Final Prospectus
Table of Contents

Filed Pursuant to Rule 424(b)(3)
Registration No. 333-151578

LOGO

O’Reilly Automotive, Inc.

Offer to Exchange

Each Outstanding Share of Common Stock

(Including the Associated Common Stock Purchase Rights)

of

CSK Auto Corporation

for

(I) Between 0.3673 and 0.4285 of a Share of Common Stock of

O’Reilly Automotive, Inc. and (II) $1.00 in Cash, Subject to Possible Reduction

The offer and withdrawal rights will expire at 12:00 midnight, New York City time, on July 10, 2008, unless extended. Shares tendered pursuant to the offer may be withdrawn at any time prior to the expiration of the offer, but not during any subsequent offering period.

This prospectus amends and supercedes information included in the prospectus originally filed with the Securities and Exchange Commission on June 11, 2008.

We are offering to exchange (i) between 0.3673 and 0.4285 of a share of common stock of O’Reilly Automotive, Inc. (“O’Reilly”) and (ii) $1.00 in cash, subject to possible reduction, as described below, for each share of common stock, including the associated common stock purchase rights, of CSK Auto Corporation (“CSK”) that you validly tender in the offer, through our indirect wholly owned subsidiary, OC Acquisition Company, a Delaware corporation (“OC Acquisition”), on the terms and conditions contained in this prospectus and in the related letter of transmittal. The number of shares of O’Reilly common stock received for each tendered share of CSK common stock, together with the associated rights to purchase CSK common stock issued pursuant to the Rights Agreement, dated February 4, 2008, between CSK and Mellon Investor Services LLC (“common stock purchase rights”), will be determined based on an exchange ratio equal to $11.00 divided by the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including the second trading day prior to the consummation of the offer and rounded to four decimal places; provided, however, that if such average closing sale price of O’Reilly stock is greater than $29.95, then the exchange ratio shall equal 0.3673, and if such average closing sale price is less than $25.67, then the exchange ratio shall equal 0.4285. The $1.00 in cash received per share of CSK common stock will be subject to reduction for costs in excess of $3,000,000, if any, incurred by CSK associated with obtaining any necessary waivers or consents under CSK’s credit agreements prior to the completion of the offer. CSK has indicated to O’Reilly that, as of the date of this prospectus, it does not anticipate obtaining any waivers or consents under its credit agreements prior to the anticipated completion of the offer.

By way of example, if the average of the reported closing sale prices of O’Reilly common stock as reported on the NASDAQ Stock Market, Inc. (“NASDAQ”) for the five (5) consecutive trading days ending on and including June 17, 2008, the last trading day prior to the printing of this prospectus for which this information was practicably available, were to be used to establish the exchange ratio, each share of CSK common stock would be exchanged into 0.4285 shares of O’Reilly common stock and $1.00 in cash, subject to possible reduction, as described herein.

The offer is being made pursuant to an Agreement and Plan of Merger, which is referred to throughout this prospectus as the merger agreement, dated as of April 1, 2008, among O’Reilly, OC Acquisition, and CSK, as may be amended in accordance with its terms. The members of the CSK board of directors unanimously approved the merger agreement and the transactions contemplated thereby, including the offer and the merger, in all respects, and determined that the merger agreement and the transactions contemplated thereby, including the offer and the merger, taken together, are at a price and on terms that are advisable and fair to and in the best interests of CSK and its stockholders, and resolved to recommend that CSK stockholders accept the offer and tender their shares pursuant to the offer.

The offer is conditioned on there being validly tendered and not properly withdrawn prior to the expiration of the offer a number of shares of CSK common stock that, together with shares of CSK common stock then directly or indirectly owned by O’Reilly, represents at least a majority of the fully diluted shares of CSK common stock, calculated as described in this prospectus, and satisfaction of the other conditions described in this prospectus under “The Offer—Conditions of the Offer” on page 67.

After completion of the offer, O’Reilly will cause OC Acquisition to complete a merger with and into CSK, with CSK continuing as the surviving corporation, in which each outstanding share of CSK common stock (except for shares beneficially owned directly or indirectly by O’Reilly for its own account and any shares held in treasury by CSK) will be converted into the right to receive the same consideration paid in exchange for each share of CSK common stock in the offer, subject to appraisal rights to the extent applicable under Delaware law. If after the completion of the offer we beneficially own more than 90% of the outstanding shares of CSK common stock or if we exercise our option to purchase additional shares directly from CSK to reach the 90% threshold, we may effect this merger without the approval of CSK stockholders, as permitted under Delaware law, subject to appraisal rights to the extent applicable under Delaware law. Furthermore, if necessary to preserve the intended treatment of the offer and the merger as a tax-free reorganization for United States federal income tax purposes, O’Reilly will cause CSK to merge, immediately after the merger, with and into a direct, wholly-owned, limited liability company subsidiary of O’Reilly that is treated as a disregarded entity for United States federal income tax purposes. We refer to this merger throughout this prospectus as the LLC merger.

We are not asking you for a proxy and you are requested not to send us a proxy. Any request for proxies, if required, will be made only pursuant to separate proxy solicitation materials complying with the requirements of Section 14(a) of the Securities Exchange Act of 1934, as amended, which is referred to throughout this prospectus as the Exchange Act.

See “Risk Factors” beginning on page 21 for a discussion of important factors that you should consider in connection with the offer.

O’Reilly’s common stock is quoted on the NASDAQ under the symbol “ORLY” and CSK’s common stock is quoted on the New York Stock Exchange (“NYSE”) under the symbol “CAO.”

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is June 11, 2008, as amended on June 20, 2008.


Table of Contents

TABLE OF CONTENTS

 

     Page

QUESTIONS AND ANSWERS ABOUT THE OFFER

   iii

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

   viii

SUMMARY

   1

SELECTED HISTORICAL FINANCIAL DATA

   10

O’Reilly’s Selected Historical Consolidated Financial Data

   10

CSK’s Selected Historical Consolidated Financial Data

   12

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

   14

UNAUDITED COMPARATIVE PER COMMON SHARE DATA

   16

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

   18

RECENT CLOSING PRICES

   20

RISK FACTORS

   21

Risks Related to the Offer and the Merger

   21

Risks Related to O’Reilly and the Combined Company

   23

BACKGROUND AND REASONS FOR THE OFFER AND THE MERGER

   27

Background of the Offer and the Merger

   27

Additional Factors for Consideration by CSK Stockholders

   31

RECOMMENDATION OF CSK’S BOARD OF DIRECTORS

   32

THE OFFER

   33

Exchange of Shares of CSK Common Stock

   33

Timing of the Offer

   34

Extension, Termination and Amendment

   34

Subsequent Offering Period

   35

Conditions of the Offer

   35

Important Definitions

   38

Procedure for Tendering Shares

   38

Guaranteed Delivery

   39

Withdrawal Rights

   40

Effect of a Tender of Shares

   41

Delivery of Shares of O’Reilly Common Stock and Cash

   42

Cash Instead of Fractional Shares of O’Reilly Common Stock

   42

Material United States Federal Income Tax Considerations

   42

Transferability of Shares of O’Reilly Common Stock

   46

Approval of the Merger

   46

Appraisal Rights

   47

CERTAIN LEGAL MATTERS

   47

Regulatory Approvals

   47

State Takeover Laws

   47

CERTAIN EFFECTS OF THE OFFER

   48

Effects on the Market; Exchange Act Registration

   48

Financing of the Offer and the Merger

   49

Conduct of CSK if the Offer is Not Completed

   50

Accounting Treatment

   50

Fees and Expenses

   50

INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER

   52

Interests of Management and the CSK Board

   52

Interests of O’Reilly in the Offer

   56

THE MERGER AGREEMENT

   58

The Offer

   58

The Merger

   60

 

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     Page

Representations and Warranties

   61

Covenants

   62

Conditions of the Offer

   67

Conditions of the Merger

   67

Termination of the Merger Agreement

   68

Extension, Waivers and Amendment

   70

INFORMATION WITH RESPECT TO CSK

   71

INFORMATION WITH RESPECT TO O’REILLY AND OC ACQUISITION

   71

DESCRIPTION OF O’REILLY CAPITAL STOCK

   72

COMPARISON OF RIGHTS OF HOLDERS OF O’REILLY COMMON STOCK AND CSK COMMON STOCK

   72

ADDITIONAL INFORMATION

   81

Legal Matters

   81

Experts

   81

Where You Can Find Additional Information

   81

Miscellaneous

   83

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

   84

Annex A Agreement and Plan of Merger

   A-1

Annex B Section 262 of the Delaware General Corporation Law

   B-1

Annex C Information Concerning Directors and Executive Officers of O’Reilly and OC Acquisition

   C-1

Annex D CSK’s Annual Report on Form 10-K for the Year Ended February 3, 2008

   D-1

Annex E CSK’s Amendment to its Annual Report on Form 10-K/A for the Year Ended February 3, 2008

   E-1

Annex F CSK’s Current Report on Form 8-K filed on May 14, 2008

   F-1

Annex G CSK’s Quarterly Report on Form 10-Q for the Quarter Ended May 4, 2008

   G-1

ADDITIONAL INFORMATION

As permitted under the rules of the Securities and Exchange Commission (the “SEC”), this prospectus incorporates important business and financial information about O’Reilly that is contained in documents filed with the SEC but that are not included in or delivered with this prospectus. You may obtain copies of these documents, without charge, from the website maintained by the SEC at www.sec.gov, as well as other sources. See “Additional Information—Where You Can Find Additional Information” on page 81.

You may also obtain copies of these documents, without charge, upon written or oral request to our information agent, Innisfree M&A Incorporated (“Innisfree”) (Banks and Brokerage Firms, please call (212) 750-5833; all others call toll free: (888) 750-5834). To obtain timely delivery of copies of these documents, you should request them no later than five business days prior to the expiration of the offer. UNLESS THE OFFER IS EXTENDED, THE LATEST YOU SHOULD REQUEST COPIES OF THESE DOCUMENTS IS JULY 2, 2008.

Except as otherwise specifically noted, “O’Reilly,” “we,” “our,” “us” and similar words in this prospectus refer to O’Reilly Automotive, Inc. We refer to CSK Auto Corporation as “CSK” and to OC Acquisition Company as “OC Acquisition.”

 

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QUESTIONS AND ANSWERS ABOUT THE OFFER

General Questions and Answers

The following is important information in a question-and-answer format regarding the offer and this prospectus.

 

Q: What is O’Reilly proposing?

 

A: O’Reilly proposes to acquire all outstanding shares of CSK common stock, together with the associated common stock purchase rights. We have entered into a merger agreement with CSK pursuant to which we are offering, through OC Acquisition, our indirect wholly-owned subsidiary, to exchange a fraction of a share of O’Reilly common stock and cash for each outstanding share of CSK common stock. If the offer is completed, subject to approval by the stockholders of CSK, if necessary, OC Acquisition will merge with and into CSK. As a result of the offer and the merger, CSK will become an indirect wholly-owned subsidiary of O’Reilly.

 

     For a more complete description of the merger, please see the section entitled “The Merger Agreement—The Merger” beginning on page 60 of this prospectus.

 

Q: Why are O’Reilly and CSK proposing the offer and the merger?

 

A: O’Reilly and CSK believe that combining the strengths of the two companies is in the best interests of both companies and their respective stockholders. Please see the section entitled “Background and Reasons for the Offer and the Merger” beginning on page 27 of this prospectus for the numerous factors considered by the boards of directors of CSK and O’Reilly when contemplating the offer and the merger.

 

Q: What would I receive in exchange for my shares of CSK common stock?

 

A: For each share of CSK common stock that is validly tendered and not properly withdrawn, we are offering (i) between 0.3673 and 0.4285 of a share of common stock of O’Reilly and (ii) $1.00 in cash, subject to possible reduction, as described herein. The number of shares of O’Reilly common stock received for each tendered share of CSK common stock will be determined based on an exchange ratio equal to $11.00 divided by the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including the second trading day prior to the consummation of the offer and rounded to four decimal places; provided, however, that if such average closing sale price of O’Reilly stock is greater than $29.95, then the exchange ratio shall equal 0.3673, and if such average closing sale price is less than $25.67, then the exchange ratio shall equal 0.4285. The $1.00 in cash received per share of CSK common stock will be subject to reduction for costs in excess of $3,000,000, if any, incurred by CSK associated with obtaining any necessary waivers or consents under CSK’s credit agreements prior to the completion of the offer. CSK has indicated to O’Reilly that, as of the date of the prospectus, it does not anticipate obtaining any waivers or consents under its credit agreements prior to the anticipated completion of the offer. After completion of the offer and upon consummation of the merger, each share of CSK common stock that has not been tendered and accepted for exchange in the offer will be converted in the merger into the right to receive the same consideration as offered in exchange for each share of CSK common stock in the offer.

 

     O’Reilly will not issue any fractional shares of common stock in connection with the offer or the merger. CSK stockholders will instead receive cash for any fractional shares otherwise issuable to them.

 

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Q: What are some of the other factors I should consider in deciding whether to tender my shares of CSK common stock?

 

A: In addition to the factors described elsewhere in this prospectus, you should consider the following:

 

   

As an O’Reilly shareholder, your interest in the performance and prospects of the CSK business would only be indirect and in proportion to your share ownership in O’Reilly. You, therefore, will not realize the same financial benefits of future appreciation in the value of the CSK business, if any, that you might realize if the offer and the merger were not completed and you remained a CSK stockholder; and

 

   

The failure of the combined company to meet the challenges involved in integrating the operations of O’Reilly and CSK successfully or to otherwise realize any of the anticipated benefits of the offer and the merger could seriously harm the results of operations of the combined company.

 

     We describe various factors CSK stockholders should consider in deciding whether to tender their shares in the offer under “Risk Factors” on page 21 and “Background and Reasons for the Offer and the Merger—Additional Factors for Consideration by CSK Stockholders” on page 31.

 

Q: Do I have to pay any fees or commissions?

 

A: If you are the record owner of your shares and you tender your shares in the offer, you will not incur any brokerage fees. If you own your shares through a broker or other nominee who tenders the shares on your behalf, your broker or other nominee may charge you a fee for doing so. You should consult your broker or nominee to determine whether any charges will apply.

 

Q: Does CSK support the offer and the merger?

 

A: Yes. The members of the CSK board of directors, at a meeting duly called and held on March 31, 2008, voted unanimously to approve the merger agreement and the transactions contemplated thereby, including the offer and the merger, and determined that the merger agreement, the offer, and the merger are advisable and fair to, and in the best interest of, CSK’s stockholders. The CSK board of directors voted unanimously to recommend that CSK’s stockholders accept the offer and tender their shares in the offer. Information about the recommendation of CSK’s board of directors is more fully set forth in CSK’s Solicitation/Recommendation Statement on Schedule 14D-9, which is being mailed to CSK stockholders together with this prospectus.

 

Q: What percentage of O’Reilly common stock will CSK stockholders own after the offer and the merger?

 

A: If we obtain all of the outstanding shares of CSK pursuant to the offer and the merger, former stockholders of CSK would own approximately 14.0% of the outstanding shares of common stock of O’Reilly, based upon the number of outstanding shares of O’Reilly common stock and CSK common stock on June 17, 2008 and based on the closing sale price of O’Reilly common stock as reported on the NASDAQ on June 17, 2008, disregarding stock options, and shares of common stock that may be issued by O’Reilly or CSK pursuant to an employee stock plan.

 

Q: What are the most significant conditions to the acceptance of shares of CSK common stock in the offer?

 

A: O’Reilly’s obligation to accept shares of CSK common stock in the offer is subject to several conditions, including:

 

   

The valid tender, without proper withdrawal, of a number of shares of CSK common stock that, together with shares of CSK common stock then directly or indirectly owned by O’Reilly, represents at least a

 

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majority of the outstanding shares of CSK common stock, on a fully diluted basis (including all shares issuable upon exercise of all options or other rights to purchase CSK common stock that will be vested by September 28, 2008), which we refer to in this prospectus as the minimum tender condition;

 

   

The expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which occurred on April 17, 2008; and

 

   

The registration statement of which this prospectus is a part having been declared effective by the SEC and not subject to any stop order or proceeding seeking a stop order.

 

     These and other conditions to the offer are discussed in this prospectus under “The Offer—Conditions of the Offer” beginning on page 35.

 

Q: How long will it take to complete the offer and the merger?

 

A: We hope to complete the offer by July 10, 2008, the initial scheduled expiration date. However, we may decide, or be required, to extend the offer if certain conditions of the offer have not been satisfied by the initial scheduled expiration date. In addition, we, in our sole discretion, will extend the offer for an aggregate period of not more than ten (10) business days beyond the last expiration date of the offer that would otherwise be permitted if, in our reasonable discretion, such extension is necessary to complete the necessary conditions to complete our financing transactions for the offer so long as such extension does not extend the expiration date of the offer beyond thirty (30) business days following commencement of the offer. We expect to complete the merger shortly after successful completion of the offer or, if CSK stockholder approval is required, shortly after such approval is obtained either at a special meeting of the CSK stockholders called for that purpose or following the receipt of the requisite approval of CSK stockholders acting by written consent. If the conditions to the offer are satisfied, O’Reilly will have sufficient votes to adopt the merger agreement without the need for any other CSK stockholders to vote in favor of such adoption. Because completion of the offer and the merger is subject to various conditions, O’Reilly and CSK cannot predict the exact timing of completion of the offer or the merger or whether the offer or the merger will be completed at all.

 

Q: How do I participate in the offer?

 

A: You are urged to read this entire prospectus carefully and to consider how the offer and the merger affect you. Then, if you wish to tender your shares of CSK common stock, you should do the following:

 

   

If you hold your shares in your own name, complete and sign the enclosed letter of transmittal and return it with your share certificates to Mellon Investor Services LLC, exchange agent for the offer, at one of its addresses on the back cover of this prospectus.

 

   

If you hold your shares in “street name” through a broker, ask your broker to tender your shares.

 

     For more information about the procedures for tendering your shares, timing of the offer, extensions of the offer period and your rights to withdraw your shares from the offer before the expiration date, please refer to “The Offer” beginning on page 33.

 

Q: Do I have to vote to approve the offer or the merger?

 

A: Because we are extending the offer directly to CSK stockholders, CSK stockholders are not being asked to vote to approve the offer, but approval of the merger by CSK stockholders may be required following the successful completion of the offer. If approval of the merger is required once the offer is completed, it can be accomplished solely by us because we will own a majority of the shares of CSK common stock at that time. CSK stockholders will receive an information statement relating to our approval of the merger. If we own 90% or more of the outstanding common stock of CSK following completion of the offer or if we exercise our option to purchase additional shares directly from CSK to reach the 90% threshold, the merger can be accomplished without any vote of CSK stockholders under applicable Delaware law.

 

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Q: If I decide not to tender, how will this affect the offer and my shares of CSK common stock?

 

A: We will not acquire any shares of CSK common stock in the offer unless the minimum tender condition is satisfied. Your failure to tender your shares of CSK common stock will reduce the likelihood that we will receive tenders of a sufficient number of shares of CSK common stock to be able to complete the offer.

 

     The offer is the first step in our acquisition of CSK and is intended to facilitate the acquisition of all outstanding shares of CSK common stock. After completion of the offer, we will cause OC Acquisition, an indirect wholly-owned subsidiary of O’Reilly, to complete a merger with and into CSK with CSK continuing as the surviving corporation, which is referred to throughout this prospectus as the merger. The purpose of the merger will be to acquire all outstanding shares of CSK common stock not exchanged in the offer. In the merger, each outstanding share of CSK common stock (except for shares beneficially owned directly or indirectly by O’Reilly for its own account and any shares held in treasury by CSK) will be converted into the same amount of cash and fraction of a share of O’Reilly common stock being issued in exchange for each share of CSK common stock accepted in the offer, subject to appraisal rights to the extent applicable under Delaware law. If the merger takes place, except for your right to an appraisal of your shares of CSK common stock to the extent applicable under Delaware law, the only difference to you between tendering your shares of CSK common stock in the offer and not tendering your shares of CSK common stock is that you will receive cash and shares of O’Reilly common stock earlier if you tender your shares in the offer. An earlier tender of your shares of CSK common stock may, however, help to ensure the satisfaction of the minimum tender condition and the completion of the offer and merger.

 

Q: What is the “top-up option” and when will it be exercised?

 

A: Under the merger agreement, if the minimum tender condition is satisfied and we consummate the offer, we have the option, which we refer to as the top-up option, to purchase from CSK additional shares of CSK common stock, subject to limitations described herein, equal to the lowest number of shares that, when added to the number of shares already owned by O’Reilly, will constitute one share more than 90% of the shares of CSK common stock then outstanding. If we exercise this option, we may issue a promissory note, bearing interest at five percent per annum, in the amount required to pay the aggregate purchase price for the additional shares of CSK common stock at the offer price. In no event will the top-up option be exercisable for a number of shares of CSK common stock (i) that would require CSK to obtain stockholder approval under applicable law or the rules and regulations of the New York Stock Exchange or (ii) in excess of CSK’s then authorized and unissued shares of common stock.

 

Q:

What will happen to the 6 3/4% exchangeable notes of CSK in the offer?

 

A:

CSK has outstanding 6 3/4% Exchangeable Senior Notes due 2025. O’Reilly will assume these notes as a successor under the indenture governing these notes through a supplemental indenture.

 

Q: What will happen to CSK’s outstanding options and other stock-based awards in the merger?

 

A: At the effective time of the merger (or an earlier date O’Reilly may select on or following consummation of the offer), unexercised CSK stock options, whether vested or unvested, then outstanding will automatically be converted into vested options to acquire O’Reilly common stock. Option holders will not receive the cash portion of the offer consideration and their exchange ratio will be adjusted to account for the cash portion of the offer consideration.

 

     At the effective time of the merger, with the exception of the CSK stock award of 89,899 shares relating to Mr. Lawrence Mondry, all CSK stock awards will be converted into a right to receive the offer consideration multiplied by the number of shares of CSK common stock subject to such stock award. With respect to the award of 89,899 shares of restricted stock, it will be converted into the right to receive O’Reilly common stock on the same basis as the option holders and such award shall continue to vest in accordance with its terms.

 

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Q: Will I be taxed on the O’Reilly shares I receive?

 

A: It is a condition to the completion of the offer that O’Reilly and CSK receive legal opinions from their respective tax counsel to the effect that the offer, the merger and the LLC merger (if any) together will constitute a reorganization within the meaning of section 368(a) of the Internal Revenue Code, or the Code. A CSK common stockholder who, consistent with such opinions, receives cash (other than cash in lieu of a fractional share of O’Reilly common stock) and shares of O’Reilly common stock pursuant to a transaction constituting a reorganization within the meaning of section 368(a) of the Code will recognize gain (but will not recognize any loss), and the gain recognized will be equal to the lesser of (i) any cash received (other than cash received in lieu of a fractional share of O’Reilly common stock) and (ii) the excess, if any, of (x) the sum of the cash received (other than cash received in lieu of a fractional share of O’Reilly common stock) and the fair market value of the O’Reilly common stock received over (y) such CSK common stockholder’s tax basis in the shares of CSK common stock exchanged therefor. In addition, such CSK common stockholder will recognize gain or loss attributable to cash received in lieu of a fractional share of O’Reilly common stock. CSK common stockholders should consult their tax advisors for a full understanding of all of the tax consequences of the offer, the merger and the LLC merger (if any) to them.

 

Q: Do the statements on the cover page regarding this prospectus being subject to change and the registration statement filed with the SEC not yet being effective mean that the offer has not commenced?

 

A: No. As permitted under SEC rules, we may commence the offer without the registration statement, of which this prospectus is a part, having been declared effective by the SEC. We cannot, however, complete the offer and accept for exchange any shares of CSK common stock tendered in the offer until the registration statement is declared effective by the SEC and the other conditions to the offer have been satisfied or, where permissible, waived. The offer will commence when we first mail this prospectus and the related letter of transmittal to CSK stockholders.

 

Q: Is O’Reilly’s financial condition relevant to my decision to tender my shares in the offer?

 

A: Yes. Since shares of CSK common stock accepted in the offer will be exchanged in part for shares of O’Reilly common stock, you should consider our financial condition before you decide to tender shares in the offer. In considering O’Reilly’s financial condition, you should review carefully the information in this prospectus and the documents incorporated by reference in this prospectus because they contain detailed business, financial and other information about us.

 

Q: Are there any risks related to the proposed transaction or any risks related to owning O’Reilly common stock that I should consider in deciding whether to participate in the exchange offer?

 

A: Yes. You should carefully review the section entitled “Risk Factors” beginning on page 21 of this prospectus.

 

Q: Where can I find more information about O’Reilly and CSK?

 

A: You can find more information about O’Reilly and CSK as described under “Where You Can Find Additional Information” on page 81.

 

Q: Whom should I contact if I have more questions about the offer and the merger?

 

A: You may contact Innisfree M&A Incorporated, the information agent for the offer, toll free at (888) 750-5834. Banks and brokers may call collect at (212) 750-5833.

 

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CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

This prospectus, including information included or incorporated by reference in this prospectus, contains forward-looking statements. These forward-looking statements include, but are not limited to, statements discussing among other things, expected growth, store development and expansion strategy, business strategies, future revenues, future performance, the benefits of the merger, including future financial and operating results and performance; statements about O’Reilly’s and CSK’s plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “should,” “may” or words of similar meaning.

These forward-looking statements are based on estimates, projections, beliefs and assumptions and are not guarantees of future events and results. Such statements are subject to risks, uncertainties and assumptions, including, but not limited to, competition, product demand, the market for auto parts, the economy in general, inflation, consumer debt levels, governmental approvals, our ability to hire and retain qualified employees, risks associated with the integration of acquired businesses, weather, terrorist activities, war and the threat of war. Actual results may materially differ from anticipated results described or implied in these forward-looking statements.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

 

   

the risk that the proposed transaction will not close because of a failure to satisfy one or more of the closing conditions;

 

   

the risk that O’Reilly’s business will have been adversely impacted during the pendency of the proposed transaction;

 

   

the risk that the integration of CSK’s operations may not be successful or may be materially delayed or may be more costly or difficult than expected;

 

   

the risk that the expected cost savings and other synergies from the transaction may not be fully realized, realized at all or take longer to realize than anticipated;

 

   

the risk that management’s estimates of the fair value of certain of CSK’s assets may not be equal to the carrying value of those assets and/or management’s estimates of certain of CSK’s liabilities may be less than the actual amount of such liabilities, in each case, now or in future time periods;

 

   

the completion of the offer and the merger may be materially delayed or prohibited;

 

   

general economic conditions may be less favorable than we currently anticipate;

 

   

contingencies may arise of which we were not aware or of which we underestimated the significance;

 

   

the amount, both in absolute dollars and as a percentage of net sales, of the combined companies’ expenditures for selling, general and administrative and capital acquisitions and improvements may be materially greater or less than those expected; and

 

   

the amount of expenses and other liabilities incurred or accrued between the date of the signing of the merger agreement and date of the closing of the offer and the merger may be greater than expected.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus or the date of any document incorporated by reference in this prospectus. All subsequent written and oral forward-looking statements concerning the offer and the merger or other matters addressed in this prospectus and attributable to O’Reilly or CSK or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable law or regulation, O’Reilly undertakes no obligation to update these

 

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forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.

The list of factors discussed under “Risk Factors” on page 21 that may affect future performance and the accuracy of forward-looking statements is illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

 

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SUMMARY

This brief summary highlights selected information from this prospectus. It does not contain all of the information that is important to CSK stockholders. CSK stockholders are urged to read carefully the entire prospectus and the other documents referred to and incorporated by reference in this prospectus to fully understand the offer and the merger. In particular, stockholders of CSK should read the documents attached to this prospectus, including the merger agreement, which is attached as Annex A. For a guide as to where you can obtain more information on O’Reilly, see “Additional Information—Where You Can Find Additional Information” on page 81.

The Offer

We are proposing to acquire all of the outstanding shares of CSK common stock in exchange for shares of O’Reilly common stock and cash.

Stock Component. The stock component consists of between 0.3673 and 0.4285 of a fully paid and nonassessable share of common stock, par value of $0.01, of O’Reilly as determined based on an “exchange ratio” equal to (i) $11.00 divided by (ii) the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including the second trading day prior to the consummation of the exchange offer and rounded to four decimal places; provided, however, that if such average closing sale price of O’Reilly stock is greater than $29.95, then the exchange ratio shall equal 0.3673, and if such average closing sale price is less than $25.67, then the exchange ratio shall equal 0.4285.

Cash Component. The cash component consists of $1.00 in cash minus the adjustment amount, if any, which we refer to as the per share cash consideration. The adjustment amount is the amount equal to the quotient obtained by dividing (i) the sum of any amount paid by CSK or its subsidiaries to the lenders under its credit agreements in connection with obtaining any bank consent, waiver or amendment under the credit agreements after April 1, 2008 minus $3,000,000 by (ii) the sum of the (a) total number of shares of CSK common stock outstanding immediately prior to the expiration of the offer and (b) total number of shares of CSK common stock determined by O’Reilly up to a maximum of the total number of shares of CSK common stock issuable upon the exercise or conversion of all options, warrants, rights and convertible securities (if any) that will be vested by September 28, 2008. The adjustment amount will be rounded down to the nearest 1/10 (one-tenth) of a cent and will in no event be greater than $1.00 or less than zero. CSK has indicated to O’Reilly that, as of the date of this prospectus, it does not anticipate obtaining any bank consent, waiver or amendment under its credit agreements prior to the anticipated completion of the offer.

After completion of the offer, O’Reilly will cause OC Acquisition to complete a merger with and into CSK in which each outstanding share of CSK common stock (except for shares beneficially owned directly or indirectly by O’Reilly for its own account and any shares held in treasury by CSK) will be converted into the right to receive the same consideration paid in exchange for each share of CSK common stock in the offer, subject to appraisal rights to the extent applicable under Delaware law. If, after the completion of the offer, either as a result of the offer alone or in conjunction with the exercise of our top-up option to purchase shares directly from CSK, we beneficially own more than 90% of the outstanding shares of CSK common stock, we may effect the merger without the approval of CSK stockholders, as permitted under Delaware law. If, on the other hand, after the completion of the offer, we beneficially own more than 50%, but less than 90%, of the outstanding shares of CSK common stock, a meeting of CSK stockholders and the affirmative vote of at least a majority of the shares of CSK common stock outstanding on the record date for such meeting will be needed to complete the merger. Since O’Reilly will own a majority of the shares of CSK common stock outstanding on the record date for any such meeting, approval of the merger by CSK stockholders will be assured.

 

 

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The number of shares of O’Reilly common stock issued to CSK stockholders in the offer and the merger will constitute approximately 14.0% of the outstanding common stock of the combined company after the merger, based upon the number of outstanding shares of O’Reilly common stock and CSK common stock on June 17, 2008 and based on the average of the reported closing sale prices of O’Reilly common stock as reported on the NASDAQ for the five (5) consecutive trading days ending on and including June 17, 2008, disregarding stock options, and shares of common stock that may be issued by O’Reilly or CSK pursuant to an employee stock plan.

Exchange of Shares of CSK Common Stock (Page 33)

Upon the terms and subject to the conditions of the offer, promptly after the expiration of the offer, we will accept shares of CSK common stock that are validly tendered and not properly withdrawn in exchange for shares of O’Reilly common stock and cash. Each share of CSK common stock validly tendered and not properly withdrawn prior to the expiration of the offer will be exchanged for between 0.3673 and 0.4285 of a share of O’Reilly common stock and $1.00 in cash, subject to possible reduction, as described herein.

Timing of the Offer (Page 34)

We commenced the offer on June 11, 2008, the date of distribution of the initial prospectus. The offer is scheduled to expire at 12:00 midnight, New York City time, on July 10, 2008, unless we extend the period of the offer. All references to the expiration of the offer mean the time of expiration, as extended.

Conditions of the Offer (Page 35)

The offer is subject to a number of conditions, and O’Reilly will not be required to accept any tendered shares of CSK common stock for exchange if any of these conditions are not satisfied or, where permissible, waived as of the expiration of the offer. These conditions provide, among other things, that:

 

   

there must be validly tendered and not properly withdrawn prior to the expiration of the offer a number of shares of CSK common stock that, together with shares of CSK common stock then directly or indirectly owned by O’Reilly, represents at least a majority of the fully diluted shares of CSK common stock, calculated as described in this prospectus, which we refer to as the minimum tender condition;

 

   

the termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which we refer to as the HSR Act, which occurred on April 17, 2008;

 

   

the registration statement on Form S-4 of which this prospectus is a part must have been declared effective by the SEC;

 

   

the shares of O’Reilly common stock issuable in the offer and the merger shall have been authorized for listing on NASDAQ;

 

   

CSK and O’Reilly shall have received certain tax opinions;

 

   

there shall have been no event having a material adverse effect on CSK and no material breaches by CSK of the merger agreement, in each case that have not been cured;

 

   

there shall be no legal impediments to the completion of the offer or the merger;

 

   

CSK’s board of directors shall not have withdrawn its recommendation of the offer; and

 

   

the merger agreement shall not have been terminated in accordance with its terms.

O’Reilly has agreed with CSK in the merger agreement that it will not consummate the offer unless the conditions set forth in the third, fourth, and fifth bullet points in the immediately preceding paragraph are

 

 

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satisfied or waived by CSK. In addition, unless waived by CSK, O’Reilly has also agreed with CSK in the merger agreement that it will not consummate the offer if there shall have been any event having a material adverse effect on O’Reilly or any material breaches by O’Reilly of the merger agreement, in each case that have not been cured.

Extension, Termination and Amendment (Page 34)

In the event that the conditions to the offer have not been satisfied or waived upon the expiration of the offer (as the same may be extended), we are required to extend the offer for periods of up to twenty (20) business days until the earlier of such time that all of the conditions to the offer have been satisfied or waived or the merger agreement has been terminated in accordance with its terms. In addition, we, in our sole discretion, will extend the offer for an aggregate period of not more than ten (10) business days beyond the last expiration date of the offer that would otherwise be permitted if, in our reasonable discretion, such extension is necessary to complete the necessary conditions to complete our financing transactions for the offer so long as such extension does not extend the expiration date of the offer beyond thirty (30) business days following commencement of the offer. During any extension, all shares of CSK common stock previously tendered and not validly withdrawn will remain deposited with the exchange agent, subject to your right to withdraw your shares of CSK common stock. If we exercise our right to use a subsequent offering period as described below, we will first consummate the exchange with respect to the shares validly tendered and not properly withdrawn in the initial offer period.

In the event the merger agreement is terminated in accordance with its terms prior to the acceptance of any shares of CSK common stock for exchange pursuant to the offer, we will promptly terminate the offer without accepting any shares that were previously tendered.

Subsequent Offering Period (Page 35)

We may elect to provide subsequent offering periods of up to twenty (20) business days after the acceptance of shares of CSK common stock in the offer in accordance with Rule 14d-11 under the Exchange Act if, on the expiration date of the offer, all of the conditions to the offer have been satisfied or waived, but the total number of shares of CSK common stock that have been validly tendered and not withdrawn pursuant to the offer, together with shares of CSK common stock then directly or indirectly owned by O’Reilly, is less than 90% of the total number of shares of CSK common stock then outstanding. If we exercise our right to use a subsequent offering period, we will first consummate the exchange with respect to the shares validly tendered and not properly withdrawn in the initial offer period. You will not have the right to withdraw any shares of CSK common stock that you tender in the subsequent offering period. If we elect to provide a subsequent offering period, we will make a public announcement to that effect no later than 9:00 a.m. New York City time on the next business day after the previously scheduled expiration.

Procedure for Tendering Shares (Page 38)

For you to validly tender shares of CSK common stock pursuant to the offer, the enclosed letter of transmittal, properly completed and duly executed, or a manually executed facsimile of that document, along with any required signature guarantees, or an agent’s message in connection with a book-entry transfer, and any other required documents, must be transmitted to and received by the exchange agent at one of its addresses set forth on the back cover of this prospectus, and certificates for tendered shares of CSK common stock must be received by the exchange agent at one of its addresses or those shares of CSK common stock must be tendered pursuant to the procedures for book-entry tender set forth below, and a confirmation of receipt of the tender received, which confirmation we refer to below as a book-entry confirmation, in each case before the expiration date.

 

 

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Guaranteed Delivery (Page 39)

If you wish to tender shares of CSK common stock pursuant to the offer and your certificates are not immediately available or you cannot deliver the certificates and all other required documents to the exchange agent prior to the expiration date or cannot complete the procedure for book-entry transfer on a timely basis, your shares of CSK common stock may nevertheless be tendered, if you comply with the guaranteed delivery procedures as set forth in “The Offer—Guaranteed Delivery” on page 39.

Withdrawal Rights (Page 40)

You may withdraw any shares of CSK common stock that you previously tendered into the offer at any time before the expiration of the offer by following the procedures described under “The Offer—Withdrawal Rights” on page 40.

Delivery of Shares of O’Reilly Common Stock and Cash (Page 42)

Subject to the satisfaction (or, where permissible, waiver) of the conditions to the offer as of the expiration of the offer, we will accept for exchange shares of CSK common stock validly tendered and not properly withdrawn promptly after the expiration of the offer and will exchange shares of O’Reilly common stock, $1.00 minus the adjustment amount, if any, and cash in lieu of fractional shares for the tendered shares of CSK common stock. In all cases, the exchange of shares of CSK common stock tendered and accepted for exchange pursuant to the offer will be made only if the exchange agent timely receives:

 

   

certificates for those shares of CSK common stock, or a timely confirmation of a book-entry transfer of those shares of CSK common stock in the exchange agent’s account at DTC, and a properly completed and duly executed letter of transmittal, or a duly executed copy, and any other required documents; or

 

   

a timely confirmation of a book-entry transfer of those shares of CSK common stock in the exchange agent’s account at DTC, together with an “agent’s message” as described under “The Offer—Procedure for Tendering Shares” on page 38.

Cash Instead of Fractional Shares of O’Reilly Common Stock (Page 42)

We will not issue any fractional shares of O’Reilly common stock pursuant to the offer or the merger. Rather, O’Reilly will arrange for the exchange agent to make a cash payment in lieu of the fractional shares.

The Merger (Page 60)

The merger agreement provides that following completion of the offer OC Acquisition will be merged with and into CSK, with CSK continuing as the “surviving corporation.” In the event that O’Reilly beneficially owns more than 90% of the outstanding shares of CSK common stock upon completion of the offer, the merger agreement provides that the parties will take all necessary and appropriate action to cause the merger to become effective as soon as practicable following completion of the offer, without a meeting of CSK stockholders, by effecting a “short form” merger under Delaware law. If the minimum tender condition is met, we have the option, subject to certain limitations described herein, which we refer to as the top-up option, to purchase from CSK additional shares of common stock that, when added to the number of shares already owned by O’Reilly, will constitute one share more than 90% of the shares of CSK common stock then outstanding. If after the completion of the offer O’Reilly beneficially owns more than 50%, but less than 90%, of the outstanding shares of CSK common stock and O’Reilly’s exercise of the top-up option will not result in it owning one share more than 90% of the outstanding shares of CSK common stock, a meeting of CSK stockholders and the affirmative vote of at least a majority of the shares of CSK common stock outstanding on the record date for such meeting will be needed to complete the merger. Since O’Reilly will own a majority of the shares of CSK common stock

 

 

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outstanding on the record date for any such meeting, approval of the merger by CSK stockholders will be assured. If necessary to preserve the intended treatment of the offer and the merger as a tax-free reorganization for United States federal income tax purposes, O’Reilly will cause the LLC merger to occur immediately after the merger.

No Solicitation of Acquisition Proposals (Page 63)

CSK has agreed, subject to limited exceptions, that neither CSK nor any of its subsidiaries nor any of their respective officers, directors, employees, agents and representatives will initiate or engage in any negotiations concerning an acquisition proposal. However, the merger agreement provides that, prior to the consummation of the offer, CSK may, in response to an unsolicited bona fide third-party acquisition proposal that CSK’s board determines in good faith (after consultation with CSK’s outside legal counsel and financial advisors) constitutes or may reasonably be expected to lead to a superior proposal:

 

   

furnish to such third party nonpublic information relating to CSK or any of its subsidiaries pursuant to a confidentiality and standstill agreement with terms no less favorable to CSK than those contained in the confidentiality and standstill agreements between CSK and O’Reilly; and

 

   

participate in discussions or negotiations with such third party regarding such acquisition proposal.

CSK has also agreed to advise O’Reilly orally and in writing within forty-eight (48) hours of the receipt of any inquiries, proposals or offers regarding any acquisition proposal; any request for non-public information relating to CSK or its subsidiaries (other than requests for information not reasonably expected to be related to an acquisition proposal); and any inquiry or request for discussion or negotiation regarding an acquisition proposal.

Termination of the Merger Agreement (Page 68)

The merger agreement provides that it can be terminated by CSK or O’Reilly under a number of different scenarios, including:

 

   

by the mutual written consent of the parties;

 

   

by either party, subject to various conditions, if:

 

   

the offer is not consummated by September 28, 2008; or

 

   

on or after September 28, 2008, any court or governmental entity issues a nonappealable final order restraining, enjoining or otherwise prohibiting the transactions set forth in the merger agreement;

 

   

by O’Reilly, subject to various conditions, if:

 

   

CSK breaches any of its representations, warranties, covenants or agreements set forth in the merger agreement, which breach would result in a failure of a condition to the offer or the merger and cannot be cured by September 28, 2008;

 

   

the CSK board of directors, or any of its committees, withdraws, modifies or qualifies in a manner adverse to O’Reilly its approval or recommendation in favor of the merger agreement or the merger; or

 

   

a material adverse effect has occurred with respect to CSK that is not capable of being cured by September 28, 2008;

 

   

by CSK, subject to various conditions, if:

 

   

O’Reilly or OC Acquisition breaches any of its representations, warranties, covenants or agreements set forth in the merger agreement, which breach would result in a failure of a condition to the offer or the merger and cannot be cured by September 28, 2008;

 

 

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the CSK board of directors accepts a superior proposal in compliance with the merger agreement and CSK enters into an agreement regarding such superior proposal and pays the termination fee;

 

   

a material adverse effect has occurred with respect to O’Reilly that is not capable of being cured by September 28, 2008; or

 

   

the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including the second trading day prior to the consummation of the offer and rounded to four decimal places is less than or equal to $21.00, provided that no right of termination will attach if O’Reilly elects to increase the number of shares of O’Reilly common stock or cash included in the offer price such that the value of the offer price per share of CSK common stock is at least equal to $10.00.

Termination Fee (Page 69)

Termination of the merger by either O’Reilly or CSK under specified circumstances could result in CSK being required to pay O’Reilly a termination fee equal to $22 million. In the event that the merger agreement is terminated by O’Reilly because CSK files for bankruptcy or because of certain adverse events related to CSK’s failure to meet its existing debt obligations, CSK is obligated to pay O’Reilly for its actual documented reasonable out-of-pocket expenses in connection with the negotiation, execution and delivery of the merger agreement, compliance by O’Reilly with the merger agreement and actions taken in furtherance of the consummation of the transactions contemplated in the merger agreement.

CSK Board of Directors (Page 59)

The merger agreement provides that, upon acceptance for exchange of shares of CSK common stock in the offer, we will be entitled to designate a number of directors of CSK, rounded up to the next whole number, equal to the product of the total number of directors on CSK’s board of directors and the percentage of aggregate number of shares of CSK common stock beneficially owned by us. This would enable us to control the CSK board of directors after completion of the offer.

Material United States Federal Income Tax Considerations (Page 42)

It is a condition to the completion of the offer that O’Reilly and CSK receive written opinions from their respective tax counsel to the effect that the offer, the merger and the LLC merger (if any) together will constitute a reorganization within the meaning of section 368(a) of the Code. A CSK stockholder who, consistent with such opinions, receives cash (other than cash in lieu of a fractional share of O’Reilly common stock) and shares of O’Reilly common stock pursuant to a transaction constituting a reorganization within the meaning of section 368(a) of the Code will recognize gain (but will not recognize any loss), and the gain recognized will be equal to the lesser of (i) any cash received (other than cash received in lieu of a fractional share of O’Reilly common stock) and (ii) the excess, if any, of (x) the sum of the cash received (other than cash received in lieu of a fractional share of O’Reilly common stock) and the fair market value of the O’Reilly common stock received over (y) the CSK stockholder’s tax basis in the shares of CSK common stock exchanged therefor. In addition, the CSK stockholder will recognize gain or loss attributable to cash received in lieu of a fractional share of O’Reilly common stock. CSK stockholders should consult their tax advisors for a full understanding of all of the tax consequences of the offer, the merger and the LLC merger (if any) to them.

Appraisal Rights (Page 47)

Under Delaware law, you will not have any appraisal rights in connection with the offer. However, the merger is expected to entitle you to appraisal rights under Section 262 of the Delaware General Corporation Law, which we refer to as the DGCL. A copy of the appraisal rights provisions of the DGCL is attached as Annex B to this prospectus.

 

 

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Regulatory Approvals (Page 47)

We and CSK have agreed pursuant to the merger agreement to use all reasonable best efforts to take whatever actions are required to obtain necessary regulatory approvals with respect to the offer and the merger. Other than clearance under the antitrust laws applicable to the offer and the merger, which are described below, the SEC declaring the effectiveness of the registration statement of which this prospectus is a part, and the filing of a certificate of merger under the DGCL with respect to the merger, we do not believe that any additional governmental filings are required with respect to the offer and the merger.

Under the HSR Act, and the related rules, the merger may not be completed until we and CSK notify and furnish information to the Federal Trade Commission and the Antitrust Division of the United States Department of Justice and specified waiting period requirements have been satisfied. The applicable waiting period under the HSR Act was terminated on April 17, 2008.

Financing of the Offer and the Merger (Page 49)

The offer is not conditioned upon the receipt of financing. O’Reilly estimates that the total amount of funds necessary to consummate the transactions contemplated by the offer and the merger will be approximately $1.2 billion, a substantial portion of which will be used to (i) refinance certain existing indebtedness of O’Reilly and CSK, (ii) pay customary fees and expenses relating to the offer, the merger and the financing, (iii) pay approximately $42.2 million to holders of CSK common stock for the cash portion of the offer consideration and (iv) provide for ongoing working capital requirements of the combined corporation. O’Reilly has received a commitment letter from Bank of America, N.A., Banc of America Securities LLC, Lehman Commercial Paper Inc., Lehman Brothers Commercial Bank and Lehman Brothers Inc. to provide an asset-based senior secured credit facility to provide $1.075 billion through a revolving credit facility and $125.0 million through a first-in-last-out revolving credit facility. See “Certain Effects of the Offer—Financing of the Offer and the Merger” starting on page 49 for more information.

Accounting Treatment (Page 50)

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations,” O’Reilly will account for the transactions as a purchase business combination. Upon consummation of the transactions, O’Reilly will record the acquisition at cost with cost consisting of the fair value of O’Reilly common stock and stock options issued, the cash consideration issued and transaction costs. The total cost will be allocated based on the fair value of tangible and intangible assets acquired and liabilities assumed. The excess of cost over the fair value of net assets acquired will be recorded as goodwill.

Interests of Certain Persons in the Offer and the Merger (Page 52)

Certain CSK directors, officers and stockholders have interests in the offer and the merger that are different from, or are in addition to, those of other stockholders. These interests include:

 

   

the accelerated vesting of stock options and other unvested stock-based awards previously issued to certain CSK directors and officers;

 

   

current and future employment arrangements;

 

   

severance benefits; and

 

   

the indemnification of directors and officers of CSK against certain liabilities.

The boards of directors of CSK and O’Reilly were aware of these interests and considered them, among other matters, when they approved the offer, the merger and the merger agreement.

 

 

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As of the date of this prospectus, O’Reilly beneficially owns of record 2,153,928 shares of CSK common stock, constituting approximately 4.9% of the fully diluted shares of CSK common stock. Such shares will be counted for purposes of determining whether the minimum tender condition in the offer has been satisfied and, after completion of the offer, O’Reilly will vote such shares in favor of the merger.

Comparison of Rights of Holders of O’Reilly Common Stock and CSK Common Stock (Page 72)

CSK is a Delaware corporation, while O’Reilly is a Missouri corporation. If we complete the offer, holders of CSK common stock will become O’Reilly shareholders, and their rights as shareholders will be governed by Missouri law as well as O’Reilly’s articles of incorporation and bylaws. There are differences between Delaware law, the certificate of incorporation and bylaws of CSK, on the one hand, and Missouri law, the articles of incorporation and bylaws of O’Reilly, on the other hand.

The Companies

O’Reilly Automotive, Inc.

233 South Patterson

Springfield, Missouri 65802

Telephone: (417) 862-6708

www.oreillyauto.com

O’Reilly Automotive, Inc., founded in 1957 and incorporated under the laws of Missouri, is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. O’Reilly sells its products to do-it-yourself customers and professional installers. As of March 31, 2008, we operated 1,867 stores in Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Virginia, Wisconsin and Wyoming.

O’Reilly’s common stock is currently quoted on the NASDAQ (symbol: ORLY).

CSK Auto Corporation

645 E. Missouri Ave., Suite 400

Phoenix, Arizona 85012

Telephone: (602) 265-9200

www.cskauto.com

CSK Auto Corporation, founded in 1993 and incorporated under the laws of Delaware, is the largest specialty retailer of automotive parts and accessories in the Western United States and one of the largest such retailers of products in the country. As of May 4, 2008, through its wholly owned subsidiary, CSK Auto, Inc., CSK operated 1,345 stores in the United States, principally concentrated in the western United States. CSK’s stores are known by the following four brand names: (i) Checker Auto Parts, founded in 1969, with 487 stores in the Southwestern, Rocky Mountain and Northern Plains states and Hawaii; (ii) Schuck’s Auto Supply, founded in 1917, with 222 stores in the Pacific Northwest states and Alaska; (iii) Kragen Auto Parts, founded in 1947, with 504 stores primarily in California; and (iv) Murray’s Discount Auto Stores, founded in 1972, with 136 stores in the Midwest.

CSK’s common stock is currently quoted on the NYSE (symbol: CAO).

Comparative Per Share Market Price and Dividend Information (Page 18)

On March 31, 2008, the last trading day before O’Reilly and CSK announced the offer, O’Reilly common stock closed at $28.52 per share and CSK common stock closed at $9.31 per share. On June 17, 2008, the last

 

 

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trading day prior to the printing of this prospectus for which this information was practicably available, O’Reilly common stock closed at $25.55 per share and CSK common stock closed at $11.50 per share.

Neither O’Reilly nor CSK has paid any dividends in the prior two fiscal years and O’Reilly does not anticipate paying any cash dividends on its common stock in the foreseeable future.

Questions About the Offer and Subsequent Merger

If you have any questions about the offer or the merger or if you need additional copies of this prospectus, you should contact our information agent:

INNISFREE M&A INCORPORATED

501 Madison Avenue, 20th Floor

New York, NY 10022

Stockholders Call Toll-Free: (888) 750-5834

Banks and Brokers Call Collect: (212) 750-5833

 

 

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SELECTED HISTORICAL FINANCIAL DATA

O’Reilly’s Selected Historical Consolidated Financial Data

The information in the following table is based on O’Reilly’s historical financial statements that O’Reilly has presented in its prior filings with the SEC. You should read the selected historical financial data in the following table in conjunction with the historical financial statements and related notes (including other selected historical financial data contained therein), O’Reilly’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in O’Reilly’s Annual Report on Form 10-K for the year ended December 31, 2007 and O’Reilly’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in O’Reilly’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, which have been incorporated into this document by reference. See “Additional Information—Where You Can Find Additional Information” on page 81.

The historical consolidated financial data for O’Reilly for the fiscal years 2007, 2006, 2005, 2004 and 2003 have been derived from O’Reilly’s consolidated financial statements, which were audited by Ernst & Young LLP, an independent registered public accounting firm. The accompanying selected interim financial data for O’Reilly for the three months ended March 31, 2008 and 2007 have been derived from O’Reilly’s unaudited interim financial statements. The unaudited interim financial statements include all adjustments, consisting of normal recurring accruals, which O’Reilly considers necessary for a fair presentation of the financial position and the results of operations for these periods. Operating results for the three months ended March 31, 2008 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2008.

Amounts (except per share amounts) are shown in thousands.

 

    Three Months
Ended March 31,
    Fiscal Year Ended December 31,  
    2008     2007     2007   2006     2005     2004     2003  

INCOME STATEMENT DATA:

             

Sales

  $ 646,220     $ 613,145     $ 2,522,319   $ 2,283,222     $ 2,045,318     $ 1,721,241     $ 1,511,816  

Cost of goods sold, including warehouse and distribution expenses

    357,726       343,864       1,401,859     1,276,511       1,152,815       978,076       873,481  
                                                     

Gross profit

    288,494       269,281       1,120,460     1,006,711       892,503       743,165       638,335  

Operating, selling, general and administrative expenses

    214,338       192,089       815,309     724,396       639,979       552,707       473,060  
                                                     

Operating income

    74,156       77,192       305,151     282,315       252,524       190,458       165,275  

Other income (expense), net

    (450 )     (10 )     2,337     (50 )     (1,455 )     (2,721 )     (5,233 )
                                                     

Income before income taxes and cumulative effect of accounting change

    73,706       77,182       307,488     282,265       251,069       187,737       160,042  

Provision for income taxes

    27,375       28,775       113,500     104,180       86,803       70,063       59,955  
                                                     

Income before cumulative effect of accounting change

    —         —         193,988     178,085       164,266       117,674       100,087  

Cumulative effect of accounting change, net of tax(1)

    —         —         —       —         —         21,892       —    
                                                     

Net income

  $ 46,331     $ 48,407     $ 193,988   $ 178,085     $ 164,266     $ 139,566     $ 100,087  
                                                     

BASIC EARNINGS PER COMMON SHARE:

             

Income before cumulative effect of accounting change

  $ 0.40       0.42     $ 1.69   $ 1.57     $ 1.47     $ 1.07     $ 0.93  

Cumulative effect of accounting change(1)

    —         —         —       —         —         0.20       —    
                                                     

Net income per share

    0.40       0.42     $ 1.69   $ 1.57     $ 1.47     $ 1.27     $ 0.93  

Weighted-average common shares outstanding—basic

    115,386       113,936       114,667     113,253       111,613       110,020       107,816  
                                                     

 

 

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    Three Months Ended
March 31,
  Fiscal Year Ended December 31,
    2008   2007   2007   2006   2005   2004   2003

EARNINGS PER COMMON SHARE- ASSUMING DILUTION:

             

Income before cumulative effect of accounting change

  $ 0.40     0.42   $ 1.67   $ 1.55   $ 1.45   $ 1.05   $ 0.92

Cumulative effect of accounting change(1)

    —       —       —       —       —       0.20     —  
                                         

Net income per share

    0.40     0.42   $ 1.67   $ 1.55   $ 1.45   $ 1.25   $ 0.92

Weighted-average common shares outstanding—adjusted

    116,291     115,537     116,080     115,119     113,385     111,423     109,060
                                         

PRO FORMA INCOME STATEMENT DATA:(2)

             

Sales

              $ 1,511,816

Cost of goods sold, including warehouse and distribution expenses

                872,658
                 

Gross profit

                639,158

Operating, selling, general and administrative expenses

                473,060
                 

Operating income

                166,098

Other income (expense), net

                (5,233
                 

Income before income taxes

                160,865

Provision for income taxes

                60,266
                 

Net income

              $ 100,599
                 

Net income per share

              $ 0.93

Net income per share—assuming dilution

              $ 0.92

BALANCE SHEET DATA:

             

Working capital

  $ 578,291   $ 573,174   $ 573,328   $ 566,892   $ 424,974   $ 479,662   $ 441,617

Total assets

    2,397,736     2,093,628     2,279,737     1,977,496     1,718,896     1,432,357     1,157,033

Current portion of long-term debt and short-term debt

    25,323     312     25,320     309     75,313     592     925

Long-term debt, less current portion

    75,068     100,390     75,149     110,170     25,461     100,322     120,977

Shareholders’ equity

    1,651,013     1,420,485     1,592,477     1,364,096     1,145,769     947,817     784,285

 

(1) The cumulative change in accounting method, effective January 1, 2004, changed the method of applying LIFO accounting policy for certain inventory costs. Under the new method, included in the value of inventory are certain procurement, warehousing and distribution center costs. The previous method was to recognize those costs as incurred, reported as a component of costs of goods sold.
(2) The pro forma income statement reflects the retroactive application of the cumulative effect of the accounting change to historical periods.

 

 

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CSK’s Selected Historical Consolidated Financial Data

The information in the following table is based on the historical financial statements of CSK included elsewhere in this prospectus. You should read the selected historical financial data in the following table in conjunction with the historical financial statements and related notes (including other selected historical financial data contained therein), CSK’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in CSK’s Annual Report on Form 10-K for the year ended February 3, 2008, attached as Annex D to this prospectus, and CSK’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in CSK’s Quarterly Report on Form 10-Q for the quarter ended May 4, 2008, attached as Annex G to this prospectus.

The historical consolidated financial data for the fiscal years 2007, 2006, 2005, 2004 and 2003 have been derived from the consolidated financial statements of CSK, which were audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm. The accompanying selected interim financial data for CSK for the thirteen week periods ended May 4, 2008 and May 6, 2007 have been derived from CSK’s unaudited interim financial statements. The unaudited interim financial statements include all adjustments, consisting of normal recurring accruals, which CSK considers necessary for a fair presentation of the financial position and the results of operations for these periods. Operating results for the thirteen weeks ended May 4, 2008 are not necessarily indicative of the results that may be expected for the entire year ending February 1, 2009.

Amounts (except per share amounts) are shown in thousands.

 

    Thirteen Weeks
Ended
  Fiscal Year(1)  
    May 4,
2008
    May 6,
2007
  2007     2006     2005   2004   2003  

Statement of Operations Data

             

Net sales

  $ 461,104     $ 473,035   $ 1,851,647     $ 1,907,776     $ 1,651,285   $ 1,604,991   $ 1,606,731  

Cost of sales

    243,801       252,437     984,649       1,011,712       864,674     839,564     904,090  
                                                 

Gross profit

    217,303       220,598     866,998       896,064       786,611     765,427     702,641  

Operating and administrative

    205,810       199,234     804,265       788,400       653,471     629,309     624,557  

Investigation and restatement costs(2)

    983       4,564     12,348       25,739       —       —       —    

Securities class action settlement(3)

    —         —       11,700       —         —       —       —    

Insurance recovery(4)

    (15,000 )     —       —         —         —       —       —    

Store closing costs(5)

    785       706     1,983       1,487       2,903     2,229     12,522  
                                                 

Operating profit

    24,725       16,094     36,702       80,438       130,237     133,889     65,562  

Interest expense

    15,445       13,322     54,163       48,767       33,599     33,851     52,754  

Loss on debt retirement(6)

    —         —       —         19,450       1,600     1,026     49,494  
                                                 

Income (loss) before income taxes and cumulative effect of change in accounting principle

    9,280       2,772     (17,461 )     12,221       95,038     99,012     (36,686 )

Income tax expense (benefit)

    3,913       1,102     (6,309 )     4,991       37,248     39,450     (14,738 )
                                                 

Income (loss) before cumulative effect of change in accounting principle

    5,367       1,670     (11,152 )     7,230       57,790     59,562     (21,948 )

Cumulative effect of change in accounting principle, net of tax(7)

    —         —       —         (966 )     —       —       —    
                                                 

Net income (loss)

  $ 5,367     $ 1,670   $ (11,152 )   $ 6,264     $ 57,790   $ 59,562   $ (21,948 )
                                                 

Basic earnings (loss) per share:

             

Income (loss) before cumulative effect of change in accounting principle

  $ 0.12     $ 0.04   $ (0.25 )   $ 0.16     $ 1.30   $ 1.30   $ (0.48 )

Cumulative effect of change in accounting principle(7)

    —         —       —         (0.02 )     —       —       —    
                                                 

Net income (loss) per share

  $ 0.12     $ 0.04   $ (0.25 )   $ 0.14     $ 1.30   $ 1.30   $ (0.48 )
                                                 

 

 

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    Thirteen Weeks
Ended
  Fiscal Year(1)  
    May 4,
2008
  May 6,
2007
  2007     2006     2005   2004   2003  

Diluted earnings (loss) per share:

             

Income (loss) before cumulative effect of change in accounting principle

  $ 0.12   $ 0.04   $ (0.25 )   $ 0.16     $ 1.29   $ 1.29   $ (0.48 )

Cumulative effect of change in accounting principle(7)

    —       —       —         (0.02 )     —       —       —    
                                               

Net income (loss) per share

  $ 0.12   $ 0.04   $ (0.25 )   $ 0.14     $ 1.29   $ 1.29   $ (0.48 )
                                               

Shares used in computing basic per share amounts

    44,032     43,951     43,971       43,877       44,465     45,713     45,658  

Shares used in computing diluted per share amounts

    44,101     44,697     43,971       44,129       44,812     46,002     45,658  

Balance Sheet Data (end of period)

             

Cash and cash equivalents

  $ 19,679   $ 23,260   $ 16,520     $ 20,169     $ 17,964   $ 56,229   $ 36,982  

Total assets

    1,197,427     1,182,888     1,138,690       1,151,762       1,140,034     957,151     969,588  

Total debt (including current maturities)

    524,025     538,677     519,188       531,501       577,594     508,877     534,654  

Stockholders’ equity

    170,899     174,175     164,538       171,510       156,157     120,139     81,497  

 

 

(1) CSK’s fiscal year consists of 52 or 53 weeks, ends on the Sunday nearest to January 31 and is named for the calendar year just ended. All fiscal years presented had 52 weeks except fiscal 2006, which had 53 weeks.
(2) As further discussed in Note 21—Legal Matters in the notes to the audited consolidated financial statements included in Item 8 of its Annual Report on Form 10-K for the year ended February 3, 2008, CSK incurred approximately $12.3 million and $25.7 million in legal, accounting consultant and audit fees in fiscal 2007 and fiscal 2006, respectively, for matters related to the fiscal 2006 audit committee-led investigation and the related restatement of CSK’s consolidated financial statements in CSK’s Annual Report on Form 10-K for the fiscal year ended January 29, 2006 filed May 1, 2007 and completion of CSK’s delinquent SEC filings for fiscal 2006.
(3) Amount relates to the agreement in principle reached to settle a securities class action lawsuit. See Note 21—Legal Matters and Note 22—Subsequent Events in the notes to the audited consolidated financial statements included in Item 8 of CSK’s Annual Report on Form 10-K for the year ended February 3, 2008.
(4) Amount represents an insurance recovery related to the securities class action lawsuit and the recovery of certain legal defense costs previously expensed by CSK. See Note 12 Legal Matters in the notes to the unaudited consolidated financial statements included in Part 1 Item 1 of CSK’s Quarterly Report on Form 10-Q for the quarterly period ended May 4, 2008.
(5) Amounts relate to costs incurred in connection with the closure of existing stores. During fiscal 2003, CSK incurred $12.2 million associated with the reversal of the reserve established under Emerging Issues Task Force No. 94-3 and the establishment of a new closed store reserve on the basis of CSK’s change in exit strategy in accordance with Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities.

(6)

In fiscal 2006, CSK purchased all of its 7% senior subordinated notes, repaid its 3 3 /8% exchangeable notes and made a payment on termination of an interest rate swap related to its 7% senior subordinated notes, which resulted in an aggregate loss on debt retirement of $19.5 million. The $1.6 million loss on debt retirement in fiscal 2005 resulted from the write-off of certain deferred financing fees associated with CSK’s former credit facility, which was repaid. During fiscal 2004, CSK recorded a loss on debt retirement of $1.0 million as a result of the redemption of the $15.0 million remaining balance of CSK’s 12% senior notes. During fiscal 2003, CSK recorded a loss on debt retirement of $49.5 million primarily due to the early redemption of 94% of CSK’s 12% senior notes.

(7) In December 2004, the Financial Accounting Standards Board issued SFAS No. 123R, Share-Based Payment. SFAS No. 123R sets accounting requirements for “share-based” compensation to employees and requires companies to recognize the grant-date fair value of stock options and other equity-based compensation in the income statement. CSK adopted SFAS No. 123R during fiscal 2006 using the modified prospective method. In addition to stock options and restricted stock, CSK granted incentive units in fiscal 2005 under a long-term incentive plan (the “LTIP”) for its senior executive officers, which are classified as liability awards, and as such, the transition rule under SFAS No. 123R requires that for an outstanding instrument that previously was classified as a liability and measured at intrinsic value, an entity should recognize the liability that would have been recorded under the fair value method at the date of adoption, net of any related tax effect, as the cumulative effect of a change in accounting principle. As of January 30, 2006, CSK recognized a cumulative effect of a change in accounting principle of approximately $1.0 million, net of $0.6 million tax benefit, associated with the LTIP.

 

 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The following selected unaudited pro forma financial data is designed to show how the merger of O’Reilly and CSK might have affected the historical financial data of O’Reilly, giving effect to the merger and related financing as if they had been consummated at an earlier date. The following selected unaudited pro forma financial data gives effect to the merger and related financing as if they had been completed on March 31, 2008, with respect to the pro forma balance sheet data, and as of January 1, 2007, with respect to the pro forma statement of income data. The historical financial data has been adjusted to give effect to pro forma events that are directly attributable to the merger, factually supportable, and expected to have a continuing impact of the combined results.

The following unaudited pro forma condensed, combined financial data should be read in conjunction with the historical consolidated financial statements and notes thereto of O’Reilly, which are incorporated into this document by reference and the historical consolidated financial statements and notes thereto of CSK, which are set forth in CSK’s Annual Report on Form 10-K for the year ended February 3, 2008, attached as Annex D to this prospectus and CSK’s Quarterly Report on Form 10-Q for the quarter ended May 4, 2008, attached as Annex G to this prospectus. See “Additional Information—Where You Can Find Additional Information” on page 81. Certain amounts in CSK’s historical financial statements have been reclassified to conform to O’Reilly’s presentation of such items.

The following selected unaudited pro forma condensed combined financial data was prepared using the purchase method of accounting with O’Reilly treated as the acquiring entity and reflect adjustments, which are based upon preliminary estimates, to allocate the estimated purchase price to CSK’s assets acquired and liabilities assumed. For purposes of estimating the purchase price, it is assumed that the $1.00 in cash per share to be received by CSK stockholders will not be reduced. The purchase price allocation reflected herein is preliminary insofar as the final allocation will be based upon the actual purchase price and the actual assets acquired and liabilities assumed of CSK as of the date of the completion of the merger. The final allocation of the purchase price is also dependent upon certain required valuations and other analyses that cannot be completed prior to the merger. In certain instances, O’Reilly has identified intangible assets of CSK for which there has not been sufficient information available to make a preliminary estimate of fair value as of the date of this prospectus. For example, O’Reilly expects to record assets and liabilities for fair value adjustments to CSK lease arrangements once access to all of CSK’s lease information and market research is available to O’Reilly. The purchase price paid for these intangible assets has been allocated to goodwill until such time as a preliminary estimate is available. Additionally, we have not received sufficient information to make a preliminary estimate of the fair value of CSK’s inventory and property and equipment and the purchase price paid for these assets has been reflected in the pro forma data at CSK’s historical cost. Accordingly, the actual purchase accounting adjustments will differ from the preliminary pro forma adjustments reflected herein. See “Unaudited Pro Forma Condensed Combined Financial Data” on page 84 for additional details regarding these matters.

The following selected unaudited pro forma financial data are presented for illustrative purposes only and are not necessarily indicative of the financial condition or results of operations that actually would have been realized had the merger and related financing been completed on the dates indicated above. In addition, the following selected unaudited pro forma financial data does not purport to project the future financial condition or results of operations of the combined company. It should also be noted that O’Reilly and CSK have different fiscal year ends. Accordingly, the selected unaudited pro forma income statement data for the calendar year ended December 31, 2007 combines O’Reilly’s historical consolidated income statement data for the year then ended with CSK’s historical consolidated income statement data for the fiscal year (fifty-two (52) weeks) ended February 3, 2008. The selected unaudited pro forma income statement data for the three months ended March 31, 2008 combines O’Reilly’s historical consolidated income statement data for the three calendar months then ended with CSK’s historical consolidated income statement data for its first fiscal quarter (thirteen (13) weeks)

 

 

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ended May 4, 2008. The selected unaudited pro forma balance sheet data combines O’Reilly’s historical consolidated balance sheet data as of March 31, 2008 with CSK’s historical consolidated balance sheet data as of May 4, 2008.

 

     Year Ended
December 31, 2007
   Three Months Ended
March 31, 2008
     (in thousands, except per share date)

Pro Forma Statement of Income Data:

     

Net sales

   $ 4,330,360    $ 1,096,597

Net income

     182,842      55,784

Diluted earnings per share from continuing operations

   $ 1.36    $ 0.41
     
          At March 31, 2008
          (in thousands)

Pro Forma Balance Sheet Data:

     

Working capital

      $ 675,203

Total assets

        3,905,315

Long-term debt and capital lease obligations (net of current portion)

        613,128

Total stockholders’ equity

        2,119,045

 

 

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UNAUDITED COMPARATIVE PER COMMON SHARE DATA

The following table summarizes the net income from continuing operations and book value per common share information for O’Reilly and CSK on a historical and unaudited pro forma combined basis. The table accounts for the different fiscal years of O’Reilly and CSK discussed above in “Selected Unaudited Pro Forma Condensed Combined Financial Data.”

The pro forma book value combined per common share of O’Reilly is computed by dividing total pro forma shareholders’ equity by the pro forma number of shares of O’Reilly common stock outstanding at the end of the period, in each case, after giving effect to the merger and the related financing. The historical book value per common share of O’Reilly and CSK is computed by dividing total shareholders’ equity by the number of shares of common stock outstanding at the end of the period.

O’Reilly expects to incur merger and integration charges as a result of combining O’Reilly and CSK. O’Reilly also anticipates that the merger will provide the combined company with financial benefits that include reduced operating expenses and the opportunity to generate more revenue. The pro forma financial data, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect these expenses or benefits and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the combined company would have been had O’Reilly and CSK actually been combined during the periods presented.

The historical per share data of O’Reilly has been derived from, and should be read in conjunction with, the historical financial statements of O’Reilly incorporated by reference in this prospectus. See “Where You Can Find Additional Information” beginning on page 81. The historical per share data of CSK has been derived from, and should be read in conjunction with, the historical financial statements of CSK included elsewhere in this prospectus. See “Annex D – CSK’s Annual Report on Form 10-K for the year ended February 3, 2008” beginning on page D-1 and “Annex G – CSK’s Quarterly Report on Form 10-Q for the quarter ended May 4, 2008” beginning on page G-1. The unaudited pro forma per share data has been derived from, and should be read in conjunction with, the unaudited condensed combined pro forma financial statements included elsewhere in this prospectus. See “Unaudited Pro Forma Condensed Combined Financial Data” beginning on page 84.

The CSK unaudited pro forma combined equivalent share data was calculated by multiplying the corresponding O’Reilly unaudited pro forma combined per share data by an estimate of the exchange ratio of 0.4285, which is based upon the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including June 17, 2008. This data shows how each share of CSK common stock would have participated in net income and book value of O’Reilly if the companies had been consolidated for accounting and financial reporting purposes for the periods presented. The equivalent earnings per share data does not give effect to the cash portion of the offer consideration. These amounts, however, are not intended to reflect future per share levels of net income and book value of O’Reilly.

 

     As of and
For the Three
Months Ended
March 31, 2008
   As of and
For the Year
Ended
December 31, 2007

Historical O’Reilly:

     

Net income from continuing operations per common share—basic

   $ 0.40    $ 1.69

Net income from continuing operations per common share—diluted

   $ 0.40    $ 1.67

Book value per common share

   $ 14.30    $ 13.82

Dividends declared per common share

     —        —  

 

 

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     As of and
For the Three
Months Ended
May 4, 2008
   As of and
For the Year
Ended
February 3, 2008

Historical CSK:

     

Net income (loss) per common share—basic

   $0.12    $ (0.25)

Net income (loss) per common share—diluted

   $0.12    $ (0.25)

Book value per common share

   $3.88    $   3.74

Dividends declared per common share

   —      —  
     
     
     As of and
For the Three
Months Ended
March 31, 2008
   As of and
For the Year
Ended
December 31, 2007

Unaudited pro forma combined per OReilly share:

     

Net income from continuing operations per common share—basic

   $  0.42    $1.38

Net income from continuing operations per common share—diluted

   $  0.41    $1.36

Book value per common share

   $15.87    N/A

Dividends declared per common share

   —      —  

Unaudited pro forma combined per CSK equivalent share:

     

Net income per common share—basic

   $  0.18    $0.59

Net income per common share—diluted

   $  0.18    $0.58

Book value per common share

   $  6.80    N/A

Dividends declared per common share

   —      —  
     

 

 

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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

O’Reilly common stock is listed on the NASDAQ, under the symbol “ORLY”. CSK common stock is listed on the NYSE under the symbol “CAO”. The table below sets forth, for the periods indicated and the range of high and low per share sales prices for O’Reilly common stock and CSK common stock as reported on the NASDAQ and NYSE, respectively. Neither O’Reilly nor CSK has paid any dividends for the calendar quarters indicated. For current price information, you should consult publicly available sources. For more information on O’Reilly’s payment of dividends, see “—O’Reilly’s Dividend Policy” below on this page.

O’Reilly and CSK have different fiscal years as discussed above in “Selected Unaudited Pro Forma Condensed Combined Financial Data.”

O’Reilly Common Stock

 

     O’Reilly
Common Stock
     High    Low

Fiscal Year 2006 (ended December 31, 2006)

     

First quarter

   $ 38.30    $ 30.87

Second quarter

   $ 36.99    $ 29.30

Third quarter

   $ 34.24    $ 27.49

Fourth quarter

   $ 35.10    $ 30.92

Fiscal Year 2007 (ended December 31, 2007)

     

First quarter

   $ 35.72    $ 31.45

Second quarter

   $ 38.84    $ 32.58

Third quarter

   $ 38.20    $ 31.44

Fourth quarter

   $ 34.72    $ 30.43

Fiscal Year 2008 (ending December 31, 2008)

     

First quarter

   $ 32.68    $ 24.08

Second quarter (through June 17, 2008)

   $ 30.50    $ 24.59

CSK Common Stock

 

     CSK
Common Stock
     High    Low

Fiscal Year 2006 (ended February 4, 2007)

     

First quarter

   $ 16.84    $ 12.23

Second quarter

   $ 13.29    $ 10.71

Third quarter

   $ 15.91    $ 10.62

Fourth quarter

   $ 17.27    $ 15.17

Fiscal Year 2007 (ended February 3, 2008)

     

First quarter

   $ 17.95    $ 16.27

Second quarter

   $ 19.14    $ 12.42

Third quarter

   $ 13.95    $ 10.03

Fourth quarter

   $ 10.72    $ 3.96

Fiscal Year 2008 (ending February 1, 2009)

     

First quarter

   $ 12.43    $ 8.93

Second quarter (through June 17, 2008)

   $ 12.07    $ 11.13

As of June 17, 2008, there were 12,707 holders of record of O’Reilly common stock and 47 record holders of CSK common stock.

 

 

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The above tables show only historical comparisons. These comparisons may not provide meaningful information to CSK stockholders in determining whether to adopt the merger agreement and the transactions contemplated by the merger agreement, including the merger. CSK stockholders are urged to obtain current market quotations for O’Reilly and CSK common stock and to review carefully the other information contained in this prospectus or incorporated by reference into this prospectus in considering whether to adopt the merger agreement. See the section entitled “Additional Information—Where You Can Find Additional Information” beginning on page 81 of this prospectus.

O’Reilly’s Dividend Policy

O’Reilly has not declared or paid any cash dividends on its common stock during any period for which financial information is provided in this prospectus. At this time, O’Reilly intends to retain future earnings, if any, to fund the development and growth of its business and does not anticipate paying any cash dividends on its common stock in the foreseeable future.

 

 

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RECENT CLOSING PRICES

The following table sets forth the closing prices per share of O’Reilly common stock and CSK common stock as reported on the NASDAQ and NYSE on March 31, 2008 the last full trading day prior to the announcement of the entry into the merger agreement, and June 17, 2008, the most recent practicable date prior to the mailing of this prospectus to CSK’s stockholders.

 

Date

   O’Reilly Common
Stock
   CSK Common Stock    Implied Value of
CSK Common Stock
in Offer

March 31, 2008

   $ 28.52    $ 9.31    $ 13.22

June 17, 2008

   $ 25.55    $ 11.50    $ 11.95

The above table shows only historical and hypothetical comparisons in which the implied value of one share of CSK common stock is calculated by (i) multiplying the closing price for one share of O’Reilly common stock by the exchange ratio of 0.4285 and (ii) adding the maximum cash consideration per share of $1.00. These prices may fluctuate prior to the offer and the merger, and CSK stockholders are urged to obtain current stock price quotations for O’Reilly common stock and CSK common stock and to review carefully the other information contained in this prospectus or incorporated by reference into this prospectus in deciding whether to tender their shares. See the section entitled “Additional Information—Where You Can Find Additional Information” on page 81.

 

 

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RISK FACTORS

The offer and the merger involve a high degree of risk. By participating in the offer, CSK stockholders will be choosing to invest in O’Reilly common stock. An investment in O’Reilly common stock also involves a high degree of risk. In addition to the other information contained in this prospectus, you should carefully consider the risks involved in the offer and the merger, including the following risk factors, those incorporated by reference into this prospectus and those starting on page 17 of Annex D to this prospectus, in deciding whether to tender your shares of CSK common stock.

Risks Related to the Offer and the Merger

Because the market price of O’Reilly’s common stock may fluctuate, CSK stockholders may not be sure of the value of the offer consideration they receive.

The holder of each share of CSK common stock will receive in the offer (i) between 0.3673 and 0.4285 of a share of common stock of O’Reilly and (ii) $1.00 in cash, subject to reduction for the adjustment amount, if any. The number of shares of O’Reilly common stock received for each validly tendered share of CSK common stock will be determined based on an exchange ratio equal to $11.00 divided by the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including the second trading day prior to the consummation of the offer and rounded to four decimal places; provided, however, that if such average closing sale price of O’Reilly stock is greater than $29.95, then the exchange ratio shall equal 0.3673, and if such average closing sale price is less than $25.67, then the exchange ratio shall equal 0.4285. After completion of the offer, each share of CSK common stock will be converted in the merger into the right to receive the same consideration as offered in exchange for each share of CSK common stock in the offer. Because the exchange ratio will not be adjusted to reflect any changes in the average closing sale price of O’Reilly common stock greater than $29.95 or less than $25.67, the market value of the O’Reilly common stock issued in the offer and the merger may be higher or lower than $11.00.

Accordingly, at the time CSK stockholders tender their shares, they will not necessarily know or be able to calculate the value of the stock consideration they will receive upon the consummation of the offer. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in our business, operations and prospects, governmental actions, legal proceedings and developments, market assessments of the benefits of the merger, the likelihood that the offer will be consummated and the timing of completion, the prospects of post-merger operations and other factors. Many of these factors are beyond our control. CSK is permitted to terminate the merger agreement if O’Reilly’s average closing sale price at the time the exchange ratio is fixed is less than or equal to $21.00, unless O’Reilly increases the offer consideration to avoid such potential termination.

Failure to complete the transaction with O’Reilly could materially and adversely affect CSK’s results of operations and CSK’s stock price.

If the offer is not consummated or the merger is not completed for any reason:

 

   

CSK will remain liable for significant transaction costs relating to the merger;

 

   

under some circumstances, CSK may have to pay a termination fee to O’Reilly in the amount of $22 million or O’Reilly’s transaction expenses; see “The Merger Agreement—Termination Fee” beginning on page 69 of this prospectus;

 

   

any operational investments that CSK may delay due to the pending transaction would need to be made, potentially on an accelerated time frame, which could then prove costly and more difficult to implement;

 

   

the market price of CSK’s common stock may decline to the extent that the current market price reflects a market belief that the offer and the merger will be completed; and

 

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CSK may have difficulty maintaining certain financial ratios or complying with other financial or restrictive covenants in its debt agreements which could result in an event of default under one of such agreements, which could result in a default or acceleration of all of its other indebtedness, which acceleration, if it occurs, would have a material adverse effect on CSK.

Additionally, the announcement of the pending offer and merger may lead to uncertainty for CSK’s employees and its customers and suppliers. This uncertainty may mean:

 

   

the attention of CSK’s management and employees may be diverted from day-to-day operations; and

 

   

CSK’s ability to attract new employees and retain existing employees may be harmed by uncertainties associated with the merger.

The occurrence of any of these events individually or in combination could materially and adversely affect CSK’s results of operations and stock price.

The merger agreement limits CSK’s ability to pursue alternative transactions, and in certain instances requires payment of a termination fee, which could deter a third party from proposing an alternative transaction.

The merger agreement has terms and conditions that make it more difficult for CSK to enter into an alternative transaction. These “no shop” provisions impose restrictions on CSK and, subject to limited exceptions, limit CSK’s ability to discuss, facilitate or commit to an alternative transaction. See “The Merger Agreement—No Solicitation of Acquisition Proposals” beginning on page 63 of this prospectus. In addition, under specified circumstances, CSK is required to pay a termination fee of $22 million if the merger agreement is terminated.

These provisions might discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of CSK from considering or proposing an acquisition even if it were prepared to pay consideration with a higher per share market price than that proposed in the offer, or might result in a potential competing acquiror proposing to pay a lower per share price to acquire CSK than it might otherwise have proposed to pay.

Officers and directors of CSK have potential conflicts of interest in the transaction.

CSK stockholders should be aware of potential conflicts of interest and the benefits available to CSK directors when considering CSK’s board of directors’ recommendation to participate in the offer and approve the merger. CSK officers and directors have stock options, employment agreements and/or benefit plans that provide them with interests in the transaction that are different from, or in addition to, the interests of CSK stockholders. For example, if the offer is consummated, all outstanding CSK stock options will be converted into vested stock options of O’Reilly, and, with the exception of the CSK stock award of 89,899 shares of CSK common stock relating to Mr. Mondry, all CSK unvested stock awards will vest upon consummation of the offer and, in connection with the merger, will be converted into a right to receive the offer consideration multiplied by the number of shares of CSK common stock subject to such stock award. In addition, O’Reilly has agreed to indemnify former CSK directors and executive officers for actions or events occurring prior to the consummation of the merger. See “Interests of Management and the CSK Board” on page 52.

CSK stockholders will have a reduced ownership and voting interest after the merger.

After completion of the merger, CSK stockholders will own a significantly smaller percentage of the combined company and its voting stock than they currently own of CSK. Following completion of the merger, CSK stockholders will own approximately 14.0% of the combined company. Consequently, CSK stockholders will not be able to exercise as much influence over the management and policies of the combined company as they currently exercise over CSK.

 

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If the value of CSK’s business, together with any synergies to be achieved from its combination with O’Reilly, is less than the value of the stock to be issued in connection with the offer and the merger, the price of O’Reilly common stock could decrease.

It is possible that the price of the common stock of the combined company will decrease following consummation of the merger. To the extent that the price of the common stock declines as a result of the belief that the value of the stock to be issued in connection with the merger, plus transaction costs, is greater than the value of CSK’s business, together with any synergies to be achieved from its combination with O’Reilly, the merger could have a dilutive effect on the value of the common stock held by O’Reilly shareholders.

O’Reilly and CSK will incur significant costs associated with the offer and the merger.

O’Reilly and CSK expect to incur significant costs associated with transaction fees, professional services and other costs related to the offer and the merger and there will be in excess of $25.0 million in transaction costs related to the offer and the merger. O’Reilly and CSK believe the combined entity may incur charges to operations, which are not currently reasonably estimable, in the quarter in which the merger is completed or the following quarters, to reflect costs associated with integrating the two companies. There can be no assurance that the combined company will not incur additional material charges in subsequent quarters to reflect additional costs associated with the merger and the integration of the two companies.

The unaudited pro forma financial information included in this document may not be indicative of what O’Reilly’s actual financial position or results of operations would have been.

The unaudited pro forma financial information in this document is presented for illustrative purposes only and is not necessarily indicative of what O’Reilly’s actual financial position or results of operations would have been had the merger been completed on the dates indicated. The unaudited pro forma financial information reflects preliminary adjustments determined by O’Reilly management to allocate the purchase price of CSK’s net assets. Subsequent to the merger completion date, O’Reilly will retain a valuation professional to determine the value of select tangible and intangible assets. Based on this determination and as other information becomes available, there will be further refinements to the purchase price allocation. Accordingly, the final purchase accounting adjustments may differ materially from the pro forma adjustments reflected in this document, and in particular, we would expect some amounts to be allocated to intangible assets that are currently allocated to goodwill as described below. See “Unaudited Pro Forma Condensed Combined Financial Data” on page 84 for more information.

Risks Related to O’Reilly and the Combined Company

The integration of the businesses and operations of O’Reilly and CSK involves risks, and the failure to integrate successfully the businesses and operations in the expected time frame may adversely affect the future results of the combined company.

The failure of the combined company to meet the challenges involved in integrating the operations of O’Reilly and CSK successfully or to otherwise realize any of the anticipated benefits of the merger could seriously harm the results of operations of the combined company. The ability of the combined company to realize the benefits of the merger will depend in part on the timely integration of organizations, operations, procedures, policies and technologies, as well as the harmonization of differences in the business cultures of the two companies and retention of key personnel. The integration of the companies will be a complex, time-consuming and expensive process that, even with proper planning and implementation, could significantly disrupt the businesses of O’Reilly and CSK. The challenges involved in this integration include the following:

 

   

implementing our distribution, point of sale and inventory management systems;

 

   

combining our respective product offerings;

 

   

preserving customer, supplier and other important relationships of both O’Reilly and CSK and resolving potential conflicts that may arise;

 

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minimizing the diversion of management attention from ongoing business concerns;

 

   

addressing differences in the business cultures of O’Reilly and CSK to maintain employee morale and retain key employees; and

 

   

coordinating and combining geographically diverse operations, relationships and facilities, which may be subject to additional constraints imposed by distance and local laws and regulations.

The combined company may not successfully integrate the operations of O’Reilly and CSK in a timely manner, or at all, and the combined company may not realize the anticipated benefits or synergies of the merger to the extent, or in the time frame, anticipated. The anticipated benefits and synergies are based on projections and assumptions, not actual experience, and assume a successful integration. In addition to the integration risks discussed above, the combined company’s ability to realize these benefits and synergies could be adversely affected by practical or legal constraints on its ability to combine operations. If O’Reilly fails to manage the integration of these businesses effectively, its growth strategy and future profitability could be negatively affected, and it may fail to achieve the intended benefits of the merger.

O’Reilly’s increased debt levels could adversely affect its cash flow and prevent O’Reilly from fulfilling its obligations.

Upon consummation of the offer, O’Reilly expects to enter into a new credit facility, which will significantly increase its outstanding indebtedness and interest expense. O’Reilly’s substantial debt could have important consequences, such as:

 

   

requiring O’Reilly to dedicate a substantial portion of its cash flow from operations and other capital resources to principal and interest, thereby reducing its ability to fund working capital, capital expenditures and other cash requirements;

 

   

increasing O’Reilly’s vulnerability to adverse economic and industry conditions;

 

   

limiting O’Reilly’s flexibility in planning for, or reacting to, changes and opportunities in, its industry, which may place us at a competitive disadvantage; and

 

   

limiting O’Reilly’s ability to incur additional debt on acceptable terms, if at all.

In addition, the terms of the financing obligations include restrictions, such as affirmative and negative covenants, conditions to borrowing, subsidiary guarantees and asset and stock pledges. A failure to comply with these restrictions could result in a default under the financing obligations or could require O’Reilly to obtain waivers from its lenders for failure to comply with these restrictions. The occurrence of a default that remains uncured or the inability to secure a necessary consent or waiver could have a material adverse effect on O’Reilly’s business, financial condition or results of operations.

Risks related to the combined company and unanticipated fluctuations in the combined company’s quarterly operating results could affect the combined company’s stock price.

Each of O’Reilly and CSK believes that quarter-to-quarter comparisons of its financial results are not necessarily meaningful indicators of the future operating results of the combined company and should not be relied on as an indication of future performance. If the combined company’s quarterly operating results fail to meet the expectations of analysts, the trading price of O’Reilly common stock following the offer and the merger could be negatively affected. O’Reilly and CSK cannot be certain that the business strategy of the combined company will be successful or that it will successfully manage these risks. If the combined company fails to adequately address any of these risks or difficulties, its business would likely suffer.

 

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The automotive aftermarket business is highly competitive, and we may have to risk our capital to remain competitive.

Both the do-it-yourself and professional installer portions of our business are highly competitive, particularly in the more densely populated areas that we serve. Some of our competitors are larger than we are and have greater financial resources. In addition, some of our competitors are smaller than we are overall but have a greater presence than we do in a particular market. We may have to expend more resources and risk additional capital to remain competitive.

The market price of our common stock may be volatile and could expose us to securities class action litigation.

The stock market and the price of our common stock may be subject to wide fluctuations based on general economic and market conditions. The market price for our common stock may also be affected by our ability to meet analysts’ expectations. Failure to meet such expectations, even by slight amounts, could have an adverse effect on the market price of our common stock.

In addition, stock market volatility has had a significant effect on the market prices of securities issued by many companies for reasons unrelated to the operating performance of these companies. Downturns in the stock market may cause the price of our common stock to decline. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against such a company. If similar litigation were instituted against us, it could result in substantial costs and a diversion of our management’s attention and resources, which could have an adverse effect on our business.

We cannot assure future growth will be achieved.

We believe that our ability to open additional stores at a high growth rate will be a significant factor in achieving our growth objectives for the future. Our ability to accomplish our growth objectives is dependent, in part, on matters beyond our control, such as weather conditions, zoning and other issues related to new store site development, the availability of qualified management personnel and general business and economic conditions. We cannot be sure that our growth plans for 2008 and beyond will be achieved. Failure to achieve our growth objectives may negatively impact the trading price of our common stock.

We depend on certain key personnel to successfully manage and grow our business.

Our success has been largely dependent on the efforts of certain key personnel, including David O’Reilly, Ted Wise and Greg Henslee. Our business and results of operations could be materially adversely affected by the unexpected loss of the services of one or more of these individuals. Additionally, the successful implementation and management of our growth and expansion strategies will depend on our ability to continue to attract and retain qualified personnel. We cannot be sure that we will be able to continue to attract such qualified personnel, which could cause us to be less efficient, thus reducing our sales and profitability.

Sales of shares of our common stock eligible for future sale, including the common stock issued to CSK stockholders, could adversely affect our share price.

All of the shares of our common stock currently held by our affiliates may be sold in reliance upon the exemptive provisions of Rule 144 of the Securities Act of 1933, as amended, which is referred to throughout this prospectus as the Securities Act, subject to certain volume and other conditions imposed by such rule. Furthermore, all of the shares of our common stock issued to CSK stockholders upon completion of the offer and the merger that are not held by our affiliates may be sold immediately upon receipt. We cannot predict the effect, if any, which future sales of shares of our common stock or the availability of such shares for sale will have on the market price of our common stock prevailing from time to time. Sales of substantial amounts of our common stock, or the perception that such sales might occur, could adversely affect the prevailing market price of our common stock. We believe the current stockholders of CSK include certain arbitrage and investment firms who may be more likely to quickly sell the shares of O’Reilly common stock received in the offer or the merger.

 

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In order to be successful, the combined company will need to retain and motivate key employees, which may be more difficult in light of uncertainty regarding the merger, and failure to do so could seriously harm the combined company.

In order to be successful, the combined company will need to retain and motivate executives and other key employees. Experienced management and technical personnel are in high demand and competition for their talents is intense. Employee retention may be a particularly challenging issue in connection with the merger. Employees of O’Reilly or CSK may experience uncertainty about their future role with the combined company until or after strategies with regard to the combined company are announced or executed. The combined company also must continue to motivate employees and keep them focused on the strategies and goals of the combined company, which may be particularly difficult due to the potential distractions of the merger.

 

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BACKGROUND AND REASONS FOR THE OFFER AND THE MERGER

Background of the Offer and the Merger

The merger agreement and the terms and conditions of the offer and the merger are the result of arm’s length negotiations between representatives of O’Reilly and representatives of CSK. The following chronology summarizes the key meetings and events that led to the signing of the merger agreement among O’Reilly, CSK and OC Acquisition. During this period, Greg Henslee, Chief Executive Officer and Co-President of O’Reilly, and Lawrence Mondry, President and Chief Executive Officer of CSK, held many conversations, both by telephone and in person, about the possible merger of their businesses. Although O’Reilly and CSK have had various conversations relating to a possible business combination since 2006, the chronology below covers only the key events leading up to the merger agreement, and does not purport to catalogue every conversation between representatives of O’Reilly and CSK.

On March 9, 2007, O’Reilly delivered a letter to CSK’s board of directors indicating its interest in acquiring CSK and inviting CSK’s management to meet with O’Reilly’s management to discuss a potential strategic combination between O’Reilly and CSK. At that time, William Shutzer, a member of CSK’s board of directors, informed O’Reilly that CSK would contact O’Reilly when it deemed it appropriate to do so. Subsequently, CSK indicated that it was not in a position to hold meaningful discussions with O’Reilly, or any other party, concerning an acquisition transaction until such time as CSK had completed its restatement process and the preparation of current financial statements.

Over the course of the next several months, O’Reilly attempted to initiate discussions with CSK, but no confidential information was exchanged and no substantive progress was made with respect to discussions regarding a strategic business combination.

On October 2, 2007, O’Reilly began to purchase shares of CSK common stock in open market transactions. As of the date of this prospectus, O’Reilly owns 2,153,928 shares of CSK common stock, constituting approximately 4.9% of the total outstanding common stock of CSK.

On October 8, 2007, following a number of discussions with Messrs. Shutzer and Mondry, O’Reilly delivered a letter to CSK’s board of directors expressing a non-binding indication of interest, based solely on then publicly available information, in acquiring all outstanding shares of CSK’s common stock for $15 to $16 per share in cash, plus the assumption of all outstanding debt and other liabilities, and requesting the opportunity to conduct a due diligence review and a meeting to discuss O’Reilly’s interest in acquiring CSK. Mr. Mondry agreed to meet with members of O’Reilly’s management to discuss O’Reilly’s interest in acquiring CSK.

On October 10, 2007, CSK entered into a third amendment to its term loan credit facility.

On October 18, 2007, in anticipation of a meeting between the parties, CSK and O’Reilly entered into a confidentiality agreement. On October 21, 2007, Messrs. Mondry and Shutzer met with Mr. Henslee and Ted Wise, Chief Operating Officer and Co-President of O’Reilly. In this meeting and subsequent conversations, Mr. Henslee reiterated O’Reilly’s desire to enter into a mutually beneficial transaction with CSK at a premium relative to CSK’s then current trading price. CSK indicated that although it might be willing to consider a transaction with O’Reilly, the price would have to be higher than that suggested by O’Reilly. O’Reilly responded that it would be unable to consider such a higher price without first reviewing certain non-public information concerning CSK’s business. Mr. Mondry indicated that he would discuss allowing O’Reilly access to confidential information with CSK’s board of directors at their regular scheduled meeting on November 7, 2007. On November 5, 2007, O’Reilly provided an initial due diligence request list to Mr. Mondry.

On November 8, 2007, O’Reilly’s board of directors held a board meeting and considered O’Reilly’s alternatives with respect to CSK. After extensive discussions, including discussions with O’Reilly’s financial and legal advisors, O’Reilly’s board of directors unanimously authorized management to pursue a tender offer for all of the outstanding shares of CSK’s common stock.

 

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On November 14, 2007, as a condition to continue further discussions and allowing O’Reilly access to certain non-public information of CSK, CSK provided O’Reilly with a form of a standstill agreement limiting O’Reilly’s ability to take certain actions regarding CSK and its common stock once O’Reilly received such non-public information. O’Reilly decided not to enter into a standstill agreement at such time.

On December 12, 2007, CSK disclosed that CSK Auto, Inc. was seeking to amend the terms of its term loan facility to mitigate the risk that CSK Auto, Inc. would not be able to comply with certain fixed charge coverage and leverage ratio covenants of the term loan facility. CSK entered into the amendment on December 18, 2007.

On December 19, 2007, CSK disclosed in its quarterly report on Form 10-Q for the quarter ended November 4, 2007 that it had engaged J.P. Morgan Securities Inc., or JPMorgan, as its financial advisor in connection with evaluating its strategic alternatives. Subsequently, CSK indicated to O’Reilly that JPMorgan would be contacting Lehman Brothers Inc., or Lehman Brothers, O’Reilly’s financial advisor, concerning O’Reilly’s participation in CSK’s strategic review process and JPMorgan contacted Lehman Brothers encouraging O’Reilly to be a participant in CSK’s process.

On January 3, 2008, O’Reilly resubmitted to CSK the original list of due diligence items delivered on November 5, 2007.

On January 11, 2008, O’Reilly submitted to CSK’s board of directors an offer to acquire CSK in a stock-for-stock transaction in which approximately 0.2105 to 0.2353 of a share of O’Reilly common stock would be exchanged for each outstanding share of CSK’s common stock (or approximately $5.37 to $6.00 for each share of CSK’s common stock), which represented a 13% to 26% premium based on the closing price of CSK’s common stock on January 11, 2008.

On January 24, 2008, following a number of discussions between counsel for O’Reilly and CSK regarding the terms of a proposed standstill agreement to be entered into in connection with becoming a participant in CSK’s strategic alternatives process, Mr. Henslee sent a letter to Mr. Mondry and CSK’s board of directors reiterating O’Reilly’s interest in pursuing either a cash or stock-for-stock acquisition of CSK and expressing its frustration in the process to date.

On January 28, 2008, Mr. Mondry delivered a letter to Mr. Henslee responding to Mr. Henslee’s letter of January 24, 2008 again rejecting O’Reilly’s offer to acquire CSK on the terms previously offered and offering to grant O’Reilly a “most favored nations” clause in its standstill agreement should it choose to enter into one with CSK.

On February 1, 2008, Mr. Henslee delivered a letter to Mr. Mondry and CSK’s board of directors, which was also released to the press, proposing to acquire CSK in a cash transaction at a price of $8.00 for each outstanding share of CSK’s common stock, conditioned on satisfactory completion of a due diligence investigation of CSK. CSK indicated to O’Reilly that it intended to complete its formal review of strategic alternatives, and O’Reilly was encouraged to be a participant in the process.

On February 4, 2008, CSK announced the adoption of a stockholder rights plan.

On February 6, 2008, CSK and O’Reilly reached agreement on the terms of a standstill agreement, and O’Reilly was granted access to the confidential information provided to the other third parties participating in the strategic review process.

On February 11, 2008, as part of CSK’s formal strategic evaluation process, O’Reilly submitted an initial indication of interest in acquiring CSK’s common stock for $8.00 per share in cash and the assumption of $490 million of CSK indebtedness.

 

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Between February 15, 2008 and March 10, 2008, O’Reilly and its advisors performed due diligence on CSK and had multiple in-person and telephonic conference calls with CSK management. JPMorgan instructed O’Reilly to submit its best and final offer by March 10, 2008.

On February 21, 2008, a draft merger agreement prepared by Gibson, Dunn & Crutcher LLP, or Gibson Dunn, legal counsel to CSK, was provided by JPMorgan to O’Reilly and JPMorgan requested that O’Reilly provide written comments to the draft merger agreement during the week of March 3, 2008. On March 3, 2008, O’Reilly submitted a preliminary markup to the proposed merger agreement to CSK’s advisors.

During the week of March 3, 2008, O’Reilly, through Lehman Brothers, contacted JPMorgan to indicate that in order to increase the value of its offer, it would be submitting an all stock offer to acquire CSK as a whole.

On March 10, 2008, O’Reilly submitted a revised proposal at an offer price of $10.50 for each outstanding share of CSK’s common stock consisting of shares of O’Reilly’s common stock (based on the closing price of O’Reilly’s common stock on March 7, 2008) with a “collar” adjustment mechanism to preserve $10.50 of value should O’Reilly’s stock price increase or decrease by not more than 5%. O’Reilly’s proposal was not subject to a financing condition, but was subject to limited confirmatory due diligence.

From March 12, 2008 through March 15, 2008, representatives from JPMorgan and CSK met by telephone with representatives of O’Reilly and Lehman Brothers to discuss O’Reilly’s proposed offer price, the status of O’Reilly’s due diligence review of CSK, and the operation of O’Reilly’s proposed “collar” mechanism. During this period, CSK’s counsel provided O’Reilly with comments on its merger agreement markup. Subsequent to O’Reilly’s submission of updated terms, CSK asked for “best and final” proposals by noon EST on March 15, 2008.

On March 15, 2008, O’Reilly submitted a revised offer letter to JPMorgan, increasing its offer price to $11.50 for each outstanding share of CSK’s common stock, consisting of $1.00 in cash and $10.50 in shares of O’Reilly’s common stock (based on the closing price of O’Reilly’s common stock on March 14, 2008) with a “collar” adjustment mechanism to preserve $10.50 of value of O’Reilly common stock should O’Reilly’s stock price increase or decrease by not more than 10%. O’Reilly further indicated that it would be able to complete its due diligence review of CSK in three to five days, and that it believed that CSK would be able to undertake and complete a due diligence review of O’Reilly during that period. In addition, O’Reilly indicated that it would require CSK to enter into a one-week exclusivity agreement with O’Reilly in order to proceed.

On March 15, 2008 and March 16, 2008, representatives of CSK, JPMorgan, and Gibson Dunn met by telephone with representatives of O’Reilly, Lehman Brothers, and Skadden, Arps, Slate, Meagher & Flom LLP, or Skadden, legal counsel to O’Reilly, to discuss O’Reilly’s revised offer. During these calls, it was agreed that the “collar” adjustment mechanism would be set such that $10.50 of value in shares of O’Reilly common stock would be preserved should O’Reilly’s stock price increase by not more than 5% or decrease by not more than 12.5%. In addition, CSK agreed to negotiate exclusively with O’Reilly through March 23, 2008. O’Reilly provided CSK with a revised markup of the merger agreement during this time.

From March 17, 2008 through March 23, 2008, representatives of CSK, JPMorgan, and Gibson Dunn met by telephone with representatives of O’Reilly, Lehman Brothers, and Skadden to participate in due diligence review meetings with respect to O’Reilly, including attending presentations by members of O’Reilly’s senior management, including Messrs. Henslee and Wise. In addition, during this time, representatives of Gibson Dunn met by telephone with representatives of Skadden to review and negotiate the proposed merger agreement, including, among other things, the structure of the transaction and the proposed exchange offer, the terms and conditions of the proposed exchange offer, the circumstances for extending the proposed exchange offer, CSK’s representations, warranties, and covenants, the definition of “material adverse effect” and its impact on the rights of the parties in the proposed merger agreement, the ability of CSK to receive, but not to solicit, alternative proposals for the acquisition of CSK, and the termination rights of O’Reilly and CSK, including the amount and under what circumstances CSK would pay a termination fee to O’Reilly.

 

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On March 23, 2008, CSK’s exclusivity period in favor of O’Reilly expired without O’Reilly having completed its due diligence or O’Reilly and CSK having reached substantive agreement on the terms and conditions of the proposed merger agreement. On March 24, 2008, O’Reilly requested that CSK grant O’Reilly a continuation of the exclusivity period, which request was rejected by CSK.

On March 29, 2008, O’Reilly, through Lehman Brothers, submitted a revised offer to JPMorgan, increasing its offer price to $11.75 for each share of CSK’s common stock, consisting of $1.00 in cash and $10.75 in shares of O’Reilly’s common stock (based on the closing price of O’Reilly’s common stock on March 28, 2008) with a “collar” adjustment mechanism to preserve $10.75 of value of O’Reilly common stock should O’Reilly’s stock price increase by not more than 5% or decrease by not more than 12.5%. Between March 17, 2008 and March 31, 2008, O’Reilly and CSK each completed due diligence on one another.

Between March 29, 2008 and March 31, 2008, the parties continued to negotiate the merger agreement and the economic terms of the proposed transaction.

On March 31, 2008 continuing through the morning hours of April 1, 2008, representatives of CSK, JPMorgan, and Gibson Dunn met in person in Dallas, Texas with representatives of O’Reilly, Lehman Brothers, and Skadden to continue negotiating the terms of the proposed merger agreement, including, among other things, modifications to provisions relating to the conditions to the consummation of the exchange offer, the definition of “material adverse effect” and its impact on the rights of the parties in the proposed merger agreement, and the termination rights of O’Reilly and CSK, including the amount and under what circumstances CSK would pay a termination fee to O’Reilly.

O’Reilly was informed that on March 31, 2008, CSK’s board of directors met, with all directors and representatives of CSK’s legal and financial advisors attending, to discuss the proposed terms of the proposed transaction with O’Reilly.

In the evening on March 31, 2008, O’Reilly held a telephonic meeting of its board of directors, which included members of O’Reilly’s senior management and O’Reilly’s legal and financial advisors, to receive an update as to the status of the negotiations. Management and its legal advisors and financial advisors discussed the progress made during negotiations. In addition, the board of directors discussed the potential transaction price.

In the late evening on March 31, 2008, O’Reilly increased its offer price to $12.00 for each outstanding share of CSK’s common stock, consisting of $1.00 in cash and $11.00 in shares of O’Reilly’s common stock (based on the closing price of O’Reilly’s common stock on March 31, 2008) with a “collar” adjustment mechanism to preserve $11.00 of value of O’Reilly common stock should O’Reilly’s stock price increase by not more than 5% or decrease by not more than 10%. At approximately the same time on March 31, 2008, the final provisions of the merger agreement were agreed to, pending final approval of the boards of O’Reilly and CSK, respectively.

O’Reilly was informed that late on March 31, 2008, CSK’s board of directors met, with all directors and representatives of CSK’s legal and financial advisors attending, and unanimously approved the merger agreement and the transactions contemplated thereby, including the offer and the merger.

The board of directors of O’Reilly, including members of O’Reilly’s senior management and O’Reilly’s legal and financial advisors, reconvened early in the morning of April 1, 2008 to receive a final update as to the status of the negotiations. Mr. Henslee reported that, subject to the approval of the O’Reilly board of directors, agreement as to the price to be paid for each share of CSK common stock was reached. O’Reilly’s board of directors discussed the negotiated provisions of the merger agreement and Lehman Brothers and the O’Reilly board of directors discussed various financial aspects of the transaction. Following further discussion among O’Reilly’s board of directors together with O’Reilly’s legal and financial advisors, O’Reilly’s board of directors approved the merger agreement and the transactions contemplated thereby, including the offer and the merger.

 

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During the morning of April 1, 2008 and prior to the opening of trading on the New York Stock Exchange, CSK and O’Reilly executed the merger agreement and issued a joint press release announcing the execution of the merger agreement.

Additional Factors for Consideration by CSK Stockholders

O’Reilly’s Reasons for Making the Offer

O’Reilly’s board of directors believes that the merger with CSK represents an opportunity to enhance value for O’Reilly shareholders. The decision of O’Reilly’s board of directors to enter into the merger agreement was the result of careful consideration by the board of directors of numerous factors. Significant factors considered by the O’Reilly board of directors include, among others:

 

   

Strategic Growth through Acquisition. O’Reilly believes that the most successful retailers of automotive aftermarket parts will be those with greater financial resources, more extensive supplier and distributor networks and a broader geographic base. The merger with CSK furthers O’Reilly’s strategy of expanding its dual market strategy and operations through combinations with well-established companies.

 

   

Geographic Diversity. O’Reilly believes that CSK’s western presence would provide an expedited entry into desirable markets. O’Reilly believes in the cost effectiveness of expansion into CSK’s current markets through acquisition as opposed to new store growth.

 

   

Operating Results. O’Reilly believes that the combination of O’Reilly and CSK provides the potential for the combined enterprise to realize enhanced operating results through increased distribution system optimization, increased buying power for inventory and reduced redundancy in expenses of certain communications and administrative activities.

O’Reilly’s board also evaluated the risks, inherent in any transaction such as the merger, that currently unanticipated difficulties could arise in integrating the operations and that the synergies expected from combining the operations of O’Reilly and CSK may not be realized or, if realized, may not be realized within the period expected. O’Reilly’s board believed that these risks were outweighed by the potential benefits to be realized from the merger.

The foregoing discussion of factors considered by O’Reilly’s board is not meant to be exhaustive, but includes the material factors considered by the O’Reilly board in approving the merger agreement and the transactions contemplated by the merger agreement. The O’Reilly board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination. Rather, the board members made their respective determinations based on the totality of the information presented to them, including the recommendation by O’Reilly management, and the judgments of individual members of the board may have been influenced to a greater or lesser degree by different factors.

Other Factors You Should Consider

In deciding whether or not to tender your shares of CSK common stock, you should consider the factors described above under “Background and Reasons for the Offer and the Merger” on page 27 as well as the factors set forth under “Risk Factors” on page 21 and the other factors set forth in this prospectus.

 

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RECOMMENDATION OF CSK’S BOARD OF DIRECTORS

At a meeting held on March 31, 2008, the CSK board of directors voted unanimously to approve the merger agreement and the transactions contemplated thereby, including the offer and the merger, and determined that the merger agreement, the offer, and the merger are advisable and fair to, and in the best interest of, CSK’s stockholders. The CSK board of directors voted unanimously to recommend that CSK’s stockholders accept the offer and tender their shares of CSK common stock in the offer.

CSK’s Reasons for the Recommendation of the Offer

CSK’s board of directors believes that the merger with O’Reilly is advisable and fair to, and in the best interest of, the CSK stockholders, and in reaching its recommendation that stockholders tender their shares of CSK common stock in the offer, and, if applicable, vote in favor of the merger, the CSK board of directors considered a number of factors, including the following material factors, which the CSK board of directors viewed as supporting its recommendation:

 

   

Strategic Alternatives to Sale Transaction. Throughout the process that the CSK board of directors conducted to evaluate strategic alternatives available to CSK, the CSK board of directors considered possible alternatives to the proposed transaction with O’Reilly, including continuing to execute on its strategic plan as an independent company, selling assets of CSK, and refinancing CSK’s existing indebtedness through various capital raising and investment transactions. The CSK board of directors also considered the strategic fit and the revenue base and financial resources of O’Reilly, which it believed to be a significant benefit that could not be obtained by remaining an independent company. The CSK board of directors concluded (after taking into account the current and historical financial condition, results of operations, competitive position, business prospects, opportunities and strategic objectives of each of CSK and O’Reilly, including the potential risks involved in achieving those prospects and objectives) that (i) the financial prospects of CSK and O’Reilly on a combined basis were more favorable than the financial prospects of CSK on a stand-alone basis, (ii) a combined company should be able to compete very successfully, leading to higher equity value and (iii) on a risk-adjusted basis, the offer price is greater than the long-term value inherent in CSK as a stand-alone entity.

 

   

Prospects of the Combined Entity. The CSK board of directors considered that the combined company would be a stronger and more financially flexible company than CSK as a stand-alone entity. The combined company would be well positioned to be a nation-wide leader in the automotive aftermarket industry. The CSK board of directors also considered that the offer presents an opportunity for CSK’s stockholders to receive common stock in a healthier, more competitive and more financially stable company, to have greater liquidity for their shares, to benefit from any synergies experienced by O’Reilly in the acquisition and integration of CSK, and to participate in any future growth of O’Reilly and CSK on a combined basis.

 

   

Premium to Market Price. The CSK board of directors considered the current and historical market prices of the CSK common stock and the premium implied by the offer price based on market prices of the CSK common stock and O’Reilly common stock as of recent and historical dates.

 

   

Timing and Certainty of Completion. The CSK board of directors considered the anticipated timing and certainty of consummation of the offer, including the low risk of regulatory review of the transaction by relevant governmental authorities, and the structure of the transaction as an exchange offer for all CSK common stock, which transaction structure may enable CSK’s stockholders to receive the offer price and obtain the benefits of the transaction more quickly than might be the case in other transaction structures.

Additional information about the recommendation of CSK’s board of directors, including the reasons for the recommendation, is more fully set forth in CSK’s Solicitation/Recommendation Statement on Schedule 14D-9, which is being mailed to CSK stockholders together with this prospectus.

 

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THE OFFER

Exchange of Shares of CSK Common Stock

We are proposing to acquire all of the outstanding shares of CSK common stock in exchange for (i) between 0.3673 and 0.4285 of a share of common stock of O’Reilly and (ii) $1.00 in cash, subject to possible reduction, as described below, for each validly tendered share of CSK common stock.

Stock Component. The stock component consists of between 0.3673 and 0.4285 of a fully paid and nonassessable share of common stock, par value of $0.01, of O’Reilly as determined based on an “exchange ratio” equal to (i) $11.00 divided by (ii) the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including the second trading day prior to the consummation of the exchange offer and rounded to four decimal places; provided, however, that if such average closing sale price of O’Reilly stock is greater than $29.95, then the exchange ratio shall equal 0.3673, and if such average closing sale price is less than $25.67, then the exchange ratio shall equal 0.4285.

Cash Component. The cash component consists of $1.00 in cash minus the adjustment amount, if any, which we refer to as the per share cash consideration. The adjustment amount is the amount equal to the quotient obtained by dividing (i) the sum of any amount paid by CSK or its subsidiaries to the lenders under its credit agreements in connection with obtaining any bank consent, waiver or amendment under the credit agreements after April 1, 2008 minus $3,000,000 by (ii) the sum of the (a) total number of shares of CSK common stock outstanding immediately prior to the expiration of the offer and (b) total number of shares of CSK common stock determined by O’Reilly up to a maximum of the total number of shares of CSK common stock issuable upon the exercise or conversion of all options, warrants, rights and convertible securities (if any) that will be vested by September 28, 2008. The adjustment amount will be rounded down to the nearest 1/10 (one-tenth) of a cent and will in no event be greater than $1.00 or less than zero. CSK has indicated to O’Reilly that, as of the date of this prospectus, it does not anticipate obtaining any bank consent, waiver or amendment under its credit agreements prior to the anticipated completion of the offer.

The offer consideration consists of the per share cash consideration plus the fraction of a share of O’Reilly common stock equal to the exchange ratio.

We will not issue any fractional shares of O’Reilly common stock pursuant to the offer or the merger. In lieu thereof, O’Reilly will arrange for the exchange agent to make a cash payment (without interest and subject to any withholding for taxes) equal to the fractional share interest multiplied by the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including the second trading day prior to the consummation of the exchange offer and rounded to four decimal places.

By way of example, if the average of the reported closing sale prices of O’Reilly common stock as reported on NASDAQ for the five (5) consecutive trading days ending on and including June 17, 2008, the last trading day prior to the printing of this prospectus for which this information was practicably available, were to be used to establish the exchange ratio, each share of CSK common stock would be exchanged into 0.4285 shares of O’Reilly common stock and $1.00 in cash, subject to possible reduction, as described herein.

The expiration date shall refer to 12:00 midnight, New York City time, on July 10, 2008, unless we extend the period of time for which the offer is open, in which case the term expiration date means the latest time and date on which the offer, as so extended, expires.

We will not acquire any shares of CSK common stock in the offer unless CSK stockholders have validly tendered and not properly withdrawn prior to the expiration of the offer that number of shares which, together with the shares then owned directly or indirectly by O’Reilly, represents at least a majority of the shares of CSK common stock outstanding on a fully diluted basis. We refer to this condition as the minimum tender condition.

 

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After completion of the offer, O’Reilly will cause OC Acquisition to complete a merger with and into CSK, in which each outstanding share of CSK common stock (except for shares beneficially owned directly or indirectly by O’Reilly for its own account and any shares held in treasury by CSK) will be converted into the right to receive the same consideration paid in exchange for each share of CSK common stock in the offer, subject to appraisal rights under Delaware law, to the extent properly exercised. If, after the completion of the offer, either as a result of the offer alone or in conjunction with the exercise of our option to purchase shares directly from CSK, we beneficially own more than 90% of the outstanding shares of CSK common stock, we may effect the merger without the approval of CSK stockholders, as permitted under Delaware law. If, on the other hand, after the completion of the offer, we beneficially own more than 50%, but less than 90%, of the outstanding shares of CSK common stock, a meeting of CSK stockholders and the affirmative vote of at least a majority of the shares of CSK common stock outstanding on the record date for such meeting will be needed to complete the merger. Since O’Reilly will own a majority of the shares of CSK common stock outstanding on the record date, approval of the merger by CSK stockholders will be assured. See “—Approval of the Merger” on page 46.

If the minimum tender condition is satisfied and we consummate the offer, we have the option to purchase from CSK additional shares of common stock equal to the lowest number of shares that, when added to the number of shares already owned by O’Reilly, will constitute one share more than 90% of the shares of CSK common stock then outstanding for the same consideration as paid in exchange for each share of CSK common stock in the offer, which we refer to as the top-up option. At O’Reilly’s option, the aggregate purchase price for such shares may be satisfied with a promissory note, bearing interest at five percent per annum. In no event will the top-up option be exercisable for a number of shares of CSK common stock (i) that would require CSK to obtain stockholder approval under applicable law or the rules and regulations of the NYSE or (ii) in excess of CSK’s then authorized and unissued shares of common stock.

The number of shares of O’Reilly common stock issued to CSK stockholders in the offer and the merger will constitute approximately 14.0% of the outstanding common stock of the combined company after the merger based upon the number of outstanding shares of O’Reilly common stock and CSK common stock on June 17, 2008 and based on the closing price of O’Reilly common stock as reported on NASDAQ on June 17, 2008, disregarding stock options and shares of common stock that may be issued by O’Reilly or CSK pursuant to an employee stock plan.

If you are the record owner of your shares and you tender your shares directly to the exchange agent, you will not be obligated to pay any charges or expenses of the exchange agent or any brokerage commissions. If you own your shares through a broker or other nominee, and your broker or nominee tenders the shares on your behalf, your broker or nominee may charge you a fee for doing so. You should consult your broker or nominee to determine whether any charges will apply.

Timing of the Offer

We commenced the offer on June 11, 2008, the date of distribution of the initial prospectus. The offer is scheduled to expire at 12:00 midnight, New York City time, on July 10, 2008, unless we extend the period of the offer. All references to the expiration of the offer mean the time of expiration, as extended. For more information, see the discussion under “—Extension, Termination and Amendment” below.

Extension, Termination and Amendment

In the event that the conditions to the offer have not been satisfied or waived upon the expiration of the offer (as the same may be extended), we are required to extend the offer for periods of up to twenty (20) business days until the earlier of such time that all of the conditions to the offer have been satisfied or waived or the merger agreement has been terminated in accordance with its terms. In addition, we, in our sole discretion, will extend the offer for an aggregate period of not more than ten (10) business days beyond the last expiration date of the

 

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offer that would otherwise be permitted if, in our reasonable discretion, such extension is necessary to complete the necessary conditions to complete our financing transactions for the offer so long as such extension does not extend the expiration date of the offer beyond thirty (30) business days following commencement of the offer. During any extension, all shares of CSK common stock previously tendered and not validly withdrawn will remain deposited with the exchange agent, subject to your right to withdraw your shares of CSK common stock. If we exercise our right to use a subsequent offering period as described below, we will first consummate the exchange with respect to the shares validly tendered and not properly withdrawn in the initial offer period.

We expressly reserve the right, but shall not be obligated to, waive any conditions to the offer and to make any changes to the terms of or conditions to the offer, provided that, without the prior written consent of CSK, we cannot:

 

   

reduce the offer price;

 

   

change the form of consideration payable in the offer, other than to increase the consideration;

 

   

reduce the number of shares to be purchased in the offer;

 

   

waive or amend the minimum tender condition or the condition that the merger agreement has not been terminated;

 

   

add any additional conditions to the offer;

 

   

extend the offer except as permitted by the merger agreement; or

 

   

modify any condition to the offer or any term of the offer in a manner adverse to CSK’s stockholders.

In the event the merger agreement is terminated in accordance with its terms prior to the acceptance of any shares of CSK common stock for exchange pursuant to the offer, we will promptly terminate the offer without accepting any shares that were previously tendered.

We will follow any extension, termination, waiver or amendment, as promptly as practicable, with a public announcement. Subject to the requirements of the Exchange Act and other applicable law, and without limiting the manner in which we may choose to make any public announcement, we assume no obligation to publish, advertise or otherwise communicate any public announcement.

Subsequent Offering Period

We may elect to provide subsequent offering periods of up to twenty (20) business days after the acceptance of shares of CSK common stock in the offer in accordance with Rule 14d-11 under the Exchange Act if, on the expiration date of the offer, all of the conditions to the offer have been satisfied or waived, but the total number of shares of CSK common stock that have been validly tendered and not withdrawn pursuant to the offer, together with shares of CSK common stock then directly or indirectly owned by O’Reilly, is less than 90% of the total number of shares of CSK common stock then outstanding. If we exercise our right to use a subsequent offering period, we will first consummate the exchange with respect to the shares validly tendered and not properly withdrawn in the initial offer period. You will not have the right to withdraw any shares of CSK common stock that you tender in the subsequent offering period. If we elect to provide a subsequent offering period, we will make a public announcement to that effect no later than 9:00 a.m. New York City time on the next business day after the previously scheduled expiration.

Conditions of the Offer

The offer is subject to a number of conditions, which we describe below. Notwithstanding any other provisions of the offer, and in addition to O’Reilly’s rights to amend the offer at any time in its sole discretion (subject to the provisions of the merger agreement and any applicable rules and regulations of the SEC, including

 

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Rule 14e-l(c) under the Exchange Act), O’Reilly shall not be required to accept for exchange, or exchange the offer consideration for, any validly tendered shares of CSK common stock if any of these conditions are not satisfied or, where permissible, waived as of the expiration of the offer.

Minimum Tender Condition

There must be validly tendered and not properly withdrawn prior to the expiration of the offer that number of shares of CSK common stock that, together with shares of CSK common stock then directly or indirectly owned by O’Reilly, represents at least a majority of the fully diluted shares of CSK common stock.

Regulatory Clearance

The waiting periods under the HSR Act have been terminated and no longer restrict the consummation of the merger. The applicable waiting period under the HSR Act was terminated on April 17, 2008.

Registration Condition

The registration statement on Form S-4 of which this prospectus is a part must have been declared effective by the SEC under the Securities Act and not be the subject of any stop order or proceedings seeking a stop order.

NASDAQ Condition

The shares of O’Reilly common stock issuable in exchange for shares of CSK common stock in the offer and the merger shall have been authorized for listing on the NASDAQ.

Tax Opinion Condition

O’Reilly shall have received a written opinion from Skadden, Arps, Slate, Meagher & Flom LLP to the effect that the offer, the merger and the LLC merger (if any) together will constitute a reorganization within the meaning of Section 368(a) of the Code (which opinion may rely on such assumptions and representations as such counsel reasonably deems appropriate). In addition, CSK shall have received a written opinion from Gibson, Dunn & Crutcher LLP to the effect that the offer, the merger and the LLC merger (if any) together will constitute a reorganization within the meaning of Section 368(a) of the Code (which opinion may rely on such assumptions and representations as such counsel reasonably deems appropriate).

Additional Conditions

In addition, notwithstanding any other provisions of the offer, subject to the provisions of the merger agreement and any applicable rules and regulations of the SEC (including Rule 14e-1(c) under the Exchange Act), O’Reilly shall not be required to accept for exchange, or exchange the offer consideration for, any validly tendered shares of CSK common stock if any of the following events has occurred:

 

   

any governmental entity has issued an order, decree, injunction or ruling or taken any other action permanently restraining, enjoining or otherwise materially delaying or preventing the consummation of the offer or the merger and such order, decree, injunction, ruling or other action has become final and non-appealable;

 

   

there is any pending action, proceeding or counterclaim by any governmental entity with respect to the actions set forth above in the immediately preceding bullet point; provided, however, that this condition will only be a condition during the first sixty (60) days after April 1, 2008;

 

   

any law enacted, entered, enforced, issued or in effect that prohibits or makes illegal the consummation of the offer, the merger or any other transaction contemplated by the merger agreement;

 

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the representations and warranties of CSK contained in the merger agreement are not true and correct in all respects, as of April 1, 2008 or at the consummation of the offer, as if made at such time, except where the failure to be so true and correct has not had and would not reasonably be expected to have, either individually or in the aggregate, a material adverse effect on CSK (except with respect to the CSK representations relating to the capital stock and authority, which must be correct in all material respects) and such breach has not been cured;

 

   

CSK has materially breached any of its obligations under the merger agreement and such breach or failure to perform has not been cured;

 

   

any event, change or development shall have occurred following April 1, 2008 that has had or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on CSK and such material adverse effect shall not have been cured;

 

   

CSK’s board of directors has changed its recommendation of the merger agreement in a manner adverse to O’Reilly and such change has not been withdrawn;

 

   

CSK has approved, endorsed or recommended to CSK’s stockholders an acquisition proposal other than the offer or the merger with O’Reilly and OC Acquisition; or

 

   

the merger agreement has been terminated in accordance with its terms.

General Conditions

All of the foregoing conditions, other than the minimum tender condition and the condition that the merger agreement has not been terminated, are for our sole benefit and may be asserted by us regardless of the circumstances giving rise to any such condition, in whole or in part at any time prior to the expiration of the offer or, with respect to the condition relating to receipt of approvals from any government entity, prior to the acceptance for exchange of any shares of CSK common stock pursuant to the offer, and all conditions, other than the minimum tender condition and the condition that the merger agreement has not been terminated, may be waived by us, in our sole discretion, in whole or in part at any applicable time subject in each case to the terms of the merger agreement and the applicable rules and regulations of the SEC.

O’Reilly has agreed with CSK in the merger agreement that it will not consummate the offer without CSK’s consent unless the conditions set forth above under Registration Condition, NASDAQ Condition and Tax Opinion Condition are satisfied. In addition, O’Reilly has also agreed with CSK in the merger agreement that it will not consummate the offer without CSK’s consent if:

 

   

the representations and warranties of O’Reilly contained in the merger agreement are not true and correct in all respects, as of April 1, 2008 or at the consummation of the offer, as if made at such time, except where the failure to be so true and correct has not had and would not reasonably be expected to have, either individually or in the aggregate, a material adverse effect on O’Reilly (except with respect to the O’Reilly representations relating to the capital stock and authority, which must be correct in all material respects) and such breach has not been cured;

 

   

O’Reilly has materially breached any of its obligations under the merger agreement and such breach or failure to perform has not been cured; or

 

   

any event, change or development shall have occurred following April 1, 2008 that has had or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on O’Reilly and such material adverse effect shall not have been cured.

The failure by us at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and, each such right shall be deemed an ongoing right that may be asserted at any time and from time to time.

 

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O’Reilly and CSK cannot assure you that all of the conditions to completing the offer will be satisfied or waived.

Important Definitions

The merger agreement provides that a material adverse effect means, when used in connection with O’Reilly or CSK, any fact, circumstance, event, change, effect, development or occurrence that, either individually or in the aggregate is materially adverse to (i) the business, assets, liabilities, condition (financial or otherwise) or results of operations of O’Reilly or CSK and their respective subsidiaries, taken as a whole or (ii) the ability of O’Reilly or CSK or perform, in all material respects, their obligations under the merger agreement or to consummate the transactions contemplated by the merger agreement; provided that material adverse effect shall not include the effect of any fact, circumstance, event, change, effect, development or occurrence arising out of or attributable to any of the following, either alone or in combination:

 

   

the industry and markets in which O’Reilly or CSK and their respective subsidiaries operate generally (that do not materially disproportionately affect O’Reilly or CSK, as applicable, and their respective subsidiaries, taken as a whole);

 

   

general economic, business, regulatory or political conditions (including those affecting the securities or financial markets) (that do not materially disproportionately affect O’Reilly or CSK, as applicable, and their respective subsidiaries, taken as a whole);

 

   

gasoline prices in the United States;

 

   

any actions required under the merger agreement to obtain any approval or authorization under applicable antitrust or competition laws for the consummation of the offer or the merger;

 

   

the public announcement or pendency of the merger agreement or the consummation of the transactions contemplated thereby (including any loss of employees or labor disputes or employee strikes, slowdowns, job actions or work stoppages or labor union activities or any termination or reduction or similar negative impact on relationships, contractual or otherwise, with any customers, suppliers or distributors);

 

   

acts of war (whether or not declared), sabotage or terrorism, military actions or the escalation thereof or other force majeure events (such as natural disasters or acts of God) occurring after April 1, 2008 (other than any of the foregoing that causes material damage or destruction to a material number of stores of O’Reilly or CSK, as applicable, and their respective subsidiaries, taking into account the proceeds of any applicable insurance policies);

 

   

any changes in applicable laws or applicable accounting regulations or principles or interpretations thereof; and

 

   

the taking of any action contemplated by or arising from this agreement or consented to or requested by the other party.

In addition to the above, the definition of material adverse effect for CSK excludes the effect of any fact, circumstance, event, change, effect, development or occurrence attributable to certain financial and operational trends of CSK.

Procedure for Tendering Shares

For you to validly tender shares of CSK common stock pursuant to the offer:

 

   

the enclosed letter of transmittal, properly completed and duly executed, or a manually executed facsimile of that document, along with any required signature guarantees, or an agent’s message (as defined below) in connection with a book-entry transfer, and any other required documents, must be transmitted to and received by the exchange agent at one of its addresses set forth on the back cover of

 

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this prospectus, and certificates for tendered shares of CSK common stock must be received by the exchange agent at one of its addresses or those shares of CSK common stock must be tendered pursuant to the procedures for book-entry tender set forth below, and a confirmation of receipt of the tender received, which confirmation we refer to below as a book-entry confirmation, in each case before the offer expiration date; or

 

   

you must comply with the guaranteed delivery procedures set forth below.

The term “agent’s message” means a message, transmitted by DTC to, and received by, the exchange agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the participant in DTC tendering the shares of CSK common stock that are the subject of the book-entry confirmation, that the participant has received and agrees to be bound by the terms of the letter of transmittal and that we may enforce that agreement against the participant.

The exchange agent will establish accounts at DTC with respect to the shares of CSK common stock for purposes of the offer within two (2) business days after the date of this prospectus, and any financial institution that is a participant in DTC may make book-entry delivery of the shares of CSK common stock by causing DTC to transfer tendered shares of CSK common stock into the exchange agent’s account in accordance with DTC’s procedure for the transfer. However, although delivery of shares of CSK common stock may be effected through book-entry at DTC, the letter of transmittal, or a manually signed facsimile thereof, with any required signature guarantees, or an agent’s message in connection with a book-entry transfer, and any other required documents, must, in any case, be transmitted to and received by the exchange agent at one of its addresses set forth on the back cover of this prospectus prior to the offer expiration date, or the guaranteed delivery procedures described below must be followed.

Signatures on all letters of transmittal must be guaranteed by an eligible institution, except in cases in which shares of CSK common stock are tendered either by a registered holder of shares of CSK common stock who has not completed the box entitled “Special Payment Instructions” or “Special Delivery Instructions” on the letter of transmittal or for the account of an eligible institution.

If the certificates for shares of CSK common stock are registered in the name of a person other than the person who signs the letter of transmittal, or if certificates for unexchanged shares of CSK common stock are to be issued to a person other than the registered holder(s), the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holder(s) appear(s) on the certificates, with the signature(s) on the certificates or stock powers guaranteed in the manner we have described above.

Guaranteed Delivery

If you wish to tender shares of CSK common stock pursuant to the offer and your certificates are not immediately available or you cannot deliver the certificates and all other required documents to the exchange agent prior to the expiration date or cannot complete the procedure for book-entry transfer on a timely basis, your shares of CSK common stock may nevertheless be tendered, if all of the following conditions are satisfied:

 

   

you make your tender by or through an eligible institution;

 

   

the enclosed notice of guaranteed delivery, properly completed and duly executed, substantially in the form enclosed with this prospectus, is received by the exchange agent as provided below on or prior to the expiration date; and

 

   

the certificates for all tendered shares of CSK common stock, or a confirmation of a book-entry transfer of tendered shares into the exchange agent’s account at DTC as described above, in proper form for transfer, together with a properly completed and duly executed letter of transmittal or a manually signed facsimile thereof, with any required signature guarantees, or, in the case of a book-

 

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entry transfer, an agent’s message, and all other documents required by the letter of transmittal are received by the exchange agent within three (3) New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery. You may deliver the notice of guaranteed delivery by hand or transmit it by facsimile transmission or mail to the exchange agent and you must include a signature guarantee by an eligible institution in the form set forth in that notice.

In all cases, we will exchange shares of CSK common stock tendered and accepted for exchange pursuant to the offer only after timely receipt by the exchange agent of certificates for shares of CSK common stock, or timely confirmation of a book-entry transfer of tendered shares into the exchange agent’s account at DTC as described above, properly completed and duly executed letter(s) of transmittal, or manually signed facsimile(s) thereof, or an agent’s message in connection with a book-entry transfer, and any other required documents.

By executing a letter of transmittal, you irrevocably appoint our designees as your attorneys-in-fact and proxies, each with full power of substitution, to the full extent of your rights with respect to your shares of CSK common stock tendered and accepted for exchange by us and with respect to any and all other shares of CSK common stock and other securities. That appointment is effective if and when, and only to the extent that, we accept the shares of CSK common stock for exchange pursuant to the offer. All of these proxies shall be considered coupled with an interest in the tendered shares of CSK common stock and therefore shall not be revocable. Upon the effectiveness of the appointment, all prior proxies that you have given will be revoked, and you may not give any subsequent proxies, and, if given, they will not be deemed effective. Our designees will, with respect to the shares of CSK common stock for which the appointment is effective, be empowered, among other things, to exercise all of your voting and other rights as they, in their sole discretion, deem proper at any annual, special or adjourned meeting of CSK’s stockholders or otherwise. We reserve the right to require that, in order for shares of CSK common stock to be deemed validly tendered, immediately upon our exchange of those shares of CSK common stock, we must be able to exercise full voting rights with respect to the tendered shares of CSK common stock.

We will determine questions as to the validity, form, eligibility including time of receipt, and acceptance for exchange of any tender of shares of CSK common stock, in our sole discretion, and our determination shall be final and binding. We reserve the absolute right to reject any and all tenders of shares of CSK common stock that we determine are not in proper form or the acceptance of or exchange for which may, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any defect or irregularity in the tender of any shares of CSK common stock. No tender of those shares of CSK common stock will be deemed to have been validly made until all defects and irregularities in tenders of those shares of CSK common stock have been cured or waived. Neither we, the exchange agent, the information agent nor any other person will be under any duty to give notification of any defects or irregularities in the tender of any shares of CSK common stock or will incur any liability for failure to give notification. Our interpretation of the terms and conditions of the offer, including the letter of transmittal and instructions thereto, will be final and binding.

The tender of shares of CSK common stock pursuant to any of the procedures described above will constitute a binding agreement between us and you upon the terms and subject to the conditions of the offer.

Withdrawal Rights

Shares of CSK common stock that you tender pursuant to the offer may be withdrawn according to the procedures set forth below at any time prior to the expiration of the offer and, unless theretofore accepted for exchange in the offer, may also be withdrawn at any time after August 10, 2008.

For your withdrawal to be effective, the exchange agent must timely receive from you a written or facsimile transmission notice of withdrawal at one of its addresses set forth on the back cover of this prospectus, and your notice must include your name, address, social security number, the certificate number(s) and the number of shares of CSK common stock to be withdrawn, as well as the name of the registered holder, if it is different from that of the person who tendered those shares of CSK common stock. If shares of CSK common stock have been

 

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tendered pursuant to the procedures for book-entry tender discussed above under “—Procedure for Tendering Shares,” any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn shares of CSK common stock and must otherwise comply with DTC’s procedures. If certificates have been delivered or otherwise identified to the exchange agent, the name of the registered holder and the serial numbers of the particular certificates evidencing the shares of CSK common stock withdrawn must also be furnished to the exchange agent, as stated above, prior to the physical release of the certificates. We will decide all questions as to the form and validity (including time of receipt) of any notice of withdrawal, in our sole discretion, and our decision will be final and binding.

An eligible institution must guarantee all signatures on the notice of withdrawal unless the shares of CSK common stock have been tendered for the account of an eligible institution.

None of O’Reilly, the exchange agent, the information agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or will incur any liability for failure to give any notification. Any shares of CSK common stock that you properly withdraw will be deemed not to have been validly tendered for purposes of the offer. However, you may retender withdrawn shares of CSK common stock by following one of the procedures discussed under “—Procedure for Tendering Shares” or “—Guaranteed Delivery” at any time before the expiration of the offer.

Effect of a Tender of Shares

By executing a letter of transmittal, you will agree and acknowledge that our acceptance for exchange of shares of CSK common stock you tender in the offer will, without any further action, revoke any prior powers of attorney and proxies that you may have granted in respect of those shares and you will not grant any subsequent proxies and, if any are granted, they will not be deemed effective. We reserve the right to require that, in order for shares of CSK common stock to be validly tendered, we must be able to exercise full voting, consent and other rights with respect to those shares of CSK common stock immediately upon our acceptance of those shares of CSK common stock for exchange.

We will determine questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of shares of CSK common stock, in our sole discretion, and our determination will be final and binding. We reserve the absolute right to reject any and all tenders of shares of CSK common stock that we determine are not in proper form or the acceptance of or exchange for which may, in the opinion of our counsel, be unlawful. No tender of shares of CSK common stock will be deemed to have been validly made until all defects and irregularities in tenders of those shares have been cured or waived. None of O’Reilly, the exchange agent, the information agent, or any other person will be under any duty to give notification of any defects or irregularities in the tender of any shares of CSK common stock or will incur any liability for failure to give any such notification. Our interpretation of the terms and conditions of the offer, including the letter of transmittal and instructions, will be final and binding.

The tender of shares of CSK common stock pursuant to any of the procedures described above will constitute a binding agreement between you and us upon the terms and subject to the conditions of the offer.

 

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Delivery of Shares of O’Reilly Common Stock and Cash

Subject to the satisfaction (or, where permissible, waiver) of the conditions to the offer as of the expiration of the offer, we will accept for exchange shares of CSK common stock validly tendered and not properly withdrawn promptly after the expiration of the offer and will exchange shares of O’Reilly common stock, $1.00 minus the adjustment amount, if any, and cash in lieu of fractional shares for the tendered shares of CSK common stock. In all cases, exchange of shares of CSK common stock tendered and accepted for exchange pursuant to the offer will be made only if the exchange agent timely receives:

 

   

certificates for those shares of CSK common stock, or a timely confirmation of a book-entry transfer of those shares of CSK common stock in the exchange agent’s account at DTC, and a properly completed and duly executed letter of transmittal or a duly executed copy thereof, and any other required documents; or

 

   

a timely confirmation of a book-entry transfer of those shares of CSK common stock in the exchange agent’s account at DTC, together with an “agent’s message” as described under “—Procedure for Tendering Shares.”

For purposes of the offer, we will be deemed to have accepted for exchange shares of CSK common stock validly tendered and not properly withdrawn when, as and if we notify the exchange agent of our acceptance of the tender of those shares of CSK common stock pursuant to the offer. The exchange agent will deliver the shares of O’Reilly common stock, the $1.00 in cash, subject to reduction, if any, and cash in lieu of a fraction of a share of O’Reilly common stock promptly after receipt of our notice. The exchange agent will act as agent for tendering CSK stockholders for the purpose of receiving the cash portion of the offer price, the shares of O’Reilly common stock and cash instead of a fraction of a share of O’Reilly common stock and transmitting the shares and cash to you. You will not receive any interest on any cash that you are entitled to receive, even if there is a delay in making the exchange. If we do not accept shares of CSK common stock for exchange pursuant to the offer or if certificates are submitted for more shares of CSK common stock than are tendered in the offer, we will return certificates for these unexchanged shares of CSK common stock without expense to the tendering stockholder. If we do not accept shares of CSK common stock for exchange pursuant to the offer, shares of CSK common stock tendered by book-entry transfer into the exchange agent’s account at DTC pursuant to the procedures set forth under “—Procedure for Tendering Shares” will be credited to the account maintained with DTC from which those shares were originally transferred, promptly following expiration or termination of the offer.

Cash Instead of Fractional Shares of O’Reilly Common Stock

We will not issue any fractional shares of O’Reilly common stock pursuant to the offer or the merger. Rather, O’Reilly will arrange for the exchange agent to make a cash payment (without interest and subject to any withholding for taxes) equal to the fractional share interest multiplied by the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including the second trading day prior to the consummation of the offer and rounded to four decimal places.

Material United States Federal Income Tax Considerations

The following is a general summary of the anticipated material United States federal income tax consequences of the offer, the merger and the LLC merger (if any) to “United States holders” (as defined below) of CSK common stock. This summary applies only to CSK stockholders who are United States holders and who hold their shares of CSK common stock, and will hold the shares of O’Reilly common stock received in exchange for their shares of CSK common stock, as capital assets within the meaning of section 1221 of the Code.

For purposes of this discussion, a “United States holder” means:

 

   

a citizen or resident of the United States;

 

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a corporation or other entity taxable as a corporation created or organized under the laws of the United States or any state thereof or in the District of Columbia;

 

   

a trust, the substantial decisions of which are controlled by one or more United States persons and which is subject to the primary supervision of a United States court, or a trust that validly has elected under applicable Treasury Regulations to be treated as a United States person for United States federal income tax purposes; or

 

   

an estate that is subject to United States federal income tax on its income regardless of its source.

Holders of CSK common stock who are not United States holders may have different tax consequences than those described below and are urged to consult their own tax advisors regarding the tax treatment to them under United States and non-United States tax laws.

This discussion does not address all of the United States federal income tax consequences that may be relevant to particular United States holders in light of their individual circumstances, and does not address any aspect of state, local, foreign, estate or gift taxation that may be applicable to a United States holder. In addition, this discussion does not consider any specific facts or circumstances that may be relevant to a United States holder subject to special rules under United States federal income, including without limitation:

 

   

banks, trusts and other financial institutions;

 

   

tax-exempt organizations;

 

   

insurance companies;

 

   

cooperatives;

 

   

dealers in securities or foreign currencies;

 

   

mutual funds, regulated investment companies or real estate investment trusts;

 

   

traders in securities that elect to use a mark-to-market method of accounting;

 

   

holders whose functional currency is not the U.S. dollar;

 

   

partnerships or other entities treated as partnerships for United States federal income tax purposes;

 

   

holders who hold shares as part of a hedge, straddle or other risk reduction, constructive sale or conversion transaction; and

 

   

holders who acquired their shares upon the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan.

If a partnership or other entity treated as a partnership for United States federal income tax purposes holds shares of CSK common stock, the tax treatment of a partner generally will depend on the status of the partner and on the activities of the partnership. Partners of partnerships holding CSK common stock should consult their tax advisors about the tax consequences of the offer, the merger and the LLC merger (if any) to them.

This discussion is based, and the tax opinions referred to in the following paragraphs will be based, upon the provisions of the Code, applicable Treasury Regulations, published positions of the Internal Revenue Service (the “IRS”), judicial decisions and other applicable authorities, as in effect on the date of the registration statement on Form S-4 of which this prospectus is a part or the date of the tax opinions, as the case may be. There can be no assurance that future legislative, administrative or judicial changes or interpretations, which changes or interpretations could apply retroactively, will not affect the accuracy of this discussion or the statements or conclusions set forth in the tax opinions referred to in the following paragraphs. No rulings have been or will be sought from the IRS concerning the tax consequences of the offer, the merger and the LLC merger (if any), and none of the tax opinions of counsel to be received in connection with the offer and the merger will be binding on the IRS or any court. As such, there can be no assurance that the IRS will not take a contrary position regarding the tax consequences of the offer and the merger described in this discussion or the tax opinions of counsel, or

 

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that any such contrary position would not be sustained. The tax opinions referred to in the following paragraphs will rely on facts, assumptions and representations of factual statements and covenants contained in officer’s certificates of O’Reilly and CSK.

Tax matters are very complicated, and the tax consequences of the offer, the merger and the LLC merger (if any) to CSK stockholders will depend on each such stockholder’s particular tax situation. CSK STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER, THE MERGER AND THE LLC MERGER (IF ANY), INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND OF CHANGES IN APPLICABLE TAX LAWS.

Tax Consequences of the Offer and the Merger

The obligations of O’Reilly and CSK to complete the offer are conditioned upon the delivery of a written opinion to O’Reilly by Skadden, Arps, Slate, Meagher & Flom LLP and the delivery of a written opinion to CSK by Gibson, Dunn & Crutcher LLP, to the effect that, for United States federal income tax purposes, the offer, the merger and the LLC merger (if any) together will constitute a reorganization within the meaning of section 368(a) of the Code. These opinions of counsel will be given in reliance on customary representations of O’Reilly and CSK and assumptions as to certain factual matters, including that the merger will occur in the ordinary course after completion of the offer and the LLC merger will occur immediately after the merger if necessary to preserve the intended tax treatment of the offer and the merger as a tax free reorganization.

Subject to the limitations and qualifications set forth in this section “Material United States Federal Income Tax Considerations,” and in the tax opinions filed as Exhibits 8.1 and 8.2 to the registration statement on Form S-4 of which this prospectus is a part, the following are the anticipated material United States federal income tax consequences to CSK common stockholders who, consistent with the opinions of counsel referred to above, receive cash and shares of O’Reilly common stock pursuant to a transaction constituting a reorganization within the meaning of section 368(a) of the Code:

 

   

A CSK common stockholder who exchanges his or her shares of CSK common stock for cash (other than cash in lieu of a fractional share of O’Reilly common stock) and shares of O’Reilly common stock pursuant to the offer and/or the merger will recognize gain (but will not recognize any loss), and the gain recognized will be equal to the lesser of (i) any cash received (other than cash received in lieu of a fractional share of O’Reilly common stock) and (ii) the excess, if any, of (x) the sum of the cash received (other than cash received in lieu of a fractional share of O’Reilly common stock) and the fair market value of the O’Reilly common stock received (determined at the effective time of the merger) over (y) the CSK common stockholder’s tax basis in the shares of CSK common stock exchanged therefor. The amount of gain (or non-recognized loss) must be computed separately for each block of CSK common stock that was purchased by the CSK common stockholder in the same transaction, and a loss realized on one block of stock may not be used to offset a gain realized on another block of stock. A CSK common stockholder to whom these rules may apply should consult his or her tax advisor regarding the manner in which gain or loss should be computed for different blocks of CSK common stock surrendered in the offer and the merger. Any recognized gain will generally be long-term capital gain if the stockholder’s holding period for the shares of CSK common stock surrendered is more than one year at the effective time of the offer or the merger, as the case may be, except as discussed below.

 

   

Notwithstanding the above, if the cash received (other than cash in lieu of a fractional share of O’Reilly common stock) has the effect of a distribution of a dividend, any recognized gain will be treated as a dividend to the extent of the CSK stockholder’s ratable share of accumulated earnings and profits as computed for United States federal income tax purposes. In general, the determination of whether any gain recognized in the offer and the merger will be treated as capital gain or dividend income will depend upon whether, and to what extent, the exchange in the offer

 

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and the merger reduces the eligible CSK common stockholder’s deemed percentage ownership interest in O’Reilly after the merger. For purposes of this determination, an eligible CSK common stockholder will be treated as if he or she first exchanged all of his or her shares of CSK common stock solely for shares of O’Reilly common stock and then O’Reilly immediately redeemed a portion of those shares in exchange for the cash that the eligible CSK common stockholder actually received (excluding cash in lieu of a fractional share of O’Reilly common stock). In determining whether the receipt of cash has the effect of a distribution of a dividend, the Code’s constructive ownership rules must be taken into account. The IRS has indicated in rulings that any reduction in the interest of a minority stockholder who owns a small number of shares in a publicly and widely held corporation and who exercises no control over corporate affairs would result in capital gain as opposed to dividend treatment. Each CSK common stockholder should consult his or her tax advisor regarding the application of these rules.

 

   

Each CSK stockholder’s aggregate tax basis in the shares of O’Reilly common stock received in the offer and the merger will be the same as his or her aggregate tax basis in the CSK common stock surrendered in the offer and the merger (including any fractional share of O’Reilly common stock for which cash is received), increased by the amount of gain recognized (including any portion of the gain that is treated as a dividend as described above, but excluding any gain attributable to the receipt of cash in lieu of a fractional share of O’Reilly common stock) and decreased by (i) any cash received (other than cash received in lieu of a fractional share of O’Reilly common stock) and (ii) the amount of any tax basis allocable to any fractional share interest for which cash is received. The holding period of the shares of O’Reilly common stock received in the offer and the merger by a CSK common stockholder will include the holding period of the shares of CSK common stock that he or she surrendered in the offer and the merger. If a CSK common stockholder has differing tax bases and/or holding periods in respect of the stockholder’s shares of CSK common stock, the stockholder should consult with a tax advisor in order to identify the tax bases and/or holding periods of the particular shares of O’Reilly common stock that the stockholder receives.

 

   

A cash payment received by a CSK common stockholder in lieu of a fractional share of O’Reilly common stock generally will be treated as received in exchange for that fractional share interest, and gain or loss generally will be recognized for federal income tax purposes on the receipt of the cash payment, measured by the difference between the amount of cash received and the portion of the basis of the CSK common stock allocable to the fractional share interest. The gain or loss will be long-term capital gain or loss if the CSK common stock is considered to have been held for more than one year at the effective time of the offer or the merger, as the case may be. The deductibility of capital losses is subject to limitations.

If the IRS determines successfully that the offer, the merger and the LLC merger (if any) together do not constitute a reorganization within the meaning of section 368(a) of the Code, each CSK common stockholder would be required to recognize gain or loss with respect to each share of CSK common stock that he or she surrenders in the offer and the merger in an amount equal to the difference between (i) the sum of any cash received (including cash received in lieu of a fractional share of O’Reilly common stock) and the fair market value of O’Reilly common stock received and (ii) the tax basis of the shares of CSK common stock surrendered in exchange therefor. The amount and character of gain or loss would be computed separately for each block of CSK common stock that was purchased by the stockholder in the same transaction. A CSK common stockholder’s aggregate tax basis in the O’Reilly common stock received in the offer and the merger would in this case equal its fair market value at the time of the closing of the offer or the merger, as applicable, and the holding period for the O’Reilly common stock would begin the day after the closing of the offer or the merger, as applicable.

Except as provided for in “Appraisal Rights” beginning on page 47, CSK common stockholders are entitled to appraisal rights in connection with the merger, subject to properly perfecting such rights. If a CSK common stockholder receives cash pursuant to the exercise of appraisal rights, such stockholder generally will recognize

 

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gain or loss, measured by the difference between the amount of cash received and such holder’s tax basis in such CSK common stock. A CSK common stockholder who exercises appraisal rights is urged to consult his or her tax advisor.

A United States holder who receives shares of O’Reilly common stock as a result of the offer and the merger will be required to retain records pertaining to the offer and the merger. Each United States holder who is required to file a United States federal income tax return and who is a “significant holder” that receives shares of O’Reilly common stock generally will be required to file a statement with such holder’s United States federal income tax return setting forth such holder’s tax basis in the CSK common stock and the fair market value of the O’Reilly common stock received in the merger. A “significant holder” is a United States holder, who immediately before the offer and the merger owned, either (i) at least 5% (by vote or value) of the outstanding stock of CSK or (ii) securities of CSK with a tax basis of $1.0 million or more.

Information Reporting and Backup Withholding

CSK common stockholders may be subject to “backup withholding” for United States federal income tax purposes on any cash received in the offer or in the merger unless certain requirements are met. Payments will not be subject to backup withholding if the stockholder (i) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact or (ii) provides O’Reilly or the exchange agent, as appropriate, with the stockholder’s correct taxpayer identification number and completes the substitute Form W-9 included in the letter of transmittal in which the stockholder certifies that the stockholder is not subject to backup withholding. The taxpayer identification number of an individual is his or her Social Security number. Any amount paid as backup withholding tax will be credited against the stockholder’s United States federal income liability provided the stockholder furnishes the required information to the IRS.

Transferability of Shares of O’Reilly Common Stock

The shares of O’Reilly common stock offered hereby will be registered under the Securities Act and quoted on the NASDAQ. Accordingly, such shares may be traded freely subject to restrictions under the Securities Act applicable to subsequent transfers of our shares by our “affiliates” (as defined in the Securities Act), which, in general, provide that our affiliates may not transfer our shares except pursuant to further registration of those shares under the Securities Act or in compliance with Rule 145 (or if applicable, Rule 144) under the Securities Act or another available exemption from registration under the Securities Act.

Approval of the Merger

Under the DGCL, the approval of the board of directors of a company and the affirmative vote of the holders of a majority of the outstanding shares entitled to vote are required to approve a merger and adopt a merger agreement.

CSK’s board of directors has previously approved the merger and adopted the merger agreement. If, after completion of the offer, we own less than 90% of the outstanding shares of CSK common stock, approval of the merger can be accomplished through a special meeting of CSK stockholders to vote on the merger. Since we will own a majority of the shares of CSK common stock on the record date for determining the CSK stockholders entitled to vote, we would have a sufficient number of shares of CSK common stock to approve the merger without the vote of any other CSK stockholder and, therefore, approval of the merger by CSK stockholders would be assured. Completion of the transaction in this manner is referred to in this prospectus as a “long-form merger.” Under the DGCL, a merger can occur without a vote of CSK stockholders, referred to as a “short-form merger,” if, after completion of the offer, as it may be extended and including any subsequent offering period, we were to own at least 90% of the outstanding shares of CSK common stock. If, after completion of the offer, as it may be extended and including any subsequent offering period, or after O’Reilly’s exercise of its option to purchase additional shares from CSK directly, we own at least 90% of the outstanding shares of CSK common stock, we may complete the acquisition of the remaining outstanding shares of CSK common stock by completing a short-form merger.

 

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Appraisal Rights

The offer does not entitle CSK stockholders to appraisal rights with respect to their shares of CSK common stock.

Except as provided in the following paragraph, the merger does entitle CSK stockholders to appraisal rights with respect to their shares of CSK common stock. If the merger is consummated, holders of shares of CSK common stock at the effective time of the merger will have certain rights pursuant to the provisions of Section 262 of the DGCL to demand appraisal of their shares of CSK common stock. Under Section 262, CSK stockholders who comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their shares of CSK common stock (exclusive of any element of value arising from the accomplishment or expectation of the merger) and to receive payment of such fair value in cash, together with interest, if any, at a rate equal to 5% over the federal reserve discount rate (including any surcharge) compounded quarterly, unless the court in its discretion determines otherwise for good cause shown. Any such judicial determination of the fair value of shares of CSK common stock could be based upon factors other than, or in addition to, the price per CSK share to be paid in the merger or the market value of the shares of CSK common stock. The value so determined could be more or less than the price per share of CSK common stock to be paid in the merger.

If the $1.00 per share cash component of the offer consideration is decreased to zero pursuant to the terms of the offer, and at the record date fixed to determine the CSK stockholders entitled to vote, the CSK common stock and O’Reilly common stock are listed on the NYSE, NASDAQ or another national securities exchange or are held of record by more than 2,000 holders, then CSK stockholders will not be entitled to appraisal rights if a vote by the CSK stockholders is required under the DGCL to effect the merger.

The foregoing summary of Section 262 of the DGCL does not purport to be complete and is qualified in its entirety by reference to the full text of Section 262 of the DGCL, which is set forth in Annex B to this prospectus. CSK stockholders who may wish to exercise appraisal rights under Delaware law are urged to consult legal counsel for assistance in exercising their rights. Failure to comply completely and on a timely basis with all requirements of Section 262 for perfecting appraisal rights will result in the loss of those rights.

Holders of O’Reilly common stock are not entitled to appraisal rights in connection with the offer or the merger.

CERTAIN LEGAL MATTERS

Regulatory Approvals

We and CSK have agreed pursuant to the merger agreement to use all reasonable best efforts to take whatever actions are required to obtain necessary regulatory approvals with respect to the offer and the merger. Other than clearance under the antitrust laws applicable to the offer and the merger that are described below and that have already been obtained, the SEC declaring the effectiveness of the registration statement of which this prospectus is a part and the filing of a certificate of merger under the DGCL with respect to the merger, we do not believe that any additional governmental filings are required with respect to the offer and the merger.

Under the HSR Act, and the related rules, the merger may not be completed until we and CSK notify and furnish information to the Federal Trade Commission and the Antitrust Division of the United States Department of Justice and specified waiting period requirements have been satisfied. The applicable waiting period under the HSR Act was terminated on April 17, 2008.

State Takeover Laws

A number of states have adopted takeover laws and regulations which purport, to varying degrees, to be applicable to attempts to acquire securities of corporations which have substantial assets, stockholders, principal

 

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executive offices or principal places of business in those states. CSK has taken all action necessary to exempt the offer and the merger and the transactions contemplated hereby from the provisions of Section 203 of the DGCL. We reserve the right to challenge the validity or applicability of any state law allegedly applicable to the offer, and nothing in this prospectus or any action taken in connection herewith is intended as a waiver of that right. If one or more takeover statutes apply to the offer and are not found to be invalid, we may be required to file documents with, or receive approvals from, relevant state authorities and we may also be unable to accept for exchange shares of CSK common stock tendered into the offer or may delay the offer. See “The Offer—Conditions of the Offer” on page 35.

CERTAIN EFFECTS OF THE OFFER

Effects on the Market; Exchange Act Registration

The tender and the acceptance of shares of CSK common stock in the offer will reduce the number of shares of CSK common stock that might otherwise trade publicly and also the number of holders of shares of CSK common stock. This could adversely affect the liquidity and market value of the remaining shares of CSK common stock held by the public following completion of the offer. Depending upon the number of shares of CSK common stock tendered to and accepted by us in the offer, the shares of CSK common stock may no longer meet the requirements for continued inclusion on the NYSE.

If the NYSE ceased publishing quotations for the shares of CSK common stock, it is possible that the shares of CSK common stock would continue to trade in the over-the-counter market and that price or other quotations would be reported by other sources. The extent of the public market for such shares of CSK common stock and the availability of such quotations would depend, however, upon such factors as the number of stockholders and/or the aggregate market value of such securities remaining at such time, the interest in maintaining a market in the shares of CSK common stock on the part of securities firms, the possible termination of registration under the Exchange Act as described below and other factors. We cannot predict whether the reduction in the number of shares of CSK common stock that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the shares of CSK common stock.

Shares of CSK common stock are currently registered under the Exchange Act. CSK can terminate that registration upon application to the SEC if the outstanding shares of CSK common stock are not listed on a national securities exchange and if there are fewer than 300 holders of record of shares of CSK common stock. Termination of registration of the shares of CSK common stock under the Exchange Act would reduce the information that CSK must furnish to its stockholders and to the SEC and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) and the requirement of furnishing a proxy statement in connection with stockholders meetings pursuant to Section 14(a) and the related requirement of furnishing an annual report to stockholders, no longer applicable with respect to the shares of CSK common stock. In addition, if the shares of CSK common stock are no longer registered under the Exchange Act, the requirements of Rule 13e-3 under the Exchange Act with respect to “going-private” transactions would no longer be applicable to CSK. Furthermore, the ability of “affiliates” of CSK and persons holding “restricted securities” of CSK to dispose of such securities pursuant to Rule 144 under the Securities Act may be impaired or eliminated. If registration of the shares of CSK common stock under the Exchange Act were terminated, they would no longer be eligible for NYSE listing or for continued inclusion on the Federal Reserve Board’s list of “margin securities.” O’Reilly may seek to cause CSK to apply for termination of registration of the shares of CSK common stock under the Exchange Act as soon after the expiration of the offer as the requirements for such termination are met. If the NYSE listing and the Exchange Act registration of the shares of CSK common stock are not terminated prior to the merger, then the shares of CSK common stock will be delisted from the NYSE and the registration of the shares of CSK common stock under the Exchange Act will be terminated following the consummation of the merger. The shares of CSK common stock are presently “margin securities” under the regulations of the Federal Reserve Board, which has the effect, among other things, of

 

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allowing brokers to extend credit on the collateral of shares of CSK common stock. Depending on the factors similar to those described above with respect to listing and market quotations, following consummation of the offer, the shares of CSK common stock may no longer constitute “margin securities” for the purposes of the Federal Reserve Board’s margin regulations, in which event the shares of CSK common stock would be ineligible to be treated as collateral for margin loans made by brokers.

Financing of the Offer and the Merger

The offer is not conditioned upon the receipt of financing. O’Reilly estimates that the total amount of funds necessary to consummate the transactions contemplated by the offer and the merger will be approximately $1.2 billion, which includes approximately $42.2 million for payment to holders of CSK common stock for the cash portion of the offer consideration. O’Reilly has received a commitment letter from Bank of America, N.A., Banc of America Securities LLC, Lehman Commercial Paper Inc., Lehman Brothers Commercial Bank and Lehman Brothers Inc. for the transactions contemplated by the offer and the merger as set forth in more detail below.

The financing commitments expire on September 28, 2008. The definitive documentation governing the financing arrangements has not been finalized and, accordingly, the actual terms of such arrangements may differ from those described in this prospectus. In addition, although the debt financing described in this prospectus is not subject to a due diligence condition, such financing may not be considered assured. As of the date of this prospectus, no alternative financing arrangements or alternative financing plans have been made in the event the financing described below is not available as anticipated.

General

O’Reilly has engaged Banc of America Securities LLC and Lehman Brothers as joint lead arrangers and joint book-runners to arrange and syndicate a 5-year $1.2 billion asset-based senior secured credit facility. The asset-based credit facility will be comprised of: (i) an up to $1.075 billion tranche A revolving credit facility and (ii) an up to $125.0 million first-in-last-out revolving credit facility, or the FILO tranche.

Availability under the credit facility will be subject to a borrowing base determined by advances against the combined company’s eligible accounts receivable, inventory and real estate. The credit facility will be utilized for (i) payment of the cash portion of the offer consideration to acquire all of the outstanding shares of CSK common stock, (ii) refinancing certain outstanding O’Reilly and CSK indebtedness, (iii) payment of customary fees and expenses associated with the offer, the financing and the merger and (iv) funding working capital requirements and other general corporate purposes of the combined corporation.

Conditions Precedent to Financing Commitments

The financing commitments are subject to, among other things, (i) there not having occurred since November 4, 2007 any event, development or circumstance that has caused or could reasonably be expected to cause a material adverse change in or affecting the business, financial condition, results of operations or prospects of O’Reilly and its subsidiaries and CSK and its subsidiaries, taken as a whole, (ii) there not having occurred since November 4, 2007 any fact, circumstance, event, change, effect, development or occurrence that, either individually or in the aggregate, is or would reasonably be expected to be materially adverse to the business, assets, liabilities, condition (financial or otherwise) or results of operations of CSK and its subsidiaries, taken as a whole, or the ability of CSK to perform in all material respects its obligations under the merger agreement, subject to certain exceptions and certain other special provisions, (iii) consummation of the offer pursuant to the merger agreement, (iv) O’Reilly having complied in all material respects with all of its obligations under the financing commitments, including payment of all fees and expenses, (v) delivery of certain historical and pro forma financial information, (vi) delivery of lien searches and the absence of any liens other than permitted liens, (vii) delivery of a borrowing base certificate demonstrating certain minimum excess availability (and delivery of satisfactory substantiation therefor), (viii) satisfaction of customary closing conditions and (ix) the successful negotiation, execution and delivery of definitive documentation.

 

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Interest Rates and Fees

Borrowings under the tranche A revolver are expected to bear interest, at O’Reilly’s option, at a rate equal to either (i) a base rate plus 1.50% per annum or (ii) LIBOR plus 2.50% per annum, each rate being subject to adjustment based upon certain excess availability thresholds. Borrowings under the FILO tranche are expected to bear interest, at O’Reilly’s option, at a rate equal to either (i) a base rate plus 2.75% per annum or (ii) LIBOR plus 3.75% per annum, each rate being subject to adjustment based upon certain excess availability thresholds. As used in this section, the base rate is equal to the higher of the prime lending rate established by Bank of America, N.A. from time to time and the federal funds effective rate as in effect from time to time plus 0.50%.

In addition, O’Reilly will pay customary commitment fees, letter of credit fees, underwriting fees and other administrative fees in respect of the credit facility.

Borrowers and Guarantors

O’Reilly and any of its material direct, wholly-owned, domestic subsidiaries, including CSK Auto Inc., which own any assets of the type included in the borrowing base may be borrowers. CSK and each of the material direct and indirect, wholly-owned, domestic subsidiaries of O’Reilly and CSK that are not borrowers shall be guarantors.

Security

All of the obligations under the credit facility will be secured by liens on (i) substantially all of the tangible and intangible assets of O’Reilly and each of its material direct and indirect, wholly-owned, domestic subsidiaries, including CSK, collectively referred to as the credit parties, (ii) all of the capital stock of each direct domestic subsidiary of each credit party and (iii) 65% of the voting stock and 100% of the non-voting stock of each direct foreign subsidiary of each credit party.

Other Terms

The credit facility will contain customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, mergers and consolidations, sales of assets, investments and dividends and other distributions. The credit facility will also include customary events of defaults, including a change of control to be defined.

Conduct of CSK if the Offer is Not Completed

If the offer is not completed because the minimum tender condition or another condition is not satisfied or, if permissible, waived, we expect that CSK will continue to operate its business as presently operated, subject to market and industry conditions.

Accounting Treatment

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations,” O’Reilly will account for the transactions as a purchase business combination. Upon consummation of the transactions, O’Reilly will record the acquisition at cost with cost consisting of the fair value of O’Reilly common stock and stock options issued, the cash consideration issued and transaction costs. The total cost will be allocated based on the fair value of tangible and intangible assets acquired and liabilities assumed. The excess of cost over the fair value of net assets acquired will be recorded as goodwill.

Fees and Expenses

O’Reilly has retained Lehman Brothers to provide certain financial advisory services in connection with the offer and the merger. Lehman Brothers will receive a customary fee for providing the financial advisory services

 

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to O’Reilly. We have agreed to indemnify Lehman Brothers and related persons against certain liabilities and expenses they may incur in connection with providing financial advisory services for the offer, including certain liabilities and expenses under the federal securities laws. Lehman Brothers is currently engaged by O’Reilly and has in the past provided, and may in the future provide, financial advisory and financing services to O’Reilly and CSK, including in connection with O’Reilly’s acquisition of CSK, and has received, and may receive, fees for rendering these services. In the ordinary course of Lehman Brothers’ businesses, Lehman Brothers and its affiliates may actively trade in the debt and equity securities of O’Reilly and CSK for their own accounts and for the accounts of customers and, accordingly, may at any time hold a long or short position in these securities.

We have retained Innisfree M&A Incorporated as information agent in connection with the offer. The information agent may contact CSK stockholders by mail, telephone, telex, telegraph and personal interview and may request brokers, dealers and other nominee stockholders to forward material relating to the offer to beneficial owners of shares of CSK common stock. We will pay the information agent customary fees for these services in addition to reimbursing the information agent for its reasonable out-of-pocket expenses. We have agreed to indemnify the information agent against certain liabilities and expenses in connection with the offer, including certain liabilities under the United States federal securities laws.

In addition, we have retained Mellon Investor Services LLC as the exchange agent. We will pay the exchange agent customary fees for its services in connection with the offer and the merger, will reimburse the exchange agent for its reasonable out-of-pocket expenses and will indemnify the exchange agent against certain liabilities and expenses.

Except as set forth above, we will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of shares of CSK common stock pursuant to the offer. We will reimburse brokers, dealers, commercial banks and trust companies and other nominees, upon request, for customary clerical and mailing expenses incurred by them in forwarding offering materials to their customers.

 

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INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER

Interests of Management and the CSK Board

In considering the recommendations of the CSK board of directors regarding the offer and the merger, CSK stockholders should be aware that the directors and officers of CSK have interests in the offer and the merger that differ from those of other stockholders of CSK, as described below and in more detail in CSK’s Solicitation/Recommendation Statement on Schedule 14D-9, including the Information Statement to be attached as Exhibit (a)(4) to the Schedule 14D-9, which will be filed by an Amendment to the Schedule 14D-9. The CSK board of directors was aware of these interests and considered them, among other matters, in recommending the tender of shares in the offer and approval of the merger.

As a result of these interests, the directors and officers of CSK could be more likely to vote to recommend the offer and approval of the merger than if they did not hold these interests, and may have reasons for doing so that are not the same as the interests of other CSK stockholders. CSK stockholders should consider whether these interests may have influenced the directors and officers to support or recommend the offer and the merger.

Treatment of Stock Options and Stock-Based Awards

Certain directors and officers of CSK have received options to acquire shares of CSK common stock. Each outstanding option to acquire shares of CSK common stock outstanding immediately prior to the merger, including options granted to CSK officers and directors, will be assumed upon consummation of the merger by O’Reilly and will thereafter be exercisable for that number of shares of O’Reilly common stock equal to the product obtained by multiplying (i) the number of shares subject to such cancelled option by (ii) the option exchange ratio (as described below), rounded down to the nearest whole share of O’Reilly common stock. Option holders will not receive the cash portion of the offer consideration and their exchange ratio will be adjusted to account for the cash portion of the offer consideration as follows: the option exchange ratio will be equal to the sum of (i) the exchange ratio and (ii) the number equal to the quotient of (a) $1.00, subject to possible reduction, as described herein, divided by (b) the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including the second trading day prior to the consummation of the exchange offer and rounded to four decimal places.

As of June 17, 2008, the following directors and officers of CSK have outstanding options to purchase the number of shares specified below:

 

Name

  

Title

   Exercise
      Options    Price    Vesting Status
Prior to Closing

James G. Bazlen

   Director    10,000    $ 9.8200    Unvested
      51,000    $ 11.0000    Vested
      10,000    $ 13.3200    Vested
      10,000    $ 14.4000    Vested
      10,000    $ 16.6150    Vested

Michael Bryk

   Senior Vice President of Finance and Controller    50,000    $ 10.7950    Unvested

Larry Buresh

   Senior Vice President and Chief Information Officer    12,500    $ 9.8700    Vested
      56,202    $ 10.7950    Unvested
      43,250    $ 11.0000    Vested
      38,141    $ 13.3200    Vested
      30,247    $ 16.6150    20,165 Unvested
      27,555    $ 16.3500    Vested

James Constantine

   Executive Vice President of Finance and Chief Financial Officer    100,000    $ 10.1500    Unvested

Larry Ellis

   Senior Vice President—Logistics    5,000    $ 9.8700    Vested
      42,627    $ 10.7950    Unvested
      2,800    $ 11.0000    Vested
      28,432    $ 13.3200    Vested
      20,643    $ 16.3500    Vested
      22,914    $ 16.6150    15,276 Unvested

 

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Name

  

Title

  Exercise
     Options    Price   Vesting Status
Prior to Closing

Morton Godlas

   Director   10,000    $ 9.8200   Unvested
     10,000    $ 13.3200   Vested
     10,000    $ 14.4000   Vested
     10,000    $ 16.6150   Vested

Terilyn A. Henderson

   Director   10,000    $ 9.8200   Unvested
     10,000    $ 13.3200   Vested
     10,000    $ 14.4000   Vested
     10,000    $ 16.6150   Vested

Greg Langdon

   Senior Vice President—Store Operations   825    $ 9.8700   Vested
     12,568    $ 10.7950   Unvested
     5,645    $ 11.0000   Vested
     6,000    $ 13.3200   Vested
     6,756    $ 16.6150   4,504 Unvested
     3,918    $ 16.3500   Vested

Charles K. Marquis

   Director   10,000    $ 9.8200   Unvested
     10,000    $ 13.3200   Vested
     10,000    $ 14.4000   Vested
     10,000    $ 16.6150   Vested

Lawrence N. Mondry

   President, Chief Executive Officer and Director   144,847    $ 10.7950   Unvested
     300,000    $ 18.6550   Unvested

Randi V Morrison

   Senior Vice President, General Counsel and Secretary   660    $ 9.8700   Vested
     42,627    $ 10.7950   Unvested
     12,000    $ 13.3200   Vested
     7,727    $ 16.3500   Vested
     22,914    $ 16.6150   15,276 Unvested
     5,089    $ 19.5800   Vested

Charles J. Philippin

   Director   10,000    $ 9.8200   Unvested
     10,000    $ 13.3200   Vested
     10,000    $ 14.4000   Vested
     10,000    $ 16.6150   Vested

John Saar

   Senior Vice President—Real Estate and Human Resources   1,650    $ 9.8700   Vested
     40,889    $ 10.7950   Unvested
     20,000    $ 13.3200   Vested
     13,154    $ 16.3500   Vested
     21,998    $ 16.6150   14,666 Unvested

William A. Shutzer

   Director   10,000    $ 9.8200   Unvested
     10,000    $ 13.3200   Vested
     10,000    $ 14.4000   Vested
     10,000    $ 16.6150   Vested

Dale Ward

   Executive Vice President—Operations   4,125    $ 9.8700   Vested
     70,209    $ 10.7950   Unvested
     40,934    $ 13.3200   Vested
     28,676    $ 16.3500   Vested
     37,741    $ 16.6150   25,161 Unvested

Brian Woods

   Executive Vice President—Merchandising   100,000    $ 10.7950   Unvested

Except for 94,847 of the 144,847 options granted to Mr. Mondry with an exercise price of $10.7950, all options will vest upon consummation of the offer or the merger. The vesting schedule for Mr. Mondry’s remaining 94,487 options is as follow: 31,616 options will vest on October 20, 2008, 31,616 options will vest on October 20, 2009, and 31,615 options will vest on October 20, 2010, in all cases, subject to Mr. Mondry being employed on such dates by the combined company.

 

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As of June 17, 2008, the following directors and officers of CSK have outstanding restricted stock and restricted stock units with respect to shares of CSK common stock specified below:

 

Name

  

Title

   Shares

Michael Bryk

   Senior Vice President of Finance and Controller    10,000

Larry Buresh

   Senior Vice President and Chief Information Officer    13,119

James Constantine

   Executive Vice President of Finance and Chief Financial Officer    25,000

Larry Ellis

   Senior Vice President—Logistics    9,933

Greg Langdon

   Senior Vice President—Store Operations    2,808

Lawrence N. Mondry

   President, Chief Executive Officer and Director    50,000

Lawrence N. Mondry

   President, Chief Executive Officer and Director    89,899

Randi V. Morrison

   Senior Vice President, General Counsel and Secretary    7,942

John Saar

   Senior Vice President—Real Estate and Human Resources    9,163

Dale Ward

   Executive Vice President—Operations    16,067

Brian Woods

   Executive Vice President—Merchandising    25,000

Except as noted in the following sentence, all then unvested restricted stock and restricted stock units will vest upon a change of control of CSK, and under the agreements governing the grant of the restricted stock and restricted stock units, consummation of the offer or the merger will constitute a change of control of CSK. The grant of 89,899 shares of restricted stock to Mr. Mondry will vest upon the earliest of (i) the date that is six months following the consummation of the Offer, or (ii) the date his employment is terminated by reason of an Involuntary Termination (as such term is defined in the Restricted Stock Agreement) after the consummation of the Offer.

The merger agreement provides that, at the effective time of the merger, each vested and outstanding right of any kind, contingent or accrued, to receive shares of CSK common stock or benefits measured by the value of a number of shares of CSK common stock, which we refer to as a CSK stock-based award, will be converted into the right to receive the offer consideration multiplied by the number of shares of CSK common stock subject to such CSK stock-based award, and each unvested and outstanding CSK stock-based award will be converted into the right to receive the number of shares of O’Reilly common stock equal to the product of the number of shares of CSK common stock subject to such CSK stock-based award multiplied by the option exchange ratio.

CSK’s 2008 Cash in Lieu Bonus Plan provides executives and employees of CSK Auto, Inc., which we refer to as CSK Auto, who otherwise would have received annual grants of stock options and/or restricted stock in 2008 under CSK’s Amended and Restated 2004 Stock and Incentive Plan a right to receive a cash bonus payment. Awards under this plan were made based on the participant’s base salary as of the award date as follows: for executive vice presidents, the cash-in-lieu award is equal to 100% of salary; for senior vice presidents, the cash-in-lieu award is equal to 85% of salary; and for vice presidents, the cash-in-lieu award is equal to 35% of salary. Under the 2008 Cash in Lieu Bonus Plan, assuming a change of control of CSK, any unvested portion of any bonus awarded to the participant under such plan will accelerate and become vested and payable in full upon the earliest of (i) the date that is six (6) months following a change of control or (ii) the date the participant’s employment is terminated by reason of an involuntary termination after a change of control. Under this plan, consummation of the offer will constitute a change of control of CSK. “Involuntary termination” means (a) any termination of the participant’s employment with CSK Auto for any reason other than for cause (as defined in the 2004 Stock and Incentive Plan) or the participant’s death or disability or (b) by the participant for good reason (as defined in such participant’s severance agreement).

Severance Agreements

Under the terms of an employment agreement between CSK Auto and Lawrence N. Mondry, dated as of June 8, 2007, and a first amendment to the employment agreement, dated as of March 31, 2008, if Mr. Mondry’s employment is terminated by CSK Auto without cause (other than by reason of death or disability), or if Mr. Mondry resigns for any reason, in each case, during the twelve (12) months following a change of control, then Mr. Mondry will be entitled to receive (i) his salary through the date of termination, (ii) any earned but unpaid potion of his annual bonus, (iii) reimbursement for any unreimbursed business expenses properly incurred prior to the date of termination, (iv) such employee benefits, if any, as to which Mr. Mondry may be entitled

 

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under the employee benefits plans of CSK according to their terms and (v) a lump sum cash payment equal to two (2) times the sum of his base salary and annual target bonus (provided that Mr. Mondry complies with certain confidentiality and non-competition provisions and executes a release). In addition, if a change of control of CSK occurs prior to the end of CSK Auto’s 2008 fiscal year and, for a period of six (6) months following such change of control: (i) Mr. Mondry remains continuously employed by CSK Auto or the surviving company or (ii) Mr. Mondry’s employment with CSK Auto is terminated by CSK Auto without cause or by Mr. Mondry for good reason, then (a) if Mr. Mondry’s employment terminates prior to the end of the 2008 fiscal year, CSK Auto shall pay Mr. Mondry a prorated portion of his target bonus (either in proportion to the number of months Mr. Mondry worked during the 2008 fiscal year or the number of months between February 4, 2008 and the date that is six (6) months following the change of control, whichever is greater) or (b) if Mr. Mondry remains employed by CSK Auto or the surviving company through the end of the 2008 fiscal year, CSK Auto shall pay a gross lump sum cash amount equal to Mr. Mondry’s target bonus for the 2008 fiscal year. Finally, the first amendment to the employment agreement extended the period during which Mr. Mondry is entitled to reasonable travel and temporary living expenses and a $2,000 monthly car allowance from June 30, 2008 until the earlier of (i) the date that is eight (8) months after the consummation of a change of control of CSK and (ii) the date that is thirty (30) days following the date of Mr. Mondry’s termination of employment for any reason. Under Mr. Mondry’s employment agreement, as amended, consummation of the offer will constitute a change of control of CSK.

CSK Auto has entered into severance and retention agreements with James Constantine, Dale Ward, Brian Woods, Michael Bryk, Larry Buresh, Larry Ellis, Greg Langdon, Randi Morrison and John Saar. Under the terms of these agreements, if a change of control occurs and, for a period of six (6) months following such change of control: (i) such executive remains continuously employed by CSK Auto or the surviving company or (ii) such executive’s employment with CSK Auto is terminated by CSK Auto without cause or by such executive for good reason, then CSK Auto shall pay to such executive a gross lump sum cash amount equal to three (3) months of such executive’s then current base salary. In addition, if a change of control occurs on or prior to the end of the 2008 fiscal year and, for a period of six (6) months following such change of control, (i) such executive remains continuously employed by CSK Auto or the surviving company or (ii) such executive’s employment with CSK Auto is terminated by CSK Auto without cause or by such executive for good reason, then (a) if such executive’s employment terminates prior to the end of the 2008 fiscal year, CSK Auto shall pay to such executive a prorated portion of such executive’s target bonus (either in proportion to the number of months such executive worked during the 2008 fiscal year or the number of months between February 4, 2008 and the date that is six (6) months following the change of control, whichever is greater) or (b) if such executive remains employed by CSK Auto or the surviving company through the end of the 2008 fiscal year, CSK Auto shall pay a gross lump sum cash amount equal to such executive’s target bonus for the 2008 fiscal year. In addition to the retention bonus and the 2008 annual bonus, each executive is entitled to receive severance benefits if (1) a change of control of CSK occurs and, during the twelve (12) months following such change of control, such executive’s employment with CSK Auto is terminated by CSK Auto without cause or by such executive for good reason or (2) if a change of control occurs, the acquiring company is O’Reilly (or another competitor), and such executive terminates his or her employment for any reason in the thirty (30) day period following the six-month period following the change of control. “Severance benefits” include the payment of such executive’s salary and target bonus over a twelve (12) month period, continuation of benefits for a period of twelve (12) months following termination, and any amounts due to such executive under CSK Auto’s 2008 Cash in Lieu Bonus Plan. Under these agreements, consummation of the offer will constitute a change of control of CSK.

For purposes of the agreements described in this section, “cause” means that the executive (i) has been convicted of a felony, or has entered a plea of guilty or nolo contendere to a felony, (ii) has committed an act of fraud or dishonesty which is injurious to CSK or any of its subsidiaries, (iii) has willfully and continually refused to substantially perform his or her duties with CSK or any of its subsidiaries (after certain procedures for notice have been followed) or (iv) has willfully engaged in gross misconduct injurious to CSK or any of its subsidiaries. For purposes of the agreements described in this section, “good reason” includes a reduction in the executive’s responsibilities, compensation, or benefits; a breach of the employment or severance agreement; or a refusal of O’Reilly to assume the obligations of the employment or severance agreement.

 

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Reimbursement of Travel and Living Expenses

Michael Bryk and James Constantine entered into agreements with CSK Auto pursuant to which, after a change of control, CSK Auto must continue to reimburse each such executive for commuting expenses and temporary living arrangements on terms no less favorable than those provided prior to the change of control until the earlier of (i) the date that is eight months after such change of control or (ii) the date that is thirty (30) days after the date of such executive’s termination of employment for any reason. Randi Morrison entered into an agreement with CSK Auto pursuant to which, after a change of control, CSK is required to continue to reimburse Ms. Morrison for her travel and home office expenses incurred for the purposes of telecommuting on terms no less favorable than those provided prior to the change of control until thirty (30) days from the date she is either terminated by CSK without cause or resigns for good reason. Brian Woods entered into an agreement with CSK Auto pursuant to which, after a change of control, CSK Auto must continue to reimburse Mr. Woods for his relocation, home sale and purchase, and temporary living expenses on terms no less favorable than those provided prior to the change of control until the earlier of (i) the date that is eight months after such change of control or (ii) the date that is six (6) months after the date of Mr. Woods’ termination of employment for any reason. Under these agreements, consummation of the offer will constitute a change of control of CSK.

Indemnification

The merger agreement provides that, after the effective time of the merger and for a period of six years thereafter, O’Reilly will, or will cause the surviving company to, indemnify and hold harmless, to the fullest extent permitted under applicable law, CSK’s certificate of incorporation, and CSK’s bylaws, each present (as of the effective time of the merger) and former officer, director, or employee of CSK and its subsidiaries, against all claims, losses, liabilities, damages, judgments, inquiries, fines and reasonable fees, costs and expenses incurred in connection with any suit, claim, action, proceeding, arbitration, mediation or investigation arising out of or pertaining to the fact that such person was an officer, director, or employee of CSK or any of its subsidiaries or for matters existing or occurring prior to the effective time of the merger. In addition, O’Reilly has agreed to cause the surviving company in the merger to advance expenses with respect to any matters subject to indemnification, to the fullest extent permitted under applicable law and in CSK’s certificate of incorporation and bylaws, subject to an undertaking by the indemnified person, if so required under applicable law or CSK’s certificate of incorporation or bylaws, to repay such advances if it is ultimately determined that such person is not entitled to indemnification. In the merger agreement, O’Reilly has agreed that for a period of six years after the effective time of the merger, all rights to indemnification provided in CSK’s certificate of incorporation or bylaws or in any indemnification agreement with CSK shall survive the merger and continue in full force and effect. For a period of six years after the effective time of the merger, O’Reilly has also agreed to either (i) cause to be maintained in effect the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by CSK and its subsidiaries, (ii) provide substitute policies of at least the same coverage and amounts (provided that O’Reilly will not be required to pay an annual premium in excess of 250% of the last annual premium paid by CSK prior to the date of the merger agreement), or (iii) permit CSK to purchase a six-year prepaid “tail policy” prior to the effective time of the merger having a premium of not more than 250% of the last annual premium paid by CSK prior to the date of the merger agreement and on terms and conditions providing substantially equivalent benefits as the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by CSK and its subsidiaries with respect to matters arising on or before the effective time of the merger.

Interests of O’Reilly in the Offer

As of the date of this prospectus, O’Reilly beneficially owns 2,153,928 shares of CSK common stock, constituting approximately 4.9% of the fully diluted shares of CSK common stock, which O’Reilly acquired from other CSK stockholders in ordinary brokerage transactions on the open market from October 2, 2007 through November 30, 2007. Such shares will be counted for purposes of determining whether the minimum tender condition in the offer has been satisfied and, after completion of the offer, O’Reilly will vote such shares in favor of the merger.

 

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Except as outlined in this prospectus, neither we nor, to the best of our knowledge, any of our directors, executive officers or other affiliates has any contract, arrangement, understanding or relationship with any other person with respect to any securities of CSK, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies. Except as described in this prospectus, there have been no negotiations, transactions or material contacts during the two years prior to the filing of this prospectus between us or, to the best of our knowledge, any of our directors, executive officers or other affiliates on the one hand, and CSK or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, a tender offer or other acquisition of securities, an election of directors, or a sale or other transfer of a material amount of assets. Neither we nor, to the best of our knowledge, any of our directors, executive officers or other affiliates has, during the two years prior to the filing of this prospectus, had any transaction with CSK or any of its executive officers, directors or affiliates that would require disclosure under the rules and regulations of the SEC applicable to the offer.

Except as described in this prospectus, neither we nor, to the best of our knowledge, any of our directors, executive officers or other affiliates beneficially owns or has any right to acquire, directly or indirectly, any shares of CSK common stock and neither we nor, to the best of our knowledge, any of our directors, executive officers or other affiliates, has effected any transaction in the shares of CSK common stock during the past sixty (60) days.

 

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THE MERGER AGREEMENT

The following summary describes the material provisions of the merger agreement. The provisions of the merger agreement are complicated and not easily summarized. This summary may not contain all of the information about the merger agreement that is important to you. The merger agreement is attached to this prospectus as Annex A and is incorporated by reference into this prospectus, and O’Reilly and CSK encourage you to read it carefully in its entirety for a more complete understanding of the merger agreement. The merger agreement is not intended to provide any other factual information about either O’Reilly or CSK. Such information can be found elsewhere in this prospectus and in the other public filings each of O’Reilly and CSK makes with the SEC, which are available without charge at www.sec.gov.

The Offer

Terms of the Offer

The merger agreement provides for the commencement by OC Acquisition, an indirect wholly-owned subsidiary of O’Reilly, of the offer to exchange all outstanding shares of CSK common stock, together with the associated common stock purchase rights, for consideration consisting of shares of O’Reilly common stock and cash. For each share of CSK common stock (together with the associated common stock purchase rights) that is validly tendered and not properly withdrawn, OC Acquisition is offering (i) between 0.3673 and 0.4285 of a share of common stock of O’Reilly and (ii) $1.00 in cash, subject to possible reduction for the adjustment amount, if any. The number of shares of O’Reilly common stock received for each tendered share of CSK common stock will be determined based on an exchange ratio equal to $11.00 divided by the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including the second trading day prior to the consummation of the offer and rounded to four decimal places; provided, however, that if such average closing sale price of O’Reilly stock is greater than $29.95, then the exchange ratio shall equal 0.3673, and if such average closing sale price is less than $25.67, then the exchange ratio shall equal 0.4285. The $1.00 in cash received per share of CSK common stock will be subject to reduction for costs in excess of $3,000,000, if any, incurred by CSK associated with obtaining any necessary waivers or consents under CSK’s credit agreements prior to the completion of the offer. CSK has indicated to O’Reilly that, as of the date of this prospectus, it does not anticipate obtaining any waivers or consents under its credit agreements prior to the anticipated completion of the offer.

The merger agreement provides that the initial expiration date of the offer is the twentieth (20th) business day following commencement of the offer and that the offer is subject to a number of conditions, including the minimum tender condition. For a description of those matters, refer to the discussion under “The Offer” on page 33 of this prospectus.

The merger agreement prohibits OC Acquisition from, without the prior written consent of CSK, reducing the offer consideration, changing the form of the consideration payable in the offer (other than adding consideration), reducing the number of shares subject to the offer, waiving or changing the minimum tender condition or the condition that the merger agreement has not been terminated, adding to the offer conditions, extending the expiration of the offer except as provided in the merger agreement or modifying any other condition or any term of the offer set forth in the merger agreement in a manner adverse to the CSK stockholders.

Mandatory Extensions of the Offer

OC Acquisition is required to extend the offer if at the scheduled or extended expiration date of the offer, any of the offer conditions set forth under “The Offer—Conditions of the Offer” on page 35 have not been satisfied, until the earlier of (i) the satisfaction or waiver of such conditions and the consummation of the offer or (ii) the termination of the merger agreement in accordance with its terms. OC Acquisition is also required to extend the offer if any period is so required by any rule, regulation, interpretation or position of the SEC or the staff applicable to the offer or any period required by law. No such extension will occur after the earlier to occur of (i) the date on which all the conditions have been satisfied or waived or (ii) September 28, 2008.

 

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Optional Extensions of the Offer

OC Acquisition has the right to extend the offer if such extension is necessary for O’Reilly to satisfy the necessary conditions to complete its financing transactions in connection with the offer for an aggregate period of not more than ten (10) business days beyond the last expiration date of the offer that would otherwise be permitted; provided that such extension would not be permitted if it would extend the expiration date of the offer to a date later than the thirtieth (30th) business day after the date that the offer is commenced.

Top-Up Option

Under the merger agreement, if the minimum tender condition is satisfied and we consummate the offer, we have the option, which we refer to as the top-up option, to purchase from CSK additional shares of CSK common stock equal to the lowest number of shares that, when added to the number of shares already owned by O’Reilly, will constitute one share more than 90% of the shares of CSK common stock then outstanding for the same consideration paid in exchange for each share of CSK common stock in the offer.

O’Reilly or OC Acquisition may exercise this option at any time after the consummation of the offer and prior to the earlier to occur of (i) the time the merger becomes effective and (ii) the termination of the merger agreement in accordance with its terms. If we exercise this option, we may issue a promissory note, bearing interest at five percent per annum, in the amount required to pay the aggregate purchase price for the additional shares of CSK common stock at the offer price. In no event will the top-up option be exercisable for a number of shares of CSK common stock (i) that would require CSK to obtain stockholder approval under applicable law or the rules and regulations of the NYSE or (ii) in excess of CSK’s then authorized and unissued shares of common stock.

Prompt Payment for CSK common stock after the Closing of the Offer

Subject to the conditions of the offer, OC Acquisition will accept for exchange and exchange, promptly after the expiration of the offer, all shares of CSK common stock validly tendered and not properly withdrawn pursuant to the offer. We will not issue fractional shares of O’Reilly common stock in the offer. Instead, each tendering CSK stockholder who would otherwise be entitled to a fractional share (after aggregating all fractional shares of O’Reilly common stock that otherwise would be received by such stockholder) will receive cash equal to such fraction multiplied by the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including the second trading day prior to the consummation of the exchange offer and rounded to four decimal places.

CSK Board of Directors

Upon the acceptance for exchange of shares of CSK common stock pursuant to the offer, O’Reilly will be entitled to designate a number of directors of CSK, rounded up to the next whole number, that equals the product of:

 

   

the total number of directors on CSK’s board of directors (determined after giving effect to the election of additional directors pursuant to the offer), and

 

   

the percentage that the aggregate number of shares of CSK common stock beneficially owned by O’Reilly and OC Acquisition at such time (including shares accepted for payment) bears to the total number of CSK common stock then outstanding.

CSK will use commercially reasonable efforts to cause the individuals designated by O’Reilly to be elected to CSK’s board of directors and to constitute the same percentage as is on the CSK board of directors of:

 

   

each committee of the CSK board of directors, other than a committee of the CSK board, if any, established with respect to the merger agreement or the transactions contemplated thereunder, and

 

   

each board of directors of each subsidiary of CSK (and each committee thereof).

 

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Until the merger has become effective, CSK shall use commercially reasonable efforts to cause the board of directors to include at least two members who were independent directors of CSK (as determined under applicable NYSE rules) prior to the consummation of the offer. The merger agreement provides that, prior to the effective time of the merger, the affirmative vote of a majority of the continuing CSK independent directors will be required (or a majority of the board of directors if such CSK independent directors cease to serve as directors for any reason and are not replaced in accordance with the merger agreement) for CSK to:

 

   

amend or terminate the merger agreement;

 

   

extend the time for performance of O’Reilly’s or OC Acquisition’s obligations under the merger agreement; or

 

   

waive any of CSK’s rights under the merger agreement or take any other action adversely affecting the rights of stockholders of CSK, with respect to the transactions contemplated by the merger agreement.

The Merger

The merger agreement provides that following completion of the offer, OC Acquisition will be merged with and into CSK with CSK continuing as the “surviving corporation.” The merger agreement provides that, if necessary to preserve the intended treatment of the offer and the merger as a tax-free reorganization for United States federal income tax purposes, the LLC merger will occur immediately after the merger.

Effective Time of the Merger

The merger will become effective upon the filing of a certificate of merger with the Secretary of State of Delaware or such later time as is agreed by CSK and O’Reilly and specified in the certificate of merger. The filing of the certificate of merger will take place as soon as practicable on or after the closing date of the merger.

Treatment of CSK Common Stock

Under the terms of the merger agreement, at the effective time of the merger, each share of CSK common stock will be converted into the right to receive from OC Acquisition the same consideration paid in exchange for each share of CSK common stock in the offer.

Treatment of CSK Options and Other Equity Based Awards

At the effective time of the merger (or such earlier date as O’Reilly may elect following completion of the offer), each then outstanding option to purchase shares of CSK common stock granted under any employee or director stock option, stock purchase or equity compensation plan, arrangement or agreement of CSK, whether vested or unvested, will be automatically converted into a vested option to acquire that number of shares of O’Reilly equal to the product of multiplying (i) the number of shares of common stock of CSK subject to such cancelled CSK stock option by (ii) the sum of the exchange ratio used to determine the number of O’Reilly shares of common stock paid in the offer and the number equal to the quotient of the per share cash consideration divided by the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including the second trading day prior to the consummation of the offer and rounded to four decimal places, which we refer to as the “option exchange ratio.”

At the effective time of the merger, each right of any kind to receive CSK common stock or benefits measured by the value of a number of CSK common stock, and each award of any kind consisting of CSK common stock (including restricted stock, restricted stock units, performance units, performance shares and other stock-based awards, other than CSK stock options) that is outstanding immediately prior to the effective time, with the exception of the CSK stock award of 89,899 shares of restricted stock relating to Mr. Lawrence Mondry, will be converted into the right to receive the same consideration paid in exchange for each share of CSK common stock in the offer multiplied by the number of CSK common stock subject to such CSK stock-based award. With respect to the award of 89,899 shares of restricted stock, it will be converted into a right to receive a

 

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comparable right to receive that number of shares of O’Reilly common stock equal to the option exchange ratio multiplied by the number of shares of CSK common stock subject to such CSK stock-based award and the award will continue to vest in accordance with its terms.

Representations and Warranties

O’Reilly and CSK each made a number of representations and warranties in the merger agreement regarding aspects of their respective businesses, financial condition, structure and other facts pertinent to the merger. Each of the companies made representations and warranties as to:

 

   

corporate organization, standing and power;

 

   

capitalization;

 

   

authorization of the merger agreement by the respective companies;

 

   

the lack of conflicts and required consents and approvals;

 

   

filings and reports with the SEC;

 

   

absence of untrue statements of material fact or omissions of material fact in the registration statement, offer documents, and Schedule 14D-9 to be filed with the SEC;

 

   

absence of certain changes or events;

 

   

absence of undisclosed material litigation;

 

   

compliance with applicable laws and regulatory approvals required to complete the merger;

 

   

taxes;

 

   

the use of brokers; and

 

   

the applicability of state takeover laws to the offer and merger.

In addition, CSK made representations and warranties as to:

 

   

employee matters and benefit plans;

 

   

labor matters;

 

   

environmental matters;

 

   

contracts;

 

   

insurance;

 

   

title to property;

 

   

intellectual property;

 

   

rights plan;

 

   

related party transactions; and

 

   

the opinion of CSK’s financial advisor.

In addition, O’Reilly and OC Acquisition made representations and warranties as to:

 

   

O’Reilly’s ownership of OC Acquisition’s common stock;

 

   

the availability of funds to complete the offer;

 

   

votes and approvals required; and

 

   

the operations of OC Acquisition.

The representations and warranties asserted in the merger agreement will not survive the merger.

 

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Covenants

Conduct of Business Pending the Merger

Conduct of CSK. The merger agreement provides that, subject to limited exceptions, until the effective time of the merger, CSK will, unless O’Reilly consents in writing otherwise (which consent shall not be unreasonably withheld or delayed), use reasonable efforts to conduct its business in the ordinary course of business consistent with past practice, to preserve substantially intact its business organization and to preserve its present relationships with customers, suppliers, employees and other persons with which it has material business relations. The merger agreement also expressly restricts the ability of CSK to take the following actions without the prior written consent of O’Reilly (which consent, in certain instances, shall not be unreasonably withheld or delayed):

 

   

amend or otherwise change its certificate of incorporation or bylaws or any similar governing instruments;

 

   

adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization;

 

   

issue, deliver, sell, pledge, dispose of or otherwise encumber any share of CSK common stock or any securities convertible into shares of CSK common stock or other equity interests;

 

   

declare, set aside, make or pay any dividends or other distributions on CSK common stock, split, combine or reclassify any common stock or authorize the issuance of any other securities;

 

   

adjust, split, combine, repurchase or otherwise acquire shares of CSK common stock;

 

   

acquire any corporation, partnership or other business organization or division thereof;

 

   

sell, lease or otherwise dispose of any assets outside of the ordinary course of business;

 

   

enter into, materially amend, fail to enforce or terminate any material contract, other than in the ordinary course of business consistent with past practice;

 

   

grant to or acquire from any person, or abandon, dispose of or permit to lapse any rights to intellectual property, other than in the ordinary course of business consistent with past practice;

 

   

authorize any new capital expenditures in excess of the sum of $500,000 and CSK’s capital expenditure budget;

 

   

make any loans or advances, incur any indebtedness for borrowed money or issue any debt securities (other than borrowings under existing credit agreements not in excess of $475,000,000), or modify or amend any of its debt instruments;

 

   

increase the total compensation or benefits of any director or vice president or higher level position of CSK or terminate, amend to adopt any compensation or benefit plan with or for the benefit of its employees or directors;

 

   

enter into any closing agreement with respect to material taxes, settle or compromise any material liability for taxes (except with respect to any tax liability, for an amount that is not materially in excess of the amount reserved therefor on the financial statements of CSK and its subsidiaries), make, revoke, or change any material tax election, knowingly surrender any claim for a material refund of taxes, execute or consent to any waivers extending the statutory period of limitations with respect to the collection or assessment of material taxes (except for extensions routinely granted during the course of an examination or audit), file any material amended tax return involving a material amount of additional taxes (except as required by applicable law), or obtain any material tax ruling;

 

   

implement or adopt any material change in its methods of accounting except as may be appropriate to conform to changes in statutory or regulatory accounting rules or requirements or to U.S. generally accepted accounting principles;

 

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compromise, settle or agree to settle any action, or consent to the same, other than compromises, settlements or agreements in the ordinary course of business that involve only the payment of monetary damages not in excess of $2,000,000 in the aggregate for the ninety (90) days after April 1, 2008 and not in excess of $4,000,000 in the aggregate for the 180 days after April 1, 2008;

 

   

take any action that would cause any material insurance policy to be cancelled or terminated or fail to use commercially reasonable efforts to renew or replace any expiring policies; or

 

   

enter into, materially amend, fail to enforce or terminate any collective bargaining agreement.

Conduct of O’Reilly. The merger agreement provides that until the effective time of the merger, O’Reilly will not, without the prior written consent of CSK, directly or indirectly, take any action that is intended to or that would reasonably be expected to:

 

   

materially adversely affect or materially delay the ability of O’Reilly or OC Acquisition to obtain any necessary governmental approvals for completion of the offer or the merger;

 

   

materially adversely affect or materially delay the ability of O’Reilly or OC Acquisition to perform its covenants or agreements under the merger agreement;

 

   

cause any of its representations and warranties to be untrue in any material respect; or

 

   

otherwise, individually or in the aggregate, have a material adverse effect on O’Reilly.

The merger agreement also expressly restricts the ability of O’Reilly to engage in the following actions without the prior consent of CSK:

 

   

amend or otherwise change its articles of incorporation or bylaws or any similar governing instruments;

 

   

adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization;

 

   

declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock (except for any dividend or distribution by a subsidiary of O’Reilly to O’Reilly or to other subsidiaries); or

 

   

adjust, split, combine, redeem, repurchase or otherwise acquire any shares of capital stock of O’Reilly (except in connection with the cashless exercises or similar transactions pursuant to the exercise of O’Reilly stock options or settlement of other awards or obligations outstanding as of the date hereof), or reclassify, combine, split, subdivide or otherwise amend the terms of its capital stock.

No Solicitation of Acquisition Proposals

The merger agreement provides that, except in the circumstances described below, CSK will not, directly or indirectly:

 

   

initiate, solicit, knowingly encourage or intentionally take any action to facilitate any inquiries, proposals or offers with respect to an acquisition proposal;

 

   

engage or participate in any negotiations, discussions or communications concerning, or provide any non-public information relating to CSK or any subsidiary in connection with, an acquisition proposal;

 

   

approve, endorse or recommend any acquisition proposal;

 

   

approve, endorse or recommend, or enter into any letter of intent or any other agreement relating to an acquisition proposal; or

 

   

(i) amend, grant any waiver or release under, or fail to enforce any standstill or similar agreement with respect to CSK or it subsidiaries, (ii) approve any transaction under, or any other person becoming an “interested stockholder” under Section 203 of the DGCL or (iii) amend or grant any waiver or release under the CSK rights agreement.

 

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An “acquisition proposal” is any inquiry, proposal or offer from any person other than O’Reilly or one of its subsidiaries for (i) a merger, reorganization, consolidation, share exchange, business combination, joint venture recapitalization, liquidation, dissolution or similar transaction involving an acquisition of CSK (or any subsidiary whose business constitutes 10% or more of the net revenues, income or assets of CSK and its subsidiaries, taken as a whole) or (ii) the acquisition in any manner, directly or indirectly, of over 10% of the equity securities or consolidated total assets of CSK and its subsidiaries, in each case other than the offer or the merger.

Notwithstanding the restrictions described above, prior to the consummation of the offer, CSK may, in response to an unsolicited bona fide written acquisition proposal that CSK’s board of directors determines in good faith (after consultation with CSK’s outside legal counsel and financial advisors) constitutes or may reasonably be expected to lead to a superior proposal:

 

   

furnish to such third party nonpublic information relating to CSK or any of its subsidiaries pursuant to a confidentiality and standstill agreement with terms no less favorable to CSK than those contained in the confidentiality and standstill agreements between CSK and O’Reilly; and

 

   

participate in discussions or negotiations with such third party regarding such acquisition proposal.

A “superior proposal” is a bona fide written acquisition proposal (not resulting from a breach by CSK) for at least 80% of the equity securities or consolidated total assets of CSK and its subsidiaries that (i) is not conditioned upon obtaining financing or any regulatory approvals or consents beyond or in addition to those regulatory approvals and consents required in connection with the transactions contemplated by the merger agreement, (ii) is reasonably likely to be consummated (taking into account, among other things, all legal, financial, regulatory and other aspects of such acquisition proposal and the identity of the person submitting such an acquisition proposal) and (iii) CSK’s board of directors determines in good faith (after consultation with CSK’s outside legal counsel and financial advisors) is more favorable from a financial point of view to CSK’s stockholders than the transactions contemplated by the merger agreement, taking into account all the terms and conditions of such acquisition proposal and the merger agreement (including any changes proposed by O’Reilly to the terms of the merger agreement in response to the superior proposal).

The merger agreement also provides that CSK’s board of directors (or any committee thereof) will not and will not resolve or publicly propose to:

 

   

withdraw, modify or qualify in a manner adverse to O’Reilly its approval or recommendation of the merger agreement or the merger; or

 

   

approve or recommend, or cause or permit CSK to enter into, any letter of intent or other agreement constituting or relating to any acquisition proposal.

Notwithstanding the above, if, prior to the consummation of the offer:

 

   

CSK’s board of directors determines in good faith (after consultation with CSK’s outside legal counsel) that the failure to do so would be inconsistent with the exercise of its fiduciary duties, it may withdraw, modify or qualify in a manner adverse to O’Reilly its approval or recommendation of the merger agreement or the merger; or

 

   

CSK receives an acquisition proposal that CSK’s board of directors determines in good faith (after consultation with CSK’s outside legal counsel and financial advisors) constitutes a superior proposal, CSK may terminate the merger agreement and enter into an agreement with respect to the superior proposal, as provided in the following paragraph.

CSK has agreed not to terminate the merger agreement to enter into an agreement with respect to a superior proposal unless:

 

   

CSK has given O’Reilly written notice of its intent to terminate the merger agreement, identifying the superior proposal and including the form of the definitive agreement to be entered into;

 

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within a period of five (5) business days following delivery of notice, O’Reilly does not propose adjustments in the terms and conditions of the merger agreement, that CSK’s board of directors determines in good faith (after consultation with CSK’s financial advisors) to be as favorable to CSK’s stockholders from a financial point of view as the superior proposal; and

 

   

at least five (5) business days after CSK has provided notice, CSK simultaneously delivers to O’Reilly (i) an irrevocable written notice of termination of the merger agreement and (ii) a wire transfer of same day funds in the amount of the termination fee.

CSK has also agreed to advise O’Reilly orally and in writing within forty-eight (48) hours of the receipt of any inquiries, proposals or offers regarding any acquisition proposal; any request for non-public information relating to the CSK or its subsidiaries (other than requests for information not reasonably expected to be related to an acquisition proposal); and any inquiry or request for discussion or negotiation regarding an acquisition proposal.

Preparation of the Registration Statement

O’Reilly is obligated to prepare and file the Form S-4 registration statement with the SEC, of which this prospectus is a part. O’Reilly will use its best efforts to have:

 

   

the Form S-4 declared effective by the SEC; and

 

   

the Form S-4 remain effective as long as necessary to complete the offer and the merger.

O’Reilly has agreed to promptly provide CSK with copies of any written comments and to promptly inform CSK of any oral comments that O’Reilly may receive from time to time from the SEC with respect to the Form S-4 or the offer documents. O’Reilly has agreed not to make any amendment or supplement to the Form S-4 without providing CSK a reasonable opportunity to review the amendment or supplement, and has agreed to give reasonable and good faith consideration to all additions, deletions or changes suggested by CSK.

If, prior to the effective time of the merger, either O’Reilly or CSK discovers any information relating to either party that should be set forth in an amendment or a supplement to the Form S-4, or to any of the filings related to the offer, so that the documents would not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading, the party that discovers that information is obligated to promptly notify the other party, and an appropriate amendment or supplement describing such information will be promptly filed with the SEC and disseminated to holders of CSK common stock.

Reasonable Best Efforts

The merger agreement provides that each of O’Reilly and CSK will use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done all things reasonably necessary, to consummate the offer and the merger and the other transactions contemplated by the merger agreement.

Antitrust Laws

The merger agreement provides that O’Reilly and CSK will use reasonable best efforts to obtain all requisite approvals and authorizations for the transactions contemplated by the merger agreement under any applicable antitrust laws. O’Reilly and CSK each will use its reasonable best efforts to cooperate in all respects with each other in connection with any filing or submission and in connection with any investigation or other inquiry, including keeping the other party reasonably informed of any communication received from the Federal Trade Commission, the Department of Justice or the competition or merger control authorities of any other governmental entity, permitting the other party to review any such communication, consulting with the other party in advance of any meeting or conference and providing the other party the opportunity to attend and

 

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participate in such meetings and conferences. O’Reilly may be required to agree to any divestiture by O’Reilly or CSK or any of O’Reilly’s subsidiaries or affiliates of any assets, properties and stock, or the imposition of any limitation on the ability of O’Reilly or CSK or any of O’Reilly’s subsidiaries or affiliates to conduct their businesses or to own or exercise control of their assets, properties and stock.

Employee Benefits

After the effective time of the merger, O’Reilly will give the employees of the surviving company that were employees of CSK immediately prior to the effective time full credit for purposes of eligibility and vesting and benefit accruals (but not for purposes of benefit accruals under any defined benefit pension plans other than any such plans maintained by CSK) under any employee compensation, incentive and benefit plans, programs, policies and arrangements maintained for the benefit of CSK employees to the same extent recognized by CSK immediately prior to the merger, except to the extent such recognition would result in duplication of benefits.

O’Reilly will assume, honor and be responsible for any accrued or unused vacation, sick and personal leave to which any CSK employee is entitled pursuant to the paid time-off policy applicable to such CSK employee immediately prior to the effective time of the merger. O’Reilly will continue to provide paid time-off benefits to CSK employees on terms at least equal to the paid time-off benefits provided under the CSK policy prior to the effective time of the merger.

No Rights Agreement Amendment

Prior to the termination of the merger agreement, CSK will not:

 

   

redeem the rights distributed to the CSK common stockholders pursuant to the rights agreement between CSK and Mellon Investor Services LLC;

 

   

amend the rights agreement; or

 

   

take any action that would allow any person other than O’Reilly, OC Acquisition or any of their respective subsidiaries to beneficially own more than 10% or more of the CSK common stock without causing a distribution date or triggering event (as each is defined in the rights agreement) to occur.

Treatment of Exchangeable Notes

CSK will use reasonable efforts to cooperate and assist O’Reilly with respect to O’Reilly’s assumption of CSK’s 6 3/4% senior exchangeable notes due 2025 as a successor under the indenture relating to the exchangeable notes. CSK agrees to provide an a timely basis, all reasonable cooperation in connection with this assumption, as may be reasonably requested by O’Reilly, including:

 

   

requiring CSK directors to appoint the directors O’Reilly is entitled to designate pursuant to the merger agreement;

 

   

assisting O’Reilly in the preparation by O’Reilly of a supplemental indenture with respect to the assumption by O’Reilly of the exchangeable notes; and

 

   

promptly notifying O’Reilly of an event of default, any correspondence with the trustee and any action taken by the holders of the exchangeable notes under the terms of the indenture.

Financing

At the sole cost and expense of O’Reilly, CSK will use its reasonable efforts to cooperate and assist O’Reilly with respect to the arrangement of O’Reilly’s financing. CSK agrees to provide on a timely basis, all reasonable cooperation in connection with the arrangement of the financing as may be reasonably requested by O’Reilly, including:

 

   

participation in meetings, drafting sessions and due diligence sessions led by O’Reilly;

 

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furnishing O’Reilly and its financing sources with financial and other pertinent information regarding CSK as may be reasonably requested by O’Reilly;

 

   

assisting O’Reilly with the preparation by O’Reilly of an offering document for the financing and materials for rating agency presentations;

 

   

reasonably cooperating with marketing efforts and related roadshow activities of O’Reilly;

 

   

providing and executing documents as may be reasonably requested by O’Reilly and assisting O’Reilly in obtaining comfort letters of CSK’s accountants, consents of CSK’s accountants for use of their reports in any materials relating to the financing, legal opinions of CSK’s counsel and surveys and title insurance with respect to real property;

 

   

coordinating and making its real property available for appraisal and inspection;

 

   

making senior officers and representatives of CSK reasonably available for presentations to rating agencies and roadshow presentations; and

 

   

reasonably facilitating the pledge of the surviving corporation’s collateral.

Indemnification and Insurance

The merger agreement provides that, after the effective time of the merger and for a period of six years thereafter, O’Reilly will, or will cause the surviving company to, indemnify, advance expenses, and hold harmless, to the fullest extent permitted under applicable law, CSK’s certificate of incorporation, and CSK’s bylaws, each present (as of the effective time of the merger) and former officer, director, or employee of CSK and its subsidiaries, for acts or omissions pertaining to the fact that such person was an officer, director, or employee of CSK or any of its subsidiaries or for matters existing or occurring prior to the effective time of the merger. In the merger agreement, O’Reilly has agreed to maintain in effect, for a period of six years after the effective time of the merger, all rights to indemnification provided in CSK’s certificate of incorporation or bylaws or in any indemnification agreement with CSK. For a period of six years after the effective time of the merger, O’Reilly has also agreed to either (i) cause to be maintained in effect the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by CSK and its subsidiaries, (ii) provide substitute policies of at least the same coverage and amounts (provided that O’Reilly will not be required to pay an annual premium in excess of 250% of the last annual premium paid by CSK prior to the date of the merger agreement), or (iii) permit CSK to purchase a six-year prepaid “tail policy” prior to the effective time of the merger having a premium of not more than 250% of the last annual premium paid by CSK prior to the date of the merger agreement and on terms and conditions providing substantially equivalent benefits as the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by CSK and its subsidiaries.

Conditions of the Offer

For a description of the conditions of the offer, see “The Offer—Conditions of the Offer” on page 35.

Conditions of the Merger

The obligations of O’Reilly, OC Acquisition and CSK to consummate the merger are subject to the satisfaction of the following conditions:

 

   

if required by Delaware law, the merger agreement shall have been approved and adopted by the holders of a majority of each class of CSK entitled to vote on the merger agreement and the merger in accordance with Delaware law and CSK’s certificate of incorporation and bylaws;

 

   

no court or other governmental entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and prohibits consummation of the merger;

 

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any waiting period applicable under the HSR Act will have expired, been terminated, or no longer restrict the consummation of the merger, which occurred on April 17, 2008;

 

   

OC Acquisition or O’Reilly shall have purchased all shares of CSK common stock validly tendered and not withdrawn pursuant to the offer;

 

   

the registration statement on Form S-4 relating to the merger, including any post-effective amendment thereto, shall have been declared effective by the SEC and no stop order suspending effectiveness shall be in effect and no proceedings for such purpose shall be pending before or threatened by the SEC;

 

   

the shares of O’Reilly common stock to be issued in the merger shall have been approved for listing on the NASDAQ, subject to official notice of issuance, or shall be exempt from such requirement under the then applicable laws, regulations and rules of the NASDAQ; and

 

   

neither the O’Reilly tax opinion nor the CSK tax opinion shall have been withdrawn and no event shall have occurred that would prevent O’Reilly from relying on the O’Reilly tax opinion or CSK from relying on the CSK tax opinion.

Termination of the Merger Agreement

Termination by Mutual Agreement

The merger agreement may be terminated at any time prior to the effective time of the merger by mutual written agreement of O’Reilly and CSK.

Termination by Either O’Reilly or CSK

The merger agreement may be terminated prior to the effective time of the merger by either O’Reilly or CSK by giving notice of termination to the non-terminating party:

 

   

if the offer has not been consummated on or before September 28, 2008, unless the failure to consummate the offer is caused by or results from the failure of the party seeking to terminate to perform or comply with the covenants and agreements of such party set forth in the merger agreement and such action or failure to perform constitutes a breach of the merger agreement; or

 

   

on or after September 28, 2008, if any court or governmental entity issues a nonappealable final judgment, order, injunction, rule or decree, or takes any other action restraining, enjoining or otherwise prohibiting any of the transactions contemplated by the merger agreement, including the acceptance for payment of, and payment for, the shares of CSK common stock pursuant to the offer, provided, that a party seeking to terminate shall have in all respects complied with its obligations to contest, appeal and remove such judgment, order, injunction, rule, decree, ruling or take other action in accordance with the merger agreement.

Termination by O’Reilly

O’Reilly may terminate the merger agreement at any time prior to the effective time of the merger if:

 

   

CSK breaches any of its representations, warranties, covenants or agreements set forth in the merger agreement, which breach would result in a failure of a condition to the offer or the merger and cannot be cured by September 28, 2008;

 

   

CSK’s board of directors, or any of its committees, (i) withdraws, modifies or qualifies in a manner adverse to O’Reilly its approval or recommendation in favor of the merger agreement or the merger, (ii) approves, endorses or recommends to CSK’s stockholders an acquisition proposal other than the offer or the merger, or (iii) fails to publicly reaffirm its recommendation of the merger agreement within seven (7) business days following receipt of a written request by O’Reilly to provide such reaffirmation following the public announcement of an acquisition proposal;

 

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a material adverse effect has occurred with respect to CSK that is not capable of being cured by September 28, 2008;

 

   

any of the following occur (i) filing of a case by CSK under the United States Bankruptcy Code, (ii) the acceleration of the payment of the principal or other material amounts under any debt instruments of CSK, (iii) the failure of CSK or any of its subsidiaries to make any payment when due under any debt instrument, (iv) the lenders under any of the debt instruments of CSK ceasing to make loans, advances or otherwise extend credit to CSK which cessation continues for five (5) business days or (v) the occurrence of any other action undertaken by the lenders of the debt instruments of CSK that in any way impairs, in any material respect, the availability of loans and other credit extensions to CSK and its subsidiaries, which impairment continues for ten (10) business days; or

 

   

CSK receives an audit report with respect to the audited financial statements for its fiscal year ended February 3, 2008 that contains an adverse opinion or is qualified in certain respects.

Termination by CSK

CSK may terminate the merger agreement at any time prior the consummation of the offer if:

 

   

O’Reilly or OC Acquisition breaches any of its representations, warranties, covenants or agreements set forth in the merger agreement, which breach would result in a failure of a condition to the offer or the merger and cannot be cured by September 28, 2008;

 

   

CSK’s board of directors accepts a superior proposal in compliance with the merger agreement and CSK enters into an agreement regarding such superior proposal and pays the termination fee;

 

   

a material adverse effect has occurred with respect to O’Reilly that is not capable of being cured by September 28, 2008; or

 

   

the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including the second trading day prior to the consummation of the exchange offer and rounded to four decimal places is less than or equal to $21.00, provided that no right of termination will exist if O’Reilly elects to increase the number of shares of O’Reilly common stock or cash included in the offer price such that the value of the offer price per share of CSK common stock is at least equal to $10.00.

Termination Fee

CSK has agreed to pay O’Reilly a termination fee of $22,000,000 if the merger agreement is terminated:

 

   

(i) by O’Reilly pursuant to a breach or failure by CSK to perform any of its representations, warranties, covenants or agreements or (ii) by CSK if the offer has not been consummated on or before September 28, 2008 and, in either case, prior to termination of the merger agreement, an acquisition proposal for at least 35% of the equity securities or consolidated total assets of CSK and its subsidiaries was communicated to CSK’s senior management or CSK’s board of directors or was made publicly known to CSK’s stockholders and within twelve (12) months after such termination, CSK entered into a definitive material agreement with respect to, or has consummated an acquisition proposal for at least 35% of the equity securities or consolidated total assets of CSK and its subsidiaries;

 

   

by CSK in order to enter into a transaction that is a superior proposal; or

 

   

by O’Reilly if CSK’s board of directors, or any of its committees, (i) withdraws, modifies or qualifies in a manner adverse to O’Reilly its approval or recommendation in favor of the merger agreement or the merger, (ii) approves, endorses or recommends to CSK’s stockholders an acquisition proposal other than the offer or the merger, or (iii) fails to publicly reaffirm its recommendation of the merger agreement within seven (7) business days following receipt of a written request by O’Reilly to provide such reaffirmation following the public announcement of an acquisition proposal.

 

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CSK has also agreed to pay O’Reilly promptly (in no event later than two (2) business days) an amount equal to O’Reilly’s actual expenses in connection with the negotiation, execution, and delivery of the merger agreement and actions taken in furtherance of the transactions contemplated by the merger agreement, if the merger agreement is terminated:

 

   

due to (i) filing of a case by CSK under the United States Bankruptcy Code, (ii) the acceleration of the payment of the principal or other material amounts under any debt instruments of CSK, (iii) the failure of CSK or any of its subsidiaries to make any payment when due under any debt instrument, (iv) the lenders under any of the debt instruments of CSK ceasing to make loans, advances or otherwise extend credit to CSK which cessation continues for five (5) business days or (v) the occurrence of any other action undertaken by the lenders of the debt instruments of CSK that in any way impairs, in any material respect, the availability of loans and other credit extensions to CSK and its subsidiaries, which impairment continues for ten (10) business days; or

 

   

due to the receipt by CSK of an audit report with respect to the audited financial statements for its fiscal year ended February 3, 2008 that contains an adverse opinion or is qualified in certain respects.

Extension, Waivers and Amendment

At any time prior to the effective time of the merger, O’Reilly, CSK and OC Acquisition may, by action taken or authorized by their respective boards of directors, to the extent permitted by applicable law, (i) extend the time for the performance of any of the obligations or acts of the other party under the merger agreement, (ii) waive any inaccuracies in the representations and warranties of the other parties set forth in the merger agreement or (iii) subject to applicable law, waive compliance with any of the agreements or conditions of the other parties contained in the merger agreement. However, after the CSK stockholder approval has been obtained, no amendment may be made that pursuant to applicable law requires further approval or adoption by the stockholders of CSK without such further approval or adoption.

 

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INFORMATION WITH RESPECT TO CSK

CSK Auto Corporation, incorporated under the laws of Delaware, is the largest specialty retailer of automotive parts and accessories in the western United States and one of the largest such retailers of products in the country. As of May 4, 2008, through its wholly owned subsidiary, CSK Auto, Inc., CSK operated 1,345 stores in the United States, principally concentrated in the western United States. CSK’s stores are known by the following four brand names: (i) Checker Auto Parts, founded in 1969, with 487 stores in the Southwestern, Rocky Mountain and Northern Plains states and Hawaii; (ii) Schuck’s Auto Supply, founded in 1917, with 222 stores in the Pacific Northwest states and Alaska; (iii) Kragen Auto Parts, founded in 1947, with 504 stores primarily in California; and (iv) Murray’s Discount Auto Stores, founded in 1972, with 136 stores in the Midwest.

CSK Auto Corporation

645 E. Missouri Ave., Suite 400

Phoenix, Arizona 85012

Telephone: (602) 265-9200

www.cskauto.com

CSK’s common stock is currently quoted on the NYSE (symbol: CAO).

INFORMATION WITH RESPECT TO O’REILLY AND OC ACQUISITION

O’Reilly

O’Reilly Automotive, Inc., founded in 1957 and incorporated under the laws of Missouri, is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment and accessories in the United States. O’Reilly sells its products to do-it-yourself customers and professional installers. At March 31, 2008, we operated 1,867 stores in Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Virginia, Wisconsin and Wyoming. The principal executive offices of O’Reilly are located at:

O’Reilly Automotive, Inc.

233 South Patterson

Springfield, Missouri 65802

Telephone: (417) 862-6708

www.oreillyauto.com

O’Reilly’s common stock is currently quoted on the NASDAQ (symbol: ORLY).

OC Acquisition

OC Acquisition is a Delaware corporation incorporated on March 28, 2008, and, to date, has engaged in no activities other than those incident to its formation and to the offer and the merger. OC Acquisition is an indirect wholly-owned subsidiary of O’Reilly. The principal executive offices of OC Acquisition are located at:

OC Acquisition Company

233 South Patterson

Springfield, Missouri 65802

Telephone: (417) 862-6708

 

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DESCRIPTION OF O’REILLY CAPITAL STOCK

O’Reilly’s articles of incorporation permit it to issue up to 245,000,000 shares of common stock, par value $0.01 per share, and 5,000,000 shares of preferred stock, par value $0.01 per share. As of June 17, 2008, there were 115,730,387 shares of O’Reilly’s common stock outstanding held of record by approximately 12,707 shareholders and no shares of preferred stock outstanding. The following description of O’Reilly’s common stock and provisions of its articles of incorporation and bylaws is only a summary, and O’Reilly encourages you to review complete copies of O’Reilly’s articles of incorporation and bylaws, which O’Reilly has previously filed with the SEC.

Holders of O’Reilly’s common stock are entitled to receive, as, when and if declared by its board of directors, dividends and other distributions in cash, stock or property from its assets or funds legally available for those purposes subject to any dividend preferences that may be attributable to preferred stock. Holders of common stock are entitled to one vote for each share held of record on all matters on which shareholders may vote. Holders of common stock are not entitled to cumulative voting for the election of directors. There are no preemptive, conversion, redemption or sinking fund provisions applicable to O’Reilly’s common stock. All outstanding shares of O’Reilly’s common stock are fully paid and non-assessable. In the event of O’Reilly’s liquidation, dissolution or winding up, holders of common stock are entitled to share ratably in the assets available for distribution, subject to any prior rights of any holders of preferred stock then outstanding.

O’Reilly’s common stock is traded on the NASDAQ under the symbol “ORLY.”

COMPARISON OF RIGHTS OF HOLDERS OF

O’REILLY COMMON STOCK AND CSK COMMON STOCK

General

O’Reilly is a Missouri corporation, and its shareholders’ rights are governed by the General and Business Corporation Law of Missouri (the “MGBCL”), as well as its articles of incorporation and bylaws. CSK is a Delaware corporation, and its stockholders’ rights are governed by the DGCL, as well as its certificate of incorporation and bylaws. Although the rights and privileges of stockholders of a Delaware corporation are in many instances comparable to those of shareholders of a Missouri corporation, there are also differences.

As a result of the offer and the merger, CSK’s stockholders will become shareholders of O’Reilly. The following discussion of certain similarities and material differences between the rights of CSK stockholders and the rights of O’Reilly shareholders under O’Reilly’s articles of incorporation and CSK’s certificate of incorporation and their respective bylaws is only a summary of certain provisions and does not purport to be a complete description of the similarities and differences, and is qualified in its entirety by reference to the MGBCL and the DGCL, common law and the full text of the articles/certificate of incorporation and bylaws of each of O’Reilly and CSK. While O’Reilly believes that the description covers the material differences between the two, this summary may not contain all of the information that is important to you. You should carefully read this entire document and the other documents referred to for a more complete understanding of the differences between being a stockholder of CSK and being a shareholder of O’Reilly. When reading this description, please note that the DGCL refers to holders of common stock as stockholders while the MGBCL uses the term shareholder. The two terms mean the same thing in practice and for all practical purposes may be used interchangeably; however, the discussion generally uses the term “stockholder” when referring to holders of CSK common stock or to the DGCL and “shareholder” when referring to holders of O’Reilly common stock or to the MGBCL.

 

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Authorized Capital Stock

O’Reilly’s articles of incorporation permit it to issue up to 245,000,000 shares of common stock, par value $0.01 per share, and 5,000,000 shares of preferred stock, par value $0.01 per share. As of June 17, 2008, there were 115,730,387 shares of O’Reilly’s common stock outstanding and no shares of preferred stock outstanding.

CSK’s certificate of incorporation permits it to issue up to 90,000,000 shares of common stock, par value $0.01 per share. As of June 17, 2008, there were 44,054,011 shares of CSK’s common stock outstanding.

Size of Board of Directors

Under the MGBCL, the board of directors shall consist of one or more individuals, the number being specified or fixed in accordance with the articles of incorporation or bylaws. O’Reilly’s articles of incorporation provide that the number of directors shall be the number fixed in the bylaws but not less than three (3). O’Reilly’s bylaws provide that the number of directors will be nine (9). O’Reilly currently has nine (9) directors.

The DGCL permits the board of directors to change the authorized number of directors by amendment to the bylaws or in the manner provided in the bylaws unless the number of directors is fixed in the certificate of incorporation. The DGCL minimum requirement for the board of directors is one (1) or more members. CSK’s certificate of incorporation provides that the number of directors which constitute the board of directors will be fixed by the bylaws. CSK’s bylaws provide that the authorized number of directors of the corporation may be fixed from time to time by the board of directors or the stockholders by resolution. The number of directors is currently fixed at twelve (12).

Cumulative Voting

Cumulative voting allows a stockholder to cast a number of votes equal to the number of directors to be elected multiplied by the number of shares held in the stockholder’s name on the record date. This total number of votes may be cast for one nominee or may be distributed among as many of the candidates as the stockholder desires. The candidates who receive the highest number of votes are elected, up to the total number of directors to be elected. In general, cumulative voting may help groups of minority stockholders elect some candidates to the board.

The MGBCL provides for cumulative voting for directors unless the corporation’s articles or bylaws provide otherwise. O’Reilly’s articles of incorporation explicitly state that there is no right to cumulative voting.

Under the DGCL, cumulative voting in the election of directors is not mandatory, and for cumulative voting to be effective it must be expressly provided for in the certificate of incorporation. CSK’s certificate of incorporation is silent with respect to cumulative voting rights, so holders of CSK common stock have no cumulative voting rights.

Classified Board of Directors

O’Reilly currently has a classified board of directors. The articles of incorporation provide for a board of directors that is divided into three classes, as nearly equal in number of directors as possible, which will be designated Class I, Class II and Class III. Directors in each class are elected to hold office for a term of three (3) years or until their successors are duly elected and qualified, or if earlier, until their death, resignation or removal.

CSK’s directors are elected at each annual meeting of stockholders. All directors, including those elected prior to the annual meeting to fill a vacancy or a newly created directorship, will hold office until the next annual meeting of stockholders and until their respective successors have been elected and qualified or until their earlier resignation or removal. Newly created directorships and vacancies in the board of directors may only be filled by a majority vote of the directors then in office.

 

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Removal of Directors

Under the MGBCL, unless the articles of incorporation or bylaws provide otherwise, any number of directors or the entire board of directors may be removed with or without cause, by a vote of a majority of the shares then entitled to vote at an election of the directors. The MGBCL provides that any director of the corporation may be removed for cause by an action of a majority of the entire board of directors if the director to be removed shall, at the time of removal, fail to meet the qualifications set forth in the articles of incorporation or bylaws for election as a director or shall be in breach of any agreement between such director and the corporation relating to such director’s services as a director or employee of the corporation. O’Reilly’s articles of incorporation and bylaws are silent with respect to removal of directors.

Under the DGCL, a director of a corporation that does not have a classified board of directors may be removed with or without cause by a majority stockholder vote. CSK’s bylaws allow for any or all directors to be removed with or without cause by the stockholders at a special meeting held for that purpose.

Vacancies on the Board

The MGBCL provides that, unless otherwise provided for in the articles of incorporation or bylaws of the corporation, vacancies on the board and newly created directorships may be filled by a majority vote of the directors then in office, even if less than a quorum, or by a sole remaining director, until the next election of directors by the shareholders of the corporation. If holders of any class or classes of stock are entitled to elect one or more directors by the articles of incorporation, vacancies may be filled by a majority of the directors elected by such class then in office. O’Reilly’s articles of incorporation and bylaws provide that a vacancy occurring in the board will be filled only by the affirmative vote of the majority of remaining directors still in office, even if less than a quorum.

Under the DGCL, vacancies and newly created directorships may be filled by a majority of the directors then in office, even though less than a quorum, unless otherwise provided in the certificate of incorporation or bylaws and unless the certificate of incorporation directs that a particular class is to elect the director, in which case any other directors elected by such class, or a sole remaining director, shall fill such vacancy. CSK’s bylaws provide that vacancies may only be filled by the vote of a majority of the directors then in office. Each director so selected shall hold office until the next annual meeting of stockholders and until his successor is duly elected and qualified.

Fiduciary Duties of Directors

Directors of corporations incorporated or organized under Delaware law and Missouri law have fiduciary obligations to the corporation and its stockholders. Pursuant to these fiduciary obligations, the directors must act in accordance with the so-called duties of “due care” and “loyalty.” Under Delaware law, the duty of care requires that the directors act in an informed and deliberative manner and to inform themselves, prior to making a business decision, of all material information reasonably available to them. The duty of loyalty may be summarized as the duty to act in good faith, not out of self-interest and in a manner that the directors reasonably believe to be in the best interests of the corporation. Under Missouri law, the duty of care requires that a director’s duties be discharged with the care and skill which ordinarily prudent and diligent persons would exercise under similar circumstances. The duty of loyalty prohibits diverting corporate opportunities in furtherance of self-interests and acting on corporate matters which conflict with the self-interests of directors and requires director conduct that is fair, open and in the utmost good faith.

Transactions Involving Directors

The MGBCL generally permits transactions involving a Missouri corporation and an interested director of that corporation if: (i) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or committee, and the board of directors or committee in good

 

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faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (iii) the contract or transaction is fair as to the corporation as of the time it is authorized or approved by the board of directors, a committee thereof, or the shareholders.

The DGCL generally permits transactions involving a Delaware corporation and an interested director of that corporation if: (i) the material facts as to the director’s or officer’s relationship or interest and as to the transaction are disclosed or are known to the board of directors or a committee thereof, and the board of directors or committee in good faith authorizes the transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors represent less than a quorum; or (ii) the material facts as to the director’s or officer’s relationship or interest and as to the transaction are disclosed or are known to the stockholders entitled to vote thereon, and the transaction is specifically approved in good faith by vote of the stockholders; or (iii) the transaction is fair to the corporation. The DGCL allows loans to officers and employees whenever, in the judgment of the directors, such loan may reasonably be expected to benefit the corporation.

Indemnification and Limitation of Liability

The MGBCL and the DGCL contain similar provisions and limitations on indemnification by a corporation of its officers, directors, employees and other agents. Both the MGBCL and the DGCL also permit a corporation to adopt a provision in its charter eliminating the liability of a director to the corporation or the holders of its capital stock for monetary damages for breach of fiduciary duty as a director, provided such liability does not arise from certain proscribed conduct, including, in the case of Delaware law, any breach of the director’s duty of loyalty to the corporation or its stockholders, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, the payment of unlawful dividends or expenditure of funds for unlawful stock purchases or redemptions or transactions from which such director derived an improper personal benefit, or, in the case of Missouri law, if the individual acted in good faith and in a manner such individual reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such individual’s conduct was unlawful. The O’Reilly articles of incorporation set forth the same indemnification provisions as the MGBCL. The CSK certificate of incorporation authorizes indemnification of directors and officers and other authorized representatives of the corporation to the fullest extent permitted by the DGCL.

Special Meetings

Under the MGBCL, special meetings of the shareholders may be called by the board of directors or by such other person or persons as may be authorized by the articles of incorporation or the bylaws. O’Reilly’s articles of incorporation provide that a special meeting of the shareholders may be called only by (i) the board of directors pursuant to a resolution adopted by the affirmative vote of a majority of the entire board of directors, (ii) the chief executive officer of the corporation or (iii) the chief operating officer of the corporation. O’Reilly’s bylaws provide that a special meeting of the shareholders may be called only by (a) the board of directors pursuant to a resolution adopted by the affirmative majority of the entire board of directors or (b) a president of the corporation.

Under the DGCL, a special meeting of stockholders may be called by the board of directors or by any other person authorized to do so in the certificate of incorporation or the bylaws. CSK’s bylaws provide that special meetings of stockholders may be called by the board of directors, either by written instrument or a vote of the majority, and will be called whenever stockholders owning one-fourth of the capital stock issued and outstanding shall, in writing, make application before the president stating the object of such meeting.

 

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Nominations and Proposals by Holders of Common Stock

O’Reilly’s bylaws provide that for a shareholder proposal to be considered, it must have been properly brought before the meeting by the board of directors or by a shareholder of record who has complied with the following procedures. The shareholder must have given notice either by personal delivery or by United States mail, postage prepaid, to the Secretary of the corporation not less than sixty (60) days nor more than ninety (90) days prior to the meeting, provided however, that if less than seventy (70) days notice or prior public disclosure of the date of such meeting has been given or made to shareholders, notice by the shareholder of such meeting has been given or made to shareholders notice by the shareholder to be timely must be received not later than the close of business on the tenth day following the earlier of (i) the day on which notice of the date of the meeting was mailed or (ii) the day on which public disclosure of the meeting was made. The notice must set forth (i) a brief description of the proposal desired to be brought before the meeting and the reasons for considering such proposal, (ii) the name and address of record of the shareholder making the proposal and any other shareholders known to be in support thereof, (iii) the class and number of shares of capital stock that are beneficially owned by the shareholder on the date of the shareholder notice and by any other shareholders known by such shareholder to be supporting the proposal on the date of the shareholder notice and (iv) any material interest of the shareholder in the proposal. O’Reilly’s bylaws also state that only persons who are nominated in accordance with the procedures for nominating directors will be eligible for election of directors of the corporation.

CSK’s bylaws provide that stockholder nominations for election of directors and proposals of business must either be (i) specified in the notice of meeting given by or at the direction of the board or any authorized committee thereof, (ii) brought at an annual meeting at the direction of the president, the chairman of the board or by a vote of the majority of the full board or (iii) brought at an annual meeting by any stockholder of record who is entitled to vote and has given proper notice. To constitute proper notice, a stockholder’s proposal must be received at CSK’s principal executive offices not less than 120 calendar days before the date corresponding with the date set forth on CSK’s proxy statement released to stockholders in connection with the previous year’s annual meeting; provided however, that if CSK did not hold an annual meeting the previous year, or if the date of the current year’s annual meeting has been changed by more than thirty (30) days from the anniversary date of the previous year’s meeting, then the stockholder’s proposal must be received no later than the close of business 120 days prior to the upcoming annual meeting.

Inspection of Lists of Holders of Common Stock

Both the MGBCL and the DGCL allow any stockholder to inspect the stockholders’ list for a purpose reasonably related to such person’s interest as a stockholder. The MGBCL provides an absolute right of inspection of a corporation’s list of shareholders to any shareholder. O’Reilly’s bylaws provide that at least ten (10) days before each meeting of shareholders, the officer or agent having charge of the transfer book for shares of the corporation will make a complete list of the shareholders entitled to vote at such meeting with the address of, and the number shares held by each shareholder, which list, for a period of not less than ten (10) days, will be kept on file at the registered office of the corporation and will be subject to inspection by any shareholder during usual business hours. Such list will also be produced at the meeting.

The DGCL provides for inspection rights as to a list of stockholders entitled to vote at a meeting within a ten (10) day period preceding a stockholders’ meeting for any purpose germane to the meeting. CSK’s bylaws provide that the secretary or other officer of the corporation having charge of the stock ledger of the corporation will prepare and make, at least ten (10) days before every meeting of the stockholders, a complete list of the stockholders, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list will be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting. The list will also be available at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present.

 

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Shareholder Rights Plan

O’Reilly. Sections 351.180 and 351.182 of the MGBCL grant the board of directors the authority to adopt a shareholder rights plan. O’Reilly adopted its shareholder rights plan on May 7, 2002. The rights under the plan will become exercisable upon the occurrence, subject to certain exceptions, of certain triggering events, including upon the acquisition by an acquiring person of beneficial ownership of 15% or more of the outstanding shares of common stock. The rights will also become exercisable upon the commencement of a tender offer or exchange offer that would result in a person or group becoming an acquiring person. The existence of a shareholder rights plan may discourage or render more difficult an acquisition of O’Reilly that is deemed undesirable by O’Reilly’s board of directors.

CSK. The DGCL does not include a statutory provision expressly validating stockholder rights plans, however, such plans have generally been upheld by decisions of courts applying Delaware law. CSK adopted its stockholder rights agreement on February 4, 2008. The rights under the rights agreement will become exercisable upon the date, subject to certain exceptions, of certain triggering events, including upon any person acquiring beneficial ownership of 10% or more of the outstanding shares of common stock. However, CSK’s board of directors has taken action to render the rights agreement inapplicable to the offer and the merger and cause the rights to expire immediately prior to consummation of the merger. The existence of a stockholder rights plan may discourage or render more difficult an acquisition of CSK that is deemed undesirable by CSK’s board of directors.

Dividends

Under the MGBCL, a corporation may make a distribution to its shareholders as long as the corporation’s net assets are not less than its stated capital or when the payment thereof would not reduce the net assets of the corporation below its stated capital. If a dividend is declared out of the paid-in surplus of the corporation, whether created by reduction of stated capital or otherwise, (i) no such distribution may be made to any class of shareholders unless all cumulative dividends accrued on preferred special classes of shares entitled to preferred dividends have been fully paid and (ii) each distribution, when made, shall be identified as a liquidating dividend and the amount per share shall be disclosed to the shareholders receiving the same, concurrently with the payment thereof. O’Reilly’s articles of incorporation provide that the board will determine the dividend rate, whether dividends should be cumulative and, if so, from which date or dates and the relative rights of priority of the payment of dividends on that series. O’Reilly’s bylaws state that the board may, from time to time, declare, and the corporation may pay, dividends on its outstanding shares in the manner and condition provided by law and in the articles of incorporation.

The DGCL recognizes the concepts of par value, capital and surplus. The DGCL permits a corporation, unless otherwise restricted by its certificate of incorporation, to declare and pay dividends out of its surplus or, if there is no surplus, out of next profits for the fiscal year in which the dividend is declared and/or for the preceding fiscal year, as long as the amount of capital of the corporation is not less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets. The ability of a Delaware corporation to pay dividends on its shares is dependent on the financial status of the corporation standing alone and not on a consolidated basis. In determining the amount of surplus of a Delaware corporation, the assets of the corporation, including stock of subsidiaries owned by the corporation, must be valued at their fair market value as determined by the board of directors, regardless of their historical book value. CSK’s certificate of incorporation and bylaws are silent with respect to dividends.

Amendment of the Articles or Certificate of Incorporation

Under the MGBCL, after a corporation has received any payment for any of its stock, an amendment to the articles of incorporation requires the approval of the corporation’s board of directors and a majority of the outstanding shares entitled to vote, either before or after the board approval. O’Reilly’s articles of incorporation may be amended in accordance with MGBCL and do not require a supermajority vote to approve amendments.

 

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Under the DGCL, after a corporation has received any payment for any of its stock, an amendment to the certificate of incorporation requires the approval of the corporation’s board of directors and a majority of the outstanding shares. CSK’s certificate of incorporation provides that the certificate of incorporation may be amended, altered or repealed and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner prescribed in the bylaws. CSK’s bylaws do not require a supermajority vote to approve amendments.

Amendment of Bylaws

Under the MGBCL, after a corporation has received any payment for any of its stock, a corporation’s bylaws may be adopted, amended or repealed by the shareholders, unless and to the extent that such power may be vested in the board by the articles of incorporation. O’Reilly’s articles of incorporation provide that the board of directors has power to adopt, repeal or amend the bylaws and to adopt new or additional bylaws, subject to the paramount right of the shareholders to divest the board of directors of such power. O’Reilly’s bylaws also provide that the majority of the board of directors may alter, amend or repeal any bylaws, provided that no bylaw may be adopted or amended so as to be inconsistent with the articles of incorporation or the constitution or laws of the State of Missouri.

Under the DGCL, after a corporation has received any payment for any of its stock, the power to adopt, amend or repeal bylaws is entirely with the stockholders of the corporation. However, a corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors of the corporation. CSK’s certificate of incorporation and bylaws expressly provide that the board of directors of CSK has the power and authority to make, alter, amend, change, add to or repeal the bylaws of CSK.

Advance Notice of Record Date

As permitted under the MGBCL, O’Reilly’s bylaws provide that, in order that the corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, the board of directors may fix a record date, which record date will not be more than seventy (70) days before the date of such meeting.

The DGCL requires that stockholders be provided prior written notice no more than sixty (60) days nor less than ten (10) days prior to the record date for determining the rights to vote at the meeting of stockholders. The DGCL further states that the record date to determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action shall not precede the date upon which the resolution fixing the record date is adopted and which record date shall be not more than sixty (60) days prior to such action. Finally, the DGCL provides that due notice of the time, place and purpose of the meeting to approve a merger agreement be mailed at least twenty (20) days prior to the date of the meeting. CSK’s bylaws provide that for the purposes of determining the stockholders entitled to notice of any meeting, the directors may fix, in advance, a record date which will not be more than sixty (60) days nor less than ten (10) days before the meeting.

Consent in Lieu of Meeting

The MGBCL provides that, unless otherwise provided in the articles of incorporation, any action required or allowed to be taken at a meeting of the shareholders of a corporation may be taken without a meeting if consents in writing, setting forth the action so taken, are signed by all of the shareholders entitled to vote with respect to the subject matter thereof. Such consents have the same force and effect as a unanimous vote of the shareholders at a meeting duly held and may be stated as such in any certificate or document filed under the MGBCL. O’Reilly’s bylaws provide that any action which may be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing is signed by all shareholders entitled to vote with respect to the subject matter thereof.

 

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Under the DGCL, unless otherwise provided in the certificate of incorporation, any action to be taken at an annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote if a written consent to the action shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize such action at a meeting at which all shares entitled to vote were present and voted. Additionally, unless the certificate of incorporation provides otherwise, stockholders may act by written consent to elect directors; provided, however, that, if such consent is less than unanimous, such action by written consent may be held in lieu of an annual meeting only if all of the directorships to which directors could be elected at an annual meeting are vacant and are filled by such action. CSK’s bylaws provide that any action required by the DGCL to be taken at any annual or special meeting may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action to be taken, is signed by the holders of outstanding stock having not less than the minimum votes necessary had there been a meeting where votes were actually taken.

Derivative Actions

Under Missouri law, shareholders may bring derivative actions on behalf of, and for the benefit of, the corporation. A shareholder may not sue derivatively unless he first makes demand on the corporation that it bring suit and such demand has been refused, unless it is shown that such demand would have been futile.

Derivative actions may be brought in Delaware by a stockholder on behalf of, and for the benefit of, the corporation. Delaware law provides that a stockholder must aver in the complaint that he or she was a stockholder of the corporation at the time of the transaction of which he or she complains. A stockholder may not sue derivatively unless he first makes demand on the corporation that it bring suit and such demand has been refused, unless it is shown that such demand would have been futile.

Dissenters’ Rights

Delaware General Corporation Law. Under the DGCL, dissenters’ appraisal rights are available to a corporation’s stockholders in connection with certain mergers and consolidations. However, no rights are available in certain situations. A corporation’s stockholders will not receive such rights if the corporation is the surviving corporation and no stockholder vote is required for the merger. Also, no such rights are available if the corporation’s stock is either:

 

   

listed on a national securities exchange, or

 

   

held of record by more than 2,000 stockholders.

However, dissenters’ appraisal rights will be available if the merger or consolidation requires stockholders to exchange their stock for anything other than:

 

   

shares of the surviving corporation,

 

   

shares of another corporation that will be listed on a national securities exchange or held of record by more than 2,000 stockholders, or

 

   

cash in place of fractional shares.

For more information regarding appraisal rights with respect to the offer and the merger, see “The Offer—Appraisal Rights” on page 47.

O’Reilly. Under the MGBCL, O’Reilly’s shareholders will not have any appraisal or dissenters’ rights as a result of the issuance of additional shares of O’Reilly common stock in connection with the offer or the merger.

CSK. Under Section 262 of the DGCL, CSK stockholders who have not voted in favor of the merger are expected to be entitled to demand appraisal of their shares. See “Annex B – Section 262 of the Delaware General Corporation Law” on page B-1.

 

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Business Combination Statutes

General and Business Corporation Law of Missouri. The MGBCL protects domestic corporations from unsolicited takeovers by prohibiting certain transactions once an acquiror has gained control. The statute restricts certain “Business Combinations” between a corporation and an “Interested Shareholder” or affiliates of the Interested Shareholder for a period of five (5) years unless certain conditions are met. A “Business Combination” includes a merger or consolidation, certain sales, leases, exchanges, pledges and similar dispositions of corporate assets or stock and certain reclassifications and recapitalizations. An “Interested Shareholder” includes any person or entity which beneficially owns or controls 20% or more of the outstanding voting shares of the corporation.

During the initial five-year restricted period, no Business Combination may occur unless such Business Combination or the transaction in which an Interested Shareholder becomes “interested” is approved by the board of directors of the corporation. Business Combinations may occur during such five-year period if: (i) prior to the stock acquisition by the Interested Shareholder, the board of directors approves the transaction in which the Interested Shareholder became such or approves the Business Combination in question; (ii) the holders of a majority of the outstanding voting stock, other than stock owned by the Interested Shareholder, approve the Business Combination; or (iii) the Business Combination satisfies certain detailed fairness and procedural requirements. The MGBCL exempts from its provisions: (i) corporations not having a class of voting stock registered under Section 12 of the Exchange Act; (ii) corporations which adopt provisions in their articles of incorporation or bylaws expressly electing not to be covered by the statute; and (iii) certain circumstances in which a shareholder inadvertently becomes an Interested Shareholder.

O’Reilly’s articles of incorporation expressly elect not to be covered by this statute.

Delaware General Corporation Law. Section 203 of the DGCL makes it more difficult to effect certain transactions between a corporation and a person or group that owns 15% or more of the corporation’s outstanding voting stock (including any rights to acquire stock pursuant to an option, warrant, agreement, arrangement or understanding, or upon the exercise of conversion or exchange rights, and stock with respect to which the person has voting rights only), or is an affiliate or associate of the corporation and was the owner of 15% or more of such voting stock, referred to as a 15% stockholder, at any time within the previous three (3) years (excluding persons who became 15% stockholders by action of the corporation alone). For a period of three (3) years following the date that a stockholder became a holder of 15% or more of the corporation’s outstanding voting stock, the following types of transactions between the corporation and the 15% stockholder are prohibited (unless certain conditions, described below, are met): (i) mergers or consolidations; (ii) sales, leases, exchanges or other transfers of 10% or more of the aggregate assets of the corporation; (iii) issuances or transfers by the corporation of any stock of the corporation which would have the effect of increasing the 15% stockholder’s proportionate share of the stock of any class or series of the corporation; (iv) receipt by the 15% stockholder of the benefit (except proportionately as a stockholder) of loans, advances, guarantees, pledges or other financial benefits provided by the corporation; and (v) any other transaction which has the effect of increasing the proportionate share of the stock of any class or series of the corporation which is owned by the 15% stockholder. The three-year ban does not apply if either the proposed transactions or the transaction by which the 15% stockholder became a 15% stockholder is approved by the board of directors of the corporation prior to the date such stockholder became a 15% stockholder. Additionally, a 15% stockholder may avoid the statutory restriction if upon the consummation of the transaction whereby such stockholder became a 15% stockholder, the stockholder owns at least 85% of the outstanding voting stock of the corporation without regard to those shares owned by the corporation’s officers and directors or certain employee stock plans. Business combinations are also permitted within the three-year period if approved by the board of directors and, at an annual or special meeting, by the holders of 66 2/3% of the voting stock not owned by the 15% stockholder.

A corporation may, at its option, exclude itself from the coverage of Section 203 by providing in its certificate of incorporation or bylaws at any time that it is exempt from Section 203, provided that a certificate or bylaws amendment cannot become effective for twelve (12) months after such amendment is adopted. In

 

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addition, any transaction is exempt from the statutory ban if it is proposed at a time when the corporation has proposed, and a majority of certain continuing directors of the corporation have approved, a transaction with a party who is not a 15% stockholder of the corporation (or who became such with board approval) if the proposed transaction involves (i) certain mergers or consolidations involving the corporation; (ii) a sale or other transfer of over 50% of the aggregate assets of the corporation; or (iii) a tender or exchange offer for 50% or more of the outstanding voting stock of the corporation. CSK’s certificate of incorporation and bylaws do not exempt the corporation from the coverage of Section 203. The application of Section 203 to CSK confers upon the board of directors the power to reject a proposed business combination in certain circumstances, even though a potential acquiror may be offering a substantial premium for CSK’s shares over the then-current market price.

ADDITIONAL INFORMATION

Legal Matters

The validity of the issuance of the O’Reilly common stock offered hereby will be passed upon for O’Reilly by Gallop, Johnson & Neuman, L.C., St. Louis, Missouri.

Experts

The consolidated financial statements of O’Reilly and it subsidiaries incorporated by reference in O’Reilly’s Annual Report (Form 10-K) for the year ended December 31, 2007 (including the schedule appearing therein), have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report on the consolidated financial statements, incorporated by reference therein, and their report on the schedule included therein, and collectively incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

The consolidated financial statements of CSK and its subsidiaries as of February 3, 2008 and February 4, 2007 and for each of the three years in the period ended February 3, 2008 and management’s assessment of the effectiveness of internal control over financial reporting (which is included in Management’s Report on Internal Control Over Financial Reporting) as of February 3, 2008 included in this prospectus have been so included in reliance on the report (which contains (i) an explanatory paragraph relating to CSK’s entering into an agreement and plan of merger with O’Reilly and CSK’s compliance with debt covenants both as more fully described in Note 1 to the consolidated financial statements, and (ii) an adverse opinion of the effectiveness of internal control over financial reporting) of PricewaterhouseCoopers LLP, an independent registered accounting firm, given on the authority of said firm as experts in auditing and accounting.

Where You Can Find Additional Information

This prospectus incorporates documents by reference which are not presented in or delivered with this prospectus. You should rely only on the information contained in this prospectus and in the documents that are incorporated by reference into this prospectus. O’Reilly and CSK have not authorized anyone to provide you with information that is different from or in addition to the information contained in this document and incorporated by reference into this prospectus.

The following documents, which were filed by O’Reilly with the SEC, are incorporated by reference into this prospectus:

 

   

O’Reilly’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, filed with the SEC on March 3, 2008;

 

   

O’Reilly’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2007, filed with the SEC on June 10, 2008;

 

   

O’Reilly’s Quarterly Report on Form 10-Q for the fiscal year ended March 31, 2008, filed with the SEC on May 9, 2008;

 

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O’Reilly’s Definitive Proxy Statement on Schedule 14A filed with the SEC on March 24, 2008.

 

   

O’Reilly’s Current Reports on Form 8-K filed with the SEC on January 14, 2008, February 1, 2008, February 11, 2008, February 25, 2008, April 1, 2008, April 7, 2008, April 11, 2008, April 18, 2008, April 23, 2008 and June 11, 2008.

In addition, all documents filed by O’Reilly pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act after the date of this prospectus are deemed to be incorporated by reference into, and to be a part of, this prospectus from the date of filing of those documents.

Any statement contained in this prospectus or in a document incorporated or deemed to be incorporated by reference into this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or any other subsequently filed document that is deemed to be incorporated by reference into this prospectus modifies or supersedes the statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus.

O’Reilly has supplied all information contained in this prospectus about O’Reilly, and CSK has supplied all information contained or incorporated by reference in this prospectus about CSK.

The documents incorporated by reference into this prospectus are available upon request. O’Reilly will provide a copy of any and all of the information that is incorporated by reference in this prospectus (not including exhibits to the information unless those exhibits are specifically incorporated by reference into this prospectus) to any person, without charge, upon written or oral request.

Any questions about the offer or the merger, requests for assistance or requests for a copy of information incorporated by reference into this prospectus should be directed to:

INNISFREE M&A INCORPORATED

501 Madison Avenue, 20th Floor

New York, NY 10022

Stockholders Call Toll-Free: (888) 750-5834

Banks and Brokers Call Collect: (212) 750-5833

For information relating to CSK:

CSK Auto Corporation

645 E. Missouri Ave.

Suite 400

Phoenix, Arizona 85012

Attention: Brenda Bonn, Investor Relations Manager

(602) 631-7483

O’Reilly and CSK file annual, quarterly and current reports, proxy and information statements and other information with the SEC. Copies of the reports, proxy and information statements and other information filed by O’Reilly and CSK with the SEC may be read and copied by the public at the Public Reference Room maintained by the SEC at:

100 F Street, N.E.

Washington, D.C. 20549

Please call the SEC at 1-800-SEC-0330 for information on the operation of the Public Reference Room.

Reports, proxy and information statements and other information concerning O’Reilly may be inspected at:

NASDAQ Stock Market, Inc.

1735 K Street, N.W.

Washington, D.C. 20006

 

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Reports, proxy and information statements and other information concerning CSK may be inspected at:

New York Stock Exchange

20 Broad Street

New York, New York 10005.

The public may read and copy any of the materials filed with the SEC by O’Reilly and CSK at the SEC’s Public Reference Section located at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding O’Reilly and CSK. The address of the SEC internet site is http://www.sec.gov.

O’Reilly has filed a registration statement on Form S-4 under the Securities Act with the SEC with respect to O’Reilly’s common stock to be issued to CSK stockholders in connection with the offer and the merger. This prospectus constitutes the prospectus of O’Reilly filed as part of the registration statement. This prospectus does not contain all of the information set forth in the registration statement because certain parts of the registration statement are omitted in accordance with the rules and regulations of the SEC. The registration statement and its exhibits are available for inspection and copying as set forth above.

Miscellaneous

The offer is being made solely by this prospectus and the related letter of transmittal and is being made to holders of all outstanding shares of CSK common stock. We are not aware of any jurisdiction where the making of the offer is prohibited by any administrative or judicial action or pursuant to any valid state statute. If we become aware of any valid state statute prohibiting the making of the offer or the acceptance of shares pursuant thereto, we will make a good faith effort to comply with any such state statute. If, after making a good faith effort, we cannot comply with that state statute, the offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of shares in that state. In any jurisdiction where the securities, blue sky or other laws require the offer to be made by a licensed broker or dealer, the offer shall be deemed to be made on our behalf by one or more registered brokers or dealers licensed under the laws of that jurisdiction. No person has been authorized to give any information or make any representation on behalf of O’Reilly not contained in this prospectus or in the letter of transmittal, and if given or made, such information or representation must not be relied upon as having been authorized.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The following unaudited pro forma condensed, combined financial data is designed to show how the merger of O’Reilly and CSK might have affected the historical financial data of O’Reilly, giving effect to the merger and related financing as if they had been consummated at an earlier date. The following unaudited pro forma condensed, combined financial data give effect to the merger and related financing as if they had been completed on March 31, 2008, with respect to the pro forma balance sheet data, and as of January 1, 2007, with respect to the pro forma statement of income data.

It should be noted that O’Reilly and CSK have different fiscal year ends. Accordingly, the selected unaudited pro forma income statement data for the calendar year ended December 31, 2007 combine O’Reilly’s historical consolidated income statement data for the year then ended with CSK’s historical consolidated income statement data for the fiscal year (fifty-two weeks) ended February 3, 2008. The selected unaudited pro forma income statement data for the three months ended March 31, 2008 combine O’Reilly’s historical consolidated income statement data for the three calendar months then ended with CSK’s historical consolidated income statement data for its first fiscal quarter (thirteen weeks) ended May 4, 2008. The selected unaudited pro forma balance sheet data combine O’Reilly’s historical consolidated balance sheet data as of March 31, 2008 with CSK’s historical consolidated balance sheet data as of May 4, 2008.

The following unaudited pro forma condensed, combined financial data should be read in conjunction with the historical consolidated financial statements and notes thereto of O’Reilly, which are incorporated into this document by reference and the historical consolidated financial statements and notes thereto of CSK, which are set forth in CSK’s Annual Report on Form 10-K for the year ended February 3, 2008, attached as Annex D to this prospectus and CSK’s Quarterly Report on Form 10-Q for the quarter ended May 4, 2008, attached as Annex G to this prospectus. See “Additional Information-Where You Can Find Additional Information” on page 81. Certain amounts in CSK’s historical financial statements have been reclassified to conform to O’Reilly’s presentation of such items.

The following unaudited pro forma condensed, combined financial data are presented for illustrative purposes only and are not necessarily indicative of what O’Reilly’s actual financial position or results of operations would have been had the merger and financing been completed on the dates indicated above. In addition, the following selected unaudited pro forma condensed, combined financial data do not purport to project the future financial position or results of operations of the combined company. The following unaudited pro forma condensed, combined financial data do not give effect to (1) O’Reilly’s or CSK’s results of operations or other transactions or developments since March 31, 2008 and May 4, 2008, respectively, (2) the synergies, cost savings and one-time charges expected to result from the merger, (3) the effects of transactions or developments which may occur subsequent to the merger, or (4) the determination of the final purchase price or purchase price allocation, which is discussed below. In addition, the following unaudited pro forma condensed, combined financial data assume that the cash portion of the purchase price will be $1.00 per share and will not be reduced.

Estimated Purchase Price

The estimated purchase price of $539.8 million used in preparing the pro forma data has been calculated as follows (in thousands except per share amounts and ratio):

 

Historical cost of CSK shares owned by O’Reilly at March 31, 2008

     $ 21,724

Number of shares of CSK common stock outstanding at March 31, 2008 (1)

     44,312    

Number of shares of CSK common stock held by O’Reilly at March 31, 2008

     (2,154 )  
          

Estimated number of shares of CSK common stock to be exchanged

     42,158    

Estimated stock exchange ratio (2)

     0.4285    

Multiplied by O’Reilly common stock average stock price (3)

   $ 25.42    
          

Estimated value of shares issued

       459,205

Estimated cash distribution to CSK common stockholders

       42,158

Estimated fair value of options exchanged and unvested restricted stock exchanged (4)

       8,689

Estimated transaction costs

       8,000
        

Estimated purchase price

     $ 539,776
        

 

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(1) The number of shares outstanding at March 31, 2008 includes 281,000 unvested restricted shares at March 31, 2008 that will vest in conjunction with the merger and will receive the same stock and cash consideration as unrestricted CSK shares.
(2) The number of shares of O’Reilly common stock received for each validly tendered share of CSK common stock will be determined based on an exchange ratio equal to $11.00 divided by the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including the second trading day prior to the consummation of the offer and rounded to four decimal places; provided, however, that if such average closing sale price of O’Reilly stock is greater than $29.95, then the exchange ratio shall equal 0.3673, and if such average closing sale price is less than $25.67, then the exchange ratio shall equal 0.4285. The estimated stock exchange ratio reflected in the calculation of estimated purchase price in the above table is derived in accordance with the exchange ratio formula based on the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including June 17, 2008.
(3) The estimated common stock average stock price is calculated as the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including June 17, 2008.
(4) Under the terms of the merger agreement, at the effective time of the merger, each CSK stock option that is outstanding and unexercised immediately prior to the effective time will be converted into an option to purchase O’Reilly common stock and O’Reilly will assume that stock option in accordance with the terms of the applicable CSK stock option plan and terms of the stock option agreement relating to that CSK stock option. Based on CSK’s stock options outstanding at March 31, 2008, O’Reilly would convert options to purchase approximately 3.8 million shares of CSK common stock into options to purchase approximately 1.7 million shares of O’Reilly common stock. The actual number of O’Reilly stock options into which CSK stock options will be converted will be determined based on the actual number of CSK stock options outstanding at the consummation of the merger and the final stock exchange ratio (adjusted to reflect the per share cash consideration as set forth in the merger agreement). The fair value of the options to be exchanged was determined using a Black-Scholes valuation model with the following weighted-average assumptions: volatility of 32%; risk-free interest rates ranging from 1.77%-2.30%, weighted-average expected life of 2.2 years and dividend yield of zero resulting in an estimated weighted-average fair value of $4.38 per share. As discussed above, 281,000 shares of restricted stock outstanding at March 31, 2008 will vest in conjunction with the merger and will receive the same stock and cash consideration as unrestricted CSK shares. O’Reilly will exchange the remaining 89,899 shares of unvested restricted stock for O’Reilly shares, after applying the exchange ratio (adjusted to reflect the per share cash consideration) and it will continue to vest in accordance with its terms. The actual number of shares of unvested restricted stock to be exchanged will be determined based on the actual number of shares of CSK restricted stock outstanding upon the consummation of the merger. The fair value of the restricted stock to be issued was determined based on the exchange ratio formula based on the average of the reported closing sale prices of O’Reilly common stock for the five (5) consecutive trading days ending on and including June 17, 2008 and the resulting intrinsic value of each share.

Purchase Price Allocation

The merger will be accounted for under the purchase method of accounting, with O’Reilly treated as the acquiring entity. Under this method of accounting, the purchase price will be allocated to CSK’s assets acquired and liabilities assumed based upon estimated fair values at the date of acquisition. For purposes of estimating the purchase price, it is assumed that the $1.00 in cash per share to be received by the CSK stockholders will not be reduced. The actual purchase price to be so allocated will depend upon, among other things, the final stock exchange ratio and the number of shares of CSK common stock issued and outstanding or subject to outstanding options immediately prior to the merger. The final purchase price allocation is dependent upon certain valuations and other analyses that cannot be completed prior to the merger and are required to make a final allocation. In certain instances, O’Reilly has identified intangible assets of CSK for which there has not been sufficient information available to make a preliminary estimate of fair value at the time of this filing. For example,

 

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O’Reilly expects to record assets and liabilities for fair value adjustments to CSK lease arrangements once access to all of CSK’s lease information and market research is available to O’Reilly. The purchase price paid for these intangible assets has been allocated to goodwill until such time as a preliminary estimate is available. Additionally, we have not received sufficient information to make a preliminary estimate of the fair value of CSK’s inventory and property and equipment and the purchase price paid for these assets has been reflected in the pro forma data at CSK’s historical cost. At the time of this filing, we anticipate that the range of estimated useful lives of CSK’s property and equipment, and the corresponding depreciation period for any fair value adjustments, would be four (4) to seven (7) years. The actual estimated useful life will be determined at the time of the final purchase price allocation. Based on this estimate, the total annual incremental depreciation charge for each $10 million of fair value adjustment to these assets would range from $1.4 million to $2.5 million.

The final determination of the fair value of CSK’s assets and liabilities will be made after completion of the transaction and will be based on the actual net tangible and intangible assets and liabilities of CSK that exist as of the date of completion of the merger. Accordingly, the pro forma purchase price adjustments are preliminary, subject to future adjustments and have been made solely for the purpose of providing the unaudited pro forma condensed, combined financial data presented below. The estimated purchase price has been assigned to the assets acquired and liabilities assumed as follows (in thousands):

 

     Preliminary
Fair Value
 
     (in thousands)  

Inventory

   $ 553,470  

Other current assets

     136,893  

Property and equipment

     169,162  

Goodwill

     607,457  

Other intangible assets

     2,354  

Other assets

     73,181  

Current maturities of long-term debt and capital lease obligations

     (502,873 )

Other current liabilities

     (449,841 )

Long-term debt and capital lease obligations, less current portion

     (34,550 )

Other liabilities

     (15,477 )
        

Total estimated purchase price

   $ 539,776  
        

Identifiable Intangible Assets

O’Reilly has identified certain intangible assets of CSK expected to be recorded in the final purchase price allocation for which there has not been sufficient information available to make a preliminary estimate of fair value at the time of this filing. We expect these identifiable intangible assets to include the following:

Leasehold interests. We expect to record an intangible asset for properties leased by CSK at rates below the prevailing market rental rates at the time of consummation of the merger. Likewise, we would record a related accrued liability for properties leased by CSK at rates above the prevailing market rental rates at the time of consummation of the merger. These assets and liabilities would be amortized to rent expense over the remaining term of the related leases. As of the date of this prospectus, insufficient information has been made available to estimate these amounts. In particular, O’Reilly had been restricted from receiving the detailed information related to individual properties that is required to complete a preliminary estimate because our possession of this information could be disadvantageous to CSK if the merger is not consummated. At the time of this filing, we anticipate that the range of potential amortization periods for favorable and unfavorable lease assets and liabilities, based on the average remaining term to lease expiration of CSK’s current leases, would be four (4) to seven (7) years. Based on this estimate, the total annual amortization for each $10 million of purchase price allocated to these assets and liabilities would range from $1.4 million to $2.5 million. The actual amortization period will be determined at the time of the final purchase price allocation.

 

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Trademarks and tradenames. We expect to record an intangible asset for tradenames and trademarks acquired in this merger. These include the following brand names: Checker Auto Parts, Schuck’s Auto Supply, Kragen Auto Parts, and Murray’s Discount Auto Stores. At the time of this filing, we anticipate that the range of potential lives for the trademarks and tradenames would be two (2) to five (5) years based on the period of time we expect to receive benefit from such trademarks and tradenames. Based on this estimate, the total annual amortization for each $10 million of purchase price allocated to these assets would range from $2.0 million to $5.0 million. The actual lives will be determined at the time of the final purchase price allocation.

Customer relationships. We expect to record an intangible asset to reflect the value of CSK’s ongoing customer relationships with its professional installer customers. As of the date of this prospectus, insufficient information has been made available to estimate these amounts. Detailed information related to individual professional installer customers will not be available to us until after the consummation of the merger. Receipt of this information prior to that time could be disadvantageous to CSK should the merger not be consummated. We expect to amortize the fair value of these assets based on the pattern in which the economic benefits of the intangible asset will be consumed. At the time of this filing, we anticipate that the range of potential lives for the customer relationships intangible would be three (3) to seven (7) years based on our historical experience with this customer base. Based on this estimate, the total annual amortization for each $10 million of purchase price allocated to this asset would range from $1.4 million to $3.3 million. The actual lives will be determined at the time of the final purchase price allocation.

Other. We expect that we could record additional amounts for other identifiable intangible assets, such as non-compete agreements with CSK team members, in the final determination of the fair value of CSK’s assets and liabilities. At the time of this filing, we do not expect these amounts to be material.

O’Reilly Financing

O’Reilly has received a commitment letter from Bank of America, N.A., Banc of America Securities LLC, Lehman Commercial Paper Inc., Lehman Brothers Commercial Bank and Lehman Brothers Inc. to provide an asset-based senior secured credit facility to provide $1.075 billion through a revolving credit facility and $125.0 million through a first-in-last-out revolving credit facility. The following unaudited pro forma condensed, combined financial data assumes that O’Reilly will finance the merger transaction through the borrowing of $578.5 million under these facilities. The proceeds of the financing and O’Reilly’s existing cash will be used to refinance certain existing indebtedness of O’Reilly and CSK which will become payable as a direct result of the merger transaction, pay customary fees and expenses relating to the offer, the merger and the financing, and pay approximately $42.2 million to holders of CSK common stock for the cash portion of the offer consideration. O’Reilly has the capacity to incur additional borrowings under the facility following the merger transaction to provide for ongoing working capital requirements of the combined corporation, but these borrowings are not directly attributable to the merger and have not been reflected in the pro forma financial data presented.

The facility will be comprised of: (i) an up to $1.075 billion tranche A revolving credit facility expected to bear interest, initially, at LIBOR plus 2.50% per annum and (ii) an up to $125.0 million first-in-last-out revolving credit facility expected to bear interest, initially, at LIBOR plus 3.75% per annum, each of which is described in more detail under “Financing of the Offer and the Merger” on page 49. For the purposes of adjusting interest expense in the pro forma financial data, O’Reilly has estimated the weighted-average interest on the anticipated borrowings under the facilities to be LIBOR plus 2.75%, or approximately 5.4%. Actual amounts borrowed, and interest rates payable, will depend upon O’Reilly’s cash balances at the time of the merger and conditions in the capital markets, principally prevailing rates of interest, at the time the merger is completed (see note (v) to the Unaudited Pro Forma Condensed Combined Financial Statements for the impact of a 1/8% change in interest rates).

 

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O’Reilly Automotive, Inc.

Unaudited Pro Forma Condensed Combined Balance Sheet

March 31, 2008

(in thousands)

 

     Historical
O’Reilly
March 31,
2008
    Historical
CSK
May 4,
2008
   Reclassifications (a)     Pro Forma
Adjustments
    O’Reilly/
CSK
Combined
Pro Forma

ASSETS:

             

Current assets:

             

Cash and cash equivalents

   $ 113,287     $ 19,679    $       $ (80,426 )   (b )   $ 52,540

Accounts receivable, net

     93,123       36,721      (16,873 )         112,971

Amounts receivable from vendors

     47,293       —        15,054           62,347

Inventory

     892,583       549,002      4,468           1,446,053

Deferred income taxes

     —         44,527        (10,364 )   (c )     34,163

Other current assets

     20,331       50,434      (2,649 )         68,116
                                       
             

Total current assets

     1,166,617       700,363      —         (90,790 )       1,776,190

Property and equipment – net

     1,125,963       159,267      9,895       49,237     (d )     1,344,362

Notes receivable, less current portion

     24,253       —        7,242           31,495

Identified intangibles, net

     —         61,905        (59,551 )   (e )     2,354

Goodwill

     50,583       224,937        (224,937 )   (f )  
            607,457     (g )     658,040

Deferred income taxes

     —         17,288        (26,651 )   (c )  
            48,200     (h )     38,837

Other assets

     30,320       33,667      (17,137 )     7,187     (i )     54,037
                                       

Total Assets

   $ 2,397,736     $ 1,197,427    $ —       $ 310,152       $ 3,905,315
                                       

LIABILITIES AND SHAREHOLDERS’ EQUITY:

             

Current liabilities:

             

Accounts payable

   $ 417,128     $ 291,225    $ 16,677     $         $ 725,030

Self-insurance reserves

     31,760       —        25,031           56,791

Accrued payroll

     27,445       59,666      (51,521 )         35,590

Accrued benefits and withholdings

     14,776       —        28,673           43,449

Deferred income taxes

     10,364       —          (10,364 )   (c )     —  

Other current liabilities

     61,530       98,950      (18,860 )     (3,458 )   (j )     138,162

Current portion of long-term debt

     25,000       493,443        (397,783 )   (k )  
            (25,000 )   (l )     95,660

Current portion of capital lease obligations

     323       5,982            6,305
                                       

Total current liabilities

     588,326       949,266      —         (436,605 )       1,100,987
                                       

Long-term debt, less current portion

     75,000       16,131        (75,000 )   (m )  
            9,950     (n )  
            578,510     (o )     604,591

Capital lease obligations, less current portion

     68       8,469            8,537

Deferred income taxes

     26,651       —          (26,651 )   (c )     —  

Other liabilities

     56,678       52,662        (37,185 )   (p )     72,155

Shareholders’ equity:

             

Common stock

     1,155       —          181     (q )     1,336

Additional paid-in capital

     448,173       —          466,812     (q )     914,985

Retained earnings

     1,202,724       —              1,202,724

Accumulated other comprehensive income

     (1,039 )     —          1,039     (r )     —  

Stockholders’ equity of CSK

     —         170,899        (170,899 )   (s )     —  
                                       

Total shareholders’ equity

     1,651,013       170,899      —         297,133         2,119,045
                                       

Total Liabilities and Shareholders’ Equity

   $ 2,397,736     $ 1,197,427    $ —       $ 310,152       $ 3,905,315
                                       

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements

 

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O’Reilly Automotive, Inc.

Unaudited Pro Forma Condensed Combined Statement of Income

Year Ended December 31, 2007

(in thousands)

 

     Historical
O’Reilly
Year
ended
December 31,
2007
    Historical
CSK Year
ended
February 3,
2008
    Reclassifications
(a)
    Pro Forma
Adjustments
    O’Reilly/CSK
Combined
Pro Forma
 

Sales

   $ 2,522,319     $ 1,851,647     $ (43,606 )   $       $ 4,330,360  

Cost of goods sold

     1,401,859       984,649       (43,606 )     5,961  (t)     2,348,863  
                                        

Gross profit

     1,120,460       866,998         (5,961 )     1,981,497  

Selling, general and administrative expenses

     815,309       804,265       951       (2,396 )(u)     1,618,129  

Investigation and restatement costs

       12,348           12,348  

Securities class action settlement

       11,700           11,700  

Store closing cost

       1,983           1,983  
                                        

Operating income

     305,151       36,702       (951 )     (3,565 )     337,337  

Other income (expense), net:

          

Interest expense

     (3,723 )     (54,163 )     (279 )     3,574  (v)     (54,591 )

Interest income

     4,077       —             4,077  

Other

     1,983       —         1,230         3,213  
                                        

Income before income taxes

     307,488       (17,461 )       9       290,036  

Provision for income taxes

     113,500       (6,309 )       3  (w)     107,194  
                                        

Net income

   $ 193,988     $ (11,152 )   $ —       $ 6     $ 182,842  
                                        

Basic earnings per share

   $ 1.69           $ 1.38  

Diluted earnings per share

     1.67             1.36  

Average common shares:

          

Basic

     114,667           18,065  (x)     132,732  

Diluted

     116,080           18,330  (x)(y)     134,410  

 

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statements

 

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O’Reilly Automotive, Inc.

Unaudited Pro Forma Condensed Combined Statement of Income

Three Months Ended March 31, 2008

(in thousands)

 

     Historical
O’Reilly
Three
months
ended
March 31,
2008
    Historical
CSK Thirteen
weeks ended
May 4, 2008
    Reclassifications
(a)
    Pro Forma
Adjustments
    O’Reilly/CSK
Combined
Pro Forma
 

Sales

   $ 646,220     $ 461,104     $ (10,727 )   $       $ 1,096,597  

Cost of goods sold

     357,726       243,801       (10,727 )     (2,624 )(t)     588,176  
                                        

Gross profit

     288,494       217,303         2,624       508,421  

Selling, general and administrative expenses

     214,338       205,810       243       (520 )(u)     419,871  

Investigation and restatement costs

       983           983  

Insurance recovery

       (15,000 )         (15,000 )

Store closing cost

       785           785  
                                        

Operating income

     74,156       24,725       (243 )     3,144       101,782  

Other income (expense), net:

          

Interest expense

     (1,371 )     (15,445 )     (49 )     3,341  (v)     (13,524 )

Interest income

     519       —             519  

Other

     402       —         292