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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 333-75887
FLEETPRIDE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
ALABAMA 63-0681070
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
520 LAKE COOK ROAD
DEERFIELD, ILLINOIS 60015
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 572-8000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 1, 2000, there was no established trading market for the
Registrant's common stock.
As of February 29, 2000, the number of outstanding shares of common stock,
par value $.01 per share, of FleetPride, Inc. was 94,229.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Information Statement of FleetPride, Inc. relating to the
Company's 2000 annual meeting of stockholders are incorporated by reference into
Part III of this Form 10-K.
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FLEETPRIDE, INC. - FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999
INDEX
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10-K Page
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Index i
Part I
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Item 1 - Business................................................. 1
Item 2 - Properties............................................. 10
Item 3 - Legal Proceedings...................................... 10
Item 4 - Submission of Matters to a Vote of Security Holders.... 10
Part II
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Item 5 - Market for Registrant's Common Equity and Related...... 12
Stockholder Matters
Item 6 - Selected Financial Data................................ 12
Item 7 - Management's Discussion and Analysis of................ 13
Financial Condition and Results of Operations
Item 7(A) - Quantitative and Qualitative Disclosures About...... 19
Market Risk
Item 8 - Financial Statements and Supplementary Data............ 21
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ 46
Part III
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Item 10 - Directors and Executive Officers of the Registrant.... 47
Item 11 - Executive Compensation................................ 47
Item 12 - Security Ownership of Certain Beneficial Owners....... 47
and Management
Item 13 - Certain Relationships and Related Transactions........ 47
Part IV
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Item 14 - Exhibits, Financial Statement Schedules and Reports.... 48
on Form 8-K
Financial Statement Schedule
Signatures
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PART I
ITEM 1. BUSINESS
We were established in June 1998 by Brentwood Associates, a private equity
fund located in Los Angeles, through the acquisition and integration of two
highly regarded heavy duty vehicle aftermarket parts distributors: City Truck
(as defined below) and Stone (as defined below), which have been in operation
since 1975 and 1952, respectively. On June 1, 1998, Brentwood purchased 80% of
the outstanding common stock of City Truck, a Birmingham, Alabama based
distributor with 17 branch locations in the southeastern United States, in a
recapitalization transaction. On June 19, 1998, City Truck acquired
substantially all of the assets of Stone, a Raleigh, North Carolina based
operator with 18 branch locations primarily in the southeastern United States.
On June 30, 1998, City Truck, as recapitalized and including Stone, changed its
name to HDA Parts System, Inc. On December 1, 1999, HDA Parts System, Inc.
changed its name to FleetPride, Inc.
We were formed by Brentwood to pursue a growth build-up strategy in the
highly fragmented heavy duty aftermarket parts industry. Since our inception, we
have acquired 16 businesses, including our September 30, 1999 merger with QDSP
(as defined below), a company formed in June 1998 by Aurora Capital Group, a
private equity fund located in Los Angeles, to pursue an acquisition strategy
similar to ours. Since QDSP's inception, it has acquired 12 companies.
Unless the context otherwise requires, all references to the following
entities are before or after giving effect to the acquisitions, as appropriate:
(1) "City Truck" means City Truck and Trailer Parts, Inc., (2) "Stone" means the
assets and business of Stone Heavy Duty, Inc., (3) "Truck & Trailer Parts" means
Truck & Trailer Parts, Inc., including the assets and business of DHP Leasing,
Inc., (4) "Truckparts" means Truckparts, Inc., (5) "Tampa Brake" means the
assets and business of Tampa Brake & Supply Co., Inc., (6) "Connecticut
Driveshaft" means the assets and business of Connecticut Driveshaft, Inc., (7)
"Associated" means Associated Brake Supply, Inc. and its subsidiaries, (8)
"Tisco" means Tisco, Inc., including Tisco of Redding, Inc., (9) "Vantage Parts"
means the assets and business of the Vantage Parts division of CNF
Transportation Inc. and one of its subsidiaries, (10) "Active Gear" means Active
Gear, L.L.C., (11) "Superior Truck" means Superior Truck & Auto Supply, Inc.,
(12) "Certified Powertrain" means some of the assets of the Certified Powertrain
Specialist business of Certified Power, Inc., (13) "California Equipment" means
the assets and business of California Equipment Company and California Equipment
Co. of Sacramento, (14) "Wheels and Brakes" means Wheels and Brakes, Inc.,
including Specrite Brake Company, (15) "QDSP" means QDSP Holdings, Inc. and its
subsidiaries, (16) "Southwest Virginia" means Southwest Virginia Truck Parts,
Inc. and (17) "Oklahoma Truck" means Oklahoma Truck Supply Assoc., Inc..
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FleetPride's acquisitions are described below:
<TABLE>
<CAPTION>
Number of
Branch
Company Acquisition Date Region Locations
<S> <C> <C> <C>
City Truck May 1998 Southeast 17
Stone June 1998 Mid-Atlantic 18
Truck & Trailer Parts September 1998 Southeast 7
Tampa Brake October 1998 Southeast 5
Connecticut Driveshaft November 1998 New England 6
Truckparts December 1998 New England 4
Associated January 1999 West 22
Tisco January 1999 West 4
Active Gear April 1999 West 2
Vantage Parts May 1999 National 7
Superior Truck June 1999 New England 1
Certified Powertrain August 1999 Northeast 1
California Equipment August 1999 West 6
QDSP September 1999 National 63
Wheels & Brakes October 1999 Southeast 10
Southwest Virginia November 1999 Mid-Atlantic 1
Oklahoma Truck February 2000 Central 3
---
177
===
</TABLE>
QDSP's acquisitions and the 63 branch locations identified above as QDSP
branch locations are described below:
<TABLE>
<CAPTION>
Number of
Branch
Company Acquisition Date Region Locations
<S> <C> <C> <C>
Fleetpride, Inc. July 1998 Northeast 8
Sharkey Family Holdings, Inc. (d/b/a
Universal Joint Sales Company) July 1998 Northeast 11
Truck City Parts, Inc. July 1998 Central/Mid-Atlantic 7
Wheatley Truck Parts, Inc. July 1998 Central 4
Automotive Sales Company, Inc. July 1998 Southwest 2
Drivetrain Southwest, Inc. July 1998 Southwest 4
SLM Group, Inc. August 1998 Southcentral 14
Holt Incorporated August 1998 Central 5
City Spring Works, Inc. August 1998 Central 3
Clutch & Brake, Inc. March 1999 Northeast 2
New England Truck & Auto
Service, Inc. March 1999 Northeast 1
TBS, Incorporated March 1999 Southwest 2
------
63
======
</TABLE>
We distribute parts to over 25,000 customers through 177 branch locations
across 31 states.
We purchase replacement parts for heavy duty vehicles from component
manufacturers, inventory a broad selection of these parts and deliver them
directly to customer locations from our branches or sell them "over-the-counter"
to customers who visit our branches. Our 177
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branch locations consist primarily of warehouse and service space, with a small
retail selling space. A typical location averages 10,000 square feet. Our
breadth of product inventory generally enables us to provide delivery customers
with parts within 24 hours and to provide over-the-counter customers with parts
immediately. We maintain a fleet of delivery vehicles that makes daily scheduled
deliveries to customers, picks up used parts for remanufacture or repair and
makes other delivery stops for special orders. By offering reliable and timely
availability of a wide range of heavy duty vehicle parts, we allow our customers
to reduce their investment in inventories and minimize lost productivity and
other costs associated with vehicle and equipment downtime.
We carry a comprehensive selection of heavy duty vehicle parts including
braking, steering and suspension systems, transmissions, drivelines, axles,
wheels and rims, hydraulic systems and engine components. Our customers use
these parts for regular preventative maintenance, such as replacement of worn
brake shoes and air and oil filters, and for repairs of damaged parts. To
complement our parts distribution business, we provide our customers with
value-added services, such as extensive remanufacturing capabilities and machine
shop services. Our remanufacturing facilities allow us to offer our customers a
timely and reliable source of high quality parts. We operate 30 facilities which
reline brake shoes and 29 facilities which rebuild transmissions, rear axles and
other components.
We operate in one business segment, that being the distribution of heavy
duty vehicle parts in the United States.
INDUSTRY OVERVIEW
Industry sources estimate that the heavy duty vehicle parts and repair
industry generated $17.0 billion in revenues in 1997. An industry source expects
the market for replacement parts, which accounted for the majority of revenues
in the overall heavy duty vehicle parts and repair industry, to grow 17.7% from
1997 to 2002. We believe growth in the heavy duty vehicle parts and repair
industry and growth in market share for full-service independent distributors
like us has been and will continue to be driven by the following primary
factors:
- Expanding fleet of heavy duty vehicles. The population of heavy duty
vehicles increased from approximately 3.7 million in 1992 to
approximately 4.1 million in 1999, a 10.8% increase, and is projected
to reach 4.5 million by 2001.
- Increased life expectancy of fleet vehicles. The life expectancy of
the average fleet vehicle has grown 61.9% from 451,000 miles in 1978
to approximately 730,000 miles in recent years.
- Increased total truck tonmiles driven annually. Annual truck tonmiles
driven steadily increased from 1.6 trillion in 1989 to 2.3 trillion in
1999, a 43.8% increase.
- Increased outsourcing of parts inventory management by fleet
operators. We believe that heavy duty vehicle fleet operators are
increasingly outsourcing parts inventory management and service work
and concentrating supplier relationships in favor of a limited number
of integrated single-source suppliers. We believe that full service
independent distributors with a broad network of branch locations are
well positioned to capitalize on this outsourcing trend.
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The independent heavy duty vehicle parts and repair industry is highly
fragmented, and we believe it is in the early stages of consolidation. Most of
the approximately 2,000 independent distributors and thousands of repair shops
in the industry are small, owner-operated businesses with limited access to the
capital required to develop and maintain a large volume and wide selection of
inventory, provide a full line of product offerings, implement advanced
management information systems and service national and regional accounts. We
believe that the five largest heavy duty vehicle parts distributors currently
account for less than 10% of all revenues generated in the heavy duty vehicle
parts and repair industry.
COMPETITIVE STRENGTHS
We benefit from the following competitive strengths:
Ability to successfully execute our acquisition strategy. Since the
combination of City Truck and Stone in June 1998, we have successfully
identified, acquired and integrated 15 companies with 142 locations, forming the
largest distributor of heavy duty vehicle parts in the United States based on
both sales in the region and number of branch locations. The completed
acquisitions have permitted us to eliminate duplicative costs and reduce
overhead, expand product offerings and integrate regional sales activities.
Proven ability to grow revenue and profits. On a combined basis, we and our
predecessors have experienced strong same location sales growth averaging
approximately 2.4% annually over the past five years and approximately 1.4%
annually over the past two years. We have a strong record of successfully
opening or acquiring 51 branch locations since 1993. These locations generated
$110.0 million of 1999 sales.
Purchasing leverage. We are a leading customer of virtually all major heavy
duty vehicle replacement parts manufacturers. As a result of our purchasing
volume and centralized purchasing programs, we believe that we purchase parts at
a discount to industry averages.
Established customer relationships. By emphasizing superior customer
service, we have developed long-standing relationships with many of our
customers. We are the leading distributor of heavy duty vehicle parts to local,
regional and national fleet operators such as United Parcel Service of America,
Inc., Consolidated Freightways Corporation, Con-Way Transportation Services and
Penske Leasing, Inc. Our fleet customers depend on us for the timely
availability of high quality heavy duty parts. As evidence of the strength of
our customer relationships, we have served our top 10 customers for an average
of 14 years.
Superior inventory availability. Because of the significant costs
associated with vehicle downtime, we believe that the availability of parts on a
timely basis is the key component of quality service. We maintain a broad
selection of inventory with over 20,000 discrete part numbers. In order to
achieve high fill rates, we actively manage and track our inventory on a
real-time basis. We believe that we are more likely than our competitors to have
parts in stock when requested by our customers.
Outstanding customer service. We believe that we have a leading reputation
for providing high quality service based on more than 40 years of operations. We
are committed to attracting new customers and retaining existing customers by:
- offering numerous branch locations conveniently located near our major
customers;
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- providing a knowledgeable and responsive sales staff;
- ensuring timely delivery of products to our customers; and
- providing a hassle-free warranty policy for all of the products we
sell.
Experienced management team. Our operating management has an average of 24
years of experience in the heavy duty vehicle parts and repair industry. Our
management and sales staff have extensive knowledge of our markets and
long-standing relationships with a broad range of customers and suppliers. We
developed our management team by retaining key operating managers from our
acquired companies and by recruiting our senior executives from outside the
heavy duty vehicle parts industry. Management owns approximately 19% of our
parent's outstanding equity.
The negative factors relating to our competitive position in the heavy duty
vehicle aftermarket parts industry include:
- the industry is highly fragmented but is experiencing consolidation.
Current and potential competitors may have financial, personnel and
other resources substantially greater than ours to finance acquisition
and development opportunities;
- the industry consolidation may result in our competitors having lower
overhead cost structures which may enable them to provide their parts
and services at lower rates than us;
- the industry is highly competitive based primarily on service,
availability and quality of parts, geographic proximity and price;
- original equipment manufacturers are in a position to offer incentives
to heavy duty vehicle owners to return to their authorized dealerships
for heavy duty vehicle parts and repair services, which could
adversely affect our ability to compete; and
- some owners of leased fleets may have sufficient leverage to purchase
replacement parts directly from component manufacturers or to
negotiate higher volume discounts from us.
BUSINESS STRATEGY
Our strategic objective is to further grow our sales and profits by
capitalizing on the continued growth and consolidation opportunities in the
heavy duty vehicle parts and repair industry. Our business strategy is to:
Become the largest national distributor of heavy duty vehicle parts. We
intend to build a nationwide system of branch locations through acquisitions as
well as the opening of new stores. As our customer base continues to
consolidate, we believe that it is increasingly important to establish a
national presence to serve our customers effectively. Smaller independent
distributors may be unable to adequately supply larger fleets because they lack
a broad network of branch locations to satisfy customer expectations for rapid
delivery times, availability of a broad selection of parts, consistent pricing
and a uniform warranty policy.
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Further reduce cost of products sold. We expect to further reduce our cost
of products sold by:
- passing on our favorable vendor terms to acquired companies;
- negotiating more favorable pricing and terms from our suppliers as our
total volume of purchases increases through acquisitions and internal
growth; and
- sourcing remanufactured components from our facilities and thereby
reducing purchases from outside remanufacturers.
Develop distribution and operating efficiencies. We believe that we will be
able to achieve distribution and operating efficiencies as we continue to add
locations, including:
- improved operating efficiency through regional management of
individual branch locations and the closing of overlapping branch
locations;
- improved inventory management and enhanced customer service through
the integration of newly acquired businesses into our information and
logistics systems; and
- reduced overhead costs by consolidating administrative functions such
as marketing, insurance, employee benefits, accounting and risk
management.
Achieve benefits from combining complementary operations. We believe that
we can obtain significant synergies from combining the operations of recently
acquired businesses and future acquisitions, including:
- sharing customer bases and broadening product offerings including
cross-selling of parts not previously offered at many of our
locations;
- enhancing the efficiency of our remanufacturing operations by
increasing capacity utilization and consolidating overlapping
facilities; and
- sharing "best practices" and operational expertise throughout our
company.
We expect our completed and pending acquisitions to generate a number of
these benefits. For example, the acquisitions of Truck & Trailer Parts and
Vantage Parts allow us to offer a broad selection of trailer parts throughout
our system. In addition, the acquisition of Active Gear provides additional
remanufacturing expertise and the opportunity to take advantage of facility
consolidation opportunities in the Pacific Northwest.
Expand relationships with national and regional fleet operators. We believe
there are significant opportunities to expand our sales to national and regional
fleet operators who are increasingly seeking to outsource their parts inventory
management and service work to integrated single-source providers. With our
broad network of branch locations, we believe we are one of the only
distributors capable of effectively serving large national and regional fleets
operating in the southeastern, western and New England regions of the United
States.
OPERATIONS AND SERVICES
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Our 177 branch locations, which consist primarily of warehouse and service
space with a small retail selling space, offer well-known national brand name
and private label heavy duty vehicle replacement parts. If we do not have a
specific part in stock at a particular location, our sales employee can utilize
our information system at many of our locations to attempt to locate the
requested product from another location. Our information system allows the sales
employee to record the sale, reserve the part and request delivery. As a result
of our inventory management programs, we believe we provide broad product
availability on a timely basis which enhances customer satisfaction and loyalty.
We also provide commercial vehicle parts installation and repair services
in several locations. We employ mechanics and other technicians who repair
vehicles using parts maintained in inventory. In addition, at 117 of our
facilities we offer machine shop services to rebuild and repair damaged or used
heavy duty vehicle parts for our customers, including some or all of: axles,
transmissions, power steering and hydraulic and driveline components. We also
operate 30 brake shoe remanufacturing facilities where approximately 160,000
brake shoes are remanufactured monthly. In addition, we remanufacture
drivelines, hydraulic systems, transmissions and rear axles. We resell these
parts, remanufactured to meet original specifications or specifications
acceptable to the customer, at a lower price than new parts.
PRODUCTS
We distribute replacement parts for substantially all heavy duty vehicle
makes and models in service in the United States, including imported vehicles.
Our extensive product line includes a wide selection of parts for braking,
steering and suspension systems, transmissions, drivelines, axles, wheels and
rims, hydraulic systems and engine components. The useful lives of parts range
from those of high-mortality items such as brake shoes and drums, clutches,
bearings, belts and hoses, which are generally replaced frequently, to those of
transmissions, engines and drivelines, which generally have significantly longer
useful lives. In addition to replacement parts, we distribute ancillary supply
items such as oil, antifreeze, transmission, brake and power steering fluids,
engine additives, protectants and waxes. We believe approximately 35% of our
parts sales are attributable to the regular preventative maintenance of heavy
duty vehicles as opposed to "as needed" repairs. We inventory over 150 component
brands. We also offer remanufactured components, including remanufactured brake
shoes under our own brand, which provide customers with a timely and reliable
source of high quality parts.
CUSTOMERS
We believe that our commitment to high quality customer service, consistent
availability of parts and hassle-free warranty policy are the key elements to
maintaining and continuing to build our diverse base of over 25,000 customers.
Generally, our customers are located within 25 miles of a branch location. We
service a large variety of local and regional government entities and
businesses. Our customers include:
- the local operations of companies with national and regional fleets,
such as Waste Management, Inc., Browning-Ferris Industries, Inc., Dole
Food, Inc., and Tyson Foods, Inc.;
- companies with common carrier and rental fleets, including United
Parcel Service of America, Inc. and Consolidated Freightways
Corporation; and
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- government entities and utilities, including the North Carolina
Department of Transportation and Alabama Power.
We also distribute parts to independent repair shops, heavy duty vehicle
dealerships authorized by original equipment manufacturers and other heavy duty
vehicle owners and operators. No single customer accounted for more than 3% of
our pro forma sales in 1999, and our top ten customers accounted for
approximately 10% of our 1999 pro forma sales.
SUPPLIERS
We purchase heavy duty vehicle parts from over 150 component manufacturers.
Our five largest principal parts suppliers, Meritor Automotive, Inc., Euclid
Industries, Inc., Federal-Mogul Corporation, Haldex Midland Corporation, Dana
Corporation and Webb Wheel Products, Inc., represented less than 25% of our
purchases in 1999. We frequently purchase comparable parts from multiple
manufacturers to enable us to offer a broader selection of products to our
customers. To maximize efficient distribution of our products, we strive to have
suppliers deliver shipments directly to each of our branch locations. When that
arrangement is not possible, we receive parts at our central warehouses and
utilize our fleet of delivery vehicles to distribute the parts to each of the
branch locations. We are not dependent on any one supplier and do not have a
purchasing contract with any suppliers.
We receive rebates on most parts we purchase. Until December 31, 1999, we
purchased many products through HD America, Inc., the largest industry
purchasing cooperative in the United States. We believe that we will be able to
obtain additional volume discounts from component manufacturers on both parts
historically purchased through HD America, Inc. and those purchased directly
from the component manufacturers. We believe this purchasing advantage will
improve as we add volume through internal growth and acquisitions.
SALES AND MARKETING
We believe that our superior customer service and our consistent
availability and quality of parts are critical elements in the sales process.
Based on these factors, among others, we have been able to establish and
maintain long-term relationships with existing customers as well as expand our
market share through our sales and marketing efforts. We receive advertising and
marketing allowances from component manufacturers which are based on our volume
of purchases. In addition, we actively cooperate with our suppliers to design
and implement effective marketing programs to promote our products.
Our sales force is two-tiered: "inside" salespeople are responsible for
maintaining customer relationships, receiving and soliciting individual
over-the-counter orders at branch locations and responding to service and other
inquiries by customers, while "outside" salespeople are primarily responsible
for identifying new customers and soliciting new business. We believe that our
experienced sales force has enabled us to maintain one of the largest customer
bases in the heavy duty vehicle replacement parts industry in the United States.
COMPETITION
We operate in a highly fragmented and competitive industry. Competition is
based primarily on service, availability and quality of parts, geographic
proximity and price. We compete with other heavy duty vehicle parts
distributors, dealerships authorized by the original equipment manufacturers,
independent repair shops and component manufacturers on a regional and local
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level. The heavy duty vehicle parts and repair industry has experienced
consolidation, and we compete with other companies which may pursue a
consolidation strategy. In addition, the members of the National Auto Parts
Association comprise an affiliated network of locations that compete with us
primarily for over-the-counter parts sales. We also compete with dealerships
authorized by original equipment manufacturers, such as Freightliner
Corporation, Mack Trucks, Inc., Navistar International Corporation and Paccar
Inc. These dealerships sell replacement parts to customers who purchased
vehicles from their dealerships, as well as, to other heavy duty vehicle owners
and operators who purchase replacement parts in the aftermarket. We believe that
our market leadership, significant purchasing leverage, superior customer
service, parts availability and delivery capabilities provide us with a
competitive advantage over other companies in the heavy duty vehicle parts and
repair industry.
GOVERNMENT REGULATIONS AND ENVIRONMENTAL MATTERS
We are subject to a number of environmental laws. We are also subject to
federal, state and local laws and regulations relating to workplace health and
safety. In particular, our operations are subject to environmental laws
governing waste disposal, air and water emissions, the handling of hazardous
substances, workplace exposure and other matters. Stringent environmental laws
govern the handling and disposal of chemicals and substances, such as solvents
and lubricants, commonly used in some of our service and remanufacturing
operations. In addition, some of our facilities operate, or have operated,
above-ground and underground storage tanks for fuels and other substances which
are subject to a variety of environmental laws. Currently, we are not party to
any legal proceedings pursuant to applicable environmental laws and believe we
are in material compliance with all applicable environmental laws.
MANAGEMENT INFORMATION SYSTEMS
We operate integrated management information systems. We use these systems
to purchase, monitor and allocate inventory on a real-time basis throughout our
branch system and central warehouses. The systems enable us to effectively
manage inventory costs and turnover rates. The systems include computerized
order entry, sales analysis, inventory status, invoicing and payment. We employ
systems to determine optimum branch location inventory levels based on usage
rates, production statistics, technological advances and other factors. We
intend to install a common management information system among all acquired
businesses supported by Karmak, Inc., the leading designer of information
systems specifically for the heavy duty vehicle replacement parts industry.
EMPLOYEES
As of December 31, 1999, we employed 2,738 persons in management and
administration, sales and marketing, warehousing and repair and service
functions. To market heavy duty vehicle parts effectively, salespeople must have
significant expertise regarding the various manufacturers and specifications of
vehicle parts. We believe we maintain a competitive advantage over other parts
distributors due to the high level of expertise of our sales force. None of our
employees are party to collective bargaining agreements, and we benefit from
good employee relations.
RECRUITING, TRAINING AND SAFETY
We believe that recruiting and training high quality personnel is a major
component of a successful operation. We have implemented a number of training
programs and incentives to
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encourage the development of technical expertise by our sales and service
personnel, which enables them to advise customers when vehicles need regular
scheduled maintenance, recommend the appropriate products and instruct customers
on parts use and installation.
ITEM 2. PROPERTIES
We currently operate 177 facilities located throughout the United Sates and
the United Kingdom. We own eight facilities located in Milford, Connecticut,
South Windsor, Connecticut, Fresno, California, Phoenix, Arizona, Las Vegas,
Nevada, Atlanta, Georgia, Corpus Christi, Texas and Klamath Falls, Oregon and
lease 168 facilities throughout the United States. We also lease one facility
located in the United Kingdom. Leases for 39, 24, 6, 43 and 22 facilities expire
in 2000, 2001, 2002, 2003 and 2004, respectively. The remaining 34 leases expire
on various dates through 2017. The average total warehouse and service space is
approximately 10,000 square feet per location, which consists primarily of
warehouse and service space, with a small retail selling space. Our facilities
are used for sales, services, warehousing and administration.
Our facilities are located in the following states:
NUMBER OF NUMBER OF
STATE FACILITIES STATE FACILITIES
Alabama 11 New Mexico 3
Arizona 5 New York 7
California 27 North Carolina 10
Colorado 1 Ohio 1
Connecticut 9 Oklahoma 6
Florida 10 Oregon 4
Georgia 12 Pennsylvania 1
Illinois 1 South Carolina 4
Indiana 1 South Dakota 1
Kentucky 5 Tennessee 7
Massachusetts 10 Texas 12
Mississippi 1 Vermont 1
Missouri 1 Virginia 7
Nebraska 4 Washington 6
Nevada 3 West Virginia 4
New Hampshire 1
Our corporate office is located in 7,000 square feet of office space in
Deerfield, Illinois. In addition, we own the land on which the Gardena,
California facility is located and property in Huntington Park, California which
we lease to an unrelated third party.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, we are involved in legal proceedings
relating to claims arising out of our operations. We do not believe that there
are any pending or threatened legal proceedings that are reasonably likely to
have a material adverse effect on us.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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None.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
Our executive officers, listed as follows, are elected annually. There are
no family relationships among them.
John J. Greisch, 43, President, Chief Executive Officer and Director. Mr.
Greisch has served as our President, Chief Executive Officer and as a director
since joining us in June 1998. From May 1986 to December 1997, Mr. Greisch
served in various positions at The Interlake Corporation, a global industrial
equipment manufacturer with approximately $800 million in 1997 sales that was
acquired by GKN plc in early 1999. Most recently, Mr. Greisch served as
President of the Material Handling Group, Interlake's largest operating unit
with approximately $475 million in 1997 sales, and before that he served as Vice
President of Finance, Chief Financial Officer. Mr. Greisch is a Certified Public
Accountant.
John P. Miller, 42, Vice President of Finance, Chief Financial Officer,
Treasurer and Secretary. Mr. Miller has served as our Vice President of Finance,
Chief Financial Officer and Secretary since joining us in June 1998 and our
Treasurer since November 1999. From 1997 to June 1998, Mr. Miller served as
Chief Financial Officer of Peapod, Inc., an internet-based grocery shopping
service. From 1985 to 1997, Mr. Miller served in various positions at Interlake.
Mr. Miller last served as Controller for Interlake, and before that he served as
Vice President Finance for Interlake's Material Handling Group. Mr. Miller is a
Certified Public Accountant.
Anthony W. Cavalle, 44, Vice President Operations. Mr. Cavalle has served
as Vice President Operations since joining us in October 1998. From 1997 to
October 1998, Mr. Cavalle served as Executive Vice President Operations of
Carstar, a franchiser and consolidator of collision service centers with
approximately $250 million in 1998 sales. From 1981 to 1997, Mr. Cavalle served
in various positions at Chief Auto Parts, an auto parts retailer and distributor
with approximately $500 million in 1997 sales. Mr. Cavalle's most recent
position at Chief Auto Parts was as Vice President Commercial and International
Business and before that he served as Vice President Marketing.
Gilbert Johnson, 53, Vice President and Chief Information Officer. Mr.
Johnson has served as Vice President and Chief Information Officer since joining
us in January 2000. From 1994 to January 2000, Mr. Johnson was the owner and
President of Johnson Assoc. LLC, an information and professional services
consulting business.
11
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS.
There is no established trading market for our common stock. As of March
22, 2000, FleetPride Corporation was the only stockholder of record of our
common stock.
Prior to June 1998, we historically paid dividends and distributions to
stockholders. However, no dividends have been paid since then and we do not
anticipate that we will pay dividends in the foreseeable future. We intend to
retain earnings, if any, to finance growth and for general corporate purposes.
In addition, our credit facility includes restrictions on our ability to pay
dividends.
ITEM 6. SELECTED FINANCIAL DATA.
FleetPride Corporation is our parent company and has no separate
operations. Its only asset is its investment in us and equity in our earnings
recorded and it has no liabilities. FleetPride Corporation is contingently
liable for its guarantee of our debt. Thus, our separate financial statements
are not presented.
The selected audited financial data of FleetPride Corporation and its
subsidiaries for the years ended December 31, 1996, 1997, 1998 and 1999 set
forth below are derived from the more detailed financial statements and related
notes of FleetPride Corporation and its subsidiaries included elsewhere in this
annual report. The unaudited financial data of FleetPride Corporation and
subsidiaries for the year ended December 31, 1995 are derived from unaudited
financial statements of FleetPride Corporation and its subsidiaries, which are
prepared on the same basis as the audited financial statements and, in the
opinion of management, reflect all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of data. In addition,
FleetPride Corporation and its subsidiaries operated throughout the periods
presented as independent, privately owned entities, which influenced the
historical level of owners' compensation and other expenses. Accordingly, the
historical results of operations include (1) historical compensation expenses in
excess of the current compensation levels to the former owners of FleetPride
Corporation subsidiaries and divisions of those subsidiaries, (2) other private
company expenses and (3) no accrual for federal income taxes before May 29,
1998. Therefore, the historical results discussed below do not represent
FleetPride, Inc.'s results had FleetPride Corporation and its subsidiaries been
combined and operated under common ownership during that period. The comparative
financial data for 1995, 1996 and 1997 include only the combined operations of
City Truck and its subsidiaries and affiliated companies. The 1998 and 1999
financial data also includes the operations of Stone, Truck & Trailer,
Connecticut Driveshaft, Truckparts, Tampa Brake, Associated, Tisco, Active Gear,
Superior Truck, Certified Power, California Equipment, QDSP, Wheels & Brakes and
Southwest Virginia from their dates of acquisition. The financial data set forth
below should be read in conjunction with the financial statements and related
notes and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," all included elsewhere in this report.
12
<PAGE> 15
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------
1995 1996 1997 1998 1999
--------- --------- --------- --------- ---------
(In thousands, except location and ratio data)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Sales $ 50,063 $ 52,609 $ 57,837 $ 103,295 $ 358,363
Cost of sales 31,981 33,283 36,611 65,855 234,709
--------- --------- --------- --------- ---------
Gross profit 18,082 19,326 21,226 37,440 123,654
Selling, general and administrative expenses 13,592 14,390 16,143 31,030 97,446
--------- --------- --------- --------- ---------
Income from operations 4,490 4,936 5,083 6,410 26,208
Interest expense, net 31 628 776 5,895 18,875
Other (income) expense 4 (40) (58) (86) 58
Income tax expense (benefit)(1) 37 53 93 (687) 3,574
--------- --------- --------- --------- ---------
Income before extraordinary charge 4,418 4,295 4,272 1,288 3,701
Extraordinary charge, net of taxes -- -- -- -- 1,510
--------- --------- --------- --------- ---------
Net income and comprehensive income $ 4,418 $ 4,295 $ 4,272 $ 1,288 $ 2,191
========= ========= ========= ========= =========
Supplemental Pro Forma Income Data:
Pro forma income taxes on income before extraordinary charge $ 1,773 $ 1,731 $ 1,737 $ 239 $ 3,574
Pro forma extraordinary charge, net of taxes -- -- -- -- 1,510
Pro forma net income 2,682 2,617 2,628 362 2,191
Balance Sheet Data:
Cash and cash equivalents $ 227 $ 152 $ 191 $ 8,328 $ 6,445
Net working capital(2) 12,176 12,403 13,872 43,387 131,427
Total assets 26,145 28,915 33,203 163,924 477,674
Total debt (including current maturities) 11,898 13,184 13,056 118,361 221,250
Stockholders' equity 7,580 9,593 12,018 16,474 190,878
Other Data:
Capital expenditures(3) $ 1,234 $ 4,301 $ 1,627 $ 1,668 $ 4,069
Number of locations 15 16 17 57 177
Ratio of earnings to fixed charges 15.1x 5.6x 5.1x 1.1x 1.2x
</TABLE>
(1) FleetPride Corporation and its subsidiaries were comprised solely of
sub-chapter 'S' corporations prior to the recapitalization in 1998.
(2) Net working capital equals current assets less current liabilities.
(3) Capital expenditures for 1996 include $3.7 million related to the
construction of City Truck's new corporate offices and distribution center
in Birmingham, Alabama.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis should be read in conjunction with
the audited consolidated financial statements and related notes thereto. This
report contains "forward-looking statements" which are identifiable by the use
of forward-looking terms such as "may", "intend", "will", "expect",
"anticipate", "estimate", "continue" or similar phrases. In particular, any
statement concerning future opportunities, future operating results or the
ability to generate future revenues, income or cash flow are forward-looking
statements. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, expectations may not prove to be
correct. Such statements are subject to inherent uncertainties and risks which
could cause actual results to vary materially from suggested results, including
but not limited to the following: our substantial debt, our ability to acquire
and successfully integrate heavy duty vehicle parts businesses at reasonable
prices, management's ability to meet the significant demands of growth, pricing
pressure and competitive factors and economic factors in the trucking industry.
GENERAL
FleetPride Corporation is our parent company and has no separate
operations, assets, except its investment in us, or liabilities, except for its
guarantee of our debt. FleetPride Corporation's historical financial statements
are identical to ours except with respect to the accounts which comprise the
stockholders' equity section of the balance sheet.
13
<PAGE> 16
The historical financial data prior to 1998 reflect only the financial
results of City Truck. The historical financial data for the twelve months ended
December 30, 1998 reflect the financial results of City Truck for the full
period and the companies acquired in 1998 from the dates of their acquisition.
The financial data for the twelve months ended December 30, 1999, includes
results for the companies acquired in 1998 for the full periods and the
following from the dates of acquisition:
Company Date of Acquisition
------- -------------------
Associated January 11, 1999
Tisco January 12, 1999
Active Gear April 20, 1999
Vantage Parts May 28, 1999
Superior Truck June 7, 1999
Certified Powertrain August 6, 1999
California Equipment August 26, 1999
QDSP September 30, 1999
Wheels & Brakes October 8, 1999
Southwest Virginia November 19, 1999
Accordingly, our historical financial results are not comparable
to results for the twelve months ended December 31, 1999. Our financial
statements do not include the results of Oklahoma Truck, which was acquired
February 24, 2000.
HISTORICAL RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
1997 1998 1999
----------------- ------------------ ------------------
$ % $ % $ %
------ ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Sales....................................... $ 57.8 100.0% $ 103.3 100.0% $ 358.4 100.0%
Gross profit................................ 21.2 36.7% 37.4 36.2% 123.7 34.5%
SG&A expenses............................... 16.1 27.9% 31.0 30.0% 97.5 27.2%
Income from operations...................... 5.1 8.8% 6.4 6.2% 26.2 7.3%
Interest expense, net....................... 0.8 1.4% 5.9 5.7% 18.9 5.3%
Other income................................ 0.1 0.2% 0.1 0.1% - 0.0%
Income tax expense (benefit)................ 0.1 0.2% (0.7) 0.7% 3.6 1.0%
Income before extraordinary charge.......... 4.3 7.4% 1.3 1.3% 3.7 1.0%
Extraordinary charge, net of taxes.......... - 0.0% - 0.0% 1.5 0.4%
Supplemental pro forma income taxes......... 1.8 3.1% 0.2 0.2% 3.6 1.0%
Supplemental pro forma net income........... 2.6 4.5% 0.4 0.4% 2.2 0.6%
</TABLE>
COMPARISON OF HISTORICAL RESULTS OF OPERATIONS
FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998
Sales. Sales for the twelve months ended December 31, 1999, increased to
$358.4 million from $103.3 million for the same period in 1998, an increase of
247.0%. The majority of our sales growth has come from acquisitions completed in
1998 and 1999. Sales growth from existing businesses was driven by increased
tonmiles driven.
Gross profit. Gross profit increased to $123.7 million for the fiscal 1999
from $37.4 million in 1998, an increase of 230.7%, as a result of the
acquisitions completed. As a percentage of
14
<PAGE> 17
sales, our gross profit decreased to 34.5% in 1999 from 36.2% in 1998. The lower
margin reflects the impact of revenue from acquired companies with lower
margins.
SG&A expenses. SG&A expenses increased to $97.5 million in 1999 from $31.0
million in 1998, an increase of 214.5%. As a percentage of sales, SG&A expenses
decreased to 27.2% in 1999 from 30.0% in 1998. The decrease in SG&A expenses as
a percentage of sales is the result of cost containment measures which reduced
expense growth, reductions in duplicate facilities and acquired companies with
lower SG&A as a percent of sales partially offset by acquired amortization of
goodwill and intangibles relating to the acquired companies and corporate
expenses.
Income from operations. Income from operations increased to $26.2 million
in 1999 from $6.4 million in 1998, an increase of 309.4%. As a percentage of
sales, income from operations increased to 7.3% from 6.2%. The increase in
income from operations as a percentage of sales is due primarily to the decrease
in SG&A expenses as a percentage of sales as a result of cost containment
measures, reductions in duplicate facilities and acquired companies with lower
SG&A as a percent of sales partially offset by lower gross margin from companies
acquired, acquired amortization and corporate expenses.
Interest expense, net. Interest expense increased to $18.9 million in 1999
from $5.9 million in 1998. The increase was the result of higher debt incurred
to complete acquisitions in 1998 and 1999. Debt at September 30, 1999 primarily
consisted of $100.0 million senior subordinated notes, $75.0 term loan and $46.5
million of borrowings under the revolving credit facility. Comparably, long term
debt at September 30, 1998 was $100.0 million with cash and cash equivalents of
$25.1 million.
Income tax expense (benefit). Income tax expense was $3.6 million in 1999
compared to a benefit of $0.7 million for 1998. The 1999 expense was the result
of income from acquired companies and our being taxed as a C corporation for the
full year. Prior to June 1, 1998, we were taxed as an S corporation and as a
result of the change to C corporation status, a net deferred tax asset of $15.1
million was created, of which $0.9 million has been credited to the income
statement, creating the income tax benefit for 1998.
Income before extraordinary charge. Net income before extraordinary charge
of $3.7 million for 1999 increased from $1.3 million in 1998 due primarily to
income from acquired companies and cost containment measures partially offset by
acquired amortization, corporate expenses, higher interest expense and higher
income tax expense as discussed above.
Extraordinary charge, net of taxes. In connection with refinancing the
prior credit facilities, we incurred a $1.5 million, net of taxes of $1.0
million, extraordinary loss for the write-off of deferred financing fees.
Supplemental pro forma income taxes. Pro forma income taxes are $3.6
million in 1999 compared to pro forma income taxes of $0.2 million in 1998. The
higher expense results from higher earnings due to income from acquired
companies, cost containment measures, reductions in duplicate facilities and
acquired companies with lower SG&A as a percent of sales discussed above.
Supplemental pro forma net income. Pro forma net income increased to $2.2
million for 1999 from pro forma net income of $0.4 million in 1998 due primarily
to income from acquired companies, cost containment measures, reductions in
duplicate facilities and acquired companies
15
<PAGE> 18
with lower SG&A as a percent of sales discussed above, partially offset by an
extraordinary loss for the write-off of deferred loan costs.
FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997
Sales. Sales increased to $103.3 million in 1998 from $57.8 million in
1997, an increase of 78.7%. The overall sales growth is attributable to the
acquisitions of Stone, Truck & Trailer, Tampa Brake, Connecticut Driveshaft and
Truckparts, which combined contributed $39.7 million to 1998 sales. Excluding
acquisitions, the sales increase was 10.0% which is attributable to the full
year impact of the location opened in Jackson, Mississippi in May 1997 and an
increase in sales at the Mobile, Alabama and Monroeville, Alabama locations due
to targeted sales initiatives. Same location sales growth, only at City Truck,
was 7.8% in 1998.
Gross profit. Gross profit increased to $37.4 million in 1998 from $21.2
million in 1997, an increase of 76.4%. Excluding acquisitions, gross profit
increased by 12.7% to $23.9. As a percentage of sales, our gross profit
decreased to 36.2% in 1998 from 36.7% in 1997 reflecting the impact of revenue
from acquired businesses with lower margins. Excluding acquisitions, margins
increased to 37.6% due to higher vendor rebates.
SG&A expenses. SG&A expenses increased to $31.0 million in 1998 from $16.1
million in 1997, an increase of 92.5%. As a percentage of sales, SG&A expenses
increased to 30.0% in 1998 from 27.9% in 1997. The increase in SG&A expenses as
a percentage of sales is primarily the result of acquisition related
amortization expense, primarily goodwill and incremental overhead resulting from
establishing a corporate staff and corporate office. Excluding acquired
amortization and corporate expenses, SG&A as a percent of sales decreased to
27.2% due to an increase in sales without a similar increase in SG&A which
includes overhead and other fixed expenses.
Income from operations. Income from operations increased to $6.4 million
in 1998 from $5.1 million in 1997, an increase of 25.5%. As a percentage of
sales, income from operations decreased to 6.2% from 8.8%. The decrease in
income from operations as a percentage of sales is primarily due to higher SG&A
expenses as a percent of sales. Excluding amortization and corporate expenses,
income from operations as a percentage of sales increased to 9.0%.
Interest expense. Interest expense increased to $5.9 million in 1998 from
$0.8 million in 1997, due to the $100.0 million of senior subordinated notes we
issued and increased borrowing under our revolving credit facility, primarily to
finance acquisitions completed in 1998.
Income tax expense (benefit). We recorded an income tax benefit of $0.7
million in 1998 compared to an expense of $0.1 million in 1997. Prior to June 1,
1998, we were taxed as an S corporation and as a result of the change to C
corporation status, a net deferred tax asset of $15.1 million was created, of
which $887 has been credited to the income statement, creating the income tax
benefit. The remainder, $14.2 million, has been credited to paid-in capital.
Net income. Net income decreased to $1.3 million in 1998 from $4.3 million
in 1997, a decrease of 69.8%. The decrease is due primarily to the factors
discussed above.
Supplemental pro forma income taxes. Pro forma income taxes were $0.2
million in 1998 compared to pro forma income taxes of $1.8 million in 1997. The
lower expense results from lower earnings due to lower margin companies
acquired, acquired amortization, corporate expenses and higher interest expense
as discussed above.
16
<PAGE> 19
Supplemental pro forma net income. Pro forma net income decreased to $0.4
million in 1998 from pro forma net income of $2.6 million in 1997 primarily due
to lower margin companies acquired, acquired amortization, corporate expenses
and higher interest expense as discussed above.
PRO FORMA RESULTS OF OPERATIONS
The unaudited pro forma summarized financial information presented below
was derived by applying pro forma consolidated adjustments to our historical
financial statements, after giving effect to:
- the recapitalization of City Truck;
- the acquisitions of Stone, Truck & Trailer Parts, Tampa Brake,
Connecticut Driveshaft, Truckparts, Tisco, Associated, Active Gear,
Vantage Parts, Superior Truck, Certified Powertrain, California
Equipment, QDSP, Wheels and Brakes and Southwest Virginia.
- the effect of refinancing the credit agreement which provides a term
loan of $75.0 million and a revolving line of credit up to $150.0
million and the issuance of $100.0 million in senior subordinated
notes; and
- the June 1998 private equity offering, the January 1999 private equity
offering which was fully funded in April 1999 and the September 30,
1999 private equity offering funded in connection with the QDSP merger.
These pro forma consolidated adjustments give effect to the above transactions
as if these transactions had occurred on January 1, 1998 for the unaudited pro
forma condensed income statement data. The pro forma adjustments reflect the
elimination of excess compensation based on employment contracts entered into at
the times of acquisitions and other expense reductions resulting from the
closure of duplicate facilities and other activities.
PRO FORMA
TWELVE MONTHS ENDED DECEMBER 31,
--------------------------------------------
1998 1999
-------------------- --------------------
$ % $ %
-------- ------- -------- ------
Sales .......................... $ 545.6 100.0% $ 553.9 100.0%
Gross profit ................... 176.3 32.3% 185.6 33.5%
SG&A expenses .................. 142.5 26.1% 151.6 27.4%
Income from operations ......... 33.8 6.2% 34.0 6.1%
Interest expense, net .......... 21.1 3.9% 21.6 3.9%
Other income ................... 0.4 0.1% 0.6 0.1%
Income tax expense ............. 5.8 1.1% 5.8 1.0%
Net Income ..................... 7.3 1.3% 7.2 1.3%
The pro forma financial data are subject to numerous assumptions and
estimates which are subject to change and, in many cases, are beyond our
control. The pro forma financial data may not be indicative of the operating
results or financial position we would have achieved had we consummated the
events described above. You should not construe this data as representative of
our future operating results or financial position. The pro forma information
presented above and discussed below has not been derived pursuant to APB 16.
17
<PAGE> 20
COMPARISON OF PRO FORMA RESULTS OF OPERATIONS
PRO FORMA TWELVE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO PRO FORMA TWELVE
MONTHS ENDED DECEMBER 31, 1998
Sales. Pro forma sales were $553.9 for the twelve months ended December
31, 1999 compared to $545.6 in 1998, a 1.5% increase. Sales growth slowed during
1999 due to a lower rate of growth in tonnage carried and miles driven which has
affected demand in the heavy duty parts aftermarket. Sales for the southwest
decreased 1.3% mainly due to low demand from the oil and mining industries.
Gross profit. Pro forma gross profit for the twelve months ended December
31, 1999 increased to $185.6 million from $176.3 million in 1998, an increase of
5.3%. As a percentage of sales, the Company's gross profit increased to 33.5% in
1999 from 32.3% in 1998. The improved margin reflects the impact of lower
product costs.
SG&A expenses. Pro forma SG&A expenses for 1999 increased to $151.6
million or 6.4% from $142.5 million in 1998. As a percentage of sales, SG&A
expenses increased to 27.4% in 1999 from 26.1% in 1998. The increase in SG&A
expenses as a percentage of sales is primarily the result of overhead resulting
from establishing a corporate staff and corporate office. Excluding corporate
expenses, SG&A as a percent of sales for 1999 was 24.6%.
Income from operations. Pro forma income from operations increased to
$34.0 million in 1999 from $33.8 million in 1998, an increase of 0.6%. As a
percentage of sales, income from operations decreased slightly 6.1% from 6.2%.
Improved gross profit margins were offset by increased corporate expenses as
discussed above. Excluding corporate expenses, income from operations increased
by 12.8%.
Interest expense. Pro forma interest expense increased to $21.6 million in
1999 from $21.1 million in 1998. The higher pro forma interest expense was due
to an increase in average outstanding borrowings used to complete acquisitions.
Net Income. Pro forma net income increased to $7.2 million in the twelve
months ended December 31, 1999 from $7.3 million in 1998 due primarily to
improved gross profit margins off set by higher SG&A, as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
We have historically used internal cash flow from operations to fund our
working capital requirements, capital expenditures and new branch locations.
Capital expenditure requirements have been relatively low historically and were
$4.1 million the twelve months ended December 31, 1999. Also, we do not
anticipate that we will pay dividends for the foreseeable future.
In January 1999, we secured $52.5 million of commitments in a private
equity offering consisting of series A preferred stock and common stock of
FleetPride Corporation. Brentwood committed $15.0 million and other investors
committed $37.5 million. In January 1999, we received $10.5 million of the
equity to partially finance the acquisitions of Associated and Tisco and
borrowed $49.3 million under the revolving credit facility to finance the
balance and an additional $4.0 million for working capital. In April 1999, we
received the remaining equity commitments of $42.0 million which we used to
finance the Vantage Parts, Active Gear and Superior Truck acquisitions and for
general corporate purposes.
18
<PAGE> 21
On September 30, 1999, our $85.0 million revolving credit facility was
replaced by a new $225.0 million senior secured credit facility. The new
facility is in the form of a five-year $150.0 million revolving credit facility
and a five-year $75.0 million term loan. We used the term loan and a portion of
the $150.0 million revolving credit facility to refinance existing bank
indebtedness, to pay fees and expenses related to the QDSP merger, to fund the
acquisition of Wheels and Brakes and for general corporate purposes. The term
loan matures in consecutive quarterly installments of $250 thousand and the
first installment payment was made on December 30, 1999. On December 31, 1999,
$46.5 million was outstanding under our $150.0 million revolving credit
facility. We intend to use the remaining portion of our $150.0 million revolving
credit facility for general corporate purposes, including acquisitions. The
effective rate of interest on our term loan and revolving credit facility as of
December 31, 1999 was approximately 9.2% per year.
Upon consummation of our merger with QDSP and after giving effect to the
additional issuance of common and preferred stock for cash, holders of existing
QDSP common and preferred stock received consideration, in the form of common
and preferred stock of Holdings, valued at $72.5 million in the aggregate. In
connection with the merger, Aurora and Brentwood made a combined cash equity
contribution of $40.0 million to FleetPride Corporation.
We expect to fund our working capital needs, capital expenditures and
future acquisitions through availability under our credit facility, future
issuances of debt or equity securities and cash flow generated from operations.
However, our ability to execute our growth strategy and to make scheduled
payments of interest or principal or to refinance our indebtedness will depend
upon our future operating performance, which will be affected by general
economic, financial, competitive, legislative, regulatory, business and other
factors beyond our control.
EFFECT OF INFLATION
Inflation has not had a significant effect on our results of operations in
recent years. Our selling, general and administrative expenses, such as
salaries, employee benefits, and facilities costs are subject to normal
inflationary pressures.
Many of our customers have a reduced number of working days in the fourth
quarter resulting from public holidays. As a result, we have lower sales in that
quarter than in the other quarters. With the exception of the fourth quarter,
our operations are generally not affected by seasonal fluctuations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
We are exposed to market risk primarily from interest rates. We are
actively involved in monitoring our exposure to market risks and continue to
develop and utilize appropriate risk management techniques. Accordingly, we may
enter into certain derivative financial instruments such as interest rate caps
or swaps and foreign currency futures contracts or obligations. We do not use
derivative financial instruments for trading or to speculate on changes in
interest rates or foreign currency exchange rates. The sensitivity analysis
below, which hypothetically illustrate our potential market risk exposure,
estimate the effects of hypothetical sudden and sustained changes in the
applicable market conditions on 1999 earnings. The sensitivity analysis
presented does not consider any additional actions we might take to mitigate our
exposure to such a change. The market change, assumed to occur as of December
31, 1999, includes a 100 basis point change in market interest rates. The
hypothetical change and assumptions may be different from what actually occurs
in the future.
19
<PAGE> 22
As of December 31, 1999, we had no derivative financial instruments to
manage interest rate risk. Accordingly, we are exposed to earnings and fair
value risk due to changes in interest rates with respect to our long-term
obligations. As of December 31, 1999, approximately 54.8% of our long-term
obligations were floating rate obligations. The detrimental effect on our
earnings of the hypothetical 100 basis point increase in interest rates
described above would be approximately $1.2 million before income taxes. This
effect is primarily due to the floating rate borrowing under our revolving
credit facility.
20
<PAGE> 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of FleetPride Corporation and
Subsidiaries
In our opinion, the consolidated financial statements listed in the index
appearing under item 14(a)(1) on page 48 present fairly, in all material
respects, the financial position of FleetPride Corporation and its subsidiaries
("FleetPride") at December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted in
the United States. In addition, in our opinion, the financial statement schedule
listed in the index appearing under item 14(a)(2) on page 48 presents fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of
FleetPride's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Chicago, Illinois
March 30, 2000
21
<PAGE> 24
FLEETPRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 1998 AND 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,328 $ 6,445
Trade accounts receivable, less allowance for doubtful
accounts of $1,149 and $1,727 in 1998 and 1999 18,099 64,344
Inventories, net 41,453 113,585
Prepaid expenses 61 2,090
Deferred tax asset 2,588 4,581
Current portion of patronage dividend receivable 2,108 5,928
-------- --------
Total current assets 72,637 196,973
Property, plant and equipment, net 13,613 27,390
Deferred financing fees 5,424 13,802
Goodwill and other intangibles 55,496 222,689
Deferred tax asset 12,516 11,245
Other assets 4,238 5,575
-------- --------
Total assets $163,924 $477,674
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 14,105 $ 37,861
Accrued interest 5,217 7,410
Accrued liabilities relating to the acquisitions 2,279 4,793
Accrued liabilities 7,649 15,482
-------- --------
Total current liabilities 29,250 65,546
Line of credit 18,200 121,250
Long-term debt 100,000 100,000
-------- --------
Total liabilities 147,450 286,796
Stockholders' equity:
Preferred Stock, liquidation value $100, par value $.01
per share (Series A outstanding: 881,420 in 1999 and
435,750 in 1998, Series B outstanding: 779,940 in 1999
and 0 in 1998, Series C outstanding: 1 in 1999 and 0 in
1998 and Series D outstanding: 1 in 1999 and 0 in 1998) 43,575 170,259
Common stock, par value $.01 per share (outstanding:
393,664 in 1999 and 108,834 in 1998) 1 4
Additional paid-in capital 14,325 60,266
Employee notes receivable - (415)
Retained earnings (deficit) (41,427) (39,236)
-------- --------
Total stockholders' equity 16,474 190,878
-------- --------
Total liabilities & stockholders' equity $163,924 $477,674
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
22
<PAGE> 25
FLEETPRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(AMOUNTS IN THOUSANDS)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Net sales $57,837 $103,295 $358,363
Cost of sales 36,611 65,855 234,709
------- -------- --------
Gross profit 21,226 37,440 123,654
Selling general & administrative expenses 16,143 31,030 97,446
------- -------- --------
Operating income 5,083 6,410 26,208
Other (income) / expense
Interest expense 841 6,519 19,406
Interest (income) (65) (624) (531)
Other expense / (income) (58) (86) 58
------- -------- --------
Income before income taxes and extraordinary charge 4,365 601 7,275
Income tax expense (benefit) 93 (687) 3,574
------- -------- --------
Income before extraordinary charge 4,272 1,288 3,701
Extraordinary charge, net of taxes - - 1,510
------- -------- --------
Net income and comprehensive income $ 4,272 $ 1,288 $ 2,191
======= ======== ========
Supplemental pro forma income data:
Pro forma income taxes on income before extraordinary charge $ 1,737 $ 239 $ 3,574
Extraordinary charge, net of taxes - - 1,510
------- -------- --------
Pro forma net income $ 2,628 $ 362 $ 2,191
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
23
<PAGE> 26
FLEETPRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FleetPride, Inc. FleetPride
FleetPride, Inc. FleetPride, Inc. Series B Corporation
Common Stock Bridge Securities Preferred Stock Common Stock
----------------- ----------------- ----------------- ----------------
Par Paid In Par Paid In Par Paid In Par Paid In
Value Capital Value Capital Value Capital Value Capital
----- -------- ----- ------- ----- ------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $ 2 $ 493 $ - $ - $ - $ - $- $ -
Net Income and Comprehensive Income
Capital Contribution 25
Distribution to Owners
----- -------- ----- ------- ----- ------- ----- --------
Balance at December 31, 1997 2 518 - - - - - -
Distribution to Owners
Stock Repurchase of FleetPride, Inc.
Recapitalization (1) (462) 3 24,940
Recapitalization Fees and Other
Creation of deferred tax
asset for intangibles 14,217
Issuance of Bridge Securities - 6,000
Repayment of Bridge Securities - (6,000)
Issuance of FleetPride, Inc. for
Acquisition of Stone Heavy Duty 7 - 2,993
Issuance of FleetPride, Inc. 30 1 10,300
Formation and Issuance of FleetPride
Corporation stock (1) (14,310) (4) (38,233) 1 14,310
Issuance of FleetPride Corporation
stock for Truck and Trailer
Trailer Acquisition - 7
Issuance of FleetPride Corporation
stock for Truckparts Acquisition - 5
Issuance of FleetPride Corporation
stock - 3
Net Income and Comprehensive Income
----- -------- ----- ------- ----- ------- ----- --------
Balance at December 31, 1998 - - - - - - 1 14,325
Issuance of FleetPride Corporation
stock for Associated Truck Parts
Acquisition - 11
Issuance of FleetPride Corporation
stock for Tisco Acquisition - 2
Issuance of FleetPride Corporation stock 1 15,145
Issuance of FleetPride Corporation
stock for Active Gear Acquisition - 281
Issuance of FleetPride Corporation
stock for Superior Truck & Auto
Supply Acquisition - 84
Issuance of FleetPride Corporation
stock for QDSP Acquisition 1 19,606
Issuance of FleetPride Corporation
stock in conjunction with QDSP Acquisition 1 10,812
Net Income and Comprehensive Income
----- -------- ----- ------- ----- ------- ----- --------
Balance at December 31, 1999 $ - $ - $ - $ - $ - $ - $ 4 $ 60,266
===== ======== ===== ======= ===== ======= ===== ========
<CAPTION>
FleetPride FleetPride
Corporation Corporation
Series A Series B
Preferred Stock Preferred Stock FleetPride,
---------------- ---------------- Inc. Employee Retained Total
Par Paid In Par Paid In Treasury Notes Earnings Shareholders'
Value Capital Value Capital Stock Receivable (Deficit) Equity
----- ------- ----- ------- ----------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $- $ - $- $ - $ (810) $ - $ 9,908 $ 9,593
Net Income and Comprehensive Income 4,272 4,272
Capital Contribution 25
Distribution to Owners (1,872) (1,872)
----- ------- ----- ------- ----------- -------- --------- -------------
Balance at December 31, 1997 - - - - (810) - 12,308 12,018
Distribution to Owners (1,390) (1,390)
Stock Repurchase of FleetPride, Inc. (25,821) (25,821)
Recapitalization 26,631 (51,111) -
Recapitalization Fees and Other (2,522) (2,522)
Creation of deferred tax
asset for intangibles 14,217
Issuance of Bridge Securities 6,000
Repayment of Bridge Securities (6,000)
Issuance of FleetPride, Inc. for
Acquisition of Stone Heavy Duty 3,000
Issuance of FleetPride, Inc. 10,331
Formation and Issuance of FleetPride
Corporation stock 4 38,233 -
Issuance of FleetPride Corporation
stock for Truck and Trailer
Trailer Acquisition - 2,993 3,000
Issuance of FleetPride Corporation
stock for Truckparts Acquisition - 1,995 2,000
Issuance of FleetPride Corporation
stock - 350 353
Net Income and Comprehensive Income 1,288 1,288
----- ------- ----- ------- ----------- -------- --------- -------------
Balance at December 31, 1998 4 43,571 - - - - (41,427) 16,474
Issuance of FleetPride Corporation
stock for Associated Truck Parts
Acquisition 1 4,988 5,000
Issuance of FleetPride Corporation
stock for Tisco Acquisition - 748 750
Issuance of FleetPride Corporation stock 4 37,891 (415) 52,626
Issuance of FleetPride Corporation
stock for Active Gear Acquisition - 719 1,000
Issuance of FleetPride Corporation
stock for Superior Truck & Auto
Supply Acquisition - 216 300
Issuance of FleetPride Corporation
stock for QDSP Acquisition 5 52,924 72,536
Issuance of FleetPride Corporation
stock in conjunction with QDSP Acquisition 3 29,185 40,001
Net Income and Comprehensive Income 2,191 2,191
----- ------- ----- ------- ----------- -------- --------- -------------
Balance at December 31, 1999 $ 9 $88,133 $ 8 $82,109 $ - $ (415) $(39,236) $ 190,878
===== ======= ===== ======= =========== ======== ========= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
24
<PAGE> 27
FLEETPRIDE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(AMOUNTS IN THOUSANDS)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
Operating activities:
Income before extraordinary charge $ 4,272 $ 1,288 $ 3,701
Extraordinary charge, net of taxes - - 1,510
------- -------- --------
Net income 4,272 1,288 2,191
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 1,187 1,752 3,104
Amortization 54 863 4,890
Deferred tax expense (benefit) - (887) 1,704
(Gain) on sale of property and equipment (58) (86) (58)
Changes in operating assets and liabilities:
Accounts receivable (910) 40 (5,745)
Patronage dividend receivable (387) (868) (3,820)
Inventories (2,285) (1,366) (3,700)
Prepaid expenses (348) 564 8,618
Other assets 28 (721) 1,998
Deferred tax asset - 887 (2,426)
Accounts payable (499) (1,634) 3,048
Accrued liabilities 77 7,113 (12,233)
------- -------- --------
Net cash provided by operating activities 1,131 6,945 (2,429)
Investing activities:
Acquisition of property and equipment (1,627) (1,668) (4,069)
Proceeds from sale of property and equipment 98 116 -
Acquisitions, net of cash acquired - (74,527) (122,582)
------- -------- --------
Net cash used by investing activities (1,529) (76,079) (126,651)
Financing activities:
Short term borrowings 2,412 (4,716) -
Proceeds of revolving line of credit 10,680 - 142,000
Payments of revolving line of credit (10,503) (677) (126,828)
Proceeds on term loan (net of fees) - 68,481 69,493
Payments on term loan - (51,993) (46,365)
Principal payment of long-term debt (455) (10,802) -
Proceeds from issuance of long-term debt (net of fees) 150 95,931 -
Payment of bond consent and fees - - (3,730)
Payments for stock repurchase - (25,821) -
Payments of recapitalization fees - (2,522) -
Proceeds from issuance of Preferred Stock - 10,651 66,668
Proceeds from issuance of Common Stock - 33 25,959
Distribution to owners (1,872) (1,294) -
Contribution to stockholders' equity 25 - -
------- -------- --------
Net cash provided by financing activities 437 77,271 127,197
------- -------- --------
Increase (decrease) in cash and cash equivalents 39 8,137 (1,883)
Cash and cash equivalents at beginning of year 152 191 8,328
------- -------- --------
Cash and cash equivalents at end of year $ 191 $ 8,328 $ 6,445
======= ======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 841 $ 1,214 $ 9,470
Cash paid for income taxes 77 273 473
Details of Acquisitions
Fair value of assets and liabilities acquired $ - $ 83,226 $208,115
Less equity payments - 8,000 79,586
------- -------- --------
Cash paid - 75,226 128,529
Less cash acquired - 699 5,947
------- -------- --------
Net cash paid for acquisitions $ - $ 74,527 $122,582
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
25
<PAGE> 28
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 1 - ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements for FleetPride Corporation, formerly City
Truck Holdings, Inc., and its subsidiaries ("FleetPride") are presented on the
basis of accounting principles that are generally accepted in the United States.
All professional standards that are effective as of December 31, 1999 have been
taken into consideration in preparing the financial statements. At December 31,
1998, the consolidated financial statements for City Truck Holdings, Inc.
include its wholly owned subsidiary HDA Parts System, Inc., whose operations
include Stone Heavy Duty, Truck and Trailer Parts, Inc., Connecticut Driveshaft,
Truckparts, Inc., and Tampa Brake and Supply Co. since their dates of
acquisition. At December 31, 1999, the consolidated financial statements for
FleetPride Corporation include its wholly owned subsidiary FleetPride, Inc.,
formerly HDA Parts System, Inc., whose operations include, in addition to the
subsidiaries and divisions listed above, Associated Brake Supply, Inc. and its
subsidiaries, Tisco, Inc., Tisco of Redding, Inc., Vantage Parts, Active Gear,
L.L.C., Superior Truck and Auto Supply, Inc., Certified Powertrain, California
Equipment Company, California Equipment Co. of Sacramento, QDSP Holdings, Inc.
and its subsidiaries, Wheels and Brakes, Inc. and Southwest Virginia Truck
Parts, Inc.
Description of the Companies
As of May 29, 1998, City Truck and Trailer Parts of Tennessee, Inc., City Truck
and Trailer Parts of Alabama, Inc., City Truck and Trailer Parts of Alabama,
L.L.C., and City Friction, Inc. were merged into City Truck and Trailer Parts,
Inc., an Alabama corporation. All of these companies were under common control.
The stockholders of City Truck and Trailer Parts of Tennessee, Inc., City Truck
and Trailer Parts of Alabama, Inc. and City Friction, Inc. converted their
shares into 498 shares of common stock of City Truck and Trailer Parts, Inc.,
such that these three companies became wholly owned subsidiaries of City Truck
and Trailer Parts, Inc. The members of City Truck and Trailer Parts of Alabama,
L.L.C. contributed all of their equity interest to City Truck and Trailer Parts,
Inc. in exchange for 30 shares of common stock in City Truck and Trailer Parts,
Inc. and as a result became a wholly owned subsidiary. The transaction has been
accounted for in a manner similar to a pooling of interests under Accounting
Principles Board Opinion No. 16. Accordingly, all prior period consolidated and
combined financial statements presented have been restated to include the
combined results of operations, financial position and cash flows of these
companies as though they had always been a part of City Truck and Trailer Parts,
Inc. These companies previously followed consistent accounting policies and
there were no adjustments to the book value of their assets and liabilities.
City Transportation, Inc., at net book value $94, previously a wholly owned
subsidiary of City Truck and Trailer Parts, Inc., was retained by the prior
owners of City Truck and Trailer Parts, Inc. This has been accounted for as a
dividend distribution at net book value on the statement of stockholders' equity
as a distribution to owners.
The following transactions outline the chronology of the formation of
FleetPride.
26
<PAGE> 29
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 1 -ACCOUNTING POLICIES, CONTINUED
On June 1, 1998, BABF City Corp. purchased 80% of the outstanding capital stock
of City Truck and Trailer Parts, Inc. At December 31, 1999 this interest had
decreased to 37.5% as a result of various capital transactions.
On June 1, 1998, City Truck and Trailer Parts, Inc. issued $6.0 million of
redeemable, non-convertible, non-voting preferred stock (the "Bridge
Securities"). In July, 1998, the Bridge Securities were redeemed.
On June 19, 1998, City Truck and Trailer Parts, Inc. converted its 457 shares of
existing $1 par common stock into 57,227 shares of $0.01 par value common stock
and 249,427 shares of $0.01 par 6% preferred stock.
On July 8, 1998, City Truck and Trailer Parts, Inc. was renamed HDA Parts System
Inc.
On September 30, 1998, City Truck Holdings, Inc., a Delaware corporation, was
formed by the share for share exchange of stock in HDA Parts System, Inc. for
stock in City Truck Holdings, Inc. City Truck Holdings, Inc. is a holding
company which has no operations or debt, except for its guarantee of HDA Parts
System, Inc.'s debt.
On November 19, 1999, City Truck Holdings, Inc. changed its name to FleetPride
Corporation. On December 1, 1999, HDA Parts System, Inc. changed its name to
FleetPride, Inc.
All of the above name changes have been reflected elsewhere in the financial
statements.
Nature of Operations
FleetPride distributes a full line of nationally recognized brand name heavy
duty vehicle parts, as well as a private brand assortment operating 177 branch
locations in 31 states throughout the United States. The comprehensive selection
of parts includes braking, steering and suspension systems, transmissions,
drivelines, axles, wheels and rims, hydraulic systems and engine components.
Replacement parts for heavy duty vehicles are purchased from component
manufacturers, inventoried and delivered directly to customer locations from the
branches or sold "over-the-counter" to customers who visit the branches. The 177
branch locations consist primarily of warehouse and service space, with a small
retail selling space. In addition, FleetPride offers in-house re-manufactured
products such as brake shoes, transmissions, rear axles and driveline
components. Truck and trailer repair services also are offered at a number of
locations.
Principles of Consolidation
The consolidated financial statements include the accounts of FleetPride and all
subsidiary companies. All material intercompany transactions have been
eliminated in consolidation.
27
<PAGE> 30
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 1 -ACCOUNTING POLICIES, CONTINUED
Segment Information
Based on the criteria outlined in SFAS Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information", FleetPride has determined
that it operates in one business segment, that being the distribution of heavy
duty vehicle parts in the United States. Thus, all information required by SFAS
No. 131 is included in FleetPride's financial statements. No single customer
represented more than 10% of the FleetPride's total sales.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid instruments with original
maturities of three months or less from the date of purchase.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using
either the first-in, first-out (FIFO) or average-costs basis.
Property, Plant and Equipment
Property, plant and equipment is carried at cost less accumulated depreciation
and amortization. FleetPride provides for depreciation and amortization of
property and equipment using the straight-line method over the following
estimated useful lives:
Classification Depreciation Lives
- - - - - - - - - - - - - - - -------------- ------------------
Buildings and building improvements 40 years or the life of the lease
Furniture and fixtures 7 years
Vehicles 6 years
Machinery and equipment 3-8 years
28
<PAGE> 31
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 1 - ACCOUNTING POLICIES, CONTINUED
When assets are retired or otherwise disposed of, the assets and related
allowances for depreciation and amortization are eliminated from the accounts
and any resulting gain or loss is reflected in income.
Goodwill and Other Intangibles
Goodwill represents the excess of the purchase cost over the fair value of net
assets acquired in a business and is presented net of accumulated amortization.
Amortization of goodwill is recorded on a straight line basis over 40 years.
Other intangibles are amortized over the useful lives of these assets which
range from 5 to 9 years. When facts and circumstances indicate impairment,
FleetPride reviews goodwill and other intangibles to assess recoverability from
estimated future results of operations and cash flows.
Long-Lived Assets
FleetPride evaluates its long-lived assets (including goodwill) on an ongoing
basis. Identifiable intangible assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
related asset may be impaired. Whether assets to be held and used are impaired
is measured by a comparison of the carrying amount of the asset to future
undiscounted cash flows expected to be generated by the asset. If the asset is
determined to be impaired, the loss recognized is measured by the amount by
which the carrying value of the asset exceeds its fair value.
Revenue Recognition
Revenue is recognized when products are shipped. Sales for core parts are
recorded net of exchanges and "core" credits. Cores, which are reusable
components of originally purchased parts, may be exchanged for credit at the
time of a sale or within a specified period. Returned cores are either returned
to the vendor for credit or remanufactured.
Preopening Expense
Expenses associated with the opening of new branch locations are expensed in the
period such costs are incurred.
Income Taxes
Prior to the recapitalization on May 29, 1998, with the exception of Truck
Parts, Inc., each of the companies included within these financial statements,
with the consent of its shareholders and members, had elected under the
Internal Revenue Code to be taxed as an S Corporation or a limited liability
company. In lieu of corporate income taxes, the stockholders of an S corporation
and the members of a limited liability company are taxed on their proportionate
share of FleetPride's taxable income. Therefore, no provision or liability for
federal income taxes had been included in the financial statements for 1997 and
through May 28, 1998. For comparison purposes, a supplemental pro forma income
tax is calculated for the periods prior to FleetPride being a C corporation.
Supplemental pro-forma net income included on the income statement is calculated
by applying an income tax rate of 39.8%, 39.8% and 44.6% in 1997, 1998 and 1999,
respectively, to the historical income before taxes.
29
<PAGE> 32
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 1 - ACCOUNTING POLICIES, CONTINUED
Concurrent with the recapitalization, FleetPride elected to be taxed as a C
corporation and is subject to income taxes on its profits in 1998. FleetPride
then set up a deferred tax asset of $15,104, increasing paid in capital by
$14,217, and recognized $887 net income. FleetPride applies an asset and
liability approach to accounting for income taxes. Deferred tax liabilities and
assets are recognized for the expected future tax consequences of temporary
differences between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the years in which the
differences are expected to reverse.
Deferred Financing Costs
In connection with establishing a revolving credit facility in September, 1999
and the private placement of debt in July 1998, FleetPride incurred various
financing costs which have been deferred on FleetPride's balance sheet and are
being amortized over the terms of the agreements.
Stock Based Compensation
FleetPride has elected to follow the disclosure requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation" only and continues to account for
stock based compensation under the basis of Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees".
Reclassifications
Certain amounts for the year ended December 31, 1998, were reclassified to
conform to the current year presentation. There was no impact on net income or
stockholders equity.
NOTE 2 - INVENTORIES
Inventories consisted of the following at December 31:
1998 1999
----------- ------------
Parts inventory $ 35,959 $ 99,783
Cores 5,494 13,802
----------- ------------
$ 41,453 $ 113,585
=========== ============
30
<PAGE> 33
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at December 31:
1998 1999
----------- ------------
Land $ 20 $ 2,947
Buildings and building improvements 7,732 9,426
Furniture and fixtures 920 4,016
Vehicles 3,862 7,942
Machinery and equipment 7,907 13,918
Less: accumulated depreciation (6,828) (10,859)
----------- ------------
Net property and equipment $ 13,613 $ 27,390
=========== ============
NOTE 4 - GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangibles consisted of the following at December 31:
1998 1999
----------- ------------
Goodwill $ 54,061 $ 221,618
Other intangibles 2,117 5,784
Less: accumulated amortization (682) (4,713)
----------- ------------
Net goodwill and other intangibles $ 55,496 $ 222,689
=========== ============
Goodwill represents the cost in excess of the fair value of the net assets of
companies acquired in purchase transactions. Other intangible assets have been
recognized for covenants not to compete, workforce and a specific beneficial
customer agreement arising from purchase transactions. FleetPride has charged
$44, $505 and $4,031 in 1997, 1998 and 1999, respectively, for amortization of
goodwill and other intangibles.
NOTE 5 - BORROWINGS
Revolving Line of Credit
At December 30, 1998, FleetPride increased its maximum availability to $85.0
million on a revolving line of credit from a bank with interest based on the
LIBOR rate plus applicable margin, at 2.3% or, at FleetPride's option, several
other common indices. The interest rate at December 31, 1998, was 7.8%.
FleetPride has pledged all of its assets as collateral. FleetPride's outstanding
balance at December 31, 1998, was $18.2 million. On September 30, 1999, in
conjunction with the transaction
31
<PAGE> 34
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 5 - BORROWINGS, CONTINUED
with QDSP Holdings, Inc. and its subsidiaries, this credit facility, and the
prior credit facility of QDSP Holdings, Inc. and its subsidiaries, were replaced
with a new credit agreement.
On September 30, 1999, FleetPride entered into a new $225.0 million Credit
Agreement (the "Agreement"). The Agreement provides for a $75.0 million term
loan and a $150.0 million revolving line of credit from a bank with interest
based upon the LIBOR rate plus applicable margin, initially at 3.25% and 2.75%,
respectively, or, at FleetPride's option, several other common indices.
FleetPride has pledged all of its assets as collateral. FleetPride and
FleetPride, Inc.'s subsidiaries are guarantors under the Agreement. The term
loan and revolving line of credit expire on September 30, 2004. FleetPride's
outstanding balance at December 31, 1999 was $121.3 million. The weighted
average interest rate on revolving credit and term loan borrowings outstanding
as of December 31, 1999 was 9.2%.
In connection with refinancing the prior credit facilities, FleetPride incurred
a $1.5 million extraordinary loss for the write-off of deferred financing fees,
net of taxes of $1.0 million.
Senior Subordinated Notes
On July 31, 1998, FleetPride issued $100.0 million of 12% Senior subordinated
notes due 2005 (the "Senior Subordinated Notes"), and received approximately
$96.0 million of proceeds after discounts, commissions and fees. Interest on
these notes is paid semi-annually on February 1, and August 1 commencing
February 1, 1999. The Senior Subordinated Notes may be redeemed at the option of
FleetPride, in whole or in part, at any time on or after August 1, 2002 at the
redemption prices set forth in the Indenture, plus accrued and unpaid interest
and liquidated damages, if any, to the date of redemption. In addition, at any
time prior to August 1, 2001, FleetPride may redeem up to 35% of the aggregate
principal amount of notes originally issued at a redemption price equal to 112%
of the aggregate principal amount thereof, plus accrued and unpaid interest out
of the proceeds of public equity offerings.
In connection with the issuance of the Senior Subordinated Notes, FleetPride
entered into a registration rights agreement that required it to file a
registration statement by December 28, 1998 and to use its best efforts to cause
the registration to become effective by March 13, 1999. The registration became
effective November 12, 1999. FleetPride did not comply with the obligations to
file and have a registration statement declared effective as set forth above.
FleetPride has paid the holders of the notes liquidated damages through November
12, 1999 as set forth in the registration rights agreements which are not
material to the consolidated financial statements. In addition, under certain
circumstances, FleetPride will be required to offer to purchase the Senior
Subordinated Notes at a price equal to 100% of the principal amount thereof,
plus accrued and unpaid interest to the date of purchase with the proceeds of
certain assets sales.
The debt agreements described above contain certain covenants that, among other
things, limit the ability of FleetPride to: (i) pay dividends or make certain
other restricted payments; (ii) incur additional debt; (iii) encumber or sell
assets; (iv) enter into certain guarantees of debt; (v) enter into
32
<PAGE> 35
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 5 - BORROWINGS, CONTINUED
transactions with affiliates; and (vi) merge or consolidate with any other
entity or transfer or lease all or substantially all of their assets.
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, accounts payable, and accrued
expenses approximate fair value because of the short maturity of these items.
The carrying amounts of the debt issued pursuant to FleetPride's revolving line
of credit agreement approximates fair value because the interest rates change
with market interest rates.
The Senior Subordinated Notes are not actively traded, but the most recent trade
of the Senior Subordinated Notes prior to December 31, 1999 was at a price of
$92. Using this price of $92, the fair value of these notes at December 31, 1999
would be $92.0 million.
There are no quoted market prices for FleetPride's 6% Series A Preferred Stock.
Each share of the 6% Series A Preferred Stock has a liquidation value of $100
per share, plus accrued and unpaid dividends. The total liquidation value of the
Series A Preferred Stock would be $94.2 million at December 31, 1999.
There are no quoted market prices for FleetPride's 6% Series B Preferred Stock.
Each share of the 6% Series B Preferred Stock has a liquidation value of $100
per share, plus accrued and unpaid dividends. The total liquidation value of the
Series B Preferred Stock would be $83.4 million at December 31, 1999.
These fair value estimates are subjective in nature and involve uncertainties
and matters of significant judgment and therefore, cannot be determined with
precision. Changes in assumptions could significantly affect these estimates.
NOTE 7 - ACQUISITIONS
FleetPride has made the following acquisitions during 1998 and 1999. They have
all been accounted for as a purchase and the consolidated financial statements
include income since the date of acquisition.
On June 19, 1998, FleetPride acquired substantially all of the assets of Stone
Heavy Duty, Inc. for approximately $24.5 million in cash and $3.0 million in
common and preferred stock. FleetPride has allocated $12.1 million of the
purchase price to the identified assets and liabilities.
On September 30, 1998, FleetPride acquired all of the capital stock of Truck and
Trailer Parts, Inc. for approximately $18.7 million in cash and $3.0 million in
common and preferred stock. FleetPride has allocated $7.1 million of the
purchase price to the identified assets and liabilities.
33
<PAGE> 36
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 7 - ACQUISITIONS, CONTINUED
On October 30, 1998, FleetPride acquired substantially all of the assets of
Tampa Brake and Supply Co., Inc. for approximately $9.9 million in cash.
FleetPride has allocated $4.1 million of the purchase price to the identified
assets and liabilities.
On November 4, 1998, FleetPride acquired substantially all of the assets of
Connecticut Driveshaft for approximately $9.9 million in cash. FleetPride has
allocated $5.1 million of the purchase price to the identified assets and
liabilities.
On December 17, 1998, FleetPride acquired all of the capital stock of
Truckparts, Inc. for approximately $12.1 million in cash and $2.0 million in
common and preferred stock. FleetPride has allocated $3.3 million of the
purchase price to the identified assets and liabilities.
On January 11, 1999, FleetPride acquired all of the capital stock of Associated
Brake Supply, Inc. and its subsidiaries for approximately $54.2 million in cash
and $5.0 million in common and preferred stock. FleetPride has allocated $16.5
million of the purchase price to the identified assets and liabilities.
On January 12, 1999, FleetPride acquired all of the capital stock of Tisco, Inc.
and Tisco of Redding, Inc. for approximately $6.5 million in cash and $0.8
million in common and preferred stock. FleetPride has allocated $2.7 million of
the purchase price to the identified assets and liabilities.
On April 20, 1999, FleetPride acquired all of the membership interests of Active
Gear, L.L.C. for approximately $6.8 million in cash and $1.0 million in common
and preferred stock. FleetPride has allocated $3.7 million of the purchase price
to the identified assets and liabilities.
On May 28, 1999, FleetPride acquired certain assets of CNF Transportation Inc.
and Vantage Parts of Illinois, Inc. for approximately $29.2 million in cash.
FleetPride has allocated $15.1 million of the purchase price to the identified
assets and liabilities.
On June 7, 1999, FleetPride acquired all of the capital stock of Superior Truck
and Auto Supply, Inc. for approximately $1.7 million in cash and $0.3 million in
common and preferred stock. FleetPride has allocated $1.7 million of the
purchase price to the identified assets and liabilities.
On August 6, 1999, FleetPride acquired certain assets of Certified Powertrain,
Inc. for approximately $6.1 million in cash. FleetPride has allocated $2.6
million of the purchase price to the identified assets and liabilities.
On August 25, 1999, FleetPride acquired substantially all of the assets of
California Equipment Company and California Equipment Co. of Sacramento for
approximately $1.8 million in cash. FleetPride has allocated $1.1 million of the
purchase price to the identified assets and liabilities.
On September 30, 1999, FleetPride acquired all of the capital stock of QDSP
Holdings, Inc. and its subsidiaries for approximately $72.5 million in common
and preferred stock. FleetPride has assumed $12.9 million of net liabilities in
this acquisition.
34
<PAGE> 37
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 7 - ACQUISITIONS, CONTINUED
On October 8, 1999, FleetPride acquired all of the capital stock of Wheels and
Brakes, Inc. and Specrite Brake Company for approximately $11.7 million in cash.
FleetPride has allocated $5.6 million of the purchase price to the identified
assets and liabilities.
On November 19, 1999, FleetPride acquired all of the stock of Southwest
Virginia Truck Parts, Inc. for approximately $1.2 million in cash. FleetPride
has allocated $.8 million of the purchase price to the identified assets and
liabilities.
In connection with these acquisitions, FleetPride has recorded aggregate
goodwill of $221.4 million and certain liabilities totaling $5.7 million in
connection with vendor consolidations, the closure of duplicate facilities, and
other activities that will be phased out during 1999 and 2000. Of the
liabilities established related to acquisitions, in 1999 FleetPride charged $648
for employee costs, $152 for stores and support facilities and $146 for other
items.
The following unaudited pro forma financial information combines the results of
operations of Associated Brake Supply, Inc. and its subsidiaries, Tisco, Inc.,
Tisco of Redding, Inc., Vantage Parts, Active Gear, L.L.C., Superior Truck and
Auto Supply, Inc., Certified Powertrain, California Equipment Company,
California Equipment Co. of Sacramento, QDSP Holdings, Inc. and its
subsidiaries, Wheels and Brakes, Inc. and Southwest Virginia Truck Parts, Inc.
as if the acquisitions had taken place on January 1, 1998, after giving effect
to certain adjustments including: amortization of goodwill, interest expense and
a normal charge for income taxes assuming all of the companies had operated as
"C" corporations for 1998 and 1999.
1998 1999
------------------- -------------------
ACTUAL PROFORMA ACTUAL PROFORMA
-------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
Net sales $103,295 $545,582 $358,363 $553,884
Net income and comprehensive
income (loss) 1,288 7,271 2,191 7,196
In addition, FleetPride's subsidiaries operated throughout the periods presented
as independent, privately owned entities, which influenced the historical level
of owners' compensation and other expenses. Accordingly, the historical results
of operations include (i) historical compensation expenses in excess of the
current compensation levels to the former owners of certain subsidiaries of
FleetPride; and (ii) certain other private company expenses.
35
<PAGE> 38
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 8 - COMMON STOCK
The following are the number of shares outstanding for each of FleetPride,
Inc.'s and FleetPride Corporation's classes of common stock as of the dates
indicated:
<TABLE>
<CAPTION>
FleetPride, Inc. FleetPride, Inc. FleetPride Corporation
Common Stock Bridge Securities Common Stock Common Stock
(Par Value $1) (Par Value $.01) (Par Value $.01) (Par Value $.01)
--------------- ----------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Balannce at January 1, 1997 938 - - -
--------------- ----------------- ---------------- ----------------------
Balannce at December 31, 1997 938 - - -
Stock repurchase (481)
Recapitalization (457) 57,227
Issuance of bridge security 30,000
Repayment of bridge security (30,000)
Issuance of acquisition of Stone Heavy
Duty, Inc. 6,867
Issuance to employees and others 30,135
Formation of FleetPride Corporation (94,229) 94,229
Issuance for acquisition of Truck and
Trailer Parts, Inc. 6,867
Issuance for acquisition of Truckparts, Inc. 4,578
Issuance to employees 3,160
--------------- ----------------- ---------------- ----------------------
Balance at December 31, 1998 - - - 108,834
Issuance of acquisition of Associated
Brake Supply, Inc. and subsidiaries 11,446
Issuance of acquisition of Tisco, 1,717
Inc. and Tisco of Redding, Inc.
Issuance of acquisition of Active Gear, L.L.C. 1,651
Issuance of acquisition of Superior Truck
& Auto Supply, Inc. 495
Issuance of acquisition of QDSP Holdings,
Inc. and subsidiaries 115,338
Issuance to employees and others 153,792
--------------- ----------------- ---------------- ----------------------
Balance at December 31, 1999 - - - 393,273
=============== ================= ================ ======================
</TABLE>
The common stock of FleetPride, Inc. had a par value of $1 per share, of which
2,000 were authorized, and 1,538 were issued at December 31, 1997.
The common stock of FleetPride has a par value of $.01 per share, of which
250,000 and 25,000,000 were authorized at December 31, 1998 and 1999,
respectively, and 108,834 and 393,273 were issued and outstanding at December
31, 1998 and 1999, respectively.
36
<PAGE> 39
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
================================================================================
NOTE 9 - PREFERRED STOCK
The following are the number of shares issued for each of the FleetPride, Inc.'s
and FleetPride Corporation's classes of preferred stock as of the dates
indicated:
<TABLE>
<CAPTION>
FleetPride, FleetPride FleetPride FleetPride FleetPride
Inc. Corporation Corporation Corporation Corporation
Series B Series A Series B Series C Series D
Preferred Stock Preferred Stock Preferred Stock Preferred Stock Preferred Stock
(Par Value $.01) (Par Value $.01) (Par Value $.01) (Par Value $.01) (Par Value $.01)
--------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 -- -- -- -- --
Balance at December 31, 1997 -- -- -- -- --
Recapitalization 249,428
Issuance of acquisition of Stone Heavy
Duty, Inc. 29,931
Issuance to employees and others 103,013
Formation of FleetPride Corporation (382,372) 382,372
Issuance for acquisition of Truck and
Trailer Parts, Inc. 29,931
Issuance for acquisition of Truckparts,
Inc. 19,954
Issuance to employees and others 3,493
------------ ---------------- --------------- ---------------- --------------
Balance at December 31, 1998 -- 435,750 -- -- --
Issuance of acquisition of Associated
Brake Supply, Inc. and subsidiaries 49,886
Issuance of acquisition of Tisco,
Inc. and Tisco of Redding, Inc. 7,483
Issuance of acquisition of Active Gear,
L.L.C. 7,194
Issuance of acquisition of Superior Truck
& Auto Supply, Inc. 2,158
Issuance of acquisition of QDSP Holdings,
Inc. and subsidiaries -- 502,719 1 1
Issuance to employees and others 378,949 277,221
------------ ---------------- --------------- ---------------- --------------
Balance at December 31, 1999 -- 881,420 779,940 1 1
============ ================ =============== ================ ==============
</TABLE>
FleetPride's Series A Preferred Stock has a par value of $.01 per share, of
which 850,000 and 50,000,000 were authorized at December 31, 1998 and 1999,
respectively, and 435,750 and 881,420 were issued at December 31, 1998 and 1999,
respectively. Each share of Series A Preferred Stock is entitled to one vote per
share on all matters. These shares earn dividends at a rate of 6.0% per annum,
payable quarterly on March 31, June 30, September 30 and December 31 of each
year, commencing June 30, 1998. Dividends not paid will cumulate whether or not
earned or declared with additional dividends thereon, compounded quarterly at
the rate of 6% per annum. At December 31, 1998 and 1999, FleetPride had $1,320
and $6,041 cumulated dividends on these shares, respectively.
FleetPride has no right to redeem any shares of its Series A Preferred Stock and
the holders of FleetPride's Series A Preferred Stock do not have a right to
require FleetPride to redeem any of the shares. Upon liquidation, holders of
Series A Preferred Stock are entitled to $100 per share plus accrued and unpaid
dividends.
FleetPride's Series B Preferred Stock has a par value of $.01 per share, of
which 0 and 1,700,000 were authorized at December 31, 1998 and 1999,
respectively, and 0 and 779,940 were issued at December 31, 1998 and 1999,
respectively. Each share of Series B Preferred Stock is entitled to one vote per
share on all matters. These shares earn dividends at a rate of 6.0% per annum,
payable quarterly on March 31, June 30, September 30 and December 31 of each
year, commencing December 31, 1999.
37
<PAGE> 40
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
================================================================================
NOTE 9 - PREFERRED STOCK, CONTINUED
Dividends not paid will cumulate whether or not earned or declared with
additional dividends thereon, compounded quarterly at the rate of 6% per annum.
At December 31, 1998 and 1999, FleetPride had $0 and $1,242 cumulated dividends
on these shares, respectively.
FleetPride has no right to redeem any shares of its Series B Preferred Stock and
the holders of FleetPride's Series B Preferred Stock do not have a right to
require FleetPride to redeem any of the shares. Upon liquidation, holders of
Series B Preferred Stock are entitled to $100 per share plus accrued and unpaid
dividends.
FleetPride's Series C Special Voting Preferred Stock has a par value of $.01 per
share, of which 0 and 1 were authorized at December 31, 1998 and 1999,
respectively, and 0 and 1 were issued at December 31, 1998 and 1999,
respectively. Each share of Series C Special Voting Preferred Stock is entitled
to one vote per share on all matters and is entitled to elect three directors,
provided that a specified ownership percentage of FleetPride's common stock is
maintained by the holder. These shares are not entitled to receive dividends.
FleetPride has the right to redeem the share of its Series C Special Voting
Preferred Stock if the specified ownership percentage of FleetPride's common
stock is not maintained by the holder. The holders of FleetPride's Series C
Special Voting Preferred Stock do not have a right to require FleetPride to
redeem any of the shares. Upon liquidation, holders of Series C Special Voting
Preferred Stock are entitled to $100 per share.
FleetPride's Series D Special Voting Preferred Stock has a par value of $.01 per
share, of which 0 and 1 were authorized at December 31, 1998 and 1999,
respectively, and 0 and 1 were issued at December 31, 1998 and 1999,
respectively. Each share of Series D Special Voting Preferred Stock is entitled
to one vote per share on all matters and is entitled to elect three directors,
provided that a specified ownership percentage of FleetPride's common stock is
maintained by the holder. These shares are not entitled to receive dividends.
FleetPride has the right to redeem the share of its Series D Special Voting
Preferred Stock if the specified ownership percentage of FleetPride's common
stock is not maintained by the holder. The holders of FleetPride's Series D
Special Voting Preferred Stock do not have a right to require FleetPride to
redeem any of the shares. Upon liquidation, holders of Series D Special Voting
Preferred Stock are entitled to $100 per share.
NOTE 10 - FLEETPRIDE, INC. CONDENSED FINANCIAL INFORMATION
FleetPride, Inc. is a wholly owned subsidiary of FleetPride. During September
1998, the shares of common stock of FleetPride, Inc. were exchanged for shares
of common stock of FleetPride.
Subsidiaries were acquired by FleetPride, Inc. using, in part, shares of common
stock of FleetPride. These holdings so acquired were subsequently contributed to
FleetPride, Inc. and recorded as an increase to paid-in capital. As the only
assets and operations of FleetPride relate to its ownership of the shares of
common and preferred stock in FleetPride, Inc., the financial position and
results of operations of FleetPride are identical to FleetPride, Inc.
No guarantor subsidiaries existed in 1997. FleetPride, Inc.'s payment
obligations under the Senior Subordinated Notes are fully and unconditionally
guaranteed on a joint and several basis by Truck and Trailer Parts, Inc. and
Truckparts, Inc. (collectively Guarantor Subsidiaries) in 1998. In 1999,
Associated Brake Supply, Inc. and its subsidiaries, Tisco, Inc., Tisco of
Redding, Inc., Active Gear, L.L.C., Superior Truck and Auto Supply, Inc., QDSP
Holdings Inc. and its subsidiaries, Wheels and Brakes, Inc., Southwest Virginia
Truck Parts, Inc. and FleetPride West, Inc. were also guarantor subsidiaries.
FleetPride and FleetPride, Inc.'s subsidiaries also guarantee FleetPride, Inc.'s
obligations under the Credit Agreement. The following consolidating condensed
financial information is listed below:
38
<PAGE> 41
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
================================================================================
Note 10 - FleetPride, Inc. Condensed Financial Information
Consolidating Balance Sheet at December 31, 1998:
<TABLE>
<CAPTION>
FleetPride, Guarantor Consolidated
Inc. Subsidiaries Eliminations Total
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents $ 7,791 $ 537 $ -- $ 8,328
Accounts receivable, net 13,344 4,755 -- 18,099
Inventories 33,377 8,076 -- 41,453
Other current assets 4,562 195 -- 4,757
--------- --------- --------- ---------
Total current assets 59,074 13,563 -- 72,637
Property, plant & equipment, net 12,705 908 -- 13,613
Investments 34,497 -- (34,497) --
Other long term assets 21,773 405 -- 22,178
Goodwill and other intangibles 30,844 -- 24,652 55,496
--------- --------- --------- ---------
Total assets $ 158,893 $ 14,876 $ (9,845) $ 163,924
========= ========= ========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 12 $ 149 $ -- $ 161
Accounts payable 10,780 3,325 -- 14,105
Accrued liabilities 13,427 1,557 -- 14,984
--------- --------- --------- ---------
Total current liabilities 24,219 5,031 -- 29,250
Revolving credit facility 18,200 -- -- 18,200
12% senior subordinated notes 100,000 -- -- 100,000
--------- --------- --------- ---------
Total liabilities 142,419 5,031 -- 147,450
--------- --------- --------- ---------
Total stockholders' equity 16,474 9,845 (9,845) 16,474
--------- --------- --------- ---------
Total liabilities and stockholders' equity $ 158,893 $ 14,876 $ (9,845) $ 163,924
========= ========= ========= =========
Consolidating Balance Sheet at December 31, 1999:
FleetPride, Guarantor Consolidated
Inc. Subsidiaries Eliminations Total
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents $ 5,847 $ 598 $ -- $ 6,445
Accounts receivable, net 25,406 38,938 -- 64,344
Inventories 42,487 71,098 -- 113,585
Other current assets 8,242 4,357 -- 12,599
--------- --------- --------- ---------
Total current assets 81,982 114,991 -- 196,973
Property, plant & equipment, net 13,741 13,649 -- 27,390
Investments 24,307 -- (24,307) --
Other long term assets 26,737 3,885 -- 30,622
Goodwill and other intangibles 52,799 -- 169,890 222,689
--------- --------- --------- ---------
Total assets $ 199,566 $ 132,525 $ 145,583 $ 477,674
========= ========= ========= =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 17,867 $ 19,994 $ -- $ 37,861
Accrued liabilities 13,816 13,869 -- 27,685
--------- --------- --------- ---------
Total current liabilities 31,683 33,863 -- 65,546
Revolving credit facility 121,250 -- -- 121,250
12% senior subordinated notes 100,000 -- -- 100,000
--------- --------- --------- ---------
Total liabilities 252,933 33,863 -- 286,796
--------- --------- --------- ---------
Total stockholders' equity (53,367) 98,662 145,583 190,878
--------- --------- --------- ---------
Total liabilities and stockholders' equity $ 199,566 $ 132,525 $ 145,583 $ 477,674
========= ========= ========= =========
</TABLE>
39
<PAGE> 42
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
================================================================================
<TABLE>
<CAPTION>
NOTE 10--FLEETPRIDE, INC. CONDENSED FINANCIAL INFORMATION, CONTINUED
Consolidating Income Statement at December 31, 1998:
FleetPride, Guarantor Consolidated
Inc. Subsidiaries Total
----------- ------------ ------------
<S> <C> <C> <C>
Net sales $ 95,089 $ 8,206 $ 103,295
Cost of sales 59,690 6,165 65,855
--------- --------- ---------
Gross profit 35,399 2,041 37,440
Selling, general & administrative expenses 29,498 1,532 31,030
--------- --------- ---------
Operating income 5,901 509 6,410
Interest expense 6,519 -- 6,519
Interest (income) (624) -- (624)
Other (income) / expense (87) 1 (86)
--------- --------- ---------
Income before income taxes and extraordinary charge 93 508 601
Income tax expense (benefit) (687) -- (687)
--------- --------- ---------
Income before extraordinary charge 780 508 1,288
Extraordinary charge, net of taxes -- -- --
--------- --------- ---------
Income and comprehensive income $ 780 $ 508 $ 1,288
========= ========= =========
Consolidating Income Statement at December 31, 1999:
FleetPride, Guarantor Consolidated
Inc. Subsidiaries Total
----------- ------------ ------------
Net sales $ 59,979 $ 298,384 $ 358,363
Cost of sales 37,310 197,399 234,709
--------- --------- ---------
Gross profit 22,669 100,985 123,654
Selling, general & administrative expenses 21,817 75,629 97,446
--------- --------- ---------
Operating income 852 25,356 26,208
Interest expense 19,320 86 19,406
Interest (income) (451) (80) (531)
Other (income) / expense 102 (44) 58
--------- --------- ---------
Income before income taxes and extraordinary charge (18,119) 25,394 7,275
Income tax expense (benefit) 3,316 258 3,574
--------- --------- ---------
Income before extraordinary charge (21,435) 25,136 3,701
Extraordinary charge, net of taxes 1,510 -- 1,510
--------- --------- ---------
Income and comprehensive income $ (22,945) $ 25,136 $ 2,191
========= ========= =========
Consolidating Statement of Cash Flows at December 31, 1998:
FleetPride, Guarantor Consolidated
Inc. Subsidiaries Total
----------- ------------ -----------
Net income and comprehensive income $ 779 $ 509 $ 1,288
Adjustments to reconcile net income to net
cash provided by operating activities 5,700 (43) 5,657
-------- -------- --------
Cash provided by operating activities 6,479 466 6,945
Cash (used)/provided by investing activities (76,150) 71 (76,079)
Cash provided by financing activities 77,271 -- 77,271
-------- -------- --------
Net increase in cash 7,600 537 8,137
Cash and cash equivalents at the beginning of period 191 -- 191
-------- -------- --------
Cash and cash equivalents at the end of period $ 7,791 $ 537 $ 8,328
======== ======== ========
</TABLE>
40
<PAGE> 43
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
================================================================================
NOTE 10 - FLEETPRIDE, INC. CONDENSED FINANCIAL INFORMATION, CONTINUED
Consolidating Statement of Cash Flows, For the Year Ended December 31, 1999:
<TABLE>
<CAPTION>
FleetPride, Guarantor Consolidated
Inc. Subsidiaries Total
----------- ------------ ------------
<S> <C> <C> <C>
Net income and comprehensive income $ (22,945) $ 25,136 $ 2,191
Adjustments to reconcile net income to net cash
provided by operating activities (6,609) 1,989 (4,620)
--------- --------- ---------
Cash provided by operating activities (29,554) 27,125 (2,429)
Cash (used)/provided by investing activities (126,651) -- (126,651)
Cash provided by financing activities 127,197 -- 127,197
--------- --------- ---------
Net increase in cash (29,008) 27,125 (1,883)
Cash and cash equivalents at the beginning of period 8,328 -- 8,328
--------- --------- ---------
Cash and cash equivalents at the end of period $ (20,680) $ 27,125 $ 6,445
========= ========= =========
</TABLE>
NOTE 11 - EMPLOYEE BENEFIT PLANS
FleetPride sponsors a number of defined contribution 401(k) plans covering
substantially all of its full-time employees. Employees may contribute up to 15%
of their salary to the plan while FleetPride may make discretionary
contributions to it. Total expenses under these plans were $130, $248 and $787
for the years ended December 31, 1997, 1998 and 1999, respectively.
NOTE 12 - OPERATING LEASES
FleetPride leases office and warehouse space from related parties and third
parties. Rental expense to related parties was $750, $1,136 and $5,962 in 1997,
1998 and 1999, respectively. FleetPride also leases office, warehouse space and
transportation equipment from unrelated parties. Rental expense to third parties
was $381, $494 and $4,626 in 1997, 1998 and 1999, respectively. Minimum future
rental payments under these leases for each of the next five years and
thereafter, and in the aggregate are as follows:
2000 9,230
2001 8,349
2002 7,897
2003 6,834
2004 4,868
Thereafter 14,259
-------
$51,437
=======
41
<PAGE> 44
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 13 - RELATED PARTY TRANSACTIONS
In addition to the transactions described in the above footnotes, the following
related party transactions existed at December 31, 1999.
In May 1998, FleetPride entered into a Corporate Development and Administrative
Services Agreement with Brentwood Private Equity L.L.C. ("BPE"), an affiliate
of FleetPride's majority shareholder, Brentwood. Under the terms of the
agreement, BPE agreed to assist FleetPride with corporate development services
for a predetermined percentage of certain transactions. On September 30, 1999
FleetPride terminated this agreement. FleetPride incurred $2,208 and $1,684 in
1998 and 1999, respectively, under the terms of this agreement in connection
with acquisitions made by FleetPride.
On September 30, 1999, FleetPride entered into a Management Services Agreement
with Brentwood Private Equity Management LLC ("BPEM") and Aurora Management
Partners LLC ("AMP"), affiliates of FleetPride's majority shareholders. Under
the terms of the agreement, BPEM and AMP have agreed to assist FleetPride with
corporate development services for a fixed fee and a predetermined percentage of
certain transactions. In 1999, FleetPride incurred $2,272 under the terms of
this agreement.
NOTE 14 - INCOME TAXES
The income tax expense (benefit) for the years ended December 31, consists of
the following:
1997 1998 1999
---- ---- ----
Current tax expense
Federal $ -- $ -- $ 241
State and local 93 200 630
Deferred tax expense (benefit)
Federal -- (751) 2,162
State and local -- (136) (458)
------- ------- -------
$ 93 $ (687) $ 2,575
======= ======= =======
42
<PAGE> 45
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 14 - INCOME TAXES, CONTINUED
The provision for income tax differs from the statutory tax expense computed by
applying the Federal corporate rate of 34% for the years ended December 31 as
follows:
1997 1998 1999
----- ----- ----
Taxes computed at statutory rate $ 93 204 1,620
State tax expense, net of Federal benefit -- 42 114
Income earned while an S corporation -- (1,017) --
Goodwill amortization -- 5 491
Other non-deductible expenses -- 79 350
------- ------- -------
Total income tax expense (benefit) $ 93 $ (687) $ 2,575
======= ======= =======
The above tables include a tax benefit of $999 related to an extraordinary item
incurred in 1999.
The approximate tax effects of temporary differences between the tax basis of
assets and liabilities and their financial reporting amounts that give rise to
a significant portion of the deferred tax asset and deferred tax liability are
as follows at December 31:
1998 1999
-------- --------
Inventories $ 619 $ 3,215
Property, plant and equipment -- 169
Accrued liabilities 167 1,243
Recapitalization 13,664 12,716
Net operating loss carryforwards 854 2,231
Other -- 44
-------- --------
Total deferred tax asset 15,304 19,618
Rebates receivable -- (2,532)
Goodwill and other intangibles (200) (1,260)
-------- --------
Total deferred tax liability (200) (3,792)
-------- --------
Net deferred tax asset $ 15,104 $ 15,826
======== ========
43
<PAGE> 46
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
NOTE 14 - INCOME TAXES, CONTINUED
The acquisition of FleetPride's stock by BABF City Corp. resulted in a step-up
in the tax basis of FleetPride's net assets of $37,413 in 1998. This amount will
be amortized over 15 years for tax purposes, resulting in a deferred tax asset
of $14,217. Pursuant to SFAS 109, FleetPride's contributed capital has been
increased by the amount of this tax benefit.
Net operating loss carryforwards of $4,454 at December 31, 1999, will begin
expiring in 2018.
NOTE 15 - STOCK COMPENSATION PLANS
FleetPride has a stock option plan that provides for the granting of stock
options to officers and key employees. The objectives of this plan include
attracting and retaining the best personnel, providing for additional
performance incentives, and promoting the success of FleetPride by providing
employees the opportunity to acquire common stock. The 1999 Equity Incentive
Plan is the only plan with stock option awards available for grant; no prior
plans existed. FleetPride is authorized to grant options for up to 25,000 common
shares under the 1999 Equity Incentive Plan, of which 11,700 have been granted,
as of December 31, 1999. Options outstanding under FleetPride's option plan
have been granted at prices which are either equal to or above the market value
of the stock on the date of grant, vest over an eight year period and expire ten
years after the grant date.
In addition, on September 30, 1999 FleetPride granted options to purchase
3,956 shares of FleetPride common stock to various individuals upon conversion
of options to purchase QDSP Holdings, Inc. stock, in accordance with the terms
of the Agreement and Plan of Merger relating to FleetPride's acquisition of QDSP
Holdings, Inc. These grants were not made under the 1999 Equity Incentive Plan.
The status of FleetPride's outstanding stock options is summarized below as of
December 31, 1999:
Number Weighted
of Shares Average
(in thousands) Exercise Price
- - - - - - - - - - - - - - - -------------------------------------------------------------------------
Outstanding at December 31, 1998 -- --
Granted 15,656 $ 170
Exercised -- --
Canceled -- --
- - - - - - - - - - - - - - - -------------------------------------------------------------------------
Outstanding (held by 38 optionees)
at December 31, 1999 15,656 $ 170
- - - - - - - - - - - - - - - -------------------------------------------------------------------------
Options exercisable
at December 31, 1999 440 $ 170
- - - - - - - - - - - - - - - -------------------------------------------------------------------------
FleetPride continues to account for stock-based compensation using the intrinsic
value method prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," under which no compensation cost for
stock options is recognized for stock option awards granted at or above fair
market value. Had compensation expense for FleetPride's stock-based compensation
plan been determined based upon fair values at the grant dates for awards under
those plans in accordance with SFAS No. 123, "Accounting for Stock-Based
Compensation," FleetPride's net earnings would have been reduced to the pro
forma amounts indicated below. The
44
<PAGE> 47
FLEETPRIDE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)
- - - - - - - - - - - - - - - --------------------------------------------------------------------------------
pro forma effects of applying SFAS 123 are not indicative of future amounts.
Additional stock option awards are anticipated in future years.
NOTE 15 - STOCK COMPENSATION PLANS, CONTINUED
1999
-------------------------------------------------
Net earnings (in thousands)
As reported $2,191
Pro forma $2,090
-------------------------------------------------
The weighted average fair value of options granted during 1999 estimated on the
date of grant using the Black-Scholes option-pricing model was $86. The fair
value of 1999 options granted is estimated on the date of grant using the
following assumptions: dividend yield of 0%, expected volatility of 31%,
risk-free interest rate range of 6.2% to 6.3% depending on grant date, and an
expected life of approximately 8 years.
On March 5, 1999, John J. Greisch, President and Chief Executive Officer, John
P. Miller, Vice President of Finance, Chief Financial Officer, Treasurer and
Secretary and Anthony W. Cavalle, Vice President of Operations purchased
2,000, 250 and 250 shares of FleetPride's common stock, respectively, subject to
vesting over four years. Mr. Greisch, Mr. Miller and Mr. Cavalle paid cash of
$3, $0 and $0, respectively, and signed promissory notes of $337, $42 and $42,
respectively, of which $415 remains outstanding at December 31, 1999. The
promissory notes mature on March 4, 2004 and bear interest at 5.3%.
45
<PAGE> 48
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
46
<PAGE> 49
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding directors of the Company will be set forth under the
caption "Election of Directors" in the Company's information statement relating
to the Company's 2000 annual meeting of stockholders (the "Information
Statement") and is incorporated herein by reference. Information regarding
executive officers of the Company is included in Item 4A of Part I of this Form
10-K as permitted by Instruction 3 to Item 401(b) of Regulation S-K. No
information is required to be disclosed by Item 405 of Regulation S-K because
the Company does not have a class of equity securities registered pursuant to
Section 12 of the Exchange Act.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by this item will be set forth under the caption
"Executive Compensation" in the Information Statement and, except for the
information under the captions "Executive Compensation -- Compensation Committee
Report on Executive Compensation" and "Executive Compensation -- Performance
Graph," is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The Information required by this item will be set forth under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the
Information Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.
Information regarding any disclosable relationships and related
transactions of directors and executive officers will be set forth under the
caption "Compensation Committee Interlocks and Insider Participation" in the
Information Statement and is incorporated herein by reference.
47
<PAGE> 50
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) Financial Statements:
(1) Consolidated Financial Statements of FleetPride Corporation which are
included at Item 8 of this report, and incorporated herein by
reference.
Page
Number
(a) Report of Independent Accountants 21
(b) Consolidated Balance Sheets at December 31, 1998
and 1999 22
(c) Consolidated Statements of Income for the Years
Ended 23
December 31, 1997, 1998 and 1999
(d) Consolidated Statements of Stockholders' Equity
for the Years 24
Ended December 31, 1997, 1998 and 1999
(e) Consolidated Statements of Cash Flows for the
Years Ended 25
December 31, 1997, 1998 and 1999
(f) Notes to Consolidated Financial Statements 26
(2) Financial Statement Schedule
(a) Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable,
or not required, or because they are included in the financial
statements or the notes thereto in Item 8 of this report.
(3) Exhibits filed with this report are listed on the "Exhibit Index".
(B) Reports on Form 8-K
None.
(C) Exhibits.
Exhibits filed with this report are listed on the "Exhibit Index".
48
<PAGE> 51
SCHEDULE II
FLEETPRIDE CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Additions
-----------------------
Balance at Charged to Charged to Balance at
beginning costs and other end of
Description of period expenses accounts Deductions period
- - - - - - - - - - - - - - - ------------------------------------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
For the year ended
December 31, 1997 $ 13 $ 121 $ -- $ 121 $ 13
For the year ended $ 13 $ 134 $1,002(1) $ -- $1,149
December 31, 1998
For the year ended
December 31, 1999 $1,149 $ (208) $ 968(1) $ 182 $1,727
Inventory valuation allowance:
For the year ended
December 31, 1997 $ 350 $ 150 $ -- $ 150 $ 350
For the year ended
December 31, 1998 4 350 $ 440 $2,682(1) $ 123 $3,349
For the year ended
December 31, 1999 $3,349 $ (249) $9,574(1) $2,787 $9,842
</TABLE>
(1) These additions relate to businesses acquired during the year.
49
<PAGE> 52
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FLEETPRIDE, INC.
Date: March 30, 2000 By: /s/ JOHN P. MILLER
-------------- -----------------------------------
John P. Miller, Vice President of Finance,
Chief Financial Officer, Secretary and
Treasurer
Pursuant to the requirements of Securities Exchange Act of 1934, this
Report to be signed by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
Date: March 30, 2000 /s/ FREDERICK J. WARREN
-------------- ------------------------------------------
Frederick J. Warren, Chairman of the Board
Date: March 30, 2000 /s/ JOHN J. GREISCH
-------------- ------------------------------------------
John J. Greisch, Director, President and
Chief Executive Officer (Principal
Executive Officer)
Date: March 30, 2000 /s/ ROBERT ANDERSON
-------------- ------------------------------------------
Robert Anderson, Director
Date: March 30, 2000 /s/ W. LARRY CLAYTON
-------------- ------------------------------------------
W. Larry Clayton, Director
Date: March 30, 2000 /s/ RICHARD R. CROWELL
-------------- ------------------------------------------
Richard R. Crowell, Director
Date: March 30, 2000 /s/ CHRISTOPHER A. LAURENCE
-------------- ------------------------------------------
Christopher A. Laurence, Director
Date: March 30, 2000 /s/ GERALD L. PARSKY
-------------- ------------------------------------------
Gerald L. Parsky, Director
Date: March 30, 2000 /s/ WILLIAM S. WADE
-------------- ------------------------------------------
William S. Wade, Director
Date: March 30, 2000 /s/ JOHN P. MILLER
-------------- ------------------------------------------
John P. Miller, Vice President of Finance,
Chief Financial Officer, Secretary and
Treasurer (Principal Financial Officer
and Principal Accounting Officer).
50
<PAGE> 53
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- - - - - - - - - - - - - - - --------------- -----------------------------------------------------------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-4, as amended
(Commission File No. 333-75887) (the "S-4")).
3.2 Amendment to Amended and Restated Articles of Incorporation
of the Company.
3.3 Bylaws of the Company (incorporated by reference to Exhibit
3.2 to the S-4).
4.1 Indenture, dated as of July 31, 1998, by and among the
Company, the guarantors identified therein and U.S. Trust
Company of California, N.A., as trustee (incorporated by
reference to Exhibit 4.1 to the S-4).
4.1.1 First Supplemental Indenture, dated as of September 30,
1998, by and among Truck & Trailer Parts, Inc., FleetPride
Corporation, the Company, any other guarantors party
thereto, any Parent party thereto and U.S. Trust Company,
National Association, as trustee (incorporated by reference
to Exhibit 4.1.1 to the S-4).
4.1.2 Second Supplemental Indenture, dated as of December 21,
1998, by and among Truckparts, Inc., the Company, any other
guarantors party to the Indenture referred to therein and
U.S. Trust Company, National Association, as trustee
(incorporated by reference to Exhibit 4.1.2 to the S-4).
4.1.3 Third Supplemental Indenture, dated as of January 14, 1999,
by and among Associated Brake Supply, Inc., Associated
Truck Center, Inc., Onyx Distribution, Inc., Associated
Truck Parts of Nevada, Inc., Freeway Truck Parts of
Washington, Inc., Tisco, Inc. and Tisco of Redding, Inc.,
the Company, any other guarantors party to the Indenture
referred to therein and U.S. Trust Company, National
Association, as trustee (incorporated by reference to
Exhibit 4.1.3 to the S-4).
4.1.4 Fourth Supplemental Indenture, dated as of April 20, 1999,
by and among Active Gear, L.L.C., the Company, any other
guarantors party thereto, any Parent party thereto and U.S.
Trust Company, National Association, as trustee
(incorporated by reference to Exhibit 4.1.4 to the S-4).
4.1.5 Fifth Supplemental Indenture, dated as of June 7, 1999, by
and among Superior Truck & Auto Supply, Inc., the Company,
any other guarantors party thereto and U.S. Trust Company,
National Association, as trustee (incorporated by reference
to Exhibit 4.1.5 to the S-4).
4.1.6 Sixth Supplemental Indenture, dated as of September 27,
1999, by and among the Company, the several guarantors
party thereto and U.S. Trust Company of California. N.A.,
as trustee (incorporated by reference to Exhibit 4.1.6 to
the S-4).
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- - - - - - - - - - - - - - - --------------- -----------------------------------------------------------
<S> <C>
4.1.7 Seventh Supplemental Indenture, dated as of October 1,
1999, by and among QDSP Holdings, Inc., Quality
Distribution Service Partners, Inc., Automotive Sales
Company, Inc., CB Acquisition Sub, Inc., City Spring Works,
Inc., FleetPride of Agawam, Inc., Four T Sales & Service,
Inc., Holt Incorporated, New England Truck & Auto Service,
Inc., Parts Distributing Company, Ltd., Parts Holding
Company, Parts Management Company, Power Equipment
International, Inc., Power Export Distributing Company, SLM
Power Group, Inc., Specialized Sales & Service, Inc., TBS
Incorporated, Truck City Parts, Inc., Stats Remanufacturing
Center, Inc., Universal Joint Sales Company, Inc., and
Wheatley Truck Parts, Inc., the Company, any other
guarantors party to the Indenture referred to therein and
U.S. Trust Company, National Association, as trustee
(incorporated by reference to Exhibit 4.1.7 to the S-4).
4.1.8 Eighth Supplemental Indenture, dated as of October 8, 1999,
by and among Wheels and Brakes, Inc. and Specrite Brake
Company, the Company, any other guarantors party to the
Indenture referred to therein and U.S. Trust Company,
National Association, as trustee (incorporated by reference
to Exhibit 4.1.8 to the S-4).
4.1.9 Ninth Supplemental Indenture, dated as of December 6, 1999,
by and among the Company, any guarantors party to the
Indenture referred to therein and U.S. Trust Company,
National Association, as trustee.
4.1.10 Tenth Supplemental Indenture, dated as of December 7, 1999,
by and among FleetPride West, Inc., the Company, any other
guarantors party to the Indenture referred to therein and
U.S. Trust Company, National Association, as trustee.
4.1.11 Eleventh Supplemental Indenture, dated as of December 31,
1999, by and among the Company, Associated Brake Supply,
Inc., Wheels and Brakes, Inc., any other guarantors party
to the Indenture referred to therein and U.S. Trust
Company, National Association, as trustee.
4.1.12 Twelfth Supplemental Indenture, dated as of February 24,
2000, by and among Oklahoma Truck Supply Assoc., Inc., the
Company, any other guarantors party to the Indenture
referred to therein and U.S. Trust Company, National
Association, as trustee.
10.1 $225.0 million Credit Agreement, dated as of September 30,
1999, among FleetPride Corporation, the Company, as
Borrower, The Several Lenders from Time to Time Parties
Thereto, First Union National Bank, as Documentation Agent,
Credit Suisse First Boston, as Syndication Agent, and The
Chase Manhattan Bank, as Administrative Agent (incorporated
by reference to Exhibit 10.1 to the S-4).
</TABLE>
-2-
<PAGE> 55
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- - - - - - - - - - - - - - - ------- --------------------------------------------------------------
<S> <C>
10.2 Stock Purchase Agreement, dated as of May 29, 1998, by and
among BABF City Corp., the Company and its Affiliates and
Merger Subsidiaries named therein and the Shareholders and
Members of the Company and its Affiliates and Merger
Subsidiaries (incorporated by reference to Exhibit 10.2 to
the S-4).
10.3 Asset Contribution Agreement, dated as of June 19, 1998, by
and among the Company and Stone Heavy Duty, Inc., Ashland
Automotive Parts, Inc., Fred A. Stone, Jr., James T. Stone
and Thomas D. Stone (incorporated by reference to Exhibit
10.3 to the S-4).
10.4 Contribution and Purchase Agreement, dated as of September
30, 1998, by and among FleetPride Corporation, the Company
and Truck & Trailer Parts, Inc., DHP Leasing, Inc., the
Shareholders of Truck & Trailer Parts, Inc. and DHP Leasing,
Inc. (incorporated by reference to Exhibit 10.4 to the S-4).
10.5 Asset Purchase Agreement, dated as of October 31, 1998, by
and among the Company and Tampa Brake & Supply Co., Inc. and
the Shareholders of Tampa Brake & Supply Co., Inc.
(incorporated by reference to Exhibit 10.5 to the S-4).
10.6 Asset Purchase Agreement, dated as of November 4, 1998, by
and among the Company and Connecticut Driveshaft, Inc. and
the Shareholders of Connecticut Driveshaft, Inc.
(incorporated by reference to Exhibit 10.6 to the S-4).
10.7 Stock Purchase Agreement, dated as of December 17, 1998, by
and among FleetPride Corporation, the Company and Truckparts,
Inc., and the Shareholders of Truckparts, Inc. (incorporated
by reference to Exhibit 10.7 to the S-4).
10.8 Stock Purchase Agreement, dated as of January 11, 1999, by
and among FleetPride Corporation, the Company and Associated
Brake Supply, Inc., and the Shareholders of Associated Brake
Supply, Inc. (incorporated by reference to Exhibit 10.8 to
the S-4).
10.9 Stock Purchase Agreement, dated as of January 12, 1999, by
and among FleetPride Corporation, the Company, and the
Shareholders of Tisco, Inc. and Tisco of Redding, Inc.
(incorporated by reference to Exhibit 10.9 to the S-4).
10.10 Trademark License Agreement, dated as of July 6, 1998, by and
between HD America, Inc. and the Company (incorporated by
reference to Exhibit 10.10 to the S-4).
10.11 Management Services Agreement, dated as of September 30,
1999, among FleetPride Corporation, Brentwood Private Equity
Management LLC and Aurora Management Partners LLC
(incorporated by reference to Exhibit 10.11 to the S-4).
10.12 Stock Contribution Agreement, dated as of August 27, 1998, by
and among the parties identified on the signature page
thereto and FleetPride Corporation (incorporated by reference
to Exhibit 10.12 to the S-4).
</TABLE>
<PAGE> 56
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- - - - - - - - - - - - - - - ------ ------------------------------------------------------------------------
<S> <C>
10.14* Stock Purchase Agreement, dated as of July 1, 1998, by and between the
Company and John J. Greisch (incorporated by reference to Exhibit 10.14
to the S-4).
10.15* Stock Purchase Agreement, dated as of July 10, 1998, by and between the
Company and John P. Miller (incorporated by reference to Exhibit 10.15 to
the S-4).
10.16* Stock Purchase, Vesting and Repurchase Agreement, dated as of October 19,
1998, between FleetPride Corporation and Anthony William Cavalle
(incorporated by reference to Exhibit 10.16 to the S-4).
10.17* Stock Purchase Agreement, dated as of March 5, 1999, by and between
FleetPride Corporation and John J. Greisch (incorporated by reference to
Exhibit 10.19 to the S-4).
10.18* Stock Purchase Agreement, dated as of March 5, 1999, by and between
FleetPride Corporation and John P. Miller (incorporated by reference to
Exhibit 10.20 to the S-4).
10.19* Stock Purchase Agreement, dated as of March 5, 1999, by and between
FleetPride Corporation and Anthony William Cavalle (incorporated by
reference to Exhibit 10.21 to the S-4).
10.20 Purchase Agreement, dated April 20, 1999, by and among FleetPride
Corporation and the Company and the Member of Active Gear, L.L.C.
(incorporated by reference to Exhibit 10.23 to the S-4).
10.21 Asset Purchase Agreement dated as of May 28, 1999 by and among the
Company and CNF Transportation Inc. and Vantage Parts of Illinois, Inc.
(incorporated by reference to Exhibit 10.24 to the S-4).
10.22 Stock Purchase Agreement dated as of June 7, 1999 by and among FleetPride
Corporation and the Company and The Shareholders of Superior Truck & Auto
Supply, Inc. (incorporated by reference to Exhibit 10.25 to the S-4).
10.23 Asset Purchase Agreement dated as of August 6, 1999 by and among the
Company and Certified Power, Inc. (incorporated by reference to Exhibit
10.26 to the S-4).
10.24 Asset Purchase Agreement dated as of August 25, 1999 by and among
Associated Brake Supply, Inc., California Equipment Company, California
Equipment Co. of Sacramento and The Shareholders of California Equipment
Company and California Equipment Co. of Sacramento (incorporated by
reference to Exhibit 10.27 to the S-4).
10.25 Agreement and Plan of Merger, dated September 3, 1999, by and among QDSP
Holdings, Inc., FleetPride Corporation and Fleetpride Acquisition
Corporation (incorporated by reference to Exhibit 10.28 to the S-4).
10.26 Stock Purchase Agreement, dated as of October 8, 1999, among the Company
and The Shareholders of Wheels and Brakes, Inc. (incorporated by
reference to Exhibit 10.29 to the S-4).
10.27 Asset Purchase Agreement, dated as of November 19, 1999, by and among
Truck City Parts, Inc. and Southwest Virginia Truck Parts, Inc. and The
Shareholders of Southwest Virginia Truck Parts, Inc.
10.28 Stock Purchase Agreement, dated as of February 24, 2000, by and among
The Company and The Shareholders of Oklahoma Truck Supply Assoc.,
Inc.
10.29* FleetPride Corporation 1999 Equity Incentive Plan.
10.30* Form of Nonqualified Stock Option Agreement, entered into between
FleetPride Corporation and each of John J. Greisch and John P.
Miller, dated November 3, 1999 for 7,000 and 750 options,
respectively, to purchase shares of common stock of FleetPride
Corporation.
12.1 Computation of Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries of The Company.
27.1 Financial Data Schedule.
- - - - - - - - - - - - - - - -------------------------
* Management compensatory plan or arrangement.
</TABLE>
<PAGE> 1
EXHIBIT 3.2
STATE OF ALABAMA
FOR PROFIT CORPORATION
ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION
THIS FORM MAY BE USED TO:
o CHANGE THE CORPORATE TITLE
o CHANGE THE PERIOD OF DURATION
o CHANGE, ENLARGE OR DIMINISH CORPORATE PURPOSES
o INCREASE OR DECREASE AUTHORIZED CAPITAL STOCK
o EXCHANGE, CLASSIFY, RECLASSIFY OR CANCEL SHARES OF STOCK
INSTRUCTIONS
STEP 1: IF CHANGING THE CORPORATION'S NAME, CONTACT THE OFFICE OF THE SECRETARY
OF STATE AT (334) 242-5324 TO RESERVE A CORPORATE NAME.
STEP 2: FILE THE ORIGINAL AND ONE COPY IN THE COUNTY WHERE THE ORIGINAL
ARTICLES OF INCORPORATION ARE FILED (IF THE AMENDMENT CHANGES THE NAME,
THE CERTIFICATE OF NAME RESERVATION MUST BE ATTACHED), IF CHANGING THE
NAME, THE SECRETARY OF STATE'S FILING FEE IS $20.
PURSUANT TO THE PROVISIONS OF THE ALABAMA BUSINESS CORPORATION ACT, THE
UNDERSIGNED HEREBY ADOPTS THE FOLLOWING ARTICLES OF AMENDMENT.
ARTICLE I The name of the corporation.
HDA Parts System, Inc.
ARTICLE II The following amendment was adopted in the manner provided for by
the Alabama Business Corporation Act.
"Article I: The name of the Corporation is FleetPride, Inc."
ARTICLE III The amendment was adopted by the shareholders or directors in the
manner prescribed by law on November 3, 1999.
ARTICLE IV The number of shares outstanding at the time of the adoption was
476,601.711; the number of shares entitled to vote thereon was
476,601.711. (If the shares of any class are entitled to vote
thereon as a class, the designation and number of outstanding
shares entitled to vote thereon of each such class.)
ARTICLE V The number of shares voted for the amendment was 476,601.711 and
the number of shares voted against such amendment was zero (0). (If
no shares have been issued write a statement to that effect.)
Date: November 19, 1999 John J. Greisch President
----------------- ---------------------------------
Type or Print Corporate Officer's
Name and Title
/s/ JOHN J. GREISCH
----------------------------------
Signature of Officer
<PAGE> 2
STATE OF ALABAMA
I, Jim Bennett, Secretary of State of the State of Alabama, having custody of
the Great and Principal Seal of said State, do hereby certify that pursuant to
the provisions of Section 10-2B-4.02, Code of Alabama 1975, and upon an
examination of the corporation records on file in this office, the following
corporate name is reserved as available:
FleetPride, Inc.
This foreign corporation name is proposed to be qualified in the State of
Alabama and is for the exclusive use of Laura Payne, 2000 Interstate Park Drive
Ste 204, Montgomery, AL 36109 for a period of one hundred twenty days beginning
October 25, 1999 and expiring February 23, 2000.
[STAMP]
In Testimony Whereof, I have hereunto set my hand
and affixed the Great Seal of the State, at the
Capitol, in the City of Montgomery, on this day.
October 25, 1999
[SEAL] ------------------------------------------------
Date
/s/ JIM BENNETT
------------------------------------------------
Jim Bennett Secretary of State
<PAGE> 1
EXHIBIT 4.1.9
NINTH SUPPLEMENTAL INDENTURE
Ninth Supplemental Indenture (this "Ninth Supplemental Indenture"),
dated as of December 6, 1999, among the Company (as defined in the Indenture
referred to herein), the Guarantors (as defined in the Indenture referred to
herein) party to the Indenture referred to herein and U.S. Trust Company,
National Association, as trustee under the indenture referred to below (the
"Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture, dated as of July 31, 1998, as supplemented by the First
Supplemental Indenture dated September 30, 1998; the Second Supplemental
Indenture dated December 21, 1998; the Third Supplemental Indenture dated
January 14, 1999; the Fourth Supplemental Indenture dated April 20, 1999; the
Fifth Supplemental Indenture dated June 7, 1999; the Sixth Supplemental
Indenture dated September 27, 1999; the Seventh Supplemental Indenture dated
October 1, 1999; and the Eighth Supplemental Indenture dated October 8, 1999 (as
supplemented, the "Indenture"), providing for the issuance of 12% Senior
Subordinated Notes due 2005 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances, the
Company and the Guarantors may execute and deliver to the Trustee a supplemental
indenture in order to cure any ambiguity, defect or inconsistency in the
Indenture so long as such action does not adversely affect the interests of any
Holder (as defined in the Indenture); and
WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is
authorized to execute and deliver this Ninth Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Company, the Guarantors and the Trustee mutually covenant and agree as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. Name Changes. The Indenture shall hereby be amended to reflect the
following name changes:
(a) HDA Parts System, Inc., an Alabama corporation, shall
hereinafter be referred to as "FleetPride, Inc." or
the "Company";
(b) City Truck Holdings, Inc., a Delaware corporation and
a Guarantor under the Indenture, shall hereinafter be
referred to as "FleetPride Corporation"; and
<PAGE> 2
(c) Fleetpride, Inc., a Delaware corporation and a
Guarantor under the Indenture, shall hereinafter be
referred to as "FleetPride of Agawan, Inc."
3. THIS NINTH SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING, WITHOUT
LIMITATION, SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
4. Counterparts. The parties may sign any number of copies of this
Ninth Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
5. Effect of Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
(signature page follows)
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Ninth
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
FLEETPRIDE, INC. (formerly known as HDA PARTS
SYSTEM, INC.), an Alabama corporation
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
CITY TRUCK AND TRAILER PARTS OF ALABAMA,
INC., an Alabama corporation
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: Vice President
CITY TRUCK AND TRAILER PARTS OF ALABAMA,
L.L.C., an Alabama limited liability company
FLEETPRIDE, INC., as sole member
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
CITY TRUCK AND TRAILER PARTS OF TENNESSEE,
INC., a Tennessee corporation
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: Vice President
CITY FRICTION, INC., an Alabama corporation
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: Vice President
<PAGE> 4
TRUCK & TRAILER PARTS, INC., a Georgia
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
FLEETPRIDE CORPORATION (formerly known as CITY
TRUCK HOLDINGS, INC.) a Delaware corporation
as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
TRUCKPARTS, INC., a Connecticut corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: Chief Executive Officer
ASSOCIATED BRAKE SUPPLY, INC., a California
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: Vice President
ASSOCIATED TRUCK CENTER, INC., a California
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: Vice President
<PAGE> 5
ASSOCIATED TRUCK PARTS OF NEVADA, INC., a
Nevada corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: Vice President
ONYX DISTRIBUTION, INC., a California
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: Vice President
FREEWAY TRUCK PARTS OF WASHINGTON, INC., a
Washington corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: Vice President
TISCO, INC., a California corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: Vice President
<PAGE> 6
TISCO OF REDDING, INC., a California
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: Vice President
ACTIVE GEAR, L.L.C., a Washington limited
liability company, as Guarantor
FLEETPRIDE, INC., as a sole member
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
SUPERIOR TRUCK & AUTO SUPPLY, INC.,
a Massachusetts corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: Vice President
QDSP HOLDINGS, INC., a Delaware corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
QUALITY DISTRIBUTION SERVICE PARTNERS,
INC., a Delaware corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 7
AUTOMOTIVE SALES COMPANY, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
CB ACQUISITION SUB, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
CITY SPRING WORKS, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
FLEETPRIDE OF AGAWAM, INC. (formerly known as
FLEETPRIDE, INC.), a Delaware corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
FOUR-T SALES & SERVICE, INC., a Nebraska
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 8
HOLT INCORPORATED, a Delaware corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
NEW ENGLAND TRUCK & AUTO SERVICE, INC., a
Massachusetts corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
PARTS DISTRIBUTING COMPANY, LTD., a Texas
limited partnership, as Guarantor
PARTS MANAGEMENT COMPANY, as General Partner
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
PARTS HOLDINGS COMPANY, a Nevada corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
PARTS MANAGEMENT COMPANY, a Texas
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 9
POWER EQUIPMENT INTERNATIONAL, INC., a Texas
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
POWER EXPORT DISTRIBUTING COMPANY, a Texas
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
SLM POWER GROUP, INC., a Delaware corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
SPECIALIZED SALES & SERVICE, INC., an Oregon
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 10
TBS, INCORPORATED, an Arizona corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
TRUCK CITY PARTS, INC., a Delaware corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
STATS REMANUFACTURING CENTER, INC., a
Nebraska corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
UNIVERSAL JOINT SALES COMPANY, INC., a
Delaware corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
WHEATLEY TRUCK PARTS, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 11
WHEELS AND BRAKES, INC., a Georgia corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
SPECRITE BRAKE COMPANY, a Georgia corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
-------------------------------------------
Name: John J. Greisch
Title: President
U.S. TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
By: /s/ GARRETT P. SMITH
-------------------------------------------
Name: GARRETT P. SMITH
Title: Assistant Vice President
<PAGE> 1
EXHIBIT 4.1.10
TENTH SUPPLEMENTAL INDENTURE
Tenth Supplemental Indenture (this "Tenth Supplemental Indenture"),
dated as of December 7, 1999 among FleetPride West, Inc. (the "Guarantor"), the
Company (as defined in the Indenture referred to herein), any other Guarantors
(as defined in the Indenture referred to herein) party to the Indenture referred
to herein and U.S. Trust Company, National Association, as trustee under the
indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture, dated as of July 31, 1998, as supplemented by the First
Supplemental Indenture dated September 30, 1998; the Second Supplemental
Indenture dated December 21, 1998; the Third Supplemental Indenture dated
January 14, 1999; the Fourth Supplemental Indenture dated April 20, 1999; the
Fifth Supplemental Indenture dated June 7, 1999; the Sixth Supplemental
Indenture dated September 27, 1999; the Seventh Supplemental Indenture dated
October 1, 1999, the Eighth Supplemental Indenture dated October 8, 1999; and
the Ninth Supplemental Indenture dated December 6, 1999 (as supplemented, the
"Indenture"), providing for the issuance of 12% Senior Subordinated Notes due
2005 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guarantors shall execute and deliver to the Trustee a supplemental indenture
pursuant to which subsequent Guarantors shall unconditionally guarantee all of
the Company's Obligations under the Notes and the Indenture on the terms and
conditions set forth herein (the "Guarantee"); and
WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is
authorized to execute and deliver this Tenth Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guarantor irrevocably and
unconditionally guarantees the Guarantee Obligations, which include (i) the due
and punctual payment of the principal of, premium, if any, and interest and
Liquidated Damages, if any, on the Notes, whether at stated maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and premium, if any, and (to the extent permitted by law)
interest on any interest and Liquidated Damages, if any, on the Notes, and the
due and punctual performance of all other obligations of the Company, to the
Holders or the Trustee all in accordance with the terms set forth in Article XI
of the Indenture, and (ii) in case of any extension of time of payment or
renewal of any Notes or any such other obligations, that the
<PAGE> 2
same will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise.
The obligations of the Guarantor to the Holders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
XI of the Indenture and reference is hereby made to such Indenture for the
precise terms of this Guarantee.
No stockholder, employee, officer, director or incorporator, as such,
past, present or future of the Guarantor shall have any liability under this
Guarantee by reason of his or its status as such stockholder, employee, officer,
director or incorporator.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon the Guarantor and its successors and assigns
until full and final payment of all of the Company's obligations under the Notes
and Indenture or until released in accordance with the Indenture and shall inure
to the benefit of the successors and assigns of the Trustee and the Holders,
and, in the event of any transfer or assignment of rights by any Holder or the
Trustee, the rights and privileges herein conferred upon that party shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof. This is a Guarantee of payment and
not of collectibility.
The Obligations of the Guarantor under its Guarantee shall be limited
to the extent necessary to insure that it does not constitute a fraudulent
conveyance under applicable law.
THE TERMS OF ARTICLE XI OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
3. THIS TENTH SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING, WITHOUT
LIMITATION, SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
4. Counterparts. The parties may sign any number of copies of this
Tenth Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
5. Effect of Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Tenth
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
FLEETPRIDE, INC., an Alabama corporation
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
CITY TRUCK AND TRAILER PARTS OF ALABAMA,
INC., an Alabama corporation
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: Vice President
CITY TRUCK AND TRAILER PARTS OF ALABAMA,
L.L.C., an Alabama limited liability
company
FLEETPRIDE, INC., as sole member
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
CITY TRUCK AND TRAILER PARTS OF TENNESSEE,
INC., a Tennessee corporation
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: Vice President
CITY FRICTION, INC., an Alabama corporation
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: Vice President
<PAGE> 4
TRUCK & TRAILER PARTS, INC., a Georgia
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
FLEETPRIDE CORPORATION, a Delaware
corporation as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
TRUCKPARTS, INC., a Connecticut corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: Chief Executive Officer
ASSOCIATED BRAKE SUPPLY, INC., a California
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: Vice President
ASSOCIATED TRUCK CENTER, INC., a California
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: Vice President
<PAGE> 5
ASSOCIATED TRUCK PARTS OF NEVADA, INC., a
Nevada corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: Vice President
ONYX DISTRIBUTION, INC., a California
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: Vice President
FREEWAY TRUCK PARTS OF WASHINGTON, INC., a
Washington corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: Vice President
TISCO, INC., a California corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: Vice President
TISCO OF REDDING, INC., a California
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: Vice President
<PAGE> 6
ACTIVE GEAR, L.L.C., a Washington limited
liability company, as Guarantor
FLEETPRIDE, INC., as sole member
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
SUPERIOR TRUCK & AUTO SUPPLY, INC.,
a Massachusetts corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: Vice President
QDSP HOLDINGS, INC., a Delaware corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
QUALITY DISTRIBUTION SERVICE PARTNERS,
INC., a Delaware corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
AUTOMOTIVE SALES COMPANY, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 7
CB ACQUISITION SUB, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
CITY SPRING WORKS, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
FLEETPRIDE OF AGAWAM, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
FOUR-T SALES & SERVICE, INC., a Nebraska
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 8
HOLT INCORPORATED, a Delaware corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
NEW ENGLAND TRUCK & AUTO SERVICE, INC., a
Massachusetts corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
PARTS DISTRIBUTING COMPANY, LTD., a Texas
limited partnership, as Guarantor
PARTS MANAGEMENT COMPANY, as General Partner
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
PARTS HOLDINGS COMPANY, a Nevada corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
PARTS MANAGEMENT COMPANY, a Texas
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 9
POWER EQUIPMENT INTERNATIONAL, INC., a Texas
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
POWER EXPORT DISTRIBUTING COMPANY, a Texas
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
SLM POWER GROUP, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
SPECIALIZED SALES & SERVICE, INC., an Oregon
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 10
TBS, INCORPORATED, an Arizona corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
TRUCK CITY PARTS, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
STATS REMANUFACTURING CENTER, INC., a
Nebraska corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
UNIVERSAL JOINT SALES COMPANY, INC., a
Delaware corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
WHEATLEY TRUCK PARTS, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 11
WHEELS AND BRAKES, INC., a Georgia
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
SPECRITE BRAKE COMPANY, a Georgia
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: President
U.S. TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
By: /s/ GARRETT P. SMITH
-----------------------------------------
Name: GARRETT P. SMITH
Title: Assistant Vice President
FLEETPRIDE WEST, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
-----------------------------------------
Name: John J. Greisch
Title: Vice President
<PAGE> 1
EXHIBIT 4.1.11
ELEVENTH SUPPLEMENTAL INDENTURE
Eleventh Supplemental Indenture (this "Eleventh Supplemental
Indenture"), dated as of December 31, 1999, among the Company (as defined in the
Indenture referred to herein), Associated Brake Supply, Inc. ("ABS"), Wheels and
Brakes, Inc. ("Wheels and Brakes"), any other Guarantors (as defined in the
Indenture referred to herein) party to the Indenture referred to herein and U.S.
Trust Company, National Association, as trustee under the indenture referred to
below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture, dated as of July 31, 1998, as supplemented by the First
Supplemental Indenture dated September 30, 1998; the Second Supplemental
Indenture dated December 21, 1998; the Third Supplemental Indenture dated
January 14, 1999; the Fourth Supplemental Indenture dated April 20, 1999; the
Fifth Supplemental Indenture dated June 7, 1999; the Sixth Supplemental
Indenture dated September 27, 1999; the Seventh Supplemental Indenture dated
October 1, 1999; the Eighth Supplemental Indenture dated October 8, 1999; the
Ninth Supplemental Indenture dated December 6, 1999; and the Tenth Supplemental
Indenture dated December 7, 1999 (as supplemented, the "Indenture"), providing
for the issuance of 12% Senior Subordinated Notes due 2005 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guarantors shall execute and deliver to the Trustee a supplemental indenture
pursuant to which subsequent Guarantors shall unconditionally guarantee all of
the Company's Obligations under the Notes and the Indenture (the "Guarantee");
WHEREAS, the Company's wholly owned subsidiaries, City Truck & Trailer
Parts of Alabama, Inc. ("City Truck Alabama"), City Truck & Trailer Parts of
Tennessee, Inc. ("City Truck Tennessee"), City Friction, Inc. ("City Friction"
and, together with City Truck Alabama and City Truck Tennessee, the "City Truck
Subsidiaries"), Wheels and Brakes, Specrite Brake Company ("Specrite"), ABS,
Freeway Truck Parts of Washington, Inc. ("FTP") and Associated Truck Parts of
Nevada, Inc. ("ATP" and, together with FTP, the "Associated Subsidiaries"), have
previously unconditionally guaranteed all of the Company's Obligations under the
Notes and the Indenture;
WHEREAS, the Indenture provides that Guarantors under the Indenture may
merge with another person so long as the person surviving such merger assumes
all of the Obligations of each such merged Guarantor pursuant to a supplemental
indenture;
WHEREAS, each of the City Truck Subsidiaries has merged with and into
the Company, with the Company as the surviving corporation in the merger;
WHEREAS, Specrite has merged with and into Wheels and Brakes, with
Wheels and Brakes as the surviving corporation in the merger;
<PAGE> 2
WHEREAS, each of the Associated Subsidiaries has merged with and into
ABS, with ABS as the surviving corporation in the merger;
WHEREAS, the Indenture provides that (i) the Company must
unconditionally guarantee, on a senior subordinated basis, all of the City Truck
Subsidiaries' obligations under the City Truck Subsidiaries' Guarantee and the
Indenture, (ii) Wheels and Brakes must unconditionally guarantee, on a senior
subordinated basis, all of Specrite's obligations under Specrite's Guarantee and
the Indenture and (iii) ABS must unconditionally guarantee, on a senior
subordinated basis, all of the Associated Subsidiaries' obligations under the
Associated Subsidiaries' Guarantee and the Indenture; and
WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is
authorized to execute and deliver this Eleventh Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Company, ABS, Wheels and Brakes and the Trustee mutually covenant and agree for
the equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. (a) The Company irrevocably and
unconditionally guarantees the Guarantee Obligations of the City Truck
Subsidiaries, (b) Wheels and Brakes irrevocably and unconditionally guarantees
the Guarantee Obligations of Specrite and (c) ABS irrevocably and
unconditionally guarantees the Guarantee Obligations of the Associated
Subsidiaries, each of which include (i) the due and punctual payment of the
principal of, premium, if any, and interest and Liquidated Damages, if any, on
the Notes, whether at stated maturity, by acceleration or otherwise, the due and
punctual payment of interest on the overdue principal and premium, if any, and
(to the extent permitted by law) interest on any interest and Liquidated
Damages, if any, on the Notes, and the due and punctual performance of all other
obligations of the Company, to the Holders or the Trustee all in accordance with
the terms set forth in Article XI of the Indenture and (ii) in case of any
extension of time of payment or renewal of any Notes or any such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise.
The obligations of the Company, ABS and Wheels and Brakes to the
Holders and to the Trustee pursuant to this Guarantee and the Indenture are
expressly set forth in Article XI of the Indenture and reference is hereby made
to such Indenture for the precise terms of this Guarantee.
No stockholder, employee, officer, director or incorporator, as such,
past, present or future of the Company, ABS or Wheels and Brakes shall have any
liability under this Guarantee by reason of his or its status as such
stockholder, employee, officer, director or incorporator.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon the Company, ABS and Wheels and Brakes and
their respective successors and assigns until full and final payment of all of
the Company's obligations under the Notes and
2
<PAGE> 3
Indenture or until released in accordance with the Indenture and shall inure to
the benefit of the successors and assigns of the Trustee and the Holders, and,
in the event of any transfer or assignment of rights by any Holder or the
Trustee, the rights and privileges herein conferred upon that party shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof. This is a Guarantee of payment and
not of collectibility.
The Obligations of the Company, ABS and Wheels and Brakes under its
Guarantee shall be limited to the extent necessary to insure that it does not
constitute a fraudulent conveyance under applicable law.
THE TERMS OF ARTICLE XI OF THE INDENTURE ARE INCORPORATED
HEREIN BY REFERENCE.
3. THIS ELEVENTH SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING,
WITHOUT LIMITATION, SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
4. Counterparts. The parties may sign any number of copies of this
Eleventh Supplemental Indenture. Each signed copy shall be an original, but all
of them together represent the same agreement.
5. Effect of Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
(signature page follows)
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Eleventh
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
FLEETPRIDE, INC., an Alabama corporation
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
CITY TRUCK AND TRAILER PARTS OF ALABAMA,
L.L.C., an Alabama limited liability company
By: FLEETPRIDE, INC., its sole member
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
TRUCK & TRAILER PARTS, INC., a Georgia
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
FLEETPRIDE CORPORATION, a Delaware corporation
as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
TRUCKPARTS, INC., a Connecticut corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: Chief Executive Officer
<PAGE> 5
ASSOCIATED BRAKE SUPPLY, INC., a California
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: Vice President
ASSOCIATED TRUCK CENTER, INC., a California
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: Vice President
ONYX DISTRIBUTION, INC., a California corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: Vice President
TISCO, INC., a California corporation, as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: Vice President
TISCO OF REDDING, INC., a California corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: Vice President
<PAGE> 6
ACTIVE GEAR, L.L.C., a Washington limited liability
company, as Guarantor
By: FLEETPRIDE, INC., its sole member
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
SUPERIOR TRUCK & AUTO SUPPLY, INC.,
a Massachusetts corporation, as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: Vice President
QDSP HOLDINGS, INC., a Delaware corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
QUALITY DISTRIBUTION SERVICE PARTNERS,
INC., a Delaware corporation, as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
AUTOMOTIVE SALES COMPANY, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 7
CB ACQUISITION SUB, INC., a Delaware corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
CITY SPRING WORKS, INC., a Delaware corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
FLEETPRIDE OF AGAWAM, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
FOUR-T SALES & SERVICE, INC., a Nebraska
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
HOLT INCORPORATED, a Delaware corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 8
NEW ENGLAND TRUCK & AUTO SERVICE, INC., a
Massachusetts corporation, as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
PARTS DISTRIBUTING COMPANY, LTD., a Texas
limited partnership, as Guarantor
By: PARTS MANAGEMENT COMPANY, its General
Partner
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
PARTS HOLDINGS COMPANY, a Nevada corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
PARTS MANAGEMENT COMPANY, a Texas
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
POWER EQUIPMENT INTERNATIONAL, INC., a Texas
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 9
POWER EXPORT DISTRIBUTING COMPANY, a Texas
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
SLM POWER GROUP, INC., a Delaware corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
SPECIALIZED SALES & SERVICE, INC., an Oregon
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
TBS, INCORPORATED, an Arizona corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
TRUCK CITY PARTS, INC., a Delaware corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 10
STATS REMANUFACTURING CENTER, INC., a
Nebraska corporation, as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
UNIVERSAL JOINT SALES COMPANY, INC., a
Delaware corporation, as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
WHEATLEY TRUCK PARTS, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
WHEELS AND BRAKES, INC., a Georgia corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: President
FLEETPRIDE WEST, INC., a Delaware corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
------------------------------------------------
Name: John J. Greisch
Title: Vice President
<PAGE> 11
U.S. TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
By: /s/ GARRETT P. SMITH
------------------------------------------------
Name: Garrett P. Smith
Title: Assistant Vice President
<PAGE> 1
EXHIBIT 4.1.12
TWELFTH SUPPLEMENTAL INDENTURE
Twelfth Supplemental Indenture (this "Twelfth Supplemental Indenture"),
dated as of February 24, 2000, among the Company (as defined in the Indenture
referred to herein), Oklahoma Truck Supply Assoc., Inc., an Oklahoma corporation
(the "Guarantor"), any other Guarantors (as defined in the Indenture referred to
herein) party to the Indenture referred to herein and U.S. Trust Company,
National Association, as trustee under the indenture referred to below (the
"Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture, dated as of July 31, 1998 (as supplemented through the
date hereof, the "Indenture"), providing for the issuance of 12% Senior
Subordinated Notes due 2005 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guarantors shall execute and deliver to the Trustee a supplemental indenture
pursuant to which subsequent Guarantors shall unconditionally guarantee all of
the Company's Obligations under the Notes and the Indenture on the terms and
conditions set forth herein (the "Guarantee"); and
WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is
authorized to execute and deliver this Twelfth Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guarantor irrevocably and
unconditionally guarantees the Guarantee Obligations, which include (i) the due
and punctual payment of the principal of, premium, if any, and interest and
Liquidated Damages, if any, on the Notes, whether at stated maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal and premium, if any, and (to the extent permitted by law)
interest on any interest and Liquidated Damages, if any, on the Notes, and the
due and punctual performance of all other obligations of the Company, to the
Holders or the Trustee all in accordance with the terms set forth in Article XI
of the Indenture, and (ii) in case of any extension of time of payment or
renewal of any Notes or any such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of the Guarantor to the Holders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
XI of the Indenture and reference is hereby made to such Indenture for the
precise terms of this Guarantee.
<PAGE> 2
No stockholder, employee, officer, director or incorporator, as such,
past, present or future of the Guarantor shall have any liability under this
Guarantee by reason of his or its status as such stockholder, employee, officer,
director or incorporator.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon the Guarantor and its successors and assigns
until full and final payment of all of the Company's obligations under the Notes
and Indenture or until released in accordance with the Indenture and shall inure
to the benefit of the successors and assigns of the Trustee and the Holders,
and, in the event of any transfer or assignment of rights by any Holder or the
Trustee, the rights and privileges herein conferred upon that party shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof. This is a Guarantee of payment and
not of collectibility.
The Obligations of the Guarantor under its Guarantee shall be limited
to the extent necessary to insure that it does not constitute a fraudulent
conveyance under applicable law.
THE TERMS OF ARTICLE XI OF THE INDENTURE ARE INCORPORATED
HEREIN BY REFERENCE.
3. THIS TWELFTH SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING,
WITHOUT LIMITATION, SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
4. Counterparts. The parties may sign any number of copies of this
Twelfth Supplemental Indenture. Each signed copy shall be an original, but all
of them together represent the same agreement.
5. Effect of Headings. The Section headings herein are for convenience
only and shall not affect the construction hereof.
(signature page follows)
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Twelfth
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
FLEETPRIDE, INC. (formerly known as HDA Parts
System, Inc.), an Alabama corporation
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
CITY TRUCK AND TRAILER PARTS OF ALABAMA,
L.L.C., an Alabama limited liability company
By: FLEETPRIDE, INC., its sole member
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
TRUCK & TRAILER PARTS, INC., a Georgia
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
FLEETPRIDE CORPORATION (formerly known as City
Truck Holdings, Inc.), a Delaware
corporation as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 4
TRUCKPARTS, INC., a Connecticut corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: Chief Executive Officer
ASSOCIATED BRAKE SUPPLY, INC., a California
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: Vice President
ASSOCIATED TRUCK CENTER, INC., a California
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: Vice President
ONYX DISTRIBUTION, INC., a California corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: Vice President
TISCO, INC., a California corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: Vice President
<PAGE> 5
TISCO OF REDDING, INC., a California corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: Vice President
ACTIVE GEAR, L.L.C., a Washington limited liability
company, as Guarantor
By: FLEETPRIDE, INC., its sole member
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
SUPERIOR TRUCK & AUTO SUPPLY, INC.,
a Massachusetts corporation, as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: Vice President
QDSP HOLDINGS, INC., a Delaware corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
QUALITY DISTRIBUTION SERVICE PARTNERS, INC.,
a Delaware corporation, as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 6
AUTOMOTIVE SALES COMPANY, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
CB ACQUISITION SUB, INC., a Delaware corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
CITY SPRING WORKS, INC., a Delaware corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
FLEETPRIDE OF AGAWAM, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
FOUR-T SALES & SERVICE, INC., a Nebraska
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 7
HOLT INCORPORATED, a Delaware corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
NEW ENGLAND TRUCK & AUTO SERVICE, INC., a
Massachusetts corporation, as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
PARTS DISTRIBUTING COMPANY, LTD., a Texas
limited partnership, as Guarantor
By: PARTS MANAGEMENT COMPANY, its General
Partner
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
PARTS HOLDINGS COMPANY, a Nevada corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
PARTS MANAGEMENT COMPANY, a Texas corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 8
POWER EQUIPMENT INTERNATIONAL, INC., a Texas
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
POWER EXPORT DISTRIBUTING COMPANY, a Texas
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
SLM POWER GROUP, INC., a Delaware corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
SPECIALIZED SALES & SERVICE, INC., an Oregon
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 9
TBS, INCORPORATED, an Arizona corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
TRUCK CITY PARTS, INC., a Delaware corporation, as
Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
STATS REMANUFACTURING CENTER, INC., a
Nebraska corporation, as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
UNIVERSAL JOINT SALES COMPANY, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
WHEATLEY TRUCK PARTS, INC., a Delaware
corporation, as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 10
WHEELS AND BRAKES, INC., a Georgia corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
FLEETPRIDE WEST, INC., a Delaware corporation,
as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: Vice President
U.S. TRUST COMPANY, NATIONAL ASSOCIATION,
as Trustee
By: /s/ GARRETT P. SMITH
--------------------------------------------
Name: Garrett P. Smith
Title: Assistant Vice President
OKLAHOMA TRUCK SUPPLY ASSOC., INC., an
Oklahoma corporation, as Guarantor
By: /s/ JOHN J. GREISCH
--------------------------------------------
Name: John J. Greisch
Title: President
<PAGE> 1
Exhibit 10.27
ASSET PURCHASE AGREEMENT
BY AND AMONG
TRUCK CITY PARTS, INC.
AND
SOUTHWEST VIRGINIA TRUCKS PARTS, INC.
AND
THE SHAREHOLDERS OF SOUTHWEST VIRGINIA TRUCKS PARTS, INC.
NOVEMBER 19, 1999
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I...................................................................1
1.1. Estimated Purchase Price..........................................1
1.2. Post-Closing Purchase Price Adjustment............................1
(a) Closing Balance Sheet..........................................1
(b) Closing Balance Sheet Notice...................................2
(c) Post-Closing Adjustment........................................2
1.3. Transfer of Assets................................................3
1.4. Assumption of Liabilities.........................................3
1.5. Excluded Liabilities..............................................3
1.6. Allocation of Purchase Price......................................4
ARTICLE II..................................................................5
2.1. Closing...........................................................5
2.2. Conveyances at Closing............................................5
(a) Instruments and Possession........................................5
(b) Assumption Document............................................6
(c) Form of Instruments............................................6
(d) Consents.......................................................6
2.3. Payment of Estimated Purchase Price...............................6
ARTICLE III.................................................................6
3.1. Corporate Organization and Standing...............................6
3.2. Authorization.....................................................6
3.3. No Conflict or Violation..........................................7
3.4. Facilities........................................................7
(a) Actions........................................................7
(b) Leases or Other Agreements.....................................7
(c) Facility Leases and Leased Real Property.......................7
(d) Certificate of Occupancy.......................................8
(e) Utilities......................................................8
(f) Improvements, Fixtures and Equipment...........................8
(g) Flood Risk.....................................................8
(h) No Special Assessment..........................................8
3.5. Assets............................................................9
3.6. Financial Statements..............................................9
3.7. Books and Records.................................................9
3.8. Litigation........................................................9
3.9. Licenses and Permits; Compliance with Laws........................9
3.10. Tax Matters...................................................10
3.11. Brokers, Finders..............................................10
3.12. Absence of Certain Changes....................................11
3.13. Material Contracts............................................12
3.14. Proprietary Rights............................................14
3.15. Labor Matters.................................................14
3.16. Consents......................................................15
3.17. Employee Benefit Plans; Employment Agreements.................15
(a) Plans.........................................................15
(b) Pension and Welfare Benefit Plans.............................15
3.18. Compliance with Environmental Laws............................17
(a) Definitions...................................................17
i
<PAGE> 3
(b) Notice of Violation............................................19
(c) Environmental Conditions.......................................19
(d) Environmental Audits or Assessments............................19
(e) Indemnification Agreements.....................................19
(f) Releases or Waivers............................................19
(g) Notices, Warnings and Records..................................19
(h) Compliance.....................................................19
(i) Hazardous Substances...........................................19
(j) Underground Storage Tanks......................................20
(k) Asbestos Containing Material...................................20
(l) Liens..........................................................20
3.19. Certain Business Relationships with the Company................20
3.20. Undisclosed Liabilities........................................20
3.21. Insurance......................................................20
3.22. Accounts Receivable............................................20
3.23. Inventory......................................................21
3.24. Payments.......................................................21
3.25. Customers, Distributors and Suppliers..........................21
3.26. Material Misstatements Or Omissions............................21
ARTICLE IV..................................................................22
4.1. Corporate Organization and Standing...............................22
4.2. Authorization.....................................................22
4.3. No Conflict or Violation..........................................22
ARTICLE V...................................................................23
5.1. Further Assurances................................................23
5.2. Employee-Related Matters..........................................23
ARTICLE VI..................................................................24
6.1. No Injunctive Proceedings.........................................24
6.2. Representations and Warranties....................................24
6.3. Performance of Agreements; Instruments of Transfer................24
6.4. Compliance Certificate............................................24
6.5. Opinion of Counsel................................................24
6.6. Ancillary Agreements..............................................24
6.7. Consents, Etc.....................................................24
6.8. Nonforeign Affidavit..............................................25
ARTICLE VII.................................................................25
7.1. No Injunctive Proceedings.........................................25
7.2. Representations and Warranties....................................25
7.3. Performance of Agreements; Instruments of Transfer................25
7.4. Compliance Certificate............................................25
7.5. Ancillary Agreements..............................................25
7.6. Consents; Etc.....................................................25
ARTICLE VIII................................................................26
8.1. Collection of Accounts Receivable and Letters of Credit...........26
8.2. Assignability and Consents........................................26
8.3. Trade Names.......................................................26
8.4. Indemnification by the Company and the Existing Shareholders......26
8.5. Indemnification by Truck City.....................................27
8.6. Survival of Representations, Warranties and Covenants.............27
8.7. Threshold.........................................................27
8.8. Notice and Opportunity to Defend..................................28
ii
<PAGE> 4
8.9. Indemnification Payments..........................................28
ARTICLE IX..................................................................28
9.1. Expenses..........................................................28
9.2. Notices...........................................................28
9.3. Counterparts......................................................30
9.4. Entire Agreement..................................................30
9.5. Headings..........................................................30
9.6. Assignment; Amendment of Agreement................................30
9.7. Governing Law.....................................................30
9.8. Further Assurances................................................30
9.9. No Third Party Rights.............................................30
9.10. NonWaiver......................................................30
9.11. Severability...................................................30
9.12. Incorporation of Exhibits and Schedules........................31
9.13. Knowledge......................................................31
iii
<PAGE> 5
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of
November 19, 1999, is entered into by and among Truck City Parts, Inc., a
Delaware corporation ("Truck City"), Southwest Virginia Truck Parts, Inc., a
Virginia corporation (the "Company"), and C. Lloyd Lester ("Lester"), Judy C.
Lester, Lescia L. Skeens and Cheria L. Sturgill the shareholders of the Company
(each individually an "Existing Shareholder" and collectively, the "Existing
Shareholders"). Truck City, the Company and the Existing Shareholders are
referred to herein as each a "Party" and collectively, the "Parties."
RECITALS
WHEREAS, the Company and Lester own certain Assets (as defined
in Annex A) that are used or held for use in its business of distributing
aftermarket parts and ancillary services to the domestic heavy duty vehicle
market (the "Business");
WHEREAS, the Existing Shareholders collectively own
all of the issued and outstanding voting capital stock of the Company;
WHEREAS, Truck City desires to acquire and the Company and
Lester desire to sell, the Assets, other than the Excluded Assets (as defined in
Annex A); and
WHEREAS, the Existing Shareholders have determined that the
transactions set forth in this Agreement are in the best interests of the
Company and such transactions will benefit, directly and indirectly, the
Existing Shareholders;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth herein, the Parties hereby agree as
follows:
ARTICLE I.
PURCHASE AND SALE
1.1. Estimated Purchase Price. Upon the terms
and subject to the conditions set forth herein, Truck City will
purchase from the Company and Lester the Assets for an aggregate
purchase price (the "Estimated Purchase Price") of $1,200,000.
1.2. Post-Closing Purchase Price Adjustment.
(a) Closing Balance Sheet. The Company will prepare at its
expense a balance sheet of the Company dated the Closing Date (the "Closing
Balance Sheet"), prepared from its books and records and prepared in accordance
with generally accepted accounting principles ("GAAP"). The Company will also
prepare a calculation, as of the Closing Date based on the Closing Balance
Sheet, of Net Asset Value ("Closing Net Asset Value"), which
<PAGE> 6
calculation will be prepared in accordance with GAAP and on a basis consistent
with the Net Asset Value calculation reflected on Schedule 1.2 hereto. For such
purpose, Truck City shall afford the Company and the Company's agents and
representatives reasonable access to all books, records and work papers
necessary to prepare the Closing Balance Sheet that are in Truck City's
possession or control. The Company will deliver such Closing Balance Sheet and
such calculation to Truck City within 30 days after the Closing.
(b) Closing Balance Sheet Notice.
(i) Within 15 days of the receipt of the Closing
Balance Sheet and the calculation of Closing Net Asset Value, Truck
City will deliver to the Company a written notice certifying that
either (A) it agrees with such Closing Balance Sheet and calculation or
(B) it disagrees with such Closing Balance Sheet and calculation, in
which case Truck City will also provide therewith a reasonably detailed
written report stating the basis for disagreement with such Closing
Balance Sheet and such calculation (the "Closing Balance Sheet
Notice").
(ii) If the Closing Balance Sheet Notice is not
timely given as described in Section 1.2(b)(i), the Closing Balance
Sheet and the calculation of Closing Net Asset Value shall be final,
binding and conclusive upon the Parties. If the Closing Balance Sheet
Notice is properly given and the Company disagrees with such Closing
Balance Sheet Notice, and if the disagreement is not resolved by mutual
agreement among the Parties within 30 days following delivery of the
Closing Balance Sheet Notice, such dispute will be resolved by a "Big
5" accounting firm ("BFAF"), other than PricewaterhouseCoopers LLP,
selected by mutual agreement of Truck City and the Company. The costs
of resolving such a dispute shall be borne equally by Truck City and
the Company.
(iii) Upon appointment of a BFAF, such BFAF in
consultation with the Parties shall establish a schedule for resolution
of the dispute that is reasonably calculated to result in a resolution
as expeditiously as practicable, and in any event, no later than six
months after the Closing Date. In resolving such dispute, the BFAF
shall revise the Closing Balance Sheet and the calculation of Closing
Net Asset Value only with respect to the issues raised in the Closing
Balance Sheet Notice and only to the extent necessary to make it
conform to the practices, procedures and methods described in Section
1.2(a) above. The decision of the BFAF shall be final and binding on
the Parties in the absence of manifest error.
(c) Post-Closing Adjustment. Within two business days after a
final resolution by the BFAF of such disagreements as may arise out of the
review of the Closing Balance Sheet in accordance with Section 1.2(b) above, and
an appropriate adjustment to the Closing Balance Sheet and the calculation of
Closing Net Asset Value to reflect such resolution, or, if Section 1.2(b)(i)(A)
or the first sentence of Section 1.2(b)(ii) applies, two business days after
delivery of, or expiration of the period for delivering, the Closing Balance
Sheet Notice (as applicable), the Estimated Purchase Price will be adjusted (as
so adjusted, the "Purchase Price"). If Closing Net Asset Value is less than
$700,000, the difference and interest thereon will be due and payable to Truck
City by the Company; however, to the extent Closing Net Asset Value is
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<PAGE> 7
more than $700,000, the excess and interest thereon will be due and payable to
the Company by Truck City. Any amounts payable pursuant to this paragraph shall
bear interest from the Closing Date through the date of payment at an annual
rate equal to LIBOR as reported in The Wall Street Journal on the Closing Date.
1.3. Transfer of Assets. Upon the terms and subject to the
conditions set forth herein, at the Closing, the Company will sell to Truck
City, and Truck City will purchase from the Company, the Assets, free and clear
of all encumbrances other than Permitted Encumbrances (as defined in Section
3.5).
1.4. Assumption of Liabilities. Upon the terms and subject to
the conditions contained herein, at the Closing, Truck City shall assume and
shall thereafter pay, perform and discharge as and when due the liabilities and
obligations of the Business arising out of accounts payable of the Business
outstanding as of the Closing Date and calculated in a manner consistent with
Schedule 1.2 hereto (including those liabilities listed on Exhibit A to Schedule
1.2), and only those liabilities and obligations (the "Assumed Liabilities").
1.5. Excluded Liabilities. Notwithstanding any other provision
of this Agreement, except for the Assumed Liabilities expressly referred to in
Section 1.4, Truck City shall not assume, or otherwise be responsible for, the
Company's liabilities or obligations, whether actual or contingent, matured or
unmatured, liquidated or unliquidated, known or unknown, or related or unrelated
to the Business or the Assets, whether arising out of occurrences prior to, at
or after the date hereof (collectively, the "Excluded Liabilities"), which
Excluded Liabilities include, without limitation:
(a) All liabilities and obligations of the
Company arising out of or related to any of the Excluded Assets;
(b) All liabilities and obligations of the Company in respect
of any costs arising out of or related to the sale and transfer of the Assets,
including without limitation, all broker's or finder's fees and expenses and all
fees and expenses of any attorneys and accountants of the Company;
(c) All liabilities and obligations of the
Company in respect of any Tax (as defined in Section 3.10)
attributable to any period ending on or before the Closing Date;
(d) All liabilities and obligations to or in respect of any
employees or former employees, agents or independent contractors of, or other
persons providing services to, the Company, including, without limitation, (i)
any employment, incentive or severance agreement, whether or not written,
between the Company and any person, (ii) all liabilities under any Employee
Benefit Plan (as defined in Section 3.17(a)) at any time maintained, contributed
to or required to be contributed to by or with respect to the Company or under
which the Company may incur liability, or any contributions, benefits or
liabilities therefor, or any liability with respect to the Company's withdrawal
or partial withdrawal from or termination of any Employee Benefit Plan and (iii)
all claims of an unfair labor practice, or any claim under any state
unemployment compensation or worker's compensation law or regulation or under
any federal or
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state employment discrimination law or regulation, which shall have been
asserted on or prior to the Closing Date or is based on acts or omissions that
occurred on or prior to the Closing Date;
(e) All liabilities and obligations of the Company relating to
any claim, suit, litigation, proceeding or investigation pending on the date
hereof, or instituted hereafter, that is based in whole or in part on events or
conditions occurring or existing in connection with, arising out of, resulting
from or relating to, directly or indirectly, the operation of the Business prior
to the Closing Date, or the ownership, possession, use or sale of the Assets
prior to the Closing Date;
(f) All liabilities and obligations of the Company arising out
of or related to any indebtedness for borrowed money owing to the Company or any
of its affiliates;
(g) All claims, liabilities or obligations (including, without
limitation, fines, penalties, punitive damages, legal fees and expenses and all
other damages and losses), irrespective of the actual or alleged basis therefor,
that is based in whole or in part on events or conditions occurring or existing
prior to the Closing in connection with, arising out of, resulting from or
relating to, directly or indirectly, (i) any applicable laws regulating or
establishing quality criteria or standards for air, water, land, noise or
industrial safety and health, providing for remediation of environmental
conditions or otherwise relating to the environment, whether existing as of the
date hereof or subsequently amended, enacted or promulgated, (ii) employee
health and safety or (iii) compliance with any laws or regulations relating to
any of the foregoing;
(h) All liabilities and obligations arising from or relating
to any injury to or death of any person or damage to or destruction of any
property, whether based on negligence, breach of warranty, strict liability,
enterprise liability or any other legal or equitable theory arising, in whole or
in part, from defects in products sold or services performed by or on behalf of
the Company or any other person or entity on or prior to the Closing Date, or
arising from any other cause, irrespective of the act and/or alleged basis
therefor, that is based in whole or in part on events or conditions occurring or
existing on or prior to the Closing Date, including without limitation any
liabilities arising (on a date of occurrence basis or otherwise) relating to the
use or misuse of equipment or to traffic accidents; and
(i) Without limitation by the specific enumeration of the
foregoing, any liabilities not expressly assumed by, or subject to
indemnification obligations of, Truck City.
1.6. Allocation of Purchase Price. The sum of (a) the Purchase
Price (as adjusted pursuant to Section 1.2 hereof) plus (b) the Assumed
Liabilities (collectively, the "Allocable Amount") represents the amount agreed
upon by the Parties to be the aggregate consideration paid for the Assets, and
shall be allocated among the Assets in accordance with a schedule (the
"Allocation Schedule") to be agreed after the Closing Date by Truck City and the
Company. Truck City shall prepare and deliver the Allocation Schedule to the
Company for its review and approval within 45 days after the period for making
any adjustment to the Purchase Price expires (as provided in Section 1.2
hereof), and the Company shall deliver to Truck City any proposed adjustment
thereto within 30 days of its receipt of the Allocation Schedule. If the Company
does not deliver to Truck City proposed adjustments to the Allocation Schedule
within
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<PAGE> 9
such time, it shall be deemed to agree with the Allocation Schedule as prepared
by Truck City. In the event of any disagreement, Truck City and the Company
shall negotiate in good faith for a resolution of the allocation. The Allocation
Schedule shall comply with the requirements of Section 1060 of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations promulgated
thereunder. Truck City and the Company shall (i) report for all Tax purposes the
purchase of the Assets in a manner consistent with the Allocation Schedule and
in a manner consistent with all applicable rules and regulations; (ii) timely
file a Form 8594 in accordance with the requirements of Section 1060 of the Code
and this Section 1.6; (iii) not assert, in connection with any Tax Return, Tax
audit or similar proceedings, any allocation of the Allocable Amount that
differs from that agreed to herein; and (iv) notify the other in the event any
taxing authority is taking or proposing to take a position inconsistent with
such allocation.
ARTICLE II.
CLOSING
2.1. Closing. The Closing of the transactions contemplated
herein (the "Closing") shall be held at 10:00 a.m. local time on November 19,
1999 (the "Closing Date") at the offices of Jones, Day, Reavis & Pogue, 77 West
Wacker, Chicago, Illinois 60601. The place of the Closing and the Closing Date
may be varied by agreement among the Parties.
2.2. Conveyances at Closing.
(a) Instruments and Possession. To effect the sale and
transfer of Assets referred to in Section 1.3 hereof, the Company will, at the
Closing, execute and deliver to Truck City:
(i) one or more Bills of Sale, in the form
attached hereto as Exhibit A, conveying in the aggregate all of the
personal property owned by the Company included in the Assets;
(ii) subject to Section 8.2, Assignments of Lease
in the form attached hereto as Exhibit B with respect to those leases
that Truck City will assume;
(iii) subject to Section 8.2, Assignments of
Contract Rights in the form attached hereto as Exhibit C with respect
to those contracts that Truck City will assume;
(iv) subject to Section 8.2, Assignments of
Patents and Trademarks and other Proprietary Rights (including an
assignment of all rights, title and interest of the Company to the name
"Southwest Virginia Truck Parts" and all variations thereof) each in
the form attached hereto as Exhibit D, in recordable form to the extent
necessary to assign such rights; and
(v) such other instruments as shall be requested
by Truck City to vest in Truck City title in and to the Assets in
accordance with the provisions hereof.
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(b) Assumption Document. Upon the terms and subject to the
conditions set forth herein, at the Closing, Truck City shall deliver to the
Company an instrument of assumption substantially in the form attached hereto as
Exhibit E, evidencing Truck City's assumption of the Assumed Liabilities (the
"Assumption Document").
(c) Form of Instruments. To the extent that a form of any
document to be delivered hereunder is not attached as an Exhibit hereto, such
documents shall be in form and substance, and shall be executed and delivered in
a manner reasonably satisfactory to Truck City and the Company.
(d) Consents. The Company shall deliver all Licenses and
Permits (as defined herein) and any other third party consents required for the
valid transfer of the Assets as contemplated by this Agreement.
2.3. Payment of Estimated Purchase Price. Truck City shall
wire transfer at the Closing, $1,200,000 in immediately available funds in the
amount or amounts and to the bank account or accounts designated by the Company
in writing (less 5% of the Purchase Price to be delivered to the Escrow Agent
(as defined in Section 6.6) pursuant to Section 8.9 hereof).
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE EXISTING SHAREHOLDERS
The Company and each Existing Shareholder jointly and
severally represent and warrant to Truck City as follows, except as set forth in
a disclosure schedule ("Schedule") attached hereto and made a part hereof, the
number of each Schedule corresponding to the Section number to which it refers:
3.1. Corporate Organization and Standing. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Virginia and has all requisite corporate power and authority to
own or lease its properties and to carry on its business as presently conducted.
The Company has delivered to Truck City or its representatives complete and
correct copies of its Articles of Incorporation and Bylaws and all amendments
thereto. The Company is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the nature of its business
as now being conducted by it or the property owned or leased by it makes such
qualification necessary, all of which are listed on Schedule 3.1. Schedule 3.1
contains a list entitled "Existing Shareholders" which sets forth a true,
correct and complete list of each of the shareholders of the Company and each of
their respective holdings of the Company and no other person or entity owns any
equity interest in the Company. The Company has no subsidiaries.
3.2. Authorization. This Agreement, the Ancillary Agreements
(as defined) to which the Company is a party and the transactions contemplated
hereby and thereby have been duly authorized by the Company. This Agreement and
the Ancillary Agreements have been duly executed and delivered by the Company
and the Existing Shareholders, who own 100% of the voting capital stock of the
Company, party thereto and are the legal, valid and binding
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obligations of the Company and the Existing Shareholders, enforceable against
the Company and the Existing Shareholders in accordance with their terms.
3.3. No Conflict or Violation. Neither the execution and
delivery of this Agreement or the Ancillary Agreements by the Company nor the
consummation of the transactions contemplated hereby or thereby by the Company
or the Existing Shareholders will (a) violate, conflict with or result in or
constitute a default under or result in the termination or the acceleration of,
or the creation in any party of any right (whether or not with notice or lapse
of time or both) to declare a default, accelerate, terminate, modify or cancel
any indenture, contract, lease, sublease, loan agreement, note or other
obligation or liability ("Contractual Obligation") to which the Company or any
Existing Shareholder is a party or by which it is bound or to which its assets
are subject or result in the creation of any lien or encumbrance upon any of
said assets, (b) violate, conflict with or result in a breach of or constitute a
default under any provision of the Articles of Incorporation or Bylaws of the
Company, (c) violate, conflict with or result in a breach of or constitute a
default under any judgment, order, decree, rule or regulation of any court or
governmental agency to which the Company or any Existing Shareholder is subject
or (d) violate, conflict with or result in a breach of any applicable federal or
state rule or regulation.
3.4. Facilities. Schedule 3.4 contains a complete and accurate
list of all real property used in connection with the Business of the Company
("Real Property"), all of which is leased ("Leased Real Property").
(a) Actions. There are no pending or, to the best knowledge of
the Company, threatened, condemnation proceedings or other actions, claims,
suits, litigation, proceedings, notices of violation, inquiry or investigations
(collectively, "Actions") relating to any facility ("Facility") used in
connection with the Business.
(b) Leases or Other Agreements. There are no leases,
subleases, licenses, occupancy agreements, options, rights, disputes,
concessions or other agreements or arrangements, written or oral, granting to
any person the right to purchase, use or occupy any Facility or any Real
Property or any portion thereof, or interest in any such Facility or Real
Property.
(c) Facility Leases and Leased Real Property. With respect to
each Facility lease, the Company is the sole lessee and has an unencumbered
interest in the leasehold estate related thereto. The Company enjoys peaceful
and undisturbed possession of all of the Leased Real Property. Each Facility
lease is valid, binding and enforceable in accordance with its terms. The
Company is not in default under any Facility lease or sublease, and no event or
condition exists that with notice or lapse of time or both would constitute a
default by the Company under any Facility lease or sublease.
(d) Certificate of Occupancy. All Facilities have received all
required approvals of governmental authorities (including, without limitation,
permits and a certificate of occupancy or similar certificate permitting lawful
occupancy of the Facilities) required in connection with the operation thereof
and are and have been operated and maintained in accordance with applicable
regulations.
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(e) Utilities. All Facilities are supplied with utilities
(including, without limitation, water, sewage, disposal, electricity, gas and
telephone) and other services necessary for the operation of such Facilities as
currently operated, and there is no condition that would reasonably be expected
to result in the termination of the present access from any Facility to such
utility services.
(f) Improvements, Fixtures and Equipment. The improvements
constructed on the Facilities, including, without limitation, all leasehold
improvements, and all fixtures and equipment and other tangible assets owned,
leased or used by the Company at the Facilities are (i) insured to the extent
and in a manner customary in the industry, (ii) structurally sound with no known
material defects, (iii) in good operating condition and repair, subject to
ordinary wear and tear, (iv) not in need of maintenance, repair or correction
except for ordinary routine maintenance and repair, the cost of which would not
be material, (v) necessary, desirable and appropriate for the operation of the
Business as presently conducted and (vi) in conformity with all applicable
regulations.
(g) Flood Risk. None of the Facilities is located in either a
special service district or an area for which federal flood risk insurance is
necessary.
(h) No Special Assessment. The Company has not received notice
of any special assessment relating to any Facility or any portion thereof, and
there is no pending or threatened special assessment.
3.5. Assets. The Company and Lester have and will transfer to
Truck City good and marketable title to the Assets, free and clear of any
encumbrances, except for minor liens that in the aggregate are not substantial
in amount, do not materially detract from the value or transferability of the
Assets subject thereto or interfere in any material respect with the present use
and have not arisen other than in the ordinary course of business ("Permitted
Encumbrances"). The delivery to Truck City of the instruments of transfer
contemplated hereby will vest good, marketable and exclusive title to the Assets
in Truck City, free and clear of all encumbrances of any kind other than
Permitted Encumbrances. The Assets constitute all of the assets necessary to
conduct the Business in substantially the manner conducted by the Company as of
the date of this Agreement. All tangible assets and properties that are part of
the Assets are in good operating condition and repair, ordinary wear and tear
excepted, and are usable in the ordinary course of business and conform in all
material respects to all applicable regulations (including Environmental Laws
(as defined in Section 3.18(a)(iv))) relating to their use and operation.
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3.6. Financial Statements.
(a) The unaudited balance sheet and income statement of the
Company at and for the year ended December 31, 1998, were prepared in accordance
with GAAP consistently applied and fairly present the financial condition and
results of operations of the Company as of its date and for such period. The
Company has no liabilities of any nature, whether absolute, accrued, asserted or
unasserted or contingent or whether due or to become due that should have been
recorded or reserved for on such balance sheet and were not so recorded or
reserved.
(b) The unaudited balance sheet and income statement of the
Company at and for the nine months ended September 30, 1999, were prepared in
accordance with GAAP consistently applied and fairly present the financial
condition and results of operations of the Company as of its date and for such
period and are consistent with the financial statements described in Section
3.6(a). All unaudited balance sheets and income statements of the Company for
periods ending after September 30, 1999, will be prepared in accordance with
GAAP consistently applied and will fairly present the financial conditions and
results of operations of the Company as of their date or dates and as of such
period or periods and will be consistent with the financial statements described
in Section 3.6(a).
(c) Copies of the financial statements described in Sections
3.6(a) and (b) have been or will be provided to Truck City or its
representatives.
3.7. Books and Records. The Company has made and kept and
given Truck City and its representatives access to books and records and
accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Company. The minute books of the Company accurately and
adequately reflect all action taken by the shareholders, board of directors and
committees of the board of directors of the Company. The copies of the stock
book records of the Company are true, correct and complete, and accurately
reflect all transactions effected in the Company's stock interests through and
including the date hereof. The Company has not engaged in any transaction,
maintained any bank account or used any corporate funds except for the
transactions, bank accounts and funds that have been and are reflected in the
normally maintained books and records of the Company.
3.8. Litigation. There is no claim, action, suit, proceeding,
or investigation pending or, to the best knowledge of the Company, threatened
against the Company or its directors, officers, agents or employees (in their
capacity as such) or any properties or rights of the Company. There are no
orders, writs, injunctions or decrees currently in force against the Company or
its directors, officers, agents or employees (in their capacity as such) with
respect to the conduct of the Business.
3.9. Licenses and Permits; Compliance with Laws. Schedule 3.9
sets forth a complete list of all licenses, franchises, permits, approvals and
other governmental authorizations (collectively, "Licenses and Permits") and all
pending applications therefor issued to the Company and currently used by the
Company in the conduct of the Business. The Company owns, holds or possesses all
Licenses and Permits necessary to entitle it to use the name "the Company," to
own or lease, operate and use the Assets and properties and to carry on and
permit the continued lawful conduct of the Business. The Business is not being
conducted in a manner
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that violates any of the terms or conditions under which any of the Licenses and
Permits was granted. The Company has performed all obligations and satisfied all
conditions required to be performed or satisfied by it to date under, and is not
in default in respect of, any of the Licenses and Permits and no event has
occurred that, with due notice or lapse of time or both, would constitute such a
default or permit the revocation or cancellation of any of the Licenses and
Permits. There is no administrative or judicial proceeding to revoke, cancel or
declare any of the Licenses and Permits invalid in any respect pending or, to
the best knowledge of the Company, threatened. The Company has provided Truck
City with a true, correct and complete copy of each of the Licenses and Permits.
3.10. Tax Matters. The Company has duly and timely filed, or
caused to be duly and timely filed, all Tax Returns required to be filed by it
with the appropriate governmental authorities, or requests for extensions to
file such Tax Returns have been timely filed and granted and have not expired.
All such Tax Returns were at the time of filing and are as of the date hereof
true, correct and complete in all respects. All Taxes owed by the Company
(whether or not shown on any Tax Return) have been paid within the time and in
the manner prescribed by law. The financial statements referred to in Section
3.6 hereof reflect adequate reserves for all Taxes payable by the Company for
all Taxable periods and portions thereof accrued through the dates of such
financial statements. All deficiencies for any Taxes that have been proposed,
asserted or assessed against the Company have been fully paid, or are fully
reflected as a liability in such financial statements, or are being contested
and an adequate reserve therefor has been established and is fully reflected in
such financial statements. The Company is not a party to any pending audit,
action or proceeding, nor to the best of the Company's knowledge, is any such
audit, action or proceeding contemplated or threatened, by any governmental
authority for the assessment or collection of any Taxes of the Company. No claim
has ever been made by any governmental authority in a jurisdiction where the
Company has never filed a Tax Return that the Company is or may be subject to
taxation by that jurisdiction. There are no liens for Taxes (other than for
current Taxes not yet due and payable) on the Assets. Schedule 3.10 sets forth
each state, local and foreign jurisdiction in which the Company (a) filed an
income or franchise Tax Return, whether on a consolidated, combined or separate
return basis, during the five-year period ended December 31, 1998, and (b)
collected or remitted any sales and/or use Taxes during the five-year period
ended December 31, 1998. All Taxes that the Company is required by law to
withhold or to collect have been withheld or collected and paid over to the
proper governmental authorities or segregated and set aside for such payment.
For the purposes of this Agreement, "Tax" or "Taxes" (including, with
correlative meaning, the term "Taxable") means all federal, state, local and
foreign income, profits, franchise, gross receipts, payroll, sales, employment,
use, property, withholding, excise, alternative minimum, gains, transfer,
documentary, stamp and other taxes, duties or assessments of any nature
whatsoever, together with all interest, penalties and additions imposed with
respect to such amounts, and the term "Tax Returns" means all returns, reports,
declarations, statements, elections, forms or other documents or information
required to be filed with any governmental authority with respect to any Taxes.
3.11. Brokers, Finders. The Company has not retained any
broker or finder in connection with the transactions contemplated herein, and
the Company is not obligated and has not agreed to pay any brokerage or finder's
commission, fee or similar compensation.
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3.12. Absence of Certain Changes.
(a) Since December 31, 1998, the Company has conducted the
Business in the ordinary course, and there has not occurred with respect to the
Company:
(i) any material adverse effect on the business,
operations, assets, results of operations, financial condition or
prospects of the Company, taken as a whole ("Material Adverse Effect");
(ii) any revaluation of the Assets, including,
without limitation, writing down the value of inventory or writing off
notes or accounts receivable;
(iii) any payment, discharge or satisfaction of any
liabilities or obligations, other than in the ordinary course of
business;
(iv) any incurrence of liabilities, except
liabilities incurred in the ordinary course of business, or increase or
change in any assumptions underlying or methods of calculating, any
doubtful account contingency or other reserves;
(v) any capital expenditure exceeding $2,000, the
execution of any lease or the incurring of any obligation to make any
capital expenditure or execute any lease other than in the ordinary
course of business;
(vi) the failure to pay or satisfy when due any
liability, except where the failure would not have a Material Adverse
Effect;
(vii) any Assets (whether real, personal or mixed,
tangible or intangible) becoming subject to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind;
(viii) the failure to carry on diligently the
Business in the ordinary course so as to preserve for Truck City the
Assets, the Business and the goodwill of the suppliers, customers,
distributors of the Business and others having business relations with
the Business;
(ix) the disposition or lapsing of any Proprietary
Rights (as defined in Section 3.14) or any disposition or disclosure to
any person of any Proprietary Rights not theretofore a matter of public
knowledge;
(x) any cancellation or waiver of any material claims
or rights of value, or any sale, lease, transfer, assignment,
distribution or other disposition of any Assets, except for sales of
finished goods inventory in the ordinary course of business, or any
disposal of any material Assets for any amount, including, without
limitation, transactions between the Company and any of its affiliates;
(xi) an amendment, modifications, cancellation or
termination of any contract, commitment, agreement, lease, transaction
or Permit relating to the Assets or
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the Business or entry into any contract, commitment, agreement, lease,
transaction or Permit that is not in the ordinary course of business,
including, without limitation, any employment or consulting
agreements;
(xii) any bonus or distribution paid or promised, any
increase in the base compensation, or other payment or loan to any
officer or employee of the Company, whether now or hereafter payable or
granted, or entry into or variation of the terms of any employment,
incentive or severance agreement with, or employee benefit plan, policy
or arrangement covering, any such person;
(xiii) an adverse change in employee relations that
has or is reasonably likely to have an adverse effect on the
productivity, financial condition, results of operations or the
Business or the relationships between the employees of the Company and
its management;
(xiv) any change in any method of accounting or
keeping books of account or accounting practices;
(xv) any material damage, destruction or loss of any
Asset, whether or not covered by insurance;
(xvi) the issuance, delivery or sale of any equity
securities by the Company, or alteration in terms of any outstanding
securities issued by the Company or any increase in the indebtedness
for borrowed money of the Company;
(xvii) the adoption of any plan of liquidation or
resolutions providing for the liquidation, dissolution, merger,
consolidation or other reorganization of the Company;
(xviii) the existence of any other event or condition
that, in any one case or in the aggregate, has been or might reasonably
be expected to have a Material Adverse Effect; or
(xix) an agreement to do any of the things described
in the preceding clauses (i) - (xviii) other than as expressly provided
for herein.
3.13. Material Contracts. Schedule 3.13 attached hereto sets
forth a complete and correct list of all the Material Contracts to
which the Company is a party. As used in this Agreement, "Material
Contracts" means:
(a) all contracts not made in the ordinary course of business;
(b) all leases or other agreements under which the Company is
a lessor or lessee of any Real Property or any machinery, equipment, vehicle or
other tangible personal property owned by a third party and used in the
Business, which entail annual payments, in the case of any such lease or
agreement, in excess of $2,000;
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(c) all options with respect to any property, real or
personal, whether the Company is the grantor or grantee thereunder;
(d) all distribution, franchise, license, technical
assistance, sales, commission, consulting, agency or advertising contracts
related to the Assets or the Business and that are not cancelable, without
payment of any kind, on 30 calendar days' notice;
(e) all mortgages, indentures, security agreements, pledges,
notes, loan agreements or guaranties in a principal amount (or with maximum
availability) in excess of $2,000;
(f) all contracts and agreements to which the Company is a
party and that are (i) outstanding contracts with officers, employees, agents,
consultants, advisors, sales personnel, sales representatives, distributors,
sales agents or dealers other than contracts that by their terms are cancelable
by the Company with notice of not more than 30 days and without cancellation
penalties or severance payments, in the case of any such contract, in excess of
$2,500, (ii) all collective bargaining agreements of the Company and (iii) all
pension, profit-sharing, bonus, retirement, stock option or employee benefit
plans or other similar plans or arrangements of the Company;
(g) any covenant not to compete or similar restriction on the
Company;
(h) any contract with the United States, state or local
government or any agency or department thereof, involving expenditures or
liabilities in excess of $2,000; or
(i) any contract or agreement providing for the receipt or
payment (whether the obligations are fixed or contingent) of $2,000 or more
after the date of this Agreement, including, without limitation, agreements
calling for penalties or payments upon voluntary termination or withdrawal by
the Company.
The Company has furnished or will furnish to Truck City or its representatives
true and correct copies of all Material Contracts prior to the Closing,
including all amendments and supplements thereto.
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3.14. Proprietary Rights.
(a) Schedule 3.14 lists the material patents, trademarks
(whether registered or unregistered), service marks, trade names, service names,
brand names, logos and copyrights (collectively, the "Proprietary Rights") for
the Company. Schedule 3.14 also sets forth: (i) for each patent, the number,
normal expiration date and subject matter for each country in which such patent
has been issued, or, if applicable, the application number, date of filing and
subject matter for each country, (ii) for each trademark, the application serial
number or registration number, the class of goods covered and the expiration
date for each country in which a trademark has been registered and (iii) for
each copyright, the number and date of filing for each country in which a
copyright has been filed. The Proprietary Rights listed in Schedule 3.14 are all
those used by the Company in connection with the Business or the Assets. True
and correct copies of all patents (including all pending applications) owned,
controlled, created or used by or on behalf of the Company or in which the
Company has any interest whatsoever have been provided to Truck City or its
representatives.
(b) the Company does not have any obligation to compensate any
person for the use of any such Proprietary Rights. the Company has not granted
to any person any license, option or other rights to use in any manner any of
Proprietary Rights, whether requiring the payment of royalties or not.
(c) the Company owns or has a valid right to use each of the
Proprietary Rights, and the Proprietary Rights will not cease to be valid rights
by reason of the execution, delivery and performance of this Agreement, the
Ancillary Agreements or the consummation of the transactions contemplated hereby
and thereby. All of the pending patent applications have been duly filed. The
Company has not received any notice of invalidity or infringement of any rights
of others with respect to such trademarks. The Company has taken all reasonable
and prudent steps to protect the Proprietary Rights from infringement by any
other person. No other person (i) has the right to use any trademarks of the
Company on the goods on which they are now being used either in identical form
or in such near resemblance thereto as to be likely, when applied to the goods
of any such person, to cause confusion with such trademarks or to cause a
mistake or to deceive, (ii) has notified the Company that it is claiming any
ownership of or right to use such Proprietary Rights, or (iii) to the best
knowledge of the Company, is infringing upon any such Proprietary Rights in
anyway. The Company's use of any Proprietary Rights does not conflict with,
infringe upon or otherwise violate the valid rights of any third party in or to
such Proprietary Rights, and no Action has been instituted against or notices
received by the Company that are presently outstanding, alleging that the
Company's use of the Proprietary Rights infringes upon or otherwise violates any
rights of a third party in or to such Proprietary Rights. There are not, and it
is reasonably expected that after the Closing there will not be, any
restrictions on the Company's right to sell products manufactured in connection
with the operation of the Business.
3.15. Labor Matters. The Company is not a party to any labor
agreement with respect to its employees with any labor organization, union,
group or association, and there are no employee unions (or any other similar
labor or employee organizations) under local statutes, custom or practice. The
Company has not experienced any attempt by organized labor or its
representatives to make it conform to demands of organized labor relating to its
employees or to
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enter into a binding agreement with organized labor that would cover the
employees of the Company. There is no labor strike or labor disturbance pending
or, to the best knowledge of the Company, threatened against the Company, nor is
any grievance currently being asserted, and the Company has not experienced a
work stoppage or other labor difficulty, and is not and has not engaged in any
unfair labor practice. Without limiting the foregoing, the Company is in
compliance with the Immigration Reform and Control Act of 1986 and maintains a
current Form I-9 as required by such Act, in the personnel file of each employee
hired after November 9, 1986.
3.16. Consents. No consent, approval, authorization, order,
filing, registration or qualification of or with any court, governmental
authority or third person is required to be made or obtained by the Company in
connection with the execution and delivery of this Agreement, the Ancillary
Agreements or the consummation by the Company of the transactions contemplated
herein and therein.
3.17. Employee Benefit Plans; Employment Agreements.
(a) Plans. Schedule 3.17 sets forth a true, complete and
accurate list of: (i) any and all severance or employment agreements with any
current or former member of management or other employee providing services to
or employed by the Company; (ii) any and all severance programs or policies
applicable to any such personnel; (iii) any and all plans or arrangements
relating to any current or former member of management or other employee
providing services to or employed by the Company containing change in control
provisions; (iv) any agreements, plans, policies or arrangements (including,
without limitation, collective bargaining agreements or consulting agreements)
established, maintained or contributed to by the Company for the benefit of any
current or former employee providing services to or employed by the Company,
including bonus, incentive compensation, stock ownership, stock option, stock
appreciation, stock purchase, phantom stock, vacation, retirement, insurance,
severance, supplemental unemployment, disability, death benefit,
hospitalization, medical, workers compensation, pension, profit-sharing or
deferred compensation plans; or any employee welfare and employee pension
benefit plans (as such terms are defined in Sections 3(1) and 3(2), respectively
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(singularly, "Employee Benefit Plan" and collectively, "Employee Benefit
Plans"); and (v) all plans that would be Employee Benefit Plans, except that
they have been terminated on or before the date hereof ("Terminated Employee
Benefit Plans").
(b) Pension and Welfare Benefit Plans. With respect to the
Employee Benefit Plans and Terminated Employee Benefit Plans, each as described
on Schedule 3.17:
(i) each Employee Benefit Plan is in compliance with the
requirements provided by any and all statutes, orders or
governmental rules or regulations currently in effect and
applicable to such Employee Benefit Plans, including but not
limited to ERISA and the Code, and each Employee Benefit Plan
has been administered in accordance with its terms;
(ii) each Employee Benefit Plan that is intended to be
qualified pursuant to Code Section 401(a) and Code Section
501(a) is so qualified and has received a
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favorable determination letter from the IRS covering the Tax
Reform Act of 1986, as amended, that such ERISA Plans are so
qualified and each trust established in connection with any
such plan is exempt from federal income taxation and nothing
(either in form or operation) has since occurred from the
date of the last favorable determination letter to cause the
loss of such qualification;
(iii) all required reports and disclosures (including
without limitation the IRS Form 5500 Annual Return/Report,
summary annual report and summary plan description) with
respect to each Employee Benefit Plan has been timely filed
and distributed;
(iv) all required contributions for all periods ending
prior to Closing (including periods from the first day of the
current plan year to Closing) will be made to such Employee
Benefit Plans prior to the Closing Date by the Company;
(v) all insurance premiums have been paid in full, subject
only to normal retrospective adjustments in the ordinary
course, with regard to such Employee Benefit Plan for policy
years or other applicable policy periods ending on or before
Closing;
(vi) the Company has not taken any action directly or
indirectly that obligates the Company to institute, modify or
change any Employee Benefit Plan, any change in the manner in
which contributions are made or the basis on which such
contributions are determined;
(vii) with respect to each Employee Benefit Plan, no
action, suit, grievance, arbitration, investigation, audit or
other manner of litigation, or claim (other than routine
claims for benefits made in the ordinary course of plan
administration for which plan administrative review procedures
have not been exhausted) is pending, threatened or imminent
against or with respect to such Employee Benefit Plans;
(viii) with respect to each such Employee Benefit Plan,
neither the Company, its affiliates, nor any fiduciary (as
defined in ERISA Section 3(21)) of any Employee Benefit Plan
have engaged in any prohibited transactions (as defined in
ERISA Section 406 or Code Section 4975); no penalty, fine,
tax, action, suit, grievance, arbitration, investigation,
audit, litigation or claim (other than routine claims for
benefits made in the ordinary course of plan administration
for which plan administrative review procedures have not been
exhausted) are pending, threatened or imminent against or with
respect to any Employee Benefit Plans, the Company, or any
fiduciary (as defined in ERISA Section 3(21)) of any such
Employee Benefit Plan (including without limitation any
action, suit, grievance, arbitration or other manner of
litigation, or claim regarding conduct which allegedly
interferes with the attainment of rights under such plans);
neither the Company, nor any fiduciary with respect to any
Employee Benefit Plan has any knowledge of any facts that
would give rise to or could give rise to any penalty, fine,
tax, action, suit, grievance, arbitration or other manner of
litigation, or claim; and the
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Company has not incurred any lien under Section 401(a)(29)
or any liability for any tax or civil penalty imposed by
Section 4971 or 4976 of the Code or Section 502 of ERISA and
no condition or set of circumstances exists that presents a
risk to the Company of incurring any such lien or liability;
(ix) no Employee Benefit Plan is (A) a "defined benefit"
plan (as defined in Section 3(35) of ERISA, nor was any
Terminated Employee Benefit Plan such a "defined benefit"
plan, (B) a "multiemployer plan" within the meaning of Section
3(37) of ERISA, (C) a "multiple employer" or a "multiple
employer welfare arrangement" within the meaning of Section
413(c) of the Code or Section 3(40) of ERISA, respectively, or
(D) a "welfare benefit fund" as defined in Section 419(e) of
the Code;
(x) except as set forth herein and on Schedule 3.17, none
of the Employee Benefit Plans has been completely or partially
terminated. Effective prior to the Closing Date, the Company
terminated the Southwest Virginia Truck Parts Retirement
Savings Plan and the Integrated Money Purchase Pension Plan
and Trust, and such terminations were in all respects in
compliance with applicable law;
(xi) no current or former employee of the Company will be
entitled to any payment, additional benefits or any
acceleration of the time of payment or vesting of any benefits
under any Employee Benefit Plan as a result of the
transactions contemplated by this Agreement (either alone or
in conjunction with any other event such as a termination of
employment) and no trustee under any "rabbi trust" or similar
arrangement in connection with any Employee Benefit Plan will
be entitled to payment as a result of the transactions
contemplated by this Agreement; and
(xii) no Employee Benefit Plan provides medical, life or
other welfare benefits (whether or not insured), with respect
to current or former employees after retirement or other
termination of service (other than coverage mandated by
applicable law). With respect to any contract or arrangement
with an insurance company providing funding under any Employee
Benefit Plan, there is no material liability for any
retroactive rate adjustment. Each Employee Benefit Plan that
is a "group health plan," as defined in Section 5000 of the
Code has been operated in accordance with Section 4980B of the
Code, Section 9801 and the secondary payor requirements of
Section 1862(b) of the Social Security Act.
3.18. Compliance with Environmental Laws.
(a) Definitions. The following terms, when used in this
Section 3.18, shall have the following meanings. Any of these terms may, unless
the context otherwise requires, used in the singular or the plural depending on
the reference.
(i) "The Company" for the purposes of this Section
3.18, shall include (A) the Company, (B) all partnerships, joint
ventures and other entities or
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organizations in which the Company was at any time or is a partner,
joint venturer, member or participant and (C) all predecessor or former
corporations, partnerships, joint ventures, organizations, businesses
or other entities, whether in existence as of the date hereof or at any
time prior to the date hereof, the assets or obligations of which have
been acquired or assumed by the Company or to which the Company has
succeeded.
(ii) "Release" shall mean and include any existing or
previously existing spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment or the workplace of any Hazardous
Substance or otherwise as defined in any Environmental Law.
(iii) "Hazardous Substance" shall mean any pollutant,
contaminant, chemical, waste and any toxic, infectious, carcinogenic,
reactive, corrosive, ignitable or flammable chemical or chemical
compound or hazardous substance, material or waste, whether solid,
liquid or gas, including, without limitation, any quantity of asbestos
in any form, urea formaldehyde, PCB's, radon gas, crude oil or any
fraction thereof, all forms of natural gas, petroleum products or
by-products or derivatives, radioactive substance or material,
pesticide waste waters, sludges, slag and any other substance, material
or waste that is subject to regulation, control or remediation under
any Environmental Laws.
(iv) "Environmental Laws" shall mean all laws,
statutes, regulations, rules, ordinances, by-laws, orders or
determinations of any governmental or judicial authority at the
federal, state or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted which regulate or relate
to the protection or clean-up of the environment, the use, treatment,
storage, transportation, generation, manufacture, processing,
distribution, handling or disposal of, or emission, discharge or other
release or threatened release of Hazardous Substances or otherwise
dangerous substances, wastes, pollution or materials (whether, gas,
liquid or solid), the preservation or protection of waterways,
groundwater, drinking water, air, wildlife, plants or other natural
resources, or the health and safety of persons or property, including,
without limitation, protection of the health and safety of employees.
Environmental Laws shall include, without limitation, the Federal
Insecticide, Fungicide and Rodenticide Act, Resource Conservation &
Recovery Act, Clean Water Act, Safe Drinking Water Act, Atomic Energy
Act, Occupational Safety and Health Act, Toxic Substances Control Act,
Clean Air Act, Comprehensive Environmental Response, Compensation and
Liability Act, Emergency Planning and Community Right-to-Know Act and
the Hazardous Materials Transportation Act.
(v) "Environmental Conditions" means the introduction
into the environment, whether or not yet discovered, of any Hazardous
Substance (whether or not upon any Facility or other property and
whether or not such pollution constituted at the time thereof a
violation of any Environmental Law as a result of any Release of any
kind whatsoever of any Hazardous Substance) as a result of which the
Company has or may become liable to any person or by reason of which
any Facility may suffer or be subjected to any lien or as a result of
which the Company or Truck City could incur any damage, loss, cost,
expense, claim, demand, order or liability to a third party (including,
without limitation, any governmental authority).
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(b) Notice of Violation. The Company has not received any
notice of alleged, actual or potential responsibility for, or any inquiry
concerning, and knows of no investigation regarding, (i) any Release or
threatened Release of any Hazardous Substance at the Facilities or (ii) an
alleged violation of or non-compliance with the conditions of any Permit
required under any Environmental Law or the provisions of any Environmental Law
at the Facilities. The Company has not received written notice of any other
claim, demand or Action by any individual or entity alleging any actual or
threatened injury or damage to any person, property, natural resource or the
environment arising from or relating to any Release or threatened Release of any
Hazardous Substances at, on, under, in, to or from any of the Facilities.
(c) Environmental Conditions. There are no present or past
Environmental Conditions.
(d) Environmental Audits or Assessments. True, complete and
correct copies of the written reports, and all parts thereof, including any
drafts of such reports that are in the possession or control of the Company, of
all environmental audits or assessments which have been conducted at any
Facility within the past five years, either by the Company or any attorney,
environmental consultant or engineer engaged for such purpose, have been
delivered to Truck City or its representatives and a list of all such reports,
audits and assessments and any other similar report, audit or assessment of
which the Company and the Existing Shareholders have knowledge is included in
Schedule 3.18 hereto.
(e) Indemnification Agreements. The Company is not a party,
whether as a direct signatory or as successor, assign or third party
beneficiary, or otherwise bound, to any lease or other contract (excluding
insurance policies disclosed on Schedule 3.21) under which the owner or lessee
of any Facility is obligated by or entitled to the benefits of directly or
indirectly, any representation, warranty, indemnification, covenant, restriction
or other undertaking concerning Environmental Conditions.
(f) Releases or Waivers. The Company has not released any
other person from any claim under any Environmental Law with respect to any
Facility or waived any rights concerning any Environmental Condition with
respect to any Facility.
(g) Notices, Warnings and Records. The Company has given all
notices and warnings, made all reports, and has kept and maintained all records
required by and in compliance with all Environmental Laws with respect to each
Facility.
(h) Compliance. The Company has not ever violated and is
presently in compliance with all Environmental Laws at each Facility.
(i) Hazardous Substances. The Company has not generated,
manufactured, refined, transported, treated, disposed, stored, handled,
transferred, produced or processed any Hazardous Substance at any Facility in
violation of Environmental Laws.
(j) Underground Storage Tanks. There are no underground
storage tanks at any Facility.
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(k) Asbestos Containing Material. There is no asbestos
containing material at any Facility that is in a condition that would require
abatement.
(l) Liens. No lien has been imposed on any Facility pursuant
to any Environmental Law.
3.19. Certain Business Relationships with the Company. No
beneficial owner of more than 5% of the Company's outstanding voting securities
has been involved in any business arrangement or relationship with the Company
within the past 12 months, and none of such shareholders owns any assets,
tangible or intangible, that are used in the Business.
3.20. Undisclosed Liabilities. The Company has no liabilities
or obligations, whether accrued, absolute, contingent or otherwise except (a) to
the extent reflected or reserved for on the unaudited balance sheet of the
Company at December 31, 1998, (b) liabilities or obligations incurred in the
normal and ordinary course of business of the Company since December 31, 1998,
(c) liabilities or obligations disclosed in Schedule 3.20 hereto and in the
other Schedules attached hereto or (d) liabilities or obligations disclosed
elsewhere in this Agreement.
3.21. Insurance. Schedule 3.21 contains a complete and
accurate list of all policies or binders of fire, liability, title, worker's
compensation, product liability and other forms of insurance (showing as to each
policy or binder the carrier, policy number, coverage limits, expiration dates,
annual premiums, a general description of the type of coverage provided, loss
experience history by line of coverage) maintained by the Company on (a) the
Business, (b) the Assets or (c) officers, consultants or employees providing
services to or employed by the Company at any time since December 31, 1993. All
insurance coverage applicable to the Company and to the Business and the Assets
is in full force and effect, insures the Company in reasonably sufficient
amounts against all risks usually insured against by persons operating similar
businesses or properties of similar size in the localities where such businesses
or properties are located, provides coverage as may be required by applicable
regulation and by any and all contracts to which the Company is a party and has
been issued by insurers of recognized responsibility. There is no default under
any such coverage nor has there been any failure to give notice or present any
claim under any such coverage in a due and timely fashion. There are no
outstanding unpaid premiums except in the ordinary course of business and no
notice of cancellation or nonrenewal of any such coverage has been received.
There are no provisions in such insurance policies for retroactive or
retrospective premium adjustments. All products liability, general liability and
workers' compensation insurance policies maintained by the Company have been
occurrence policies and not claims made policies. There are no outstanding
performance bonds covering or issued for the benefit of the Company. There are
no facts upon which an insurer might be justified in reducing coverage or
increasing premiums on existing policies or binders. No insurer has advised the
Company that it intends to reduce coverage, increase premiums or fail to renew
existing policy or binder.
3.22. Accounts Receivable. The accounts receivable set forth
on the unaudited balance sheet of the Company at December 31, 1998, and all
accounts receivable arising since the date of such balance sheet, represent bona
fide claims of the Company against debtors for
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sales, services performed or other charges arising on or before the date hereof,
and all the goods delivered and services performed which gave rise to said
accounts were delivered or performed in accordance with the applicable orders,
contracts or customer requirements. Said accounts receivable are subject to no
defenses, counterclaims or rights of setoff and are fully collectible in the
ordinary course of business without cost in collection efforts therefor, except
to the extent of the appropriate reserves for bad debts on accounts receivable
as set forth on the unaudited balance sheet of the Company at December 31, 1998
and, in the case of accounts receivable arising since the date of such balance
sheet, to the extent of a reasonable reserve rate for bad debts on accounts
receivable which is not greater than the rate reflected by the reserve for bad
debts on such balance sheet.
3.23. Inventory. Schedule 3.23 contains a complete and
accurate list of the addresses at which all inventory set forth on the unaudited
balance sheet of the Company at December 31, 1998 or arising since such date is
located. The inventory as set forth on the Balance Sheets or arising since the
date of such balance sheet was acquired and has been maintained in accordance
with the regular business practices of the Company, consists of new and unused
items of a quality and quantity usable or salable in the ordinary course of
business, and is valued at the lower of cost or market on a FIFO basis using
replacement cost. None of such inventory is obsolete, unusable, damaged or
unsalable in the ordinary course of business, except for such items of inventory
which have been written down to realizable market value, or for which adequate
reserves have been provided in such balance sheet.
3.24. Payments. Neither the Company nor any Existing
Stockholder has, directly or indirectly, paid or delivered any fee, commission
or other sum of money or item or property, however characterized, to any finder,
agent, client, customer, supplier, government official or other party, in the
United States or any other country, which is in any manner related to the
Business, Assets, or operations of the Company, which is, or may be with the
passage of time or discovery, illegal under any federal, state or local laws of
the United States (including, without limitation, the U.S. Foreign Corrupt
Practices' Act) or any other country having jurisdiction. The Company has not
participated, directly or indirectly, in any boycotts or other similar practices
affecting any of the actual or potential customers of the Company.
3.25. Customers, Distributors and Suppliers. Schedule 3.25
sets forth a complete and accurate list of the names and addresses of the ten
largest (in terms of dollar volume) (a) customers, distributors and other agents
and representatives of the Company during the year ended December 31, 1998,
showing the approximate total sales in dollars by the Company to such customer
during such fiscal year; and (b) suppliers to the Company during the year ended
December 31, 1998, showing the approximate total purchases in dollars by the
Company from such supplier during such fiscal year. Since December 31, 1998,
there has been no adverse change in the business relationship of the Company
with any customer, distributor or supplier named on Schedule 3.25. The Company
has not received any communication from any customer, distributor or supplier
named on Schedule 3.25 of any intention to terminate or materially reduce
purchases from or supplies to the Company.
3.26. Material Misstatements Or Omissions. No representations
or warranties by any Existing Shareholder in this Agreement, nor any document,
exhibit, statement, certificate or Schedule heretofore or hereinafter furnished
to Truck City or its representatives pursuant
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hereto, or in connection with the transactions contemplated hereby, including,
without limitation, the Schedules, contains or will contain any untrue statement
of a material fact, or omits or will omit to state any material fact necessary
to make the statements or facts contained therein not misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF TRUCK CITY
Truck City represents and warrants to the Company and the
Existing Shareholders as follows:
4.1. Corporate Organization and Standing. Truck City is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
execute and deliver this Agreement and the Ancillary Agreements and to
consummate the transactions contemplated hereby and thereby.
4.2. Authorization. This Agreement has been, and the Ancillary
Agreements will be, duly authorized, executed and delivered by Truck City, and
this Agreement is, and the Ancillary Agreements will be, the legal, valid and
binding obligation of Truck City, enforceable against Truck City in accordance
with their terms.
4.3. No Conflict or Violation. Neither the execution and
delivery of this Agreement or the Ancillary Agreements nor the consummation of
the transactions contemplated hereby or thereby will (a) violate, conflict with
or result in or constitute a default under or result in the termination or the
acceleration of, or the creation in any party of any right (whether or not with
notice or lapse of time or both) to declare a default, accelerate, terminate,
modify or cancel any Contractual Obligation to which Truck City is a party or by
which it is bound or to which its assets are subject or result in the creation
of any lien or encumbrance upon any of said assets, (b) violate, conflict with
or result in a breach of or constitute a default under any provision of its
Certificate of Incorporation or Bylaws, (c) violate, conflict with or result in
a breach of or constitute a default under any judgment, order, decree, rule or
regulation of any court or governmental agency to which Truck City is subject or
(d) violate, conflict with or result in a breach of any applicable federal or
state rule or regulation.
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ARTICLE V.
POST-CLOSING COVENANTS
The Company, the Existing Shareholders and Truck City each
covenant with the other as follows:
5.1. Further Assurances. Upon the terms set forth herein, the
Parties agree, after the Closing, to (a) execute any documents, instruments or
conveyances of any kind that may be reasonably necessary or advisable to carry
out any of the transactions contemplated hereunder and (b) cooperate with each
other in connection with the foregoing (including, without limitation, any
document necessary to convey title to Truck City in and to any tangible
properties, real property improvements and personal property that are defined as
Excluded Assets in Annex A to this Agreement but that Truck City can demonstrate
are material to and used in the Business and are not primarily used by the
Company in businesses other than the Business).
5.2. Employee-Related Matters. Nothing herein is intended to
confer upon any employee of the Company any rights of any kind whatsoever under
or by reason of this Agreement, including, without limitation, any rights to or
of employment for a specified period or any other form of employment security.
Truck City shall not assume any obligation or liability for employment practices
or policies maintained by the Company with respect to the Company's employees.
Except as otherwise provided herein, Truck City shall have no obligation or
liability nor incur any cost or expense with respect to any claims, whether
arising before or after the Closing, by any employee or former employee of the
Company arising by reason of the sale or purchase of the Assets pursuant to this
Agreement or by reason of such employee or former employee's employment, or the
termination of his or her employment, by Truck City. Without limiting the
foregoing, any severance obligation arising by reason of the sale of the Assets
by the Company pursuant to this Agreement shall remain the sole liability of the
Company.
The Company shall (a) offer to all employees at the time of
the Closing the right to continue their coverage under the Company's group
health plan(s) (as defined in Section 5000(b)(1) of the Code), such offers to be
made in accordance with the continuation coverage requirements of Part 6 of
Subtitle B of Title I of ERISA and Section 4980B of the Code ("COBRA
continuation coverage"), and (b) provide COBRA continuation coverage to any
former employee of the Company (or eligible spouse or dependent of such person)
who became eligible for such COBRA continuation coverage as of or at any time
prior to Closing. The Company agrees that it shall continue in effect on and
after Closing for the maximum required period under ERISA Section 602(2) (but
without regard to ERISA Section 602(2)(B)) a group health plan or individual
medical insurance, plan, policy or arrangement for the purpose of providing
medical benefits to any employee (or eligible spouse or dependent of such
employee) who is eligible to elect or has elected COBRA continuation coverage
pursuant to the preceding sentence.
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ARTICLE VI.
CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS BY TRUCK CITY
The obligations of Truck City under this Agreement are subject
to the fulfillment prior to or at the Closing of each of the following
conditions, any one or more of which may be waived by Truck City:
6.1. No Injunctive Proceedings. No preliminary or permanent
injunction or other order (including a temporary restraining order) of any state
or federal court or other governmental agency that prevents the consummation of
the transactions that are the subject of this Agreement shall have been issued
and remain in effect (provided that Truck City has acted in accordance with the
requirements of Section 5.1 hereof).
6.2. Representations and Warranties. Except as otherwise
contemplated by this Agreement, all representations and warranties of the
Company and the Existing Shareholders contained in this Agreement shall be true
and correct in all material respects as of the Closing Date.
6.3. Performance of Agreements; Instruments of Transfer. The
Company and the Existing Shareholders shall have fully performed in all material
respects all obligations, agreements, conditions and commitments required to be
fulfilled by it pursuant to the terms hereof on or prior to the Closing Date and
shall have tendered to Truck City the documents, instruments and certificates
required by Articles II and VI hereof.
6.4. Compliance Certificate. The Company and the Existing
Shareholders each shall have delivered to Truck City or its representatives a
certificate, dated the Closing Date, executed on the Company's behalf by its
President or a Vice President, as to the fulfillment of the conditions set forth
in Sections 6.2 and 6.3 hereof.
6.5. Opinion of Counsel. Truck City shall have received the
opinion of Robertson, Cecil & Pruitt, counsel for the Company and the Existing
Shareholders, in the form set forth in Schedule 6.5 hereto.
6.6. Ancillary Agreements. The following agreements (the
"Ancillary Agreements") shall have been executed and delivered by all parties
thereto other than Truck City: (a) an escrow agreement (the "Escrow Agreement")
by and among Truck City, the Company and Chase Manhattan Bank and Trust Company,
National Association, as "Escrow Agent," substantially in the form attached
hereto as Exhibit F; and (b) a noncompetition agreement between Truck City and
the Company and Truck City and each of the Existing Shareholders, substantially
in the form attached hereto as Exhibit G.
6.7. Consents, Etc. All authorizations, consents or approvals
of any and all third parties and governmental regulatory authorities necessary
to be obtained prior to the Closing in connection with the consummation of the
Closing shall have been obtained and be in full force and effect, except where a
failure to obtain an authorization, consent or approval is a result of a breach
by Truck City. The waiting period applicable to the transactions contemplated
hereby under the HSR Act shall have terminated or expired.
24
<PAGE> 29
6.8. Nonforeign Affidavit. The Company shall furnish to Truck
City an affidavit, stating, under penalty of perjury, its United States taxpayer
identification number and that it is not a foreign person, pursuant to Section
1445(b)(2) of the Code.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE
TRANSACTIONS BY THE COMPANY AND
THE EXISTING SHAREHOLDERS
The obligations of the Company and the Existing Shareholders
under this Agreement are subject to the fulfillment prior to the Closing of each
of the following conditions, any one or more of which may be waived by the
Company and the Existing Shareholders:
7.1. No Injunctive Proceedings. No preliminary or permanent
injunction or other order (including a temporary restraining order) of any state
or federal court or other governmental agency that prevents the consummation of
the transactions that are the subject of this Agreement shall have been issued
and remain in effect (provided that the Company and the Existing Shareholders
shall have acted in accordance with the requirements of Section 5.1 hereof).
7.2. Representations and Warranties. Except as otherwise
contemplated by this Agreement, all representations and warranties of Truck City
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date.
7.3. Performance of Agreements; Instruments of Transfer. Truck
City shall have fully performed in all material respects all obligations,
agreements, conditions and commitments required to be fulfilled by it pursuant
to the terms hereof on or prior to the Closing Date and shall have tendered to
the Company and the Existing Shareholders the documents, instruments and
certificates required by Articles II and VII hereof.
7.4. Compliance Certificate. Truck City shall have delivered
to the Company and the Existing Shareholders or their representatives a
certificate, dated the Closing Date, executed on its behalf by its President or
a Vice President, as to the fulfillment of the conditions set forth in Sections
7.2 and 7.3 hereof.
7.5. Ancillary Agreements. The Ancillary Agreements shall have
been duly executed and delivered by Truck City.
7.6. Consents; Etc. All authorizations, consents or approvals
of any and all third parties and governmental regulatory authorities necessary
to be obtained prior to the Closing in connection with the consummation of the
Closing shall have been obtained and be in full force and effect, except where a
failure to obtain an authorization, consent or approval is a result of a breach
by the Company or the Existing Shareholders.
25
<PAGE> 30
ARTICLE VIII.
ACTIONS BY THE PARTIES AFTER THE CLOSING; INDEMNIFICATION
8.1. Collection of Accounts Receivable and Letters of Credit.
At the Closing, Truck City will acquire hereunder the right and authority to
collect all receivables, letters of credit and other items that constitute a
part of the Assets, and the Company shall within 48 hours after receipt of any
payment in respect of any of the foregoing, properly endorse and deliver to
Truck City any letters of credit, documents, cash or checks or other
consideration received on account of or otherwise relating to any such
receivables, letters of credit or other items.
8.2. Assignability and Consents. Notwithstanding anything to
the contrary in this Agreement, this Agreement shall not constitute an agreement
to assign any order, contract, agreement, lease, commitment, license, franchise,
permit, authorization or concession (collectively, the "Assigned Agreements") if
an attempted assignment thereof, without the consent of another party thereto or
any governmental authority, would constitute a breach of any such Assigned
Agreement or in any way affect the rights of the Company thereunder. The Company
shall use its best efforts to obtain all consents, novations and waivers and to
resolve all impracticalities of assignments, novations or transfers necessary to
convey the Assigned Agreements to Truck City at the earliest practicable date.
If such consents, novations or waivers are not obtained, or if an attempted
assignment would be ineffective, the Company shall use its best efforts to
provide to Truck City the benefits of any such Assigned Agreement, shall
enforce, at Truck City's request and for Truck City's account, any rights of the
Company under such Assigned Agreement (including the right to elect, renew,
extend or terminate) and shall promptly pay to Truck City when received all
monies received by the Company under such Assigned Agreement. To the extent
Truck City is provided the benefit of any such Assigned Agreement, Truck City
shall perform or discharge, on behalf of the Company, the Company's obligations
and liabilities under each such Assigned Agreement in accordance with the
provisions thereof. This Section 8.2 shall not be construed to require Truck
City to assume any additional liability hereunder or to perform under or assume
any obligations with respect to the Assigned Agreements in excess of those
currently required by such Assigned Agreements. The Company shall use its best
efforts to ensure that all contracts entered into by the Company after the date
hereof are assignable to Truck City without the consent of the other party
thereto.
8.3. Trade Names. The Company shall, and shall cause its
affiliates to, as soon as reasonably practicable following the Closing Date,
cease to use any trade names, trademarks, services marks, logos, designs or
similar rights and interests included in the Assets, including the name
"Southwest Virginia Truck Parts" or any abbreviation or variation thereof (the
"Acquired Name"), in the operation of their business, including on any plant,
building or equipment or any stationery, business form, packaging, container,
sign or other property (real or personal) included in the Excluded Assets;
provided however, that the Company shall, within 14 days following the Closing,
prepare, execute and file appropriate documents with the Secretary of State of
the State of Virginia and all appropriate authorities where the Company is
qualified to do business to change the corporate names of the Company so that
they do not include any Acquired Name or any name confusingly similar thereto.
8.4. Indemnification by the Company and the Existing
Shareholders. Subject to the provisions of this Article VIII, the Company and
the Existing Shareholders will jointly and
26
<PAGE> 31
severally indemnify, defend and hold harmless Truck City and its controlling
persons, subsidiaries, officers, directors, employees, agents, successors and
assigns (such indemnified persons are collectively hereinafter referred to as
"Truck City's Indemnified Persons") from and against any and all loss,
liability, damage (excluding consequential, indirect special, exemplary and
punitive damages) or deficiency (including interest, penalties, judgments, costs
of preparation and investigation, and reasonable attorneys' fees) (collectively,
"Losses") that Truck City's Indemnified Persons suffer, sustain, incur or become
subject to arising out of or due to: (a) the Excluded Liabilities or the
Excluded Assets; (b) the nonfulfillment of any covenant, undertaking, agreement
or other obligation of the Company or the Existing Shareholders under this
Agreement, any Schedule hereto or any Ancillary Agreement, not otherwise waived
by Truck City; (c) any inaccuracy of any representation of the Company or any
Existing Shareholder in this Agreement, any Schedule hereto or any Ancillary
Agreement; or (d) the breach of any warranty of the Company or any Existing
Shareholder in this Agreement, any Schedule hereto or any Ancillary Agreement;
provided however, that the maximum aggregate liability of each of Cheria L.
Sturgill and Lescia L. Skeens to indemnify Truck City's Indemnified Persons
shall not exceed, in either case, the pro rata portion of the Purchase Price
received by that Existing Shareholder. "Losses" as used herein is not limited to
matters asserted by third parties, but includes Losses incurred or sustained in
the absence of third party claims.
8.5. Indemnification by Truck City. Subject to the provisions
of this Article VIII, Truck City agrees to indemnify, defend and hold the
Company and the Existing Shareholders and their respective controlling persons,
stockholders, subsidiaries, officers, directors, employees, agents, successors
and assigns (such persons are hereinafter collectively referred to as "the
Company's Indemnified Persons"), harmless from and against any and all Losses
that the Company's Indemnified Persons may suffer, sustain, incur or become
subject to arising out of or due to: (a) the Assumed Liabilities or the Assets;
(b) the nonfulfillment of any covenant, undertaking, agreement or other
obligation of Truck City under this Agreement, any Schedule hereto or any
Ancillary Agreement, not otherwise waived by the Company or the Existing
Shareholders; (c) any inaccuracy of any representation of Truck City in this
Agreement, in any Schedule hereto or any Ancillary Agreement; or (d) the breach
of any warranty of Truck City in this Agreement or any Schedule hereto. Payment
is not a condition precedent to recovery of indemnification for Losses.
8.6. Survival of Representations, Warranties and Covenants.
The several representations, warranties and covenants of the Parties contained
in this Agreement or in any document delivered pursuant hereto and the Parties'
right to indemnity in accordance with this Article VIII shall survive the
Closing Date and shall remain in full force and effect for 18 months thereafter;
provided, however, that the representations and warranties set forth in Section
3.10 relating to tax matters, Section 3.17 relating to employee benefits matters
and Section 3.18 relating to environmental matters shall survive for the length
of the applicable statute of limitations.
8.7. Threshold. No Truck City's Indemnified Person or the
Company's Indemnified Person shall be entitled to any recovery in accordance
with this Article VIII unless and until the amount of such Losses suffered,
sustained or incurred by such party, or to which such party becomes subject, by
reason of such inaccuracy, breach or nonfulfillment exceeds $10,000 and then
only to the extent of such excess.
27
<PAGE> 32
8.8. Notice and Opportunity to Defend. If a claim for Losses
(a "Claim") is to be made by a party seeking indemnification hereunder, such
party seeking indemnification (the "Indemnitee") shall notify the party
obligated to provide indemnification (the "Indemnitor") promptly. If such event
involves (a) any claim or (b) the commencement of any action or proceeding by a
third person, the Indemnitee shall give the Indemnitor written notice of such
claim or the commencement of such action or proceeding. Delay or failure to so
notify the Indemnitor shall only relieve the Indemnitor of its obligations to
the extent, if at all, that it is prejudiced by reasons of such delay or
failure. The Indemnitor shall have a period of 30 days within which to respond
thereto. If the Indemnitor accepts responsibility or does not respond within
such 30-day period, then the Indemnitor shall be obligated to compromise or
defend, at its own expense and by counsel chosen by the Indemnitor, such matter,
and the Indemnitor shall provide the Indemnitee with such assurances as may be
reasonably required by the Indemnitee to assure that the Indemnitor will assume
and be responsible for the entire liability at issue, subject to the limitations
set forth in Sections 8.6 and 8.7 hereof. If the Indemnitor fails to assume the
defense of such matter within said 30-day period, the Indemnitee against which
such matter has been asserted will (upon delivering notice to such effect to the
Indemnitor) have the right to undertake, at the Indemnitor's cost and expense,
the defense, compromise or settlement of such matter on behalf of the
Indemnitee. The Indemnitee agrees to cooperate fully with the Indemnitor and its
counsel in the defense against any such asserted liability. In any event, the
Indemnitee shall have the right to participate at its own expense in the defense
of such asserted liability. Any compromise of such asserted liability by the
Indemnitor shall require the prior written consent of the Indemnitee, which
consent will not be unreasonably withheld and in the event the Indemnitee
defends any such asserted liability, then any compromise of such asserted
liability by the Indemnitee shall require the prior written consent of the
Indemnitor, which consent shall not be unreasonably withheld.
8.9. Indemnification Payments. At the Closing, Truck City will
deliver by wire transfer of immediately available funds 5% of the Estimated
Purchase Price to the Escrow Agent to be held by the Escrow Agent for 12 months
pursuant to the terms of the Escrow Agreement and to serve as partial security
for the indemnification obligations of the Existing Shareholders under this
Agreement. Any indemnification obligations of the Company and the Existing
Shareholders under this Article VIII shall be first satisfied by amounts held by
the Escrow Agent pursuant to the terms of the Escrow Agreement.
ARTICLE IX.
MISCELLANEOUS
9.1. Expenses. Except as otherwise set forth in this
Agreement, Truck City shall pay all costs and expenses incurred by it on its
behalf, and the Company shall pay all costs and expenses incurred by it or the
Existing Shareholders or on its or the Existing Shareholders' behalf, in
connection with this Agreement and the transactions contemplated hereby,
including fees and expenses of their financial consultants, accountants and
legal counsel.
9.2. Notices. All notices, requests, demands and other
communications given hereunder (collectively, "Notices") shall be in writing and
delivered personally or by overnight
28
<PAGE> 33
courier to the Parties at the following addresses or sent by telecopier or
telex, with confirmation received, to the telecopy specified below (except that
any notice to be provided to any Existing Shareholder shall be so provided at
the address and telecopy number as set forth on Annex B hereto):
If to the Company, at
Southwest Virginia Truck Parts, Inc.
U.S. 460 East Main Street
Grundy, Virginia 24614
Attn.: C. Lloyd Lester
Telecopy No.: (540) 935-8294
With a Copy to:
Robertson, Cecil & Pruitt
237 Main Street
P.O. Box 1560
Grundy, Virginia 24614
Attn.: David E. Cecil
Telecopy No.: (540) 935-7576
If to Truck City:
c/o HDA Parts System, Inc.
520 Lake Cook Road
Deerfield, Illinois 60015
Attn.: John J. Greisch
Telecopy No.: (847) 444-1096
With a Copy to:
Brentwood Associates
11150 Santa Monica Boulevard
Suite 1200
Los Angeles, California 90025
Attn.: Christopher A. Laurence
Telecopy No.: (310) 477-1011
And:
Jones, Day, Reavis & Pogue
77 West Wacker
Chicago, Illinois 60601
Attn.: Timothy J. Melton
Telecopy No.: (312) 782-8585
29
<PAGE> 34
All Notices shall be deemed delivered when actually received
if delivered personally or by overnight courier, sent by telecopier or telex
(promptly confirmed in writing), addressed as set forth above. Each of the
Parties shall hereafter notify the other in accordance with this Section 9.2 of
any change of address or telecopy number to which notice is required to be
mailed.
9.3. Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, and by different parties hereto in
separate counterparts, each of which when executed shall be deemed an original,
but all of which taken together shall constitute one and the same instrument.
9.4. Entire Agreement. This Agreement and the Ancillary
Agreements constitute the entire agreement of the Parties with respect to the
subject matter hereof and supersede all prior negotiations, agreements and
understandings, whether written or oral, of the Parties.
9.5. Headings. The headings contained in this Agreement and in
the Schedules and Exhibits hereto are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
9.6. Assignment; Amendment of Agreement. This Agreement shall
be binding upon the respective successors and assigns of the Parties hereto.
This Agreement may not be assigned by any Party hereto without the prior written
consent of the other Party hereto. This Agreement may be amended only by written
agreement of the Parties hereto, duly executed and delivered by an authorized
representative of each of the Parties hereto.
9.7. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Illinois applicable to contracts made in that State, without giving effect to
the conflicts of laws principles thereof.
9.8. Further Assurances. Each Party agrees that it will
execute and deliver, or cause to be executed and delivered, on or after the date
of this Agreement, all such other instruments and will take all reasonable
actions as may be necessary in order to consummate the transactions contemplated
hereby, and to effectuate the provisions and purposes hereof.
9.9. No Third-Party Rights. This Agreement is not intended,
and shall not be construed, to create any rights in any parties other than Truck
City, the Company and the Existing Shareholders, and no person shall assert any
rights as third-party beneficiary hereunder.
9.10. Non-Waiver. The failure in any one or more instances of
a Party hereto to insist upon performance of any of the terms, covenants or
conditions of this Agreement, to exercise any right or privilege in this
Agreement conferred, or the waiver by said Party of any breach of any of the
terms, covenants or conditions of this Agreement shall not be construed as a
subsequent waiver of any such terms, covenants, conditions, rights or
privileges, but the same shall continue and remain in full force and effect as
if no such forbearance or waiver had occurred.
30
<PAGE> 35
9.11. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any Party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties hereto shall
negotiate in good faith to modify this Agreement so as to affect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
9.12. Incorporation of Exhibits and Schedules. The Exhibits
and Schedules hereto are incorporated into this Agreement and shall be deemed a
part hereof as if set forth herein in full. References herein to "this
Agreement" and the words "herein," "hereof" and words of similar import refer to
this Agreement (including its Exhibits and Schedules) as an entirety. In the
event of any conflict between the provisions of this Agreement and any such
Exhibit or Schedule, the provisions of this Agreement shall control.
9.13. Knowledge. As used herein, to the "knowledge" or "best
knowledge" or similar phrase includes (a) actual knowledge, after reasonable
inquiry, of any officer, director or shareholder of the Company and any employee
of the Company whose job duties include the supervision of the subject matter in
question and (b) such knowledge as would have been obtained by any of the
foregoing individuals after inquiring of the appropriate personnel and after
conducting, or having had conducted by such appropriate personnel, a diligent
search of files, computer records and other available data.
(signature page follows)
31
<PAGE> 36
IN WITNESS WHEREOF, the Parties have duly executed and
delivered this Agreement as of the day and year first above written.
TRUCK CITY PARTS, INC.
By: /s/ JOHN P. MILLER
----------------------------------------
Name: John P. Miller
--------------------------------------
Title: Vice President, Treasurer & Secretary
-------------------------------------
SOUTHWEST VIRGINIA TRUCK PARTS, INC.
By: /s/ C. LLOYD LESTER
----------------------------------------
Name: C. Lloyd Lester
--------------------------------------
Title: Secretary/Treasurer
-------------------------------------
/s/ C. LLOYD LESTER
-------------------------------------------
C. Lloyd Lester
/s/ JUDY C. LESTER
-------------------------------------------
Judy C. Lester
/s/ LESCIA L. SKEENS
-------------------------------------------
Lescia L. Skeens
/s/ CHERIA L. STURGILL
-------------------------------------------
Cheria L. Sturgill
S-1
<PAGE> 37
ANNEX A
"Assets" shall mean all of the right, title and interest in and to the
business, properties, assets and rights of any kind, whether tangible or
intangible, real or personal and constituting, or used or useful in connection
with, or related to, the Business and in which the Company has any interest on
the Closing Date and reflected on the Closing Balance Sheet including the value
of the Company's investment in stock of HD America and including the rights,
titles and interests of Lester set forth on Schedule I to this Annex A;
provided, however, that the following rights, titles and interests of the
Company shall be excluded from the definition of Assets (the "Excluded Assets"):
(a) all cash, other than cash on hand at the Closing;
(b) all insurance policies and proceeds and rights arising out
of such policies relating to the Excluded Assets;
(c) all records prepared in connection with the sale of the
Business (including bids from third parties);
(d) all rights (including Tax and other refunds and claims
thereto) relating to the Excluded Liabilities;
(e) all nonassignable Licenses and Permits; and
(f) all amounts due to the Company under the shareholder loan
reflected on the balance sheet as a related-party receivable.
A-1
<PAGE> 38
ANNEX B
Judy C. Lester C. Lloyd Lester
22084 Sandcastle Road 22084 Sandcastle Road
Abingdon, Virginia 24211 Abingdon, Virginia 24211
Cheria L. Sturgill Lescia L. Skeens
22077 Sandcastle Road 22215 Parksmill Road
Abingdon, Virginia 24211 Abingdon, Virginia 24211
B-1
<PAGE> 1
EXHIBIT 10.28
STOCK PURCHASE AGREEMENT
BY AND AMONG
FLEETPRIDE, INC.
AND
THE SHAREHOLDERS OF
OKLAHOMA TRUCK SUPPLY ASSOC., INC.
FEBRUARY 24, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
ARTICLE I.
PURCHASE AND SALE........................................................................................1
1.1 Purchase Price..................................................................................1
1.2 Existing Indebtedness...........................................................................1
1.3 Ad Valorem Taxes................................................................................1
1.4 Attorney Fees of Existing Shareholders..........................................................1
ARTICLE II.
CLOSING..................................................................................................2
2.1 Closing.........................................................................................2
2.2 Sale of Capital Stock of Oklahoma Truck Supply..................................................2
2.3 Payment of Purchase Price.......................................................................2
2.4 Registered Agent................................................................................2
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF
THE EXISTING SHAREHOLDERS................................................................................2
3.1 Corporate Organization and Standing.............................................................2
3.2 Authorization...................................................................................3
3.3 No Conflict or Violation........................................................................3
3.4 Capitalization of Oklahoma Truck Supply.........................................................3
3.5 Subsidiaries....................................................................................3
3.6 Title to Shares.................................................................................4
3.7 Facilities......................................................................................4
3.8 Financial Statements............................................................................5
3.9 Books and Records...............................................................................5
3.10 Litigation......................................................................................6
3.11 Licenses and Permits; Compliance with Laws......................................................6
3.12 Tax Matters.....................................................................................6
3.13 Brokers, Finders................................................................................9
3.14 Absence of Certain Changes......................................................................9
3.15 Material Contracts.............................................................................11
3.16 Proprietary Rights.............................................................................12
3.17 Labor Matters..................................................................................13
3.18 Consents.......................................................................................13
3.19 Employee Benefit Plans; Employment Agreements..................................................13
3.20 Compliance with Environmental Laws.............................................................16
3.21 Certain Business Relationships with Oklahoma Truck Supply......................................18
3.22 Undisclosed Liabilities........................................................................18
3.23 Insurance......................................................................................19
3.24 Accounts Receivable............................................................................19
3.25 Inventory......................................................................................19
3.26 Payments.......................................................................................19
3.27 Customers, Distributors and Suppliers..........................................................20
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF FLEETPRIDE............................................................20
4.1 Corporate Organization and Standing............................................................20
4.2 Authorization..................................................................................20
4.3 No Conflict or Violation.......................................................................20
4.4 No Other Reports...............................................................................21
ARTICLE V.
COVENANTS...............................................................................................21
5.1 Further Assurances.............................................................................21
5.2 Tax Matters....................................................................................21
5.3 Pre-Closing Date Termination of the Shareholders' Agreement and Bonus Policy
..............................................................................................25
ARTICLE VI.
CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS
BY FLEETPRIDE...........................................................................................26
6.1 No Injunctive Proceedings......................................................................26
6.2 Representations and Warranties.................................................................26
6.3 Performance of Agreements......................................................................26
6.4 Compliance Certificate.........................................................................26
6.5 Stock Certificates.............................................................................26
6.6 Stock Books....................................................................................26
6.7 Officers and Directors.........................................................................27
6.8 Opinion of Counsel.............................................................................27
6.9 Consents, Etc..................................................................................27
6.10 Ancillary Agreements...........................................................................27
6.11 Nonforeign Affidavit...........................................................................27
6.12 Terminations...................................................................................27
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS
BY THE EXISTING SHAREHOLDERS............................................................................27
7.1 No Injunctive Proceedings......................................................................27
7.2 Representations and Warranties.................................................................27
7.3 Performance of Agreements......................................................................28
7.4 Compliance Certificates........................................................................28
7.5 Ancillary Agreements...........................................................................28
7.6 Consents; Etc..................................................................................28
7.7 Indemnification of Guarantor...................................................................28
ARTICLE VIII.
ACTIONS BY THE PARTIES AFTER THE CLOSING................................................................28
8.1 Indemnification by the Existing Shareholders...................................................28
8.2 Indemnification by FleetPride..................................................................29
8.3 Survival of Representations, Warranties and Covenants..........................................29
8.4 Threshold......................................................................................29
8.5 Notice and Opportunity to Defend...............................................................29
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
8.6 Indemnification Payments.......................................................................30
8.7 Insurance Effect...............................................................................30
ARTICLE IX.
MISCELLANEOUS...........................................................................................30
9.1 Expenses.......................................................................................30
9.2 Notices........................................................................................31
9.3 Counterparts...................................................................................32
9.4 Entire Agreement...............................................................................32
9.5 Headings.......................................................................................32
9.6 Assignment; Amendment of Agreement.............................................................32
9.7 Governing Law..................................................................................32
9.8 Further Assurances.............................................................................32
9.9 No Third-Party Rights..........................................................................32
9.10 Non-Waiver.....................................................................................33
9.11 Severability...................................................................................33
9.12 Incorporation of Exhibits and Schedules........................................................33
9.13 Knowledge......................................................................................33
</TABLE>
iii
<PAGE> 5
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of
February 24, 2000, is entered into by and among FleetPride, Inc., an Alabama
corporation ("FleetPride"), and the shareholders of Oklahoma Truck Supply
Assoc., Inc., an Oklahoma corporation ("Oklahoma Truck Supply"), identified on
Annex A hereto (the "Existing Shareholders"). FleetPride and the Existing
Shareholders are referred to herein as each a "Party" and collectively, the
"Parties."
RECITALS
WHEREAS, the Existing Shareholders own all of the capital
stock of Oklahoma Truck Supply;
WHEREAS, FleetPride desires to acquire from the Existing
Shareholders and the Existing Shareholders desire to sell to FleetPride all of
the capital stock of Oklahoma Truck Supply;
ARTICLE I.
PURCHASE AND SALE
1.1 Purchase Price. Upon the terms and subject to the
conditions set forth herein, FleetPride will purchase from the Existing
Shareholders and the Existing Shareholders will sell to FleetPride all of the
capital stock of Oklahoma Truck Supply for $3,557,000, less (a) the amount of
any of the Company's long-term or short-term indebtedness for borrowed money or
the current portion thereof, other than Oklahoma Truck Supply's outstanding line
of credit from Will Rogers Bank in the face amount of $200,000 (the "Line of
Credit"), which will be paid off by FleetPride in the amount set forth on Annex
B hereto at the Closing and (b) any dividend or bonus payment to the Existing
Shareholders or related parties paid or declared between December 1, 1999 and
the Closing Date (as defined in Section 2.1), in cash payable by wire transfer
of immediately available funds to the Existing Shareholders (the "Estimated
Purchase Price"), which shall be paid to the Existing Shareholders in direct
proportion to their ownership interest in the capital stock as set forth on
Annex A hereto, pursuant to wiring instructions to be provided by the Existing
Shareholders.
1.2 Existing Indebtedness. FleetPride agrees (a) to pay at the
Closing, in accordance with Section 1.1, the amount set forth on Annex B hereto
to Will Rogers Bank with respect to the Line of Credit and (b) to obtain a
letter of credit to replace the existing letter of credit from Will Rogers Bank
in the face amount of $54,192.85 in favor of HD America (the "HD America Letter
of Credit") either (i) prior to the Closing or (ii) as soon thereafter as
reasonably practicable.
1.3 Ad Valorem Taxes. FleetPride or Oklahoma Truck Supply
shall pay the second half of ad valorem taxes, as shown on the title
commitments, with no deduction from the Estimated Purchase Price.
1.4 Attorney Fees of Existing Shareholders. On the Closing
Date, Oklahoma Truck Supply shall pay the Existing Shareholders' attorneys fees,
with no deduction from the Estimated Purchase Price.
<PAGE> 6
ARTICLE II.
CLOSING
2.1 Closing. The Closing of the transactions contemplated
herein (the "Closing") shall be held at 10:00 a.m. local time on February 24,
2000 (the "Closing Date") at the offices of Jones, Day, Reavis & Pogue, 77 West
Wacker, Chicago, Illinois 60601. The place of the Closing and the Closing Date
may be varied by agreement among the Parties.
2.2 Sale of Capital Stock of Oklahoma Truck Supply. On the
terms and subject to the conditions of this Agreement, on the Closing Date, the
Existing Shareholders shall sell, transfer and assign to FleetPride, and
FleetPride shall purchase and acquire from the Existing Shareholders, all of the
capital stock of Oklahoma Truck Supply.
2.3 Payment of Purchase Price. At the Closing, FleetPride
shall wire transfer the Purchase Price in immediately available funds in the
amounts and to the bank accounts designated by the Existing Shareholders on
Annex B hereto (less an amount equal to $178,000, to be delivered to the Escrow
Agent (as defined in Section 6.10) pursuant to Section 8.6 hereof.
2.4 Registered Agent. On the Closing Date, FleetPride shall
cause the board of directors of Oklahoma Truck Supply to pass a resolution
approving the change of Oklahoma Truck Supply's registered agent in the State of
Oklahoma from Norman C. Long to a successor registered agent. FleetPride shall,
as soon as reasonably practicable after the Closing Date, cause to be filed with
the Secretary of State of the State of Oklahoma, a form effecting such change of
registered agent (the "Registered Agent Form"); provided, however, that
FleetPride's obligations under this Section 2.4 to file the Registered Agent
Form are subject to its receipt from Norman C. Long or his representatives, of
(a) an original, executed copy of the Registered Agent Form, and (b) an original
copy of the letter from the Oklahoma Tax Commission, Franchise Tax Department,
stating that Oklahoma Truck Supply's franchise tax, due yearly, has been paid
for the current fiscal year.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF
THE EXISTING SHAREHOLDERS
The Existing Shareholders, jointly and severally, represent
and warrant to FleetPride as follows, except as set forth in a disclosure
schedule ("Schedule") attached hereto and made a part hereof, the number of each
Schedule corresponding to the Section number to which it refers:
3.1 Corporate Organization and Standing. Oklahoma Truck Supply
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Oklahoma and has all requisite corporate power and
authority to own or lease its properties and to carry on its business as
presently conducted. Oklahoma Truck Supply has delivered to FleetPride or its
representatives complete and correct copies of its Articles of Incorporation and
Bylaws (or other charter documents) and all amendments thereto. Oklahoma Truck
Supply is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of the business as now being
conducted by it or the property owned or leased by it makes such qualification
necessary, all of which are listed on Schedule 3.1.
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3.2 Authorization. This Agreement, the Ancillary Agreements
(as defined in Section 6.10) and the transactions contemplated hereby and
thereby have been duly authorized (in the case of non-natural persons). This
Agreement and the Ancillary Agreements have been duly executed and delivered by
the Existing Shareholders party thereto and are the legal, valid and binding
obligations of the Existing Shareholders party thereto, enforceable against them
in accordance with their terms. The Norman C. Long Trust (the "Trust"), acting
by and through Norman C. Long and Jacquelin S. Long (together, the "Trustees"),
has all trust power and authority to enter into and perform its obligations
under this Agreement and the Ancillary Agreements to which it is a party. The
Trustees are authorized to execute and deliver, on behalf of the Trust, this
Agreement and the Ancillary Agreements to which the Trust is a party.
3.3 No Conflict or Violation. Neither the execution and
delivery of this Agreement or the Ancillary Agreements nor the consummation of
the transactions contemplated hereby or thereby will (a) violate, conflict with
or result in or constitute a default under or result in the termination or the
acceleration of, or the creation in any party of any right (whether or not with
notice or lapse of time or both) to declare a default, accelerate, terminate or
cancel any indenture, contract, lease, sublease, loan agreement, note or other
agreement, obligation or liability ("Contractual Obligation") to which Oklahoma
Truck Supply or any Existing Shareholder is a party or by which it, he or she is
bound or to which its, his or her assets are subject or result in the creation
of any lien or encumbrance upon any of said assets, (b) violate, conflict with
or result in a breach of or constitute a default under any provision of the
Articles of Incorporation or Bylaws (or other organizational documents) of
Oklahoma Truck Supply, (c) violate, conflict with or result in a breach of or
constitute a default under any judgment, order, decree, rule or regulation of
any court or governmental agency to which Oklahoma Truck Supply or any Existing
Shareholder is subject or (d) violate, conflict with or result in a breach of
any applicable rule or regulation of any federal, state, local or other
governmental authority.
3.4 Capitalization of Oklahoma Truck Supply. The authorized
capital stock of Oklahoma Truck Supply consists of 2,000 shares of common stock,
$10.00 par value per share (the "Common Stock"). As of the date of this
Agreement, 330 shares of Common Stock are outstanding, all of which shares have
been duly authorized, validly issued and are fully paid and non-assessable and
are owned in the aggregate by the Existing Shareholders, and individually by the
persons in the amount specified on Annex A hereto (the "Shares"). There are (a)
no preemptive or similar rights on the part of any holder of any class of
securities of Oklahoma Truck Supply and (b) no options, warrants, conversion or
other rights, agreements or commitments of any kind obligating Oklahoma Truck
Supply, contingently or otherwise, to issue, sell or otherwise cause to be
outstanding any shares of its capital stock of any class or any securities
convertible into or exchangeable for any such shares.
3.5 Subsidiaries. Oklahoma Truck Supply does not own, and has
not at any time within the past five years owned, any capital stock of, or other
securities evidencing an equity interest in, any corporation, partnership or
other entity.
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3.6 Title to Shares. The Existing Shareholders have good and
valid title to the Shares, free and clear of any claims, liens, security
interests, options, charges, restrictions and interests of others whatsoever,
except as provided on Schedule 3.6 hereto. Upon delivery to FleetPride at the
Closing of certificates representing the Shares owned by the Existing
Shareholders, duly endorsed by them for transfer to FleetPride, FleetPride will
obtain good and valid title to such Shares, free and clear of any claims, liens,
security interests, options, charges, restrictions and interests of others
whatsoever except for any restrictions created by FleetPride. The Trust, acting
by and through the Trustees, has all trust power and authority to transfer the
Shares to FleetPride. The Trustees, acting on behalf of the Trust, are
authorized to transfer good and valid title to the Shares held by the Trust to
FleetPride. There are no voting trusts, proxies, or other agreements or
understandings to which Oklahoma Truck Supply or any Existing Shareholder is a
party with respect to the voting, dividend rights or disposition of any of the
Shares. The Existing Shareholders have no obligation, absolute or contingent, to
any other person or entity to issue, sell or otherwise dispose of any capital
stock of Oklahoma Truck Supply or to effect any merger, consolidation,
reorganization or other business combination of Oklahoma Truck Supply or to
enter into any agreement with respect thereto. [OTS to include reference to
Shareholder's Agreement on Schedule 3.6]
3.7 Facilities. Schedule 3.7 contains a complete and accurate
list of all real property used in connection with the business of Oklahoma Truck
Supply (the "Real Property"), identifying which are owned ("Owned Real
Property") and which are leased or subleased ("Leased Real Property"). The Owned
Real Property and the Leased Real Property are sometimes hereinafter referred to
collectively as the "Facilities" and individually as a "Facility."
(a) Owned Real Property. Oklahoma Truck Supply has not created
any unrecorded encumbrances (including, without limitation, easements,
restrictions, covenants, rights- of-way or reservations) affecting the Owned
Real Property, and to the best knowledge of Oklahoma Truck Supply, no such
unrecorded encumbrances exist. Oklahoma Truck Supply enjoys peaceful and
undisturbed possession of all Owned Real Property.
(b) Actions. To the best knowledge of Oklahoma Truck Supply,
there are no pending or threatened condemnation proceedings or other actions,
claims, suits, litigation, proceedings, notices of violation, inquiry or
investigations (collectively, "Actions") relating to any of the Facilities or to
any improvements constructed thereon.
(c) Leases or Other Agreements. There are no leases,
subleases, licenses, occupancy agreements, options, rights, concessions or other
agreements or arrangements, written or oral, granting to any person the right to
purchase, use or occupy any Owned Real Property or any portion thereof, or
interest in any such Owned Real Property, except an outdoor billboard site
leased to Donrey Outdoor Advertising, Inc. as to 7420 W. Reno.
(d) Facility Leases and Leased Real Property. With respect to
the Leased Real Property, Oklahoma Truck Supply is the sole lessee or sublessee
and has a non-mortgaged interest in the leasehold estate related thereto.
Oklahoma Truck Supply enjoys peaceful and undisturbed possession of the Leased
Real Property. To the best knowledge of Oklahoma Truck Supply, the Facility
lease or sublease is valid, binding and enforceable in accordance with its
terms. Oklahoma Truck Supply is not in default in any material respect under the
Facility lease or sublease, and, to the best knowledge of Oklahoma Truck Supply,
no event or condition exists that with notice or lapse of time or both would
constitute a default in any material respect by Oklahoma Truck Supply under the
Facility lease or sublease. True, correct and complete copies of the lease or
sublease listed on Schedule 3.7, including all amendments, modifications,
written waivers or supplemental agreements thereto, have been delivered to, or
made available for inspection by, FleetPride or its representatives.
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(e) Certificate of Occupancy. All Facilities have received all
required approvals of governmental authorities (including, without limitation,
permits and a certificate of occupancy or similar certificate permitting lawful
occupancy of the Facilities) required in connection with the operation thereof
and are and have been operated and maintained in accordance with applicable
regulations.
(f) Utilities. All Facilities are supplied with utilities
(including, without limitation, water, sewage, disposal, electricity, gas and
telephone) and other services necessary for the operation of such Facilities as
currently operated, and there is no condition that would reasonably be expected
to result in the termination of the present access from any Facility to such
utility services.
(g) Improvements, Fixtures and Equipment. The improvements
constructed on the Facilities, including, without limitation, all leasehold
improvements, and all fixtures and equipment and other tangible assets owned,
leased or used by Oklahoma Truck Supply at the Facilities are (i) insured to the
extent shown in copies of the policies provided to FleetPride, (ii) to the best
knowledge of Oklahoma Truck Supply, structurally sound with no material defects,
(iii) in good operating condition and repair, subject to ordinary wear and tear,
(iv) not in need of maintenance, repair or correction except for ordinary
routine maintenance and repair, the cost of which would not be material, (v)
sufficient for the operation of Oklahoma Truck Supply's business as presently
conducted and (vi) in conformity with all applicable regulations.
(h) No Special Assessment. Oklahoma Truck Supply has not
received notice of any special assessment relating to any Facility or any
portion thereof, and there is no pending or threatened special assessment,
except as otherwise provided in the Lease Agreement (as defined in Section
6.10).
3.8 Financial Statements.
(a) The unaudited balance sheets and statements of income,
stockholders' equity and cash flows of Oklahoma Truck Supply at and for the
fiscal years ended August 31, 1999 and 1998 were consistently prepared and
fairly present the financial condition and results of operations of Oklahoma
Truck Supply as of their respective dates and for each such period.
(b) Copies of the financial statements described in Section
3.8(a) have been provided to FleetPride or its representatives.
3.9 Books and Records. Oklahoma Truck Supply has made and kept
and given FleetPride and its representatives access to books and records and
accounts, which, in reasonable detail, accurately and fairly reflect the
activities of Oklahoma Truck Supply. The minute books of Oklahoma Truck Supply
accurately and adequately reflect all action taken by the shareholders, board of
directors and committees of the board of directors of Oklahoma Truck Supply. The
copies of the stock book records of Oklahoma Truck Supply are true, correct and
complete, and accurately reflect all transactions effected in Oklahoma Truck
Supply's equity interests through and including the date hereof. Oklahoma Truck
Supply has not engaged in any transaction, maintained any bank account or used
any corporate funds except for the transactions, bank accounts and funds which
have been and are reflected in the normally maintained books and records of
Oklahoma Truck Supply, all of which have been provided or made available to
FleetPride and its representatives.
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3.10 Litigation. There is no claim, action, suit, proceeding,
or investigation pending or, to the knowledge of Oklahoma Truck Supply,
threatened against Oklahoma Truck Supply or the directors, officers, agents or
employees of Oklahoma Truck Supply (in their capacity as such), or any
properties or rights of Oklahoma Truck Supply. There are no orders, writs,
injunctions or decrees currently in force against Oklahoma Truck Supply or the
directors, officers, agents or employees of Oklahoma Truck Supply (in their
capacity as such) with respect to the conduct of Oklahoma Truck Supply's
business.
3.11 Licenses and Permits; Compliance with Laws. Schedule 3.11
sets forth a complete list of all licenses, franchises, permits, approvals and
other governmental authorizations (collectively, "Licenses and Permits") held by
Oklahoma Truck Supply. Oklahoma Truck Supply owns, holds or possesses all
Licenses and Permits necessary or appropriate to entitle it to use its corporate
name, to own or lease, operate and use its assets and properties and to carry on
and conduct its business and operations as presently conducted. Oklahoma Truck
Supply is not in violation of or default under any Licenses or Permits or any
judgment, order, writ, injunction or decree of any court or administrative
agency issued against it. To the best knowledge of Oklahoma Truck Supply,
Oklahoma Truck Supply's conduct of its business has been and is in compliance
with all applicable laws, statutes, ordinances and regulations. Oklahoma Truck
Supply has not received any notice asserting a failure to comply with any law,
statute, ordinance, regulation, rule or order of any foreign, federal, state or
local government or any other governmental department or agency.
3.12 Tax Matters.
(a) Oklahoma Truck Supply has prepared in good faith and duly
filed or caused to be duly filed all Tax Returns (as hereinafter defined)
(including without limitation in respect of estimated Taxes (as hereinafter
defined)) required to be filed by it with the appropriate governmental
authorities, or requests for extensions to file such Tax Returns have been
timely filed and granted and have not expired. All such Tax Returns were at the
time of filing and are as of the date hereof true, correct and complete in all
material respects. All Taxes owed by Oklahoma Truck Supply (whether or not shown
on any Tax Return) have been paid within the time and in the manner prescribed
by law.
(b) No claim has ever been made by a Taxing authority in a
jurisdiction where Oklahoma Truck Supply has never filed a Tax Return that
Oklahoma Truck Supply is or may be subject to taxation by that jurisdiction.
Schedule 3.12 sets forth each state, local and foreign jurisdiction in which
Oklahoma Truck Supply (i) filed an income or franchise Tax Return, whether on a
consolidated, combined or separate return basis, during the five year-period
ended August 31, 1999 or (ii) collected or remitted any sales or use Taxes
during the fiscal year ended August 31, 1999.
(c) The financial statements described in Section 3.8(a)
reflect an adequate reserve for all Taxes payable by Oklahoma Truck Supply for
all Taxable periods and portions thereof accrued through the respective dates of
such financial statements. Any Taxes incurred or accrued by Oklahoma Truck
Supply since September 1, 1999 have arisen in the ordinary and usual course of
business determined in the same manner as for the most recent taxable period
ending on or before such date. All deficiencies for any Taxes that have been
proposed, asserted, or assessed against Oklahoma Truck Supply have been fully
paid, or are fully reflected as a liability in such
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financial statements, or are being contested and an adequate reserve therefor
has been established and is fully reflected in such financial statements.
(d) Oklahoma Truck Supply is not a party to any pending audit,
examination, action or proceeding for the assessment or collection of any Taxes,
nor, to the knowledge of the Existing Shareholders or Oklahoma Truck Supply, is
any such audit, examination, action or proceeding threatened. No issue has been
raised by the Internal Revenue Service (the "IRS") or any other applicable
taxing authority in any examination of the federal, state, local, and foreign
income Tax Returns of Oklahoma Truck Supply that, by application of the same or
similar principles, reasonably could be expected to result in a proposed
deficiency for any other period not so examined. Oklahoma Truck Supply is not
subject to any agreements, waivers or other arrangements extending the statute
of limitations for the assessment, collection or levy of any Taxes for any
Taxable year or other period.
(e) There are no liens for Taxes (other than for current Taxes
not yet due and payable) on the assets of Oklahoma Truck Supply.
(f) Copies of all income Tax Returns of Oklahoma Truck Supply
filed in respect of any Taxable year for which the assessment of Taxes is not
barred by the statute of limitations or that has not been closed after
examination by the IRS or other applicable taxing authority have heretofore been
delivered to FleetPride or its representatives and all such Tax Returns are
listed on Schedule 3.12. Oklahoma Truck Supply has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Taxes within the meaning of Section
6662 of the Internal Revenue Code of 1986, as amended (the "Code").
(g) Copies of all Tax agreements (including, without
limitation, agreements providing for the allocation or sharing of or
indemnification with respect to Taxes) to which Oklahoma Truck Supply is a
party, including any novations, transfers or assignments thereof, have
heretofore been delivered to FleetPride or its representatives, and all such
agreements are listed on Schedule 3.12.
(h) Oklahoma Truck Supply has not filed a consent pursuant to,
or agreed to the application of, Section 341(f) of the Code.
(i) Oklahoma Truck Supply has not made any payments, is not
obligated to make any payments and is not a party to any agreement that could
obligate it to make any payments, the deductibility of which would be disallowed
(in whole or in part) under Section 280G of the Code.
(j) None of the Existing Shareholders is a foreign person
within the meaning of, and no Tax is required to be withheld as a result of any
the transactions contemplated by this Agreement pursuant to, Section 1445 or any
other provision of the Code or of any other state, local or foreign Tax laws.
(k) All Taxes that are required by law to be withheld or
collected by Oklahoma Truck Supply have been duly withheld or collected and, to
the extent required, have been paid to the proper governmental authority or
properly segregated or deposited as required by applicable law.
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(l) Oklahoma Truck Supply has (i) not been a member of an
affiliated group filing a consolidated federal income Tax Return and (ii) no
liability for the Taxes of any other person under Treasury Regulation
ss.1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract or otherwise.
(m) Oklahoma Truck Supply has not executed or entered into any
closing agreement pursuant to Section 7121 of the Code, any predecessor
provision thereof or any similar provision of state or local law.
(n) Oklahoma Truck Supply has not taken any action in
anticipation of the Closing not expressly required by this Agreement that would
have the effect of deferring any liability for Taxes of Oklahoma Truck Supply to
any Taxable period (or portion thereof) ending after the Closing Date.
(o) No power of attorney has been granted by Oklahoma Truck
Supply with respect to any matter relating to Taxes that is currently in force.
For purposes of this Agreement, (x) the term "Tax" (including,
with correlative meaning, the terms "Taxes" and "Taxable") means all federal and
state, net income, franchise, payroll, sales, employment, use, license,
property, ad valorem, withholding, excise, alternative or add-on minimum, gains,
duties, fees, assessments or charges of any nature whatsoever, together with all
interest, penalties, fines and additions to tax or additional amounts imposed
with respect thereto, and (y) the term "Tax Returns" means any return, report,
statement, election, information return or other document (including schedules
or any related or supporting information) filed or required to be filed with any
governmental authority in connection with the determination, assessment or
collection of any Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax. Oklahoma Truck Supply has not
paid, and to its knowledge has not been required to pay or been subject to, and
the definition of "Tax" set forth above shall not be deemed to include, local or
foreign taxes of any kind, or gross income, profits, gross receipts, occupation,
value added, user, fuel, excess, windfall profits, custom duties, transfer,
documentary, stamp or other taxes.
3.13 Brokers, Finders. Oklahoma Truck Supply has not retained
any broker or finder in connection with the transactions contemplated herein,
and is not obligated and has not agreed to pay any brokerage or finder's
commission, fee or similar compensation.
3.14 Absence of Certain Changes.
Since September 1, 1999, Oklahoma Truck Supply has conducted
its business in the ordinary course and there has not occurred with respect to
Oklahoma Truck Supply:
(a) any material adverse effect on the business, operations,
assets, results of operations, financial condition or prospects of
Oklahoma Truck Supply ("Material Adverse Effect");
(b) any revaluation of assets, including, without limitation,
writing down the value of inventory or writing off notes or accounts
receivable, except in the ordinary course of business;
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(c) any payment, discharge or satisfaction of any liabilities
or obligations, other than in the ordinary course of business;
(d) any incurrence of liabilities, except liabilities incurred
in the ordinary course of business, or increase or change in any
assumptions underlying or methods of calculating, any doubtful account
contingency or other reserves;
(e) any capital expenditure exceeding $10,000, the execution
of any lease or the incurring of any obligation to make any capital
expenditure or execute any lease other than in the ordinary course of
business;
(f) the failure to pay or satisfy when due any liability,
except where the failure would not have a Material Adverse Effect;
(g) any assets (whether real, personal or mixed, tangible or
intangible) of Oklahoma Truck Supply becoming subject to any mortgage,
pledge, lien, security interest, encumbrance, restriction or charge of
any kind, except in the ordinary course of business;
(h) the failure to carry on diligently the business in the
ordinary course so as to preserve for FleetPride the assets, business
and goodwill of Oklahoma Truck Supply's suppliers, customers,
distributors and others having business relations with it;
(i) the disposition or lapsing of any Proprietary Rights (as
defined in Section 3.16) or any disposition or disclosure to any person
of any Proprietary Rights not heretofore a matter of public knowledge;
(j) any cancellation or waiver of any material claims or
rights of value, or any sale, lease, transfer, assignment, distribution
or other disposition of any assets, except for sales of inventory in
the ordinary course of business, or any disposal of any material assets
for any amount;
(k) an amendment, cancellation or termination of any contract,
commitment, agreement, lease, transaction or permit relating to assets
or the business or entry into any contract, commitment, agreement,
lease, transaction or permit which is not in the ordinary course of
business, including, without limitation, any employment or consulting
agreements;
(l) any amendment or change to any Employee Benefit Plan (as
defined in Section 3.19) or any actuarial or accounting standards
applicable to any such Employee Benefit Plan, or the establishment of
or commitment to establish any employee benefit plan (as defined in
ERISA);
(m) any bonus paid or promised, an increase in the base
compensation, or other payment or loan to any director, officer or
employee, whether now or hereafter payable or granted (other than
increases in base compensation not to exceed 5% per annum in the
ordinary course consistent in timing and amount with past practices),
or entry into or variation of the terms of any employment or incentive
agreement with any such person;
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(n) an adverse change in employee relations that has or is
reasonably likely to have an adverse effect on the productivity, the
financial condition, results of operations or business of Oklahoma
Truck Supply or the relationships between the employees of Oklahoma
Truck Supply and the management of Oklahoma Truck Supply;
(o) any change in any method of accounting or keeping books of
account or accounting practices;
(p) any material damage, destruction or loss of any asset,
whether or not covered by insurance;
(q) the issuance, delivery or sale of any equity securities,
or alteration in terms of any outstanding securities issued by it or
any increase in its indebtedness for borrowed money;
(r) the declaration, payment or setting aside for payment of
any dividend or other distribution (whether in cash, stock or property
or otherwise), the redemption, purchase or other acquisition of any
shares of Common Stock, or the creation of any securities convertible
into or exchangeable for any shares of Common Stock or any options,
warrants or other rights to purchase or subscribe to any of the
foregoing;
(s) the consummation or adoption of any plan of liquidation or
resolutions providing for the liquidation, dissolution, merger,
consolidation or other reorganization of Oklahoma Truck Supply;
(t) the existence of any other known event or condition which,
in any one case or in the aggregate, has been or might reasonably be
expected to have a Material Adverse Effect; or
(u) an agreement to do any of the things described in the
preceding clauses (a) - (t) other than as expressly provided for
herein.
3.15 Material Contracts. Schedule 3.15 attached hereto sets
forth a complete and correct list of all the Material Contracts to which
Oklahoma Truck Supply or, in the case of Section 3.15(g), any Existing
Shareholder, is a party. As used in this Agreement, "Material Contracts" means:
(a) all such contracts not made in the ordinary course of
business;
(b) all such leases or other agreements under which Oklahoma
Truck Supply is a lessor or lessee of any real property or any machinery,
equipment, vehicle or other tangible personal property owned by a third party
and used in the business of Oklahoma Truck Supply, which entails annual
payments, in the case of any such lease or agreement, in excess of $10,000;
(c) all such options with respect to any property, real or
personal, whether Oklahoma Truck Supply is the grantor or grantee thereunder;
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(d) all such distribution, franchise, license, technical
assistance, sales, commission, consulting, agency or advertising contracts
related to Oklahoma Truck Supply's assets or business and that are not
cancelable on not more than 30 days notice and without cancellation penalties or
severance payments, in the case of any such contract or group of contracts, in
excess of $10,000;
(e) all such mortgages, indentures, security agreements,
pledges, notes, loan agreements or guaranties relating to Oklahoma Truck Supply;
(f) all such contracts and agreements to which Oklahoma Truck
Supply is a party and which are (i) outstanding contracts with its officers,
employees, agents, consultants, advisors, salespeople, sales representatives,
distributors, sales agents or dealers of Oklahoma Truck Supply other than
contracts which by their terms are cancelable by Oklahoma Truck Supply with
notice of not more than 30 days and without cancellation penalties or severance
payments, in the case of any such contract or group of contracts, in excess of
$10,000, (ii) collective bargaining agreements and (iii) pension,
profit-sharing, bonus, retirement, stock option or employee benefit plans or
other similar plans or arrangements of Oklahoma Truck Supply;
(g) any covenant not to compete or similar restriction on
Oklahoma Truck Supply or any Existing Shareholder;
(h) any contract with the United States, state or local
government or any agency or department thereof, involving expenditures or
liabilities in excess of $10,000; or
(i) any contract or agreement providing for the receipt or
payment (whether the obligations are fixed or contingent) of $10,000 or more
after the date of this Agreement, including, without limitation, agreements
calling for penalties or payments upon voluntary termination or withdrawal by
Oklahoma Truck Supply.
The Existing Shareholders have furnished to FleetPride or its representatives
copies of all Material Contracts, including all amendments and supplements
thereto.
3.16 Proprietary Rights.
(a) Schedule 3.16(a) lists the material patents, trademarks
(whether registered or unregistered), service marks, trade names, service names,
brand names, logos and copyrights (collectively, the "Proprietary Rights") for
Oklahoma Truck Supply. Schedule 3.16(a) also sets forth: (i) for each patent,
the number, normal expiration date and subject matter for each country in which
such patent has been issued, or, if applicable, the application number, date of
filing and subject matter for each country, (ii) for each trademark, the
application serial number or registration number, the class of goods covered and
the expiration date for each country in which a trademark has been registered
and (iii) for each copyright, the number and date of filing for each country in
which a copyright has been filed. The Proprietary Rights listed in Schedule
3.16(a) are all those used by Oklahoma Truck Supply in connection with its
business. True and correct copies of all patents (including all pending
applications) owned, controlled, created or used by or on behalf of Oklahoma
Truck Supply or in which Oklahoma Truck Supply has any interest whatsoever have
been provided to FleetPride or its representatives.
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(b) Oklahoma Truck Supply has no obligation to compensate any
person for the use of any such Proprietary Rights nor has Oklahoma Truck Supply
granted to any person any license, option or other rights to use in any manner
any of its Proprietary Rights, whether requiring the payment of royalties or
not.
(c) Oklahoma Truck Supply owns or has a valid right to use
each of the Proprietary Rights, and the Proprietary Rights will not cease to be
valid rights of Oklahoma Truck Supply by reason of the execution, delivery and
performance of this Agreement, the Ancillary Agreements or the consummation of
the transactions contemplated hereby and thereby. All of the pending patent
applications have been duly filed. Oklahoma Truck Supply has not received any
notice of invalidity or infringement of any rights of others with respect to
such trademarks. Oklahoma Truck Supply has taken all reasonable and prudent
steps to protect the Proprietary Rights from infringement by any other person.
No other person (i) has the right to use any Proprietary Rights, (ii) has
notified Oklahoma Truck Supply that it is claiming any ownership of or right to
use such Proprietary Rights or (iii) to the best knowledge of Oklahoma Truck
Supply, is infringing upon any such Proprietary Rights in any way. Oklahoma
Truck Supply's use of any Proprietary Rights does not and will not conflict
with, infringe upon or otherwise violate the valid rights of any third party in
or to such Proprietary Rights, and no action has been instituted against or
notices received by Oklahoma Truck Supply that are presently outstanding,
alleging that Oklahoma Truck Supply's use of the Oklahoma Truck Supply name and
its variations used in the Oklahoma Truck Supply business infringes upon or
otherwise violates any rights of a third party in or to such Proprietary Rights.
There are not, and it is reasonably expected that after the Closing there will
not be, any restrictions on the right of Oklahoma Truck Supply to sell products
manufactured or remanufactured by Oklahoma Truck Supply in connection with the
operation of its business.
3.17 Labor Matters. Oklahoma Truck Supply is not a party to
any labor agreement with respect to its employees with any labor organization,
union, group or association, and there are no employee unions (nor any other
similar labor or employee organizations) under local statutes, custom or
practice. Oklahoma Truck Supply has not experienced any attempt by organized
labor or its representatives to make it conform to demands of organized labor
relating to its employees or to enter into a binding agreement with organized
labor that would cover the employees of Oklahoma Truck Supply. There is no labor
strike or labor disturbance pending or, to the best knowledge of Oklahoma Truck
Supply, threatened against Oklahoma Truck Supply, nor is any grievance currently
being asserted, and Oklahoma Truck Supply has not experienced a work stoppage or
other labor difficulty, and is not and has not engaged in any unfair labor
practice. Without limiting the foregoing, Oklahoma Truck Supply is in compliance
with the Immigration Reform and Control Act of 1986 and maintains a current Form
I-9, as required by such Act, in the personnel file of each employee hired after
November 9, 1986.
3.18 Consents. No consent, approval, authorization, order,
filing, registration or qualification (each a "Consent") of or with any court,
governmental authority or third person is required to be made or obtained by
Oklahoma Truck Supply or any Existing Shareholder in connection with the
execution and delivery of this Agreement, the Ancillary Agreements or the
consummation by Oklahoma Truck Supply and the Existing Shareholders of the
transactions contemplated herein and therein, except for (a) consents required
under the Facility leases and subleases as set forth on Schedule 3.18, (b)
consents listed on Schedule 3.18 that are required to be made or obtained after
the Closing under Licenses and Permits and (c) filings, registrations, licenses
and permits listed on Schedule 3.18 generally applicable to businesses similar
to those of Oklahoma
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Truck Supply required to be obtained or made by Oklahoma Truck Supply after the
Closing in the ordinary course of business as a result of the consummation of
the transactions contemplated hereby.
3.19 Employee Benefit Plans; Employment Agreements.
(a) Plans. Schedule 3.19(a) sets forth a true, complete and
accurate list of: (i) any and all severance or employment agreements with any
current or former director, officer, independent contractor or employee of
Oklahoma Truck Supply; (ii) any and all severance plans, programs or policies;
(iii) any and all plans, agreements or arrangements relating to current or
former directors, officers, independent contractors or employees of Oklahoma
Truck Supply containing change in control provisions or currently established,
maintained or contributed to by Oklahoma Truck Supply, including bonus,
incentive compensation, stock ownership, stock option, stock appreciation, stock
purchase, phantom stock, vacation, retirement, insurance, severance,
supplemental unemployment, disability, death benefit, hospitalization, medical,
workers compensation, pension, employee stock ownership, profit-sharing or
deferred compensation plans; (iv) collective bargaining agreements; (v) any
employee welfare and employee pension benefit plans (as such terms are defined
in Sections 3(1) and 3(2), respectively, of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), which are currently established,
maintained or contributed to by Oklahoma Truck Supply and are applicable to
Oklahoma Truck Supply's former or current employees (singularly, "Employee
Benefit Plan" and collectively, "Employee Benefit Plans"); and (vi) all Employee
Benefit Plans, except those disclosed above, previously established, maintained
or contributed to by Oklahoma Truck Supply, or any one of them acting alone
("Terminated Employee Benefit Plans").
(b) Pension and Welfare Benefit Plans. With respect to the
Employee Benefit Plans and Terminated Employee Benefit Plans, each as described
on Schedule 3.19(a):
(i) each Employee Benefit Plan is in compliance with
the requirements provided by any and all statutes, orders or
governmental rules or regulations currently in effect and applicable to
such Employee Benefit Plan, including but not limited to ERISA and the
Code, and each Employee Benefit Plan has been administered in
accordance with its terms;
(ii) with respect to any Employee Benefit Plan that
is an employee welfare benefit plan (which term shall have the meaning
set forth in Section 3(3) of ERISA), any trust related thereto has been
determined to be tax-exempt by the IRS pursuant to Code ss. 501(c)(9)
and nothing has occurred since the time of such determination to cause
the loss of such trust's tax-exempt status. Each Employee Benefit Plan
intended to be qualified pursuant to Code ss. 401(a) and Code ss.
501(a) is qualified under Code ss. 401(a) and Code ss. 501(a) and has
received a favorable determination letter from the IRS covering the Tax
Reform Act of 1986, as amended, that such ERISA Plans are so qualified
and each trust established in connection with any such plan is exempt
from federal income taxation and nothing (either in form or operation)
has since occurred from the date of the last favorable determination
letter to cause the loss of such qualification;
(iii) all required reports and disclosures (including
without limitation the IRS Form 5500 Annual Return/Report, summary
annual report and summary plan
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description) with respect to each Employee Benefit Plan have been
timely filed and distributed;
(iv) any notices required by ERISA or the Code or any
other state or federal law or any ruling or regulation of any state or
federal administrative agency with respect to such Employee Benefit
Plans have been appropriately given;
(v) all required contributions for all periods ending
prior to Closing (including periods from the first day of the current
plan year to Closing) will be made to such Employee Benefit Plans prior
to the Closing Date by Oklahoma Truck Supply;
(vi) Oklahoma Truck Supply has not taken any action
directly or indirectly that obligates Oklahoma Truck Supply to
institute, modify or change any Employee Benefit Plan, any change in
the manner in which contributions are made or the basis on which such
contributions are determined;
(vii) all insurance premiums have been paid in full,
subject only to normal retrospective adjustments in the ordinary
course, with regard to such Employee Benefit Plans for policy years or
other applicable policy periods ending on or before Closing;
(viii) with respect to each such Employee Benefit
Plan, neither Oklahoma Truck Supply, its affiliates, nor any fiduciary
(as defined in ERISA ss. 3(21)) of any Employee Benefit Plan have
engaged in any prohibited transactions (as defined in ERISA ss. 406 or
Code ss. 4975); no penalty, fine, tax, action, suit, grievance,
arbitration, investigation, audit, litigation or claim (other than
routine claims for benefits made in the ordinary course of plan
administration for which plan administrative review procedures have not
been exhausted) are pending, threatened or imminent against or with
respect to any Employee Benefit Plans, Oklahoma Truck Supply, or any
fiduciary (as defined in ERISA ss. 3(21)) of any such Employee Benefit
Plan (including without limitation any action, suit, grievance,
arbitration or other manner of litigation, or claim regarding conduct
which allegedly interferes with the attainment of rights under such
plans); neither Oklahoma Truck Supply, nor any fiduciary with respect
to any Employee Benefit Plan has any knowledge of any facts that would
give rise to or could give rise to any penalty, fine, tax, action,
suit, grievance, arbitration or other manner of litigation, or claim;
and Oklahoma Truck Supply has not incurred any lien under Section
401(a)(29) or any liability for any tax or civil penalty imposed by
Section 4971 or 4976 of the Code or Section 502 of ERISA and no
condition or set of circumstances exists that presents a risk to
Oklahoma Truck Supply of incurring any such lien or liability;
(ix) no Employee Benefit Plan is (A) a "defined
benefit" plan (as defined in Section 3(35) of ERISA, (B) a
"multiemployer plan" within the meaning of Section 3(37) of ERISA, (C)
a "multiple employer" or a "multiple employer welfare arrangement"
within the meaning of Section 413(c) of the Code or Section 514(b)(6)
of ERISA, respectively, or (D) a "welfare benefit fund" as defined in
Section 419(e) of the Code;
(x) neither Oklahoma Truck Supply nor any of its
affiliates is subject to any liability under Title IV of ERISA,
including without limitation any withdrawal liability on behalf of a
multiemployer plan;
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(xi) none of Oklahoma Truck Supply or any of its
directors, officers, employees or any fiduciary of any Employee Benefit
Plan has any liability for a breach of fiduciary responsibility imposed
by ERISA for failure to comply with ERISA or the Code for any action or
failure to act in connection with the administration or investment of
such Employee Benefit Plans;
(xii) no current or former employee of Oklahoma Truck
Supply will be entitled to any payment, additional benefits or any
acceleration of the time of payment or vesting of any benefits under
any Employee Benefit Plan as a result of the transactions contemplated
by this Agreement (either alone or in conjunction with any other event
such as a termination of employment) and no trustee under any "rabbi
trust" or similar arrangement in connection with any Employee Benefit
Plan will be entitled to payment as a result of the transactions
contemplated by this Agreement; and
(xiii) no Employee Benefit Plan provides medical,
life or other welfare benefits (whether or not insured), with respect
to current or former employees after retirement or other termination of
service (other than coverage mandated by applicable law). With respect
to any contract or arrangement with an insurance company providing
funding under any Employee Benefit Plan, there is no material liability
for any retroactive rate adjustment. Except as disclosed on Schedule
3.19(a), Oklahoma Truck Supply has the right to amend or to terminate
its participation with respect to each Employee Benefit Plan. Each
Employee Benefit Plan that is a "group health plan," as defined in
Section 5000 of the Code has been operated in accordance with Section
4980B of the Code, Section 9801 and the secondary payor requirements of
Section 1862(b) of the Social Security Act.
3.20 Compliance with Environmental Laws.
(a) Definitions. The following terms, when used in this
Section 3.20, shall have the following meanings. Any of these terms may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference.
(i) "Oklahoma Truck Supply" for the purposes of this
Section, shall include (A) Oklahoma Truck Supply, (B) all partnerships,
joint ventures and other entities or organizations in which Oklahoma
Truck Supply was at any time or is a partner, joint venturer, member or
participant and (C) all predecessor or former corporations,
partnerships, joint ventures, organizations, businesses or other
entities, whether in existence as of the date hereof or at any time
prior to the date hereof, the assets or obligations of which have been
acquired or assumed by Oklahoma Truck Supply or to which Oklahoma Truck
Supply has succeeded.
(ii) "Release" shall mean and include any existing or
previously existing spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment or the workplace of any Hazardous
Substance, and/or otherwise as defined in any Environmental Law.
(iii) "Hazardous Substance" shall mean any pollutant,
contaminant, chemical, waste and any toxic, infectious, carcinogenic,
reactive, corrosive, ignitable or flammable chemical or chemical
compound or hazardous substance, material or waste,
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whether solid, liquid or gas, including, without limitation, any
quantity of asbestos in any form, urea formaldehyde, PCB's, radon gas,
crude oil or any fraction thereof, all forms of natural gas, petroleum
products or by-products or derivatives, radioactive substance or
material, pesticide waste waters, sludges, slag and any other
substance, material or waste that is subject to regulation, control or
remediation under any Environmental Laws.
(iv) "Environmental Laws" shall mean all laws,
statutes, regulations, rules, ordinances, by-laws, orders or
determinations of any governmental or judicial authority at the
federal, state or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted which regulate or relate
to the protection or clean-up of the environment, the use, treatment,
storage, transportation, generation, manufacture, processing,
distribution, handling or disposal of, or emission, discharge or other
release or threatened release of Hazardous Substances or otherwise
dangerous substances, wastes, pollution or materials (whether, gas,
liquid or solid), the preservation or protection of waterways,
groundwater, drinking water, air, wildlife, plants or other natural
resources, or the health and safety of persons or property, including,
without limitation, protection of the health and safety of employees.
Environmental Laws shall include, without limitation, the Federal
Insecticide, Fungicide, Rodenticide Act, Resource Conservation &
Recovery Act, Clean Water Act, Safe Drinking Water Act, Atomic Energy
Act, Occupational Safety and Health Act, Toxic Substances Control Act,
Clean Air Act, Comprehensive Environmental Response, Compensation and
Liability Act, Emergency Planning and Community Right-to-Know Act and
the Hazardous Materials Transportation Act.
(v) "Environmental Conditions" means the introduction
into the environment, whether or not yet discovered, of any pollution,
including, without limitation, any contaminant, irritant or pollutant
or other Hazardous Substance (whether or not upon any Facility or
former Facility or other property and whether or not such pollution
constituted at the time thereof a violation of any Environmental Law as
a result of any Release of any kind whatsoever of any Hazardous
Substance) as a result of which Oklahoma Truck Supply has or may become
liable to any person or by reason of which any Facility, former
Facility or any of the assets of Oklahoma Truck Supply may suffer or be
subjected to any lien or as a result of which Oklahoma Truck Supply or
FleetPride could incur any damage, loss, cost, expense, claim, demand,
order or liability to a third party (including, without limitation, any
governmental authority).
(b) Notice of Violation. Oklahoma Truck Supply has not
received a notice of alleged, actual or potential responsibility for, or any
inquiry or investigation regarding, (i) any Release or threatened Release of any
Hazardous Substance at any location, whether at the Facilities, any former
Facilities or otherwise or (ii) an alleged violation of or non-compliance with
the conditions of any permit required under any Environmental Law or the
provisions of any Environmental Law. Oklahoma Truck Supply has not received
notice of any other claim, demand or action by any individual or entity alleging
any actual or threatened injury or damage to any person, property, natural
resource or the environment arising from or relating to any Release or
threatened Release of any Hazardous Substances at, on, under, in, to or from any
Facilities or former Facilities, or in connection with any operations or
activities of Oklahoma Truck Supply.
(c) Environmental Conditions. To the best knowledge of
Oklahoma Truck Supply, there are no present or past Environmental Conditions,
except as disclosed in the reports
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listed on Schedule 3.20(d) or as listed on Schedule 3.20(d). With respect to the
matter listed as Item 5 on Schedule 3.20(d), the Existing Shareholders agree to
re-mediate the pump area to the extent required by Environmental Laws and
pursuant to a scope of work reasonably acceptable to FleetPride within 60 days
of the date of this Agreement or such other date agreed to in writing by the
parties. The Existing Shareholders shall also replace any removed soil with
clean fill. FleetPride will be responsible for installing a concrete pad
underneath the pumps.
(d) Environmental Audits or Assessments. True, complete and
correct copies of the written reports, and all parts thereof, including any
drafts of such reports if such drafts are in the possession or control of
Oklahoma Truck Supply, of all environmental audits or assessments which have
been conducted at any Facility or former Facility within the past five years,
either by Oklahoma Truck Supply or any attorney, environmental consultant or
engineer engaged for such purpose, have been delivered to FleetPride or its
representatives and a list of all such reports, audits and assessments and any
other similar report, audit or assessment of which Oklahoma Truck Supply has
knowledge is included in Schedule 3.20(d) hereto.
(e) Indemnification Agreements. Oklahoma Truck Supply is not a
party, whether as a direct signatory or as successor, assign or third party
beneficiary, or otherwise bound, to any lease or other contract (excluding
insurance policies disclosed on Schedule 3.23) under which Oklahoma Truck Supply
is obligated by or entitled to the benefits of directly or indirectly, any
representation, warranty, indemnification, covenant, restriction or other
undertaking concerning environmental conditions.
(f) Releases or Waivers. Oklahoma Truck Supply has not
released any other person from any claim under any Environmental Law or waived
any rights concerning any Environmental Condition.
(g) Notices, Warnings and Records. Oklahoma Truck Supply has
given all notices and warnings, made all reports, and has kept and maintained
all records required by and in compliance with all Environmental Laws of which
it has knowledge.
(h) Compliance. Oklahoma Truck Supply has never violated and
is presently in compliance with all Environmental Laws of which it has
knowledge, except as disclosed in the reports listed on Schedule 3.20(d).
(i) Hazardous Substance. Oklahoma Truck Supply has not
generated, manufactured, refined, transported, treated, disposed of, stored,
handled, transferred, produced or processed any Hazardous Substance, except
those which are handled and sold in the ordinary course of business in full
compliance with all Environmental Laws.
(j) Underground Storage Tanks. There are no underground
storage tanks at any Facility owned or operated by Oklahoma Truck Supply.
Oklahoma Truck Supply does not own or operate any underground storage tanks,
whether currently in use or formerly used.
(k) Asbestos Containing Material. Except as disclosed in the
reports listed on Schedule 3.20(d), there is no asbestos containing material at
any Facility owned or operated by Oklahoma Truck Supply.
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(l) Liens. No lien has been imposed on any Facility pursuant
to any Environmental Law.
3.21 Certain Business Relationships with Oklahoma Truck
Supply. Except as disclosed on Schedule 3.21, none of the Existing Shareholders
has been involved in any business arrangement or relationship with Oklahoma
Truck Supply within the past 12 months, and none of such Existing Shareholders
owns any assets, tangible or intangible, that are used in the business of
Oklahoma Truck Supply.
3.22 Undisclosed Liabilities. Oklahoma Truck Supply has no
liabilities or obligations, whether accrued, absolute, contingent or otherwise
except (a) to the extent reflected or reserved for on the Balance Sheet, (b)
liabilities or obligations incurred in the normal and ordinary course of
business of Oklahoma Truck Supply since August 31, 1999, (c) liabilities or
obligations disclosed in Schedule 3.22 hereto and in the other Schedules
attached hereto or (d) liabilities or obligations disclosed elsewhere in this
Agreement.
3.23 Insurance. Schedule 3.23 contains a complete and accurate
list of all policies or binders of fire, liability, title, worker's
compensation, product liability and other forms of insurance (showing as to each
policy or binder the carrier, policy number, coverage limits, expiration dates,
annual premiums, a general description of the type of coverage provided)
maintained by Oklahoma Truck Supply on its (a) business, (b) assets or (c)
employees at any time since September 1, 1996. All insurance coverage applicable
to Oklahoma Truck Supply, or its business or assets is in full force and effect,
insures Oklahoma Truck Supply in reasonably sufficient amounts against all risks
deemed necessary by the Existing Shareholders or required by all contracts to
which Oklahoma Truck Supply is a party and has been issued by insurers of
recognized responsibility. There is no default under any such coverage nor has
there been any failure to give notice or present any claim under any such
coverage in a due and timely fashion. There are no premiums for any such
insurance that are due or past due and no notice of cancellation or nonrenewal
of any such coverage has been received. There are no provisions in such
insurance policies for retroactive or retrospective premium adjustments. All
products liability, general liability and workers' compensation insurance
policies maintained by Oklahoma Truck Supply have been occurrence policies and
not claims made policies. There are no outstanding performance bonds covering or
issued for the benefit of Oklahoma Truck Supply. No insurer has advised Oklahoma
Truck Supply that it intends to reduce coverage, increase premiums or fail to
renew any existing policy or binder.
3.24 Accounts Receivable. The accounts receivable set forth on
the Balance Sheet, and all accounts receivable arising since the date of the
Balance Sheet, represent bona fide claims of Oklahoma Truck Supply against
debtors for sales, services performed or other charges arising on or before the
date hereof, and all the goods delivered and services performed which gave rise
to said accounts were delivered or performed in accordance with the applicable
orders, contracts or customer requirements. Said accounts receivable are subject
to no defenses, counterclaims or rights of setoff and are fully collectible in
the ordinary course of business without cost in collection efforts therefor,
except (a) to the extent of the appropriate reserves for bad debts on accounts
receivable as set forth on the Balance Sheet and, (b) in the case of accounts
receivable arising since the date of the Balance Sheet, to the extent of
$15,000. The $15,000 allowance for bad debts is allowed without any encroachment
into the $10,000 threshold otherwise allowed by Section 8.4.
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3.25 Inventory. Schedule 3.25 contains a complete and accurate
list of the addresses at which all inventory as set forth on the Balance Sheet,
and all inventory acquired since the date of the Balance Sheet, is located. The
inventory as set forth on the Balance Sheet or arising since the date of the
Balance Sheet was acquired and has been maintained in accordance with the
regular business practices of Oklahoma Truck Supply. Such inventory consists of
new and unused items of a quality and quantity usable or saleable in the
ordinary course of business, and is valued at the lower of cost or market on a
FIFO basis. None of such inventory is obsolete, unusable, slow-moving, damaged
or unsaleable in the ordinary course of business, except for such items of
inventory which are returnable for credit or which have been written down to
realizable market value, which items have an aggregate value of less than
$25,000. The $25,000 allowance for inventory is allowed without any encroachment
into the $10,000 threshold otherwise allowed by Section 8.4.
3.26 Payments. Oklahoma Truck Supply has not, directly or
indirectly, paid or delivered any fee, commission or other sum of money or item
or property, however characterized, to any finder, agent, client, customer,
supplier, government official or other party, in the United States or any other
country, which is in any manner related to the business, assets or operations of
Oklahoma Truck Supply, that is, or may be with the passage of time or discovery,
illegal under any federal, state or local laws of the United States (including,
without limitation, the U.S. Foreign Corrupt Practices' Act) or any other
country having jurisdiction. Oklahoma Truck Supply has not participated,
directly or indirectly, in any boycotts or other similar practices affecting any
of its actual or potential customers and has at all times done business in an
open and ethical manner.
3.27 Customers, Distributors and Suppliers. Schedule 3.27 sets
forth a complete and accurate list of the names and addresses of Oklahoma Truck
Supply's ten largest (in terms of dollar volume) (a) customers, distributors and
other agents and representatives during Oklahoma Truck Supply's last fiscal
year, showing the approximate total sales in dollars by Oklahoma Truck Supply to
such customer during such fiscal year; and (b) suppliers during Oklahoma Truck
Supply's last fiscal year, showing the approximate total purchases in dollars by
Oklahoma Truck Supply from such supplier during such fiscal year. Since August
31, 1999, there has been no adverse change in the business relationship of
Oklahoma Truck Supply with any customer, distributor or supplier named on
Schedule 3.27. Oklahoma Truck Supply has not received any communication from any
customer, distributor or supplier named on Schedule 3.27 of any intention to
terminate or materially reduce purchases from or supplies to Oklahoma Truck
Supply.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF FLEETPRIDE
FleetPride represents and warrants to the Existing
Shareholders as follows:
4.1 Corporate Organization and Standing. FleetPride is a
corporation, duly incorporated and validly existing under the laws of its
jurisdiction of incorporation, with all requisite corporate power and authority
to execute and deliver this Agreement, the Ancillary Agreements and to
consummate the transactions contemplated hereby and thereby.
4.2 Authorization. This Agreement and the Ancillary Agreements
have been duly authorized. This Agreement and the Ancillary Agreements have been
duly executed and delivered
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by FleetPride, and are the legal, valid and binding obligations of FleetPride,
enforceable against it in accordance with their terms.
4.3 No Conflict or Violation. Neither the execution and
delivery of this Agreement, the Ancillary Agreements, nor the consummation of
the transactions contemplated hereby or thereby, will (a) result in the
acceleration of, or the creation in any party of any right to accelerate,
terminate, modify or cancel any indenture, contract, lease, sublease, loan
agreement, note or other obligation or liability to which FleetPride is a party
or by which it is bound or to which any of its assets is subject, (b) conflict
with or result in a breach of or constitute a default under any provision of
FleetPride's Articles of Incorporation or Bylaws (or other charter documents),
or a default under or violation of any material restriction, lien, encumbrance
or any contract to which FleetPride is a party or by which it is bound or to
which any of its assets is subject or result in the creation of any lien or
encumbrance upon any of said assets, (c) violate or result in a breach of or
constitute a default under any judgment, order, decree, rule or regulation of
any court or governmental agency to which FleetPride is subject or (d) violate,
conflict with or result in a breach of any applicable federal or state rule or
regulation.
4.4 No Other Reports. FleetPride has not received or obtained
any written reports bearing on environmental issues other than those listed on
Schedule 3.20(d).
ARTICLE V.
COVENANTS
The Existing Shareholders and FleetPride each covenant with
the others as follows:
5.1 Further Assurances. Upon the terms and subject to the
conditions contained herein, the Parties agree, after the Closing, (a) to use
all reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement or the Ancillary
Agreements, (b) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder, and (c) to cooperate with each other in
connection with the foregoing. Without limiting the foregoing, the Parties agree
to use their respective best efforts (i) to obtain all necessary waivers,
consents and approvals from other parties (including, without limitation,
governmental entities) to the consummation of the transactions contemplated by
this Agreement; (ii) to obtain all necessary Licenses and Permits as are
required to be obtained under any regulations; (iii) to defend all Actions
challenging this Agreement or the consummation of the transactions contemplated
hereby; (iv) to lift or rescind any injunction or restraining order or other
court order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby; (v) to give all notices to, and make all
registrations and filings with third parties, including, without limitation,
submissions of information requested by governmental authorities; and (vi) to
fulfill all conditions to this Agreement.
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5.2 Tax Matters.
(a) Tax Indemnification.
(i) The Existing Shareholders shall jointly and severally
indemnify, defend and hold FleetPride harmless from and against: (A) any and all
liability for Taxes (including without limitation any obligation to contribute
to the payment of a Tax determined on a consolidated, combined or unitary basis
with respect to a group of corporations that includes or included Oklahoma Truck
Supply) of Oklahoma Truck Supply for all taxable periods ending on or before the
Closing Date (the "Pre-Closing Tax Period") and for the portion of any Taxes
(including without limitation any obligation to contribute to the payment of a
Tax determined on a consolidated, combined or unitary basis with respect to a
group of corporations that includes or included Oklahoma Truck Supply) of
Oklahoma Truck Supply for any Straddle Period (as defined in Section
5.2(a)(iii)) that is allocated pursuant to Section 5.2(a)(iii) to the
Pre-Closing Tax Period (such liabilities collectively, "Pre-Closing Tax
Liabilities"); (B) any and all liability (as a result of Treasury Regulation
ss.1.1502-6 or any similar provision of state, local or foreign law or
otherwise) for Taxes of the Existing Shareholders or any other person (other
than Oklahoma Truck Supply) that is or has ever been affiliated with Oklahoma
Truck Supply, or with whom Oklahoma Truck Supply otherwise joins or has ever
joined (or is or has ever been required to join) in filing any consolidated,
combined or unitary Tax Return prior to the Closing; (C) any and all liability
for Conveyance Taxes (as hereinafter defined); (D) any and all liability for
Taxes or other Losses (as defined in Section 8.1) arising out of a breach or
inaccuracy of any representation or warranty contained in Section 3.12; and (E)
any and all liability for reasonable legal, accounting and appraisal fees and
expenses with respect to any item described in clause (A), (B), (C) or (D)
above; provided, however, that with respect to any Tax Claim (as hereinafter
defined) for the Pre-Closing Tax Period giving rise to a "timing difference,"
the amount of the indemnity obligation of the Existing Shareholders for Taxes
pursuant to this Section 5.2(a)(i) shall only include the amount of any
interest, penalty, fine and addition to tax or additional amount (and not the
amount of any taxes owed to any governmental authority as a result of the
"timing difference," the liability for which shall be borne by FleetPride).
Nothing in the foregoing proviso changes the indemnity obligation of the
Existing Shareholders to jointly and severally indemnify, defend and hold
FleetPride harmless from and against any and all liability for any Taxes (as
defined in Section 3.12, specifically including any interest, penalty, fine and
addition to tax or additional amount) for the Pre-Closing Tax Period arising
from a Tax Claim that gives rise to a "permanent difference."
(ii) FleetPride shall indemnify, defend and hold the
Existing Shareholders harmless from and against: (A) any and all liability for
Taxes of Oklahoma Truck Supply for any taxable period ending after the Closing
Date (except with respect to a Straddle Period, in which case FleetPride's
indemnity will cover only Taxes (other than Conveyance Taxes) that are not
Pre-Closing Tax Liabilities); (B) any liability (as a result of Treasury
Regulation ss.1.1502-6 or any similar provision of state, local or foreign law
or otherwise) for Taxes of FleetPride or any other person (other than Oklahoma
Truck Supply) that is or has ever been affiliated with FleetPride, or with whom
FleetPride joins or has ever joined (or is or has ever been required to join) in
filing any consolidated, combined or unitary Tax Return; and (C) any and all
liability for reasonable legal, accounting and appraisal fees and expenses with
respect to any liability for Taxes described in clause (A) or (B) above.
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(iii) In the case of any taxable period that includes but
does not end on the Closing Date (a "Straddle Period"), Taxes of Oklahoma Truck
Supply for the Straddle Period shall be computed in a manner consistent with
past practice, and shall be allocated to the Pre-Closing Tax Period using an
interim-closing-of-the-books method assuming that such taxable period ended at
the close of the Closing Date, except that (A) exemptions, allowances or
deductions that are calculated on an annual basis (such as the deduction for
depreciation) shall be apportioned on a per-diem basis and (B) real property,
personal property, intangibles and other similar taxes shall be allocated in
accordance with the principles of Section 164(d) of the Code.
(b) Procedures Relating to Tax Indemnification.
(i) If any claim for Taxes is made by any governmental
authority that, if successful, would result in an indemnity payment pursuant to
Section 5.2(a) (a "Tax Claim"), or if notice is given by any governmental
authority of the commencement of an audit with respect to Taxes that could give
rise to such a Tax Claim (a "Tax Audit"), the party seeking indemnification (the
"Indemnified Party") shall notify the other party (the "Indemnifying Party") in
writing of the Tax Claim or Tax Audit within 45 days of receipt of such claim or
such notice, as the case may be, and in sufficient detail to apprise the
Indemnifying Party of the nature of the Tax Claim or the Tax Audit. If notice of
a Tax Claim or a Tax Audit is not given to the Indemnifying Party within such 45
day period or in detail sufficient to apprise the Indemnifying Party of the
nature of the Tax Claim or the Tax Audit, the Indemnifying Party shall not be
liable to the Indemnified Party to the extent that the Indemnifying Party's
position is actually and materially prejudiced as a result thereof.
(ii) FleetPride shall have the sole right to represent the
interests of Oklahoma Truck Supply in the defense of and to control any Tax
Claim or the conduct of any Tax Audit. Notwithstanding the foregoing, the
Existing Shareholders shall be entitled to participate at their own expense in
the defense of any such Tax Claim or the conduct of any such Tax Audit for a
Taxable year or period ending after the Closing Date that may be subject to
indemnification by the Existing Shareholders pursuant to Section 5.2(a)(i).
FleetPride shall not be entitled to settle, either administratively or after the
commencement of litigation, any Tax Claim without the prior written consent of
the Existing Shareholders if such settlement would result in an indemnity
payment from the Existing Shareholders to FleetPride pursuant to Section
5.2(a)(i). In such case, the Existing Shareholders' consent shall not be
unreasonably withheld.
(c) Preparation and Filing of Returns.
(i) The Existing Shareholders shall cause Oklahoma Truck
Supply to prepare and file on a timely basis all Tax Returns with respect to
Oklahoma Truck Supply that are required to be filed (after giving effect to any
valid extensions thereof) on or prior to the Closing Date.
(ii) FleetPride shall prepare or cause to be prepared and
shall file or cause to be filed on a timely basis all other Tax Returns with
respect to Oklahoma Truck Supply. In connection therewith, the Existing
Shareholders shall be responsible for and shall pay any Taxes for which the
Existing Shareholders have agreed to indemnify FleetPride pursuant to Section
5.2(a)(i). Before filing any Tax Return with respect to any Straddle Period or
any other Tax Return with respect to Taxes for which the Existing Shareholders
have agreed to indemnify FleetPride pursuant to Section 5.2(a)(i), FleetPride
shall provide the Existing Shareholders with a copy of such Tax
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Return at least 20 business days prior to the last date for timely filing such
Tax Return (after giving effect to any valid extensions thereof), accompanied by
a statement calculating in reasonable detail the Existing Shareholders'
indemnification obligation pursuant to Section 5.2(a)(i). If for any reason the
Existing Shareholders do not agree with FleetPride's calculation of their
indemnification obligation, the Existing Shareholders shall notify FleetPride of
their disagreement within ten days of receiving a copy of the Tax Return and
FleetPride's calculation, and such dispute shall be resolved pursuant to the Tax
Dispute Resolution Mechanism (as hereinafter defined). If the Existing
Shareholders agree with FleetPride's calculation of their indemnification
obligation, the Existing Shareholders shall pay to FleetPride the amount of the
Existing Shareholders' indemnification obligation at least five business days
prior to the last date for timely filing such Tax Return (including any valid
waivers or extensions thereof).
(iii) Any refunds or credits of Taxes of Oklahoma Truck
Supply plus any interest received with respect thereto from an applicable taxing
authority for any taxable period ending on or before the Closing Date
(including, without limitation, refunds or credits arising by reason of amended
Tax Returns filed after the Closing Date) shall, except as otherwise provided in
Section 5.2(j) and except to the extent any such refund or claim is reflected as
an asset on Oklahoma Truck Supply's balance sheet as of August 31, 1999, be for
the account of the Existing Shareholders and shall be paid by FleetPride to the
Existing Shareholders within 30 days after FleetPride receives such refund or
after the relevant Tax Return is filed in which the credit is applied against
FleetPride's or the Surviving Corporation's liability for Taxes. Any refunds or
credits of Taxes of Oklahoma Truck Supply plus any interest received with
respect thereto from an applicable Taxing authority for any Taxable period
beginning after the Closing Date shall be for the account of FleetPride. Any
refunds or credits of Taxes of Oklahoma Truck Supply for any Straddle Period
shall be apportioned between the Existing Shareholders, on the one hand, and
FleetPride, on the other hand, in the same manner as the liability for such
Taxes is apportioned pursuant to Section 5.2(a)(iii).
(d) Cooperation on Tax Matters. Within 30 days following the
Closing Date, the Existing Shareholders shall deliver or cause to be delivered
to FleetPride all books, records, Tax Returns, schedules, work papers and other
documents (including without limitation appraisals and other background
information) that are in the possession of the Existing Shareholders and that
relate to any Taxes of Oklahoma Truck Supply for any Taxable year or other
period. Upon request of FleetPride, the Existing Shareholders shall furnish
FleetPride as promptly as practicable with such information and assistance
relating to Oklahoma Truck Supply and its business and affairs as may be
reasonably necessary for the preparation and filing of any Tax Return of
Oklahoma Truck Supply, for the preparation and defense of any audit or other
dispute relating to Taxes of Oklahoma Truck Supply for any taxable period or for
defending against or prosecuting any claim, suit or proceeding relating to Taxes
of Oklahoma Truck Supply for any taxable period.
(e) Conveyance Taxes. Notwithstanding any other provision of
this Agreement to the contrary, the Existing Shareholders shall be liable for,
and shall timely pay, any and all gains, transfer, sales, use, bulk sales,
recording, registration, documentary, stamp and other Taxes that may result
from, or be incurred in connection with, the transactions contemplated by this
Agreement ("Conveyance Taxes"). The Existing Shareholders shall, at their own
expense, properly complete, sign and timely file any and all required Tax
Returns with respect to Conveyance Taxes.
(f) Survival of Tax Provision. The obligations of the parties
set forth in this Section 5.2 shall be unconditional and absolute and shall
remain in effect until the date that is 90
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days after the expiration of the relevant statute of limitations applicable to
the Taxes at issue, giving effect to all valid waivers or extensions thereof.
Claims for indemnification arising under or with respect to Section 3.12 or this
Section 5.2 may not be made unless notice of such claims has been given on or
prior to the date that is 90 days after the expiration of the relevant statute
of limitations applicable to the Taxes at issue, giving effect to all valid
waivers or extensions thereof.
(g) Exclusivity. All rights and obligations of the parties
hereto with respect to Taxes, including all rights of either party to
indemnification with respect to Taxes, shall be governed exclusively by the
provisions of this Section 5.2 and Section 3.12 and, in particular, the
provisions of Article VIII shall not apply to obligations arising under this
Section 5.2.
(h) Tax Dispute Resolution Mechanism. Whenever in this Section
5.2 it is provided that a dispute shall be resolved pursuant to the "Tax Dispute
Resolution Mechanism," such dispute shall be resolved as follows: The parties
shall submit the dispute to a jointly selected nationally recognized accounting
firm (the "Settlement Accountants") for resolution, which resolution shall be
final, conclusive and binding on the parties. Notwithstanding anything in this
Agreement to the contrary, the fees and expenses of the Settlement Accountants
in resolving a dispute shall be borne equally by the Existing Shareholders and
by FleetPride, other than fees and expenses relating to a dispute as to the
amount of Taxes owed by either of the parties with respect to a Tax Return for a
Straddle Period, in which case such fees and expenses shall be paid by
FleetPride and by the Existing Shareholders in proportion to each party's
respective liability for Taxes as determined by the Settlement Accountants.
(i) Tax Sharing Agreements. Any and all existing agreements or
practices relating to the allocation or sharing of Taxes (the "Tax Sharing
Agreements") between Oklahoma Truck Supply and any member of an affiliated
group, within the meaning of Section 1504(a) of the Code, of which Oklahoma
Truck Supply is or was a member shall be terminated as of the Closing Date
without payment by or other obligation of Oklahoma Truck Supply. After the
Closing Date, neither Oklahoma Truck Supply nor any member of any such group
shall have any further rights or obligations under any such Tax Sharing
Agreement.
(j) Carryforwards of Losses. FleetPride shall be free to cause
the Surviving Corporation to elect, where permitted by applicable law, to carry
forward any net operating loss, net capital loss, charitable contribution or
other item arising after the Closing Date, including, without limitation, any
such loss or other item that would, absent such election, be carried back to a
Taxable period ending on or before the Closing Date. Notwithstanding anything to
the contrary in Section 5.2(c)(iii), FleetPride shall be entitled to any refund
of income Taxes paid before the Closing Date, to the extent that such refund is
attributable to carryback of losses or deductions of the Surviving Corporation
that accrue after the Closing Date.
5.3 Pre-Closing Date Termination of the Shareholders'
Agreement and Bonus Policy.
(a) Shareholders' Agreement. Effective prior to the Closing
Date, the Existing Shareholders shall terminate the Shareholders' Agreement,
dated August 1, 1990, by and between the Existing Shareholders and Oklahoma
Truck Supply (the "Shareholders' Agreement"), and the Existing Shareholders
agree that as of the Closing Date, Oklahoma Truck Supply and FleetPride shall
have no liability in connection with the Shareholders' Agreement, the
termination of the
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Shareholders' Agreement or the holding, termination or other disposition of the
insurance policies (including, without limitation, liability for premiums due on
the policies or taxes due with respect to the disposition of, or payments made
under, such policies) owned by the Existing Shareholders in conjunction with the
Shareholders' Agreement.
(b) Bonus Policy. Effective prior to the Closing Date, the
Existing Shareholders shall cause, through appropriate action taken by the board
of directors of Oklahoma Truck Supply or otherwise, the termination of all of
Oklahoma Truck Supply's bonus plans or policies, including, without limitation,
the bonus policy adopted by the board of directors of Oklahoma Truck Supply as
reflected in the minutes of the forty-fifth meeting of the board, held on August
27, 1997, and attached as Schedule E thereto (the "Bonus Policy"), and the
Existing Shareholders agree that as of the Closing Date, Oklahoma Truck Supply
and FleetPride shall have no liability or obligation of any kind, retroactively
or prospectively, to make bonus payments for any period, or to declare and pay
any dividend, under the Bonus Policy, or with respect to the termination of the
Bonus Policy, or with respect to any other bonus plan or policy of Oklahoma
Truck Supply, including the termination thereof.
ARTICLE VI.
CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS
BY FLEETPRIDE
The obligations of FleetPride under this Agreement are subject
to the fulfillment prior to or at the Closing of each of the following
conditions, any one or more of which may be waived by FleetPride.
6.1 No Injunctive Proceedings. No preliminary or permanent
injunction or other order (including a temporary restraining order) of any state
or federal court or other governmental agency which prevents the consummation of
the transactions that are the subject of this Agreement shall have been issued
and remain in effect.
6.2 Representations and Warranties. Except as otherwise
contemplated by this Agreement, all representations and warranties of the
Existing Shareholders contained in this Agreement shall be true and correct as
of the Closing Date.
6.3 Performance of Agreements. The Existing Shareholders shall
have performed in all material respects all obligations, agreements and
commitments required to be fulfilled by them pursuant to the terms hereof on or
prior to the Closing Date.
6.4 Compliance Certificate. The Existing Shareholders shall
have delivered to FleetPride or its representatives, their respective
certificates, dated the Closing Date, as to the fulfillment of the conditions
set forth in Sections 6.2 and 6.3 hereof.
6.5 Stock Certificates. The Existing Shareholders shall
deliver to FleetPride certificates representing all of the Shares, together with
duly executed transfer powers in favor of FleetPride.
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6.6 Stock Books. FleetPride shall have received the stock
books, stock ledgers, minute books and corporate seal (if any) of Oklahoma Truck
Supply.
6.7 Officers and Directors. FleetPride shall have received the
written resignation of all officers and directors of Oklahoma Truck Supply in
office immediately prior to the Closing.
6.8 Opinion of Counsel. FleetPride shall have received the
opinion of Kelley and Kelley, PC, counsel for Oklahoma Truck Supply and the
Existing Shareholders, in the form set forth in Schedule 6.8 hereto.
6.9 Consents, Etc. All authorizations, consents or approvals
of any and all third parties and governmental regulatory authorities necessary
in connection with the consummation of the Closing shall have been obtained and
be in full force and effect. Copies of all such authorizations, consents or
approvals shall have been delivered to FleetPride or its representatives.
6.10 Ancillary Agreements. The following agreements (the
"Ancillary Agreements") shall have been duly executed and delivered by all
parties thereto other than FleetPride: (a) an escrow agreement (the "Escrow
Agreement") by and among FleetPride, the Existing Shareholders and Chase
Manhattan Bank and Trust Company, National Association, as "Escrow Agent;" (b) a
non-competition agreement by and between FleetPride and Norman C. Long; and (c)
a lease agreement (the "Lease Agreement") by and between Oklahoma Truck Supply
and Long Family Investment Company, an Oklahoma general partnership, for the
property located at 6045 N.W. 2nd Street, Oklahoma City, Oklahoma 73127.
6.11 Nonforeign Affidavit. Each Existing Shareholder shall
furnish to FleetPride an affidavit, stating, under penalty of perjury, its
United States taxpayer identification number and that it is not a foreign
person, pursuant to Section 1445(b)(2) of the Code.
6.12 Terminations. The Existing Shareholders shall have
furnished to FleetPride evidence of termination of (a) the Shareholders'
Agreement and (b) the Bonus Policy, in accordance with Section 5.3 hereof.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS
BY THE EXISTING SHAREHOLDERS
The obligations of the Existing Shareholders under this
Agreement are subject to the fulfillment prior to the Closing of each of the
following conditions, any one or more of which may be waived by the Existing
Shareholders:
7.1 No Injunctive Proceedings. No preliminary or permanent
injunction or other order (including a temporary restraining order) of any state
or federal court or other governmental agency which prevents the consummation of
the transactions which are the subject of this Agreement shall have been issued
and remain in effect.
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7.2 Representations and Warranties. Except as otherwise
contemplated by this Agreement, all representations and warranties of FleetPride
contained in this Agreement shall be true and correct as of the Closing Date.
7.3 Performance of Agreements. FleetPride shall have performed
in all material respects all obligations, agreements and commitments required to
be fulfilled by FleetPride pursuant to the terms hereof on or prior to the
Closing Date.
7.4 Compliance Certificates. FleetPride shall have delivered
to the Existing Shareholders a certificate, dated the Closing Date, executed on
its behalf by its President or a Vice President, as to the fulfillment of the
conditions set forth in Sections 7.2 and 7.3 hereof.
7.5 Ancillary Agreements. The condition set forth in Section
6.10 shall be satisfied.
7.6 Consents; Etc. All authorizations, consents or approvals
of any and all third parties and governmental regulatory authorities necessary
to be obtained prior to the Closing in connection with the consummation by
FleetPride of the Closing shall have been obtained and be in full force and
effect, except where a failure to obtain an authorization, consent or approval
is a result of a breach by Oklahoma Truck Supply or the Existing Shareholders.
7.7 Indemnification of Guarantor. FleetPride shall use its
best efforts to obtain a letter of credit to replace the HD America Letter of
Credit prior to the Closing or as soon thereafter as reasonably practicable. At
the Closing, in the event the HD America Letter of Credit remains outstanding,
FleetPride hereby agrees to indemnify and hold harmless Norman C. Long from any
liabilities or other obligations arising as a result of his guaranty of the HD
America Letter of Credit.
ARTICLE VIII.
ACTIONS BY THE PARTIES AFTER THE CLOSING
8.1 Indemnification by the Existing Shareholders. Subject to
the provisions of this Article VIII, the Existing Shareholders will jointly and
severally indemnify, defend and hold harmless FleetPride and its stockholders,
subsidiaries, affiliates, officers, directors, employees, agents, successors and
assigns, (such indemnified persons are collectively hereinafter referred to as
"FleetPride's Indemnified Persons") from and against any and all loss,
liability, damage (excluding consequential, indirect special, exemplary and
punitive damages) or deficiency (including interest, penalties, judgments, costs
of preparation and investigation, and reasonable attorneys' fees) (collectively,
"Losses") that FleetPride's Indemnified Persons may suffer, sustain, incur or
become subject to arising out of or due to: (a) any inaccuracy of any
representation of any Existing Shareholder in this Agreement or in any Schedule
hereto; (b) the breach of any warranty of any Existing Shareholder in this
Agreement or any Schedule hereto; or (c) the nonfulfillment of any covenant,
undertaking, agreement or other obligation of any Existing Shareholder under
this Agreement or any Schedule hereto. "Losses" as used herein is not limited to
matters asserted by third parties, but includes Losses incurred or sustained in
the absence of third party claims. FleetPride agrees that it will take all
necessary action to cause Oklahoma Truck Supply to (a) maintain insurance
consistent with insurance coverage now carried by Oklahoma Truck Supply for at
least one year following the Closing, (b) make all necessary claims for insured
Losses, (c)
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cooperate by providing all requested or required information to the insurers and
(d) use its reasonable efforts to pursue each such claim to recover amounts
recoverable under such policies. Payment is a condition precedent to recovery of
indemnification for Losses in those cases where a payment is required to be made
in connection with such Loss.
8.2 Indemnification by FleetPride. Subject to the provisions
of this Article VIII, FleetPride agrees to indemnify, defend and hold the
Existing Shareholders and their respective heirs, representatives, successors
and assigns (such persons are hereinafter collectively referred to as the
"Existing Shareholders' Indemnified Persons"), harmless from and against any and
all Losses that the Existing Shareholders' Indemnified Persons may suffer,
sustain, incur or become subject to arising out of or due to: (a) any inaccuracy
of any representation of FleetPride in this Agreement or in any Schedule hereto;
(b) the breach of any warranty of FleetPride in this Agreement or any Schedule
hereto; or (c) the nonfulfillment of any covenant, undertaking, agreement or
other obligation of FleetPride under this Agreement or any Schedule hereto. The
Existing Shareholders agree that they will take all necessary action to cause
the Existing Shareholders' Indemnified Persons to (a) make all necessary claims
for insured Losses, (b) cooperate by providing all requested or required
information to the insurers and (c) use reasonable efforts to pursue each such
claim to recover amounts recoverable under such policies.
8.3 Survival of Representations, Warranties and Covenants. The
several representations, warranties and covenants of the Parties contained in
this Agreement or in any document delivered pursuant hereto and the Parties'
right to indemnity in accordance with this Article VIII shall survive the
Closing Date and shall remain in full force and effect for one year thereafter;
provided, however, that the representations and warranties set forth in Section
3.19 relating to employee benefits matters shall survive for the length of the
applicable statute of limitations; provided further that the representations and
warranties set forth in Sections 3.4, 3.5 and 3.6 shall survive indefinitely.
8.4 Threshold. No FleetPride's Indemnified Person or Existing
Shareholders' Indemnified Person shall be entitled to any recovery in accordance
with this Article VIII unless and until the amount of such Losses suffered,
sustained or incurred by such party, or to which such party becomes subject, by
reason of such inaccuracy, breach or nonfulfillment exceeds $10,000, subject to
(a) the last sentence of (i) Section 3.24 and (ii) Section 3.25 and (b) Section
8.7.
8.5 Notice and Opportunity to Defend. Promptly after receipt
by an indemnified party under this Article VIII of notice of any claim or the
commencement of any action, the indemnified party shall, if a claim is to be
made against the indemnifying party under this Article VIII, notify the
indemnifying party in writing of the claim or the commencement of that action;
provided, however, that the failure to notify the indemnifying party shall not
relieve it from any liability that it may have under this Article VIII except to
the extent it has been materially prejudiced by such failure and, provided,
further, that the failure to notify the indemnifying party shall not release it
from any liability that it may have to an indemnified party otherwise than under
this Article VIII. If any such claim or action shall be brought against an
indemnified party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it wishes, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Article VIII for any legal or other expenses subsequently incurred
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by the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that any indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (a) the employment
thereof has been specifically authorized by the indemnifying party in writing,
(b) such indemnified party shall have been advised by counsel that there may be
one or more legal defenses available to it that are different from or in
addition to those available to the indemnifying party and in the reasonable
judgment of such counsel it is advisable for such indemnified party to employ
separate counsel or (c) the indemnifying party has failed to assume the defense
of such action and employ counsel reasonably satisfactory to the indemnified
party, in which case, if such indemnified party notifies the indemnifying party
in writing that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for all such indemnified parties, which
firm shall be designated in writing by FleetPride if the indemnified parties
under this Article VIII consist of any FleetPride's Indemnified Persons, or by
Norman C. Long, if the indemnified parties under this Article VIII consist of
any Existing Shareholders' Indemnified Persons. Each indemnified party, as a
condition of the indemnity agreements contained in this Article VIII, shall use
its reasonable best efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be liable for
any settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with its written
consent or if there be a final judgment of the plaintiff in any such action, the
indemnifying party agrees to indemnify and hold harmless any indemnified party
from and against any Loss by reason of such settlement or judgment.
8.6 Indemnification Payments. At the Closing, FleetPride will
deliver by wire transfer of immediately available funds an amount equal to
$178,000, to the Escrow Agent to be held by the Escrow Agent for 12 months
pursuant to the terms of the Escrow Agreement and to serve as partial security
for the indemnification obligations of the Existing Shareholders under this
Agreement. Any indemnification obligations of the Existing Shareholders under
this Article VIII shall be satisfied first by amounts held by the Escrow Agent
pursuant to the terms of the Escrow Agreement.
8.7 Insurance Effect. The amount of any Loss for which
indemnification is provided under this Article VIII shall be net of any amounts
recovered by the indemnified party under insurance policies with respect to such
Loss.
ARTICLE IX.
MISCELLANEOUS
9.1 Expenses. Except as otherwise set forth in this Agreement,
FleetPride shall pay all costs and expenses incurred by it or on its behalf, and
FleetPride shall pay all costs and expenses incurred by any Existing Shareholder
or Oklahoma Truck Supply on such Existing Shareholder's or Oklahoma Truck
Supply's behalf prior to the Closing, in connection with this
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Agreement and the transactions contemplated hereby, including fees and expenses
of their financial consultants, accountants, legal counsel and environmental
consultants.
9.2 Notices. All notices, requests, demands and other
communications given hereunder (collectively, "Notices") shall be in writing and
delivered personally or by overnight courier to the Parties at the following
addresses or sent by telecopier or telex, with confirmation received, to the
telecopy specified below:
If to any Existing Shareholder, at the address or telecopier
number of such Existing Shareholder set forth on Annex B
hereto.
With a Copy to:
Kelley, Kelley & Gregory
One Leadership Square
211 North Robinson
Suite 800
Oklahoma City, Oklahoma 73102
Attn: Jim Kelley
Telecopy No.: (405) 235-5247
And:
Norman C. Long
15321 Fairview Farm Road
Edmond, Oklahoma 73013-1330
Telecopy No.: (405) 844-6888
If to FleetPride
FleetPride, Inc.
520 Lake Cook Road
Deerfield, Illinois 60015
Attn.: John J. Greisch
Telecopy No.: (847) 444-1096
With a Copy to:
Brentwood Associates
11150 Santa Monica Boulevard
Suite 1200
Los Angeles, California 90025
Attn.: Christopher A. Laurence
Telecopy No.: (310) 477-1011
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And:
Jones, Day, Reavis & Pogue
77 West Wacker
Chicago, Illinois 60601-1692
Attn.: Timothy J. Melton
Telecopy No.: (312) 782-8585
All Notices shall be deemed delivered when actually received
if delivered personally or by overnight courier, sent by telecopier or telex
(promptly confirmed in writing), addressed as set forth above. Each of the
Parties shall hereafter notify the other in accordance with this Section 9.2 of
any change of address or telecopy number to which notice is required to be
mailed.
9.3 Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, and by different parties hereto in
separate counterparts, each of which when executed shall be deemed an original,
but all of which taken together shall constitute one and the same instrument.
9.4 Entire Agreement. This Agreement and the other written
agreements entered into on the date hereof constitute the entire agreement of
the Parties with respect to the subject matter hereof and thereof and supersede
all prior negotiations, agreements and understandings, whether written or oral,
of the Parties.
9.5 Headings. The headings contained in this Agreement and in
the Schedules and Exhibits hereto are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
9.6 Assignment; Amendment of Agreement. This Agreement shall
be binding upon the respective successors and assigns of the Parties hereto.
This Agreement may not be assigned by any Party hereto without the prior written
consent of all other Parties hereto. This Agreement may be amended only by
written agreement of the Parties hereto, duly executed and delivered by an
authorized representative of each of the Parties hereto.
9.7 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Oklahoma applicable to contracts made in that State, without giving effect to
the conflicts of laws principles thereof.
9.8 Further Assurances. Each Party agrees that it will execute
and deliver, or cause to be executed and delivered, on or after the date of this
Agreement, all such other instruments and will take all reasonable actions as
may be necessary in order to consummate the transactions contemplated hereby,
and to effectuate the provisions and purposes hereof.
9.9 No Third-Party Rights. This Agreement is not intended, and
shall not be construed, to create any rights in any parties other than
FleetPride or the Existing Shareholders, and no person shall assert any rights
as third-party beneficiary hereunder.
9.10 Non-Waiver. The failure in any one or more instances of a
Party hereto to insist upon performance of any of the terms, covenants or
conditions of this Agreement, to exercise
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any right or privilege in this Agreement conferred, or the waiver by said Party
of any breach of any of the terms, covenants or conditions of this Agreement
shall not be construed as a subsequent waiver of any such terms, covenants,
conditions, rights or privileges, but the same shall continue and remain in full
force and effect as if no such forbearance or waiver had occurred.
9.11 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any Party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties hereto shall
negotiate in good faith to modify this Agreement so as to affect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
9.12 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules hereto are incorporated into this Agreement and shall be deemed a part
hereof as if set forth herein in full. References herein to "this Agreement" and
the words "herein," "hereof" and words of similar import refer to this Agreement
(including its Exhibits and Schedules) as an entirety. In the event of any
conflict between the provisions of this Agreement and any such Exhibit or
Schedule, the provisions of this Agreement shall control.
9.13 Knowledge. As used herein, to the "knowledge" or similar
phrase includes actual knowledge, after reasonable inquiry, of any officer,
director or shareholder of Oklahoma Truck Supply.
(signature page follows)
32
<PAGE> 37
IN WITNESS WHEREOF, the Parties have duly executed and
delivered this Agreement as of the day and year first above written.
FLEETPRIDE, INC.
By: /s/ JOHN P. MILLER
----------------------------------------------
Name: John P. Miller
Title: Vice President, Chief Financial Officer,
Treasurer and Secretary
THE NORMAN C. LONG TRUST
/s/ NORMAN C. LONG
-------------------------------------------------
Norman C. Long, Co-Trustee
/s/ JACQUELIN S. LONG
-------------------------------------------------
Jacquelin S. Long, Co-Trustee
CARL T. LONG and/or DIANE LONG, as joint
tenants with full right of survivorship
/s/ CARL T. LONG
-------------------------------------------------
Carl T. Long, as joint tenant
with full right of survivorship
/s/ DIANE LONG
-------------------------------------------------
Diane Long, as joint tenant
with full right of survivorship
S-1
<PAGE> 38
ANNEX A
THE EXISTING SHAREHOLDERS
<TABLE>
<CAPTION>
Name Shares
---- ------
<S> <C>
Norman C. Long and Jacquelin S. 247
Long, Trustees of the Norman C. Long Trust
Carl T. Long and/or Diane Long, 83
as joint tenants with full right of survivorship
</TABLE>
A-1
<PAGE> 39
ANNEX B
THE EXISTING SHAREHOLDERS
Notice Addresses
Norman C. Long and Jacquelin S. Long, Trustees of the Norman C. Long Trust
15321 Fairview Farm Road
Edmond, Oklahoma 73013-1330
Telecopy No.: (405) 844-6888
Telephone No.: (405) 844-6888
Carl T. Long and/or Diane Long, as joint tenants with full right of survivorship
708 Villa Ave.
Yukon, Oklahoma 73099
Telephone No.: (405) 354-0280
Wire Transfer Information
See attached Funds Flow Memorandum
B-1
<PAGE> 1
EXHIBIT 10.29
CITY TRUCK HOLDINGS, INC.
1999 EQUITY INCENTIVE PLAN
1. PURPOSE. The purpose of this 1999 Equity Incentive Plan is to
attract and retain consultants, directors, officers and other key employees for
City Truck Holdings, Inc., a Delaware corporation, and its Subsidiaries and to
provide to such persons incentives and rewards for superior performance.
2. DEFINITIONS. As used in this Plan,
"Affiliate" means, with respect to a specified Person, a
Person that controls, is controlled by, or is under common control with, the
specified Person, and in this context, "control", "controls" and "controlled"
mean the direct or indirect power to the direct management and policies or
affairs of a Person through the ownership of voting securities or by contract
or otherwise and, in the case of a limited partnership, shall include, but
shall not be limited to, all of the limited partnership's general partners and
their respective Affiliates.
"Appreciation Right" means a right granted pursuant to
Section 5 of this Plan, and shall include both Tandem Appreciation Rights and
Free-Standing Appreciation Rights.
"Aurora Group" means Aurora Equity Partners II, L.P., Aurora
Overseas Equity Partners II, L.P. and Quality Distribution Equity Partners,
L.P. and their respective Affiliates.
"Base Price" means the price to be used as the basis for
determining the Spread upon the exercise of a Free-Standing Appreciation Right
and a Tandem Appreciation Right.
"Board" means the Board of Directors of the Company and, to
the extent of any delegation by the Board to a committee (or subcommittee
thereof) pursuant to Section 15 of this Plan, such committee (or subcommittee).
"Brentwood Group" means BABF City Corp. and its Affiliates.
"Change in Control" shall have the meaning provided in
Section 11 of this Plan.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Common Shares" means shares of the common stock, par value
$0.01 per share, of the Company or any security into which such shares may be
changed by reason of any transaction or event of the type referred to in
Section 10 of this Plan.
"Company" means City Truck Holdings, Inc., a Delaware
corporation.
<PAGE> 2
"Date of Grant" means the date specified by the Board on
which a grant of Option Rights, Appreciation Rights, Performance Shares or
Performance Units or a grant or sale of Restricted Shares or Deferred Shares
shall become effective, which shall not be earlier than the date on which the
Board takes action with respect thereto.
"Deferral Period" means the period of time during which
Deferred Shares are subject to deferral limitations under Section 7 of this
Plan.
"Deferred Shares" means an award made pursuant to Section 7
of this Plan of the right to receive Common Shares at the end of a specified
Deferral Period.
"Director" means a member of the Board of Directors of the
Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, as such law, rules and
regulations may be amended from time to time.
"Free-Standing Appreciation Right" means an Appreciation
Right granted pursuant to Section 5 of this Plan that is not granted in tandem
with an Option Right.
"Incentive Stock Options" means Option Rights that are
intended to qualify as "incentive stock options" under Section 422 of the Code
or any successor provision.
"Management Objectives" means the achievement of performance
objectives established pursuant to this Plan for Participants who have received
grants of Performance Shares or Performance Units or, when so determined by the
Board, Option Rights, Appreciation Rights, Restricted Shares or dividend
credits pursuant to this Plan.
"Market Value per Share" means, as of any particular date,
(i) the closing sale price per Common Share as reported on the principal
securities exchange on which Common Shares are then trading (or, if applicable,
The Nasdaq Stock Market) on such date or, if there shall have been no sales on
such date, on the next preceding trading day during which a sale shall have
occurred, or (ii) if clause (i) does not apply, the fair market value of the
Common Shares as determined by the Board.
"Optionee" means the optionee named in an agreement
evidencing an outstanding Option Right.
"Option Price" means the purchase price payable on exercise
of an Option Right.
"Option Right" means the right to purchase Common Shares upon
exercise of an option granted pursuant to Section 4 of this Plan.
"Participant" means a person who is selected by the Board to
receive benefits under this Plan and is at that time a consultant or an officer
(including an officer who is also a Director) or other key employee of the
Company or one or more Subsidiaries or has agreed to commence serving in any of
such capacities within 90 days of the Date of Grant.
2
<PAGE> 3
"Performance Period" means, in respect of a Performance Share
or Performance Unit, a period of time established pursuant to Section 8 of this
Plan within which the Management Objectives relating to such Performance Share
or Performance Unit are to be achieved.
"Performance Share" means a bookkeeping entry that records
the equivalent of one Common Share awarded pursuant to Section 8 of this Plan.
"Performance Unit" means a bookkeeping entry that records a
unit equivalent to $1.00 awarded pursuant to Section 8 of this Plan.
"Person" means any individual, corporation, joint venture,
limited liability company, partnership, trust, unincorporated organization or
other entity.
"Plan" means this City Truck Holdings, Inc. 1999 Equity
Incentive Plan.
"Reload Option Rights" means additional Option Rights granted
automatically to an Optionee upon the exercise of Option Rights pursuant to
Section 4(g) of this Plan.
"Restricted Shares" means Common Shares granted or sold
pursuant to Section 6 of this Plan as to which neither the substantial risk of
forfeiture nor the prohibition on transfers referred to in such Section 6 has
expired.
"Rule 16b-3" means Rule 16b-3 under the Exchange Act (or any
successor rule to the same effect) as in effect from time to time.
"Spread" means the excess of the Market Value per Share on
the date when an Appreciation Right is exercised, or on the date when Option
Rights are surrendered in payment of the Option Price of other Option Rights,
over the Option Price or Base Price provided for in the related Option Right or
Free-Standing Appreciation Right, respectively.
"Subsidiary" means a corporation or other entity in which the
Company now or hereafter directly or indirectly owns or controls more than 50
percent of the outstanding shares or other securities (representing the right
to vote for the election of directors or other managing authority) issued by
such corporation or other entity or, in the case of a partnership or other
entity that does not have outstanding shares or other securities, in which the
Company now or hereafter has a direct or indirect ownership interest
(representing the right generally to make decisions for such partnership or
other entity) of more than 50 percent; provided, however, for the purposes of
determining whether any person may be a Participant for the purposes of any
grant of Incentive Stock Options, "Subsidiary" means any corporation in which
the Company then directly or indirectly owns or controls more than 50 percent
of the total combined voting power represented by all classes of stock issued
by such corporation.
"Tandem Appreciation Right" means an Appreciation Right
granted pursuant to Section 5 of this Plan that is granted in tandem with an
Option Right.
"Voting Power" means, at any time, the total votes relating
to then-outstanding securities of the Company entitled to vote generally.
3
<PAGE> 4
3. SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as
provided in Section 3(b) and Section 10, the number of Common Shares that may
be issued or transferred upon the exercise of Option Rights or Appreciation
Rights, as Restricted Shares and thereafter released from substantial risks of
forfeiture, as Deferred Shares, in payment of Performance Shares or Performance
Units that have been earned, or in payment of dividend equivalents paid with
respect to awards made under this Plan, shall not in the aggregate exceed
25,000 Common Shares, which may be shares of original issuance or treasury
shares or a combination thereof.
(b) The number of Common Shares covered by any unexercised
portion of any Option Rights or Appreciation Rights that shall be canceled or
shall expire or otherwise terminate, the number of Common Shares corresponding
to any Restricted Shares or Deferred Shares that shall be forfeited, and the
number of Common Shares corresponding to any Performance Shares that shall be
forfeited or shall be unearned at the end of the applicable Performance Period,
shall again be available for issuance or transfer under this Plan. The number
of Common Shares that shall be withheld in payment of any Option Price or tax
withholding obligations upon the exercise of any Option Rights or Appreciation
Rights, the vesting of any Restricted Shares, or the issuance of any Deferred
Shares or Performance Shares, shall again be available for issuance or transfer
under this Plan. The number of Common Shares available for issuance or transfer
under this Plan shall be increased by the number of outstanding Common Shares
that shall be transferred to the Company by a Participant in payment of any
Option Price or tax withholding obligations. Upon payment in cash of the
benefit provided by any award granted under this Plan, any Common Shares that
were covered by that award shall again be available for issuance or transfer
hereunder.
4. OPTION RIGHTS. The Board may from time to time authorize the
grant to Participants of options to purchase Common Shares upon such terms and
conditions as the Board may determine consistent with this Plan. Each grant of
Option Rights may utilize any or all of the authorizations, and shall be
subject to all of the requirements, contained in the following provisions:
(a) Each grant shall specify the number of Common Shares to
which it pertains, subject to the limitations set forth in Section 3 of this
Plan.
(b) Each grant shall specify an Option Price per share, which
shall not be less than the Market Value per Share on the Date of Grant.
(c) Each grant shall specify whether the Option Price shall
be payable (i) in cash or by check or other cash equivalent acceptable to the
Company, (ii) by the actual or constructive transfer to the Company of
outstanding Common Shares owned by the Optionee, or Common Shares issuable to
the Optionee upon exercise of an Option Right, or other consideration
authorized pursuant to Section 4(d), having a value (based on the Market Value
per Share) at the time of exercise equal to the aggregate Option Price, (iii)
unless prohibited by law, by a loan from the Company or a full-recourse
promissory note bearing interest at a rate not less than such rate as shall
then preclude the imputation of interest under the Code and payable upon and
subject to such terms as may be prescribed by the Board, including any security
to be given for such loan or note, or (iv) by a combination of such methods of
payment.
(d) The Board may at or after the Date of Grant determine
that payment of the Option Price of any Option Right (other than an Incentive
Stock Option) may also be made in whole
4
<PAGE> 5
or in part in the form of Restricted Shares or other Common Shares that are
forfeitable or subject to restrictions on transfer, Deferred Shares,
Performance Shares (based, in each case, on the Market Value per Share on the
date of exercise), other Option Rights (based on the Spread on the date of
exercise) or Performance Units. Unless otherwise determined by the Board at or
after the Date of Grant, whenever any Option Price is paid in whole or in part
by means of any of the forms of consideration specified in this Section 4(d),
the Common Shares received upon the exercise of the Option Rights shall be
subject to such risks of forfeiture or restrictions on transfer as may
correspond to any that apply to the consideration surrendered, but such risks
and restrictions shall apply to Common Shares received only to the extent of
(i) the number of Restricted Shares or other Common Shares, Deferred Shares or
Performance Shares surrendered, (ii) the Spread of any unexercisable portion of
Option Rights surrendered or (iii) the stated value of Performance Units
surrendered.
(e) Any grant may provide for deferred payment of the Option
Price from the proceeds of sale through a broker on a date satisfactory to the
Company of some or all of the Common Shares to which the subject exercise
relates.
(f) Any grant may at or after the Date of Grant provide for
the automatic grant of Reload Option Rights to an Optionee upon the exercise of
Option Rights (including Reload Option Rights) using Common Shares or other
consideration specified in Section 4(d). Reload Option Rights shall cover up to
the number of Common Shares, Deferred Shares, Option Rights or Performance
Shares (or the number of Common Shares having a value equal to the value of any
Performance Units) surrendered to the Company upon any such exercise in payment
of the Option Price or to meet any withholding obligations. Reload Option
Rights shall not have an Option Price that is less than the Market Value per
Share at the time of exercise and shall be on such other terms as may be
specified by the Board, which may be the same as or different from those of the
original Option Rights.
(g) Successive grants may be made to the same Participant
regardless of whether any Option Rights previously granted to such Participant
remain unexercised.
(h) Each grant shall specify the period or periods of
continuous service by the Optionee with the Company or any Subsidiary that is
necessary before the Option Rights or installments thereof will become
exercisable and may provide for the earlier exercise of such Option Rights in
the event of a Change in Control.
(i) Any grant of Option Rights may specify Management
Objectives that must be achieved as a condition to the exercise of such rights.
(j) Option Rights granted under this Plan may be (i) options,
including but not limited to Incentive Stock Options, that are intended to
qualify under particular provisions of the Code, (ii) options that are not
intended so to qualify or (iii) combinations of the foregoing.
(k) At or after the Date of Grant of any Option Right other
than an Incentive Stock Option, the Board may provide for the payment of
dividend equivalents to the Optionee on a current, deferred or contingent basis
or may provide that such equivalents shall be credited against the Option
Price.
5
<PAGE> 6
(l) The exercise of an Option Right shall result in the
cancellation on a share-for-share basis of any Tandem Appreciation Right
authorized under Section 5 of this Plan.
(m) No Option Right shall be exercisable more than 10 years
after the Date of Grant.
(n) Each grant of Option Rights shall be evidenced by an
agreement, which shall be executed on behalf of the Company by an officer and
delivered to the Optionee and shall contain such terms and provisions,
consistent with this Plan, as the Board may approve.
5. APPRECIATION RIGHTS. (a) The Board may from time to time
authorize the grant of Tandem Appreciation Rights to any Optionee in respect of
Option Rights granted hereunder, and may from time to time authorize the grant
of Free-Standing Appreciation Rights to any Participant, upon such terms and
conditions as the Board may determine consistent with this Plan. A Tandem
Appreciation Right shall be a right of the Optionee, exercisable by surrender
of the related Option Right, to receive from the Company an amount determined
by the Board, which shall be expressed as a percentage of the Spread (not
exceeding 100 percent) at the time of exercise. Tandem Appreciation Rights may
be granted at any time prior to the exercise or termination of the related
Option Rights; provided, however, that a Tandem Appreciation Right awarded in
relation to an Incentive Stock Option must be granted concurrently with such
Incentive Stock Option. A Free-Standing Appreciation Right shall be a right of
the Participant to receive from the Company an amount determined by the Board,
which shall be expressed as a percentage of the Spread (not exceeding 100
percent) at the time of exercise.
(b) Each grant of Appreciation Rights may utilize any or
all of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(i) Any grant may specify that the amount payable on
exercise of the subject Appreciation Right may be paid by the Company
in cash, in Common Shares or in any combination thereof and may either
grant to the Participant or retain in the Board the right to elect
among those alternatives.
(ii) Any grant may specify that the amount payable
on exercise of the subject Appreciation Right may not exceed a maximum
specified by the Board at the Date of Grant.
(iii) Any grant may specify waiting periods before
exercise and permissible exercise dates or periods.
(iv) Any grant may specify that the subject
Appreciation Right may be exercised only in the event of, or earlier
in the event of, a Change in Control.
(v) Any grant may provide for the payment to the
Participant of dividend equivalents thereon in cash or Common Shares
on a current, deferred or contingent basis.
(vi) Any grant may specify Management Objectives
that must be achieved as a condition of the exercise of the subject
Appreciation Right.
6
<PAGE> 7
(vii) Each grant shall be evidenced by an agreement,
which shall be executed on behalf of the Company by an officer and
delivered to and accepted by the Participant and shall describe the
subject Appreciation Right, identify any related Option Right and
contain such other terms and provisions, consistent with this Plan, as
the Board may approve.
(c) Any grant of a Tandem Appreciation Right shall
provide that the subject Tandem Appreciation Right may be exercised only at a
time when the related Option Right is also exercisable and the Spread is
positive and by surrender of the related Option Right for cancellation.
(d) Regarding Free-Standing Appreciation Rights only:
(i) Each grant shall specify a Base Price,
which shall be equal to or greater than the Market Value per Share on
the Date of Grant;
(ii) Successive grants may be made to the same
Participant regardless of whether any Free-standing Appreciation
Rights previously granted to the Participant remain unexercised; and
(iii) No Free-standing Appreciation Right granted
under this Plan may be exercised more than 10 years from the Date of
Grant.
6. RESTRICTED SHARES. The Board may from time to time authorize
the grant or sale of Restricted Shares to Participants upon such terms and
conditions as the Board may determine consistent with this Plan. Each grant or
sale of Restricted Shares may utilize any or all of the authorizations, and
shall be subject to all of the requirements, contained in the following
provisions:
(a) Each grant or sale shall constitute an immediate transfer
of the ownership of Common Shares to the Participant in consideration of the
performance of services, entitling such Participant to voting, dividend and
other ownership rights, subject to the substantial risk of forfeiture and
restrictions on transfer hereinafter referred to.
(b) Each grant or sale may be made without additional
consideration or in consideration of a payment by the Participant that is less
than the Market Value per Share at the Date of Grant.
(c) Each grant or sale shall provide that the Restricted
Shares covered thereby shall be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code and may provide for the earlier
termination of such period in the event of a Change in Control.
(d) Each grant or sale shall provide that, during the period
for which such substantial risk of forfeiture is to continue, the
transferability of the Restricted Shares shall be prohibited or restricted in
the manner and to the extent prescribed by the Board at the Date of Grant
(which may include, without limitation, rights of repurchase or first refusal
in the Company or provisions subjecting the Restricted Shares to a continuing
substantial risk of forfeiture in the hands of any transferee).
7
<PAGE> 8
(e) Any grant may specify Management Objectives that, if
achieved, will result in termination or early termination of the restrictions
applicable to such shares. Any grant may specify in respect of such Management
Objectives a minimum acceptable level of achievement and may set forth a
formula for determining the number of Restricted Shares on which restrictions
will terminate if performance is at or above the minimum level but falls short
of full achievement of the specified Management Objectives.
(f) Any grant or sale may require that any or all dividends
or other distributions paid on the Restricted Shares covered thereby during the
period of such restrictions be automatically deferred and reinvested in
additional Restricted Shares, which may be subject to the same restrictions as
the underlying award.
(g) Each grant or sale shall be evidenced by an agreement,
which shall be executed on behalf of the Company by an officer and delivered to
and accepted by the Participant and shall contain such terms and provisions,
consistent with this Plan, as the Board may approve. Unless otherwise directed
by the Board, all certificates representing Restricted Shares (together with a
stock power or powers endorsed in blank by the Participant in whose name such
certificates are registered) shall be held in custody by the Company until all
restrictions thereon shall have lapsed.
7. DEFERRED SHARES. The Board may from time to time authorize
the grant or sale of Deferred Shares to Participants upon such terms and
conditions as the Board may determine consistent with this Plan. Each grant or
sale may utilize any or all of the authorizations, and shall be subject to all
of the requirements, contained in the following provisions:
(a) Each grant or sale shall constitute the agreement by the
Company to deliver Common Shares to the Participant in the future in
consideration of the performance of services, subject to the fulfillment of
such conditions during the Deferral Period as the Board may specify.
(b) Any grant or sale may be made without additional
consideration or in consideration of a payment by the Participant that is less
than the Market Value per Share at the Date of Grant.
(c) Each grant or sale shall be subject to a Deferral Period,
which shall be determined by the Board at the Date of Grant, and may provide
for the earlier termination of the Deferral Period in the event of a Change in
Control.
(d) During the Deferral Period, the Participant shall have no
right to transfer any rights under the award and shall have no ownership or
voting rights with respect to the Deferred Shares covered thereby, but the
Board may at or after the Date of Grant authorize the payment of dividend
equivalents on such Deferred Shares on a current, deferred or contingent basis
in cash or additional Common Shares.
(e) Each grant or sale shall be evidenced by an agreement,
which shall be executed on behalf of the Company by an officer and delivered to
and accepted by the Participant and shall contain such terms and provisions,
consistent with this Plan, as the Board may approve.
8
<PAGE> 9
8. PERFORMANCE SHARES AND PERFORMANCE UNITS. The Board may from
time to time authorize the grant of Performance Shares and Performance Units
that will become payable to a Participant upon achievement of specified
Management Objectives. Each grant may utilize any or all of the authorizations,
and shall be subject to all of the requirements, contained in the following
provisions:
(a) Each grant shall specify the number of Performance Shares
or Performance Units to which it pertains, which may be subject to adjustment
to reflect changes in compensation or other factors.
(b) The Performance Period with respect to each Performance
Share or Performance Unit shall be determined by the Board on the Date of Grant
and may be subject to earlier termination in the event of a Change in Control.
(c) Each grant shall specify Management Objectives that, if
achieved, will result in payment or early payment of the subject Performance
Shares or Performance Units, and any grant may specify in respect of such
Management Objectives a minimum acceptable level of achievement and shall set
forth a formula for determining the number of Performance Shares or Performance
Units that will be earned if performance is at or above the minimum level but
falls short of full achievement of the specified Management Objectives. Each
grant shall specify that, before the subject Performance Shares or Performance
Units shall be earned and paid, the Board must certify that the specified
Management Objectives have been satisfied.
(d) Each grant shall specify the time and manner of payment
of Performance Shares or Performance Units that have been earned. Any grant may
specify that the amount payable with respect thereto may be paid by the Company
in cash or Common Shares or any combination thereof and may either grant to the
Participant or retain in the Board the right to elect among those alternatives.
(e) Any grant of Performance Shares may specify that the
amount payable with respect thereto may not exceed a maximum specified by the
Board at the Date of Grant. Any grant of Performance Units may specify that the
amount payable or the number of Common Shares issued with respect thereto may
not exceed maximums specified by the Board at the Date of Grant.
(f) At or after the Date of Grant of Performance Shares, the
Board may provide for the payment of dividend equivalents thereon in cash or
additional Common Shares on a current, deferred or contingent basis.
(g) Each grant shall be evidenced by an agreement, which
shall be executed on behalf of the Company by an officer and delivered to and
accepted by the Participant and shall contain such other terms and provisions,
consistent with this Plan, as the Board may approve.
9. TRANSFERABILITY. (a) Except as otherwise determined by the
Board, no Option Right, Appreciation Right or other derivative security granted
under this Plan shall be transferable by a Participant other than by will or
the laws of descent and distribution. Except as otherwise determined by the
Board, Option Rights and Appreciation Rights shall be exercisable during a
Participant's lifetime only by the Participant or his or her guardian or legal
representative.
9
<PAGE> 10
(b) The Board may specify at the Date of Grant that part or
all of the Common Shares that are to be issued or transferred by the Company
upon the exercise of Option Rights or Appreciation Rights, upon the termination
of the Deferral Period applicable to Deferred Shares or upon payment under any
grant of Performance Shares or Performance Units, or are no longer subject to
the substantial risk of forfeiture and restrictions on transfer referred to in
Section 6 of this Plan, shall be subject to further restrictions on transfer.
10. ADJUSTMENTS. The Board may make or provide for such
adjustments in the numbers of Common Shares covered by Option Rights,
Appreciation Rights, Deferred Shares and Performance Shares outstanding
hereunder, in the Option Price and Base Price provided in Option Rights and
Appreciation Rights outstanding hereunder, and in the kind of shares covered
thereby, as the Board may in good faith determine is equitably required to
prevent dilution or expansion of the rights of Participants that otherwise
would result from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, (b)
any merger, consolidation, spin-off, split-off, spin-out, split-up,
reorganization, partial or complete liquidation or other distribution of assets
or issuance of rights or warrants to purchase securities or (c) any other
corporate transaction or event having an effect similar to any of the
foregoing; provided, however, that any such adjustments to an Incentive Stock
Option may be made only if and to the extent that such adjustments would not
cause the Incentive Stock Option to cease to qualify as such. In the event of
any transaction or event referred to in the preceding sentence, the Board may
also provide in substitution for any or all outstanding awards under this Plan
such alternative consideration as the Board may in good faith determine to be
equitable in the circumstances and may require in connection therewith the
surrender of all awards so replaced. The Board may also make or provide for
such adjustments in the number of shares specified in Section 3 of this Plan as
the Board may in good faith determine is appropriate to reflect any transaction
or event described in the first sentence of this Section 10.
11. CHANGE IN CONTROL. For the purposes of this Plan, a "Change
in Control" shall mean the occurrence of one or more of the following events:
(a) The Company is merged, consolidated or reorganized into
or with another Person, and as a result of such merger, consolidation or
reorganization, less than a majority of the combined voting power of the
then-outstanding securities of such Person immediately after such transaction
is held in the aggregate by the holders of the Voting Power immediately prior
to such transaction;
(b) The Company and the Subsidiaries sell or otherwise
transfer to another Person all or substantially all of their combined assets,
and less than a majority of the combined voting power of the then-outstanding
securities of such Person immediately after such sale or transfer is held in
the aggregate by the holders of the Voting Power immediately prior to such sale
or transfer;
(c) (i) A "person" (as defined in Sections 3(a)(9) and
13(d)(3) or 14(d)(2) of the Exchange Act) becomes the "beneficial owner" (as
defined in Rule 13d-3 or any successor rule or regulation promulgated under the
Exchange Act) of securities representing more than a majority of the Voting
Power or (ii) there is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), as promulgated pursuant to the Exchange
Act, disclosing that a "person"
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(as so defined) has become the "beneficial owner" (as so defined) of securities
representing more than a majority of the Voting Power;
(d) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act disclosing in
response to Form 8-K or Schedule 14A (or any successor schedule, form or report
or item therein) that a change in control of the Company has or may have
occurred, or will or may occur in the future, pursuant to any then- existing
contract or transaction; or
(e) If during any period of two consecutive years,
individuals who at the beginning of such period constitute the Directors cease
for any reason to constitute at least a majority thereof, unless the election,
or the nomination for election by the Company's stockholders, of each Director
first elected during such period was approved by a vote of at least two-thirds
of the Directors then still in office who were Directors at the beginning of
such period.
Notwithstanding the provisions of subsections (c) and (d) of
this Section 11, a "Change in Control" shall not be deemed to have occurred for
the purposes of this Plan solely because (i) the Company, a Subsidiary, a
Company-sponsored employee stock ownership plan or other employee benefit plan
of the Company, the Aurora Group or any member(s) thereof or the Brentwood
Group or any member(s) thereof (1) become(s) the beneficial owner(s) of a
majority of the Voting Power or (2) file(s) or become(s) obligated to file with
the Securities and Exchange Commission a report or proxy statement under or in
response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) pursuant to the Exchange
Act, disclosing beneficial ownership by it of securities representing in excess
of 50 percent of the Voting Power or otherwise, (ii) the Company reports that a
change in control of the Company has or may have occurred, or will or may occur
in the future, by reason of any of the circumstances or events described in
clause (i) of this sentence or (iii) of a change in control of any Subsidiary.
12. FRACTIONAL SHARES. The Company shall not be required to issue
any fractional Common Shares pursuant to this Plan. The Board may provide for
the elimination of fractional Common Shares or for the settlement of fractional
Common Shares in cash.
13. WITHHOLDING TAXES. To the extent that the Company is required
to withhold federal, state, local or foreign taxes in connection with any
payment to be made or benefit to be realized by a Participant or other person
under this Plan, and the amounts available to the Company for such withholding
are insufficient, it shall be a condition to the receipt of such payment or the
realization of such benefit that the Participant or such other person make
arrangements satisfactory to the Company for payment of the balance of such
taxes required to be withheld, which may in the discretion of the Board include
relinquishment of a portion of such payment or benefit. The Company and a
Participant or such other person may also make similar arrangements with
respect to the payment of any taxes with respect to which withholding is not
required.
14. FOREIGN EMPLOYEES. In order to facilitate the making of any
grant or combination of grants under this Plan, the Board may provide for such
special terms for awards to Participants who are foreign nationals or who are
employed by the Company or any Subsidiary outside of the United States of
America as the Board may consider necessary or appropriate to accommodate
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<PAGE> 12
differences in local law, tax policy or custom. The Board may also approve such
supplements to or amendments, restatements or alternative versions of this Plan
as it may consider necessary or appropriate for such purposes, without thereby
affecting the terms of this Plan as in effect for any other purpose, and the
Secretary or other appropriate officer of the Company may certify any such
document as having been approved and adopted in the same manner as this Plan.
No such special terms, supplements, amendments or restatements, however, shall
include any provisions that are inconsistent with the terms of this Plan as
then in effect, unless this Plan could have been amended to eliminate such
inconsistency without further approval by the stockholders of the Company.
15. ADMINISTRATION OF THE PLAN. (a) This Plan shall be
administered by the Board, which may from time to time delegate all or any part
of its authority under this Plan to a committee of the Board (or subcommittee
thereof) consisting of not less than two Nonemployee Directors appointed by the
Board. A majority of the committee (or subcommittee) shall constitute a quorum,
and the action of the members of the committee (or subcommittee) present at any
meeting at which a quorum is present, or acts unanimously approved in writing,
shall be the acts of the committee (or subcommittee). To the extent of any such
delegation, references in this Plan to the Board shall be deemed to be
references to any such committee (or subcommittee).
(b) The interpretation and construction by the Board of any
provision of this Plan or of any agreement, notification or other document
evidencing the grant of Option Rights, Appreciation Rights, Restricted Shares,
Deferred Shares, Performance Shares or Performance Units, and any determination
by the Board pursuant to any provision of this Plan or any such agreement,
notification or other document, shall be final and conclusive. No member of the
Board shall be liable for any such action or determination made in good faith.
16. AMENDMENTS, ETC. (a) The Board may at any time and from time
to time amend the Plan in whole or in part; provided, however, that (i) any
amendment that must be approved by the stockholders of the Company in order to
comply with applicable law or the rules of any national securities exchange
upon which the Common Shares are traded or quoted shall not be effective unless
and until such approval shall have been obtained, and (ii) to the extent that
any amendment would adversely affect the rights of Participants who then hold
outstanding awards under this Plan, such amendment shall be of no force or
effect insofar as such awards then outstanding under this Plan are concerned,
unless the affected Participant shall consent thereto in writing. Presentation
of this Plan or any amendment hereof for stockholder approval shall not be
construed to limit the Company's authority to offer similar or dissimilar
benefits under other plans without stockholder approval.
(b) With the concurrence of the affected Participant, the
Board may cancel any agreement evidencing an Option Right or any other award
granted under this Plan. In the event of any such cancellation, the Board may
authorize the grant of new Option Rights or other awards hereunder, which may
or may not cover the same number of Common Shares as had been covered by the
canceled Option Right or other award, at such Option Price, in such manner and
subject to such other terms, conditions and discretion as would have been
permitted under this Plan had the canceled Option Right or other award not been
granted.
(c) The Board may grant under this Plan any award or
combination of awards authorized under this Plan in exchange for the
cancellation of an award that was not granted under
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this Plan, including but not limited to any award that was granted prior to the
adoption of this Plan by the Board, and any such award or combination of awards
so granted under this Plan may or may not cover the same number of Common
Shares as had been covered by the canceled award and shall be subject to such
other terms, conditions and discretion as would have been permitted under this
Plan had the canceled award not been granted.
(d) The Board may also permit Participants to elect to defer
the issuance of Common Shares or the settlement of awards in cash under the
Plan pursuant to such programs or rules as the Board may establish for the
purposes of this Plan. The Board also may provide that deferred issuances and
settlements include the payment or crediting of dividend equivalents or
interest on the deferral amounts.
(e) The Board may condition the grant of any award or
combination of awards authorized under this Plan on the surrender or deferral
by the Participant of his or her right to receive a cash bonus or other
compensation otherwise payable by the Company or a Subsidiary to the
Participant.
(f) In case of termination of employment by reason of death,
disability or normal or early retirement, or in the case of hardship or other
special circumstances, of a Participant who holds an Option Right or
Appreciation Right that is not then immediately exercisable in full, or any
Restricted Shares as to which the substantial risk of forfeiture or the
prohibition or restriction on transfer has not then lapsed, or any Deferred
Shares as to which the Deferral Period has not then ended, or any Performance
Shares or Performance Units that have not then been fully earned, or who holds
Common Shares subject to any transfer restriction imposed pursuant to Section
9(b) of this Plan, the Board may in its sole discretion accelerate the time at
which such Option Right or Appreciation Right may be exercised or the time at
which such substantial risk of forfeiture or prohibition or restriction on
transfer will lapse or the time when such Deferral Period will end or the time
at which such Performance Shares or Performance Units will be deemed to have
been fully earned or the time when such transfer restriction will terminate or
may waive any other limitation or requirement under any such award.
(g) This Plan shall not confer upon any Participant any right
with respect to continuance of employment or other service with the Company or
any Subsidiary and shall not interfere in any way with any right the Company or
any Subsidiary would otherwise have to terminate such Participant's employment
or other service at any time.
(h) To the extent that any provision of this Plan would
prevent any Option Right that was intended to qualify as an Incentive Stock
Option from qualifying as such, such provision shall be null and void with
respect to such Option Right. Such provision, however, shall remain in effect
for other Option Rights and there shall be no further effect on any provision
of this Plan.
17. TERMINATION. No grant shall be made under this Plan more than
10 years after the date on which this Plan is first adopted by the Board, but
all grants made on or prior to the tenth anniversary of such date of adoption
shall continue in effect thereafter subject to the terms thereof and of this
Plan.
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<PAGE> 1
EXHIBIT 10.30
CITY TRUCK HOLDINGS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
WHEREAS, ____________________ (the "Optionee") is an employee of
[__________________________________, a subsidiary of] City Truck Holdings, Inc.
(the "Company");
WHEREAS, the execution of a stock option agreement in the form hereof
has been authorized by a resolution of the Board of Directors of the Company
(the "Board") that was duly adopted on ______________________ (the "Date of
Grant"); and
WHEREAS, the option granted hereby is intended to be a nonqualified
stock option and shall not be treated as an "incentive stock option" within the
meaning of that term under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code");
NOW, THEREFORE, pursuant to the Company's 1999 Equity Incentive Plan
(the "Plan") and subject to the terms and conditions thereof and the terms and
conditions hereinafter set forth, the Company hereby grants to the Optionee a
nonqualified stock option (the "Option") to purchase ____________ shares (the
"Option Shares") of the Company's common stock, par value $0.01 per share (the
"Common Stock"), at the exercise price of $170 per Option Share (the "Exercise
Price").
1. VESTING OF OPTION. (a) INCREMENTAL VESTING. Unless sooner terminated
as hereinafter provided, the Option shall become cumulatively vested and
exercisable to the extent of 10 percent of the Option Shares on December 31,
2000 (the "Initial Vesting Date"), an additional 10 percent of the Option Shares
on each of the first four anniversaries of the Initial Vesting Date, an
additional 16.66 percent of the Option Shares on the fifth anniversary of the
Initial Vesting Date, and an additional 16.67 percent of the Option Shares on
each of the sixth and seventh anniversaries
<PAGE> 2
of the Initial Vesting Date, for so long as the Optionee remains in the
continuous employ of the Company or a Subsidiary (as defined in the Plan). For
the purposes of this agreement, the continuous employment of the Optionee with
the Company or a Subsidiary shall not be deemed to have been interrupted, and
the Optionee shall not be deemed to have ceased to be an employee of the Company
or a Subsidiary, by reason of the transfer of the Optionee's employment among
the Company and its Subsidiaries or a leave of absence approved by the Board.
(b) PERFORMANCE ACCELERATION. (i) Notwithstanding the
provisions of Section 1(a) hereof, 50 percent of the Option Shares (the
"Performance Shares") shall be subject to the vesting and performance criteria
set forth in Annex A hereto (the "Performance Criteria"), which is incorporated
herein by this reference. Depending on the extent to which the Performance
Criteria are satisfied, the Option may become vested and exercisable for up to
20 percent of the Performance Shares on the Initial Vesting Date and up to an
additional 20 percent of the Performance Shares (each such 20 percent increment
of Performance Shares being hereinafter referred to as a "Performance Share
Increment") on each of the first four anniversaries of the Initial Vesting Date
(the twelve-month period ending on the Initial Vesting Date and each of the
twelve-month periods ending on each of the first four anniversaries of the
Initial Vesting Date being hereinafter referred to as a "Performance Year").
(ii) If the Option becomes vested and exercisable
for less than 100 percent of a Performance Share Increment at the end of any
Performance Year, the Option shall become vested and exercisable for all or some
part of the unvested portion of such Performance Share Increment at the end of
the immediately succeeding Performance Year, if the Performance Criteria for
such immediately succeeding Performance Year are exceeded as provided in Annex
A.
(iii) All Performance Shares for which the Option
becomes vested and exercisable shall reduce share-for-share in inverse order the
number of Option Shares, beginning
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<PAGE> 3
with the Option Shares that are scheduled to vest on the seventh anniversary of
the Initial Vesting Date pursuant to Section 1(a) hereof.
(c) ACCELERATION UPON DEATH, DISABILITY OR CHANGE IN CONTROL.
Notwithstanding the provisions of Sections 1(a) and 1(b) hereof, the Option
shall become immediately and fully vested and exercisable upon the death or
Disability of the Optionee or upon a Change in Control (as defined in the Plan).
For the purposes of this agreement, "Disability" means that the Optionee shall
have become totally physically disabled, as determined in writing by the
Optionee's personal physician and, at the option of the Company, confirmed in
writing by a physician selected by the Company, and the Optionee or, if
applicable, the Optionee's guardian or legal representative shall allow such
Company-selected physician to conduct such physical examinations and tests, and
to review such of the Optionee's medical records, as such Company-selected
physician may deem appropriate.
(d) EXERCISABLE IN WHOLE OR IN PART. To the extent that the
Option shall have become exercisable in accordance with the terms of Section
1(a), 1(b) or 1(c) hereof, it may be exercised in whole or in part from time to
time thereafter.
2. TERMINATION OF OPTION. The Option shall terminate automatically and
without further notice on the earliest of the following dates:
(a) 90 days after the Optionee ceases to be an employee of the
Company or a Subsidiary for any reason other than (i) the death or
Disability of the Optionee, (ii) the discharge of the Optionee by the
Company or a Subsidiary for cause or (iii) the voluntary resignation of
the Optionee;
(b) one year after the Optionee ceases to be an employee of
the Company or a Subsidiary (i) by reason of the death or Disability of
the Optionee or (ii) if the Optionee dies or suffers Disability during
the ninety-day period referred to in Section 2(a) hereof;
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<PAGE> 4
(c) at the time the Optionee ceases to be an employee of the
Company or a Subsidiary by reason of (i) the discharge of the Optionee
by the Company or a Subsidiary for cause or (ii) the voluntary
resignation of the Optionee; or
(d) ten years from the Date of Grant;.
For the purposes of this Section 2, the Board shall unilaterally determine what
constitutes "cause" and whether the Optionee shall be or shall have been
discharged by the Company or a Subsidiary for "cause," and any such
determination by the Board shall be final and binding on all parties concerned,
including the Optionee.
3. PAYMENT OF EXERCISE PRICE. The Exercise Price shall be payable (a)
in cash in the form of currency or check or other cash equivalent acceptable to
the Company, (b) with the consent of the Board, by actual or constructive
transfer to the Company of (i) nonforfeitable, nonrestricted shares of Common
Stock that shall be owned by the Optionee and shall have been outstanding for at
least six months prior to the date of exercise or (ii) Option Shares (including
Performance Shares) issuable to the Optionee pursuant to the exercise of the
Option, (c) with the consent of the Board and unless prohibited by law, by a
loan from the Company or a full-recourse promissory note bearing interest at a
rate not less than such rate as shall then preclude the imputation of interest
under the Code and payable upon and subject to such terms as may be prescribed
by the Board, including any security to be given for such loan or note, or (d)
with the consent of the Board, by any combination of the foregoing methods of
payment. Nonforfeitable, nonrestricted shares of Common Stock that are
transferred by the Optionee in payment of all or any part of the Exercise Price
shall be valued on the basis of their Market Value per Share (as defined in the
Plan) on the date of exercise. If the Common Stock is registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), at the time of
exercise, the requirement of payment in cash shall be deemed satisfied if the
Optionee makes arrangements that are satisfactory to the Company with a broker
that is a member
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<PAGE> 5
of the National Association of Securities Dealers, Inc. to sell a sufficient
number of the Option Shares (including Performance Shares) that are being
purchased pursuant to the exercise, so that the net proceeds of the sale
transaction will at least equal the amount of the aggregate Exercise Price and
pursuant to which the broker undertakes to deliver to the Company the amount of
the aggregate Exercise Price not later than the date on which the sale
transaction will settle in the ordinary course of business.
4. MANNER OF EXERCISE. The Option may be exercised only by delivery to
the Secretary of the Company of all of the following prior to the time when the
Option shall terminate and, therefore, cease to be exercisable pursuant to
Section 2 hereof:
(a) notice in writing signed by the Optionee or other person
then entitled to exercise the Option, (i) stating that the Option (or
applicable portion thereof) is thereby exercised and (ii) otherwise
complying with all applicable rules and procedures established by the
Board;
(b) full payment of the aggregate Exercise Price in accordance
with Section 3 hereof;
(c) a bona fide written representation and agreement, signed
by the Optionee or other person then entitled to exercise the Option,
in a form satisfactory to the Board and stating that (i) the Option
Shares (including any Performance Shares) are being acquired for the
account of the Optionee or such other person for investment and without
any then present intention of distributing or reselling any of such
shares except as may be permitted under the Securities Act of 1933, as
amended (the "Securities Act"), and then applicable rules and
regulations thereunder, and (ii) the Optionee or such other person will
indemnify the Company against and hold it harmless from any loss,
damage, expense or liability resulting to the Company from any sale or
distribution of such shares by the Optionee or such other
5
<PAGE> 6
person that shall be contrary to such representation and agreement (The
Board may take such additional actions as it may deem appropriate to
insure the observance and performance of such representation and
agreement and to effect compliance with the Securities Act and any
other federal or state securities laws, rules or regulations, including
but not limited to requiring an opinion of counsel acceptable to the
Board to the effect that any subsequent transfer of such shares does
not violate the Securities Act or other federal or state securities
laws, rules or regulations and issuing stop-transfer orders covering
such shares. Share certificates evidencing shares of Common Stock
issued upon exercise of the Option shall bear an appropriate legend
referring to the provisions of this subsection (c) and the agreements
herein. The written representation and agreement referred to in this
subsection (c) shall not be required, however, if the shares of Common
Stock to be issued pursuant to such exercise have been registered under
the Securities Act and such registration is then effective with respect
to such shares.);
(d) full payment to the Company (or other employer
corporation) in accordance with Section 8 hereof of all applicable
federal, state and local taxes that shall be required to be withheld
upon exercise of the Option; and
(e) in the event the Option shall be exercised by any person
or persons other than the Optionee, appropriate proof of the right of
such person or persons to exercise the Option.
5. COMPLIANCE WITH LAW. The Company shall make reasonable efforts to
comply with all applicable federal and state securities laws, rules and
regulations and the rules of any securities exchange on which shares of the
Common Stock may hereafter be trading (or, if applicable, the rules of The
Nasdaq Stock Market); provided, however, notwithstanding any other provision of
this agreement, the Option shall not be exercisable:
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<PAGE> 7
(a) unless and until the Option Shares (including Performance
Shares) shall have been listed on all securities exchanges on which
shares of the Common Stock are then trading (or, if applicable, The
Nasdaq Stock Market);
(b) unless and until the Option Shares (including Performance
Shares) shall have been duly registered or qualified under such federal
and state securities laws, rules and regulations as the Board may deem
necessary or advisable; or
(c) if the exercise of the Option, or the issuance or transfer
of Option Shares (including Performance Shares) upon the exercise
thereof, would result in a violation of any such law, rule or
regulation.
6. TRANSFERABILITY AND EXERCISABILITY OF OPTION. Neither the Option nor
any interest therein may be transferred by the Optionee except by will or the
laws of descent and distribution, and the Option may not be exercised during the
lifetime of the Optionee except by the Optionee or, in the event of the
Optionee's legal incapacity, by the Optionee's duly appointed guardian or legal
representative acting on behalf of the Optionee in a fiduciary capacity.
7. ADJUSTMENTS. The Board shall make any adjustments in the Exercise
Price and the number or kind of shares of stock or other securities covered by
the Option that the Board may in good faith determine to be equitably required
to prevent any dilution or expansion of the Optionee's rights under this
agreement that otherwise would result from any (a) stock dividend, stock split,
combination of shares, recapitalization or other change in the capital structure
of the Company, (b) merger, consolidation, spin-off, split-off, spin-out,
split-up, reorganization or partial or complete liquidation or other
distribution of assets or issuance of rights or warrants to purchase or
otherwise acquire securities or (c) other corporate transaction or event having
an effect similar to any of those referred to in clause (a) or (b) of this
sentence. Furthermore, in the event that any transaction or event described or
referred to in the immediately preceding sentence shall occur, the Board may
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<PAGE> 8
provide in substitution of any or all of the Optionee's rights under this
agreement such alternative consideration as the Board may determine in good
faith to be equitable under the circumstances.
8. WITHHOLDING TAXES. If the Company shall be required to withhold any
federal, state, local or foreign tax in connection with any exercise of the
Option, the Optionee shall pay the tax or make provisions that are satisfactory
to the Company for the payment thereof. With the consent of the Board, the
Optionee may elect to satisfy all or any part of any such withholding obligation
by transfer to the Company of nonforfeitable, nonrestricted shares of Common
Stock that shall be owned by the Optionee and shall have been outstanding for at
least six months prior to the date of exercise or by surrendering to the Company
a portion of the Option Shares that are issued or transferred to the Optionee
upon the exercise of the Option, and the Option Shares so transferred or
surrendered by the Optionee shall be credited against any such withholding
obligation at the Market Value per Share on the date of exercise.
9. COMPANY OPTION TO REPURCHASE OPTION SHARES. (a) If the Optionee
voluntarily terminates his or her employment with the Company or a Subsidiary
prior to the fourth anniversary of the Initial Vesting Date, the Company will
have the unconditional option to purchase any or all of the then outstanding
Option Shares (including Performance Shares) for the Exercise Price, and
regardless of whether the Company exercises such option, the Optionee will be
released from the covenant not to compete set forth in Section 10 hereof.
(b) If the Optionee's employment with the Company or a
Subsidiary terminates prior to the fourth anniversary of the Initial Vesting
Date for any reason other than its voluntary termination by the Optionee, the
Optionee (i) may give the Company the option to purchase any and all of the then
outstanding Option Shares (including Performance Shares) (and, if applicable,
any and all of the Option Shares, including Performance Shares, that may be
issued or transferred upon exercise of the Option during the ninety-day period
referred to in Section 2(a) hereof) for the
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<PAGE> 9
Exercise Price and, regardless of whether the Company exercises such option, be
released from the covenant not to compete set forth in Section 10 hereof or (ii)
may not give the Company such option and, thus, be subject to the covenant not
to compete set forth in Section 10 hereof (any option referred to in Section
9(a) and this Section 9(b) being hereinafter referred to as a "Company Purchase
Option").
(c) If the Company elects to exercise a Company Purchase
Option, it must do so within 60 days after the termination of the Optionee's
employment. A Company Purchase Option may be exercised in whole or in part. The
aggregate amount owed by the Company to the Optionee pursuant to the exercise of
a Company Purchase Option shall be payable in cash promptly after the exercise
of the Company Purchase Option.
(d) The provisions of this Section 9 shall become null and
void and of no further force or effect upon the consummation of an initial
public offering of common stock of the Company (an "IPO").
10. NONCOMPETITION AND NONSOLICITATION. (a) RECITALS. The Optionee
acknowledges and agrees that he has technical expertise associated with the
heavy duty truck parts business and related businesses, as conducted by the
Company and its Subsidiaries as of the date of termination of his employment
(the "Business"), and is well known in the Business community throughout the
United States. The Optionee also has valuable business contacts with clients and
potential clients of the Business and with professionals in the Business, and
the Optionee's reputation and goodwill are an integral part of his business
success throughout the areas where the Business is and will be conducted. The
Company would not have granted the Optionee the Option and entered into this
agreement but for the Optionee's covenant not to compete set forth in Section
10(b) hereof and, therefore, if the Optionee deprives the Company of any of his
goodwill or in any manner uses his
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<PAGE> 10
reputation and goodwill in competition with the Company, the Company will be
deprived of the benefits it has bargained for pursuant to this agreement.
(b) COVENANT NOT TO COMPETE. During the Optionee's employment
with the Company (including any Subsidiary) and for a period of 12 months
thereafter (such period of employment and the twelve-month period thereafter
being hereinafter referred to as the "Term"), the Optionee will not directly or
indirectly own (except ownership of less than five percent of the outstanding
securities of a publicly-traded company), join, manage, operate or control, or
participate in the ownership, management, operation or control of, or be
affiliated or associated as a director, officer, employee, partner, consultant
or otherwise with, or permit his name to be used by or in connection with, any
profit or nonprofit business or organization that is engaged in the Business in
whole or in part anywhere in the United States so long as the Company (including
any Subsidiary) carries on the Business therein.
(c) NO SOLICITATION OF CUSTOMERS OR EMPLOYEES. The Optionee
agrees that:
(i) during the Term, the Optionee will not directly or
indirectly divert or take away (or attempt to divert or take away) from
the Company or any affiliate of the Company (including but not limited
to by way of divulging to any competitor or potential competitor of the
Company) any person, partnership, firm, corporation or other entity
that is or was a customer of Company or whose identity is known to
Optionee at the date hereof or the date of termination of his
employment with the Company or a Subsidiary as one whom the Company or
any affiliate of the Company intends to solicit, except in connection
with any business endeavor that is not prohibited by Section 10(b)
hereof; and
(ii) during the Term, the Optionee will not directly or
indirectly hire or offer employment to, or seek to hire or offer
employment (other than employment with the
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Company or a Subsidiary) to, any employee of the Company whose
employment is continued by the Company or a Subsidiary after the date
hereof or any employee of any successor or affiliate of the Company or
a Subsidiary that is engaged in the Business, unless the Company or a
Subsidiary first terminates the employment of such employee or gives
its written consent to such employment or offer of employment.
(d) SEVERABILITY OF PROVISIONS. In the event that the
provisions of this Section 10 should ever be determined by a court of competent
jurisdiction to exceed the time or geographic or other limitations permitted by
applicable law, then such provisions shall be deemed reformed to the maximum
time or geographic or other limitations permitted by applicable law, as
determined by such court. Without limiting the foregoing, the covenants
contained herein shall be construed as separate covenants, covering their
respective subject matters, with respect to (i) each of the separate counties of
the State of Illinois and other places in which the Company or a Subsidiary
transacts any business, (ii) each business conducted by the Company or a
Subsidiary, and (iii) the Company and each Subsidiary and their respective
successors separately. Each breach of the covenants set forth herein shall give
rise to a separate and independent cause of action.
(e) INJUNCTIVE RELIEF. The Optionee acknowledges that (i) the
provisions of this Section 10 and Section 11 hereof are reasonable and necessary
to protect the legitimate interests of the Company, and (ii) any violation of
this Section 10 or Section 11 hereof will result in irreparable injury to the
Company and Subsidiaries, the exact amount of which will be difficult to
ascertain, and that the remedies at law for any such violation would not be
reasonable or adequate compensation to the Company and Subsidiaries for such a
violation. Accordingly, the Optionee agrees that if he violates the provisions
of this Section 10 or Section 11 hereof, in addition to any other remedy that
may be available at law or in equity, the Company and Subsidiaries shall be
entitled to specific
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<PAGE> 12
performance and injunctive relief, without posting bond or other security and
without the necessity of proving actual damages.
11. RESTRICTIONS ON TRANSFER OF OPTION SHARES. (a) There can be no
valid transfer (as hereinafter defined) of any Option Shares (including
Performance Shares), or any interest in such shares, by any holder of such
shares or interests, unless such transfer is solely for cash consideration and
is made in compliance with the following provisions:
(i) Before there can be a valid transfer of any
Option Shares (including Performance Shares) or any interest therein,
the record holder of the shares to be transferred or the shares in
which an interest is to be transferred (the "Offered Shares") shall
give written notice (by registered or certified mail) to the Company.
Such notice shall specify the identity of the proposed transferee, the
cash price offered for the Offered Shares by the proposed transferee
and the other terms and conditions of the proposed transfer. The date
such notice is mailed shall be hereinafter referred to as the "notice
date" and the record holder of the Offered Shares shall be hereinafter
referred to as the "Offeror."
(ii) For a period of 30 calendar days after the
notice date, the Company shall have the option to purchase all (but not
less than all) of the Offered Shares at the purchase price and on the
terms set forth in subsection (a)(iii) of this Section 11. Such option
shall be exercisable by the Company by mailing (by registered or
certified mail) written notice of exercise to the Offeror prior to the
end of such thirty-day period.
(iii) The price at which the Company may purchase the
Offered Shares pursuant to the exercise of such option shall be the
cash price offered for the Offered Shares by the proposed transferee
(as set forth in the notice required under subsection (a)(i) of this
Section 11). The Company's notice of exercise of such option shall be
accompanied by full
12
<PAGE> 13
payment for the Offered Shares and, upon such payment by the Company,
the Company shall acquire all right, title and interest in and to all
of the Offered Shares.
(iv) If such option is not exercised by the Company,
the transfer proposed in the notice given pursuant to subsection (a)(i)
of this Section 11 may be effected; provided, however, that such
transfer must in all respects be exactly as proposed in such notice
except that such transfer may not be effected before the tenth calendar
day after the expiration of such thirty-day option exercise period or
after the ninetieth calendar day following the expiration of such
thirty-day option exercise period, and if such transfer has not been
effected prior to such ninetieth day, such transfer may not be effected
without once again complying with the provisions of this subsection
(a).
(b) As used in this Section 11 the term "transfer" means any
sale, assignment, transfer, conveyance, pledge, gift or other form of
disposition or encumbrance of shares of stock of the Company or any legal or
equitable interest therein; provided, however, that the term "transfer" does not
include a transfer of such shares or interests by will or the laws of descent
and distribution or a gift of such shares if the donee agrees to be bound by the
provisions of this Section 11.
(c) None of the Option Shares (including Performance Shares)
shall be transferred on the books of the Company, and the Company shall not
recognize any such transfer of any such shares or any interest therein, unless
and until all applicable provisions of this Section 11 have been complied with
in all respects. The stock certificates evidencing Option Shares (including
Performance Shares) shall bear an appropriate legend referring to the transfer
restrictions imposed by this Section 11 and the Company Purchase Option provided
for in Section 9 hereof.
(d) The provisions of this Section 11 shall become null and
void and of no further force or effect upon the consummation of an IPO.
13
<PAGE> 14
12. RIGHT TO TERMINATE EMPLOYMENT AND ADJUST COMPENSATION. No provision
of this agreement shall limit in any way whatsoever any right that the Company
or a Subsidiary may otherwise have to terminate the employment or adjust the
compensation of the Optionee at any time.
13. RELATION TO OTHER BENEFITS. Any economic or other benefit to the
Optionee under this agreement or the Plan shall not be taken into account in
determining any benefits to which the Optionee may be entitled under any
profit-sharing, retirement or other benefit or compensation plan maintained by
the Company or a Subsidiary and shall not affect the amount of any life
insurance coverage available to any beneficiary under any life insurance plan
covering employees of the Company or a Subsidiary.
14. AMENDMENTS. Any amendment to the Plan shall be deemed to be an
amendment to this agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment shall adversely affect the rights
of the Optionee hereunder without the Optionee's written consent.
15. SEVERABILITY. In the event that one or more of the provisions of
this agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof shall continue
to be valid and fully enforceable.
16. GOVERNING LAW. This agreement is made under, and shall be construed
in accordance with, the laws of the State of Delaware.
This agreement is executed by the Company on this ____ day of
___________________.
CITY TRUCK HOLDINGS, INC.
By:
-------------------------------------
Name:
Title:
14
<PAGE> 15
The undersigned Optionee hereby acknowledges receipt of an executed
original of this agreement and accepts the Option granted hereunder, subject to
the terms and conditions of the Plan and the terms and conditions hereinabove
set forth.
--------------------------------------
Optionee
Date:
---------------------------------
15
<PAGE> 16
ANNEX A
CITY TRUCK HOLDINGS, INC.
NONQUALIFIED STOCK OPTION
PERFORMANCE CRITERIA
This Annex A to the Nonqalified Stock Option Agreement dated as of
__________________, between the Company and the Optionee (the "Agreement") sets
forth the Performance Criteria relating to the vesting of Performance Share
Increments. Capitalized terms used herein without definition have the meanings
ascribed to them in the Agreement.
For each Performance Year, the percentage of a Performance Share
Increment for which the Option shall become exercisable will be determined by
comparing the Company's actual EBITDA (as defined below) as of the end of the
applicable Performance Year (based on the Company's audited consolidated
financial statements for the fiscal year then ended) to Plan EBITDA (as defined
below) for such fiscal year. The percentage of the Performance Share Increment
for which the Option shall be exercisable as of the end of each Performance Year
is set forth in the following table:
<TABLE>
<CAPTION>
Percentage of Performance
Actual EBITDA as a % Share Increment for
of Plan Which the Option
EBITDA May Be Exercised
-------------------- -------------------------
<S> <C>
less than 85.00% 0%
1999
88.75% 30%
92.50% 60%
96.25% 80%
100% 100%
</TABLE>
Exercisability between the percentages listed in the table above will
be linearly interpolated.
"EBITDA" means, for any fiscal year, consolidated pre-tax income plus
interest expense (including noncash interest, amortization of original issue
discount and the interest component of capital leases) on indebtedness and
amortization of goodwill, covenants not to compete and similar intangibles, all
as determined in accordance with generally accepted accounting principles and as
reflected in the Company's audited consolidated financial statements.
"Plan EBITDA" means, for each Performance Year, the dollar amount of
EBITDA set forth in the Annual Operating Plan to be developed by management and
approved by the Board. Plan EBITDA will be adjusted from time to time as may be
mutually agreed upon to reflect the expected contribution to EBITDA of
acquisitions or major corporate projects.
A-1
<PAGE> 17
If less than 100% of a Performance Share Increment shall vest and
become exercisable as of the end of a Performance Year, but in the immediately
succeeding Performance Year the Company's actual EBITDA exceeds Plan EBITDA, the
Company will add the dollar amount by which the Company's actual EBITDA exceeds
Plan EBITDA for such immediately succeeding Performance Year to the Company's
EBITDA for the immediately preceding Performance Year, and that part of the
unvested portion of such Performance Share Increment that, with such dollar
amount carried back, would have vested and become exercisable in the immediately
preceding Performance Year shall vest and become exercisable as of the end of
such immediately succeeding Performance Year.
A-2
<PAGE> 1
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(AMOUNT IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Pre-tax income (loss) from continuing operations $ 4,455 $ 4,348 $ 4,365 $ 601 $ 7,275
Rental expense 209 223 226 326 10,588
Interest expense 106 722 841 6,519 19,406
------- ------- ------- ------- -------
Adjusted Income $ 4,770 $ 5,293 $ 5,432 $ 7,446 $37,269
======= ======= ======= ======= =======
Fixed charges:
Interest expense & amortization of debt discount/premium $ 106 $ 722 $ 841 $ 6,519 $19,406
Rental expense 209 223 226 326 10,588
------- ------- ------- ------- -------
Total Applicable Fixed Charges $ 315 $ 945 $ 1,067 $ 6,845 $29,994
======= ======= ======= ======= =======
RATIO OF EARNINGS TO FIXED CHARGES 15.14 5.60 5.09 1.09 1.24
======= ======= ======= ======= =======
</TABLE>
<PAGE> 1
Exhibit 21.1
FLEETPRIDE, INC.
SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION OF
COMPANY ORGANIZATION DIRECT OWNER
<S> <C> <C>
Truck & Trailer Parts, Inc. Georgia FleetPride, Inc. ("FleetPride")
Truckparts, Inc. Connecticut FleetPride
Associated Brake Supply, Inc. ("ABS") California FleetPride
Associated Truck Center, Inc. California ABS
Onyx Distribution, Inc. California ABS
Tisco, Inc. California FleetPride
Tisco of Redding, Inc. California FleetPride
Superior Truck & Auto Supply, Inc. Massachusetts FleetPride
Wheels and Brakes, Inc. Georgia FleetPride
QDSP Holdings, Inc. ("QDSP Holdings") Delaware FleetPride
Quality Distribution Service Partners, Inc. ("QDSP") Delaware QDSP Holdings
Automotive Sales Company, Inc. ("Automotive Sales") Delaware QDSP
City Spring Works, Inc. Delaware QDSP
FleetPride of Agawam, Inc. ("Agawam") Delaware QDSP
Holt Incorporated ("Holt") Delaware QDSP
SLM Power Group, Inc. ("SLM") Delaware QDSP
Truck City Parts, Inc. Delaware QDSP
Universal Joint Sales Company, Inc. Delaware QDSP
Wheatley Truck Parts, Inc. Delaware QDSP
CB Acquisition Sub, Inc. Delaware Agawam
New England Truck & Auto Service, Inc. Massachusetts Agawam
TBS, Incorporated Arizona Automotive Sales
Four-T Sales & Service, Inc. Nebraska Holt
Stats Remanufacturing Center, Inc. Nebraska Holt
Power Export Distributing Company Texas SLM
Power Equipment International, Inc. ("Power Equipment") Texas SLM
Parts Management Company ("Parts Management") Texas SLM
Parts Holding Company ("Parts Holding") Nevada SLM
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
JURISDICTION OF
COMPANY ORGANIZATION DIRECT OWNER
<S> <C> <C>
Specialized Sales & Service, Inc. Oregon SLM
City Truck & Trailer Parts of Alabama, L.L.C. Alabama FleetPride
Active Gear, L.L.C. Washington FleetPride
Parts Distributing Company, Ltd. Texas Parts Management (general partner)
Parts Holding (limited partner)
Parts Distribution Company (U.K.) Ltd. ("U.K.") United Kingdom SLM
Avon Exports Limited United Kingdom U.K.
Power Equipment de Mexico, S.A. de C.V. Mexico Power Equipment
FleetPride West, Inc. Delaware FleetPride
Oklahoma Truck Supply Assoc., Inc. Oklahoma FleetPride
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 6,445
<SECURITIES> 0
<RECEIVABLES> 64,344
<ALLOWANCES> 1,727
<INVENTORY> 113,585
<CURRENT-ASSETS> 196,973
<PP&E> 27,390
<DEPRECIATION> 12,491
<TOTAL-ASSETS> 477,674
<CURRENT-LIABILITIES> 65,546
<BONDS> 100,000
0
170,259
<COMMON> 4
<OTHER-SE> 99,087
<TOTAL-LIABILITY-AND-EQUITY> 477,674
<SALES> 358,363
<TOTAL-REVENUES> 358,363
<CGS> 234,709
<TOTAL-COSTS> 234,709
<OTHER-EXPENSES> 58
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,406
<INCOME-PRETAX> 7,275
<INCOME-TAX> 3,574
<INCOME-CONTINUING> 3,701
<DISCONTINUED> 0
<EXTRAORDINARY> 1,510
<CHANGES> 0
<NET-INCOME> 2,191
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
