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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered into as of
September 1, 2000, by and between ATCDG Acquisition Corp., Inc., a Delaware
corporation ("Buyer") and Aftermarket Technology Corp., a Delaware corporation
("Seller").
R E C I T A L S
A. ATC Distribution Group, Inc., a Delaware corporation (the
"Company") is engaged in the business of sourcing and remanufacturing
transmission and related drive train components and products for distribution to
independent aftermarket customers for use in the repair of automobiles and light
trucks principally following expiration of the new vehicle warranty (the
"Business"); and
B. Seller owns all of the issued and outstanding shares
(collectively the "Shares") of the capital stock of the Company and Buyer
desires to purchase and Seller desires to sell the Shares on the terms and
conditions set forth herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing premises, and the
mutual representations, warranties, covenants and agreements hereinafter set
forth, the parties hereto agree as follows.
ARTICLE I
DEFINITIONS
1.01 DEFINITIONS. The following terms, as used herein, have the
following meanings:
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Act of 1934, as amended. Without limiting the
generality of the foregoing, from and after the Closing, the Affiliates of Buyer
shall include the Company and the Company Subsidiaries and the Affiliates of
Seller shall exclude the Company and the Company Subsidiaries.
"APPLICABLE LAW" means, with respect to any Person, any statute, law,
ordinance or regulation (including any Environmental Law) applicable to such
Person or any of its Affiliates or Plan Affiliates or any of their respective
properties, assets, officers, directors, employees, consultants or agents (in
connection with such officer's, director's, employee's, consultant's or agent's
activities on behalf of such Person or any of its Affiliates or Plan
Affiliates).
"APPLICABLE RATE" means, with respect to any day, the 90-day LIBOR per
annum rate of interest published in the daily edition of the Wall Street Journal
on the most recently preceding first Business Day of a month (the "First
Business Day"). If the LIBOR rate so published on the First Business Day is
different from the LIBOR rate so published on the prior month's first Business
Day, the new then applicable First Business Day's rate shall apply on the First
Business Day.
"ASSOCIATE" or "ASSOCIATED WITH" means, when used to indicate a
relationship with any Person, (a) any other Person of which such Person is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of equity securities issued by such other Person, (b) any
trust or other estate in which such Person has a beneficial interest of more
than 10% or as to which such Person serves as trustee or in a similar fiduciary
capacity, and (c) the spouse of such Person and, to the extent the Seller has
Knowledge of such relationship, (i) any parent, grandparent, aunt, uncle,
sibling or
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child of such Person, or (ii) any relative of such spouse who has the
same home as such Person or who is a director or officer of such Person or any
Affiliate thereof.
"BENEFIT ARRANGEMENT" means any material benefit arrangement, other
than an Employee Benefit Plan, maintained by the Company or any ERISA Affiliate
of the Company covering the employees, former employees, directors and former
directors of the Company and the beneficiaries of any of them, including,
without limitation, (i) each material employment or consulting agreement, (ii)
each arrangement providing for material insurance coverage for employees or
workers' compensation benefits, (iii) each material incentive bonus or deferred
bonus arrangement, (iv) each arrangement providing material termination
allowance, severance or similar benefits, (v) each material equity compensation
plan, (vi) each material deferred compensation plan and (vii) each material
compensation policy and practice.
"BENEFIT PLAN" means an Employee Benefit Plan or Benefit Arrangement.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other day
on which commercial banks in Chicago, Illinois are authorized or required by law
to close.
"CLOSING DATE CUTOFF TIME" means 11:59 p.m., Chicago time, on the
Closing Date.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY SUBSIDIARY" means any direct or indirect Subsidiary of the
Company.
"CONTRACTS" means all contracts, agreements, options, leases,
licenses, sales and purchase order, commitments and other instruments of any
kind, whether written or oral, to which the Company or any Company Subsidiary is
a party on the Closing Date, including the Scheduled Contracts and the
Subsequent Material Contracts.
"DAMAGES" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities, judgments, awards,
fines, sanctions, penalties, charges and amounts paid in settlement, net of
insurance proceeds actually received, including without limitation (i) interest
on cash disbursements in respect of any of the foregoing, at the Applicable
Rate, from the date each such cash disbursement is made until the Person
incurring the same shall have been indemnified in respect thereof and (ii)
reasonable costs, fees and expenses of attorneys, accountants and other agents
of such Person. The amount of any Damages shall be net of any Tax benefit if and
when actually realized (as offset by any Tax burden resulting from the matter
for which a claim is asserted or from the indemnification) that accrues to an
Indemnitee in respect of the matter for which a claim is asserted; provided,
that no Indemnitee shall be required solely for the purpose of realizing a
benefit to take any Tax position that could have an adverse effect on such
Indemnitee if taken; provided, further, that the Indemnitee shall not be
required to disclose its (or its affiliates) Tax returns, work papers or other
information with respect to the preparation of such returns, but shall be
required to disclose the foregoing only to the Tax Arbitrator and provided
further, that in the event that such Tax benefit is reduced or eliminated as a
result of an examination, audit or similar proceeding, the Indemnifying Party
shall pay to the Indemnitee the amount of any attendant increase in Damages.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan, as defined in
Section 3(3) of ERISA, that the Company or any ERISA Affiliate currently
sponsors or contributes and that covers employees or former employees of the
Company or any Company Subsidiary.
"EMPLOYEE PENSION BENEFIT PLAN" means any employee pension benefit
plan, as defined in Section 3(2) of ERISA, that is subject to Title IV of ERISA,
including a Multiemployer Plan.
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"ENCUMBRANCES" means easements, rights of way, servitudes, zoning or
building restrictions, or any other material rights of others or other material
adverse interests of any kind, including chattel mortgages, conditional sales
contracts, collateral security arrangements and other material title or interest
retention arrangements.
"ENVIRONMENTAL LIABILITIES" means, regardless of whether any of the
following are contained in any disclosure schedule to this Agreement or
otherwise disclosed to Buyer prior to the Closing, any and all loss, liability,
claim, obligation, damage, deficiency, costs and expenses, fines or penalties
(including fines, penalties and defense costs incurred for such reasonable time
after the Closing as it takes the Company or any Company Subsidiary to come into
compliance with Environmental Laws with respect to conditions in existence on or
prior to the Closing Date) and including without limitation reasonable attorney
fees and other defense costs, costs of investigation, remediation or other
response actions (any of the foregoing, "Environmental Damages") known or
unknown, foreseen or unforeseen, whether contingent or otherwise, fixed or
absolute, present or arising in the future, asserted against or reasonably
incurred by a Buyer Indemnitee arising out of or related to: (1) environmental
conditions, including the presence, Release, threat of Release, Management of or
exposure to Hazardous Substances at on, in or under any property now or
previously owned, operated or leased by the Company, any Company Subsidiary or
any of their respective predecessors in interest, whether into the air, soil,
ground or surface waters on-site or off-site, to the extent that such
environmental conditions occurred prior to the Closing Date and to the extent
that any such pre-existing presence, Release or exposure migrates or continues
(other than through the act or negligent omission of any Person not the Seller)
after the Closing Date; or (2) the off-site transportation, storage, treatment,
recycling or disposal of Hazardous Substances Managed or Released, prior to the
Closing Date, by or on behalf of the Company, any Company Subsidiary or any of
their respective predecessors in interest or at or from any property now or
previously owned, operated or leased by the Company, any Company Subsidiary or
any of their respective predecessors in interest; or (3) any violation of any
Environmental Law by the Company, any Company Subsidiary or any of their
respective predecessors in interest to the extent that such violation occurred
prior to the Closing Date.
"EQUIPMENT" means all machinery, equipment, furniture, office
equipment, communications equipment, vehicles, storage tanks, spare and
replacement parts and other tangible property (and interests in any of the
foregoing) of the Company or any of the Company Subsidiaries.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" of any Person means any other Person that, together
with such Person as of the relevant measuring date under ERISA, was or is
required to be treated as a single employer under Section 414(b), (c), (m) or
(o) of the Code.
"GAAP" means generally accepted accounting principles applied in the
United States as in effect at the time the relevant financial statement is
prepared, applied on a consistent basis utilizing the Company's practices, which
are in accordance with generally accepted accounting principles.
"GOVERNMENTAL AUTHORITY" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
"GROUP HEALTH PLAN" means any group health plan, as defined in Section
5000(b)(1) of the Code.
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"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"INCOME TAX" means any tax based on, measured by or determined by
reference to net income.
"INDEBTEDNESS" means all liabilities and obligations, contingent or
otherwise, of the Company or any of the Company Subsidiaries (i) in respect of
borrowed money, (ii) evidenced by bonds, notes, debentures or similar
instruments, (iii) representing the balance deferred and unpaid of the purchase
price of any property or services, other than those incurred in the ordinary
course of its business that constitute trade payables to trade creditors, (iv)
evidenced by a bankers' acceptance or similar instrument issued or accepted by
banks, (v) for the capitalized amount of a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP utilizing
the interest rate and other factors historically assigned to such leases by
Seller, (vi) evidenced by a letter of credit or a reimbursement obligation of
the Company or any of the Company Subsidiaries with respect to any letter of
credit, except for letter of credit or reimbursement obligations for purchases
of goods and services in the ordinary course of business and (vii) any of the
foregoing of another Person as to which the Company or any of the Company
Subsidiaries is a guarantor or otherwise liable (except endorsements of customer
checks in the ordinary course of business).
"INDEMNIFYING PARTY" means: (i) Seller when any Buyer Indemnitee is
asserting a claim under Sections 9.01(a) or (ii) Buyer and the Company when any
Seller Indemnitee is asserting a claim under Sections 9.01(b).
"INDEMNITEE" means: (i) each of Buyer and its Affiliates (including,
without limitation, after the Closing, the Company) with respect to any claim
for which Seller is the Indemnifying Party under Section 9.01(a); or (ii) Seller
and its Affiliates with respect to claims for which Buyer and the Company are
Indemnifying Parties under Section 9.01(d).
"INTERCOMPANY INDEBTEDNESS" means Indebtedness of the Company or any
of the Company Subsidiaries to Seller or any of its Subsidiaries (other than the
Company and the Company Subsidiaries) and Indebtedness of Seller or any of its
Subsidiaries (other than the Company and the Company Subsidiaries) to the
Company or any of the Company Subsidiaries.
"INVENTORY" means all items of inventory notwithstanding how
classified in the financial records of the Company, including all raw materials,
work-in-process, finished goods, supplies, spare parts, samples, cores and
stores of the Company and the Company Subsidiaries.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE" means, with respect to any entity, all things either
actually known by any of the executive officers of such entity or that it would
be reasonable to expect would be known by one or more of the executive officers
of such entity in the ordinary course of their duties; PROVIDED, HOWEVER, that
solely with respect to determining Knowledge of Seller as of the date hereof,
the following persons shall be deemed to be executive officers of Seller:
Michael Du Bose, Barry Kohn, Joseph Salamunovich, Mary Ryan, John Machota,
Daniel Scopetti, Anthony Ten-Barge, John Pinkerton, Frank Papa and Greg Bashur
(collectively, the "Seller Executive Officers"); and PROVIDED, FURTHER, that
solely with respect to determining Knowledge of Seller on and after September 8,
2000, the following persons shall be deemed to be executive officers of Seller:
the Seller Executive Officers, Tom Conroy, Tom DeMille, Gordon King, Steven
Parrish, Roger Schepman and Corby Wilemon.
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"LIABILITY" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, whether or
not the same is required to be accrued on the financial statements of such
Person and whether or not the same is disclosed on any schedule to this
Agreement.
"LIEN" means, with respect to any asset, any mortgage, title defect or
objection, lien, pledge, charge, security interest, hypothecation, restriction,
encumbrance or charge of any kind in respect of such asset.
"MANAGEMENT SERVICES AGREEMENT" means that certain Amended and
Restated Management Services Agreement, dated as of December 18, 1996, among
Seller, the Subsidiaries of Seller and Aurora Capital Partners, L.P.
"MATERIAL ADVERSE EFFECT" means a change in, or effect on, the
business, financial condition or results of operations of the Company and the
Company Subsidiaries that results in or is reasonably likely to result in a
material adverse effect on, or a material adverse change in, the Company and the
Company Subsidiaries taken as a whole or the condition (financial or otherwise)
or the results of operation of the Business, except for any change or effect
relating to or resulting from (i) general economic, financial or market
conditions or conditions generally affecting the industries in which the Company
and the Company Subsidiaries operate, (ii) actions taken by Buyer or any of its
Affiliates, or (iii) the public announcement of the transactions contemplated by
this Agreement.
"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in Section
3(37) and 4001(a)(3) of ERISA.
"NET CASH" means, with respect to the Company and the Company
Subsidiaries at any specified time, the amount, at such time, of: (i) cash on
hand; plus (ii) checks that have been received but not yet converted to cash but
as to which accounts receivable have been commensurately reduced in recognition
of such receipt; minus (iii) checks that have been issued but not yet converted
to cash but as to which accounts payable have been commensurately reduced in
recognition of such issuance. Exhibit A hereto sets forth a calculation of Net
Cash as of May 31, 2000.
"NET WORKING CAPITAL" means, with respect to the Company and the
Company Subsidiaries at any specified time, the difference between:
(i) total current assets of the Company and the Company Subsidiaries
at such time, excluding the assets set forth in SCHEDULE 1.01 and with the
adjustments set forth in SCHEDULE 1.01; and
(ii) total current liabilities of the Company and the Company
Subsidiaries at such time, excluding the liabilities set forth in SCHEDULE 1.02
and with the adjustments set forth in SCHEDULE 1.02.
Net Working Capital shall be determined in accordance with GAAP, applied on a
basis consistent with the preparation of the 2000 Balance Sheet, on a going
concern basis, and without giving effect to any purchase accounting adjustments
arising out of the transactions contemplated by this Agreement. An example of a
Net Working Capital calculation is attached hereto as Exhibit A.
"OUTSIDE DATE" means the later of (i) October 20, 2000 and (ii) the
date that is five days after the expiration or termination of the waiting period
provided for in the HSR Act; PROVIDED, HOWEVER,
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that the Outside Date shall be October 31, 2000 if such expiration or
termination has not occurred prior to October 31, 2000.
"PERMITTED LIENS" means (i) Liens for Taxes or governmental
assessments or similar obligations the payment of which is not yet due, or for
Taxes the validity of which are being contested in good faith by appropriate
proceedings; (ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Persons imposed by
Applicable Law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith; (iii) Liens relating to deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (iv)
until the Closing Date, Liens and Encumbrances specifically identified on
SCHEDULE 1.03, which such scheduled Liens and Encumbrances shall be terminated
on or prior to the Closing Date and shall not be considered Permitted Liens for
purposes of Section 8.01(g); and (v) Liens securing executory obligations under
any Lease that constitutes an "operating lease" under GAAP.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust, estate or other entity or organization,
including a Governmental Authority.
"PLAN AFFILIATE" means, with respect to any Person, any Benefit Plan
sponsored by, maintained by or contributed to by such Person, and with respect
to any Benefit Plan, any Person sponsoring, maintaining or contributing to such
Benefit Plan.
"PROHIBITED TRANSACTION" means a transaction that is prohibited under
Section 4975 of the Code or Section 406 of ERISA and not exempt under Section
4975 of the Code or Section 408 of ERISA, respectively.
"SUBSIDIARY" or "SUBSIDIARIES" of any Person means any corporation,
partnership, limited liability company, association, trust, unincorporated
association or other legal entity of which such Person (either alone or through
or together with any other subsidiary), (1) owns, directly or indirectly, fifty
percent (50%) or more of the capital stock or other equity interest that are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity, or (2) has the
contractual or other power to designate a majority of the board of directors or
other governing body (and, where the context permits, includes any predecessor
of such an entity).
"TAX" means all taxes imposed of any nature including federal, state,
local or foreign net income tax, alternative or add-on minimum tax, profits or
excess profits tax, franchise tax, gross income, adjusted gross income or gross
receipts tax, employment related tax (including employee withholding or employer
payroll tax, FICA or FUTA), real or personal property tax or ad valorem tax,
sales or use tax, excise tax, stamp tax or duty, any withholding or back up
withholding tax, value added tax, severance tax, prohibited transaction tax,
premiums tax, occupation tax, together with any interest or any penalty,
addition to tax or additional amount imposed by any governmental authority
(domestic or foreign) responsible for the imposition of any such tax.
"TAX RETURN" means all returns, reports, forms or other information
required to be filed with respect to any Tax.
"TAX SHARING AGREEMENT" means that certain Amended and Restated Tax
Sharing Agreement, dated as of December 20, 1996 among Seller and its
Subsidiaries.
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1.02 ADDITIONAL DEFINED TERMS. The following terms are defined in the
Sections referred to below:
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"338 Allocation".......................................................Section 7.05(m)
"401(k) Transfer"......................................................Section 6.03(c)
"2000 Balance Sheet"......................................................Section 3.09
"AAA Rules"...........................................................Section 11.11(a)
"Accountant"...........................................................Section 2.03(a)
"Affected Employees"...................................................Section 6.03(a)
"Agent"...............................................................Section 10.01(g)
"Agreement"...................................................................Preamble
"Aggregate Basket".....................................................Section 9.01(b)
"Aggregate Deemed Sale Price"..........................................Section 7.05(l)
"Amended LaSalle Master Lease Agreement"..................................Section 5.19
"ATC Savings Plan".....................................................Section 6.03(c)
"Back-end Lease Payments"..............................................Section 7.11(b)
"Banks"...............................................................Section 10.01(g)
"Business"...................................................................Recital A
"Buyer".......................................................................Preamble
"Buyer Indemnitees"....................................................Section 9.01(a)
"Buyer Representatives"................................................Section 6.01(a)
"Buyer's 401(k) Plan"..................................................Section 6.03(c)
"Cash Cap".............................................................Section 9.01(a)
"Closing Date".........................................................Section 2.02(a)
"Closing"..............................................................Section 2.02(a)
"Closing Inventory"....................................................Section 2.03(c)
"Company"....................................................................Recital A
"Company Master Lease Agreement"..........................................Section 5.19
"Consent".............................................................Section 10.01(g)
"Credit Facility".....................................................Section 10.01(g)
"Debt Commitment Letters".............................................Section 10.01(g)
"Environmental Laws"...................................................Section 3.17(a)
"Environmental Permits"................................................Section 3.17(a)
"Equity Commitment Letter"................................................Section 4.08
"Escrow Agent"............................................................Section 5.11
"Escrow Agreement"........................................................Section 5.11
"Estimated Net Cash"...................................................Section 2.03(b)
"Estimated Net Working Capital"........................................Section 2.03(a)
"Final Amount"......................................................Section 9.04(d)(y)
"Final Net Cash".......................................................Section 2.03(b)
"Final Net Working Capital"............................................Section 2.03(a)
"Final Section 338 Schedule"...........................................Section 7.05(l)
"Financial Statements"....................................................Section 3.09
"Half Amount"......................................................Section 9.04(d)(iv)
"Hazardous Substance"..................................................Section 3.17(c)
"Holdings"................................................................Section 5.05
"Indemnification Ending Date"..........................................Section 9.02(d)
"Indemnified Amount"...............................................Section 9.04(d)(iv)
"Insurance Policies"...................................................Section 3.16(a)
"Intellectual Property Rights".........................................Section 3.20(a)
"Intercompany Accounts"...................................................Section 5.13
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"King-O-Matic"............................................................Section 2.06
"King-O-Matic Note".......................................................Section 2.06
"LaSalle".................................................................Section 5.19
"LaSalle Master Lease Agreement"..........................................Section 5.19
"Leased Real Property".................................................Section 3.11(a)
"Leases"...............................................................Section 3.11(b)
"Letter of Credit"........................................................Section 5.11
"Licensee Indemnitor".....................................................Section 7.14
"Management"...........................................................Section 3.17(c)
"Mini-Basket"..........................................................Section 9.01(b)
"Newfoundland"............................................................Section 2.06
"Non-Compete Period"...................................................Section 5.10(a)
"OEMs".................................................................Section 5.10(a)
"Other Leases".........................................................Section 7.11(b)
"Permits"..............................................................Section 3.14(a)
"Personal Property Leases".............................................Section 3.11(b)
"Predecessor Company"..................................................Section 3.17(c)
"Preferred Shares......................................................Section 2.02(c)
"Preliminary Section 338 Schedule".....................................Section 7.05(l)
"Proceedings".............................................................Section 3.12
"Proposed Net Cash"....................................................Section 2.03(b)
"Proposed Net Working Capital".........................................Section 2.03(a)
"Proposed Settlement Amount".......................................Section 9.04(d)(ii)
"Real Property Leases".................................................Section 3.11(b)
"Related Party"...........................................................Section 3.23
"Release"..............................................................Section 3.17(e)
"Required Consents"....................................................Section 3.14(b)
"Required Contractual Consent".........................................Section 3.14(b)
"Required Governmental Approval".......................................Section 3.14(b)
"Scheduled Contracts"..................................................Section 3.13(a)
"Scheduled Leases".....................................................Section 7.09(a)
"Section 338(h)(10) Elections".........................................Section 7.05(k)
"Securities Act"..........................................................Section 4.09
"Seller"......................................................................Preamble
"Seller Indemnitees"...................................................Section 9.01(b)
"Seller Representatives"...............................................Section 5.04(a)
"Share Encumbrances"...................................................Section 3.01(a)
"Shares".....................................................................Recital B
"Slauson Litigation"......................................................Section 5.16
"Solvency Opinion".....................................................Section 8.02(i)
"Stock Cap"............................................................Section 9.01(a)
"Straddle Period"......................................................Section 7.05(b)
"Subsequent Material Contract".....................................Section 5.01(b)(iv)
"Target Employees".....................................................Section 6.03(a)
"Tax Arbitrator".......................................................Section 7.05(g)
"Transactions"............................................................Section 6.06
"Transition Period".......................................................Section 7.07
"Ultimate Amount"......................................................Section 9.04(d)
"Undisputed Item"......................................................Section 2.03(c)
"Unindemnified Amount".............................................Section 9.04(d)(iv)
"Unlimited Claim".................................................Section 9.01(b)(iii)
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"Unused Cap"...........................................................Section 9.04(d)
"Valuation Consultants"...................................................Section 6.06
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ARTICLE II
PURCHASE AND SALE
2.01 PURCHASE OF SHARES FROM SELLER. On the terms and subject to the
conditions set forth herein, at the Closing Seller shall sell, transfer, convey,
assign and deliver to Buyer, free and clear of all Share Encumbrances, and Buyer
shall purchase, acquire and accept from Seller, all the Shares. At the Closing,
Seller shall deliver to Buyer certificates evidencing the Shares duly endorsed
for transfer and such other instruments as may be reasonably requested by Buyer
to transfer full legal and beneficial ownership of the Shares to Buyer, free and
clear of all Share Encumbrances. Buyer shall pay the purchase price for the
Shares in accordance with the terms of Sections 2.02(b) and 2.02(c).
2.02 CLOSING.
(a) The closing (the "Closing") of the transactions contemplated
by this Agreement shall take place at the offices of Gibson, Dunn & Crutcher
LLP, 333 South Grand Avenue, Los Angeles, California, or such other location as
the parties may agree, on the first Friday following the first date on which the
last of the conditions to Closing set forth in Sections 8.01 and 8.02 have been
satisfied or waived by the party or parties entitled to waive the same or such
other date as to which Buyer and Seller may agree (the "Closing Date");
PROVIDED, HOWEVER, that, as provided in Section 10.01(d), Seller or Buyer may
terminate this Agreement if the Closing shall not have been consummated by the
Outside Date.
(b) At the Closing Buyer shall pay to Seller, in cash by wire
transfer of immediately available funds to a bank account or bank accounts
designated in writing by Seller, an aggregate amount equal to:
(i) Sixty Five Million Dollars ($65,000,000), plus;
(ii) the amount (if any) by which Estimated Net Working
Capital is greater than $77,246,000; plus
(iii) the amount (if any) by which Estimated Net Cash is
greater than $0; minus
(iv) the amount (if any) by which the Estimated Net Working
Capital is less than $77,246,000; minus
(v) the amount (if any) by which Estimated Net Cash is
less than $0.
(c) At the Closing Buyer shall issue and deliver to Seller
certificates representing shares (the "Preferred Shares") of Buyer's Series B
Preferred Stock having an aggregate stated value of Twelve Million Dollars
($12,000,000). The terms of the Series B Preferred Stock of Buyer shall be as
set forth in Exhibit B.
2.03 CALCULATION OF NET WORKING CAPITAL AND NET CASH.
(a) For purposes of determining the purchase price to be paid by
Buyer pursuant to Section 2.02(b), Seller shall deliver at the Closing a
certificate, executed by an officer of
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Seller, setting forth the amount of Net Working Capital as of the close of
business on the last day of the month next preceding the Closing Date (subject
to the reasonable approval of Buyer). Such estimate as of the latest month-end
prior to the Closing shall be the "Estimated Net Working Capital." As soon as
practicable but in no event more than one hundred twenty (120) days after the
Closing Date, Buyer shall cause to be prepared and delivered to Seller the
calculation of Net Working Capital as of the Closing Date Cutoff Time (the
"Proposed Net Working Capital"), together with all supporting documentation,
prepared in accordance with GAAP except for such adjustments as are required by
the terms of this Agreement or as to which the parties agree. The Proposed Net
Working Capital shall be binding upon the parties to this Agreement unless
Seller gives written notice of disagreement with any of the values or amounts
contained therein to Buyer within thirty (30) days after its receipt of such
calculation of Proposed Net Working Capital. Such notice of disagreement shall
specify in reasonable detail the nature and extent of such disagreement. If
Buyer and Seller agree upon the Proposed Net Working Capital or any adjustments
thereto within thirty (30) days after Seller's delivery of such notice, such
agreement shall be binding upon the parties to this Agreement. If Buyer and
Seller are unable to resolve any such disagreement within such period, the
disagreement shall be referred for final and binding determination to Arthur
Andersen, or, if such firm is not available, such other independent accounting
firm of national reputation selected by the reasonable mutual agreement of Buyer
and Seller. Such accounting firm (the "Accountant") shall resolve such
disagreement using the definition of Net Working Capital and the other terms set
forth in this Agreement, and shall restrict its efforts to the items in dispute
and the items impacting and impacted by the items in dispute. If the Accountant
determines that Net Working Capital as of the Closing Date Cutoff Time proposed
by Buyer is higher than the actual Net Working Capital as of the Closing Date
Cutoff Time, then for all purposes of this Agreement, Net Working Capital as of
the Closing Date Cutoff Time as determined by the Accountant shall be set to
equal Net Working Capital as of the Closing Date Cutoff Time proposed by Buyer.
If the Accountant determines that Net Working Capital as of the Closing Date
Cutoff Time proposed by Seller is lower than the actual Net Working Capital as
of the Closing Date Cutoff Time, then for all purposes of this Agreement, Net
Working Capital as of the Closing Date Cutoff Time as determined by the
Accountant shall be set to equal Net Working Capital as of the Closing Date
Cutoff Time proposed by Seller. The Net Working Capital as of the Closing Date
Cutoff Time, as finally determined in accordance with this Section 2.03, is
referred to herein as the "Final Net Working Capital," shall be final and
binding and enforceable in any court of competent jurisdiction and the
provisions of Section 11.11 shall have no application with respect to such
matter.
(b) For purposes of determining the purchase price to be paid by
Buyer pursuant to Section 2.02(b), Seller shall deliver at the Closing a
certificate, executed by an officer of Seller, setting forth the amount of Net
Cash as of the close of business on the last day of the month next preceding the
Closing Date (subject to the reasonable approval of Buyer). Such estimate as of
the latest month-end prior to the Closing shall be the "Estimated Net Cash." As
soon as practicable but in no event more than one hundred twenty (120) days
after the Closing Date, Buyer shall cause to be prepared and delivered to Seller
the calculation of Net Cash as of the Closing Date Cutoff Time (the "Proposed
Net Cash"), together with all supporting documentation, prepared in accordance
with GAAP except for such adjustments as are required by the terms of this
Agreement or as to which the parties agree. The Proposed Net Cash shall be
binding upon the parties to this Agreement unless Seller gives written notice of
disagreement with any of the values or amounts contained therein to Buyer within
thirty (30) days after its receipt of such calculation of Proposed Net Cash.
Such notice of disagreement shall specify in reasonable detail the nature and
extent of such disagreement. If Buyer and Seller agree upon the Proposed Net
Cash or any adjustments thereto within thirty (30) days after Seller's delivery
of such notice, such agreement shall be binding upon the parties to this
Agreement. If Buyer and Seller are unable to resolve any such disagreement
within such period, the disagreement shall be referred for final and binding
determination to the Accountant, which shall resolve such disagreement using the
definition of Net Cash set forth in this Agreement, and shall restrict its
efforts to the items in dispute and the items impacting and impacted by the
items in dispute. If the Accountant determines that Net Cash as of the Closing
Date Cutoff Time proposed by Buyer is higher than the actual Net Cash as of the
Closing Date Cutoff Time, then for all purposes of this Agreement, Net Cash as
of the Closing Date Cutoff Time as determined by the Accountant shall be set to
equal Net Cash as of the Closing Date Cutoff Time
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proposed by Buyer. If the Accountant determines that Net Cash as of the Closing
Date Cutoff Time proposed by Seller is lower than the actual Net Cash as of the
Closing Date Cutoff Time, then for all purposes of this Agreement, Net Cash as
of the Closing Date Cutoff Time as determined by the Accountant shall be set to
equal Net Cash as of the Closing Date Cutoff Time proposed by Seller. The Net
Cash as of the Closing Date Cutoff Time, as finally determined in accordance
with this Section 2.03, is referred to herein as the "Final Net Cash," shall be
final and binding and enforceable in any court of competent jurisdiction and the
provisions of Section 11.11 shall have no application with respect to such
matter. In the event of disagreements in respect of both Net Working Capital as
of the Closing Date Cutoff Time and Net Cash as of the Closing Date Cutoff Time,
such disagreements shall be resolved by the Accountant in a single binding
proceeding.
(c) For purposes of this Section 2.03, a complete physical
inventory (the "Closing Inventory") shall be conducted by Buyer immediately
following the Closing Date and Seller and its accountants shall have full access
to observe the conduct and completion of the Closing Inventory. Buyer shall use
its commercially reasonable efforts to cause the Closing Inventory to be
completed prior to the start of business on the Monday following the Closing
Date (which efforts shall include, without limitation, conducting the Closing
Inventory for a minimum of 16 hours per day with all necessary staff in place).
If the Closing Inventory is not completed at a particular location prior to the
start of business on such Monday, Buyer shall either (i) not open such location
for business until the Closing Inventory is completed at that location, or (ii)
take all reasonable actions necessary to assure that the conduct of business at
such location will not affect the results of the Closing Inventory at that
location, which actions will be subject to the approval of Seller, which
approval may not be unreasonably withheld. The Closing Inventory shall be
conducted in accordance with all customary inventory procedures including,
without limitation, the testing of all significant discrepancies between
physical count and perpetual records. For purposes of the calculation of Net
Working Capital, Inventory shall be valued at cost, using the first-in,
first-out method and at the same standard overhead and labor rates used in the
preparation of the 2000 Balance Sheet. No amounts will be capitalized for
warehousing and domestic freight costs, consistent with the Company's past
practices. Disagreements, if any, between Buyer and Seller with respect to the
Closing Inventory or the valuation thereof shall be resolved pursuant to the
procedures set forth in Section 2.03(a) with respect to Net Working Capital.
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(d) Each party shall bear the fees and expenses of its own
accountants in connection with the matters set forth in this Section 2.03.
The fees, costs and expenses of the Accountant in resolving disputes in
respect of Net Working Capital as of the Closing Date Cutoff Time and/or Net
Cash as of the Closing Date Cutoff Time shall be divided between Seller and
Buyer as follows: Buyer's proportion shall be equal to the fraction (N -
N(b))/(N(s) - N(b)), and Seller's proportion shall be equal to the fraction
(N(s) - N)/(N(s) -N(b)), where N(b) is the sum of Net Working Capital and Net
Cash, each as of the Closing Date Cutoff Time as proposed by Buyer, N(s) is
the sum of Net Working Capital and Net Cash, each as of the Closing Date
Cutoff Time as proposed by Seller and N is the sum of Net Working Capital and
Net Cash, each as of the Closing Date Cutoff Time as determined by the
Accountant. For purposes of the calculations of such proportions, if there is
no disagreement in respect of one of Net Working Capital or Net Cash (the
"Undisputed Item"), then the agreed number in respect of the Undisputed Item
shall be treated as the number proposed by Buyer, the number proposed by
Seller and the number determined by the Accountant in respect of the
Undisputed Item.
2.04 POST-CLOSING PURCHASE PRICE ADJUSTMENTS.
(a) If Final Net Working Capital is LESS than Estimated Net
Working Capital, then within ten (10) days after the determination of Final Net
Working Capital, Seller shall reimburse to Buyer an amount equal to such
shortfall (together with interest on such shortfall at the Applicable Rate from
the Closing Date until the date of such reimbursement) in cash in immediately
available funds by wire transfer to a bank account designated in writing by
Buyer prior to the due date thereof.
(b) If Final Net Working Capital is GREATER than Estimated Net
Working Capital, then within ten (10) days after the determination of Final Net
Working Capital, Buyer shall pay to Seller an amount equal to such excess
(together with interest on such excess at the Applicable Rate from the Closing
Date until the date of such reimbursement) in cash in immediately available
funds by wire transfer to a bank account designated in writing by Seller prior
to the due date thereof.
(c) If Final Net Cash is LESS than Estimated Net Cash, then
within ten (10) days after the determination of Final Net Cash, Seller shall pay
to Buyer an amount equal to such shortfall (together with interest on such
shortfall at the Applicable Rate from the Closing Date until the date of such
payment) in cash in immediately available funds by wire transfer to a bank
account designated in writing by Buyer prior to the due date thereof.
(d) If Final Net Cash is GREATER than Estimated Net Cash, then
within ten (10) days after the determination of Final Net Cash, Buyer shall pay
to Seller an amount equal to such excess (together with interest on such excess
at the Applicable Rate from the Closing Date until the date of such payment) in
cash in immediately available funds by wire transfer to a bank account
designated in writing by Seller prior to the due date thereof.
(e) Any payments made pursuant to this Section 2.04 will be
considered an adjustment of the purchase price for the Shares.
2.05 CLOSING DELIVERIES At the Closing:
(a) Seller and the Company shall deliver to Buyer
(i) Certificates representing the Shares;
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(ii) Stock powers duly executed in blank or duly executed
instruments of transfer, and any other documents necessary to transfer to Buyer
good title to the Shares;
(iii) Resignations of directors, officers and fiduciaries
as specified in Section 5.09;
(iv) An opinion of Gibson, Dunn & Crutcher LLP addressed
to Buyer in a form reasonably acceptable to Buyer;
(v) The Required Consents, in form and substance
reasonably satisfactory to Buyer;
(vi) Supply Agreement, executed on behalf of Seller, in a
form reasonably acceptable to the parties hereto, containing the terms set forth
in Exhibit C attached hereto;
(vii) Services Support Agreement, executed on behalf of
Seller, in a form reasonably acceptable to the parties hereto, containing the
terms set forth in Exhibit D attached hereto;
(viii) Release, by Seller, of the Company and the Company
Subsidiaries, under the Tax Sharing Agreement, in a form reasonably acceptable
to the parties hereto;
(ix) Release, by Aurora Capital Partners, L.P., of the
Company and the Company Subsidiaries, under the Management Services Agreement,
in a form reasonably acceptable to the parties hereto;
(x) Letter of credit contemplated by Section 5.11; and
(xi) All other documents, instruments and writings
required to be delivered by the Seller or the Company at or prior to the Closing
Date pursuant to this Agreement
(b) Buyer shall deliver to Seller
(i) Cash by wire transfer of immediately available funds
to a bank account or accounts designated in writing by Seller of the amount
determined in accordance with Section 2.02(b);
(ii) Certificates representing the Preferred Shares;
(iii) An opinion of Dechert, addressed to Seller, in a form
reasonably acceptable to Seller;
(iv) Supply Agreement, executed on behalf of Buyer, the
Company and the Company Subsidiaries, in a form reasonably acceptable to the
parties hereto, containing the terms set forth in Exhibit C attached hereto;
(v) Services Support Agreement, executed on behalf of
Buyer, the Company and the Company Subsidiaries, in a form reasonably acceptable
to the parties hereto, containing the terms set forth in Exhibit D attached
hereto;
(vi) Release, by Buyer, the Company and the Company
Subsidiaries, of Seller, under the Tax Sharing Agreement, in a form reasonably
acceptable to the parties hereto;
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(vii) Release, by Buyer, the Company and the Company
Subsidiaries, of Aurora Capital Partners, L.P., under the Management Services
Agreement, in a form reasonably acceptable to the parties hereto; and
(viii) All other documents, instruments and writings
required to be delivered by the Buyer at or prior to the Closing Date pursuant
to this Agreement.
2.06 PRE-CLOSING RESTRUCTURING. In order to satisfy the requirements
of Section 5.03 with respect to the Intercompany Indebtedness (including any
accrued but unpaid interest) between King-O-Matic Industries Limited, a Canadian
corporation ("King-O-Matic") and 10468 Newfoundland, Inc., a Canadian
corporation ("Newfoundland")(the "King-O-Matic Intercompany Note"), and
notwithstanding any other provision of this Agreement to the contrary, the
Seller shall, prior to the Closing, contribute cash to the Company in an amount
equal to the outstanding principal balance of, and all accrued but unpaid
interest on (together with any premium, penalty or other amounts required to
extinguish such King-O-Matic Intercompany Note), the King-O-Matic Intercompany
Note, followed immediately thereafter by the contribution of such cash by the
Company to King-O-Matic, and the tendering of such cash by King-O-Matic to
Newfoundland in complete satisfaction of the King-O-Matic Intercompany Note.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated herein, Seller represents and warrants
to Buyer as follows:
3.01 REPRESENTATIONS REGARDING THE SHARES.
(a) Seller has good and marketable title to the Shares free and
clear of any and all covenants, conditions, restrictions (other than
restrictions under federal or state securities laws), voting trust arrangements,
rights of first refusal, options, Liens and adverse claims or rights whatsoever
(collectively, "Share Encumbrances"), except as set forth on SCHEDULE 3.01; and
on the Closing Date, Seller will have, and will deliver to Buyer, good, valid
and marketable title to the Shares free and clear of any and all Share
Encumbrances (including without limitation those set forth on SCHEDULE 3.01).
(b) Seller has the full corporate right, power and authority to
enter into this Agreement, to consummate the transactions contemplated hereby
and to transfer, convey and sell the Shares to Buyer at the Closing. Upon
consummation of the purchase contemplated hereby, Buyer will acquire from Seller
good, valid and marketable title to the Shares, free and clear of all Share
Encumbrances except those created or permitted by Buyer and such restrictions as
may arise under applicable securities laws.
3.02 EXISTENCE AND POWER. The Company is a corporation duly organized
and validly existing and in good standing under the laws of the State of
Delaware. Seller has heretofore delivered to Buyer accurate and complete copies
of the Certificate of Incorporation and Bylaws of the Company. Each of the
Company and the Company Subsidiaries has all corporate power required to carry
on the Business as now conducted and to own and operate its assets as now owned
and operated. Each of the Company and the Company Subsidiaries is duly qualified
to do business as a foreign corporation in each jurisdiction where the character
of the property owned or leased by it or the nature of its activities makes such
qualification necessary to carry on its business as now conducted, except for
those jurisdictions where, in the aggregate, the failure to be so qualified does
not have a Material Adverse
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Effect. SCHEDULE 3.02, sets forth those states in which each of the Company and
the Company Subsidiaries is duly qualified to do business and in good standing.
3.03 AUTHORIZATION. The execution, delivery and performance by Seller
of this Agreement and the consummation thereby of the transactions contemplated
hereby are within Seller's powers and have been duly authorized by all necessary
corporate action on the part of Seller. This Agreement has been duly and validly
executed and delivered by Seller and constitutes the legal, valid and binding
agreement of Seller, enforceable against it in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally, limitations in
Applicable Law in respect of the geographic scope, outside of the United States
and Canada, of noncompetition agreements and subject to general principles of
equity.
3.04 NON-CONTRAVENTION. The execution, delivery and performance by
Seller of this Agreement and the consummation of the transactions contemplated
hereby do not and will not (a) contravene or conflict with the charter or bylaws
of Seller, the Company or any of the Company Subsidiaries, (b) assuming receipt
of the Required Consents, contravene or conflict with or constitute a violation
of any provision of any Applicable Law or judgment, decree or order of any
Governmental Authority binding upon or applicable to the Company, any of the
Company Subsidiaries, Seller, the Business or the Shares, (c) assuming receipt
of the Required Consents, constitute a default (or an event which might, with
the passage of time or the giving of notice, or both, constitute default) under,
violate or give rise to any right of termination, cancellation or acceleration
of, or to a loss of any benefit to which the Company or any Company Subsidiary
is entitled under, any Contract or any Permit or similar authorization relating
to the Company, any of the Company Subsidiaries, the Business or the Shares by
which the Company or any of the Company Subsidiaries or any of their respective
businesses may be bound, or (d) result in the creation or imposition of any Lien
on any assets of the Company or any of the Company Subsidiaries or any Share
Encumbrance, except, in the cases of clauses (b) and (c), events that do not,
individually or in the aggregate, have a Material Adverse Effect.
3.05 CONSENTS. The execution, delivery and performance by Seller of
this Agreement and the consummation of the transactions contemplated hereby
require no action by, consent or approval of, or filing with, any Governmental
Authority or any other Person other than (i) any actions, consents, approvals or
filings otherwise expressly referred to in this Agreement, set forth on SCHEDULE
3.14 or (ii) with respect to immaterial leases of personal property. To the
Knowledge of Seller, there are no facts relating to the identity or
circumstances of the Company or Seller that would prevent or materially delay
obtaining any of the Required Consents.
3.06 SUBSIDIARIES.
(a) SCHEDULE 3.06(a) sets forth a correct and complete list of
each Company Subsidiary and its jurisdiction of incorporation or other
formation. Each of the Company Subsidiaries is duly organized, validly existing
and in good standing (or comparable status if a non-U.S. person) under the laws
of its jurisdiction of incorporation or other formation. Seller has heretofore
delivered to Buyer accurate and complete copies of each Company Subsidiary's
charter and bylaws (or, in the case of any Company Subsidiary that is not a
corporation, comparable governing documents) as currently in full force and
effect.
(b) The authorized, issued and outstanding capital stock of each
Company Subsidiary are as set forth on SCHEDULE 3.06(b). The issued and
outstanding shares of capital stock of each Company Subsidiary are held of
record and beneficially by the persons and in the amounts with the corresponding
certificate numbers set forth on SCHEDULE 3.06(b) and are, except as set forth
in SCHEDULE 3.06(b), free and clear of all Share Encumbrances. All outstanding
shares of capital stock of each
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Company Subsidiary are duly authorized, validly issued, fully paid and
non-assessable and are not subject to preemptive rights (including rights of
first offer or similar rights).
(c) There are not outstanding (i) any options, warrants or other
rights to purchase from Seller, the Company, any of the Company Subsidiaries or
any of the other Affiliates of Seller any capital stock or other securities of
any of the Company Subsidiaries, (ii) any securities, notes or other
indebtedness convertible into or exchangeable for shares of such capital stock
or securities, (iii) any other commitments or rights of any kind for any of the
Company Subsidiaries to issue additional shares of capital stock, options,
warrants or other securities or (iv) any equity equivalent or other ownership
interests in any of the Company Subsidiaries or similar rights.
(d) There are no stockholder agreements, voting trusts or other
agreements or understandings to which Seller, the Company, any of the Company
Subsidiaries or any other Affiliate of Seller is a party or by which any of them
is bound relating to the voting or registration of any shares of capital stock
of any of the Company Subsidiaries. The Company and the Company Subsidiaries do
not, directly or indirectly, own any stock of, or any other interest in, any
other Person.
3.07 SUFFICIENCY OF AND TITLE TO ASSETS.
(a) Except as set forth in Schedule 3.07, each of the Company
and the Company Subsidiaries has title to, or the right to use, all material
assets, whether tangible or intangible, used in the operation of the Business.
(b) The assets to which the Company and the Company Subsidiaries
have title or the right to use, together with the assets set forth in Schedule
3.07, constitute all material assets necessary to operate the Business as a
going concern consistent with past practice.
3.08 CAPITAL STOCK. The authorized capital stock of the Company
consists solely of 1,000 shares of common stock, $0.01 par value, of which 1,000
shares are issued and outstanding on the date hereof. The Shares represent all
of the issued and outstanding shares of the Company's capital stock and are
owned beneficially and of record by Seller. All outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid and
non-assessable and are not subject to Share Encumbrances or preemptive rights
(including rights of first offer or similar rights) except as set forth on
SCHEDULE 3.08. There are not outstanding (a) any options, warrants or other
rights to purchase from Seller, the Company, any of the Company Subsidiaries or
any of the other Affiliates of Seller any capital stock or other securities of
the Company, (b) any securities, notes or other indebtedness convertible into or
exchangeable for shares of such capital stock or securities, (c) any other
commitments or rights of any kind for the Company to issue additional shares of
capital stock, options, warrants or other securities or (d) any equity
equivalent or other ownership interests in the Company or similar rights. There
are no stockholder agreements, voting trusts or other agreements or
understandings to which Seller, the Company, any of the Company Subsidiaries or
any other Affiliate of Seller is a party or by which any of them is bound
relating to the voting or registration of any shares of capital stock of the
Company.
3.09 FINANCIAL STATEMENTS. Attached hereto as Exhibit E are true and
complete copies of the unaudited consolidated balance sheet and related
unaudited consolidated statement of operations and retained earnings for the
Company and the Company Subsidiaries as of and for the fiscal year ended
December 31, 1999 and the six months ended June 30, 2000 (the "Financial
Statements"). The balance sheet as of June 30, 2000 is referred to herein as the
"2000 Balance Sheet." Each of the Financial Statements has been prepared in
accordance with the books and records of the Company and the Company
Subsidiaries in accordance with GAAP (except for the omission of certain
footnote disclosure required by GAAP and a statement of cash flows), and present
fairly, in all material respects, the financial
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condition, assets, liabilities and results of operations of the Company and the
Company Subsidiaries as of the date indicated or for the period indicated
(subject to normal year-end adjustments, in the case of the Financial Statements
as of and for the six months ended June 30, 2000, and to such omission of
footnotes and statement of cash flows).
3.10 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE 3.10
or, after the date hereof, as permitted by this Agreement (without regard to the
proviso to Section 8.01(a)), since the date of the 2000 Balance Sheet, the
Business has been conducted in the ordinary course, and there has not been:
(a) any event, occurrence, development or state of circumstances
or facts or change in the Company or any of the Company Subsidiaries affecting
the Company or any of the Company Subsidiaries that has had, either alone or
together with all such events, occurrences, developments, states of
circumstances or facts or changes, a Material Adverse Effect;
(b) other than in the ordinary course of business, (i) any
incurrence, assumption or guarantee of any Indebtedness for borrowed money by
the Company or any of the Company Subsidiaries, (ii) any incurrence of any
Liability relating to a documentary or standby letter of credit by the Company
or any of the Company Subsidiaries, (iii) any material change in any material
Liability, or (iv) any incurrence of any other material Liability by the Company
or any of the Company Subsidiaries;
(c) any creation, assumption or sufferance of the existence of
any Lien on any of the assets of the Company or any of the Company Subsidiaries,
other than Permitted Liens;
(d) any material Contract entered into, by the Company or any of
the Company Subsidiaries, or any waiver, amendment, termination or cancellation
of any material Contract by the Company or any of the Company Subsidiaries, or
any relinquishment (other than for fair value) of any material rights thereunder
by the Company or any of the Company Subsidiaries, or of any other material
right or debt owed to the Company or any of the Company Subsidiaries, other
than, in each such case, actions taken in the ordinary course of business;
(e) except for actions taken in the ordinary course of business
consistent with the past practice of the Company and the Company Subsidiaries or
that are not, in the aggregate, material, any (i) grant of any severance,
continuation or termination pay to any director, officer, stockholder or
employee of the Company or any of the Company Subsidiaries or any Associate of
any of the foregoing, (ii) entering into any employment, deferred compensation
or other similar agreement (or any amendment to any such existing agreement)
with any director, officer, stockholder or employee of the Company or any of the
Company Subsidiaries or any Associate of any of the foregoing, (iii) increase in
benefits payable or potentially payable under any severance, continuation or
termination pay policies or employment agreements with any director, officer,
stockholder or employee of the Company or any of the Company Subsidiaries or any
Associate of any of the foregoing, (iv) except as required by Applicable Law,
increase in compensation, bonus or other benefits payable or potentially payable
to directors, officers, stockholders or employees of the Company or any of the
Company Subsidiaries or any Associate of any of the foregoing or (v) except as
required by Applicable Law, change in the terms of any bonus, pension,
insurance, health or other Benefit Plan of the Company or any of the Company
Subsidiaries;
(f) any loan by the Company or any of the Company Subsidiaries
to, or any guarantee or assumption by the Company or any of the Company
Subsidiaries of any loan or obligation on behalf of, any director, officer or
employee of Seller or any of its Affiliates or to any Associate of any
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of the foregoing, except travel advances and relocation benefits or loans
occurring in the ordinary course of business;
(g) other than as required by GAAP, any material change by the
Company or any of the Company Subsidiaries in their respective accounting
principles, methods or practices or in the manner any of them keeps its books
and records;
(h) any payment, discharge or satisfaction of any material
Liabilities of the Company or any of the Company Subsidiaries, other than
payments, discharges or satisfactions, in the ordinary course of business, of
liabilities or obligations shown or reflected on the 2000 Balance Sheet or
incurred in the ordinary course of business since the date of the 2000 Balance
Sheet.
(i) any distribution or dividend of assets by the Company or any
of the Company Subsidiaries that is not wholly-owned by the Company and/or one
or more of the Company Subsidiaries, other than distributions or dividends
consisting of (i) the forgiveness of Intercompany Indebtedness owed to the
Company or any of the Company Subsidiaries by Seller or any of its subsidiaries
(except the Company and the Company Subsidiaries) or (ii) cash.
(j) any material damage, destruction, deterioration or loss,
whether or not covered by insurance, to assets with an aggregate book value of
$100,000 or greater;
(k) any making or authorization of capital expenditures in
excess of $100,000;
(l) any sale, transfer or disposition of any material assets of
the Company or any Company Subsidiary, except sales of inventory in the ordinary
course of business consistent with past practice;
(m) any material change or, to the Knowledge of Seller, any
threat of any material adverse change in any of its relations with, or any
termination or, to the Knowledge of Seller, threat of termination of, the
relationship between the Company or any of the Company Subsidiaries and the
National AAMCO Dealers Association or any important supplier or distributor of
the Company or any Company Subsidiary;
(n) any write-offs as uncollectible of any notes or accounts
receivable of the Company or any Company Subsidiary or write-downs of the value
of any assets by any Company or any Company Subsidiary, other than, in any such
case: (i) in immaterial amounts, (ii) in the ordinary course of business
consistent with past practice or (iii) as would not establish that the reserves
reflected on the 2000 Balance Sheet are inadequate pursuant to GAAP;
(o) except for actions that are not, in the aggregate, material,
any representation of Seller, the Company or any of the Company Subsidiaries to
any employee or former employee of the Company or any of the Company
Subsidiaries that Buyer, the Company or any of the Company Subsidiaries would
assume, continue to maintain or implement any Benefit Plan after the Closing
Date; or
(p) any material transaction, agreement or event outside the
ordinary course of the Company's or any Company Subsidiary's business.
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3.11 PROPERTIES; LEASES; TANGIBLE ASSETS.
(a) Neither the Company nor any of the Company Subsidiaries owns
any real property. Neither the Company nor any of the Company Subsidiaries has a
leasehold interest in any real property other than the real property identified
on SCHEDULE 3.11(a) (the "Leased Real Property"), which constitutes all of the
real property used in the Business. True, complete and correct copies of all
lease agreements and amendments thereto with respect to properties identified in
SCHEDULE 3.11(a) have been supplied to Buyer prior to the date hereof,
conclusive evidence of which shall be the lease agreements and amendments
thereto contained in the files of Dechert. Each of the Company and each of the
Company Subsidiaries has, and, upon consummation of the transactions
contemplated hereby, will continue to have, a good and valid leasehold interest
in the Leased Real Property being leased by it free and clear of all Liens and
Encumbrances except Permitted Liens, subject to obtaining the Required Consents
with respect to any specific parcel of Leased Real Property and the property
subject to the Personal Property Leases. Each of the Company and each of the
Company Subsidiaries has, and, upon consummation of the transactions
contemplated hereby, will continue to have, good, marketable and valid title to
its other tangible assets, free and clear of all Liens and Encumbrances, except
Permitted Liens. None of the assets of the Company or any Company Subsidiary is
owned jointly with any other Person, including any Affiliates of the Seller
(other than the Company or any Company Subsidiary).
(b) SCHEDULE 3.11(b) sets forth a true and complete list of (i)
all personal property leases or licenses (A) to which the Company or any of the
Company Subsidiaries is a party or by which the Company or any of the Company
Subsidiaries is bound and (B) that provide for annual payments by the Company or
any of the Company Subsidiaries in excess of $100,000 that cannot be terminated
by the Company or the relevant Company Subsidiary within 30 days without a
charge of $25,000 or more to the Company or any of the Company Subsidiaries (the
"Personal Property Leases") and (ii) all leases or licenses of Leased Real
Property that provide for annual payments by the Company or any of the Company
Subsidiaries in excess of $100,000 that cannot be terminated by the Company or
the relevant Company Subsidiary within 30 days without a charge of $25,000 or
more to the Company or any of the Company Subsidiaries (the "Real Property
Leases" and collectively with the Personal Property Leases, the "Leases"). With
respect to the Leases, except as set forth on SCHEDULE 3.11(b), there exist no
defaults by the Company or any of the Company Subsidiaries, or, to the Knowledge
of Seller, any default or threatened default by any lessor or third party
thereunder, that, in either such case, would, individually or collectively,
reasonably be expected to have a Material Adverse Effect. Assuming the Required
Consents are obtained, the consummation of the transactions contemplated hereby
will not result in a breach of, or give any Person the right to terminate, any
Lease to which the Company or any of the Company Subsidiaries is a party or by
which it is bound.
(c) Seller has not received notice of any pending zoning or
other land-use regulation proceedings or any proposed change in any Applicable
Laws that could reasonably be expected to adversely affect, in any material
respect, the use or operation of any Leased Real Property, nor has Seller
received notice of any special assessment proceedings affecting the Leased Real
Property, or applied for any change to the zoning or land use status of the
Leased Real Property.
3.12 LITIGATION. Except as disclosed on SCHEDULE 3.12, there are no
actions, suits, hearings, arbitrations, proceedings (public or private) or
governmental investigations that have been brought by or against any
Governmental Authority or any other Person (collectively, "Proceedings")
pending, of which the Company, any of the Company's Subsidiaries or Seller has
received formal or informal written notice or of which Seller has Knowledge, or,
to the Knowledge of Seller, threatened, (i) against or affecting the Company,
any of the Company Subsidiaries, any of their respective assets or properties or
the Shares, or (ii) that seek to enjoin or rescind the transactions contemplated
by this Agreement or otherwise prevent Seller from complying with the terms and
provisions of this Agreement.
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There are presently no outstanding judgments, decrees or orders of any court or
any governmental or administrative agency to which Seller or any Subsidiary of
Seller is a party or is bound, that could adversely affect the right, title or
interest of the Company or any Company Subsidiary to the Business, or the
performance of the obligations of Seller hereunder. Except as set forth on
SCHEDULE 3.12, neither Seller, the Company, the Company Subsidiary, nor any of
their respective current or former Affiliates have made any indemnification
claims or other claims for payment under any of the Asset Purchase Agreements
and Stock Purchase Agreements set forth on SCHEDULE 3.13 hereto.
3.13 CONTRACTS.
(a) SCHEDULE 3.13 sets forth a complete list of the following
contracts, commitments and obligations (whether written or oral) of the Company
or any of the Company Subsidiaries that have not terminated or expired in
accordance with their terms (collectively with the Leases, the "Scheduled
Contracts"):
(i) each Contract between the Company or any of the
Company Subsidiaries and (A) any supplier of services or products to the
Company, under which the remaining, unfulfilled dollar volume of required
purchases by the Company or any of the Company Subsidiaries exceeds $100,000 as
of the date hereof that cannot be terminated by the Company or the relevant
Company Subsidiary within 30 days without a charge of at least $25,000 or more
to the Company or any of the Company Subsidiaries, and (B) any Person, under
which the remaining, unfulfilled dollar volume of required sales by the Company
or any of the Company Subsidiaries exceeds $100,000 as of the date hereof that
cannot be terminated by the Company or the relevant Company Subsidiary within 30
days without a charge of at least $25,000 or more to the Company or any of the
Company Subsidiaries;
(ii) each other agreement or arrangement of the Company or
any of the Company Subsidiaries that (A) requires the payment or incurrence of
Liabilities or the rendering of services by the Company or any of the Company
Subsidiaries, subsequent to the date of this Agreement, valued at more than
$100,000 and (B) cannot be terminated by the Company or any of the Company
Subsidiaries within 30 days without a charge to the Company or any of the
Company Subsidiaries;
(iii) all Contracts relating to, and evidences of or
guarantees of, or providing security for, indebtedness for borrowed money;
(iv) all partnership, joint venture or other similar
Contracts, arrangements or agreements;
(v) to the extent that any of the following provide for
annual payments by the Company or any of the Company Subsidiaries in excess of
$100,000 and cannot be terminated by the Company within 30 days without a charge
to the Company or any of the Company Subsidiaries, all license, distribution,
commission, marketing, agent, franchise, technical assistance or similar
agreements relating to or providing for the marketing and/or sale of the
products or services to which the Company or any of the Company Subsidiaries is
a party or by which the Company or any of the Company Subsidiaries is otherwise
bound;
(vi) any employment, consulting, severance or management
services contract;
(vii) any agreement relating to the acquisition of any
business;
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(viii) any warranty, indemnity or guaranty issued by the
Company or any Company Subsidiary;
(ix) any contract or agreement restricting the right of
the Company or any Company Subsidiary to engage in any business activity or
compete with any business;
(x) any license agreements, other than those relating to
off-the-shelf, commercially available software;
(xi) any plan or agreement pursuant to which any amounts
may become payable (whether currently or in the future) to current or former
officers, directors and employees of the Company or any Company Subsidiary as a
result of or in connection with the transactions contemplated by this Agreement;
(xii) any agreement for the lease of real property (by
reference to location only); and
(xiii) all other material contracts, commitments and
obligations of the Company and the Company Subsidiaries that were entered into
other than in the ordinary course of the Business.
(b) Each Scheduled Contract and Subsequent Material Contract is
a legal, valid and binding obligation of the Company or the relevant Company
Subsidiary, as the case may be, and, to the Knowledge of Seller, each other
party thereto, enforceable (except to the extent such enforceability may be
limited by bankruptcy, insolvency, equity and creditors' rights generally)
against the Company or the relevant Company Subsidiary, as the case may be, and,
to the Knowledge of Seller, each such other party in accordance with its terms,
and neither the Company or any of the Company Subsidiaries, as the case may be,
nor, to the Knowledge of Seller, any other party thereto is in default or has
failed to perform in any material respect thereunder.
3.14 PERMITS; REQUIRED CONSENTS.
(a) The Company and the Company Subsidiaries have all approvals,
authorizations, certificates, consents, licenses, orders, permits,
qualifications or other similar authorizations of all Governmental Authorities
that are required by any Governmental Authority to allow the Company and the
Company Subsidiaries to operate the Business in substantially the same manner as
currently operated, except for such approvals, authorizations, certificates,
consents, licenses, orders, permits, qualifications or other similar
authorizations the failure of the Company or any of the Company Subsidiaries to
possess which would, individually or in the aggregate, not have a Material
Adverse Effect (the "Permits"). No notice, citation, summons or order has been
issued, no complaint has been filed, no penalty has been assessed and no
investigation or review is pending, of which the Company, any of the Company
Subsidiaries or Seller has received formal or informal written notice or of
which Seller has Knowledge, or, to the Knowledge of Seller, threatened by any
Governmental or other entity with respect to any alleged failure by Seller, the
Company or any Company Subsidiary to have any Permit required in connection with
the Business or otherwise applicable to the Business.
(b) SCHEDULE 3.14 lists (i) each governmental or other
registration, filing, application, notice, transfer, consent, approval, order,
qualification and waiver (each, a "Required Governmental Approval") required
under Applicable Law to be obtained by Seller, the Company or any of the Company
Subsidiaries by virtue of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby pursuant to any Permit or
otherwise, and (ii) each
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Scheduled Contract (and each Subsequent Material Contract, if any) with respect
to which the consent of the other party or parties thereto must be obtained by
Seller, the Company or any of the Company Subsidiaries by virtue of the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby to avoid the invalidity of such Contract, the termination
thereof, a breach or default thereunder or any other change or modification to
the terms thereof, (each, a "Required Contractual Consent" and collectively with
the Required Governmental Approvals, the "Required Consents"). Each Permit is
valid and in full force and effect in all material respects and, assuming the
related Required Consents have been obtained prior to the Closing Date, none of
the Permits will be terminated or become terminable or impaired in any material
respect as a result of the transactions contemplated hereby.
3.15 COMPLIANCE WITH APPLICABLE LAWS. Except as set forth on SCHEDULE
3.15, the Company and each Company Subsidiary is (and, to the Knowledge of
Seller, the Company and each Company Subsidiary has been) in compliance with all
material Applicable Law, and any order, writ, injunction or decree of any
Governmental Authority. Since December 31, 1998, no notice, citation, summons or
order has been issued and no penalty has been assessed, and there is no notice,
citation, summons or order currently outstanding, by any Governmental Authority
with respect to any alleged violation by Seller, the Company or any Company
Subsidiary, in connection with the conduct of the Business, of any law,
ordinance, rule, regulation or order of any Governmental Authority.
3.16 INSURANCE.
(a) SCHEDULE 3.16 sets forth a complete and correct list of all
insurance policies currently in force with respect to the Company or any of the
Company Subsidiaries (the "Insurance Policies"), including all "occurrence
based" liability policies regardless of the periods to which they relate.
SCHEDULE 3.16 sets forth for each Insurance Policy the type of coverage, the
name of the insureds, the insurer, the premium, the expiration date, the period
to which it relates, the deductibles and loss retention amounts and the amounts
of coverage. Except as set forth on SCHEDULE 3.16, no cancellation or material
amendment or material increase of premiums is pending or, to the Knowledge of
Seller, threatened with respect to any of the Insurance Policies.
(b) All Insurance Policies are in full force and effect and none
are scheduled to expire prior to the Closing. The coverages provided by the
Insurance Policies are reasonable, in both scope and amount, in light of the
risks attendant to the business in which the Company and Company Subsidiaries
are, or have been, engaged. Seller has paid-in-full all premiums due on the
Insurance Policies. There is no material default with respect to any provision
contained in any Insurance Policy, nor has there been any failure to give any
material notice or present any material claim under any Insurance Policy in a
timely fashion or in the manner or detail required by the Insurance Policies. To
Seller's Knowledge, there are no unreported outstanding claims under the
Insurance Policies. No notice of non-renewal with respect to, or disallowance of
any claim under, any Insurance Policy has been received by Seller, the Company
or any Company Subsidiary. With respect to the Business, neither Seller, the
Company nor any Company Subsidiary has been refused any insurance, nor has its
coverage been limited by any insurance carrier to which it has applied for
insurance or with which it has carried insurance during the last three years.
Except as set forth on SCHEDULE 3.16, all liability policies maintained by or
for the benefit of the Company and each Company Subsidiary (and the Seller, with
respect to the Business) during the last five years have been "occurrence"
policies and not "claims made" policies.
(c) No insurance company that issued any Insurance Policy, Board
of Fire Underwriters or similar body has issued to Seller, the Company or any
Company Subsidiary a recommendation or requirement for any material changes in
the conduct of the Business or any material
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repairs or other work to be done on or with respect to any assets of the Company
or any of the Company Subsidiaries.
3.17 ENVIRONMENTAL COMPLIANCE. Except to an extent that would not
reasonably be expected to result, individually or in the aggregate, in a
Material Adverse Effect:
(a) the Company and each Company Subsidiary holds and is in
compliance with all permits, certificates, licenses, approvals, registrations
and authorizations ("Environmental Permits") required under all applicable
environmental statutes, rules, regulations, ordinances and orders of any
governmental entity as interpreted or in effect as of the date hereof, including
those relating to Hazardous Substances (as defined below) and human health and
safety ("Environmental Laws") in connection with its business, and all of such
Environmental Permits are in full force and effect. SCHEDULE 3.17(a) lists the
Environmental Permits the failure of the Company or any of the Company
Subsidiaries to possess which would, individually or in the aggregate, have a
Material Adverse Effect;
(b) except as set forth on SCHEDULE 3.17(b), the Company and
each Company Subsidiary has complied with and is not in violation of
Environmental Laws;
(c) except as set forth on SCHEDULE 3.17(c), no written notice,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review, written request for
information, notice of claim, demand or potentially responsible party
notification is pending of which the Company, the Company Subsidiaries or Seller
has received formal or informal written notice or of which Seller has Knowledge,
or to Seller's Knowledge, threatened by any governmental or other entity: (i)
with respect to any alleged violation by the Company or any Company Subsidiary
of any Environmental Laws; (ii) with respect to any alleged failure by the
Company or any Company Subsidiary to have any Environmental Permit required in
connection with its business; or (iii) with respect to any Release, use,
possession, generation, treatment, storage, recycling, transportation or
disposal (collectively, "Management" or "Manage") of any hazardous or toxic
substance or waste, pollutant or contaminant including petroleum products and
radioactive materials ("Hazardous Substances") by or on behalf of the Company,
any Company Subsidiary or, to the Knowledge of the Company, any predecessor in
interest, PROVIDED, HOWEVER, that for the purposes of this Subsection
3.17(c)(iii), the term "to the Knowledge of the Company" shall mean the actual
knowledge of the General Counsel of Seller and the Director of Risk Management
of Seller, without inquiry by either such person;
(d) except as set forth on SCHEDULE 3.17(d), to Seller's
Knowledge, there are no underground storage tanks, active or abandoned, at any
property now or previously owned, operated or leased by the Company or any
Company Subsidiary which the Company or any Company Subsidiary is required to
investigate, retrofit, abate, remediate or remove under applicable Environmental
Laws;
(e) except as set forth on SCHEDULE 3.17(e), no Hazardous
Substance has been released, spilled, leaked, discharged, or disposed of,
pumped, poured, emptied, injected, leached, dumped or allowed to escape
("Released") by the Company or any Company Subsidiary or, to the Knowledge of
the Company, any predecessor in interest, or to Seller's Knowledge, by any other
person, at, on, about or under any property now or formerly owned, operated or
leased by the Company, any Company Subsidiary, or to the Knowledge of the
Company, any predecessor in interest, which Hazardous Substance requires
investigation, remediation or other response action under Environmental Laws,
PROVIDED, HOWEVER, that for the purposes of this Section 3.17(e), the term "to
the Knowledge of the Company" shall mean the actual knowledge of the General
Counsel of Seller and the Director of Risk Management of Seller, without inquiry
by either such person;
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(f) except as set forth on SCHEDULE 3.17(f) and heretofore made
available to Buyer, there have been no Phase I or Phase II assessments, facility
environmental compliance audits, or soil or groundwater sampling results or, to
the Seller's Knowledge, any polychlorinated biphenyl or asbestos sampling
results, in any such case prepared since 1994: (i) by or on behalf of the
Company or any Company Subsidiary; or (ii) in its possession or control
conducted by or on behalf of any other Person.
3.18 EMPLOYEE BENEFITS.
(a) SCHEDULE 3.18 sets forth all Benefit Plans applicable to
employees of the Company or any of the Company Subsidiaries. Seller has made
true and correct copies of all governing instruments and related material
agreements pertaining to such Benefit Plans available to Buyer.
(b) Except as set forth on SCHEDULE 3.18, neither the Company
nor any ERISA Affiliate of the Company sponsors or has within the last five
years sponsored, maintained, contributed to, or incurred an obligation to
contribute to, any Employee Pension Benefit Plan.
(c) Except as set forth on SCHEDULE 3.18, no individual shall
accrue or receive additional benefits, service or accelerated rights to payments
of benefits under any Benefit Plan, including the right to receive any parachute
payment, as defined in Section 280G of the Code, or become entitled to
severance, termination allowance or similar payments as a direct result of the
transactions contemplated by this Agreement.
(d) No Employee Benefit Plan has participated in, engaged in or
been a party to any material non-exempt Prohibited Transaction, and neither the
Company nor any ERISA Affiliates of the Company has had asserted against it any
claim for taxes under Chapter 43 of Subtitle D of the Code and Sections 5000 of
the Code, or for penalties under ERISA Section 502(c), (i) or (l), with respect
to any Employee Benefit Plan nor, to the Knowledge of Seller, is there a basis
for any such claim. No officer, director or employee of the Company has
committed a breach of any responsibility or obligation imposed upon fiduciaries
by Title I of ERISA with respect to any Employee Benefit Plan that would have a
Material Adverse Effect.
(e) Other than routine claims for benefits, there is no claim
pending or to the Knowledge of Seller threatened, involving any Benefit Plan by
any employee or former employee of the Company or any Company Subsidiary against
such Benefit Plan or the Company or any Company Subsidiary. There is no pending
or, to the Knowledge of Seller, threatened proceeding involving any Employee
Benefit Plan before the IRS, the United States Department of Labor or any other
Governmental Authority.
(f) Except as set forth on SCHEDULE 3.18, each Benefit Plan has
at all times prior hereto been maintained in all material respects, by its terms
and in operation, in accordance with ERISA and the Code, including, but not
limited to, all applicable reporting and disclosure requirements.
(g) With respect to any Group Health Plans maintained by the
Company or any of the Company Subsidiaries for the benefit of employees or
former employees of the Company or any Company Subsidiary, the Company or such
Company Subsidiary, as appropriate, has complied in all material respects with
the provisions of Part 6 of Title I of ERISA and Section 4980B of the Code.
Neither the Company nor any Company Subsidiary is obligated to provide health
care benefits of any kind to retired employees of the Company or any Company
Subsidiary pursuant to any Employee Benefit Plan, including, without limitation,
any Group Health Plan, or pursuant to any agreement or understanding except as
required by Applicable Law.
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(h) Neither the Company nor, to the Knowledge of Seller, any
ERISA Affiliate, has, at any time since December 31, 1993 (i) maintained or
contributed to any employee pension benefit plan subject to Title IV of ERISA or
Code section 412 or (ii) been required to contribute to, or incurred any
withdrawal liability within the meaning of ERISA section 4201, or contingent
withdrawal liability within the meaning of ERISA section 4204, to, any
multiemployer plan as defined in ERISA section 3(37).
(i) All contributions to, and payments from, the Benefit Plans
which may have been required to be made in accordance with the Benefit Plans
have been timely made. All contributions with respect to the period ending on
the Closing Date will have been paid or properly accrued and reflected on the
Balance Sheet. All payments under the Benefit Plans, except those to be made
from a trust qualified under section 401(a) of the Code, for any period ending
before the Closing Date that are not yet, but will be, required to be made are
properly accrued and reflected on the Balance Sheet or are disclosed on Schedule
3.18.
(j) Except as indicated on Schedule 3.18, all of the Benefit
Plans which are pension benefit plans have received determination letters from
the Internal Revenue Service ("IRS") to the effect that such plans are qualified
and exempt from federal income taxes under sections 401(a) and 501(a),
respectively, of the Code, or such Benefit Plans will be filed for a
determination letter within the remedial amendment period provided for under
section 401(b) of the Code, and no determination letter with respect to any
Benefit Plan has been revoked nor has the Company or any ERISA Affiliate
received notice of threatened revocation, nor has any Benefit Plan been amended,
or failed to be amended, since the date of its most recent determination letter
in any respect that would adversely affect its qualification or materially
increase its cost.
(k) Neither the Company nor any ERISA Affiliate has incurred or
is reasonably likely to incur any liability with respect to any plan or
arrangement that would be included within the definition of "Benefit Plan"
hereunder but for the fact that such plan or arrangement was terminated before
the date of this Agreement.
3.19 LABOR AND EMPLOYMENT MATTERS.
(a) No collective bargaining (or the foreign equivalent thereof)
exists that is binding on the Company or any of the Company Subsidiaries and,
except as described on SCHEDULE 3.19, since December 31, 1998 no petition has
been filed or proceedings instituted by an employee or group of employees with
any labor relations board seeking recognition of a bargaining representative.
SCHEDULE 3.19 describes any organizational effort currently being made or, to
the Knowledge of Seller, threatened by or on behalf of any labor union to
organize any employees of the Company or any of the Company Subsidiaries.
(b) Except as set forth on SCHEDULE 3.19, (i) there is no labor
strike, dispute, slow down or stoppage pending or, to the Knowledge of Seller,
threatened against or directly affecting the Business, (ii) no grievance or
arbitration proceeding arising out of or under any collective bargaining
agreement is pending; and (iii) the Company and the Company Subsidiaries have
not received any notice and Seller does not have Knowledge of any threatened
labor dispute, controversy or grievance or any other unfair labor practice
proceeding or breach of contract claim or action with respect to claims of, or
obligations to, any employee or group of employees of the Company or any of the
Company Subsidiaries.
(c) Except as set forth on SCHEDULE 3.19, since December 31,
1998 neither the Company nor or any of the Company Subsidiaries has received any
citation or other notification for the violation of occupational and health
safety laws or regulations.
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(d) All individuals who are performing or, since December 31,
1998, have performed services for the Company or any of the Company Subsidiaries
and are or were classified by the Company or any of the Company Subsidiaries as
"independent contractors" qualify for such classification under Section 530 of
the Revenue Act of 1978, as amended by Section 1706 of the Tax Reform Act of
1986, as applicable, except for such instances which are not, in the aggregate,
material.
3.20 INTELLECTUAL PROPERTY.
(a) SCHEDULE 3.20 sets forth a complete and correct list of each
patent, patent application and docketed invention, trademark, domain name, and
tradename registration or application, copyright registration or application for
copyright registration, every other material trademark, trade name, and
copyright, and each material license or licensing agreement for any of the
foregoing, relating to the Business or held by the Company or any of the Company
Subsidiaries or filed by or for the benefit of the Company or any of the Company
Subsidiaries (the "Intellectual Property Rights"). All of the patents, trademark
registrations, copyright registrations, and domain name registrations listed in
SCHEDULE 3.20 are held of record in the name of the Company or a Company
Subsidiary, and are not the subject of any cancellation or reexamination
proceeding or any other proceeding challenging their extent or validity. The
Company or a Company Subsidiary is the applicant of record in all patent
applications, and applications for trademark, copyright and domain name
registration listed on SCHEDULE 3.20, and no opposition, extension of time to
oppose, interference, rejection, or refusal to register has been received in
connection with any such application.
(b) Except as disclosed on SCHEDULE 3.20, neither the Company
nor any of the Company Subsidiaries has been a party to any Proceeding or made
or received any cease-and-desist demand or similar notice during the three years
preceding the date of this Agreement nor, to the Knowledge of Seller, is any
Proceeding threatened, that involved or may involve a claim of infringement by
any Person (including any Governmental Authority) of any Intellectual Property
Right or a claim that the Company or any of the Company Subsidiaries infringes
or has infringed any Person's intellectual property right. To the Knowledge of
Seller, and except as disclosed on SCHEDULE 3.20, no Intellectual Property Right
is subject to any outstanding order, judgment, decree, stipulation or agreement
materially restricting the use thereof by the Company or any of the Company
Subsidiaries. To the Knowledge of Seller, the use of the Intellectual Property
Rights does not conflict with, infringe upon, dilute, or violate, in any respect
that, individually or in the aggregate, would reasonably be likely to have a
Material Adverse Effect, any patent, patent license, patent application,
trademark, tradename, trade dress, trademark or tradename registration,
copyright, copyright registration, service mark, brand mark or brand name or any
pending application relating thereto, or any right of publicity, trade secret,
know-how, programs or processes, or any similar rights, of any Person.
(c) Except as set forth on SCHEDULE 3.20, the Company or one of
the Company Subsidiaries either owns the entire right, title and interest in, to
and under, or has acquired in connection with the acquisition of Equipment,
Inventory or software an express or implied license to use, any and all
inventions, processes, computer programs, know-how, formulae, trade secrets,
patents, chip designs, mask works, trademarks, tradenames, trade dress, domain
names, brand names, rights of publicity, and copyrights that are necessary for
the conduct of the Business in the manner that the Business has heretofore been
conducted, except where the failure to own or possess valid rights to use such
inventions, processes, computer programs, know-how, formulae, trade secrets,
patents, chip designs, mask works, trademarks, tradenames, trade dress, domain
names, brand names, rights of publicity, and copyrights (other than the
trademarks and tradenames set forth on SCHEDULE 3.20, which are to be retained
by Seller) would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
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3.21 ADVISORY FEES. Except for Aurora Management Partners LLC (whose
fees and expenses will be paid by Seller), there is no investment banker,
broker, finder or other intermediary or advisor that has been retained by or is
authorized to act on behalf of the Company, Seller, or any of the Company
Subsidiaries or any of their Affiliates who might be entitled to any fee,
commission or reimbursement of expenses from Buyer or any of its Affiliates or
any of their respective Associates upon consummation of the transactions
contemplated by this Agreement.
3.22 TAX MATTERS. Except as set forth on SCHEDULE 3.22:
(a) Each of Seller, the Company and the Company Subsidiaries has
filed all material Tax Returns required to have been filed by or to include the
Company and the Company Subsidiaries, and has paid or accrued all Taxes shown
thereon to be due to any taxing authority with respect to all taxable periods
ending on or prior to the Closing Date, or otherwise attributable to all periods
prior to the Closing Date; and all such Tax Returns are true, correct and
complete in all material respects. No claim has been made by any taxing
authority in a jurisdiction in which the Seller, the Company or any Company
Subsidiary does not file Tax Returns that the Company or any Company Subsidiary
is or may be subject to tax in that jurisdiction.
(b) None of Seller, the Company or any of the Company
Subsidiaries has received notice that the IRS or any other taxing authority has
asserted against the Seller (for any Tax for which the Company or any Company
Subsidiary could be held jointly and severally liable, pursuant to Treasury
Regulation Section 1.1502-6 (or similar provision of state, local or foreign
law)) the Company or any of the Company Subsidiaries any deficiency in Taxes or
claim for additional Taxes in connection with any tax period. Except for liens
arising from Taxes which are due but not yet payable, there are no liens for
Taxes on any of the assets of the Company or any of the Company Subsidiaries.
(c) Neither the Company nor any of the Company Subsidiaries is
a party to an agreement extending the time within which to file any Tax Return
or extending the statute of limitations for any period with respect to any Tax
to which the Company or any of the Company Subsidiaries may be subject.
(d) The Company or the appropriate Company Subsidiary has
withheld or collected and paid over all Taxes required to have been withheld or
collected and paid over in connection with amounts or paid or owing to, or
received from, any employee, independent contractor, creditor, stockholder, or
other Person.
(e) Neither the Company nor any of the Company Subsidiaries has
been included in any consolidated, combined or unitary Tax Return (other than
Tax Returns for the affiliated group of which Seller or an Affiliate of Seller
is the common parent) provided for under the laws of the United States, any
state or locality with respect to Taxes for any taxable period for which the
statute of limitations has not expired. Neither the Company nor any of the
Company Subsidiaries has any liability for the Taxes of any other Person under
Treasury Regulation Section 1502-6 (or any similar provision of state, local or
foreign law) as a transferee or successor by contract or otherwise.
(f) Neither the Company nor any of the Company Subsidiaries has
made any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could require it to make any
payments, that are not deductible under Section 280G of the Code.
(g) None of the assets of the Company or any of the Company
Subsidiaries constitutes tax-exempt bond financed property or tax-exempt use
property, with the meaning of Section
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168 of the Code. Neither the Company nor any of the Company Subsidiaries is a
party to any "safe harbor lease" that is subject to the provisions of Section
168(f)(8) of the Internal Revenue Code as in effect prior to the Tax Reform Act
of 1986.
(h) The Company and each Company Subsidiary have obtained all
exemption certificates for sales tax purposes or other appropriate documentation
that meets the requirements of the applicable Tax authorities for establishing
exemption from sales Tax, except for failures to obtain such certificates or
other documentation that in the aggregate would not cause a Material Adverse
Effect.
3.23 RELATED PARTY TRANSACTIONS. Except as disclosed in SCHEDULE 3.23,
no Related Party (as defined below), as of the date hereof: (i) has any
contractual or other claim, express or implied, or of any kind whatsoever
against the Business, the Company, or any Company Subsidiary; (ii) has any
interest in the Business, the Company or any Company Subsidiary; or (iii) is or
has been during the last twelve month engaged in any other transaction with the
Business, the Company or any Company Subsidiary. As used herein, "Related Party"
means Seller, any Subsidiary of Seller (other than the Company or any Company
Subsidiary), any officer or director of Seller or any Subsidiary of Seller, or
any Affiliate or Associate of any the foregoing.
3.24 DISCLOSURE. No representation or warranty by Seller in this
Agreement (including, without limitation, in the exhibits and schedules hereto)
contains any untrue statement of a material fact, or omits to state a material
fact necessary to make the statements or facts contained herein not misleading.
3.25 EXCLUSIVITY OF REPRESENTATIONS AND WARRANTIES; NO IMPLIED
WARRANTIES. IT IS UNDERSTOOD AND AGREED THAT SELLER IS NOT MAKING, HAS NOT MADE,
AND EXPRESSLY DISCLAIMS THE MAKING OF, ANY REPRESENTATION OR WARRANTY OF ANY
KIND, EXPRESS OR IMPLIED, TO BUYER EXCEPT FOR THOSE SPECIFICALLY PROVIDED IN
THIS AGREEMENT. EXCEPT FOR THE MATTERS THAT ARE EXPRESSLY COVERED BY SUCH
REPRESENTATIONS AND WARRANTIES, AND UPON WHICH BUYER INTENDS TO RELY, BUYER IS
RELYING ON ITS OWN INVESTIGATION AND ANALYSIS IN ENTERING INTO THIS AGREEMENT
AND CONSUMMATING THE TRANSACTIONS CONTEMPLATED HEREBY. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, AND EXCEPT FOR THE EXPRESS REPRESENTATIONS AND
WARRANTIES MADE BY SELLER IN THIS AGREEMENT, SELLER MAKES NO REPRESENTATION OR
WARRANTY, AND EXPRESSLY DISCLAIMS THE MAKING OF ANY REPRESENTATION OR WARRANTY,
TO BUYER REGARDING: (A) ANY PROJECTIONS, ESTIMATES OR BUDGETS HERETOFORE
DELIVERED OR MADE AVAILABLE TO BUYER OF FUTURE REVENUES, EXPENSES OR
EXPENDITURES, FUTURE RESULTS OF OPERATIONS (OR ANY COMPONENT THEREOF), FUTURE
CASH FLOWS OR FUTURE FINANCIAL CONDITION (OR ANY COMPONENT THEREOF) OF THE
COMPANY OR ANY OF THE COMPANY SUBSIDIARIES OR THE FUTURE BUSINESS OPERATIONS OF
THE COMPANY OR ANY OF THE COMPANY SUBSIDIARIES; (B) ANY OTHER INFORMATION OR
DOCUMENTS MADE AVAILABLE TO BUYER OR ITS COUNSEL, ACCOUNTANTS OR ADVISORS WITH
RESPECT TO THE COMPANY, ANY OF THE COMPANY SUBSIDIARIES OR THE BUSINESS OR
OPERATIONS OF THE COMPANY OR ANY OF THE COMPANY SUBSIDIARIES; (C) THE
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY EQUIPMENT OR
INVENTORY OF THE COMPANY OR ANY OF THE COMPANY SUBSIDIARIES OR (D) THE VALUE OF
THE BUSINESS, OPERATIONS OR ASSETS OF THE COMPANY OR ANY OF THE COMPANY
SUBSIDIARIES.
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3.26 SCHEDULES. Matters disclosed on one or more schedules attached
hereto and made a part hereof shall be deemed to have been incorporated on each
and every relevant schedule where the relevance of such incorporation is
reasonably apparent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated herein, Buyer hereby represents and
warrants to Seller that:
4.01 ORGANIZATION AND EXISTENCE. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all corporate power and authority to enter into this
Agreement and consummate the transactions contemplated hereby. Buyer has
conducted no business and has engaged in no activities, other than entering into
this Agreement and activities necessary to the consummation of the transactions
contemplated hereby.
4.02 CORPORATE AUTHORIZATION. The execution, delivery and performance
by Buyer of this Agreement and the consummation by Buyer of the transactions
contemplated hereby are within the corporate powers of Buyer and have been duly
authorized by all necessary corporate action. This Agreement constitutes a
legal, valid and binding agreement of Buyer, enforceable against Buyer in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and subject to general principles of equity.
4.03 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Buyer of this Agreement require no action by, consent or approval
of, or filing with, any Governmental Authority other than as set forth on
SCHEDULE 4.03.
4.04 NON-CONTRAVENTION. The execution, delivery and performance by
Buyer of this Agreement does not (a) contravene or conflict with the Certificate
of Incorporation or Bylaws of Buyer, or (b) assuming compliance with the matters
referred to in Section 4.03, contravene or conflict with or constitute a
violation of any provision of any Applicable Law binding upon or applicable to
Buyer.
4.05 ADVISORY FEES. Except for The Riverside Partners LLC (whose fees
and expenses will be paid by Buyer), there is no investment banker, broker,
finder or other intermediary or advisor that has been retained by or is
authorized to act on behalf of Buyer who might be entitled to any fee,
commission or reimbursement of expenses from the Company or Seller or any of its
Affiliates upon consummation of the transactions contemplated by this Agreement.
4.06 LITIGATION. There is no Proceeding pending against, or to the
Knowledge of Buyer, threatened against or affecting, Buyer before any court or
arbitrators or any governmental body, agency or official that in any matter
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement.
4.07 INVESTIGATION. Buyer has conducted inspections of the properties
and financial and other records of the Company and the Company Subsidiaries and
other due diligence with respect to the Company, the Company Subsidiaries and
the Business. Buyer has had an opportunity to ask questions of the officers of
the Company, the Company Subsidiaries and Seller relating to the management and
financial affairs of the Company and the Company Subsidiaries and to examine
books and records of the Company and the Company Subsidiaries. Buyer has
received a lease agreement with respect to each property identified in SCHEDULE
3.11(a) and
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Buyer has not received a lease agreement or any amendment to a lease agreement
with respect to any property that is not identified in SCHEDULE 3.11(a).
4.08 FINANCING. Buyer has delivered to Seller a true, complete and
correct signed commitment letter (the "Equity Commitment Letter") from 2000
Riverside Capital Appreciation Fund, L.P., a Delaware limited partnership (the
"Fund"), dated as of the date hereof, pursuant to which the Fund has agreed,
subject to the terms and conditions set forth therein, to make or cause to be
made equity investments in an aggregate amount of Fifteen Million Dollars
($15,000,000) in connection with the acquisition of the Shares contemplated
hereby. The Equity Commitment Letter is in full force and effect as of the date
hereof and will be until the earlier to occur of the Closing or the Outside
Date. Buyer has delivered to Seller a true, complete and correct copy of a term
sheet, presented by one or more financial institutions to Buyer or one or more
of its Affiliates in connection with a proposed credit facility to be available
to finance $62,500,000 in accordance with the terms thereof.
4.09 INVESTMENT REPRESENTATIONS. Buyer is acquiring the Shares for
investment solely for its own account and not with a view to, or for resale in
connection with, any distribution thereof and is aware that Seller is relying
upon the bona fide nature of Buyer's investment intent as expressed herein.
Buyer further understands that the Shares to be acquired have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and have not been qualified under applicable state securities laws and that any
subsequent disposition thereof must be registered under the Securities Act and
qualified under applicable state securities laws or be exempt from such
registration and qualification. Buyer is aware that no market may exist for the
resale of the Shares.
ARTICLE V
COVENANTS OF SELLER
5.01 CONDUCT OF THE BUSINESS; DISTRIBUTIONS. From the date hereof
until the Closing Date, Seller shall cause the Company and the Company
Subsidiaries to conduct the Business in the ordinary course and substantially in
the same manner as it has prior to the date of this Agreement and agrees, other
than in the ordinary course of business, not to enter into any material
agreements or take any other material actions without the prior written consent
of Buyer, which shall not unreasonably be delayed or withheld. From the date
hereof until the Closing Date, Seller shall cause the Company and the Company
Subsidiaries to use commercially reasonable efforts to preserve intact the
Business and the business organizations and relationships and goodwill of the
Company and the Company Subsidiaries with third parties and keep available the
services of the present officers, employees, agents and other personnel of the
Company and the Company Subsidiaries. Without limiting the generality of the
foregoing and except as otherwise expressly provided in this Agreement, from the
date hereof until the Closing Date:
(a) Seller will cause the Company and the Company Subsidiaries
to:
(i) (A) maintain the material assets of the Company and
the Company Subsidiaries in the ordinary course of business consistent with past
practice in operating order and condition, reasonable wear and tear excepted,
(B) promptly repair, restore or replace any material assets of the Company and
the Company Subsidiaries in the ordinary course of business consistent with past
practice, (C) upon any damage, destruction or loss to any of the material assets
of the Company or any of the Company Subsidiaries, apply any and all insurance
proceeds received with respect thereto to the prompt repair, replacement and
restoration thereof to the condition of the material assets of the Company or
such Company Subsidiary, as the case may be, before such event or set such
proceeds aside
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for application by the Company or such Company Subsidiary, as the case may be
after the Closing, (D) use its commercially reasonable efforts to obtain, prior
to the Closing Date, all Required Consents, and (E) take all actions reasonably
necessary to be in compliance with, and to maintain the effectiveness of, all
Permits;
(ii) use commercially reasonable efforts to comply with
Applicable Laws in all material respects; and
(iii) promptly notify Buyer in writing of (A) any action,
event, condition or circumstance, or group of actions, events, conditions or
circumstances, that results in, or could reasonably be expected to result in, a
Material Adverse Effect, (B) the commencement of any Proceeding by or against
the Company or any Company Subsidiary, or the Company or Seller becoming aware
of any action, suit, proceeding, notice of violation, subpoena, government audit
or disallowance that could reasonably be expected to result in a Material
Adverse Effect, and (C) the occurrence of any material breach by the Company or
Seller of any representation or warranty, or any covenant or agreement,
contained in this Agreement.
(b) without Buyer's prior consent (which shall not unreasonably
be delayed or withheld) or as otherwise required or permitted by this Agreement,
Seller shall not permit the Company or any Company Subsidiary to, do any of the
following or agree to do any of the following:
(i) purchase or otherwise acquire material assets from
any other Person other than in the ordinary course of business;
(ii) sell, assign, lease, license, transfer or otherwise
dispose of, or mortgage, pledge or encumber (other than with Permitted Liens),
any of the material assets of the Company or any of the Company Subsidiaries,
including Leased Real Property, except in the ordinary course of business;
(iii) enter into any agreement or arrangement that requires
or allows payment, acceleration of payment or incurrence of material Liabilities
or the rendering of material services by the Company or any of the Company
Subsidiaries, in any such case outside the ordinary course of business;
(iv) amend or modify in any material respect or terminate
any Scheduled Contract or any other Contract entered into by the Company or any
of the Company Subsidiaries after the date hereof which, if in existence on the
date hereof, would be required to be set forth in the SCHEDULE 3.13 as a
Scheduled Contract (each, a "Subsequent Material Contract");
(v) make or commit to make any capital expenditure, or
group of related capital expenditures, in excess of $500,000 in the aggregate,
other than capital expenditures expressly required under any Scheduled Contract;
(vi) enter into any Subsequent Material Contract;
(vii) (A) create, incur, assume, or guarantee any
indebtedness for borrowed money, other than in the ordinary course of business,
or (B) incur any Liability relating to a documentary or standby letter of
credit, other than in the ordinary course of business;
(viii) (A) increase the rate or terms of compensation
payable or to become payable to its employees except in the ordinary course of
business, (B) pay or agree to pay any
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pension, retirement allowance or other employee benefit not provided for by any
Employee Plan or Benefit Arrangement set forth in the schedules hereto, (C)
commit itself to any additional pension, profit sharing, bonus, incentive,
deferred compensation, stock purchase, stock option, stock appreciation right,
group insurance, severance pay, continuation pay, termination pay, retirement or
other employee benefit plan, agreement or arrangement, or increase the rate or
terms of any Employee Plan or Benefit Arrangement; PROVIDED, HOWEVER, that the
Company and Seller may amend any Benefit Plan to fully vest employees and former
employees of the Company in their accrued benefits under such Benefit Plan or to
increase benefits made available to all eligible employees of Seller, or (D)
enter into any employment agreement with or for the benefit of any Person, other
than in the ordinary course of business;
(x) make any distribution or dividend of assets by the
Company or any of the Company Subsidiaries that is not wholly-owned by the
Company and/or one or more of the Company Subsidiaries, other than distributions
or dividends consisting of (A) the forgiveness of Intercompany Indebtedness owed
to the Company or any of the Company Subsidiaries by Seller or any of its
subsidiaries or (B) cash;
(xi) issue or sell or grant any (A) shares of capital
stock of the Company or any of the Company Subsidiaries, (B) options, warrants
or other rights to purchase from the Company or any of the Company Subsidiaries
any shares of its capital stock, (C) securities convertible into or exchangeable
for shares of its capital stock or (D) other commitments of any kind for the
issuance or sale of additional shares of capital stock or options, warrants or
other securities of the Company or any of the Company Subsidiaries; or
(xii) enter into, terminate, amend or modify any lease for
Leased Real Property, except for an amendment that solely terminates a guaranty
of such lease by Seller or any Subsidiary of Seller (other than the Company or
any Subsidiary of the Company) and except for the terminations set forth in
Schedule 3.10.
5.02 ACCESS TO INFORMATION. Subject to compliance with Applicable
Laws, from the date hereof until the Closing Date, Seller will, and will cause
the Company and the Company Subsidiaries to: (a) promptly give Buyer and its
counsel, financial advisors, auditors and other authorized representatives
reasonable access to the offices, properties, books and records relating to the
Company, the Company Subsidiaries or the Business upon reasonable prior notice,
including access to perform environmental investigations prior to Closing
(including "Phase I" and "Phase II" environmental assessments and compliance
audits) as the Buyer reasonably deems necessary; (b) use commercially reasonable
efforts to cause the relevant employees of the Company and the Company
Subsidiaries to complete and sign an environmental questionnaire, to be supplied
by Buyer, promptly, completely and accurately, which completed questionnaires
shall be reviewed by Seller's General Counsel or his appropriate designee; (c)
promptly supply information in their possession or control reasonably requested
by Buyer, in each such case with respect to properties presently or formerly
owned or leased to or by the Company or any Company Subsidiaries; (d) promptly
furnish to Buyer and its counsel, financial advisors, auditors and other
authorized representatives such other information in the possession or control
of Seller, the Company or any Subsidiary of the Company relating to the Company,
the Company Subsidiaries or the Business as Buyer may reasonably request; and
(e) instruct the directors, officers, employees, counsel, auditors and financial
advisors of the Company, the Company Subsidiaries and Seller to cooperate with
Buyer and its counsel, financial advisors, auditors and other authorized
representatives in their investigation of the Company, the Company Subsidiaries
and the Business.
5.03 CAPITAL CONTRIBUTION OF CERTAIN INDEBTEDNESS. Prior to
consummation of the Closing, Seller shall contribute or cause to be contributed
to the Company the net balance of Intercompany Indebtedness then owed by the
Company and the Company Subsidiaries to Seller or any of
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its subsidiaries (other than the Company and the Company Subsidiaries), and
Intercompany Indebtedness will cease to be outstanding.
5.04 CONFIDENTIALITY.
(a) The Company and Seller will, and will cause their respective
Affiliates, directors, officers, employees, counsel, financial advisors,
accountants, agents and representatives (collectively, "Seller Representatives")
to, treat any data and information obtained with respect to Buyer or any of its
Affiliates from any representative, officer, director, or employee of Buyer, or
from any books or records of Buyer in connection with this Agreement,
confidentially and with commercially reasonable care and discretion, and will
not disclose any such information to any other third parties; PROVIDED, HOWEVER,
that the foregoing shall not apply to: (i) information in the public domain or
that becomes public through disclosure by any party other than the Company,
Seller or their Affiliates or representatives, so long as such other party is
not in breach of a confidentiality obligation; (ii) information available to the
Company or Seller on a non-confidential basis prior to its disclosure pursuant
to this Agreement; (iii) information that is required to be disclosed by
Applicable Law; or (iv) any disclosure of such information in litigation (under
appropriate seal of court) or arbitration (under appropriate seal of
confidentiality) between the parties hereto in the course of such litigation or
arbitration.
(b) In the event that the Closing fails to take place and this
Agreement is terminated, the Company and Seller, upon the written request of
Buyer, will, and will cause the Seller Representatives to, promptly deliver to
Buyer any and all documents or other materials furnished by Buyer or any of its
Affiliates to the Company or Seller in connection with this Agreement without
retaining any copy thereof. In the event of such request, all other documents,
whether analyses, compilations or studies, that contain or otherwise reflect the
information furnished by Buyer to the Company or Seller shall be destroyed by
the Company and Seller, redacted to remove such information or shall be turned
over to Buyer, and the Company and Seller shall confirm to Buyer in writing that
all such materials have been turned over, redacted or destroyed. No failure or
delay by Buyer in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any right,
power or privilege hereunder.
(c) Seller acknowledges that after the Closing, Buyer, the
Company and the Company Subsidiaries could be irreparably damaged if Seller's or
any of its Subsidiaries' confidential knowledge of the operations of the Company
or any Company Subsidiary were disclosed to or utilized on behalf of any person,
firm, corporation or other business entity other than Buyer or its Affiliates,
and Seller covenants and agrees that it will not and its Subsidiaries will not
following the Closing, without the prior written consent of Buyer, disclose (or
permit to be disclosed) or use in any such way any such confidential
information, unless (i) compelled to disclose such confidential information by
judicial or administrative process or, in the opinion of its counsel, by other
requirements of law, or (ii) such confidential information is or becomes
generally available to the public through no fault of Seller.
(d) The parties hereto recognize and agree that in the event of
a breach of this Section 5.04, money damages would not be an adequate remedy to
Buyer or its Affiliates for such breach and, even if money damages were
adequate, it would be impossible to ascertain or measure with any degree of
accuracy the damages sustained therefrom. Accordingly, if there should be a
breach or threatened breach of this Section 5.04, Buyer and its Affiliates shall
be entitled to an injunction restraining the Company and Seller from any breach
without showing or proving actual damage sustained by Buyer or its Affiliates,
as the case may be. Nothing in the preceding sentence shall limit or otherwise
affect any remedies that Buyer and its Affiliates may otherwise have under
Applicable Law.
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5.05 ESTOPPEL CERTIFICATES; LESSOR WAIVERS. Between the date hereof
and the Closing Date, Seller shall use its, and shall cause the Company and any
Company Subsidiary to use their, commercially reasonable efforts to have
delivered to Buyer at or prior to the Closing estoppel certificates and lessor
waivers (such estoppel certificates and waivers not to be conditioned on any
increased rental, other payment, reduced term, or other change of lease terms
other than the replacement of guaranties by Seller with guaranties by
Aceomatic-Recon Holdings Corporation ("Holdings") on substantially similar terms
and conditions), in a form reasonably acceptable to Buyer and its lenders (the
"Estoppel Certificates"), from each lessor requested by Buyer's lenders.
5.06 REQUIRED CONSENTS. Seller shall use its, and shall cause the
Company and the Company Subsidiaries to use their, commercially reasonable
efforts to obtain, on or prior to the Closing Date, all Required Consents,
including those set forth on SCHEDULE 5.06 hereto.
5.07 EMPLOYMENT AGREEMENT. The severance obligations provided for in
that certain employment agreement, dated as of March 27, 2000, by and between
the Company and Frank A. Papa, including any special actual or contingent
severance or payment obligations in the event of a change of control, will be
obligations of Seller, unless Mr. Papa remains employed by the Company or any
Affiliate thereof (whether as an employee, consultant, independent contractor or
otherwise) for more than forty five (45) days after the Closing Date, in which
event, such obligations will be obligations of the Company.
5.08 EXCLUSIVITY. Neither Seller nor any of its affiliates, agents or
representatives will, directly or indirectly, encourage, initiate or solicit
offers for, furnish information regarding or engage in any negotiations,
meetings or other communications with any third party concerning, or enter into
any agreements with respect to, any acquisition of the Company or any Company
Subsidiary or any of the businesses of the Company or any Company Subsidiary, by
any party other than Buyer prior to termination of this Agreement.
5.09 RESIGNATIONS. At the Closing, Seller shall cause the Company and
each Company Subsidiary to deliver written resignations of their respective
directors and officers set forth on SCHEDULE 5.09 and of the trustees, plan
administrators and fiduciaries of their respective Benefit Plans, except
trustees of the 401(k) plan for the benefit of the employees of the Company's
All Trans division, which is located in Portland, Oregon. Seller will also
deliver to Buyer evidence satisfactory to Buyer, in its sole discretion, of the
revocation of any powers of attorney or any authorization of any person to draw
on the bank accounts of the Company and any Company Subsidiary.
5.10 NONCOMPETITION.
(a) During the period beginning on the Closing Date and ending
on the fifth anniversary of the Closing Date (the "Non-Compete Period") Seller
shall not, and will cause its Subsidiaries not to, sell anywhere in the world
(and Seller shall not contest such geographic scope in any litigation,
arbitration or dispute between Seller and/or its Subsidiaries and Buyer or any
of its Affiliates) (i) transmission parts and components for automobiles and
light trucks directly to customers in the Independent Aftermarket (i.e.,
customers other than vehicle original equipment manufacturers ("OEMs") and their
dealers) or (ii) complete transmissions for automobiles and light trucks
directly to transmission repair specialists in the Independent Aftermarket;
provided, however, that it shall not be considered a violation of this Section
5.10(a) if, during the Non-Compete Period, (x) Seller or any of its Subsidiaries
acquires, by any means, a company (or all or substantially all of the assets of
a company) with respect to which less than twenty percent (20%) of its net sales
are generated by activities described in clauses (i) and (ii) above, and such
activities have completely ceased within one year after such acquisition, or (y)
Seller or any of its Subsidiaries sells transmission parts and components in the
ordinary course of
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providing reverse logistics services for its OEM customers. As used herein,
reverse logistics means the process in which automotive parts and components are
sent by an OEM and/or its dealers to Seller or one of its Subsidiaries, which
then does any of the following with such parts and components: (a) distributes
them to other OEM dealers; (b) sells them, by auction or another method required
by the OEM, to remanufacturers, rebuilders, wholesale distributors, jobbers,
core brokers or end users; (c) sells them for scrap; or (d) destroys them.
(b) During the Non-Compete Period, Seller shall not, and shall
cause its Subsidiaries not to, directly or indirectly, solicit or induce, or
attempt to solicit or induce, any employee of the Company or of any Company
Subsidiary to leave the employ of the Company or a Company Subsidiary, as
applicable, for any reason whatsoever nor shall they offer or provide employment
(whether such employment is for Seller, any Subsidiary or any other business or
enterprise), either on a full-time basis or part-time or consulting basis, to
any person who then currently is, or who within six months immediately prior
thereto was an employee of the Company or any Company Subsidiary; PROVIDED,
HOWEVER, that this Section 5.10(b) shall not apply to Frank Papa from and after
the time he ceases to be an employee of the Company if he ceases to be an
employee of the Company within 45 days after the Closing Date.
(c) Seller shall not contest, and shall cause its Subsidiaries
not to contest, that Buyer's, the Company's and each Company Subsidiary's
remedies at law for any breach or threat of breach by Seller or any of its
Affiliates of the provisions of this Section 5.10 will be inadequate, and that
Buyer, the Company and each Company Subsidiary shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of Section 5.10
and to enforce specifically such terms and provisions, in addition to any other
remedy to which Buyer, the Company and each Company Subsidiary may be entitled
at law or equity. The restrictive covenants contained in Section 5.10 are
covenants independent of any other provision of this Agreement or any other
agreement between the parties hereunder and the existence of any claim which
Seller or its Subsidiaries may allege against Buyer, the Company or any Company
Subsidiary under any other provision of the Agreement or any other agreement
will not prevent the enforcement of these covenants.
(d) If any of the provisions contained in this Section 5.10
shall for any reason be held to be excessively broad as to duration, scope,
activity or subject, then such provision shall be construed by limiting and
reducing it, so as to be valid and enforceable to the extent compatible with the
applicable law or the determination by a court of competent jurisdiction.
5.11 LETTER OF CREDIT; ESCROW AGREEMENT. At the Closing, Seller shall
deliver to the escrow agent (the "Escrow Agent"), pursuant to an escrow
agreement (the "Escrow Agreement") in the form attached hereto as Exhibit F with
such other terms and conditions as shall be required by the Escrow Agent, a
letter of credit, in form and substance reasonably acceptable to Buyer, in the
amount of Two Million Five Hundred Thousand Dollars ($2,500,000) issued by the
Bank of America, The Chase Manhattan Bank or another commercial bank reasonably
acceptable to Buyer (the "Letter of Credit"), which shall provide for draws
solely pursuant to written instructions from the Escrow Agent pursuant to
Section 4 of the Escrow Agreement or the final order of a court of competent
jurisdiction.
5.12 DISCHARGE OF INDEBTEDNESS. Seller shall cause all Indebtedness of
the Company and the Company Subsidiaries to be paid, performed, defeased or
discharged on or prior to the Closing Date, such that the Company and the
Company Subsidiaries shall have no Indebtedness as of the Closing.
5.13 CANCELLATION OF INTERCOMPANY ACCOUNTS, LIABILITIES AND
AGREEMENTS. Seller and the Company shall cause the cancellation and/or payment
in full of all intercompany accounts, liabilities and agreements between the
Company or any Company Subsidiary, on the one hand, and the
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Seller or any Subsidiary of Seller (other than the Company or any Company
Subsidiary), on the other hand (collectively, the "Intercompany Accounts");
PROVIDED, HOWEVER, that this Section 5.13 shall not prohibit the transactions
contemplated by this Agreement.
5.14 SELF-INSURED LIABILITIES. From and after the Closing, with
respect to any Damages incurred prior to Closing relating to the Company or any
Company Subsidiary of a nature as to which insurance is generally available but
as to which Seller, the Company or any Company Subsidiary is self-insured
(including, without limitation, claims with respect to damage to or by
automobiles), Seller will be responsible for maintaining such coverage with
respect to such claim (and, making payments with respect to the self-insured
portion of such claim, if, as and when such payments are due) in substantially
the same manner as maintained by Seller, the Company or the Company Subsidiaries
prior to Closing.
5.15 CERTAIN CONTINUING OBLIGATIONS. From and after the Closing Date,
Seller retains and/or assumes all liabilities and obligations relating to or
arising from the items set forth on SCHEDULE 3.12 (including, in the case of
SLAUSON TRANSMISSION PARTS V. AFTERMARKET TECHNOLOGY CORP., ET AL. (identified
in Part A(1) of SCHEDULE 3.12), any other Proceeding to the extent that it
arises out of the same or substantially similar facts and relates to the same or
substantially similar claims as those in SLAUSON TRANSMISSION PARTS V.
AFTERMARKET TECHNOLOGY CORP., ET AL. (collectively, the "Slauson Litigation"));
PROVIDED, HOWEVER, that (i) Seller shall not bear any liability or obligation in
respect of stolen cash set forth in Part C of SCHEDULE 3.12, (ii) liabilities
and obligations of Seller, if any, with respect to matters set forth in Part F
of SCHEDULE 3.12 shall be governed by Article IX and not by this Section 5.15,
(iii) liabilities and obligations of Seller, if any, with respect to the matter
set forth in Part A(4) of Schedule 3.12 shall be controlled by Section 7.13 and
not by this Section 5.15, (iv) with respect to the matter set forth in Part H(2)
of SCHEDULE 3.12, Seller shall only be liable with respect to liabilities and
obligations relating to or arising from actions or omissions prior to the
Closing Date and (v) Seller's retention and/or assumption of liabilities and
obligations relating to or arising from the Slauson Litigation shall not affect
Seller's rights under Section 6.06. Seller shall continue to defend the Slauson
Litigation after the Closing with respect to claims made against the Company and
the Company Subsidiaries; Seller shall not have the right to terminate its
defense of such litigation pursuant to Section 9.04(f). Seller shall indemnify
and hold harmless Buyer and the Company from any Damages relating to the
settlement or verdict costs of Patrick and/or Diane Townes (other than the
defense fees, costs and expenses of Patrick and/or Diane Townes) in TRANSTAR
INDUSTRIES, INC. V. PATRICK TOWNES, ET AL. (U.S. District Court for the Northern
District of Alabama, Southern District), except to the extent the obligation to
pay such settlement or verdict costs exists (or is alleged to exist by Patrick
and/or Diane Townes) as a result of an agreement or commitment made by Buyer or
the Company after the Closing Date.
5.16 ADDITIONAL KNOWLEDGE. On or before September 5, 2000 Seller shall
deliver a copy of this Agreement and the Schedules hereto to Tom Conroy, Tom
DeMille, Gordon King, Steven Parrish, Roger Schepman and Corby Wilemon for their
review and, on or before September 8, 2000, Seller shall disclose in writing to
Buyer whether, to the actual knowledge of such persons, any of the
representations or warranties contained in Article III are not true in all
material respects.
5.17 MEMPHIS BRANCH RELOCATION. Seller shall indemnify and hold
harmless Buyer and the Company from any Damages incurred by either of them to
the extent arising out of (i) the failure of Great Neck Saws to honor the letter
agreement referred to in Item I(10) on SCHEDULE 3.13 or (ii) the failure of any
of the conditions set forth in Section 3 of the Termination Agreement referred
to in Item I(9) on Schedule 3.13.
5.18 LASALLE MASTER LEASE AGREEMENT. Between the date hereof and the
Closing Date, Seller shall use its commercially reasonable efforts to obtain the
consent of LaSalle National Leasing Corporation and its successors and assigns
("LaSalle") to (i) amendments to that certain Master
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Lease Agreement, dated as of July 29, 1999 among LaSalle National Leasing
Corporation, its successors and assigns and Aaron's Automotive Products, Inc.
and other Subsidiaries of Seller (the "LaSalle Master Lease Agreement"; the
LaSalle Master Lease Agreement, as so amended, is the "Amended LaSalle Master
Lease Agreement") and (ii) entry into a new, stand-alone master lease agreement,
on substantially similar terms and conditions to those contained in the LaSalle
Master Lease Agreement, among LaSalle, its successors and assigns and the
Company and the Company Subsidiaries (the "Company Master Lease Agreement"),
that will have the effect that: (w) leases of personal property by the Company
or any of the Company Subsidiaries that, prior to the Closing, had been governed
by the LaSalle Master Lease Agreement, shall instead be governed after the
Closing by the Company Master Lease Agreement; (x) no new leases of assets and
no extensions of existing leases of assets shall be permitted under the Company
Master Lease Agreement for so long as Seller retains any liability or obligation
as guarantor thereof, (y) any action or omission by Seller or any of its
Subsidiaries after the Closing Date (including, without limitation, the breach
by Seller or any of its Subsidiaries of the Amended LaSalle Master Lease
Agreement) shall have no effect on, and shall cause no Damages or additional
liabilities or obligations to be suffered by or imposed upon, the Company or any
of the Company Subsidiaries; and (z) any action or omission by the Company or
any of the Company Subsidiaries after the Closing Date (including, without
limitation, the breach by the Company or any of the Company Subsidiaries of the
Company Master Lease Agreement) shall have no effect on, and shall cause no
Damages or additional liabilities or obligations to be suffered by or imposed
upon, Seller or any of its Subsidiaries; PROVIDED, HOWEVER, that neither Seller
nor any of its Affiliates shall be required to (A) pay money or other
consideration, or (B) agree to the inclusion of any provisions of the Amended
LaSalle Master Lease Agreement or the Company Master Lease Agreement (other than
those consistent with the LaSalle Master Lease Agreement (excluding its
cross-default-type provisions with respect to the Company or any of the Company
Subsidiaries) or having the effects set forth in the above clauses (x), (y) and
(z)), in order to obtain the consent of LaSalle to the entry into the Amended
LaSalle Master Lease Agreement or the Company Master Lease Agreement.
5.19 ASSIGNMENT OF USER SEATS. On or prior to the Closing Date, Seller
shall assign to the Company, subject to the underlying license agreement, all of
Seller's right, title and interest in and to 100 Lotus Notes user seats, as
described in Item E(3) of SCHEDULE 3.20.
5.20 MANDATORY PREPAYMENT AND DELIVERY IN PLEDGE. Seller will comply
with the terms of the Consent and will take all actions in its control necessary
to satisfy all the conditions set forth in the Consent.
ARTICLE VI
COVENANTS OF BUYER
6.01 CONFIDENTIALITY.
(a) Buyer will, and will cause its Affiliates, directors,
officers, employees, counsel, financial advisors, accountants, actual or
prospective lenders, agents and representatives (collectively, the "Buyer
Representatives") to, treat any data and information obtained with respect to
the Company, any Company Subsidiary or Seller from any representative, officer,
director or employee of the Company or Seller, or from any books or records of
the Company, any Company Subsidiary or Seller in connection with this Agreement,
confidentially and with commercially reasonable care and discretion, and will
not disclose any such information to any other third parties; PROVIDED, HOWEVER,
that the foregoing shall not apply to: (i) information in the public domain or
that becomes public through disclosure by any party other than Buyer or its
Affiliates or representatives, so long as such other party is not in breach of a
confidentiality obligation; (ii) information available to Buyer or its
Affiliates or representatives on a non-confidential basis prior to its
disclosure pursuant to this Agreement, (iii) information that is required to be
disclosed by Applicable Law; (iii) any disclosure of such
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information in litigation (under appropriate seal of court) or arbitration
(under appropriate seal of confidentiality) between the parties hereto in the
course of such litigation or arbitration; or (iv) any information that is
disclosed by Buyer after the Closing shall have occurred; PROVIDED, HOWEVER,
that in the event the Closing has occurred, this Section 6.01(a) shall cease to
be effective with respect to any data and information obtained with respect to
the Company and the Company Subsidiaries.
(b) In the event that the Closing fails to take place and this
Agreement is terminated, Buyer, upon the written request of the Company, will,
and will cause the Buyer Representatives to, promptly deliver to the Company any
and all documents or other materials furnished by the Company, any Company
Subsidiary or Seller to Buyer in connection with this Agreement without
retaining any copy thereof. In event of such request, all other documents,
whether analyses, compilations or studies, that contain or otherwise reflect the
information furnished by the Company, any Company Subsidiary or Seller to Buyer
shall be destroyed by Buyer, redacted to remove such information or shall be
turned over to the Company, and Buyer shall confirm to the Company and Seller in
writing that all such materials have been turned over, redacted or destroyed. No
failure or delay by the Company and Seller in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any right, power or privilege hereunder.
(c) The parties hereto recognize and agree that in the event of
a breach of this Section 6.01, money damages would not be an adequate remedy to
the Company and Seller for such breach and, even if money damages were adequate,
it would be impossible to ascertain or measure with any degree of accuracy the
damages sustained by the Company and Seller therefrom. Accordingly, if there
should be a breach or threatened breach of this Section 6.01, the Company and
Seller shall be entitled to an injunction restraining Buyer from any breach
without showing or proving actual damage sustained by the Company and Seller.
Nothing in the preceding sentence shall limit or otherwise affect any remedies
that the Company and Seller may otherwise have under Applicable Law.
6.02 ACCESS TO INFORMATION; BOARD OBSERVER.
(a) Subject to compliance with Applicable Laws, from the Closing
Date until December 31, 2006, Buyer and the Company will, and Buyer will cause
the Company to, promptly: (a) furnish to Seller and its counsel, financial
advisors, auditors and other authorized representatives such information
relating to the Company, any Company Subsidiary or the Business as Seller may
reasonably request in connection with the calculation of Net Working Capital and
Net Cash pursuant to Section 2.03 (including, without limitation, complete
access to all books and records of the Company and the Company Subsidiaries that
are in any way relevant to the calculation of Net Working Capital or Net Cash
and all work papers used by Buyer and its representatives in calculating
Proposed Net Working Capital or Proposed Net Cash; provided, with respect to
such work papers, that Seller executes such documents and takes such actions as
shall be requested by Buyer's firm of certified public accountants), preparation
of Tax Returns, litigation or other Proceedings, or similar matters involving
the operations of the Company and the Company Subsidiaries on or prior to the
Closing Date and (b) instruct the directors, officers, employees, counsel,
auditors and financial advisors of the Company, the Company Subsidiaries and
Buyer to cooperate in all reasonable respects with Seller and its counsel,
financial advisors, auditors and other authorized representatives in connection
with the calculation of Net Working Capital and Net Cash pursuant to Section
2.03, preparation of Tax Returns and in connection with litigation or other
Proceedings, or similar matters involving the operations of the Company and the
Company Subsidiaries on or prior to the Closing Date. After the Closing Date, in
the event that the Company or any Company Subsidiary intends to destroy any
documents that contain or otherwise reflect information in connection with the
Business for any period prior to the Closing Date, the Company will provide
written notice to Seller of such intention to destroy such documents and provide
Seller with the opportunity to request that
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such documents instead be delivered to Seller. Any information or documents
provided to Seller pursuant to this Section 6.02 shall be held by Seller
pursuant to Section 5.04 and shall be destroyed, redacted to remove such
information or returned to Buyer promptly upon the conclusion of their use by
the Seller for the purposes herein specified and Seller shall reimburse the
Buyer, the Company or any applicable Company Subsidiary for the reasonable
expenses incurred by any employees or representatives of Buyer, the Company or
any applicable Company Subsidiary in connection with complying with this Section
6.02(a); PROVIDED, HOWEVER, that expenses incurred in connection with (i) the
calculation of Net Working Capital or Net Cash shall be paid only by the Company
(without right of reimbursement from Seller) and (ii) the preparation of Tax
Returns for any Straddle Period shall be paid by Seller and the Company to the
proportionate extent (based on relative numbers of months) such Straddle Period
includes periods before and after the Closing Date, respectively.
(b) For so long as Seller owns shares of Buyer's Series B
Preferred Stock, Seller shall be entitled to designate an observer who shall be
entitled: (i) to attend (but not vote at) all meetings of Buyer's and the
Company's Boards of Directors and any respective committees thereof; (ii) to
receive all materials and information provided to members of Buyer's or the
Company's Boards of Directors or any respective committees thereof concurrently
with the provision of such materials and information to such directors; (iii) to
have the same rights (and remedies) to examine Buyer's and the Company's
respective stock ledgers, lists of stockholders and books and records as are
possessed by a director of Buyer or the Company pursuant to Section 220(d) of
the Delaware General Corporation Law (or similar statute, if Buyer or the
Company ceases to be a corporation organized under the laws of the State of
Delaware).
6.03 EMPLOYEE BENEFITS.
(a) Following the Closing, Buyer shall, and Buyer shall cause
the Company and the Company Subsidiaries to, honor all unused vacation, holiday,
sickness, personal days and other benefits accrued by the employees of the
Company and the Company Subsidiaries (including those on leave of absence and
disability (the "Affected Employees") under the policies and practices of the
Company and the Company Subsidiaries to the extent that liability for those
benefits does not exceed $1,226,000. With respect to the welfare benefits
provided to any Affected Employees of the Company or any of the Company
Subsidiaries under any of Buyer's plans, Buyer shall cause the Company and any
Company Subsidiaries to (i) waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Affected Employees under such plan (except to the
extent that such conditions, exclusions or waiting periods would apply under the
then existing plans of the Company or the relevant Company Subsidiaries absent
any change in such welfare plan coverage) and (ii) provide each Affected
Employee with credit for any co-payments and deductibles paid prior to any such
change in coverage in satisfying any applicable deductible or out-of-pocket
requirements under such new or changed plan. Buyer shall provide each Affected
Employee with credit for all service with the Company and its ERISA Affiliates
for purposes of eligibility and vesting under each employee benefit plan,
policy, program or arrangement of Buyer, the Company or any Company Subsidiary
in which such Affected Employee is eligible to participate, except to the extent
that it would result in a duplication of benefits with respect to the same
period of services.
(b) Seller shall take all actions necessary to cause, effective
as of the Closing Date, the account balances of the Affected Employees in the
Aftermarket Technology Corp. Retirement Savings Plan (the "ATC Savings Plan") to
be fully vested and nonforfeitable. As soon as practicable following the
Closing, Seller shall cause, pursuant to Section 414(l) of the Code, the
transfer of (i) the account balances of the Affected Employees including
outstanding loans of such persons and (ii) assets having a value equal to said
account balances to a tax exempt trust of a profit-sharing plan maintained by
Buyer which is qualified under Section 401(a) of the Code and which includes a
cash or deferred
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arrangement which qualifies under Section 401(k) of the Code (the "Buyer's
401(k) Plan") and Buyer shall cause the trustee(s) of such trust to accept such
transfer (the "401(k) Transfer"). The assets transferred shall consist of cash
and promissory notes evidencing outstanding loans from the ATC Savings Plan to
the Affected Employees. Buyer shall, prior to the Closing, notify the Company in
writing of the identity of Buyer's 401(k) Plan. From and after the 401(k)
Transfer, Buyer shall assume any and all responsibility and liability for the
maintenance and administration of the account balances of the Affected Employees
under the ATC Savings Plan and Seller shall have no further obligations with
respect thereto.
(c) Prior to November 1, 2000, neither the Buyer, nor the
Company, nor any Company Subsidiary shall reduce the level of benefits provided
by or terminate any Benefit Plan maintained by the Company for the employees of
its All Trans Parts division as listed on Schedule 3.18, including but not
limited to the All Trans Parts Inc. 401(k) Plan.
(d) Seller shall be responsible for any claims incurred by the
Affected Employees and their dependents under Seller's welfare benefit plans on
or before the Closing Date (notwithstanding that such claims are filed or
reported on or after the Closing Date) in accordance with the terms of such
plan. The parties agree that for purposes of this Section 6.03(d), a claim is
deemed incurred when the services that are the subject of such claim are
performed or rendered. Any expense, liability, or benefit with respect to claims
incurred by the Affected Employees or their covered dependents after the Closing
Date shall be the responsibility of Buyer.
(e) From and after the Closing Date, Buyer shall provide and be
fully responsible for the continuation coverage required by Section 4980b of the
Code and Sections 601 through 608 of ERISA for all Affected Employees and their
qualified beneficiaries.
6.04 SOLVENCY OPINION. Buyer shall promptly retain a nationally
recognized firm of valuation consultants (the "Valuation Consultants"), and
shall promptly provide to the Valuation Consultants all information in Buyer's
possession or control requested by the Valuation Consultants with the goal of
enabling the Valuation Consultants to be in a position to deliver its written
opinion to Seller on the Closing Date, in form and substance reasonably
satisfactory to Seller, as to whether, immediately after and giving effect to
the consummation of the transactions contemplated hereby (including, without
limitation, the financing of the transactions contemplated hereby) (the
"Transactions"), Buyer and its Subsidiaries on a consolidated basis are solvent.
Such written opinion will value the Company as a going-concern (including
goodwill), on a pro forma basis, immediately after and giving effect to the
Transactions and the associated indebtedness. Seller shall within five days of
written request from Buyer reimburse Buyer for all fees and expenses of the
Valuation Consultants.
6.05 ENVIRONMENTAL REPORTS. Buyer shall deliver to Seller copies of
any final reports generated by or on behalf of Buyer through the environmental
investigations described in clause (a) of Section 5.02, except those prepared by
Buyer's counsel; PROVIDED, HOWEVER, that in the case that any reports are not
finalized, the most recent draft thereof shall be delivered to Seller on or
before the Closing Date.
ARTICLE VII
COVENANTS OF ALL PARTIES
7.01 FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, each party will use all commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable under Applicable Law or otherwise to consummate the
transactions contemplated by this Agreement, including, without limitation,
commercially reasonable
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efforts to cause all conditions of Closing to be satisfied. Buyer, the Company
and Seller agree to execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be
reasonably necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by this Agreement. Without limiting
the generality of Section 11.07, the parties understand and agree that any
provisions that were included in any prior drafts of this Agreement but that are
not included in this Agreement, as executed, shall not be deemed, in any way, to
suggest or support any interpretation or construction that the subject matter of
any such omitted provision is or should be excluded from the obligations set
forth in this Section 7.01.
7.02 CERTAIN FILINGS. The parties hereto shall cooperate with one
another in determining whether any action by or in respect of, or filing with,
any Governmental Authority is required or reasonably appropriate, or any action,
consent, approval or waiver from any party to any Contract is required or
reasonably appropriate, in connection with the consummation of the transactions
contemplated by this Agreement. Subject to the terms and conditions of this
Agreement, in taking such actions or making any such filings, the parties hereto
shall promptly furnish information required in connection therewith and seek
timely to obtain any such actions, consents, approvals or waivers. Without
limiting the foregoing, the parties hereto shall each promptly complete and file
all reports and forms, and respond to all requests or further requests for
additional information, if any, as may be required or authorized under the HSR
Act and the rules of the Federal Trade Commission thereunder. Notwithstanding
the foregoing, nothing contained in this Agreement will require or obligate
Buyer or its Affiliates (i) to initiate, pursue or defend any litigation (or
threatened litigation) with respect to the antitrust laws of the United States
to which the Antitrust Division of the Justice Department, the Federal Trade
Commission or the attorney general of any state is a party; (ii) to agree or
otherwise become subject to any material limitations on (A) the right of Buyer
or its Affiliates effectively to control or operate the Company or the Company
Subsidiaries or the business or operations of Buyer, any Affiliate of Buyer, the
Company or any of the Company Subsidiaries, (B) the right of Buyer or its
Affiliates to acquire or hold the Company, the Company Subsidiaries or their
respective businesses, or (C) the right of Buyer to exercise full rights of
ownership of the business or all or any material portion of the assets of the
Company or the Company Subsidiaries; or (iii) to agree or otherwise be required
to sell or otherwise dispose of, hold separate (through the establishment of a
trust or otherwise), or divest itself of all or any material portion of the
business, assets or operations of Buyer, any Affiliate of Buyer, the Company or
any Company Subsidiary. In addition, notwithstanding the foregoing, nothing
contained in this Agreement will require or obligate Seller or its Affiliates to
initiate, pursue or defend any litigation (or threatened litigation) with
respect to the antitrust laws of the United States to which the Antitrust
Division of the Justice Department, the Federal Trade Commission or the attorney
general of any of the fifty states is a party.
7.03 PUBLIC ANNOUNCEMENTS. Up to and including the Closing Date, the
parties agree that they will not make any disclosure with respect to this
Agreement or the transactions contemplated hereby or cause to be publicized in
any manner whatsoever by way of interviews, responses to questions or inquiries,
press releases or otherwise any aspect of this Agreement or the transactions
contemplated hereby without prior written notice to and approval of the other
parties hereto (which such approval shall not unreasonably be withheld), unless
such party reasonably concludes that such release of information is required by
Applicable Law or NASDAQ regulations, and the parties hereto cannot reach
agreement upon a mutually acceptable form of release. Notwithstanding the
foregoing, the parties hereto may, on a confidential basis, advise their
respective agents, accountants, attorneys and financing sources with respect to
the contents of this Agreement and the transactions contemplated hereby.
7.04 ADMINISTRATION OF ACCOUNTS. All payments, reimbursements and
other property received by Seller after the Closing Date from any third party in
the name of or otherwise belonging to the Company or any Company Subsidiary
shall be held by Seller in trust for the benefit of the Company
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or the relevant Company Subsidiary, as the case may be, and, promptly upon
receipt by Seller of any such payment or reimbursement, Seller shall pay, or
cause to be paid, over to the Company or the relevant Company Subsidiary, as the
case may be, the amount of such payment or reimbursement. From and after the
Closing Date, Buyer shall have the right and authority to endorse without
recourse the name of the Seller or any of its Affiliates on any check or any
other evidence of indebtedness received by Buyer, the Company or any Company
Subsidiary as payment of monies or other consideration owed to the Company or
any of the Company Subsidiaries.
7.05 TAXES. The indemnification provisions of this Section 7.05 are
hereby made subject to the provisions of Article IX hereof, which shall control
over this Section 7.05 in case of conflict or conflicting interpretations.
(a) All sales, use, registration, stamp and similar Taxes
imposed in connection with the sale of the Shares shall be borne by Seller.
(b) Seller shall be liable for and indemnify Buyer, the Company
or the relevant Company Subsidiary, as the case may be, for all Taxes: (A)
imposed on the Company or any of the Company Subsidiaries or for which the
Company or any of the Company Subsidiaries may otherwise be liable, for any
taxable year or period that ends on or before the Closing Date and, with respect
to any portion of a taxable year or period beginning before and ending after the
Closing Date ("Straddle Period"), the portion of such Straddle Period ending on
and including the Closing Date or (B) resulting from the Company or any Company
Subsidiary being liable for any Taxes of any consolidated group of which the
Company or any Company Subsidiary was a member prior to the Closing Date
pursuant to Treasury Regulation Section 1502-6 or any analogous state or local
tax provision. The Company and the Company Subsidiaries shall be liable for, and
Buyer shall indemnify Seller and its Affiliates for, all Taxes imposed on Seller
or any of its Affiliates with respect to the Company or any of the Company
Subsidiaries for any taxable year or period that begins after the Closing Date
and, with respect to a Straddle Period, the portion of such Straddle Period
beginning after the Closing Date.
(c) For purposes of paragraph (b), any Income Tax Return of the
Company or a Company Subsidiary for the short period that ends on the Closing
Date shall be prepared using the closing of the books method. In addition,
whenever it is necessary to determine the liability for Taxes of the Company or
any of the Company Subsidiaries for a portion of a Straddle Period, the
determination of the Taxes for the portion of the Straddle Period ending on, and
the portion of the Straddle Period beginning after, the Closing Date, shall be
determined by assuming that the Company or the relevant Company Subsidiary had a
taxable year or period that ended at the close of the Closing Date, except that
any such Tax imposed annually based on ownership of assets on a particular date
shall be prorated on a daily basis to the period to and including the Closing
Date and the period thereafter.
(d) Seller shall be entitled to any refund of any Taxes of the
Company or any of the Company Subsidiaries, including interest paid thereon,
with respect to periods ending on or before the Closing Date and the portion of
any Straddle Period that begins before and ends on the Closing Date, except to
the extent that such refund is reflected in Final Net Working Capital. Seller
shall have the right to determine whether any claim for refund for such Taxes
shall be made on behalf of Seller by the Company or any of the Company
Subsidiaries. If Seller elects to make a claim for refund, Buyer and the Company
shall, and shall cause each of the Company Subsidiaries to, cooperate fully in
connection therewith. Notwithstanding the foregoing, Seller shall not be
entitled make any claim for refund of Taxes which would adversely affect the
liability for Taxes of Buyer, the Company or any of the Company Subsidiaries for
any period after the Closing Date to any extent (including, but not limited to,
the imposition of income tax deficiencies, the reduction of asset basis or cost
adjustments, the lengthening of any amortization or depreciation periods, the
denial of amortization or depreciation deductions, or the
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reduction of loss or credit carry forwards) without the prior written consent of
Buyer. Such consent shall not be unreasonably withheld, and shall not be
necessary to the extent that Seller have indemnified Buyer against the effects
of any such settlement. Seller shall reimburse Buyer and the Company for
reasonable out-of-pocket expenses incurred in providing such cooperation.
(e) Buyer and Seller agree to report any indemnification payment
made by Seller under this Section 7.05 as an adjustment to purchase price,
contribution to capital, or other non-taxable amount to the extent that there is
substantial authority for such reporting position under applicable law.
(f) Without the prior written consent of Seller (which shall not
unreasonably be withheld), neither Buyer nor the Company, nor any of the Company
Subsidiaries nor any Affiliate of Buyer shall (i) make any election or (ii) file
any amended Tax Return or propose or agree to any adjustment of any item with
the Internal Revenue Service or any other taxing authority with respect to any
tax period ending on, before or including the Closing Date that would have the
effect of increasing the liability for any Taxes or reducing any Tax benefit of
Seller, the Company or any of the Company Subsidiaries.
(g) Seller shall file or cause to be filed when due, including
extensions thereof, all Tax Returns that are required to be filed with respect
to the Company or any of the Company Subsidiaries for taxable years or periods
ending on or before the Closing Date and shall pay any Taxes due in respect of
such Tax Returns. All determinations with respect to such Tax Returns shall be
made in the sole discretion of Seller, PROVIDED that such Tax Returns shall be
prepared in a manner consistent with past practice except as otherwise provided
by Applicable Law. Buyer shall file or cause to be filed when due all Tax
Returns that are required to be filed with respect to the Company or any of the
Company Subsidiaries for taxable years or periods beginning and ending after the
Closing Date and shall pay any Taxes due in respect of such Returns. Buyer shall
prepare and file or cause to be filed all Tax Returns that are required to be
filed with respect to the Company or any of the Company Subsidiaries for any
Straddle Period taxable year, PROVIDED, HOWEVER, that Buyer shall provide a copy
of such Tax Returns to Seller at least thirty (30) days prior to the filing date
for Seller's review and such Tax Returns shall not be filed without the prior
written consent of Seller, which shall not unreasonably be delayed or withheld.
Seller and Buyer agree to negotiate and resolve in good faith any issue arising
as a result of the preparation of such Tax Returns. In the event the parties are
unable to resolve any dispute before the due date of any such Tax Return,
including extensions thereof, if a request for extension has been timely filed,
Seller and Buyer shall jointly select a public accounting firm with nationally
recognized tax expertise ("Tax Arbitrator") to resolve the dispute. If the Tax
Arbitrator has not resolved the dispute within five (5) Business Days prior to
the due date (including extensions) for the filing of the Tax Return in
question, then Buyer may file such Tax Return in accordance with its position on
such disputed issue without Seller's consent. Notwithstanding the filing of such
Tax Return, the Tax Arbitrator shall make a determination with respect to any
disputed issue, and the amount of Taxes for which Seller is responsible pursuant
to Section 7.05(c) shall be as determined by the Tax Arbitrator. The fees and
expenses of the Tax Arbitrator shall be paid equally by Buyer and Seller. Not
later than five (5) Business Days before the due date for the payment of Taxes
with respect to such Tax Return, Seller shall pay to Buyer an amount equal to
the Taxes allocable to Seller pursuant to Section 7.05(c). Notwithstanding the
foregoing, in the case of a dispute, Seller shall pay to Buyer, not later than
five (5) Business Days before the due date for the payment of Taxes with respect
to such Tax Return, the amount of Taxes that Seller reasonably believe at such
time is properly allocable to Seller pursuant to Section 7.05(c). If the Tax
Arbitrator later determines that Seller or Buyer is responsible for a greater
amount of Tax, Seller or Buyer, as appropriate, will pay such additional Tax as
determined by the Tax Arbitrator to the other party along with interest at the
Applicable Rate from the due date of Seller's original Tax payment. No payment
pursuant to this Section shall exempt Seller from its indemnification
obligations pursuant to this Agreement if the amount
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of Taxes as ultimately determined (on audit or otherwise) for the periods
covered by such Tax Returns that are the responsibility of Seller exceeds the
amount of Seller's payment under this Section.
(h) Whenever Buyer receives a notice of any pending or
threatened Tax audit or assessment for any taxable period for which Seller is or
may be liable under this Agreement, Buyer shall promptly inform Seller in
writing, PROVIDED that failure to comply with this provision shall not affect
Buyer's right to indemnification hereunder. Seller shall have the right to
control, at its own cost, any resulting proceedings and to determine whether and
when to settle any such claim, assessment or dispute for tax periods ending on
or before the Closing Date. In the case of a Straddle Period, Seller shall be
entitled to participate, at its expense, in any Tax audit or administrative or
court proceeding relating to (in whole or in part) Taxes of the Company or any
Company Subsidiary attributable to the portion of such period ending on or
before the Closing Date, and with written consent of Buyer (which consent shall
not unreasonably be withheld), may assume entire control of such audit or
proceeding. None of the Buyer, the Company or any Company Subsidiary may settle
any Tax claim for any Taxes for which Seller may be liable pursuant to this
Agreement without the prior written consent of Seller, which consent shall not
be unreasonably withheld. Whenever any taxing authority sends a notice of an
audit, initiates an examination of the Company or otherwise asserts a claim,
makes an assessment or disputes the amount of Taxes (i) for any taxable period
for which Buyer is liable under this Agreement or (ii) for any taxable period
that involves an issue that could potentially affect a taxable period for which
Buyer is or may be liable under this Agreement, Seller shall promptly inform
Buyer in writing, and Buyer shall have the right to control, at its cost, any
resulting proceedings and to determine whether and when to settle any such
claim, assessment or dispute, except to the extent such proceedings affect the
amount of Taxes for which Seller is liable under this Agreement.
(i) Any tax allocation or sharing agreement or arrangement,
whether or not written, that may have been entered into by Seller and the
Company or any of the Company Subsidiaries shall be terminated as to the Company
and the Company Subsidiaries as of the Closing Date, and no payments which are
owed by or to the Company or any of the Company Subsidiaries pursuant thereto
shall be made thereunder.
(j) Each of Buyer and Seller will provide the other with such
assistance as may reasonably be requested by each of them in connection with the
preparation of any Tax Return, any audit or other examination by any taxing
authority, or any judicial or administrative proceedings relating to liability
for Taxes, and each provide the other with any records or information which may
be relevant to such Tax Return, audit or examination, proceedings or
determination. Such assistance shall include making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder and shall include providing copies of any
relevant Tax Return and supporting work schedules. The party requesting
assistance hereunder shall reimburse the other for reasonable expense incurred
in providing such assistance. Without limiting in any way the foregoing
provisions of Section 7.05 or this Section 7.05(j), Buyer hereby agrees that it
will retain, until the appropriate statutes of limitation (including any
extensions) expire, copies of all Tax Returns, supporting work schedules and
other records or information which it possesses and which may be relevant to
such returns of the Company and the Company Subsidiaries for all taxable periods
ending on or prior to the Closing Date, and that such records shall be
maintained until the expiration of the applicable statute of limitations,
including any extensions thereto. Further, Buyer will not destroy or otherwise
dispose of such records without first providing Seller with a reasonable
opportunity to review and copy such records.
(k) Buyer and Seller shall (i) make the election permitted to be
made under Section 338(h)(10) of the Code and any corresponding or similar
provisions of state or local law (the "Section 338(h)(10) Elections") with
respect to the Company, (ii) take all actions necessary to effect and
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preserve timely such Section 338(h)(10) Elections in accordance with Treasury
Regulation Section 1.338(h)(10) (and any comparable provisions of state and
local law and any successor provisions thereto) and (iii) take no position
inconsistent with treating the purchase of the capital stock of the Company as a
Section 338(h)(10) Election. Buyer shall prepare a draft Form 8023 and any
accompanying schedules required under Section 338(h)(10) of the Code and any
corresponding or similar provisions of state or local law and provide such draft
to Seller within ninety (90) days after the Closing Date for Seller's review.
Buyer and Seller shall file all Tax Returns in a manner consistent with the
Section 338(h)(10) Elections, Form 8023 and any accompanying schedules and such
other documents and forms as are required by law to effectuate the Section
338(h)(10) Elections.
(l) Within sixty (60) days after the Closing Date, Buyer shall
prepare and deliver to Seller a schedule (the "Preliminary Section 338
Schedule") setting forth a preliminary allocation of the "Aggregate Deemed Sale
Price" (as defined in section 1.338-4T of the Treasury Regulations) of the
Company and the Company Subsidiaries among the assets of the Company and the
Company Subsidiaries that are deemed to have been purchased pursuant to the
election under section 338(h)(10) of the Code and comparable state tax
provisions. Buyer shall also deliver a preliminary determination of the amounts
required to be entered in Sections E and F of IRS Form 8023 (and comparable
sections of any election forms for state tax law purposes). Such schedule shall
be subject to the review and approval of Seller. If Seller and Buyer are unable
to resolve any disagreement as to the allocations set forth in the Preliminary
Section 338 Schedule, the disputed allocation or amount shall be reviewed and
determined by the Tax Arbitrator selected pursuant to or in accordance with the
terms of Section 7.05(g), which determination shall be final. Upon Seller's
approval of the Preliminary Section 338 Schedule (or a determination by the Tax
Arbitrator of all disputed allocations and amounts), Buyer shall deliver to
Seller a "Final Section 338 Schedule." If any changes are required to be made to
the section 338 election forms or schedules (including the Final Section 338
Schedule), the parties shall promptly and in good faith reach an agreement as to
the changes required to be made. Seller and Buyer shall use the Final Section
338 Schedule for purposes of preparing all reports and Returns with respect to
Taxes. The parties agree that all costs in connection with the preparation and
delivery of the Preliminary Section 338 Schedule and the Final Section 338
Schedule shall be borne by Buyer, provided that any fees incurred in resolving
any disagreement over the Preliminary Section 338 Schedule shall be borne
equally by Buyer and Seller.
7.06 INSURANCE.
(a) Between the date hereof and the Closing Date, Seller shall
cause the Company to not take or fail to take any action if such action or
inaction, as the case may be, would adversely affect, in any material respect,
the applicability of any insurance in effect on the date hereof that covers any
assets of the Company, any of the Company Subsidiaries or the Business with
respect to the period of time ending on the Closing Date.
(b) Subject to the provisions of Section 7.06(c), from and after
the Closing Date, Seller shall provide to the Company and the Company
Subsidiaries the benefit of:
(i) "occurrence based" casualty or general liability
policies of insurance maintained by Seller or any of its Affiliates prior to the
Closing in respect of any losses arising out of or based upon occurrences prior
to the Closing Date or the operation or conduct of the Business prior to the
Closing Date; and
(ii) "claims made" casualty or general liability policies
of insurance maintained by Seller or any of its Subsidiaries prior to the
Closing in respect of any losses arising out of or based upon claims made prior
to the Closing Date.
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(c) With regard to any claim covered by Section 7.06(b), Buyer,
the Company or the relevant Company Subsidiary shall tender such claim to Seller
for resolution. Seller and its Subsidiaries shall commercially reasonably pursue
all rights thereunder and shall remit to the Company any and all proceeds
received therefrom. Subject to right of indemnity, if any, pursuant to Article
IX, the Company and the Company Subsidiaries shall be responsible for any
deductibles associated with the applicable policies of insurance from third
parties (in no event to apply to self-insurance by Seller or any of its
Affiliates) and for any losses in excess of maximums (if any) applicable to any
such policies of insurance; PROVIDED, HOWEVER, that any amounts paid by the
Company or the Company Subsidiaries for such deductibles or losses in excess of
such maximums shall, to the extent, if any, that they constitute indemnifiable
claims pursuant to Section 9.01(a), count in determining whether the Aggregate
Basket or the Mini-Baskets (if applicable) have been equaled or exceeded by the
aggregate Damages of Buyer Indemnitees.
7.07 USE OF NAME; LOGO. Simultaneously with the Closing hereunder,
Seller shall grant the Company and the Company Subsidiaries a 365 day (such time
period, running from the Closing Date through the end of the 365th day after the
Closing Date, is the "Transition Period"), royalty free, non-exclusive and
non-transferable license to continue to use the logo set forth on SCHEDULE 7.07
in any medium, including, without limitation, signs, boxes, invoices and
promotional material, in which it is displayed on the date hereof. The parties
agree and acknowledge that use of such logo by the Company or any Company
Subsidiary after the end of the Transition Period would infringe Seller's
intellectual property rights, and accordingly, Buyer covenants that it will
cause the Company and the Company Subsidiaries, to cease all use of such logo
after the end of the Transition Period. On the Closing Date, the Certificate of
Incorporation of the Company shall be amended in order to change its name to a
name that does not contain any direct or indirect reference to Seller or the
letters "ATC." Within two (2) weeks after the Closing Date, Buyer shall cause
the Company to make appropriate filings, reflecting such name change, in each
jurisdiction in which the Company is authorized to conduct business as a foreign
corporation. Except to the extent expressly permitted by the license to be
granted pursuant to the first sentence of this Section 7.07, from and after the
Closing Date Buyer shall take all steps necessary to cause the Company and each
Company Subsidiary to forthwith cease all use, in any medium, that states or
implies that the Company or such Company Subsidiary is an Affiliate of Seller;
PROVIDED, HOWEVER, that Buyer shall take all steps necessary to cause the
packaging materials, catalogs and printed promotional materials containing the
logo set forth on SCHEDULE 7.07 that are used by the Company or the Company
Subsidiaries on and after the 30th day after the Closing Date and prior to the
end of the Transition Period, to bear a sticker or other clear notification
stating that the Company and the Company Subsidiaries are not affiliated with
Seller.
7.08 BRANCH CLOSURES. Concurrent with the Closing, the Company will
assign to Seller all its rights, and Seller will assume all of the Company's and
the Company Subsidiaries' liabilities and will indemnify the Company and the
Company Subsidiaries against the same, with respect to the leases of the
equipment and real properties set forth in SCHEDULE 7.08, or, to the extent such
leases are not assignable, the Company and Seller will take all commercially
reasonable steps to provide to Seller and the Company the benefits of an
assignment.
7.09 LEASE GUARANTIES.
(a) The parties hereto shall use their commercially reasonable
efforts to obtain releases of all guaranties by Seller (i) of real property
lease obligations of the Company or any of the Company Subsidiaries under leases
with respect to real properties listed on SCHEDULE 7.09 (the "Scheduled Leases")
and (ii) of personal property lease obligations of the Company or any of the
Company Subsidiaries under the LaSalle Master Lease Agreement and the Company
Master Lease Agreement; PROVIDED, HOWEVER, that neither Buyer nor any of its
Affiliates shall be required to pay money
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or other consideration or agree to any amendments or modifications to any real
property lease obligations, other than the replacement of such guaranties by
Seller with guaranties by Holdings on substantially similar terms (subject to
compliance with any of Holdings' bank agreements), in order to obtain such
releases. From and after the Closing, Buyer and the Company shall indemnify and
hold harmless Seller and any of its Subsidiaries (other than the Company and the
Company Subsidiaries) against any Damages suffered or liability incurred by
Seller or any of its Subsidiaries to the extent that such Damages or liabilities
of Seller or its Subsidiaries arise from actions or inactions of the Company or
any of the Company Subsidiaries after the Closing Date pursuant to (a) the
Company Master Lease Agreement (if the same shall exist), (b) the LaSalle Master
Lease Agreement (if the Company Master Lease Agreement shall not exist), to the
extent such Damages or liabilities relate to equipment leased by the Company or
any of the Company's Subsidiaries or (c) any Scheduled Lease, except, in any
such matter, to the extent such Damages or liability result from or arise out of
matters covered by Section 9.01(a) (without giving effect to Sections 9.01(b) or
9.01(c)), including, without limitation, breaches of such guarantied leases
occurring prior to the Closing Date or obligations undertaken by Seller or the
Company after the date hereof and prior to the Closing Date in violation of
Section 5.01.
(b) Notwithstanding anything to the contrary provided in this
Agreement, from and after the Closing, Buyer shall not, and shall cause the
Company and the Company Subsidiaries not to, (i) permit or agree to the renewal
or extension of the term of any Scheduled Lease beyond the minimum term provided
in such Scheduled Lease (whether or not such renewal or extension is provided
for in such Scheduled Lease) unless Seller shall have no liabilities or
obligations whatsoever as guarantor with respect to such Scheduled Lease during
or after the period of such renewal or extension or (ii) hold over the tenancy
of the Company or any Company Subsidiary beyond the end of the minimum term
provided for in a Scheduled Lease (without giving effect to any extension or
renewal provisions contained in such Scheduled Lease) for a period in excess of
two months.
7.10 RETENTION PLAN. Buyer and Seller agree and acknowledge that
between the date hereof and the Closing Date, Seller shall be entitled to
implement, or cause the Company to implement, a retention plan for key officers
and employees of the Company or the Company Subsidiaries. Seller shall inform
Buyer in writing prior to the implementation of such plan, and information with
respect to such plan shall be included on SCHEDULE 5.01 upon implementation.
Such plan shall not include or result in any liabilities or obligations of the
Company or the Company Subsidiaries after the Closing.
7.11 CERTAIN LEASES.
(a) With respect to that certain Master Lease, dated
February 16, 1998, between Sun Data, Inc. (now known as Solarcom) and Seller,
pursuant to which various items of computer hardware and software are leased by
Seller for the benefit of the Company, Buyer and Seller agree that, when the
term of such Master Lease expires, Seller, Buyer and the Company shall cooperate
with each other in negotiations with Solarcom concerning the amount to be paid
to Solarcom (the "Solarcom Payment") on account of the items of computer
hardware and software covered by the Master Lease that the Company either (i)
desires to purchase for fair market value or (ii) is unable, because of loss or
inability to locate, to return to Solarcom, other than items of computer
hardware or software covered by the Master Lease that the books and records of
the Company or any of the Company Subsidiaries, maintained in the ordinary
course, reflect have been sold, donated, otherwise transferred, disposed of or
destroyed after the Closing Date. Seller agrees that if, and to the extent that,
the Solarcom Payment as so negotiated, exceeds Four Hundred Ten Thousand Dollars
($410,000), Seller shall promptly pay to the Company, in cash, the amount, if
any, of such excess. Buyer agrees that the Company shall bear, without any right
against Seller or any of its Subsidiaries for indemnity or otherwise, the first
Four Hundred Ten Thousand Dollars ($410,000) of the Solarcom Payment. Buyer and
Seller hereby agree that, for all purposes of this Agreement, the Master Lease
is an operating lease, not a capital lease.
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(b) With respect to any lease of personal property existing on
the Closing Date that is neither a Scheduled Contract nor a Subsequent Material
Contract (the "Other Leases"), Buyer and Seller agree that they will apportion
between Seller and the Company as follows any monies that the lease requires the
Company to pay to the lessor upon the expiration of the term of such lease
regardless of whether or not the leased property is returned to the lessor in
good order (a "Back-end Lease Payment"). Seller agrees that if, and to the
extent that, the aggregate amount of Back-end Lease Payments paid by the Company
in respect of Other Leases exceeds One Hundred Thousand Dollars ($100,000),
Seller shall promptly reimburse to the Company, in cash, the amount, if any, of
such excess. Buyer agrees that the Company shall bear, without any right against
Seller or any of its Subsidiaries for indemnity or otherwise, the first One
Hundred Thousand Dollars ($100,000) of the aggregate amount of all Back-end
Lease Payments in respect of Other Leases.
7.12 CONTRIBUTION OF CAPITAL STOCK. On or prior to the Closing Date,
Seller shall have contributed to the capital of the Company or such other entity
as Buyer shall have identified (which such other entity must be a wholly-owned
Subsidiary of Buyer) the share of capital stock of Partes Remanufacuturadas de
Mexico, S.A. de C.V. owned by Seller free and clear of any Share Encumbrances.
7.13 CERTAIN LITIGATION. Promptly after the Closing, Seller shall
withdraw from the case captioned AFTERMARKET TECHNOLOGY CORP., ET AL. V.
WHATEVER IT TAKES TRANSMISSION, ET AL. (U.S.D.C. W.D.Ky., Louisville Division).
The parties hereto agree that the liability, if any, of Seller, Buyer and the
Company to any Indemnitee with respect to any counterclaim or similar claim in
such lawsuit shall be governed by Article IX, treating such counterclaim or
similar claim in the same manner pursuant to Article IX as if such counterclaim
or similar claim had instead been raised independently of such lawsuit.
7.14 SHARED FACILITY LICENSES. On or prior to the Closing Date, Seller
or one of its Subsidiaries, on the one hand, and the Company, on the other hand,
shall enter into license agreements in respect of a portion of each of the
facilities set forth on SCHEDULE 7.14. Such licenses shall terminate at the end
of the sixth full calendar month following the Closing Date. The license fee
payable with respect to any such license of a portion of a facility shall equal
(i) the percentage set forth on SCHEDULE 7.14 of the rental payment and other
expenses provided in the lease agreement with respect to such facility or (ii)
the dollar amount set forth on SCHEDULE 7.14. The other terms and conditions of
the license agreements shall be commercially reasonable and mutually acceptable
to Seller and Buyer. If the existence of any such license shall cause the
termination of the lease with respect to the property a portion of which is the
subject of such license, the Licensee Indemnitor shall indemnify the licensor
against licensor's reasonable, out-of-pocket moving expenses, which shall in no
event reflect any increase or decrease in the rental rate for the facility to
which licensor relocates as compared with the rental rate provided in the lease
so terminated. For purposes of this Section 7.14, "Licensee Indemnitor" with
respect to a terminated lease shall mean: (i) Seller, if the licensee with
respect to such terminated lease is a Subsidiary of Seller, and (ii) Buyer and
the Company, if the licensee with respect to such terminated lease is the
Company.
7.15 PRODUCTION OF NEW CATALOG. On or before December 31, 2000 Buyer
will cause the Company to produce and distribute a new "soft parts" catalog that
does not contain any images that infringe the copyrights that are the subject of
the Slauson Litigation (the "New Catalog") to each Person who, during the 90
days prior to the completion of the New Catalog, purchased at least $250 of
goods from the Company and the Company Subsidiaries. Upon presentation of
documentation reasonably acceptable to Seller, Seller will reimburse the Company
for 50% of the Company's reasonable, out-of-pocket expenses paid by the Company
to third parties for the production, printing and mailing of the New Catalog to
such Persons. The parties estimate that the aggregate amount of such third party
expenses will be between $100,000 and $150,000, of which aggregate amount
Seller's reimbursement obligation shall be 50%, pursuant to the preceding
sentence. Promptly upon its completion, the New Catalog shall be distributed to
each such Person under cover of a letter, in form reasonably acceptable in
advance to Seller,
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requesting that such customer discard any prior "soft parts" catalogs of the
Company (and its predecessors) and to use only the New Catalog in the future. If
this Section 7.15 is not performed in a timely manner, Seller's Damages as a
result thereof shall include, but not be limited to, any Damages that Seller
incurs in the Slauson Litigation to the extent that such Damages relate to the
Company's operations during the period from January 1, 2001 until the date that
this Section 7.15 is satisfied.
ARTICLE VIII
CONDITIONS TO CLOSING
8.01 CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the transactions contemplated hereby is subject to the satisfaction
or waiver (in whole or in part) by Buyer of each of the following conditions,
PROVIDED, HOWEVER, that if Buyer waives in writing the satisfaction of any of
the following conditions (in whole or in part) (other than the conditions set
forth in Sections 8.01(a)(iii) and 8.01(a)(iv), as to which this proviso shall
not apply and for which Seller shall be liable if and to the extent provided in
Article IX) and the Closing occurs, then neither Buyer, the Company nor any of
the Company's Subsidiaries shall have any claim whatsoever (whether for
indemnification or otherwise) against Seller or any of its Affiliates that in
any way relates to or arises out of the failure of such condition (or such part
thereof) to be satisfied or out of the circumstances or events that caused the
failure of such condition (or such part thereof) to be satisfied:
(a) (i) each of the obligations of Seller hereunder required to
be performed and satisfied by it on or prior to the Closing Date that is not
qualified as to materiality shall have been performed and satisfied in all
material respects, (ii) each of the obligations of Seller hereunder required to
be performed and satisfied by it on or prior to the Closing Date that is
qualified as to materiality shall have been performed and satisfied, (iii) each
of the representations and warranties of Seller contained in this Agreement that
is not qualified as to materiality shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects at and as of the Closing Date with the same force and effect as if made
as of the Closing Date, (iv) each of the representations and warranties of
Seller contained in this Agreement that is qualified as to materiality shall
have been true and correct when made and shall be true and correct at and as of
the Closing Date with the same force and effect as if made as of the Closing
Date and (v) Buyer shall have received certificates signed by a duly authorized
executive officer of Seller to the foregoing effect and to the effect that the
conditions specified within this Section 8.01 have been satisfied; PROVIDED,
HOWEVER, that solely with respect to clauses (iii), (iv) and (v) of this Section
8.01(a) as they apply to the representations and warranties contained in Section
3.17, "Environmental Laws" means all applicable environmental statutes, rules,
regulations, ordinances and orders of any governmental entity as interpreted or
in effect as of the Closing Date, including those relating to Hazardous
Substances and human health and safety.
(b) All Required Consents shall have been obtained; all
applicable waiting periods with respect to such Required Consents shall have
expired; and all conditions and requirements prescribed by Applicable Law or by
such Required Consents to be satisfied on or prior to the Closing Date shall
have been satisfied to the extent necessary such that all such Required Consents
are, and will remain, in full force and effect assuming continued compliance
with the terms thereof after the Closing.
(c) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable Law in any material
respect, without regard to the geographic scope, outside of the United States
and Canada, of the noncompetition agreements contained herein. No temporary
restraining order, preliminary or permanent injunction, cease and desist order
or other order issued by any court of competent jurisdiction or any competent
Governmental Authority preventing or restraining the consummation of the Closing
or the transactions contemplated hereby, limiting or adversely affecting in any
material respect Buyer's ownership or control of the Company and
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the Company Subsidiaries or their respective businesses or imposing material
Damages in respect thereto, shall be in effect, and there shall be no pending
or, to the Knowledge of Buyer, threatened actions or proceedings by any
Governmental Authority (or determinations by any Governmental Authority) (i)
challenging or in any manner seeking to restrict or prohibit the consummation of
the Closing or the transactions contemplated hereby, or (ii) seeking to impose
conditions or requirements on Buyer and its Affiliates that (A) would,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect or a material adverse effect upon Buyer and its Affiliates, taken
as a whole and (B) apply if and only if Seller and Buyer proceed with the
consummation of the Closing or the transactions contemplated hereby.
(d) Since the date hereof, there shall not have been any event,
occurrence, development or state of circumstances or facts or change in the
Company and the Company Subsidiaries affecting the Company or any of the Company
Subsidiaries that has had or that may be reasonably expected to have, either
alone or together with all such events, occurrences, developments, states of
circumstances or facts or changes, a Material Adverse Effect.
(e) The Intercompany Accounts shall have been cancelled and/or
paid in full and neither the Company nor any of the Company Subsidiaries shall
have any further liability or obligation thereunder.
(f) Buyer shall have received an opinion of Gibson, Dunn &
Crutcher LLP in a form reasonably acceptable to Buyer.
(g) As of the Closing Date, there shall exist no Liens on any
assets of the Company or any of the Company Subsidiaries (other than Permitted
Liens), and there shall exist no Share Encumbrances on any of the shares of
capital stock of the Company or any Company Subsidiary.
(h) Buyer shall have received evidence of the cancellation of
any Indebtedness of the Company or any of the Company Subsidiaries, pledges of
the stock of the Company or any of the Company Subsidiaries and security
agreements related to or affecting the assets or the stock of the Company or any
of the Company Subsidiary and a release of any obligations of the Company or any
of the Company Subsidiaries relating thereto, including with respect to the
agreements listed on SCHEDULE 8.01(h).
(i) Seller shall have contributed to the capital of the Company
or such other entity as Buyer shall have identified (which such other entity
must be a wholly-owned Subsidiary of Buyer) the share of capital stock of Partes
Remanufacuturadas de Mexico, S.A. de C.V. owned by Seller.
(j) Seller and the Company shall have entered into the Supply
Agreement, in a form reasonably acceptable to the parties hereto, containing the
terms set forth in Exhibit C attached hereto.
(k) Seller and the Company shall have entered into the Services
Support Agreement, in a form reasonably acceptable to the parties hereto,
containing the terms set forth in Exhibit D attached hereto.
(l) Buyer or its Affiliates shall have received the proceeds of
all debt financing necessary to consummate the transactions contemplated hereby
(including payment of fees and expenses relating thereto) and provide for the
reasonable ongoing working capital needs of the Company and the Company
Subsidiaries on terms and conditions reasonably satisfactory to Buyer; PROVIDED,
HOWEVER, that this Section 8.01(l) shall be deemed to have been satisfied if
debt financing in an aggregate
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amount at least equal to $62,500,000 is available to Buyer on terms that are at
least as favorable as those set forth in the Debt Commitment Letters or, if the
Debt Commitment Letters shall not have been obtained, at least as favorable as
those set forth in the term sheet provided to Seller pursuant to Section 4.08,
and that, in either case, otherwise contains terms and conditions that are
reasonably satisfactory to Buyer.
(m) Buyer shall have received the Release, by Seller, of the
Company and the Company Subsidiaries, under the Tax Sharing Agreement, in a form
reasonably acceptable to the parties hereto.
(n) Buyer shall have received the Release, by Aurora Capital
Partners, L.P., of the Company and the Company Subsidiaries, under the
Management Services Agreement, in a form reasonably acceptable to the parties
hereto.
(o) The Escrow Agreement shall have been signed and delivered by
Seller and the Escrow Agent shall have received the Letter of Credit.
(p) Buyer shall have completed, to its reasonable satisfaction,
its ongoing environmental due diligence efforts.
(q) Buyer shall have received certificates of good standing with
respect to the Company from each of the states identified in SCHEDULE 3.02.
(r) Buyer shall have received signed copies of the Amended
LaSalle Master Lease Agreement and the Company Master Lease Agreement, in each
case complying with the provisions of Section 5.19.
8.02 CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller to
consummate the transactions contemplated hereby is subject to the satisfaction
or waiver (in whole or in part) by Seller of each of the following conditions,
PROVIDED, HOWEVER, that if Seller waives in writing the satisfaction of any of
the following conditions (in whole or in part)(other than the conditions set
forth in Sections 8.02(a)(iii) and 8.01(a)(iv), as to which this proviso shall
not apply) and the Closing occurs, then neither Seller nor any of its
Subsidiaries shall have any claim whatsoever (whether for indemnification or
otherwise) against Buyer, the Company, nor any of their Affiliates that in any
way relates to or arises out of the failure of such condition (or such part
thereof) to be satisfied or out of the circumstances or events that caused the
failure of such condition (or such part thereof) to be satisfied:
(a) (i) each of the obligations of Buyer hereunder required to
be performed and satisfied by it on or prior to the Closing Date that is not
qualified as to materiality shall have been performed and satisfied in all
material respects, (ii) each of the obligations of Buyer hereunder required to
be performed and satisfied by it on or prior to the Closing Date that is
qualified as to materiality shall have been performed and satisfied, (iii) each
of the representations and warranties of Buyer contained in this Agreement that
is not qualified as to materiality shall have been true and correct in all
material respects when made and shall be true and correct in all material
respects at and as of the Closing Date with the same force and effect as if made
as of the Closing Date, (iv) each of the representations and warranties of Buyer
contained in this Agreement that is qualified as to materiality shall have been
true and correct when made and shall be true and correct at and as of the
Closing Date with the same force and effect as if made as of the Closing Date
and (v) Seller shall have received a certificate signed by a duly authorized
executive officer of Buyer to the foregoing effect and to the effect that the
conditions specified within this Section 8.02 have been satisfied.
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(b) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable Law in any material
respect, without regard to the geographic scope, outside of the United States
and Canada, of the noncompetition agreements contained herein. No temporary
restraining order, preliminary or permanent injunction, cease and desist order
or other order issued by any court of competent jurisdiction or any competent
Governmental Authority preventing or restraining the consummation of the Closing
or the transactions contemplated hereby shall be in effect, and there shall be
no pending or, to the Knowledge of Seller, threatened actions or proceedings by
any Governmental Authority (or determinations by any Governmental Authority) (i)
challenging or in any manner seeking to restrict or prohibit the consummation of
the Closing or the transactions contemplated hereby, or (ii) seeking to impose
conditions or requirements on Seller or its Affiliates that (A) would,
individually or in the aggregate, reasonably be expected to have a material
adverse effect upon Seller and its Affiliates, taken as a whole and (B) apply if
and only if Seller and Buyer proceed with the consummation of the Closing or the
transactions contemplated hereby.
(c) Seller shall have received an opinion of Dechert in a form
reasonably acceptable to Seller.
(d) Seller and the Company shall have entered into the Supply
Agreement, in a form reasonably acceptable to the parties hereto, containing the
terms set forth in Exhibit C attached hereto.
(e) Seller and the Company shall have entered into the Services
Support Agreement, in a form reasonably acceptable to the parties hereto,
containing the terms set forth in Exhibit D attached hereto.
(f) Seller shall have received the release, by the Company and
the Company Subsidiaries, of Seller and its Subsidiaries, under the Tax Sharing
Agreements, in a form reasonably acceptable to the parties hereto.
(g) Seller shall have received the release, by the Company and
the Company Subsidiaries, of Aurora Capital Partners, L.P., under the Management
Services Agreement, in a form reasonably acceptable to the parties hereto.
(h) The waiting period provided for in the HSR Act shall have
expired or early termination thereof shall have been granted.
(i) Seller shall have received a reliance letter, addressed to
the board of directors of Seller and signed by the Valuation Consultants, in
form and substance reasonably satisfactory to Seller, explicitly authorizing
such board of directors to rely on the solvency opinion letter (the "Solvency
Opinion") attached thereto, addressed to Buyer, from the Valuation Consultants,
in form and substance reasonably satisfactory to Seller, stating the Valuation
Consultants' opinion that, immediately after and giving effect to the
consummation of the Transactions, Buyer and its Subsidiaries on a consolidated
basis are solvent. The Solvency Opinion will value the Company as a
going-concern (including goodwill), on a pro forma basis, immediately after and
giving effect to the Transactions and the associated indebtedness.
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ARTICLE IX
INDEMNIFICATION
9.01 AGREEMENT TO INDEMNIFY.
(a) Subject to the limitations provided herein, Buyer and the
direct and indirect subsidiaries of Buyer (including, after the Closing has
occurred, the Company) (collectively, the "Buyer Indemnitees") shall each be
indemnified and held harmless to the extent set forth in Section 7.05 and this
Article IX by Seller in respect of any Damages incurred by any Buyer Indemnitee
(excluding consequential damages to such Buyer Indemnitee but including
consequential damages suffered by a third party that have been recovered by such
third party against a Buyer Indemnitee) as a result of:
(i) any inaccuracy or misrepresentation in or breach of
or failure to perform any representation or warranty of Seller (or, prior to the
Closing Date, of the Company) in this Agreement, including the schedules and
exhibits hereto (it being understood and agreed that, for purposes of this
Article IX only, in order to determine whether there has been any such
inaccuracy, misrepresentation in or breach of or failure to perform, and in
order to calculate the amount of Damages arising therefrom, the representations,
warranties, covenants, agreements and obligations of Seller shall be deemed not
to be qualified by any concept of "material," "materiality," "in any material
respect" or "Material Adverse Effect");
(ii) any Environmental Liabilities with respect to,
arising from or in connection with the properties identified in Exhibit H
hereto;
(iii) any Environmental Liabilities with respect to,
arising from or in connection with the properties identified in Exhibit I
hereto;
(iv) any Environmental Liabilities with respect to,
arising from or in connection with properties other than those identified in
Exhibits H or I hereto.
(v) any liabilities or obligations of the Company or any
Company Subsidiary of any nature, whether due or to become due, whether accrued,
absolute, contingent or otherwise, existing on the Closing Date, or arising out
of any transactions entered into or any state of facts existing, or the use,
ownership, possession or operation of the Company, any Company Subsidiary or the
conduct of the Business, on or prior to the Closing Date, excepting only those
obligations or liabilities that:
(v) are reflected (and only to the extent reflected)
in the Financial Statements;
(w) were incurred in the ordinary course of business
after June 30, 2000 and prior to the Closing Date and are deducted (and only to
the extent deducted) as liabilities in the calculation of Net Working Capital;
(x) are specifically disclosed (and only to the
extent specifically disclosed) in this Agreement or in the exhibits or schedules
hereto (including, without limitation, all liabilities and obligations set forth
in any Scheduled Contract to the extent such liabilities or obligations are due,
by the terms of such Scheduled Contract, to be satisfied or performed after the
Closing Date, except to the extent such obligations or liabilities result from
or arise out of matters covered by Section 9.01(a) (without giving effect to
Sections 9.01(b) or 9.01(c)) other than this Section 9.01(a)(v)(x));
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(y) are specifically set forth (and only to the
extent specifically set forth) in any (1) Subsequent Material Contract (the
entry into which by the Company or any Company Subsidiary has been consented to
by Buyer pursuant to Section 5.01(b)) or (2) Contract existing on the Closing
Date other than any Contract that (A) is a Scheduled Contract or a Subsequent
Material Contract or (B) was entered into in violation of Section 5.01(b), in
each case of (1) and (2) to the extent such liabilities or obligations are due,
by the terms of such Subsequent Material Contract or other Contract, to be
satisfied or performed after the Closing Date, except to the extent such
obligations or liabilities result from or arise out of matters covered by
Section 9.01(a) (without giving effect to Sections 9.01(b) or 9.01(c)) other
than this Section 9.01(a)(v)(y); or
(z) are described in Sections 9.01(a)(ii), (iii),
(iv) or (vii).
(vi) any breach of or failure to perform any covenant,
agreement or obligation of Seller (or, prior to the Closing Date, of the
Company) in this Agreement, including the exhibits and disclosure schedules
hereto.
(vii) any liabilities or obligations of the Company or any
of the Company Subsidiaries arising out of or related to the matters set forth
on SCHEDULE 9.01.
(b) Notwithstanding the provisions of Section 9.01(a):
(i) Buyer Indemnitees may not seek indemnification from
Seller under Sections 9.01(a)(i), 9.01(a)(iv) or 9.01(a)(v) unless and until the
aggregate Damages of Buyer Indemnitees with respect to claims set forth in
Section 9.01(a) in the aggregate exceed $750,000 (the "Aggregate Basket"),
PROVIDED, HOWEVER, that if such threshold is exceeded, Buyer Indemnitees may
seek indemnification hereunder for any and all such claims in excess of such
threshold;
(ii) Buyer Indemnitees may seek indemnification hereunder
from Seller for Environmental Liabilities with respect to non-third-party claims
based on voluntary investigation and/or remediation with respect to a parcel of
real property described in Section 9.01(a)(iii) if, but only if, the aggregate
Damages of Buyer Indemnitees with respect to such claims with respect to such
parcel exceed $50,000 (each a "Mini-Basket"); PROVIDED, HOWEVER, that if such
Mini-Basket is exceeded, Buyer Indemnitees may seek indemnification hereunder
for any and all such claims with respect to such parcel in excess of such
threshold; and PROVIDED, FURTHER, that the amount of such Damages that are not
indemnifiable pursuant to this sentence shall be counted in determining whether
the Aggregate Basket has been equaled or exceeded by the aggregate Damages of
Buyer Indemnitees; and
(iii) Claims for Damages of Buyer Indemnitees resulting
from: (A) Seller's fraud or willful misconduct, (B) a breach of Sections 3.01,
3.02, 3.03, 3.04 (clauses (a) and (d) only), 3.06, 3.07(a), 3.08, 3.18, 3.21 or
3.22; (C) liabilities or obligations described in Sections 9.01(a)(ii),
9.01(a)(vi) or 9.01(a)(vii)(collectively, claims described in clauses (A), (B)
and (C) of this Section 9.01(b)(iii) are the "Unlimited Claims"); and (D)
liabilities and obligations described in Section 9.01(a)(iii) (but only as a
result of (x) non-third-party claims based on involuntary investigation and/or
remediation and (y) third-party claims), shall not be subject to the Aggregate
Basket nor shall Damages of Buyer Indemnitees with respect to Unlimited Claims
be counted in determining whether the Aggregate Basket has been equaled or
exceeded by the aggregate Damages of Buyer Indemnitees.
(c) (i) Notwithstanding anything to the contrary provided in
this Agreement, except as provided in Section 9.01(c)(ii), the aggregate
liability of Seller under Section 9.01(a)(i), (iv) and (v) shall not exceed (x)
$8,000,000 in cash (the "Cash Cap") and (y) shares of Series B Preferred Stock
of Buyer having an aggregate stated liquidation preference of $8,000,000 ("the
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Stock Cap"), payable as follows: indemnification payments by Seller under
Section 9.01(a)(i), (iv) and (v) shall be made in cash until $8,000,000 in cash
in the aggregate shall have been so paid; additional indemnification payments by
Seller under Section 9.01(a)(i), (iv) and (v) shall be paid, at the sole option
of Seller, either in cash, in shares of Series B Preferred Stock of Buyer, or in
a combination of cash and such shares, with each such share valued, solely for
purposes of calculating the amount of such indemnity obligation that has been so
paid, at one half of its per share stated liquidation preference. Any cash so
paid at the option of the Seller as indemnity payments under Section 9.01(a)(i),
(iv) and (v) in excess of the Cash Cap shall be deemed to be a payment against
the Stock Cap equal to the number of shares of Series B Preferred Stock of Buyer
having an aggregate stated liquidation preference equal to twice the amount of
such cash paid in excess of the Cash Cap. Indemnification payments by Seller
under Section 9.01(a)(i), (iv) and (v) shall be paid by means of draws against
the Letter of Credit, which shall be deemed to be a payment against the Cash Cap
on a dollar-for-dollar basis, until the earlier to occur of (A) the exhaustion
of the aggregate amount of the Letter of Credit by such draws or (B) the
expiration or termination of the Letter of Credit in accordance with its terms.
Subsequent to the earlier to occur of events (A) or (B) in the preceding
sentence, indemnity payments by Seller under Section 9.01(a)(i), (iv) and (v)
shall be made by Seller, until the remaining amount of the Cash Cap, and then
the Stock Cap, shall have been exhausted.
(ii) Notwithstanding the provisions of Section 9.01(c)(i):
(A) the Unlimited Claims and claims for Damages of Buyer Indemnitees resulting
from liabilities and obligations described in Section 9.01(a)(iii) shall not be
subject to any such maximum cap on the indemnification obligation of Seller and
(B) indemnification payments by Seller in respect of the Unlimited Claims and
claims for Damages of Buyer Indemnitees resulting from the liabilities and
obligations described in Section 9.01(a)(iii) shall not be considered or counted
in applying any of the provisions of Section 9.01(c)(i) regarding calculation of
the Cash Cap or the Stock Cap.
(d) Seller and its Affiliates (collectively the "Seller
Indemnitees") shall each be indemnified and held harmless to the extent set
forth in this Article IX on a joint and several basis by Buyer and the Company
in respect of any and all Damages incurred by any Seller Indemnitee (excluding
consequential damages to such Seller Indemnitee but including consequential
damages suffered by a third party that have been recovered by such third party
against a Seller Indemnitee):
(i) as a result of any inaccuracy or misrepresentation
in or breach of or failure to perform any representation, warranty, covenant,
agreement or obligation of Buyer (and, after the Closing Date, the Company) in
this Agreement; or
(ii) to the extent resulting from or arising out of the
Company's conduct of the Business after Closing as and to the extent of Damages
incurred by any Seller Indemnitee resulting from or arising out of any third
party claim or Proceeding (in no event to include any claim or Proceeding by any
Buyer Indemnitee under this Article IX); PROVIDED, HOWEVER, that no indemnity
under this Section 9.02(d)(ii) can or will exist to the extent such indemnity
results from or arises out of a matter covered by Section 9.01(a) (without
regard to Sections 9.01(b) or 9.01(c)).
9.02 SURVIVAL OF REPRESENTATION, WARRANTIES AND COVENANTS.
(a) Notwithstanding Section 9.02(d), the following
representations, warranties, covenants, agreements and obligations of Seller as
an Indemnifying Party shall survive the Closing Date, but all rights of Buyer
Indemnitees for indemnity pursuant to Article IX that arise out of or relate
thereto shall expire on the 60th day following the expiration of any applicable
statute of limitations, including extensions thereof: (i) any matter that is the
subject of an Unlimited Claim, except Environmental Liabilities described in
Sections 9.01(a)(ii) or 9.01(a)(iii); (ii) Section 3.17; (iii) any of the
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covenants, agreements or obligations of Seller contained in this Agreement or in
the exhibits attached hereto; and (iv) claims described in Section 9.01(a)(iv).
Notwithstanding Section 9.02(d), the obligation of Seller as an Indemnifying
Party with respect to Environmental Liabilities described in Sections
9.01(a)(ii) and 9.01(a)(iii) shall survive the Closing Date without any time
limitation whatsoever.
(b) Notwithstanding Section 9.02(d), the following
representations, warranties, covenants, agreements and obligations of Buyer and
the Company as an Indemnifying Party shall survive the Closing Date, but all
rights of Seller Indemnitees for indemnity pursuant to Article IX that arise out
of or relate thereto shall expire on the 60th day following the expiration of
any applicable statute of limitations, including extensions thereof: (i) any
inaccuracy or misrepresentation in or breach of any representation, warranty,
covenant or agreement made by Buyer (and, after the Closing, the Company) in
this Agreement arising out of fraud or willful misconduct; (ii) any material
inaccuracy or material misrepresentation in or material breach of any
representation or warranty made in Sections 4.01, 4.02, 4.03, 4.04 (clause (a)
only), 4.05, 4.07 and 4.09 regardless of whether such inaccuracy or
misrepresentation or breach arises out of fraud or willful misconduct; and (iii)
the breach or failure to perform by Buyer or the Company or any of its
Subsidiaries after the Closing Date of any of the covenants, agreements or
obligations of such Person contained in this Agreement or in the exhibits
attached hereto.
(c) The expiration of any representation, warranty, covenant,
agreement or obligation pursuant to this Section 9.02 shall not relieve an
Indemnifying Party of its obligation with respect to any claim of breach of such
representation, warranty, covenant, agreement or obligation that is asserted by
the Indemnified Party in writing prior to such expiration.
(d) Except as expressly provided to the contrary in Sections
9.02(a), 9.02(b) or 9.02(c), the representations and warranties (but not the
covenants, agreements and obligations) of any Indemnifying Party contained
herein shall survive the Closing for a period of twenty (20) months after the
Closing Date and each shall expire at 5:00 p.m., New York City time, on the last
day of the twentieth (20th) calendar month following the Closing Date (the
"Indemnification Ending Date"), and no claim of any Indemnitee in respect of any
breach of any representation or warranty of any Indemnifying Party contained in
this Agreement shall survive the Indemnification Ending Date and each shall
expire on the Indemnification Ending Date.
9.03 CLAIMS FOR INDEMNIFICATION. If any Indemnitee shall believe that
such Indemnitee is entitled to indemnification pursuant to this Article IX in
respect of any Damages, such Indemnitee shall give the appropriate Indemnifying
Party prompt written notice thereof. Any such notice shall set forth in
reasonable detail and to the extent then known the basis for such claim for
indemnification. The failure of such Indemnitee to give notice of any claim for
indemnification promptly shall not adversely affect such Indemnitee's right to
indemnity hereunder except to the extent that such failure prejudices the right
of the Indemnifying Party to assert any reasonable defense to such claim. The
Indemnifying Party shall have 30 days following its receipt of such notice
either (a) to acquiesce in such claim by giving such Indemnitee written notice
of such acquiescence or (b) to object to the claim by giving such Indemnitee
written notice of the objection. If the Indemnifying Party does not object
thereto within such 30-day period, such Indemnifying Party shall be deemed to
have objected to such claim. If the Indemnifying Party objects to such claim in
a timely manner or is deemed to have so objected, and such Indemnitee and the
Indemnifying Party are unable to resolve their dispute within 30 days following
such objection or deemed objection (or such additional period of time as may be
mutually agreed to by such Persons), the claim may be submitted by either the
Indemnifying Party or the Indemnitee immediately to arbitration pursuant to
Section 11.11.
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9.04 DEFENSE OF CLAIMS.
(a) In connection with any claim that may give rise to indemnity
under this Article IX resulting from or arising out of any claim or Proceeding
against an Indemnitee by a Person that is not a party hereto or an Indemnitee,
the Indemnifying Parties shall have the right, exercisable by written notice to
the Indemnitee within 15 days of receipt of notice or, if later, five days prior
to the date on which an answer to the complaint or similar process in such claim
or Proceeding is due (as extended by the court or other tribunal), subject to
Section 9.04(b), to assume the defense of any such claim or Proceeding (unless
such Indemnitee elects not to seek indemnity hereunder for such claim), upon
written notice to the relevant Indemnitee. The parties hereto shall use all
reasonable efforts to obtain one or more extensions of the date on which an
answer to the complaint or similar process in such claim or Proceeding is due,
in order to enable the Indemnifying Parties to determine whether they desire to
exercise such right to assume such defense. Prior to the assumption by an
Indemnifying Party of the defense of any claim or Proceeding, the Indemnitee may
make such appearances and filings with respect thereto as the Indemnitee
reasonably determines to be necessary or appropriate (the cost of which shall be
recoverable as indemnity from the Indemnifying Parties pursuant to Section
9.01). If the Indemnifying Parties assume the defense of any such claim or
Proceeding, the Indemnifying Parties shall select counsel reasonably acceptable
to such Indemnitee to conduct the defense of such claim or Proceeding, shall
take all steps necessary in the defense or settlement thereof and shall at all
times diligently and promptly pursue the resolution thereof. If the Indemnifying
Parties shall have assumed the defense of any claim or Proceeding in accordance
with this Section 9.04, the Indemnifying Parties shall be authorized to consent
to a settlement of, or the entry of any judgment arising from, any such claim or
Proceeding, without the prior written consent of such Indemnitee, PROVIDED,
HOWEVER, that (i) the Indemnifying Parties shall pay or cause to be paid all
amounts arising out of such settlement or judgment concurrently with the
effectiveness thereof, (ii) the Indemnifying Parties shall not be authorized to
encumber any of the assets of any Indemnitee or to agree to any restriction that
would apply to any Indemnitee or to its conduct of business, and (iii) a
condition to any such settlement shall be a complete release of such Indemnitee
and its Affiliates, officers, employees, consultants and agents with respect to
such claim. Subject to Section 9.04(b), such Indemnitee shall be entitled to
participate in (but not control) the defense of any such action, with its own
counsel and at its own expense. Each Indemnitee shall, and shall cause each of
its Affiliates, officers, employees, consultants and agents to, reasonably
cooperate with the Indemnifying Parties in the defense of any claim or
Proceeding being defended by the Indemnifying Parties pursuant to this Section
9.04, the reasonable cost of which shall be recoverable as indemnity from the
Indemnifying Parties pursuant to Section 9.01. If the Indemnifying Parties do
not assume the defense of any claim or Proceeding resulting therefrom in
accordance with the terms of this Section 9.04(a), such Indemnitee may defend
against such claim or Proceeding, the reasonable cost of which shall be
recoverable as indemnity from the Indemnifying Parties pursuant to Section 9.01.
(b) Notwithstanding Section 9.04(a), the Indemnifying Parties
may not assume the defense of any claim or Proceeding and the Indemnitee may
assume such defense if, in the reasonable opinion of the Indemnitee, (A) such
claim or Proceeding involves a non-monetary issue or matter that, if determined
adversely to the Indemnitee, will or could reasonably be expected to have a
significant adverse effect on the business, operations, assets, properties or
prospects of the Indemnitee, (B) there is one or more significant legal defenses
available to the Indemnitee that conflict with those available to an
Indemnifying Party, (C) if reasonably requested to do so by the Indemnitee, the
Indemnifying Parties shall not have made reasonably adequate provision to ensure
the Indemnitee of the financial ability of the Indemnifying Parties to satisfy
the Indemnifying Party's liability for the reasonably foreseeable amount of an
adverse monetary judgment that may result from such claim or Proceeding, to the
extent of the amount that can be ascertained from the complaint or (D) the
indemnified portion of such reasonably foreseeable amount is exceeded by the
unindemnified portion thereof (conditions (A) through (D), inclusive, are,
collectively, the "Litigation Conditions").
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(c) If the Indemnitee assumes the defense of any such claim or
Proceeding, either initially or because one of the Litigation Conditions becomes
satisfied the Indemnifying Parties may participate in, but not control, the
defense of such claim or Proceeding.
(d) If the Indemnitee assumes the defense of any such claim or
Proceeding, either initially or because one of the Litigation Conditions becomes
satisfied and:
(i) the Indemnitee receives a settlement proposal from
the Person asserting such claim or instituting such Proceeding;
(ii) such settlement proposal provides solely for either
(A) the payment of a specified amount of money at the time of settlement or (B)
the payment in installments of specified amounts of money plus, if applicable,
interest (the amount of such payment under clause (A) or the aggregate amount of
such payments under clause (B) is the "Proposed Settlement Amount") ;
(iii) the Indemnitee is notified in writing by the
Indemnifying Parties that the Indemnifying Parties want to accept such
settlement proposal; and
(iv) the Indemnifying Parties covenant that they will pay,
as appropriate: (A) the portion of the Proposed Settlement Amount that both (1)
exceeds the Aggregate Basket, if applicable to Indemnitee and such claim or
Proceeding, taking into account all previous Damages that Buyer and Seller
reasonably agree have been incurred by Buyer Indemnitees and would have been
indemnified pursuant to Section 9.01(a), but for the provisions of Section
9.01(b), and (2) is less than the aggregate of the remaining portion of the Cash
Cap and the Stock Cap, if applicable to Indemnitee and such claim or Proceeding,
taking into account all previous indemnity payments by the Indemnifying Parties
pursuant to Sections 9.01(a)(i), (iv) and (v) (the portion of the Proposed
Settlement Amount that satisfies both clause (1) and clause (2), above, is the
"Indemnifiable Amount"), if the Indemnifiable Amount exceeds the remaining
portion of the Proposed Settlement Amount (the "Unindemnifiable Amount"); or (B)
one-half of the Proposed Settlement Amount (the "Half Amount"), if the
Unindemnifiable Amount equals or exceeds the Indemnifiable Amount,
then the liability of the Indemnifying Parties with respect to such claim or
Proceeding shall be determined as follows:
(x) If the claim or Proceeding is so settled in
accordance with the proposed settlement, the Indemnifying Parties shall be
liable for the Indemnifiable Amount or the Half Amount, as determined in
accordance with the covenant in Section 9.04(d)(iv), if, but only if, such
amount is paid at settlement; PROVIDED, HOWEVER, that if the Proposed Settlement
Amount is as described in Section 9.04(d)(ii)(B), the Indemnifiable Amount or
the Half Amount, as appropriate, shall be payable by the provision at the time
of settlement by the Indemnifying Party to the Indemnitee of cash, an annuity
policy reasonably satisfactory to the Indemnitee or similar means reasonably
satisfactory to the Indemnitee sufficient to make, when due, the installment
payments plus, if applicable, interest, in an aggregate amount equal to the
Indemnifiable Amount or the Half Amount, as appropriate.
(y) If the claim or Proceeding is not so settled in
accordance with the proposed settlement, and such claim or Proceeding is
ultimately resolved (by final judgment, arbitration order or settlement) for an
amount (the "Final Amount") in excess of the Proposed Settlement Amount, the
Indemnifying Parties shall be liable for the Indemnifiable Amount if, but only
if, such amount is paid at the time the claim or Proceeding is ultimately
resolved; PROVIDED, HOWEVER, that if the Final Amount is as described in Section
9.04(d)(ii)(B), the Indemnifiable Amount shall be payable by the provision at
the time of settlement by the Indemnifying Party to the Indemnitee of cash, an
annuity policy reasonably
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satisfactory to the Indemnitee or similar means reasonably satisfactory to the
Indemnitee sufficient to make, when due, the installment payments plus, if
applicable, interest, in an aggregate amount equal to the Indemnifiable Amount;
and
(z) If the claim or Proceeding is not so settled in
accordance with the proposed settlement, and the Final Amount is less than the
Proposed Settlement Amount, the Indemnifying Parties shall be liable for: (1) a
proportion of the Final Amount equal to the proportion of the Proposed
Settlement Amount represented by the Indemnifiable Amount, if the Indemnifiable
Amount exceeded the Unindemnifiable Amount, as originally calculated above or
(2) one half of the Final Amount, if the Unindemnifiable Amount equaled or
exceeded the Indemnifiable Amount, as originally calculated above; PROVIDED,
HOWEVER, that if the Final Amount is as described in Section 9.04(d)(ii)(B), the
amount described in clause (1) or in clause (2) of this Section 9.04(d)(z), as
appropriate, shall be payable by the provision at the time of settlement by the
Indemnifying Party to the Indemnitee of cash, an annuity policy reasonably
satisfactory to the Indemnitee or similar means reasonably satisfactory to the
Indemnitee sufficient to make, when due, the installment payments plus, if
applicable, interest, in an aggregate amount equal to the amount described in
clause (1) or in clause (2) of this Section 9.04(d)(z), as appropriate.
Notwithstanding the foregoing, the Indemnifying Parties shall not have the
rights set forth in Sections 9.04(c) or 9.04(d) if either (a) the
Indemnifying Parties shall have had the right to assume such defense (and
Indemnitee shall have acknowledged in writing at such time that the Indemnifying
Parties had such right) and shall have failed to exercise such right or (b)
the Indemnifying Parties shall have assumed such defense but shall have failed
diligently to defend such claim or Proceeding.
(e) If the Indemnitee elects to defend any claim or Proceeding
pursuant to the last sentence of Section 9.04(a) or pursuant to Section 9.04(b),
the Indemnitee shall conduct such defense in such manner as it shall deem
appropriate, including settling such claim or Proceeding after giving notice of
the same to the Indemnifying Parties, on such terms as such Indemnitee shall
deem appropriate, PROVIDED, HOWEVER, that such settlement expressly releases the
Indemnifying Parties from any further liability to such third party with respect
to the claim. If the Indemnifying Parties seek to question the manner in which
such Indemnitee defended such claim or Proceeding or the amount of or nature of
any such settlement, the Indemnifying Parties shall have the burden to prove by
a preponderance of the evidence that such Indemnitee did not defend such claim
or Proceeding in a reasonably prudent manner. If the Indemnifying Parties have
assumed the defense of such claim or Proceeding as provided in this Section
9.04, the Indemnifying Parties will not be liable for any legal expenses
subsequently incurred by the Indemnitee in connection with the defense thereof;
PROVIDED, HOWEVER, that if one or more of the Litigation Conditions becomes
satisfied or if the Indemnifying Party fails diligently to defend such claim or
Proceeding, the Indemnitee may assume its own defense, and the Indemnifying
Parties will be liable for all reasonable costs or expenses paid or incurred in
connection therewith.
(f) The right of an Indemnifying Party to assume the defense of
any claim or Proceeding shall be conditioned on such Indemnifying Party agreeing
in writing that, as between the Indemnifying Party and the Indemnitee, the
Indemnifying Party shall be obligated to satisfy and discharge any judgment,
arbitration award or settlement resulting from such claim or Proceeding, subject
(i) to the limitations set forth in Sections 9.01(b) and 9.01(c), as modified by
Section 9.04(g) and (ii) to the automatic voiding of such agreement and
undertaking if (A) Indemnitee assumes its own defense because one or more of the
Litigation Conditions becomes satisfied or (B) the Indemnifying Party validly
exercises its right to terminate its defense of such claim or Proceeding, as set
forth in the following sentence. If the Indemnifying Parties assume the defense
of any claim or Proceeding pursuant to Section 9.04(a) and the Indemnifying
Parties subsequently determine in good faith that the claim or Proceeding is not
one for which indemnity is provided pursuant to this Article IX, the
Indemnifying Parties shall give
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reasonable notice thereof in writing to the Indemnitee (but in no event less
than thirty (30) days' prior written notice) prior to termination of the
Indemnifying Parties' defense of such claim or Proceeding; PROVIDED, HOWEVER,
that the Indemnifying Parties may not terminate such defense more than one (1)
year after the date on which the Indemnifying Parties assumed such defense. If
the Indemnifying Parties shall have assumed such defense and shall subsequently
have given such notice of termination, then, in any subsequent proceeding by the
Indemnitee to obtain indemnification from the Indemnifying Parties pursuant to
Section 9.01(a) or Section 9.01(d), as appropriate, the Indemnifying Parties
shall have the burden to prove by a preponderance of the evidence that the
Indemnitee is not entitled to indemnification pursuant to Section 9.01(a)
(taking into account the provisions of Sections 9.01(b), 9.01(c) and 9.04(g)) or
Section 9.01(d), as appropriate; and the burden of proof in respect of the
amount of Damages for which such indemnity, if any, shall be paid shall also be
so shifted to the Indemnifying Parties.
(g) If Seller has assumed the defense of any claim or Proceeding
and either (i) Seller has continued to control such defense through and
including the time such claim or Proceeding is ultimately resolved (by final
judgment, arbitration order or settlement), or (ii) Seller has terminated such
defense but it is ultimately determined in an arbitration proceeding in
accordance with Section 11.11 among Seller and the Buyer Indemnitees that the
claim or Proceeding was one for which indemnity is provided pursuant to this
Article IX, then, in either case (i) or case (ii), Seller's aggregate liability
with respect to the amount, if any, of such final judgment, arbitration order or
settlement payable by the Buyer Indemnitees shall be determined as follows:
(x) if the amount of such final judgment, arbitration order
or settlement payable by the Buyer Indemnitees (the "Ultimate Amount") is less
than or equal to the aggregate of the remaining portion of the Cash Cap and the
Stock Cap, taking into account all previous indemnity payments by Seller
pursuant to Sections 9.01(a)(i), (iv) and (v) (the "Unused Cap"), the Seller's
liability under this Article IX with respect to such claim or Proceeding shall
equal the greater of (1) the portion of the Ultimate Amount for which Seller
would be liable pursuant to this Article IX (including, without limitation,
Section 9.01(b), taking into account all previous Damages that Buyer and Seller
reasonably agree have been incurred by Buyer Indemnitees and would have been
indemnified pursuant to Section 9.01(a), but for the provisions of Section
9.01(b)) and (2) one-half of the Ultimate Amount; and
(y) if the Ultimate Amount is greater than the Unused Cap,
the Seller's liability under this Article IX with respect to such claim or
Proceeding shall equal the sum of:
(1) the portion of the Ultimate Amount that both (A)
exceeds the Aggregate Basket, if applicable to such claim or Proceeding, taking
into account all previous Damages that Buyer and Seller reasonably agree have
been incurred by Buyer Indemnitees and would have been indemnified pursuant to
Section 9.01(a), but for the provisions of Section 9.01(b), and (B) is less than
the Unused Cap; plus
(2) one-half of the amount by which the Ultimate Amount
exceeds the Unused Cap.
9.05 SUBROGATION.
(a) To the extent that Seller shall pay any amounts as
indemnification to the Buyer Indemnitees pursuant to Article IX, the parties
hereto expressly agree that the Seller shall be subrogated to the rights of the
Buyer Indemnitees against any Person (other than the Company or any Company
Subsidiary) that is or was a party to any of the agreements set forth on
SCHEDULE 9.05 (each, a "Former Seller") with respect to any claims ("Subrogation
Claims") as to which any Buyer Indemnitee could have a claim for indemnification
against any Former Seller under any such agreement that arise out
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of, or are otherwise related to, the facts, circumstances, issues or matters
giving rise to Damages for which the Buyer Indemnitees would be entitled to
indemnity pursuant to Section 9.01(a), but for the provisions of Section
9.01(b). In addition, the Seller shall be subrogated to any Subrogation Claims
that any Buyer Indemnitee may have against any Former Seller under such
agreements that arise out of, or are otherwise related to, the facts,
circumstances, issues or matters giving rise to Damages for which the Buyer
Indemnitees would be entitled to indemnity pursuant to Section 9.01(a), but for
the provisions of Section 9.01(b).
(b) If the amount of indemnification paid by the Seller in
respect of Buyer Indemnitees' claims pursuant to Article IX shall have been
reduced by reason of the application of Section 9.01(b), the Buyer Indemnitees
shall be entitled to receive and retain all amounts recovered from Former
Sellers in respect of such Subrogation Claims until such Buyer Indemnitees shall
have recovered the amount of such reduction in full and all reasonable fees,
costs and expenses incurred in connection with asserting such claims against
Former Sellers. Any such recovery (net of such fees, costs and expenses) shall
have the effect of restoring the threshold set forth in Section 9.01(b) and the
amount of indemnity payable by the Seller shall be recalculated after giving
effect to such restoration. If by reason of such recalculation the Seller has
paid more indemnity to the Buyer Indemnitees than it was obligated to pay, the
Buyer Indemnitees shall promptly pay such excess to the Seller.
(c) In addition, to the extent that the Buyer Indemnitees are
not fully indemnified by Seller in respect of any claim for indemnification
under Article IX by reason of limitation set forth in Section 9.01(c), the Buyer
Indemnitees shall be entitled to receive and retain all amounts recovered from
Former Sellers in respect of such Subrogation Claims after the Seller shall have
recovered from Former Sellers all amounts of indemnity paid to the Buyer
Indemnitees in respect of the Buyer Indemnitees' claims and all reasonable fees,
costs and expenses incurred by Seller in connection with asserting such claims
against Former Sellers.
(d) Seller shall be entitled to prosecute in the name of the
relevant Buyer Indemnitee, and control the prosecution of, any Subrogation
Claims at its expense; and the Buyer Indemnitees shall be entitled to
participate in, but not control, the prosecution of any Subrogation Claims at
their own expense, subject to the right set forth in Section 9.05(b) to recover
their reasonable fees, costs and expenses incurred in connection with asserting
such Subrogation Claims if the amount of indemnification paid by the Seller in
respect of Buyer Indemnitees' claims pursuant to Article IX shall have been
reduced by reason of the application of Section 9.01(b). Buyer, the Company and
the Company Subsidiaries shall reasonably cooperate with Seller's exercise of
its right of subrogation set forth in this Section 9.05. Any legal counsel
retained by the Seller for purposes of prosecuting any such Subrogation Claim
must be reasonably acceptable to the Buyer Indemnitees.
(e) If Seller exercises its right of subrogation set forth in
this Section 9.05, Seller shall indemnify each and every Buyer Indemnitee
against any counterclaims (or similar claims made after Seller asserts such
Subrogation Claim) by a Former Seller against the Company or any Company
Subsidiaries if the facts or circumstances giving rise to such counterclaim (or
similar claim) occurred prior to the Closing Date; PROVIDED, HOWEVER, that
limitations that would otherwise apply to such indemnification pursuant to
Sections 9.01(b), 9.01(c) and Section 9.02 shall not apply to such
indemnification.
ARTICLE X
TERMINATION
10.01 GROUNDS FOR TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
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(a) by mutual written agreement of all of the parties hereto;
(b) by a party at any time following the expiration of 15 days
from the date that such party has given notice to another party of any one or
more inaccuracies or misrepresentations in or breaches of the representations or
warranties made by the recipient of such notice contained in this Agreement
that, if not cured prior to the Closing Date, would give the notifying party
grounds not to close under Section 8.01 or Section 8.02, as applicable, when
taken into account with all other uncured inaccuracies or misrepresentations in
or breaches of such representations or warranties as to which the notifying
party shall have given notice previously pursuant to this clause (b); PROVIDED,
HOWEVER, that no termination under this clause (b) shall take effect if such
inaccuracies, misrepresentations or breaches shall have been cured in all
material respects within such 15-day period;
(c) by a party at any time following the expiration of 15 days
from the date that such party has given written notice to another party of the
failure by recipient of such notice to perform and satisfy in any material
respect any of its material obligations under this Agreement required to be
performed and satisfied by him or it on or prior to the Closing Date, or the
failure to perform and satisfy any other obligations of the recipient of such
notice under this Agreement if the aggregate of all such other failures shall be
material; PROVIDED, HOWEVER, that no termination under this clause (c) shall
take effect if such breaches or failures shall have been cured in all material
respects within such 15-day period;
(d) by any party hereto, if the Closing shall not have been
consummated by the Outside Date; PROVIDED, HOWEVER, that a party may not
terminate this Agreement pursuant to this clause (d) if the Closing shall not
have been consummated within such time period by reason of the other party's
Closing conditions contained in Section 8.01(a)(i) - (v) or Section 8.02(a)(i) -
(v), as appropriate, not having been satisfied or waived; or
(e) by any party hereto if any Federal, state or foreign law or
regulation thereunder shall hereafter be enacted or become applicable that makes
the transactions contemplated hereby or the consummation of the Closing illegal
or otherwise prohibited, or if any judgment, injunction, order or decree
enjoining either party hereto from consummating the transactions contemplated
hereby is entered, and such judgment, injunction, order or decree shall become
final and nonappealable.
(f) by Buyer, on or prior to September 13, 2000, if on or prior
to September 8, 2000, Buyer becomes aware of any event, occurrence, development
or state of circumstances or facts or change in the Company and the Company
Subsidiaries affecting the Company or any of the Company Subsidiaries that
represents a modification to or correction or clarification of the information
provided by Seller and its representatives to Buyer and its representatives
during Buyer's due diligence in connection with this Agreement which is material
to the business, the condition (financial or otherwise) or the results of
operations of the Company and the Company Subsidiaries taken as a whole;
PROVIDED, HOWEVER, that the provisions contained in this Section 10.01(f) shall
in no way affect the requirement that the closing condition contained in Section
8.01(p) be satisfied or waived by Buyer.
(g) by Buyer, on or prior to September 25, 2000, if on or prior
to September 21, 2000, Buyer shall not have received a letter from The Chase
Manhattan Bank (the "Agent"), in form and substance reasonably satisfactory to
Buyer, to the effect that (i) the Consent will be sent by the Agent to the
Banks, (ii) The Chase Manhattan Bank will notify the Banks that it, in its
capacity as a Bank, has approved the Consent and (iii) the Consent will be in
full force and effect once it has been executed by Banks holding more than 50%
of the sum of (x) the aggregate unpaid principal amount of the term loans then
outstanding under the Credit Facility and (y) the aggregate obligation then in
existence of the Banks to make revolving loans and issue or participate in
letters of credit under the
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Credit Facility. As used herein (A) "Banks" means the banks and other financial
institutions that are then lenders under the Credit Facility, (B) "Consent"
means the agreement, a copy of which will be attached to the Agent's letter,
setting out the consent of the Banks to the sale of the capital stock of the
Company pursuant to this Agreement and the conditions that Seller must satisfy
in order to obtain the Banks' release of (1) their Liens on the assets of the
Company and the Company Subsidiaries and (2) their pledge of the capital stock
of the Company and the Company Subsidiaries, and (C) "Credit Facility" means the
term loan and revolving loan facilities under the Amended and Restated Credit
Agreement dated as of March 6, 1998 among Seller, the lenders from time to time
parties thereto and the Agent (as the same may be amended or replaced from time
to time).
(h) by Seller, on or prior to October 2, 2000, if, on or prior
to September 28, 2000, Buyer shall not have delivered to Seller debt financing
commitment letters, in form and substance reasonably satisfactory to Seller, in
full force and effect as of the date such letters are delivered to Seller and
for a period running through and including the earlier to occur of the Closing
Date and the Outside Date, pursuant to which the Persons issuing such letters
have agreed to provide an aggregate of $62,500,000 of debt financing in
connection with the transactions contemplated hereby (the "Debt Commitment
Letters").
(i) by Seller, on or prior to September 13, 2000, if, on or
prior to September 8, 2000, Seller shall not have received evidence reasonably
satisfactory to Seller that the condition set forth in clause (c)(I) of the
second sentence of the second paragraph of the Equity Commitment Letter has been
satisfied.
10.02 EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section 10.01, such termination shall be without liability of any
party to the other party to this Agreement; PROVIDED, HOWEVER, that if such
termination shall result from the breach by any party of its representations,
warranties or covenants contained in this Agreement, such party shall be fully
liable for any and all Damages incurred or suffered by the other party as a
result of such failure or breach notwithstanding such termination. The
provisions of Sections 5.04, 6.01, 6.06, 7.03, 10.02, 11.01, 11.02, 11.03,
11.05, 11.07, 11.08, 11.09, 11.10, 11.11 and 11.12 shall survive any termination
of this Agreement pursuant to Article X.
ARTICLE XI
MISCELLANEOUS
11.01 NOTICES. All notices, requests, demands, claims and other
communications hereunder shall be in writing (whether or not any particular
provision of this Agreement states that notice applicable to such provision must
be in writing) and shall be deemed duly given (i) when delivered by personal
delivery, (ii) two Business Days after having been sent by registered or
certified mail, return receipt requested, postage prepaid and addressed to the
intended recipient as set forth below, (iii) the day following being sent
through an overnight delivery service in circumstances in which such service
guarantees next day delivery, or (iv) once such notice or other communication is
transmitted to the telecopier number specified below and the appropriate answer
back or telephonic confirmation is received, PROVIDED that such notice or other
communication is promptly thereafter mailed in accordance with the provisions of
clause (ii) above:
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If to Seller:
Aftermarket Technology Corp.
One Oak Hill Center, Suite 400
Westmont, Illinois 60559
Telecopier No: (630) 455-2621
Attn: Joseph Salamunovich, Esq.
with a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
Telecopier No: (213) 229-6979
Attn: Bruce D. Meyer, Esq.
If to Buyer:
ATCDG Acquisition Corp., Inc.
c/o The Riverside Company
630 Fifth Avenue, Suite 1530
New York, NY 10111
Telecopier No: (212) 265-6478
Attn: Mr. Robert J. Fitzsimmons
with a copy to:
Dechert
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103-2793
Telecopier No: (215) 994-2222
Attn: David E. Schulman, Esq.
Any party may give any notice, request, demand, claim or other communication
hereunder using any other means (including ordinary mail or electronic mail),
but no such notice, request, demand, claim or other communication shall be
deemed to have been duly given unless and until it actually is received by the
individual for whom it is intended. Any party may change the address to which
notices, requests, demands, claims and other communications hereunder are to be
delivered by giving the other parties notice in the manner herein set forth.
11.02 AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived if,
and only if, such amendment or waiver is in writing and signed, in the case of
an amendment, by all parties hereto, or in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) No waiver by a party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation or breach
of warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or
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subsequent occurrence. No failure or delay by a party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
11.03 EXPENSES. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense. Without limiting the generality of the
foregoing, Seller shall pay all legal, accounting and other fees and expenses
incurred by Seller, the Company or any of the Company Subsidiaries prior to the
Closing Date in connection with the negotiation, execution, delivery and
performance of this Agreement.
11.04 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. No party hereto may assign either this Agreement or any of
its rights, interests or obligations hereunder without the prior written
approval of each other party, which approval shall not be unreasonably withheld,
except that Buyer may collaterally assign this Agreement to its lenders without
the approval of Seller.
11.05 GOVERNING LAW. This Agreement shall be interpreted and construed
in accordance with and governed by the internal laws (without reference to
choice or conflict of laws) of the State of New York.
11.06 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other parties hereto.
11.07 ENTIRE AGREEMENT. This Agreement (including the schedules and
exhibits referred to herein which are hereby incorporated by reference)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior oral and written and all contemporaneous
oral agreements, understandings and negotiations between the parties with
respect to the subject matter of this Agreement. Neither this Agreement nor any
provision hereof is intended to confer upon any Person other than the parties
hereto any rights or remedies hereunder.
11.08 CONSTRUCTION. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof. All references to an Article or Section include all subparts thereof.
Neither party hereto, nor its respective counsel, shall be deemed the drafter of
this Agreement, and all provisions of this Agreement shall be construed in
accordance with their fair meaning, and not strictly for or against either party
hereto.
11.09 SEVERABILITY. If any provision of this Agreement, or the
application thereof to any Person, place or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places and circumstances shall remain in full force and effect only if, after
excluding the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated hereby in
substantially the same manner as originally set forth at the later of the date
this Agreement was executed or last amended.
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11.10 THIRD PARTY BENEFICIARIES. No provision of this Agreement shall
create any third party beneficiary rights in any Person, including any employee
of Buyer or employee or former employee of the Company or any Affiliate thereof
(including any beneficiary or dependent thereof).
11.11 ARBITRATION OF CLAIMS.
(a) Except as otherwise specifically provided elsewhere in this
Agreement, any dispute or difference between or among the parties arising out of
this Agreement or the transactions contemplated hereby, including, without
limitation, any dispute between any Indemnitee and any Indemnifying Party under
Article IX which the parties are unable to resolve themselves, shall be
submitted to and resolved by arbitration pursuant to and in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in effect
on the date of the initial request that gave rise to the dispute to be
arbitrated (the "AAA Rules").
(b) Such arbitration shall be conducted by a panel of three
arbitrators, which shall be selected from a list of arbitrators pursuant to and
in accordance with the AAA Rules. Such arbitration proceeding shall be conducted
in Chicago, Illinois. The arbitrators shall not have the authority to modify any
term or provision of this Agreement. The arbitration proceeding shall include an
opportunity for the parties to conduct discovery in advance of the proceeding,
which discovery may be limited by rules established by the arbitrators.
Notwithstanding the foregoing, the parties agree that they will attempt, and
they intend that they and the arbitrators should use their best efforts in that
attempt, to conclude such arbitration proceeding and have a final decision from
the arbitrators within 90 days from the date of selection of the arbitrators;
PROVIDED, HOWEVER, that the arbitrators shall be entitled to extend such 90-day
period one or more times to the extent necessary for such arbitrators to place a
dollar value on any claim that may be unliquidated. The arbitrators shall
promptly deliver a written decision with respect to the dispute to each of the
parties, which shall promptly act in accordance therewith. Each party agrees
that any decision of the arbitrators shall be final, conclusive and binding,
absent fraud or manifest error, and that they will not contest any action by any
other party hereto in accordance with a decision of the arbitrators, except on a
basis of fraud or manifest error. It is specifically understood and agreed that
any party may enforce any award rendered pursuant to the arbitration provisions
of this Section 11.11 by bringing suit in any court of competent jurisdiction.
(c) All fees, costs and expenses (including reasonable
attorneys' fees and expenses) incurred by the party that prevails in any such
arbitration commenced pursuant to this Section 11.11 or any judicial action or
proceeding seeking to enforce the agreement to arbitrate disputes as set forth
in this Section 11.11 or seeking to enforce any order or award of any
arbitration commenced pursuant to this Section 11.11 may be assessed against the
party or parties that do not prevail in such arbitration in such manner as the
arbitrators or the court in such judicial action, as the case may be, may
determine to be appropriate under the circumstances. All costs and expenses
attributable to the arbitrators shall be allocated among the parties to the
arbitration in such manner as the arbitrators shall determine to be appropriate
under the circumstances.
(d) Neither any provision of, nor the exercise of any rights
under, this Section 11.11 shall limit the right of any party to seek and obtain
provisional or ancillary remedies, such as injunctive relief, from any court
having jurisdiction before, during or after the pendency of any arbitration
proceeding under this Section. The institution and maintenance of any such
action or proceeding shall not constitute a waiver of the right of any party to
submit a dispute, controversy or claim to arbitration under this Section. The
interpretation and construction of this Section 11.11 shall be governed by Title
9 of the United States Code, as the same may from time to time be amended or
recodified, notwithstanding the choice of law set forth in Section 11.05 hereof.
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11.12 CUMULATIVE REMEDIES. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
AFTERMARKET TECHNOLOGY CORP.:
By: /s/ Joseph Salamunovich
---------------------------------
Joseph Salamunovich, Vice President
ATCDG ACQUISITION CORP., INC.
By: /s/ Robert Fitzsimmons
---------------------------------
Robert Fitzsimmons, President
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<TABLE>
EXHIBITS
<S> <C>
Exhibit A....................................................Example of Net Working Capital Calculation
Exhibit B....................................................Terms of Series B Preferred Stock of Buyer
Exhibit C.....................................................................Terms of Supply Agreement
Exhibit D...........................................................Terms of Services Support Agreement
Exhibit E..........................................................................Financial Statements
Exhibit F......................................................................Form of Escrow Agreement
Exhibit G......................................................................Intentionally Left Blank
Exhibit H...................................................Retained Environmental Liability Properties
Exhibit I...................................Certain Limited Retained Environmental Liability Properties
SCHEDULES
Schedule 1.01.......................................................Net Working Capital Excluded Assets
Schedule 1.02..................................................Net Working Capital Excluded Liabilities
Schedule 1.03...................................................Specifically Identified Permitted Liens
Schedule 3.01........................................................................Share Encumbrances
Schedule 3.02.....................................................Company Qualifications to Do Business
Schedule 3.06(a)...................................................................Company Subsidiaries
Schedule 3.06(b)..................................................Capital Stock of Company Subsidiaries
Schedule 3.07...........................................................Sufficiency and Title to Assets
Schedule 3.08.....................................................................Capital Stock Matters
Schedule 3.10................................................................Absence of Certain Changes
Schedule 3.11(a)...................................................................Leased Real Property
Schedule 3.11(b)...............................................................Personal Property Leases
Schedule 3.12................................................................................Litigation
Schedule 3.13.......................................................................Scheduled Contracts
Schedule 3.14.........................................................................Required Consents
Schedule 3.15...........................................................Compliance with Applicable Laws
Schedule 3.16........................................................................Insurance Policies
Schedule 3.17(a)-(f)..............................................................Environmental Matters
Schedule 3.18.............................................................................Benefit Plans
Schedule 3.19..............................................................Labor and Employment Matters
Schedule 3.20.....................................................................Intellectual Property
Schedule 3.22...............................................................................Tax Matters
Schedule 3.23................................................................Related Party Transactions
Schedule 4.03...............................................................Governmental Authorizations
Schedule 5.06.........................................................................Required Consents
Schedule 5.09.......................................................Directors and Officers Resignations
Schedule 7.07......................................................................................Logo
Schedule 7.08...........................................................Leases to be Retained by Seller
Schedule 7.09..........................................................................Lease Guaranties
Schedule 7.14.........................................................................Shared Facilities
Schedule 8.01(h)..........................................Guaranties and Other Evidence of Indebtedness
Schedule 9.01.......................................................Certain Liabilities and Obligations
Schedule 9.05................................................................Former Purchase Agreements
</TABLE>
