversion Draft]
CERTIFICATE FOR DRAWING IN CONNECTION WITH THE
PAYMENT OF PRINCIPAL PLUS ACCRUED INTEREST
UPON A MANDATORY PURCHASE
(CONVERSION TO A FIXED INTEREST RATE)
Irrevocable Letter of Credit No. S141130
----------------------------------------
The undersigned, a duly authorized officer of the undersigned Credit
Facility Trustee (the "Credit Facility Trustee"), hereby certifies to First
Union National Bank (the "Bank"), with reference to Irrevocable Letter of Credit
No. S141130 (the "Letter of Credit"; the terms defined therein and not otherwise
defined herein being used herein as therein defined) issued by the Bank in favor
of the Credit Facility Trustee, as follows:
(1) The Credit Facility Trustee is the Credit Facility Trustee under
the Indenture for the registered owners of the Bonds.
(2) The Credit Facility Trustee is making a drawing under the Letter
of Credit with respect to a payment, upon a mandatory tender for purchase
pursuant to Section 2.2(e) of the Indenture (conversion to a Fixed Interest
Rate within the meaning of the Indenture) of all or less than all of the
Bonds which are Outstanding (as defined in the Indenture), of the unpaid
principal amount of, and up to 49 days' accrued and unpaid interest on, the
Bonds to be so purchased (other than Bonds presently held of record by the
Company, or the Bank, or its designee, as pledgee of the Company), which
payment is due on the date on which this Certificate and the Conversion
Draft it accompanies are being presented to the Bank.
(3) The amount of the Conversion Draft accompanying this Certificate
is $______ and is equal to the sum of (i) $______ being drawn in respect of
the payment of unpaid principal of Bonds (other than Bonds presently held
of record by the Company, or by the Bank, or its designee, as pledgee of
the Company) to be purchased, which amount does not exceed the Principal
Amount Available under the Letter of Credit, and (ii) $_____ being drawn in
respect of the payment of ___ days' [not to exceed 49 days'] accrued and
unpaid interest on such Bonds, which amount does not exceed the Interest
Amount Available under the Letter of Credit.
(4) The amount of the Conversion Draft accompanying this Certificate
was computed in compliance with the terms and conditions of the Bonds and
the Indenture and does not exceed the Amount Available under the Letter of
Credit.
13
(5) Upon receipt by the undersigned of the amount demanded hereby,
(a) the undersigned will apply the same directly to the payment when due of
the principal amount of, and interest accrued and unpaid on, the Bonds
pursuant to the Indenture, (b) no portion of said amount shall be applied
by the undersigned for any other purpose and (c) no portion of said amount
shall be commingled with other funds held by the undersigned.
(6) The Credit Facility Trustee shall register or cause to be
registered in the name of the Bank, or its designee, as pledgee of Advance
Stores Company, Incorporated (the "Company"), pursuant to Section 3 of the
Pledge Agreement and shall deliver or cause to be delivered to the Bank or
its designee a principal amount of Bonds equal to the principal amount of
the Conversion Draft accompanying this Certificate as promptly as
practicable, and in any event within five Business Days after presentation
of the Conversion Draft accompanying this Certificate.
(7) The Credit Facility Trustee acknowledges that, pursuant to the
terms of the Letter of Credit, upon the Bank's honoring the Conversion
Draft accompanying this Certificate, the Amount Available under the Letter
of Credit (i) shall be permanently reduced by the aggregate amount of such
Conversion Draft, (ii) the Principal Amount Available under the Letter of
Credit shall be permanently reduced by an amount equal to the amount of the
principal component of such draft set forth above, and (iii) the Interest
Amount Available under the Letter of Credit shall be permanently reduced by
an amount equal to the amount of interest component of such draft set forth
above.
IN WITNESS WHEREOF, the Credit Facility Trustee has executed and delivered
this Certificate as of the ___ day of ______________, 19__.
BRANCH BANKING AND TRUST COMPANY,
as Credit Facility Trustee
By:___________________________
Name:______________________
Title:_______________________
14
Annex E
-------
[Form of Certificate for Final Draft]
CERTIFICATE FOR DRAWING IN CONNECTION WITH THE PAYMENT
OF PRINCIPAL PLUS ACCRUED INTEREST, UPON STATED
OR ACCELERATED MATURITY OR OPTIONAL OR MANDATORY
REDEMPTION AS A WHOLE
Irrevocable Letter of Credit No. S141130
----------------------------------------
The undersigned, a duly authorized officer of the undersigned Credit
Facility Trustee (the "Credit Facility Trustee"), hereby certifies to First
Union National Bank (the "Bank"), with reference to Irrevocable Letter of Credit
No. S141130 (the "Letter of Credit"; the terms defined therein and not otherwise
defined herein being used herein as therein defined) issued by the Bank in favor
of the Credit Facility Trustee, as follows:
(1) The Credit Facility Trustee is the Credit Facility Trustee under
the Indenture for the registered owners of the Bonds.
(2) The Credit Facility Trustee is making a drawing under the Letter
of Credit with respect to a payment, either at stated maturity, upon
acceleration, or as a result of a redemption as a whole pursuant to the
Indenture, of the unpaid principal amount of and up to 49 days' accrued and
unpaid interest on, all of the Bonds which are "Outstanding" within the
meaning of the Indenture (other than Bonds presently held of record by the
Company or by the Bank, or its designee, as pledgee of the Company).
(3) The amount of the Final Draft accompanying this Certificate is
$__________________ and is equal to the sum of (i) $____________________
being drawn in respect of the payment of unpaid principal of Bonds (other
than Bonds presently held of record by the Company or by the Bank, or its
designee, as pledgee of the Company), which amount does not exceed the
Principal Amount Available under the Letter of Credit, and (ii) $______
being drawn in respect of the payment of ____ days' [not to exceed 49
days'] accrued and unpaid interest on such Bonds, which amount does not
exceed the Interest Amount Available under the Letter of Credit.
(4) The amount of the Final Draft accompanying this Certificate was
computed in compliance with the terms and conditions of the Bonds and the
Indenture and does not exceed the Amount Available under the Letter of
Credit.
15
(5) Upon receipt by the undersigned of the amount demanded hereby,
(a) the undersigned will apply the same directly to the payment when due of
the principal amount and accrued and unpaid interest thereon owing on
account of the Bonds pursuant to the Indenture, (b) no portion of said
amount shall be applied by the undersigned for any other purpose and (c) no
portion of said amount shall be commingled with other funds held by the
undersigned.
IN WITNESS WHEREOF, the Credit Facility Trustee has executed and
delivered this Certificate as of the __ day of _______________, 19__.
BRANCH BANKING AND TRUST COMPANY,
as Credit Facility Trustee
By:___________________________
Name:______________________
Title:_______________________
16
Annex F
-------
[Form of Reinstatement Certificate For Tender Draft]
CERTIFICATE FOR THE REINSTATEMENT OF AMOUNTS AVAILABLE
------------------------------------------------------
UNDER IRREVOCABLE LETTER OF CREDIT NO. S141130
----------------------------------------------
The undersigned, a duly authorized officer of the undersigned Credit
Facility Trustee (the "Credit Facility Trustee"), hereby certifies to First
Union National Bank (the "Bank"), with reference to Irrevocable Letter of Credit
No. S141130 (the "Letter of Credit"; the terms defined therein and not otherwise
defined herein being used herein as therein defined) issued by the Bank in favor
of the Credit Facility Trustee, as follows:
(1) The Credit Facility Trustee is the Credit Facility Trustee under
the Indenture for the holders of the Bonds.
(2) The amount of $________ paid to you today by or on behalf of the
Company is a payment made to reimburse you, pursuant to Section 3.2 of the
Letter of Credit and Reimbursement Agreement, dated as of December 1, 1997
(the "Reimbursement Agreement"), by and among the Borrowers and the Bank,
for amounts drawn under the Letter of Credit by Tender Drafts. The Credit
Facility Trustee hereby requests that you reinstate the Letter of Credit
upon receipt of such payment in an amount equal to the amount of payment so
received.
(3) Of the amount referred to in paragraph (2), $_________ represents
the aggregate principal amount of Bonds resold or to be sold on behalf of
the Company.
(4) Of the amount referred to in paragraph (2), $__________
represents accrued and unpaid interest on the Bonds.
17
IN WITNESS WHEREOF, the Credit Facility Trustee has executed and delivered
this Certificate as of the __ day of ________________, 19__.
BRANCH BANKING AND TRUST COMPANY,
as Credit Facility Trustee
By:___________________________
Name:______________________
Title:_____________________
18
[attached to Annex F]
ACKNOWLEDGMENT
--------------
The Bank hereby confirms to the Credit Facility Trustee that the
Principal Amount Available under the Letter of Credit has been reinstated by the
amount of $______________ and the Interest Amount Available under the Letter of
Credit has been reinstated by the amount of $_____________.
This ___ day of _________, 19__.
FIRST UNION NATIONAL BANK
By:___________________________
Name:______________________
Title:_____________________
19
Annex G
-------
[Form of Transfer Certificate]
INSTRUCTION TO TRANSFER
First Union National Bank
301 South Tryon Street, M7
Charlotte, North Carolina 28288-0742
Attention: International Operations
Re: Your Irrevocable Letter of Credit No. S141130
---------------------------------------------
Ladies and Gentlemen:
For value received, the undersigned beneficiary (the "Transferor")
hereby irrevocably transfer to:
___________________________
[Name of Transferee]
___________________________
[Address]
(the "Transferee") all rights of the Transferor with respect to the above-
referenced Letter of Credit, including the right to draw under said Letter of
Credit in the Amount Available. Said Transferee has succeeded the Transferor as
Credit Facility Trustee under that certain Trust Indenture dated as of December
1, 1997, by and among the Development Authority of McDuffie County, First Union
National Bank, Richmond, Virginia, as trustee and Branch Banking and Trust
Company, as the initial Credit Facility Trustee thereunder (the "Indenture"),
with respect to the Bonds as described in the Indenture and has complied with
the provisions of the Indenture.
By virtue of this transfer, the Transferee shall have the sole rights
as beneficiary of said Letter of Credit, including sole rights relating to any
past or future amendments thereof, whether increases or extensions or otherwise.
All amendments are to be advised directly to the Transferee without necessity of
any consent of or notice to the Transferor.
By its signature below, the Transferee acknowledges that it has duly
succeeded the Transferor as Credit Facility Trustee pursuant to the Indenture.
20
The advice of such Letter of Credit is returned herewith, along with a
transfer fee of $1,000.00, and we ask you to endorse the transfer on the reverse
side thereof and to forward it directly to the Transferee with your customary
notice of transfer.
Very truly yours,
BRANCH BANKING AND TRUST COMPANY,
as Credit Facility Trustee
By:_____________________________
[insert name and title of
authorized officer]
[Corporate Seal]
Acknowledged by:
_______________________________
[insert name of Transferee]
By:____________________________
[insert name and title of
authorized officer]
[Corporate Seal]
21
EXHIBIT B
---------
[FORM OF OPINION OF COUNSEL TO THE BORROWERS]
December 31, 1997
First Union National Bank, as Trustee
Richmond, Virginia
Branch Banking and Trust Company,
as Credit Facility Trustee
Wilson, North Carolina
First Union National Bank, as
Placement Agent
Charlotte, North Carolina
First Union National Bank, as
Letter of Credit Provider
Roanoke, Virginia
Re: $10,000,000 Development Authority of McDuffie County Taxable
Industrial Development Revenue Bonds (Advance Stores Company,
Incorporated Project), Series 1997
Ladies and Gentlemen:
We have acted as counsel to Advance Stores Company, Incorporated (the
"Company") and Advance Holding Corporation (the "Parent", and together with the
Company, the "Borrowers") and are familiar with the matters relating to the
preparation, execution and delivery of a Letter of Credit and Reimbursement
Agreement, dated as of December 1, 1997 (the "Reimbursement Agreement"), by and
among the Borrowers and First Union National Bank (the "Bank").
Terms defined in the Reimbursement Agreement are used herein as therein
defined. Among other things, we have examined:
(1) a fully executed counterpart of the Reimbursement Agreement, dated as
of December 1, 1997;
(2) fully executed and acknowledged counterparts of the Security
Instruments;
B-1
(3) the Placement Agreement, dated December 31, 1997 (the "Placement
Agreement") among the Company, Development Authority of McDuffie County (the
"Issuer") and First Union National Bank, Charlotte, North Carolina, as Placement
Agent;
(4) the Bond Documents (as defined in the Reimbursement Agreement);
(5) certificate of good standing for Company issued by the Virginia
Secretary of State:
(6) the Articles of Incorporation of the Company, as applicable, and all
amendments thereto;
(7) the Bylaws of the Company, as applicable, as now in effect (the
"Bylaws");
(8) certificate of good standing for Parent issued by the Virginia
Secretary of State:
(9) the Articles of Incorporation of the Parent, as applicable, and all
amendments thereto; and
(10) the Bylaws of the Parent, as applicable, as now in effect (the
"Bylaws").
We have also examined the originals, or copies certified to our
satisfaction, of (i) such other records of the Borrowers, certificates of public
officials and of officers of the Borrowers, and (ii) such other agreements,
instruments and documents as we have deemed necessary as a basis for the
opinions hereinafter expressed. As to questions of fact material to such
opinions, we have, when relevant facts were not independently established by me,
relied upon certificates of the Borrowers or of public officials. We have
assumed the due execution and delivery of the Reimbursement Agreement and other
Loan Documents by the Bank.
Based upon the foregoing and upon such investigation as we have deemed
necessary, we are of the opinion that:
(a) The Company is a duly organized and validly existing corporation
under the laws of the State of Virginia. The Company has the requisite
corporate power and authority to execute and deliver the Bonds Documents to
which it is a party, the Security Instruments and the Reimbursement
Agreement and to perform its obligations thereunder;
(b) The Parent is a duly organized and validly existing corporation
under the laws of the State of Virginia. The Parent has the requisite
corporate power and authority to execute and deliver the Bonds Documents to
which it is a party, the
B-2
Security Instruments and the Reimbursement Agreement and to perform its
obligations thereunder;
(c) All Bond Documents to which the Borrowers are a party, the
Reimbursement Agreement and the Security Instruments have been duly
authorized, executed and delivered by the Borrowers, and subject to the
last paragraph of this letter, each of them is the legal, valid and binding
obligation and agreement of the Borrowers, enforceable in accordance with
their terms;
(d) To the best of our knowledge, no authorization or approval or
other action by, and no notice to or filing or registration with, any
governmental authority or regulatory body is required for (i) the due
execution, delivery and performance by the Borrowers of the Reimbursement
Agreement or any of the Security Instruments or Bond Documents to which
they are a party;
(e) To the best of our knowledge, neither the issuance and sale of the
Bonds, nor the consummation of any other of the transactions contemplated
in the Placement Agreement, the Bond Documents, the Security Instrument or
the Reimbursement Agreement nor the fulfillment of the terms thereof will
conflict with, result in a breach of, constitute a default or require any
consent under (i) the terms of the Articles of Incorporation of the
Borrowers, as applicable, (ii) any indenture or other agreement or
instrument to which the Borrowers or any of their affiliates may be bound
or affected, or (iii) any order or regulation to be applicable to the
Borrowers, of any Federal or Virginia court, regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction
over the Borrowers, as applicable. Additionally, to the best of our
knowledge, neither the issuance and the sale of the Bonds, nor the
consummation of any other of the transactions contemplated in the Placement
Agreement, the Security Instruments, the Reimbursement Agreement or the
Bond Documents, nor the fulfillment of the terms thereof will result in the
creation of any lien, pledge, charge or encumbrance upon any of the assets
or property of the Borrowers, as applicable, other than those expressly
contemplated by such documents, the Borrowers are not in default under any
material agreement or indenture instrument; and
(f) To our best knowledge after due inquiry, there are no judicial,
regulatory or arbitral proceedings pending or threatened in and federal or
Virginia court at law or in equity against the Borrowers, as applicable,
which, if decided adversely to the Borrowers, as applicable, would have a
material adverse effect on the financial condition or operations of the
Borrowers, as applicable, or adversely affect the validity or
enforceability of the Bond Documents, the Reimbursement Agreement or the
transactions contemplated therein.
Although we have made certain inquiries and investigations in connection
with the preparation of the Placement Memorandum, we did not independently
verify the accuracy or completeness of the statements made in the Placement
Memorandum and cannot and
B-3
do not assume responsibility for or pass on the accuracy and completeness of
such statements, except insofar as such statements relate to the Borrowers.
Subject to the foregoing, we can state to you that our work in connection with
this matter did not disclose any information that caused us to believe that the
Placement Memorandum contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, not misleading.
Our opinion concerning the validity, binding effect and enforceability of
the Reimbursement Agreement or any of the Loan Documents to which Borrowers are
a party means that said documents (i) constitute effective contracts under
applicable law, (ii) are not invalid in their entirety because a specific
statutory prohibition or public policy and are not subject in their entirety to
a contractual defense, and (iii) subject to the last two sentences of this
paragraph, applicable law provides remedies for enforcement of the security
interests and liens created by the documents if the Borrowers, as applicable, is
in material default under the documents. This opinion does not mean that (i)
any particular remedy is available upon a material default, or (ii) every
provision of the documents will be upheld or enforced in any or each
circumstance by a court. Furthermore, the validity, binding effect and
enforceability of the documents may be limited or otherwise affected by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or
other similar statutes, rules, regulations or other laws affecting the
enforcement of creditor's rights and remedies generally and (ii) the
unavailability of, or limitation on the availability of, a particular right or
remedy (whether in a proceeding in equity or at law) because of an equitable
principle or a requirement as to commercial reasonableness, conscionability or
good faith. We express no opinion as to the enforceability of any provision in
the documents which provides for the waiver by Borrowers, as applicable, of any
rights or protections in bankruptcy, including, without limitation, agreement to
the lifting of automatic stay provisions.
Sincerely,
B-4
EXHIBIT C
LITIGATION
----------
On November 5, 1997, Joe C. Proffitt, ("Plaintiff") on behalf of himself
and others similarly situated filed in the Circuit Court for Jefferson County,
Tennessee, a class action complaint and Motion for Class Certification against
Advance Stores Company, Inc. ("Advance") alleging misconduct in the sale of
automobile batteries.
The gravamen of Plaintiffs' complaint is the allegation that Advance
implemented a uniform scheme to promote, offer, and sell old, used, and "out of
warranty" batteries to unsuspecting customers as if the batteries were new.
The putative class is alleged to include "All persons and entities in the
States of Alabama, California, Georgia, Kentucky, Michigan, North Carolina,
Ohio, South Carolina, Tennessee, Texas, Virginia and West Virginia, who
purchased automotive batteries from Advance or any Advance retail store
locations at any time during the period November 1, 1991 to the present."
The complaint seeks compensatory damages in an amount not to exceed $200.00
per class member, and punitive damages in an amount not to exceed $74,000.00 per
class member. Advance believes that the amounts of damages have been limited to
less than $75,000.00 to avoid the possibility of removal to Federal Court.
The case is in the very early stages of discovery. Advance, believes that
there is no merit to the complaint, or to the Motion for Class Certification,
and accordingly plans a vigorous defense.
C-1