Exhibit 2.1
EXECUTION VERSION
MEMBERSHIP INTEREST AND ASSET PURCHASE AGREEMENT
among
▇▇▇▇▇▇ GROUP INC.
▇▇▇▇▇▇ GROUP CANADA CORP.,
KAR PRODUCTS, LLC,
A. & H. BOLT & NUT COMPANY LTD.,
GC-SUN HOLDINGS II, L.P.,
A. & H. BOLT HOLDINGS, INC.
SUNSOURCE CANADA INVESTMENT COMPANY,
GC-SUN, INC.,
GC-SUN ▇.▇. ▇▇, INC.,
GC-SUN G.P., INC.,
and
GC-SUN HOLDINGS, L.P.
January 15, 2003
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS........................................................1
ARTICLE 2 THE TRANSACTION...................................................11
2.1 Sale and Purchase of the Interests.......................12
2.2 Sale and Purchase of the Canadian Assets;
Assumption of Canadian Assumed Liabilities...............12
2.3. Purchase Price; Closing Payment..........................12
2.4 Inventory Inspection.....................................13
2.5 Post Closing Adjustment to Purchase Price................14
2.6. Allocation of Purchase Price.............................16
2.7. Reconciliation of Cash...................................16
ARTICLE 3 CLOSING AND CLOSING DATE..........................................17
3.1. Closing..................................................17
3.2. Documents to be delivered to the Buyers by
the Seller Parties.......................................17
3.3. Documents to be delivered to the Sellers by
the Buyers...............................................19
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES..............20
4.1. Organization.............................................21
4.2. Authorization of Transaction.............................21
4.3. Authority of the Parents; Issuance;
US Seller's Title to the Interests.......................21
4.4. Intentionally Omitted....................................22
4.5. Consents and Approvals; No Violation.....................22
4.6. Capitalization...........................................22
4.7. Financial Statements.....................................23
4.8. Subsequent Events........................................24
4.9. Tax Matters..............................................26
4.10. Contracts...............................................28
4.11. Real Property...........................................30
4.12. Intellectual Property...................................31
4.13. Litigation..............................................32
4.14. Employee Benefit Matters................................33
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4.15. Labor Relations.........................................38
4.16. Environmental Matters...................................40
4.17. Legal Compliance........................................41
4.18. Permits.................................................41
4.19. Assets..................................................41
4.20 Accounts Receivable......................................41
4.21. Machinery; Fixtures and Equipment.......................41
4.22. Inventory...............................................41
4.23 Insurance................................................42
4.24. Brokers' Fees...........................................42
4.25. Investment in ▇▇▇▇▇▇ Parent Common Stock................42
4.26 Banks; Powers of Attorney................................43
4.27 Certain Payments.........................................43
4.28 Customers and Suppliers..................................43
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE BUYER PARTIES...............44
5.1. Organization of the Buyers...............................44
5.2. Authorization of Transaction.............................44
5.3. Consents and Approvals; No Violation.....................45
5.4. Litigation...............................................45
5.5. Brokers' Fees............................................45
5.6. Investment Intent........................................45
5.7. Financial Capability.....................................46
5.8. Capitalization...........................................46
5.9. SEC Reports..............................................46
5.10. Financial Statements....................................47
5.11. No Material Adverse Change..............................47
5.12. Residence; GST Status...................................47
ARTICLE 6 PRE-CLOSING COVENANTS.............................................47
6.1. General..................................................47
6.2. Notices and Consents.....................................47
6.3. Carry on in Regular Course...............................48
6.4. Assignment of Executive Employment Contracts.............50
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6.5. Access...................................................50
6.6 Benefit Plans............................................51
6.7. Notice of Developments; Schedules;
Updating Schedules.......................................51
6.8 No Solicitation or Negotiation...........................51
6.9 Transfer of Owned Real Property..........................52
6.10 Liens....................................................52
6.11 Purchase Order List......................................52
6.12 Customer List and Supplier List..........................52
6.13 Guarantees...............................................52
6.14 No Hire..................................................52
6.15 Offer of Employment to Canadian Employees................53
ARTICLE 7 POST-CLOSING COVENANTS............................................53
7.1 Use of Intellectual Property.............................53
7.2 Restrictive Covenants....................................53
7.3 Acquisition Bonuses......................................55
7.4 Certain Financial Information............................56
7.5 D&O Indemnitees..........................................56
7.6 Further Assurances.......................................57
7.7 Agreement Regarding Company 401(k) Plan..................57
7.8 Transition Services......................................58
7.9 Misdirected Receivables..................................58
ARTICLE 8 TAX MATTERS.......................................................58
8.1 Indemnity................................................58
8.2 Returns and Payments.....................................59
8.3 Refunds..................................................60
8.4 Contests.................................................60
8.5 Time of Payment..........................................61
8.6 Cooperation and Exchange of Information..................62
8.7 Conveyance Taxes.........................................62
8.8 Accounts Receivable Election.............................62
8.9 Canadian Sales and Transfer Taxes........................63
8.10 Goods and Services Tax and Harmonized
Sales Tax Election.......................................63
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8.11 Self-Assessment of Goods and Services Tax
and Harmonized Sales Tax on Real Property................63
8.12 Retail Sales Tax Certificate.............................63
ARTICLE 9 CONDITIONS TO CLOSING.............................................63
9.1. Conditions to Obligation of the Buyers...................63
9.2. Conditions to Obligation of the Seller Parties...........65
ARTICLE 10 TERMINATION......................................................66
10.1 Termination..............................................66
10.2 Effect of Termination....................................67
ARTICLE 11 INDEMNIFICATION..................................................67
11.1 Survival of Representations..............................67
11.2 Indemnification of the Buyers............................67
11.3 Indemnification of the Seller Parties....................68
11.4 Intentionally Omitted....................................69
11.5 Procedures...............................................69
11.6 Limitations on Indemnification;
Additional Indemnification Provisions....................69
ARTICLE 12 MISCELLANEOUS....................................................71
12.1. Press Releases and Announcements........................72
12.2. Expenses................................................72
12.3. Amendments; Waivers.....................................72
12.4. Successors and Assigns..................................72
12.5. Severability............................................72
12.6. Counterparts............................................72
12.7. Descriptive Headings....................................72
12.8. Notices.................................................72
12.9. No Third-Party Beneficiaries............................73
12.10. Entire Agreement.......................................74
12.11. Construction...........................................74
12.12. Incorporation of Schedules.............................74
12.13. Governing Law..........................................74
12.14. Submission to Jurisdiction.............................74
12.15. Waiver of Jury Trial...................................74
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Schedules and Exhibits
----------------------
2.2(a) Canadian Assets
2.2(b) Canadian Excluded Assets
2.5 Accounting Methodology
3.2(f) Registration Rights Agreement
3.2(i) Transition Services Agreement
3.2(j)(1) Owned Real Property Lease - Des Plaines Property
3.2(j)(2) Owned Real Property Lease - Windsor Property
3.2(k) Required Consents
4.1 Organization
4.5 Consent, Approvals and Notices
4.7(a) Financial Statements
4.8 Subsequent Events
4.9(a) Tax Returns
4.9(b) Audits
4.9(d) Tax Adjustments and Threatened Audits
4.9(e)(1) Tax Claims
4.9(e)(2) Taxing Jurisdictions
4.9(h) Timely Filing of Tax Returns
4.9(m) Threatened Investigation, Audit or Claims
4.10(a) Certain Contracts
4.10(b) Certain Contracts
4.10(c) Undisclosed Contracts
4.11(a) Real Property - Owned Real Property
4.11(b) Real Property - Leased Real Property
4.12(a) Intellectual Property - Trademarks
4.12(c) Intellectual Property - Licenses
4.13 Litigation
4.14(a) Plans
4.14(d) Plan Contributions
4.14(f) Transaction Payments
4.14(g) Benefits Beyond Retirement
4.14(n) Terminability of Plan
4.15(a) Threatened Strikes and Labor Slow downs
4.15(b) Collective Bargaining Agreements
4.15(c) Employees
4.15(d) Retired Employees
4.15(e) Terminated Employees
4.15(g) Sales Incentive Programs
4.15(h) Sales Employment Agreements
4.15(i) Employee Sales
4.15(j) Notices of Termination
4.15(k) Liability Under Employment Laws
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Schedules and Exhibits
----------------------
4.15(l) Unpaid Salary, etc.
4.16(d) Hazardous Releases
4.16(e) Hazardous Materials on Real Property
4.16(g) Environmental Reports
4.18 Permits
4.19 Liens
4.20 Accounts Receivable
4.22 Inventory
4.23 Insurance
4.26 Banks; Powers of Attorney
4.28(a) Customers
4.28(b)(1) Suppliers
4.28(b)(2) Supplier Price Increases
6.4 Executive Employment Contracts
7.5 D&O Indemnitees
9.1(h) Guarantees
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CONFIDENTIAL
MEMBERSHIP INTEREST AND ASSET PURCHASE AGREEMENT
THIS MEMBERSHIP INTEREST AND ASSET PURCHASE AGREEMENT (this
"Agreement") is entered into as of January 15, 2003, by and among ▇▇▇▇▇▇ Group
Inc., a Delaware corporation, ▇▇▇▇▇▇ Group Canada Corp., a Nova Scotia unlimited
liability company, KAR PRODUCTS, LLC, a Delaware limited liability company, A. &
H. BOLT & NUT COMPANY LTD., an Ontario corporation; SUNSOURCE CANADA INVESTMENT
COMPANY, a Nova Scotia unlimited liability company, GC-SUN HOLDINGS II, L.P., a
Delaware limited partnership; A & H BOLT HOLDINGS, INC., a Delaware corporation,
GC-SUN, INC., a Delaware corporation, GC-SUN ▇.▇. ▇▇, INC., a Delaware
corporation, GC-SUN G.P., INC., a Delaware corporation, and GC-SUN HOLDINGS,
L.P., a Delaware limited partnership.
RECITALS
WHEREAS, the Buyers desire to purchase from the Sellers, and the
Sellers desire to sell to the Buyers, the Interests and the Canadian Assets, all
upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises, the mutual covenants,
agreements, representations, and warranties herein contained, and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings set forth below:
"Accounting Methodology" means those accounting methods and
policies set forth on Schedule 2.5 and the attachments thereto.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Exchange Act.
"Agreement" means this Membership Interest and Asset Purchase
Agreement, as the same may be amended from time to time in accordance with the
terms hereof.
"Ancillary Agreements" means, collectively, the Registration
Rights Agreement, the Assignment of Interests, the Transition Services
Agreement, the Owned Real Property Leases, the ▇▇▇▇ of Sale, the Assumption
Agreement, and the Trademark Assignment.
"Annual Financial Statements" has the meaning set forth in
Section 4.7(a).
"Assignment of Interests" has the meaning set forth in Section
3.2(a).
"Assumption Agreement" has the meaning set forth in Section
3.3(b).
"Bankruptcy Event" means, with respect to any Person, (i) the
commencement by such Person of a voluntary case under, or the consent by such
Person to the entry of an order for relief in an involuntary case under, any
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar Law now or hereafter in effect, or (ii) the consent by such Person
to the appointment of, or taking possession by, a receiver, custodian,
liquidator, assignee, trustee or sequestrator (or other similar official) of
such Person or of any substantial part of its assets, or (iii) the making of a
general assignment by such Person generally to pay its debts as they benefit
creditors, or (iv) the admission in writing of such Person of its inability to
pay its debts as they become due in the ordinary course of business, or (v) the
adoption of a resolution by its directors or shareholders (or analogous managers
or equity owners) in furtherance of any of the foregoing, or (vi) the entry by a
court of competent jurisdiction of a decree or order for relief in respect of
such Person in an involuntary case under any bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar Law now or hereafter in
effect and the continuance of such decree or order unstayed and in effect for a
period of sixty (60) days, or (vii) the appointment of a receiver, examiner,
custodian, liquidator, assignee, trustee or sequestrator (or other similar
official) of such Person or of any substantial part of its assets, or (viii) the
ordering of the winding up or liquidation of its affairs, or conversion of a
pending reorganization proceeding into a proceeding under Chapter 7 of the
Bankruptcy Code or other proceeding to liquidate or otherwise dispose of a
substantial part of such Person's properties.
"▇▇▇▇▇▇ Common Stock" has the meaning given to that term in
Section 2.3(c).
"▇▇▇▇▇▇ Credit Facilities" means, collectively, (i) the 7.66%
Senior Notes dated November 12, 1999, (ii) the 7.80% Senior Notes dated November
12, 1999, (iii) the 8.59% Senior Notes dated November 21, 2000, and (iv) that
certain Senior Unsecured Revolving Credit Agreement dated as of June 14, 2002.
"Base Purchase Price" has the meaning given to that term in
Section 2.3.
"▇▇▇▇ of Sale" has the meaning given to that term in Section
3.2(b).
"Book Cash" means, for any Person, the amount of the cash and
cash equivalents account on the books of such Person on the applicable
determination date as determined in accordance with US generally accepted
accounting principles, consistently applied
"Business" has the meaning given to that term in Section
7.2(a).
"Business Day" means any calendar day except for Saturday or
Sunday or any statutory holidays observed in the cities of New York, New York,
Bristol, Connecticut, Chicago, Illinois or Toronto, Ontario.
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"Buyer Indemnitees" has the meaning set forth in Section 11.2.
"Buyer Parties" means, prior to the Closing, the Buyers, and
from and after the Closing, means the Buyers and the US Company.
"Buyers" means, collectively, and "Buyer" means, individually,
the US Buyer and Canadian Buyer.
"Canadian Assets" mean all of those assets set forth on
Schedule 2.2(a), excluding the Canadian Excluded Assets.
"Canadian Assumed Contracts and Plans" means those Contracts
to which the Canadian Company is a party and the Canadian Plans.
"Canadian Assumed Liabilities" means all liabilities and
obligations of the Canadian Company, other than Canadian Retained Liabilities,
including the following (except to the extent a Canadian Retained Liability):
(a) all obligations and liabilities of the Canadian
Company under the Canadian Assumed Contracts and
Plans;
(b) all accounts payable of the Canadian Company that
are accrued and unpaid as of the Closing;
(c) all liability to pay expenses of the Canadian
Company, including, without limitation, all
obligations and liabilities for refunds, adjustments, promotional and other
allowances, exchanges, returns, and warranty, guarantee and merchantability
claims in respect of any and all products sold or manufactured by the Canadian
Company at any time before the Closing Date;
(d) all obligations and liabilities arising under
Canadian Laws to Canadian Employees; and
(e) all obligations and liabilities relating to or
arising from the Canadian Buyer's ownership or use
of the Canadian Assets from and after the Closing.
"Canadian Buyer" means ▇▇▇▇▇▇ GROUP CANADA CORP.
"Canadian Cash Consideration" has the meaning set forth in
Section 2.3(a).
"Canadian Charter Documents" means, collectively, the Articles
of Incorporation and the By-laws of the Canadian Company.
"Canadian Closing Balance Sheet" means the balance sheet of
the Canadian Company as of the Closing Balance Sheet Determination Date prepared
in accordance with US generally accepted accounting principles, consistently
applied, and using the Accounting Methodology.
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"Canadian Company" means A. & H. BOLT & NUT COMPANY LTD.
"Canadian Employees" means all employees, and dependent and
independent contractors employed or engaged by the Canadian Company as of the
Closing, including employees on disability, pregnancy, parental, or other leaves
of absence.
"Canadian Excluded Assets" means those assets of the Canadian
Company set forth on Schedule 2.2(b).
"Canadian Net Worth" means the amount resulting from net worth
calculation for the Canadian Company computed using the Accounting Methodology.
"Canadian Plans" has the meaning set forth in Section 4.14(a).
"Canadian Retained Liabilities" means the following
liabilities and obligations of the Canadian Company: (a) liabilities for Taxes
imposed on the Canadian Company or any predecessor (including, without
limitation, taxes imposed under the Employer Health Tax Act (Ontario)), (b)
liabilities or obligations based on violations of Environmental Laws arising out
of the treatment, storage, disposal, recycling, reuse or arrangements for
disposal (whether at the Owned Real Property, Leased Real Property or other
locations) of wastes and Hazardous Materials generated, used, handled or
transported by or on behalf of the Canadian Company in connection with its
operations or the ownership, use or occupancy of the Owned Real Property and
Leased Real Property on or prior to the Closing Date, or the presence of
Hazardous Materials at the Owned Real Property or Leased Real Property prior to
the Closing Date, (c) liabilities related to indebtedness under those Contracts
set forth, or required to be set forth, on Schedule 4.10(a)(i) and related to
guarantees of obligations under those Contracts set forth, or required to be set
forth, on Schedule 4.10(a)(ii), and (d) liabilities otherwise covered by
policies of insurance under which the Canadian Company has coverage, but only to
the extent the Canadian Company actually recovers thereunder.
"Canadian Seller" means the Canadian Company.
"Charter Documents" means, collectively, the Canadian Charter
Documents and the US Charter Documents.
"Claim" has the meaning set forth in Section 11.5.
"Closing" has the meaning set forth in Section 3.1.
"Closing Balance Sheet Determination Date" means 11:59 p.m.
central time on the day immediately preceding the Closing Date.
"Closing Balance Sheets" means, collectively, the US Closing
Balance Sheet and the Canadian Closing Balance Sheet.
"Closing Date" has the meaning set forth in Section 3.1.
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"Closing Date Exchange Rate" means the U.S./Canadian dollar
exchange rate as reported by Reuters Group PLC on ▇▇▇.▇▇▇▇▇▇▇.▇▇▇ at 9:00 a.m.,
eastern time, on the Closing Date.
"Closing Payment" has the meaning set forth in Section 2.3(b).
"Code" means the United States Internal Revenue Code of 1986,
as amended.
"Companies" means, collectively, and "Company" means,
individually, the US Company and the Canadian Company.
"Companies Intellectual Property" has the meaning given to
that term in Section 4.12(a).
"Company 401(k) Plan" has the meaning set forth in Section
7.7.
"Contract" means any contract, agreement, lease, commitment,
instrument, license, guaranty, note, bond, indenture, mortgage, deed, deed of
trust, or purchase order, whether oral or in writing, and all amendments,
schedules and exhibits thereto.
"Customers" has the meaning set forth in Section 4.28(a).
"D&O Indemnitee" or "D&O Indemnitees" has the meaning set
forth in Section 7.5(a).
"D&O Policy" has the meaning set forth in Section 7.5(d).
"Damages" means any and all losses, charges, claims, damages,
liabilities, Liens, diminution in value, obligations, judgments, settlements,
fines, penalties, awards, demands, offsets, reasonable out-of-pocket costs,
expenses and reasonable attorneys' fees (including any such reasonable costs,
expenses and attorneys' fees incurred in enforcing a party's right to
indemnification against any indemnifying party or with respect to any appeal),
but excluding, except and solely to the extent such types of Damages are
actually paid in respect of a third party Claim, any consequential damages,
special damages, punitive damages, exemplary damages, multiple damages and other
penalty damages.
"Des Plaines Property" means that certain parcel of the Real
Property commonly known as ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
"Dollars" and "$" means, unless otherwise specified, the
lawful currency of the United States of America.
"Environmental Claims" means any and all administrative,
regulatory, Canadian common law, or other form of judicial actions, suits,
demands, demand letters, claims, Liens, notices of non-compliance or violation,
investigations or proceedings relating in any way to any Environmental Law, or
any permit issued under any such Environmental Law.
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"Environmental Law" means any Law relating to the protection
of human health and the environment, including, without limitation, the air,
surface water, groundwater or land, and/or governing the handling, use,
generation, treatment, storage, shipping, Release, licensing or disposal of
Hazardous Materials, promulgated under any Law in effect and in each case as
amended as of the Closing Date, including, without limitation, the following:
Occupational Health and Safety Act; Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 ▇.▇.▇.▇▇. 6901 et seq.;
the Resource Conservation and Recovery Act, as amended, 42 ▇.▇.▇.▇▇. 6901 et
seq.; the Federal Water Pollution Control Act, as amended, 33 ▇.▇.▇.▇▇. 1251 et
seq.; the Toxic Substances Control Act, 15 ▇.▇.▇.▇▇. 2601 et seq.; the Clean Air
Act, 42 ▇.▇.▇.▇▇. 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. ss. 3804
et seq.; Environmental Protection Act, R.S.O. 1990, c. E-19; Environmental ▇▇▇▇
of Rights, S.O. 1993, c. 28; Ontario Water Resources Act, R.S.O. 1990, c. 0-40;
Canadian Environmental Protection Act, S.C. 1999, c. 33; and Fisheries Act,
R.S.C. 1985, c. F-14.
"ERISA" means the United States Employee Retirement Income
Security Act of 1974, as amended.
"Estimated US Book Cash" has the meaning set forth in Section
2.7.
"Exchange Act" means the United States Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder.
"Executive Employment Contracts" has the meaning set forth in
Section 6.4.
"Financial Statements" has the meaning set forth in Section
4.7(a).
"Great Plains Settlement" means that certain Settlement
Agreement and Release, dated June 3, 2002, by and between Great Plains Software,
O.C., Inc., and the US Company.
"Governmental Entity" means any government or any governmental
agency, ministry, authority, bureau, board, commission, department, political
subdivision or court, whether federal, state, provincial, municipal, or local,
domestic or foreign.
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act" means the United States
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement Act of 1976, as amended.
"Hazardous Materials" means any chemical, material, substance,
radiation, sound, vibration, or a combination of them, defined as or included in
the definition of "contaminant," "pollutant," "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants," "regulated
substances" or words of similar import, under any applicable Environmental Law.
"Independent Accounting Firm" has the meaning set forth in
Section 2.5(b).
"Intellectual Property" means, with respect to any Person, (a)
all inventions (whether patented or not patented, patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications and patent disclosures,
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together with all reissuances, continuations, continuations-in-part, revisions,
extensions and reexaminations thereof, (b) all domain names, trademarks, service
marks, trade dress, logos, trade names and corporate names, together with all
translations, adaptations, derivations and combinations thereof and including
all goodwill associated therewith, and all applications, registrations and
renewals in connection therewith, (c) all copyrightable works, all copyrights,
and all applications, registrations and renewals in connection therewith, (d)
all trade secrets (including know-how, formulas, compositions, techniques,
technical data, designs, drawings, specifications, confidential business
information, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (f) all computer software
(including data and related documentation), (g) all other proprietary rights,
and (h) all copies and tangible embodiments thereof (in whatever form or
medium).
"Interests" means all of the membership interests in the US
Company.
"Inventory Purchase Orders" means purchase orders (a)
delivered to a Company by a customer for purchase of inventory from the Company,
or (b) delivered by the Company to a Person for the purchase of goods or
services by the Company.
"IRS" has the meaning set forth in Section 4.14(e).
"June 2002 Financial Statements" has the meaning set forth in
Section 4.7(a).
"KAR Retirement Plan" has the meaning set forth in Section
4.14(b).
"Knowledge of the Sellers" means the actual knowledge of
▇▇▇▇▇▇ San ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇, or ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
"Law" means any federal, state, provincial, municipal, or
local, domestic or foreign, constitutional provision, statute, law (including,
without limitation, any Canadian common law), ordinance, by-law, rule, code,
guideline, standard, regulation, Permit, decree, injunction, judgment, order or
legally binding ruling, determination, finding, directive or writ of any
Governmental Entity.
"Lien" means any lien, mortgage, pledge, security interest,
charge, claim, easement, encroachment, restrictive covenant, right of
occupation, hypothecation, option or privilege, or other encumbrance.
"Leased Real Property" has the meaning set forth in Section
4.11(b).
"Material Adverse Effect" or "Material Adverse Change" means,
with respect to any Person, any material adverse effect or material adverse
change in the condition (financial or otherwise), assets, liabilities,
obligations, operations, or results of operations of such Person other than any
effect or change arising out of (a) any change in the economy in general, or (b)
any change in the markets in which the Person operates. Material Adverse Effect
or Material Adverse Change shall include, without limitation, the occurrence of
a Bankruptcy Event with respect to such Person.
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"Net Worths" means, collectively, the US Net Worth and the
Canadian Net Worth.
"Non-Company Participants" has the meaning set forth in
Section 7.7.
"Owned Real Property" has the meaning set forth in Section
4.11(a).
"Owned Real Property Buyer" has the meaning set forth in
Section 6.9.
"Owned Real Property Leases" has the meaning set forth in
Section 3.2(j).
"Parents" means, collectively, and "Parent" means,
individually, A & H BOLT HOLDINGS, INC., SUNSOURCE CANADA INVESTMENT COMPANY,
GC-SUN, INC., GC-SUN ▇.▇. ▇▇, INC., GC-SUN G.P., INC., and GC-SUN HOLDINGS, L.P.
"Parking Lot Lease" means that certain Parking Lot Lease,
dated February 1, 1998, between Commonwealth Edison Co. and the US Company, as
amended or supplemented, and any subsequent lease thereto with respect to the
leased premises identified therein.
"Parking Lot Sublease" has the meaning set forth in Section
3.2(s).
"Permit" means any license, permit, registration, concession,
franchise, certificate of authority or order, certificate of occupancy,
certificate of approval, approval, authorization or any waiver of the foregoing,
issued by any Governmental Entity.
"Permitted Lien" means (a) any Lien for Taxes, assessments or
governmental charges or claims that are not yet delinquent and are accrued or
reserved for, to the extent appropriate, on the Financial Statements or,
following the Closing, the Closing Balance Sheets, (b) statutory Liens of
landlords, Liens of carriers, warehousemen, mechanics, materialmen and other
Liens imposed by law in each case (i) with respect to amounts that are not yet
delinquent and are accrued or reserved for, to the extent appropriate, on the
Financial Statements or, following the Closing, the Closing Balance Sheets, or
(ii) which are being contested in good faith and are accrued or reserved for, to
the extent appropriate, on the Financial Statements or, following the Closing,
the Closing Balance Sheets, (c) any Lien securing rental payments under capital
or operating lease arrangements, (d) restrictions on the transfer of securities
existing under security Laws, and (e) any exceptions, encroachments or
discrepancies disclosed by a survey of any Real Property, easements,
rights-of-way, and minor defects or irregularities in title that in the
aggregate do not materially adversely affect the use or occupancy of any Real
Property by the applicable Company as currently used or occupied.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a Governmental Entity.
"Plan" or "Plans" has the meaning set forth in Section
4.14(a).
"Plan Spin-Off" has the meaning set forth in Section 7.7.
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"Purchase Price" has the meaning set forth in Section 2.3.
"Real Property" means Leased Real Property and Owned Real
Property.
"Real Property Leases" has the meaning set forth in Section
4.11(b)(v).
"Registration Rights Agreement" has the meaning set forth in
Section 3.2(f).
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
discarding, burying, abandoning or disposing into the environment (whether
internal or external).
"Required Consents" has the meaning set forth in Section
3.2(k).
"Resolution Period" has the meaning set forth in Section
2.5(b).
"Restricted Legend" means the following legend placed on the
▇▇▇▇▇▇ Common Stock:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER A STATE LAW, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT (1) PURSUANT TO A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH
IS EFFECTIVE UNDER SUCH ACT OR (2) AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER SUCH ACT AND SUCH STATE LAWS RELATING TO
THE DISPOSITION OF SUCH SECURITIES.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND VOTING CONTAINED IN A
REGISTRATION RIGHTS AGREEMENT DATED AS OF __________________,
2003, AMONG THE ISSUER OF SUCH SECURITIES (THE "ISSUER") AND
THE HOLDER OF SUCH SECURITIES. A COPY OF SUCH REGISTRATION
RIGHTS AGREEMENT, AS AMENDED, WILL BE FURNISHED PROMPTLY
WITHOUT CHARGE BY THE ISSUER TO THE HOLDER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE UPON WRITTEN REQUEST.
"Retainage" has the meaning set forth in Section 2.3(d).
"Sales Employees" shall mean all employees who are employed or
otherwise engaged as part of the sales force of the Companies, including,
without limitation, all division vice presidents, district sales managers, zone
sales managers, sales supervisors, area managers, service writers, customer
satisfaction managers and customer service specialists.
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"Sales Employment Agreements" has the meaning set forth in
Section 4.15(h) hereof.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Seller Indemnitees" has the meaning set forth in Section
11.3.
"Seller Parties" means, prior to the Closing, each of the
Parents, the US Seller and the Companies, and means from and after the Closing,
each of the Parents, the US Seller and the Canadian Company.
"Sellers" means, collectively, and "Seller" means,
individually, the Canadian Seller and the US Seller.
"September 2002 Financial Statements" has the meaning set
forth in Section 4.7(a).
"Shared Records" means any books, records, reports or other
information of the Companies that contain information which, following the
Closing, Sellers may reasonably require, including, without limitation, in
connection with the preparation of any Tax Returns, and other financial or
similar information related to Sellers and the Companies.
"Stock Value" means, with respect to ▇▇▇▇▇▇ Common Stock, the
quotient of (i) the sum of the "Volume Weighted Average Price" per share
reported on the Bloomberg Professional Financial Service for the twenty (20)
Trading Days immediately preceding (but excluding) the date of determination,
divided by (ii) twenty (20).
"Suppliers" has the meaning given to that term in Section
4.28(b).
"Tax" or "Taxes" means any federal, state, provincial,
municipal, local or foreign net income, gross income, gross receipts, sales,
use, goods and services or other value-added or ad valorem, transfer, franchise,
profits, capital, license, lease, service, service use, withholding, payroll,
employment, social security or other social, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or other tax,
fee, assessment or charge, including Canada Pension Plan and Employment
Insurance premiums and Workers' Compensation payments and any related interest,
penalty or addition thereto.
"Tax Documents" has the meaning set forth in Section 8.6.
"Tax Return or "Tax Returns" means any return, declaration,
report, claim for refund or information return or statement relating to Taxes,
including any schedule or attachment thereto.
"Threshold Indemnity Amount" has the meaning set forth in
Section 11.6(a).
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"Trademark Assignment" has the meaning set forth in Section
3.2(c).
"Trademarks" has the meaning set forth in Section 4.12(a).
"Trading Day" means any trading day on the New York Stock
Exchange during which more than 5,000 shares of ▇▇▇▇▇▇ Common Stock are traded.
"Transition Services Agreement" has the meaning set forth in
Section 3.2(i).
"US Buyer" means ▇▇▇▇▇▇ GROUP INC.
"US Buyer Financials" has the meaning set forth in Section
5.10.
"US Buyer SEC Reports" has the meaning set forth in Section
5.9.
"US Cash Consideration" has the meaning set forth in Section
2.3(b).
"US Charter Documents" means, collectively, (i) the
Certificate of Formation of the US Company, (ii) the certificate of limited
partnership of the US Seller, (iii) the operating agreement of the US Company,
and (iv) the limited partnership agreement of the US Seller.
"US Closing Balance Sheet" means the balance sheet of the US
Company as of the Closing Balance Sheet Determination Date prepared in
accordance with US generally accepted accounting principles, consistently
applied, and using the Accounting Methodology.
"US Company" means KAR PRODUCTS, LLC.
"US Net Worth" means the amount resulting from the net worth
calculation for the US Company computed using the Accounting Methodology.
"US Plans" has the meaning set forth in Section 4.14(a).
"US Seller" means GC-SUN HOLDINGS II, L.P.
"US Stock Consideration" has the meaning set forth in Section
2.3(c).
"WARN Act" has the meaning given to that term in Section
4.15(f).
"Windsor Property" means that certain parcel of the Real
Property commonly known as ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇,
including the improvements thereon and the soils, groundwater and contents
thereof below ground surface.
"Year-end Count" has the meaning set forth in Section 2.4(a).
ARTICLE 2
THE TRANSACTION
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2.1 Sale and Purchase of the Interests. Upon and subject to
the terms and provisions of this Agreement, the US Buyer shall purchase and
accept delivery from the US Seller, and the US Seller shall sell, assign,
transfer and deliver to the US Buyer, at the Closing, the Interests, validly
issued and outstanding, non-assessable, fully paid, and free and clear of all
Liens other than restrictions on the transfer of securities existing under
securities Laws.
2.2 Sale and Purchase of the Canadian Assets; Assumption of
Canadian Assumed Liabilities.
(a) Sale and Purchase of the Canadian Assets. Upon and
subject to the terms and provisions of this Agreement, the Canadian Buyer shall
purchase and accept delivery from the Canadian Seller, and the Canadian Seller
shall sell, assign, transfer and deliver to the Canadian Buyer, at the Closing,
all of the Canadian Assets free and clear of all Liens other than Permitted
Liens.
(b) Canadian Excluded Assets. Notwithstanding anything to
the contrary in this Agreement or in any of the Ancillary Agreements, the
Canadian Seller will not sell to the Canadian Buyer, and the Canadian Buyer will
not acquire any interest in, the Canadian Excluded Assets.
(c) Assumption of Canadian Assumed Liabilities. Upon and
subject to the terms and provisions of this Agreement, at the Closing the
Canadian Buyer shall assume and shall pay, perform and discharge when due the
Canadian Assumed Liabilities.
(d) Canadian Retained Liabilities. Notwithstanding
anything to the contrary in this Agreement or in any of the Ancillary
Agreements, the Canadian Buyer shall not assume any of, and the Canadian Seller
shall remain responsible for, the Canadian Retained Liabilities.
2.3. Purchase Price; Closing Payment. The aggregate purchase
price payable in cash and securities for the Interests and the Canadian Assets
will be Seventy-eight Million Five Hundred Thousand Dollars ($78,500,000) (the
"Base Purchase Price"), subject to adjustment following the Closing pursuant to
Section 2.5 hereof (as so adjusted, the "Purchase Price"). The Base Purchase
Price will be paid by the Buyers to the Sellers as follows:
(a) At the Closing, the Canadian Buyer shall deliver to
the Canadian Seller, via wire transfer to a Canadian account specified by the
Canadian Seller no less than five (5) Business Days prior to the Closing Date,
the Canadian dollar equivalent (as determined using the Closing Date Exchange
Rate) of Four Million Dollars ($4,000,000) (the "Canadian Cash Consideration");
(b) At the Closing, the US Buyer shall deliver to the US
Seller, via wire transfer to an account specified by the US Seller no less than
five (5) Business Days prior to the Closing Date, the sum of Fifty-Six Million
Dollars ($56,000,000) (the "US Cash
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Consideration"; the aggregate of the Canadian Cash Consideration and the US Cash
Consideration is sometimes referred to herein as the "Closing Payment");
(c) At the Closing, the US Buyer shall deliver to the US
Seller that whole number (with any fractional shares to be paid in cash, unless
US Buyer elects to round up the number of shares) of validly issued, fully paid
and non-assessable shares of the common stock of US Buyer ("▇▇▇▇▇▇ Common
Stock") bearing the Restricted Legend, that when multiplied by the Stock Value
(as determined on the date that is two (2) Business Days prior to the Closing
Date) equals Fifteen Million Five Hundred Thousand Dollars ($15,500,000) (the
"US Stock Consideration"); and
(d) At the Closing, the US Buyer shall issue in the name
of the US Seller that whole number (with any fractional shares to be paid in
cash, unless US Buyer elects to round up the number of shares) of shares of
▇▇▇▇▇▇ Common Stock that when multiplied by the Stock Value (as determined on
the date that is two (2) Business Days prior to the Closing Date) equals Three
Million Dollars ($3,000,000) (including amounts distributed in respect thereof,
if any, as contemplated by clause (ii) below, the "Retainage"). The Retainage
will be held by the US Buyer in escrow pursuant to this Section 2.3(d) until
delivered to US Seller as follows:
(i) Subject to Section 2.5(d) and the provisions of
the Registration Rights Agreement, US Seller shall remain the record owner of
all Retainage and shall have the right to exercise any and all voting rights
that may attach thereto.
(ii) US Seller authorizes the US Buyer (A) to
receive any increase in or non-cash profits on the Retainage, including
securities or other non-cash distributions, and to hold the same as part of the
Retainage; and (B) to hold the cash receipts from any payment or distribution
with respect to the Retainage as part of the Retainage.
(iii) Until the Retainage is delivered to US Seller
pursuant to Section 2.3(d)(iv), US Seller (A) will defend the Retainage against
the claims and demands of all other parties, and will keep the Retainage free
from all Liens other than Permitted Liens, (B) will not sell, transfer, assign,
or otherwise dispose of the Retainage or any interest therein, and (C) will pay
all Taxes which may be levied or assessed against the Retainage.
(iv) Subject to Section 2.5(d), the US Buyer shall deliver to the US Seller the
Retainage within five (5) Business Days of the later of (i) the final
determination of the Closing Balance Sheets, and (ii) in the event any amount is
owed by Sellers to Buyers under Section 2.5(c), final payment by the Sellers of
all amounts due by the Sellers, if any, pursuant to Section 2.5(c).
2.4 Inventory Inspection.
(a) The Sellers shall provide to the Buyers the results
of the physical count of the inventory of the Companies performed by the
Companies on January 2 - 3, 2003 (the "Year-end Count"), as soon as such results
are available.
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(b) For purposes of preparing the Closing Balance Sheets,
the Buyers may, at their sole option, either (i) use the Year-end Count as
adjusted by reference to the inventory purchase and sale records of the
Companies (in which case the Year-end Count shall be binding on the parties for
purposes of the preparation of the Closing Balance Sheets), or (ii) at the
Buyers' sole expense, conduct a physical count, or test counts, of the inventory
of the Companies within ten (10) Business Days after the Closing Date as of the
Closing Balance Sheet Determination Date, which count, or test counts, the
Sellers and their representatives may observe and in which the Sellers and their
representatives may participate. In the event the Buyers conduct such a physical
count or test counts as set forth under this Section 2.4(b), the Buyers shall
provide the results and the supporting detail related to any such physical
count, or test counts, to the Sellers, and the results of such physical count,
or test counts, shall (rather than the Year-end Count), to the extent not
disputed by the Sellers within ten (10) Business Days after the receipt by the
Sellers of such results, be binding on the parties for purposes of the
preparation of the Closing Balance Sheets pursuant to Section 2.5 hereof.
2.5 Post Closing Adjustment to Purchase Price.
(a) As soon as reasonably practical following the Closing
(but in no event more than ninety (90) days after the Closing Date), taking into
account the inventory count performed in accordance with Section 2.4(a) or
2.4(b), as appropriate, the Buyers shall prepare and deliver to the Sellers (i)
the Closing Balance Sheets, which Buyers may, at their sole option and expense,
have audited within such ninety (90) day period; and (ii) based on the Closing
Balance Sheets, a calculation of the US Net Worth and the Canadian Net Worth.
Sellers shall cooperate fully with Buyers in the preparation of the Closing
Balance Sheets. All expenses incurred in connection with the preparation of the
Closing Balance Sheets shall be the responsibility of the Buyers.
(b) The Closing Balance Sheets and the Net Worths shall
become final and binding upon the parties unless, within sixty (60) days
following delivery to the Sellers by the Buyers of the Closing Balance Sheets
and the Net Worths, the Sellers notify the Buyers of their objection thereto,
which objection may only be that the Closing Balance Sheets or the Net Worths
were not properly computed in accordance with the Accounting Methodology and
this Section 2.5. Any notice of objection shall specify in reasonable detail the
reasons for objection. If the Sellers so notify the Buyers of their objection to
the Closing Balance Sheets and/or the Net Worths, the Sellers and the Buyers
shall negotiate in good faith to resolve any differences. If, within thirty (30)
days following the receipt of such notice by the Buyers (the "Resolution
Period"), any of such differences have not been resolved, then the parties shall
submit the dispute to KPMG LLP or another mutually agreed independent accounting
firm selected by Buyers and the Sellers (the "Independent Accounting Firm"). The
Independent Accounting Firm will conduct its own review and evaluate those items
or amounts in the Closing Balance Sheets relevant to the calculation of the Net
Worths and shall determine only those items still in dispute at the end of the
Resolution Period and shall determine whether such items have been prepared in
accordance with the terms of this Agreement and, with respect to both Closing
Balance Sheets, with US generally accepted accounting principles, consistently
applied. The Independent Accounting Firm will be granted reasonable access to
all records of the Companies necessary for the conduct of such review, and the
parties hereto agree to follow such procedures
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and make such submissions to the Independent Accounting Firm as it may request
in conducting its review and making its determination under this Section 2.5(b).
Buyers and Sellers shall instruct the Independent Accounting Firm to not assign
a value to any item in dispute greater than the highest value for such item
assigned by Buyers or Sellers, or less than the lowest value for such item
assigned by Buyers or Sellers. Each party agrees to execute, if requested by the
Independent Accounting Firm, a reasonable engagement letter. The Independent
Accounting Firm's determination shall be made within forty-five (45) days after
its engagement (which engagement shall be made no later than ten (10) Business
Days after the end of the Resolution Period), or as soon thereafter as possible,
shall be set forth in a written statement delivered to the Sellers and the
Buyers and shall be final, conclusive, non-appealable and binding for all
purposes hereunder. In the event the Sellers object to the Closing Balance
Sheets and the Net Worths in accordance with this Section 2.5(b), the Closing
Balance Sheets and the Net Worths, adjusted to reflect the determination of the
Independent Accounting Firm with respect to the disputed items and the agreed
resolutions with respect to items for which the Sellers and the Buyers have
reached a resolution, shall become final and binding upon the parties. The
determination of the Independent Accounting Firm shall not be deemed an award
subject to review under the Federal Arbitration Act or any other statute. The
fees and expenses of the Independent Accounting Firm in resolving any
differences pursuant to this Section 2.5(b) shall be paid one-half by the
Sellers and one-half by the Buyers.
(c) Within ten (10) days following the final
determination of the Closing Balance Sheets and the Net Worths in accordance
with Section 2.5(b):
(i) If the sum of the US Net Worth plus the Canadian
Net Worth is greater than $29,061,000 (which amount was computed by reference to
the June 2002 Financial Statements and the September 2002 Financial Statements
in accordance with the Accounting Methodology, and which amount is subject to
adjustment as set forth therein), the US Buyer shall deliver to the US Seller,
at the sole option of the US Buyer, either (1) that whole number (with any
fractional shares to be paid in cash, unless Buyers elect to round up the number
of shares) of shares of ▇▇▇▇▇▇ Common Stock that when multiplied by the Stock
Value (as determined on the date that is two (2) Business Days prior to the
Closing Date) equals the amount of such excess, or (2) by wire transfer of
immediately available funds, cash in an amount equal to such excess; or
(ii) If the sum of US Net Worth plus the Canadian
Net Worth is less than $29,061,000 (which amount was computed by reference to
the June 2002 Financial Statements and the September 2002 Financial Statements
in accordance with the Accounting Methodology, and which amount is subject to
adjustment as set forth therein), the US Seller shall deliver to the US Buyer,
at the sole option of US Seller, either (1) that whole number (with any
fractional shares to be paid in cash, unless Sellers elect to round up the
number of shares) of shares of ▇▇▇▇▇▇ Common Stock that when multiplied by the
Stock Value (as determined on the date that is two (2) Business Days prior to
the Closing Date) equals the amount of such deficiency, or (2) by wire transfer
of immediately available funds, cash in an amount equal to such deficiency.
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(d) In the event Sellers shall not have paid any amount
due to Buyers under this Section 2.5 when due (or shall not have authorized the
delivery of the applicable number of shares out of the Retainage to Buyers),
then, upon not less than five (5) days written notice to Sellers, Buyers shall
be permitted to offset amounts due to Buyers from Sellers under Section
2.5(c)(ii), if any, against the Retainage. As soon as practicable following any
such offset, Buyers shall provide Sellers with notice of such offset. In the
event of, and to the extent of, any such offset, ownership of that portion of
the Retainage so off-set shall revert to US Buyer, and all rights of US Seller
to the off-set portion of the Retainage set forth in Section 2.3(d) shall
terminate.
2.6. Allocation of Purchase Price. The parties shall allocate
the sum of the Canadian Cash Consideration and Canadian Assumed Liabilities to
the purchase and sale of the Canadian Assets, and allocate the sum of the US
Cash Consideration, the US Stock Consideration and the Retainage to the purchase
and sale of the Interests. However, such allocations shall be adjusted
appropriately based on any adjustment in US Net Worth and Canadian Net Worth,
such adjustment to be allocated as between the Canadian Assets and the Interests
based on Canadian Net Worth and US Net Worth, as shall be agreed among the
Buyers and Sellers. US Seller and Canadian Seller agree to keep each other whole
so that as between US Seller and Canadian Seller, US Seller enjoys the benefit
or burden of any changes in the US Net Worth and the Canadian Seller enjoys the
benefit or burden of any changes in the Canadian Net Worth. US Buyer and
Canadian Buyer agree to keep each other whole so that as between US Buyer and
Canadian Buyer, US Buyer enjoys the benefit or burden of any changes in the US
Net Worth and the Canadian Buyer enjoys the benefit or burden of any changes in
the Canadian Net Worth. Each party agrees to report such allocation on its Tax
Returns and not to take a position on any Tax Return that is in any manner
inconsistent with such allocation without the written consent of the other
parties or unless required by Law. US Buyer and the US Seller shall use
commercially reasonable efforts to jointly complete a Form 8594 so that each
such party may separately file such form with its federal income Tax Return for
the tax year in which the Closing Date occurs. Canadian Buyer and Canadian
Seller shall use commercially reasonable efforts to prepare a schedule of the
allocation of the total Canadian consideration among the Canadian Assets. If
Buyers and the Sellers are unable to reach agreement with respect to such
allocations, then each such party shall make its own determination of such
allocations for tax reporting purposes.
2.7. Reconciliation of Cash. On the Closing Date, but prior to
the Closing, the US Seller shall prepare and deliver to the US Buyer a good
faith estimate of the Book Cash of the US Company (the "Estimated US Book Cash")
as of the Closing Balance Sheet Determination Date. At the Closing, the US Buyer
shall deliver to US Seller, via wire transfer of immediately available funds to
an account specified by US Seller no less than five (5) Business Days prior to
Closing, an amount equal to the Estimated US Book Cash. Within ten (10) days
following the final determination of the Closing Balance Sheets, if the
difference between the Book Cash of the US Seller set forth on the US Closing
Balance Sheet and the Estimated US Book Cash is:
(a) positive, then the US Buyer shall deliver to the US
Seller, by wire transfer of immediately available funds, cash in an amount equal
to such difference; and
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(b) negative, then the US Seller shall deliver to the US
Buyer, by wire transfer of immediately available funds, cash in an amount equal
to such difference.
ARTICLE 3
CLOSING AND CLOSING DATE
3.1. Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned in accordance
with the provisions of Article 10 hereof, the closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at 10:00 a.m.
(Eastern time) as soon as practicable following the date on which all of the
conditions to the respective obligations of the parties set forth in Article 9
(other than those conditions to be satisfied at Closing) shall have been
satisfied or waived (such date and time on and at which the Closing actually
occurs being referred to herein as the "Closing Date"). The Closing shall take
place at the offices of the Buyers' US counsel, ▇▇▇▇▇ Peabody LLP, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
3.2. Documents to be delivered to the Buyers by the Seller
Parties. At the Closing, the Seller Parties will deliver to the Buyers:
(a) An Assignment of Membership Interest, executed by the
US Seller, in proper form for transfer of the Interests to the US Buyer (the
"Assignment of Interests");
(b) A ▇▇▇▇ of sale and general assignment duly executed
by the Canadian Seller in form and substance reasonably acceptable to the
Canadian Buyer documenting the sale, assignment, transfer and delivery to the
Canadian Buyer of all of the Canadian Assets pursuant to the terms of this
Agreement (the "▇▇▇▇ of Sale");
(c) An assignment of trademarks duly executed by the
Canadian Seller in form and substance reasonably acceptable to the Canadian
Buyer for recording with the Canadian Registrar of Trademarks the assignment to
the Canadian Buyer of the Trademarks owned by Canadian Company (the "Trademark
Assignment");
(d) Duly executed resignations of, or evidence of removal
of, (i) all of the directors of the US Company, (ii) ▇▇▇▇▇▇ ▇. ▇▇▇▇ as an
officer of the US Company, (iii) those individuals that are parties to the
Executive Employment Contracts as directors and/or officers of the Sellers, C&J
Fasteners, Inc., Brampton Fastener Co. Limited, the Parents and each of their
Affiliates;
(e) (i) All of the US Company's Contracts, books,
records, and other data relating to the operations of the US Company, including
the minute books of the US Company, and (ii) copies of those books and records
of the Canadian Company specified by Buyers in writing at least five (5)
Business Days prior to Closing;
(f) The Registration Rights Agreement in the form
attached hereto as Exhibit 3.2(f) (the "Registration Rights Agreement") duly
executed by the US Seller;
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(g) The opinion of U.S. counsel for the Seller Parties in
form and substance reasonably acceptable to the parties;
(h) The opinion of Canadian counsel for the Seller
Parties in form and substance reasonably acceptable to the parties;
(i) The Transition Services Agreement in the form
attached hereto as Exhibit 3.2(i) (the "Transition Services Agreement") duly
executed by Brampton Fastener Co. Limited and C&J Fasteners, Inc.;
(j) The Owned Real Property Leases in the forms attached
hereto as Exhibits 3.2(j)(1) and 3.2(j)(2) (the "Owned Real Property Leases")
duly executed by the Owned Real Property Buyer and the Canadian Company,
respectively, together with evidence of the transfer of the Des Plaines Property
to the Owned Real Property Buyer as contemplated by Section 6.9;
(k) Those third party approvals, consents, novations and
waivers that are listed on Schedule 3.2(k) (the "Required Consents");
(l) Certificates of good standing of the US Company, the
US Seller, and each of the Parents (other than Sunsource Canada Investment
Company) from the Secretary of State of the state of Delaware, and a certificate
from the Secretary of State of the states of each jurisdiction in which the US
Company is qualified or licensed to conduct business as a foreign corporation in
such state, dated not earlier than 10 days prior to the Closing Date;
(m) Certificates of status issued not earlier than 10
days prior to the Closing Date by applicable Governmental Entities with respect
to the Canadian Company and Sunsource Canada Investment Company certifying as to
the legal existence thereof;
(n) Certificates, in form and substance reasonably
acceptable to the US Buyer, executed by the Secretary or Assistant Secretary of
each of the US Company, the US Seller, and each Parent, dated the Closing Date,
and certifying as to the incumbency and genuine signature of the officers who
executed this Agreement and the Ancillary Agreements to which the US Company,
the US Seller, or the Parents are a party, respectively, and certifying that
attached thereto are (i) true and complete copies of the US Charter Documents as
amended and as in effect as of the Closing Date, and (ii) the resolutions duly
adopted by the Board of Directors, Managers or General Partners, as appropriate,
of the US Company, the US Seller and each Parent authorizing the execution,
delivery and performance of this Agreement and each Ancillary Agreement to which
the US Company, the US Seller, or the Parents are a party, which resolutions
shall not have been modified, rescinded, or amended and shall be in full force
and effect as of the Closing Date;
(o) Certificates, in form and substance reasonably
acceptable to the Canadian Buyer, executed by the Secretary or Assistant
Secretary of the Canadian Company dated the Closing Date, and certifying as to
the incumbency and genuine signature of the officers who executed this Agreement
and the Ancillary Agreements to which the Canadian Company is
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a party, and certifying that attached thereto are true and complete copies of
(i) the Canadian Charter Documents as amended and as in effect as of the Closing
Date, (ii) the resolutions duly passed by the Board of Directors of the Canadian
Company and duly adopted by the shareholder of the Canadian Company authorizing
the execution, delivery, and performance of this Agreement and each Ancillary
Agreement to which the Canadian Company is a party, as well as the approval of
the transfer of the Canadian Assets to the Canadian Buyer, which resolutions
shall not have been modified, rescinded, or amended and shall be in full force
and effect as of the Closing Date;
(p) A certification of US Seller's non-foreign status as
set forth in U.S. Treasury Regulation Section 1.1445-2(b);
(q) A duly executed election form pursuant to Section 167
of the Excise Tax Act (Canada);
(r) Assignments of the Leased Real Property leased to the
Canadian Seller;
(s) A sublease of the Parking Lot Lease ("Parking Lot
Sublease") in form and substance reasonably acceptable to the US Buyer, duly
executed by the Owned Real Property Buyer, together with evidence of the
assignment of the Parking Lot Lease, if applicable, to the Owned Real Property
Buyer;
(t) A stock power with respect to the Retainage, duly
executed in blank by the US Seller;
(u) A document, in proper form for filing with the
appropriate authorities in the Province of Quebec, necessary to terminate the
P.P.S.S. filing having registration number ▇▇-▇▇▇▇▇▇▇-▇▇▇▇, duly executed by the
secured party thereunder; and
(v) Such other certificates and documents as are
necessary to transfer to the Buyers the Interests and the Canadian Assets.
3.3. Documents to be delivered to the Sellers by the Buyers.
At the Closing, the Buyers will deliver to the Sellers:
(a) Certificates representing the US Stock Consideration;
(b) An assumption agreement in form and substance
reasonably acceptable to the Canadian Seller duly executed by the Canadian Buyer
documenting the assumption of the Canadian Assumed Liabilities by the Canadian
Buyer pursuant to the terms of this Agreement (the "Assumption Agreement");
(c) The Registration Rights Agreement duly executed by
the US Buyer;
(d) The opinion of U.S. counsel for the Buyers in form
and substance reasonably acceptable to the parties;
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(e) The opinion of Canadian counsel for the Buyers in
form and substance reasonably acceptable to the parties;
(f) The Transition Services Agreement duly executed by
the Canadian Buyer and the US Company;
(g) Each of the Owned Real Property Leases duly executed
by either the US Company or the Canadian Buyer, as the case may be;
(h) Certificate of good standing of the US Buyer from the
Secretary of State of the State of Delaware, dated not earlier than 10 days
prior to the Closing Date;
(i) Certificates of status issued not earlier than 10
days prior to the Closing Date by applicable Governmental Entities with respect
to the Canadian Buyer certifying as to the legal existence thereof;
(j) A certificate, in form and substance reasonably
acceptable to the US Seller, executed by the Secretary of the US Buyer, dated
the Closing Date, and certifying as to the incumbency and genuine signature of
the US Buyer's officers who executed this Agreement and the Ancillary
Agreements, and certifying that attached thereto is a true and complete copy of
the resolutions duly adopted by the Board of Directors of the US Buyer
authorizing the execution, delivery, and performance of this Agreement and each
Ancillary Agreement to which the US Buyer is a party, which resolutions have not
been modified, rescinded, or amended and are in full force and effect as of the
Closing Date;
(k) A certificate, in form and substance reasonably
acceptable to the Canadian Seller, executed by the Secretary of the Canadian
Buyer, dated the Closing Date, and certifying as to the incumbency and genuine
signature of the Canadian Buyer's officers who executed this Agreement and the
Ancillary Agreements, and certifying that attached thereto is a true and
complete copy of the resolutions duly adopted by the Board of Directors of the
Canadian Buyer authorizing the execution, delivery, and performance of this
Agreement and each Ancillary Agreement to which the Canadian Buyer is a party,
which resolutions have not been modified, rescinded, or amended and are in full
force and effect as of the Closing Date;
(l) A duly executed exemption election form pursuant to
Section 167 of the Excise Tax Act (Canada); and
(m) The Parking Lot Sublease duly executed by the US
Company.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES
The Seller Parties, jointly and severally, represent and
warrant to the Buyer Parties that the statements contained in this Article 4 are
true, correct and complete:
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4.1. Organization. The US Company is a duly organized and
validly existing limited liability company in good standing under the laws of
the State of Delaware. The Canadian Company is validly existing corporation
under the laws of the Province of Ontario. Each of the Companies has all company
or corporate power and authority to own or lease all of its properties and
assets and to conduct its business as currently conducted, and each are duly
qualified and in good standing as a foreign company or corporation authorized to
do business in each of the jurisdictions in which the character of the
properties owned or held under lease by it or the nature of the business
transacted by it makes such qualification necessary, except where the failure to
be so qualified or licensed would not have a Material Adverse Effect on such
Company. Except as set forth on Schedule 4.1, neither Company owns nor has the
contractual right or obligation to acquire, directly or indirectly, any equity
interest in any Person.
4.2. Authorization of Transaction. Each of the Companies has
all requisite corporate or company power and authority to execute and deliver
this Agreement and each Ancillary Agreement to which it is a party, to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and each Ancillary Agreement to which each of the Companies is a party
by each such Company and the consummation by each such Company of the
transactions contemplated hereby and thereby have been duly and validly
authorized by the Managers or Board of Directors of each of the Companies, as
the case may be, and, in the case of the Canadian Company, by the sole
shareholder of the Canadian Company, and no other corporate, company or other
proceedings on the part of any Company are necessary to authorize this Agreement
and each Ancillary Agreement to which the Companies are parties or to consummate
the transactions so contemplated. This Agreement and the Ancillary Agreements to
which any of the Companies are parties have been duly and validly executed and
delivered by each such Company and constitute the legal, valid and binding
agreements of such Company, enforceable against such Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency and other similar Laws relating to or affecting
creditors' rights generally and general equitable principles.
4.3. Authority of the Parents; Issuance; US Seller's Title to
the Interests. The US Seller and each of the Parents (other than Sunsource
Canada Investment Company) are duly organized and validly existing corporations,
limited partnerships, or limited liability companies, as the case may be, in
good standing under the laws of the state of their organization. The US Seller
and each Parent has all requisite legal capacity, power and authority to execute
and deliver this Agreement and each of the Ancillary Agreements to which the US
Seller or such Parent is a party, to perform its obligations hereunder and
thereunder and consummate the transactions contemplated herein and therein. This
Agreement and the Ancillary Agreements to which the US Seller and/or any Parent
is a party have been duly and validly executed and delivered by the US Seller
and/or such Parent, as the case may be, and constitute the valid and binding
agreements thereof, enforceable against the US Seller and/or such Parent, as the
case may be, in accordance with their terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency and other similar Laws relating
to or affecting creditors' rights generally and general equitable principles.
The Interests are duly authorized and validly issued. The US Seller has good and
valid title to and is the lawful, legal, record and beneficial owner of the
Interests. At the Closing and upon payment of the Closing Payment and delivery
of the US Stock
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Consideration, (i) the US Buyer will receive good and valid title to the
Interests free and clear of all Liens other than restrictions on the transfer of
securities existing under securities Laws, and (ii) the Canadian Buyer will
receive good and valid title to the Canadian Assets free and clear of all Liens
other than Permitted Liens.
4.4. Intentionally Omitted.
4.5. Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement and each Ancillary Agreement to which
any of the Seller Parties is a party by the Seller Parties nor the performance
by the Seller Parties of their respective obligations hereunder and thereunder,
nor the consummation of the transactions contemplated hereby or thereby will (i)
conflict with or result in any breach of any provision of the Charter Documents,
or charter or similar governing documents of any of the other Seller Parties,
(ii) except as set forth in section (ii) of Schedule 4.5 and except for any
filings required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, require any consent, waiver,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity or third party to be obtained or made by any of the Seller
Parties, (iii) except as set forth in section (iii) of Schedule 4.5, violate,
breach, be in conflict with or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or permit
the termination of any provision of, or result in the termination of, the
acceleration of the maturity of, or the acceleration of the performance of any
obligation of any Seller Party, or cause an indemnity payment to be made by any
Seller Party under, or result in the creation or imposition of any Lien upon any
properties, assets or business of any Seller or Company under any (A) Contract,
(B) Permit or (C) order, judgment or decree to which any Seller Party is a party
or by which any Seller Party or any of its assets or properties is bound or
encumbered, (iv) give any Person the right to require any Seller Party to
purchase or repurchase any notes, bonds or instruments of any kind, or (v)
violate any Law applicable to any Seller or Company or any of their properties
or assets, except with respect to clauses (iii), (iv) and (v) for any such
violations, breaches, conflicts, defaults, terminations, accelerations or rights
that would not reasonably be expected to result in a Material Adverse Effect on
any Company.
4.6. Capitalization.
(a) The membership interests of the US Company are
comprised of one class of interests. The US Seller is the sole member and holder
of membership interests in the US Company. Except for the obligation of the US
Seller to sell, transfer and assign the Interests arising under this Agreement,
there are no preemptive or other outstanding rights, options, warrants,
conversion rights (including pursuant to convertible securities), appreciation
rights, redemption rights, repurchase rights, voting, buy-sell or other
agreements, arrangements, calls, commitments or rights of any kind relating to
membership interests of the US Company or obligating the US Company to issue or
sell any membership interests or other equity interests in the US Company. As of
the date of this Agreement, there are no outstanding contractual obligations of
the US Company to repurchase, redeem or otherwise acquire any membership
interests or other equity interests in the US Company.
(b) Sunsource Canada Investment Company is the sole
shareholder of the Canadian Company. There are no preemptive or other
outstanding rights, options, warrants,
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conversion rights (including pursuant to convertible securities), appreciation
rights, redemption rights, repurchase rights, voting, buy-sell or other
agreements, arrangements, calls, commitments or rights of any kind relating to
capital stock of the Canadian Company or obligating the Canadian Company to
issue or sell any capital stock or other equity interests in the Canadian
Company.
4.7. Financial Statements.
(a) Attached hereto as Schedule 4.7(a) is a true, correct
and complete copy of (i) the unaudited balance sheets of each of the Companies
at December 31, 2000, and 2001, and the unaudited statements of income and cash
flow of each of the Companies for the period from March 2, 2000, to December 31,
2000, and for the year ended December 31, 2001 (collectively, the "Annual
Financial Statements"), (ii) the unaudited balance sheets of each of the
Companies at June 30, 2002, and the unaudited statements of income and cash
flows of each of the Companies for the six-month period ending June 30, 2002
(collectively, the "June 2002 Financial Statements"), and (iii) the unaudited
balance sheets of each of the Companies at September 30, 2002, and the unaudited
statements of income and cash flows of each of the Companies for the nine-month
period ending September 30, 2002 (collectively, the "September 2002 Financial
Statements," together with the June 2002 Financial Statements and the Annual
Financial Statements, the "Financial Statements"). The Financial Statements (A)
are true, accurate and complete in all material respects, (B) have been prepared
in accordance with US generally accepted accounting principles consistently
applied (with respect to both the US Company and the Canadian Company)
throughout the periods indicated, and (C) fairly present in accordance with US
generally accepted accounting principles the financial condition of the US
Company and the Canadian Company at the respective dates thereof and for the
periods indicated. The accounting treatment used in the Annual Financial
Statements is materially consistent with that used by Ernst & Young, LLP, in
preparation of the audited consolidated balance sheets and related consolidated
statements of income and cash flow for such periods for GC-Sun Holdings II, L.P,
and all notes and schedules thereto.
(b) Except as and to the extent specifically reflected or
reserved against in the Financial Statements, as of June 30, 2002 and as of
September 30, 2002, the Companies do not have any liabilities or obligations of
any nature, whether absolute, accrued, contingent, matured or unmatured or
otherwise, and whether due or to become due that would be required to be
reflected on the balance sheet of such Company prepared in conformity with US
generally accepted accounting principles, including, without limitation, any
liability for Taxes and interest, penalties and other charges payable with
respect to any such liability or obligation.
(c) The books of account and other financial records of
the Companies: (i) reflect all items of income and expense and all assets and
liabilities required to be reflected therein in accordance with US generally
accepted accounting principles, (ii) are in all material respects complete and
correct, and do not contain or reflect any material inaccuracies or
discrepancies, and (iii) have been maintained in accordance with good business
and accounting practices. Each Company makes and keeps accurate (in all material
respects) books and records reflecting its assets and maintains internal
accounting controls that provide reasonable assurance that, in all material
respects (x) transactions are executed in accordance with management's
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authorization and (y) transactions are recorded as necessary to permit
preparation of each Company's Financial Statements and to maintain
accountability for the assets of each of the Companies.
4.8. Subsequent Events. Except as disclosed in a corresponding
section on Schedule 4.8 and except as contemplated by this Agreement, since
December 31, 2001, through the date of this Agreement, the Companies have
conducted their businesses in the ordinary course of business, and there has not
been any Material Adverse Change in the Companies. Without limiting the
generality of the foregoing, since December 31, 2001, through the date of this
Agreement (unless an earlier date is provided below), except as disclosed in a
corresponding section on Schedule 4.8:
(a) None of the Companies has issued, sold, granted
options or rights to purchase, pledged, or authorized or proposed the issuance,
sale, grant of options or rights to purchase or pledge any membership interests
or securities of such Company, or granted or accelerated any right to convert or
exchange any membership interests or securities of such Company.
(b) None of the Companies has acquired or redeemed,
directly or indirectly, or amended the terms of any membership interests or
securities of such Company.
(c) None of the Companies has split, combined or
reclassified its capital stock or membership interests, or declared, set aside,
made or paid any dividend or distribution (whether in cash, stock, membership
interests or property) on any shares of its capital stock or membership
interests.
(d) None of the Companies granted any stock-related or
membership interest-related performance or similar awards or bonuses.
(e) None of the Companies has sold, leased, transferred,
assigned or otherwise disposed of any of its assets, tangible or intangible,
other than inventory or other assets in the ordinary course of business. Without
limiting the generality of the foregoing, the Companies have not instituted
sales incentives or engaged in other sales practices that, to the Knowledge of
the Sellers, resulted in customer inventory levels greater than would otherwise
be consistent with past practices.
(f) None of the Companies has entered into any Contract,
or series of related Contracts (other than Inventory Purchase Orders), involving
more than $25,000.
(g) Between December 31, 2001, and December 5, 2002, none
of the Companies has entered into any Inventory Purchase Order in excess of
$25,000.
(h) None of the Companies has accelerated, terminated,
modified or cancelled any Contract (excluding Inventory Purchase Orders), lease
or license (or series of related Contracts) involving more than $25,000 to which
it is a party or by which it is bound.
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(i) None of the Companies has suffered the imposition of
any Lien, other than Permitted Liens, upon any of its assets.
(j) None of the Companies has made any capital
expenditure (or series of related capital expenditures) involving more than
$25,000 in the aggregate.
(k) None of the Companies has made any capital investment
in, any loan to, or any acquisition of the securities or assets of any other
Person, except in the ordinary course of such Company's business.
(l) None of the Companies has issued any note, bond or
other debt security or created, incurred, assumed or guaranteed any indebtedness
for borrowed money or for a capitalized lease obligation either involving more
than $25,000 singly or $40,000 in the aggregate or for any obligation of the
Parents or any of their Affiliates.
(m) None of Companies has delayed or postponed the
payment of accounts payable or other liabilities outside the ordinary course of
business.
(n) None of the Companies has granted any extension of
credit in the sale of products, collection of receivables or otherwise, other
than in the ordinary course of business.
(o) None of the Companies has cancelled, compromised,
waived or released any right or claim (or series of related rights and claims)
involving more than $25,000.
(p) None of the Companies has granted any license or
sublicense of any rights under or with respect to any Intellectual Property
owned or licensed by the Companies and necessary and material to the operation
of their business as currently conducted (excluding proprietary software
provided to customers of the Companies in the ordinary course of business).
(q) None of the Companies has authorized any change in
its Certificate of Formation, Operating Agreement, Articles of Incorporation,
Memorandum of Association, By-Laws, Articles of Association or other similar
charter document.
(r) None of the Companies has experienced any material
damage, destruction or loss (whether or not covered by insurance) to its
property, reasonable wear and tear excepted.
(s) None of the Companies has made any loan to, or
entered into any other transaction (other than employment arrangements the
subject of clause (t) below) with, any director, manager or officer of any
Seller Party or any relative by blood or marriage thereof, or any of the
Sellers, the Parents or any Affiliates thereof, or any employee of the Companies
(other than routine payroll and travel advances and computer loans for employees
of the Companies).
(t) None of the Companies has entered into any employment
or compensation agreements, collective bargaining agreements or any consulting
agreements or any
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other similar arrangements, written or oral, or modified the terms of any
existing such contract or agreement, in each case outside the ordinary course of
such Company's business.
(u) None of the Companies has granted any increase in the
base compensation of any employee or officer of the Companies in excess of 10%
(or, in the case of employees or officers with annual compensation greater than
$35,000, in excess of 5%) of such employee's or officer's base annual
compensation prior to such increase or outside the ordinary course of business,
or made any other material changes in employment terms for its employees,
officer or directors outside the ordinary course of business.
(v) Except for amendments to reflect the provisions of
the Economic Growth Tax Relief Reconciliation Act of 2001, none of the Companies
has adopted, amended, modified or terminated any bonus of any type,
profit-sharing, incentive, severance or other plan, including a retirement plan,
Contract or commitment for the benefit of any of its directors, officers and
employees, or taken any such action with respect to any other Plan.
(w) None of the Companies has made or pledged to make any
charitable or other capital contribution, which, in the aggregate, is in excess
of $5,000.
(x) None of the Companies has engaged in any methods of
billing and collection, purchase, sale, lease, accounting or operation that
materially vary from its usual and customary past practice.
(y) None of the Companies has entered into a binding
agreement to do any of the foregoing.
4.9. Tax Matters.
(a) Except as set forth on Schedule 4.9(a), since March
2, 2000, the US Seller and the US Company have filed, caused to be filed or will
file on a timely basis all Tax Returns that are, were or will be required to be
filed by or with respect to the US Company, either separately or as a member of
a group of corporations, as of the Closing Date, pursuant to applicable Law.
Such Tax Returns are true, correct and complete in all material respects. The US
Seller and the US Company have paid, or made provision for the payment of, all
Taxes that are applicable to the US Company shown as due pursuant to those Tax
Returns or pursuant to any assessment or reassessment received by the US
Company. All Taxes due and payable by the US Company (whether or not shown on
any Tax Return) with respect to all periods (or partial periods) ending on or
before the Closing Date have been paid or will be paid by the US Company, or an
adequate reserve has been established on the US Closing Balance Sheet. The US
Company is not currently the beneficiary of any extension of time within which
to file any Tax Return. The US Seller and the US Company have not waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment, reassessment or deficiency for any open Tax
period.
(b) Schedule 4.9(b) lists all federal, state, provincial,
municipal, local and foreign Tax Returns of the US Company that have been
audited for the past 3 years, and
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indicates those Tax Returns that currently are the subject of audit. All
deficiencies proposed as a result of such audits, either in writing or
informally through discussions or other communications, and the status of such
proposed deficiencies, are listed on Schedule 4.9(b).
(c) The US Company has withheld and paid to the proper
jurisdiction all Taxes, if any, required to be withheld and paid in connection
with amounts paid or due and owing to any employee, independent contractor,
creditor, stockholder or other third party.
(d) Except as set forth on Schedule 4.9(d): (i) there are
no Tax liens on any assets of the Companies, or the Interests (other than for
current Taxes not yet due and payable); (ii) since March 2, 2000, no adjustment
of or deficiency for any Tax or claim for additional Taxes has been proposed,
asserted or assessed, or, to the Knowledge of the Sellers, threatened against
the US Seller or the US Company, or any member of any affiliated or combined
group of which the US Company or any predecessor are or were members, for which
the US Company could be liable; and (iii) to the Knowledge of the Sellers, there
are no audit examinations being threatened, and there is no deficiency or refund
litigation or controversy in progress or threatened, with respect to any Taxes
of the US Company (or any predecessor) or with respect to any Tax Returns
previously filed by or on behalf of the US Company (or any predecessor).
(e) Other than as set forth on Schedule 4.9(e)(1), no
claim has ever been made by an authority in a jurisdiction where the US Company
or any predecessor do not file, or have not filed, Tax Returns that the US
Company (or, to the Knowledge of Sellers, any predecessor) are, or may be,
subject to taxation by that jurisdiction. Schedule 4.9(e)(2) lists all of the
jurisdictions in which the US Company (or, to the Knowledge of Sellers, any
predecessor) have during the past three years filed any Tax Return.
(f) The US Company is not a party to any Tax allocation
or Tax sharing agreement.
(g) The US Company is, and has always been, disregarded
as an entity separate from its owners pursuant to Code regulation section
301.7701-3.
(h) Except as set forth on Schedule 4.9(h), to the
Knowledge of the Sellers, prior to March 3, 2000: (i) ), the US Company and any
predecessor to the US Company filed or caused to be filed on a timely basis all
Tax Returns that were required to be filed by or with respect to the US Company
or predecessor, either separately or as a member of a group of corporations,
pursuant to applicable Law; (ii) such Tax Returns are true, correct and complete
in all material respects; (iii) the US Company or predecessor paid all Taxes
that are applicable to the US Company or predecessor shown as due pursuant to
those Tax Returns or pursuant to any assessment or reassessment received by the
US Company or predecessor; (iv) all Taxes due and payable by the US Company or
predecessor (whether or not shown on any Tax Return) with respect to all periods
ending on or before March 3, 2000, have been paid by the US Company or the
predecessor.
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(i) The US Company is not, and to the Knowledge of the
Sellers no predecessor of any of the US Company has been, a United States real
property holding corporation (as defined in section 897(c)(2) of the Code)
during the applicable period specified in section 897(c)(1)(A)(ii) of the Code.
(j) The US Seller is a United States person within the
meaning of the Code.
(k) The US Company does not have and has not had a
permanent establishment in any foreign country outside the United States, as
defined in any applicable Tax treaty or convention between the United States of
America and such foreign country.
(l) No failure, if any, of the Canadian Company to duly
and timely pay all Taxes, including all installments on account of Taxes for the
current year, that are due and payable by it will result in a Lien on the
Canadian Assets.
(m) Except as set forth on Schedule 4.9(m), there are no
proceedings, investigations, audits or claims now pending or threatened against
the Canadian Company in respect of any Taxes, and there are no matters under
discussion, audit or appeal with any Governmental Entity relating to Taxes,
which will result in a Lien on the Canadian Assets.
(n) The Canadian Company has duly and timely withheld all
Taxes and other amounts required by Law to be withheld by it (including Taxes
and other amounts required to be withheld by it in respect of any amount paid or
credited or deemed to be paid or credited by it to or for the account or benefit
of any Person, including any employees, officers or directors and any
non-resident Person), and has duly and timely remitted to the appropriate
Governmental Entity such Taxes and other amounts required by Law to be remitted
by it.
(o) The Canadian Company has duly and timely collected
all amounts on account of any sales or transfer taxes, including goods and
services, harmonized sales and provincial or territorial sales taxes, required
by Law to be collected by it and has duly and timely remitted to the appropriate
Governmental Entity any such amounts required by Law to be remitted by it.
(p) The Canadian Seller is not a "non-resident" of Canada
within the meaning of the Income Tax Act (Canada). The Canadian Seller is
registered for the purpose of the Excise Tax Act (Canada) and its registration
number is 100087741. This Agreement, together with the Owned Real Property Lease
for the Windsor Property, provides the Canadian Buyer with ownership, possession
or use of all or substantially all of the property necessary to carry on the
business of the Canadian Seller.
4.10. Contracts.
(a) Except for the Contracts listed on a corresponding
section of Schedule 4.10(a), as of the date of this Agreement (except for
Inventory Purchase Orders of the type set forth in clause (viii) which shall be
as of December 5, 2002) none of the Companies has any liabilities or obligations
under, and is not otherwise bound by, any:
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(i) mortgage, indenture, note, installment
obligation, hedge or swap arrangement or other instrument relating to the
borrowing of money;
(ii) guarantee of any other Person's obligations;
(iii) letter of credit, bond or other indemnity
(excluding endorsements of instruments for collection in the ordinary course of
the operation of the businesses);
(iv) agreement requiring the payment by it of more
than $25,000 in any 12-month period for the purchase or lease of any machinery,
equipment or other capital assets;
(v) collective bargaining agreement, written
employment (other than the Sales Employment Agreements), sales agent,
independent representative, independent contractor or consulting agreement, if
any, or agreement providing for severance payments or other additional similar
rights or benefits (whether or not optional) in the event of the sale of any
such Company;
(vi) joint venture agreement;
(vii) Contract (other than an Inventory Purchase
Order) requiring the payment by such Company to any Person of more than $25,000
in any 12-month period commencing on or after December 31, 2001, for the
purchase of goods or services;
(viii) Inventory Purchase Order requiring the
payment of more than $25,000;
(ix) Contract (other than Inventory Purchase Orders)
requiring the payment to such Company by any Person of more than $25,000 in any
12-month period for the sale of services provided by such Company;
(x) settlement agreements or standstill agreements;
or
(xi) Contract, a default under which or the
termination of which would have a Material Adverse Effect on such Company.
(b) Schedule 4.10(b) is a true, accurate and complete
list of each of the following Contracts of the Companies as of the date of this
Agreement:
(i) all broker, distributor, dealer, manufacturer's
representative, franchise, agency, sales promotion, market research, marketing
consulting and advertising Contracts to which any Company is a party;
(ii) all management Contracts and Contracts with
independent contractors or consultants to which any Company is a party and which
are not cancelable without penalty or further payment and without more than 30
days' notice;
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(iii) all Contracts with any Governmental Entity to
which any Company is a party;
(iv) all Contracts that limit or purport to limit
the ability of any Company to compete in any line of business or with any Person
or in any geographic area or during any period of time;
(v) all Contracts between or among any of the
Companies and either Seller, any Parent or any Affiliate of any Seller or
Parent; and
(vi) all other Contracts not otherwise described in
clauses (i) - (xi) of Section 4.10(a) or in clauses (i) - (v) of this Section
4.10(b) that are material to the condition (financial or otherwise), assets,
liabilities, obligations, operations, or results of operations of any Company.
(c) Except as set forth on Schedule 4.10(c), the
Companies have delivered to the Buyers true, accurate, and complete copies of
each written Contract (and a summary of each oral Contract) listed on Schedules
4.10(a) and 4.10(b) (excluding any purchase orders).
(d) On the date hereof, and, subject to the receipt of
those consents and approvals set forth on Schedule 4.5, as of the Closing (i)
each Contract listed on Schedules 4.10(a) and 4.10(b), except as expired by its
terms, is a valid, binding and enforceable obligation of the US Company or the
Canadian Company, as the case may be, and, to the Knowledge of the Sellers, the
other party or parties thereto (subject to applicable bankruptcy, insolvency,
moratorium and similar Laws affecting creditors' or landlords' rights and
remedies generally) and is in full force and effect, (ii) the Companies have
each fully performed their respective obligations under the Contracts listed on
Schedules 4.10(a) and 4.10(b) and there exists no default by, or event of
default attributable to, any of the Companies under any of these Contracts, nor,
to the Knowledge of the Sellers, has any event occurred which with notice, the
passage of time or both would constitute a default by either Company under any
such Contract, and (iii) (A) to the Knowledge of the Sellers each of the other
parties to the Contracts listed on Schedules 4.10(a) and 4.10(b) has performed
its respective obligations thereunder, (B) there exists no default or event of
default under any of such Contracts, and (C) to the Knowledge of the Sellers, no
event has occurred, which with notice, the passage, of time or both would
constitute a default by such other party under any such Contract. Subject to
receipt of any consents set forth on Schedule 4.5 under any of the Contracts
listed on Schedules 4.10(a) and 4.10(b), each Contract listed on Schedules
4.10(a) and 4.10(b), will remain in full force and effect following the
consummation of the transactions contemplated by this Agreement.
4.11. Real Property.
(a) Schedule 4.11(a) lists and describes in reasonable
detail all interests in real property owned, whether legally or beneficially, by
any Company (the "Owned Real Property"). Except as set forth on Schedule
4.11(a), the Companies do not own and, to the
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Knowledge of the Sellers, have never owned any real property other than the
Owned Real Property.
(b) Schedule 4.11(b) describes in reasonable detail the
real property leased by either Company from a third party (the "Leased Real
Property"). With respect to the Leased Real Property, except as set forth on
Schedule 4.11(b):
(i) the party identified on Schedule 4.11(b) has a
valid leasehold interest in the Leased Real Property, free and clear of all
Liens (other than Permitted Liens);
(ii) no Seller Party has received written notice of
any condemnation or expropriation proceedings, lawsuits or administrative
actions relating to the Leased Real Property;
(iii) no Seller Party has received written notice
that the use or occupancy of the Leased Real Property violates any covenants,
conditions or restrictions that encumber such property, or that any such
property is subject to any restriction for which any Permits necessary for the
current use thereof have not been obtained;
(iv) there are no subleases, licenses, concessions
or other agreements granting to any Person the right of use or occupancy of any
portion of the Leased Real Property; and
(v) Sellers have delivered to the Buyers true,
correct and complete copies of the real property leases for the Leased Real
Property (including without limitation any amendments and underlying leases)
(the "Real Property Leases"). The Real Property Leases contain the entire
agreement between the landlord of each Leased Real Property and the appropriate
Company (and Seller or Parent if applicable) and there are no other agreements
between the landlord and any Seller Party affecting such Leased Real Property.
The Real Property Leases are in full force and effect. No material default of
the appropriate Company (and Seller or Parent if applicable) has occurred under
any of the Real Property Leases nor has any event occurred which, with the
giving of notice or the passage of time or both would constitute a material
default of the appropriate Company (and Seller or Parent if applicable)
thereunder. Any default under the Real Property Leases has been cured within
applicable cure periods provided in the Real Property Leases. Without limiting
the generality of the foregoing, the appropriate Company (and Seller or Parent
if applicable) under the Real Property Leases is current in the payment of all
rent due under the Real Property Leases. To the Knowledge of the Sellers, no
material default of the landlord has occurred under any of the Real Property
Leases nor has any event occurred which, with the giving of notice or the
passage of time or both would constitute a material default of the landlord
thereunder.
4.12. Intellectual Property.
(a) The Companies each own or have the right to use
pursuant to license, sublicense, agreement or permission all Intellectual
Property necessary for and material to the operation of their businesses as
presently conducted (the "Companies' Intellectual Property"). Each item of the
Companies' Intellectual Property immediately prior to the Closing
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hereunder will be owned or available for use by the Buyers on identical terms
and conditions immediately after the Closing. The Companies have taken all
reasonably necessary action to maintain and protect each item of the Companies'
Intellectual Property. Schedule 4.12(a) is a true, correct and complete list of
each trade name, and registered and unregistered trademark and domain name owned
or available for use by the Companies (collectively, the "Trademarks").
(b) To the Knowledge of the Sellers (i) neither Company
has interfered with, infringed upon, misappropriated or otherwise come into
conflict with any Intellectual Property rights of third parties, and (ii) since
December 31, 1996, none of the directors, managers, and officers (and any
employee with primary responsibility for Intellectual Property matters) of the
Seller Parties have ever received any charge, complaint, claim, demand or notice
alleging any such interference, infringement, misappropriation or violation
(including any claim that the Companies must license or refrain from using any
Intellectual Property rights of any third party). To the Knowledge of the
Sellers, no third party has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Intellectual Property rights of the
Companies.
(c) Except as set forth on Schedule 4.12(c), the
Companies have not granted any license, agreement, right or other permission to
any third party with respect to the Intellectual Property owned or licensed by
the Companies. With respect to each item of Intellectual Property owned or
licensed by the Companies: (i) with the exception of licenses relating to
commercial software products, the Companies possesses or will possess as of the
Closing Date, upon obtaining any consent set forth on Schedule 4.5, all right,
title and interest in and to the item, free and clear of any Lien other than
Permitted Liens, license or other restriction; (ii) the item is not subject to
any outstanding injunction, judgment, order, decree, ruling or charge; (iii) no
proceeding, complaint, claim or demand is pending or, to the Knowledge of the
Sellers, threatened which challenges the legality, validity, enforceability, use
or ownership of the item; and (iv) the Companies have not agreed to indemnify
any Person for or against any interference, infringement, misappropriation or
other conflict with respect to the item.
(d) The Companies have fully performed their respective
obligations under each license, sublicense, or agreement relating to
Intellectual Property and there exists no default or event of default on behalf
of any of the Companies thereunder, nor has any event occurred which, to the
Knowledge of Sellers, with notice, the passage of time or both would constitute
a default thereunder by any of the Companies.
4.13. Litigation. Except as set forth on Schedule 4.13, no
Seller or Company is (a) subject to any unsatisfied judgment, order, decree,
stipulation, injunction or criminal charge or regulatory proceeding (b) a party
to or, to the Knowledge of the Sellers, has been threatened to be made a party
to any complaint, claim, action, suit, grievance, criminal charge, proceeding,
including, without limitation, a regulatory hearing or investigation, in any
court or quasi-judicial or administrative agency of any Governmental Entity or
(c) subject to any product liability or other claim made or in the process of
negotiation with the claimant thereof. There are no judicial, administrative
actions, proceedings or investigations pending or, to the Knowledge of the
Sellers, threatened that question the validity of this Agreement or any of the
Ancillary Agreements or any action taken or to be taken by the Seller Parties in
connection with this
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Agreement or any of the Ancillary Agreements that, if adversely determined,
would have a Material Adverse Effect on the Companies. To the Knowledge of the
Sellers, no circumstances exist that would reasonably be expected to give rise
to any claim that would have a Material Adverse Effect on the Companies, or
material adverse effect upon the Seller Parties' ability to enter into or
perform their obligations under this Agreement or any of the Ancillary
Agreements to which any Seller Party is a party.
4.14. Employee Benefit Matters.
(a) Except as set forth on Schedule 4.14(a), the
Companies do not maintain or contribute to, or have any obligation to contribute
to or have any liability (including a liability arising out of an
indemnification, guarantee, hold harmless or similar agreement) with respect to
any plan, program, policy, arrangement, agreement, practice, or commitment which
is an employment, consulting, severance pay, termination pay, change in control
or deferred compensation agreement, or an executive compensation, incentive
bonus or other bonus or commission, employee pension, profit-sharing, savings,
retirement, early retirement, stock option, stock purchase, stock appreciation
rights, life, health, dental, disability or accident insurance plan, or other
employee benefit plan, program, arrangement, agreement or commitment, including
any "employee benefit plan" as defined in Section 3(3) of ERISA or a Registered
Pension Plan as defined under the Income Tax Act (Canada) (individually, a
"Plan," or collectively, the "Plans"). Schedule 4.14(a) sets forth a true,
correct and complete list of all Plans. Each such Plan is identified on Schedule
4.14(a) to the extent applicable, as one or both of the following: an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) or an "employee
welfare plan" (as defined in Section 3(l) of ERISA). Plans maintained by the
Companies solely for current or former employees employed in Canada are hereby
referred to as "Canadian Plans." Plans maintained by the Companies which cover
United States or Puerto Rico current or former employees are hereby referred to
as "US Plans."
(b) Except for the 2001 Amendment and Restatement of KAR
Product Retirement Income Plan (the "KAR Retirement Plan"), the Companies are
not subject to any actual or contingent liability under Title IV of ERISA,
Section 302 of ERISA, Section 412 or 4971 of the Code and no fact or event
exists which could give rise to any such liability, whether in respect of any
pension plan maintained by such Company or by any other employer or Person or
otherwise and no outstanding defaults or violations exist under the Plans. The
KAR Retirement Plan does not have an accumulated funding deficiency (as defined
under Section 412 of the Code), nor do the Companies have any current liability
with respect to such plan under, arising out of or by operation of Title IV of
ERISA (other than liability for premiums to the Pension Benefit Guaranty
Corporation arising in the ordinary course).
(c) No event has occurred and no circumstance exists, in
connection with which one of the Companies, or any US Plan, directly or
indirectly, could be subject to any material liability under ERISA, the Code, or
any other Law applicable to any US Plan or, to the Knowledge of the Sellers,
under any Contract or Law pursuant to or under which either Company has agreed
to indemnify or is required to indemnify any Person against liability incurred
under, or for a violation or failure to satisfy the requirements of ERISA, the
Code or any other Law
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applicable to any US Plan. The Companies are not in breach of any contractual or
fiduciary obligations with respect to the administration of the US Plans or the
funding media related thereto.
(d) With respect to each US Plan, (i) except as discussed
on Schedule 4.14(d), all payments, contributions or premiums due from the
relevant Company to date have been timely made, provided that, while to the
Knowledge of the Sellers all payments, contributions and premiums have been made
on a timely basis, if any contribution to a US Plan that is an employee pension
benefit plan were untimely, such failure could be corrected under the Department
of Labor's Voluntary Fiduciary Correction Program and Prohibited Transaction
Class Exemption 2002-51 without significant cost or penalty to the relevant
Company ; (ii) there are no taxes, penalties or fees owing or exigible under or
in respect of any US Plan; and (iii) there are no actions, examinations,
proceedings, suits or claims pending (other than routine claims for benefits)
or, to the Knowledge of the Sellers, threatened with respect to any such Plan or
against the assets of any such US Plan and to the Knowledge of the Sellers no
facts or circumstances exist which could reasonably be expected to give rise to
any such investigation, examination, proceeding, action, suit or claim (other
than routine claims for benefits).
(e) Each US Plan which is an "employee pension benefit
plan" (as defined in Section 3(2) of ERISA) and intended to qualify under
Section 401 of the Code has received a favorable determination letter from the
Internal Revenue Service (the "IRS") with respect to such qualification, its
related trust has been determined to be exempt from taxation under Section
501(a) of the Code, or the remedial amendment period for such Plan has not yet
expired and nothing has occurred that has or is likely to adversely affect such
qualification or exemption. Each US Plan has complied in all material respects
with all applicable Laws, including ERISA and the Code, and each of the Plans
has been maintained and operated in material compliance with its terms.
(f) Except as set forth on Schedule 4.14(f), the
consummation of the transactions contemplated by this Agreement and each
Ancillary Agreement (alone or together with any other event) will not (i)
entitle any Person to any benefit or payment under any US Plan (including
without limitation bonus, golden parachute, retirement, severance, employment
compensation, or other benefit or enhanced benefit), (ii) accelerate the time of
payment or vesting, or increase the amount, of any compensation or other benefit
due to any Person under any US Plan, (iii) entitle any employee to any job
security or similar benefit or any enhanced benefits, or (iv) result in the
payment or series of payments by either Company to any Person of an "excess
parachute payment" within the meaning of Section 280G of the Code.
(g) Except as disclosed in Schedule 4.14(g), the
Companies do not have any liability with respect to an obligation to provide
benefits (whether or not insured) with respect to any Person beyond their
retirement or other termination of service other than (i) coverage under a US
Plan mandated by Part 6 of Title I of ERISA or Section 4980B of the Code or
similar state law and which is fully paid for by the Person entitled to such
coverage, (ii) fully funded retirement benefits under any employee pension plan,
(iii) short-term disability and fully insured long-term disability benefits
(provided such coverage is not made available to employees
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after their termination of employment with the Companies), or (iv) fully insured
death benefits (provided such coverage is not made available to employees after
their termination of employment with the Companies).
(h) Each Company has delivered to the Buyer, with respect
to each US Plan for which the following exists:
(i) a true, accurate and complete copy of the three
most recent Forms 5500 with respect to each Plan;
(ii) a true, accurate and complete copy of the
Summary Plan Description, together with each "Summary of Material
Modifications", required under ERISA with respect to such Plan, and, unless the
Plan is embodied entirely in an insurance policy to which the Company is a party
and which has been delivered to Buyer, a true and complete copy of such Plan;
(iii) if the Plan is funded through a trust or any
third party funding vehicle (other than an insurance policy), a copy of the
trust or other funding agreement;
(iv) the most recent determination letter received
from the IRS with respect to each Plan that is intended to be a "qualified plan"
under Section 401 of the Code;
(v) the two most recent actuarial reports and
financial statements prepared for each Plan; and
(vi) a written description of (i) each US Plan that
is not in writing, and (ii) each amendment to any US Plan that has not been
reduced to writing.
(i) The Companies have not announced any plan and do not
have any legally binding commitment to create any additional US Plans or to
amend or modify any existing US Plan, other than amendments required by Law or
those that would not materially increase costs under any such Plan and no event
has occurred which would entitle any Person (without the consent of the relevant
Company) to wind up or terminate any US Plan, in whole or in part.
(j) The Companies have complied in all material respects
with the provisions of Part 6 of Title I of ERISA and Sections 4980B, 9801 and
9802 of the Code.
(k) Except for the KAR Retirement Plan, the Companies do
not and have never sponsored, maintained, contributed to, or incurred an
obligation to contribute to any "Defined Benefit Plan", "Multiemployer Plan" or
"Multiple Employer Plan". For these purposes, "Defined Benefit Plan" has the
meaning set forth in Section 414 of the Code, "Multiemployer Plan" means a
multiemployer Plan as defined in Section 3(37) and 4001(a)(3) of ERISA and
"Multiple Employer Plan" means any Plan sponsored by more than one employer,
within the meaning of Sections 4063 or 4064 or ERISA or Section 413(c) of the
Code.
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(l) The transactions contemplated by this Agreement shall
not trigger a "reportable event" and there has been no "reportable event" as
that term is defined in Section 4043 of ERISA and the regulations there under
which would require the giving of notice to the Pension Benefit Guaranty
Corporation.
(m) Except as contemplated by Section 7.7, as of the
Closing, the US Plans will cover only employees and former employees of the US
Company and their dependents and beneficiaries, will not provide benefits to any
other employees or former employees of the Seller Parties or their Affiliates,
and, except for employees and former employees of the US Company and their
dependents and beneficiaries, no other individuals will have an interest in or
rights under the US Plans.
(n) Except as set forth on Schedule 4.14(n) and for the
benefits promised under such US Plan, each US Plan may be terminated without
additional further liability to any of the Companies.
(o) To the Knowledge of the Sellers, with respect to each
Plan that is a "welfare plan" as defined in section 3(1) of ERISA, there is no
event or circumstance that has occurred that could result in a material increase
in the premium costs of any insured Plan or a material increase in the benefits
costs of any self-insured Plan.
(p) Canadian Plans.
(i) Where required by Law, the Canadian Plans have
been established under, and are registered, maintained, invested and
administered in accordance with, Laws relating to such plans and the terms of
such Canadian Plans, and all filings, reports and disclosures with respect
thereto required by Law have been filed or distributed. All obligations of the
Sellers and the Canadian Company required by Law, the terms of the Canadian
Plans or by contract to be performed in connection with the Canadian Plans or
the funding media relating thereto, have been so performed or fulfilled.
(ii) All payments, contributions or premiums
required to be remitted or paid to or in respect of each Canadian Plan have been
remitted and paid in a timely fashion in accordance with the terms thereof, any
contract in respect thereof and all Laws. There are no outstanding defaults or
violations by any party to any Canadian Plan nor any Taxes, penalties or fees
owing or exigible under any Canadian Plan and to the Knowledge of the Sellers no
fact or circumstance exists which would adversely affect the tax-exempt status
of any Canadian Plan or result in or give rise to any liability to the Canadian
Company.
(iii) There is no investigation, examination,
proceeding, action, suit or claim (other than routine claims for benefits)
pending or threatened involving any Canadian Plan or its assets and to the
Knowledge of the Sellers no facts or circumstances exist which could reasonably
be expected to give rise to any such investigation, examination, proceeding,
action, suit or claim (other than routine claims for benefits).
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(iv) No event has occurred in respect of any
Canadian Plan which would result in the requirement of the Canadian Company
(without its consent) to wind up or terminate any applicable Canadian Plan,
either in whole or in part.
(v) None of the Canadian Plans, other than in
respect of pension plans, provides post-employment or post-retirement benefits
to or in respect of the employees or any former employees of the Canadians
Companies, or to or in respect of the beneficiaries or dependents thereof.
(vi) The Sellers have provided to the Buyers true
and complete copies of all Canadian Plans (or where such Canadian Plans are oral
commitments, written summaries of their terms), and any amendments thereto,
together with all related documents including without limitation, funding
agreements, investment contracts or guidelines, actuarial reports, insurance
policies, funding returns, annual returns, financial statements, plan summaries,
employee booklets and personnel manuals. All employee data necessary to
administer the Canadian Plans is in the possession and control of the Canadian
Company and is complete and accurate.
(vii) Where required by Law, under its terms or by
Contract, each Canadian Plan has been fully funded or fully insured. In respect
of each Canadian Plan that is funded, in whole or in part, no funds have been
withdrawn from any such Canadian Plan except in accordance with the terms
thereof and Law.
(viii) None of the Canadian Plans requires or
permits a retroactive increase in premiums or payments.
(ix) No amendments or improvements to the benefits
provided under the Canadian Plans have been promised to employees or former
employees of the Canadian Company.
(x) Neither the execution of this Agreement nor the
consummation of any of the transactions contemplated in this Agreement will:
(A) result in any payment (including without
limitation bonus, golden parachute, retirement, severance, employment
compensation, or other benefit or enhanced benefit) becoming payable under any
Canadian Plan;
(B) increase any benefits otherwise payable
under any Canadian Plan;
(C) entitle any employee to any job security or
similar benefit or any enhanced benefits; or
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(D) result in the acceleration of the time of
payment or vesting of any benefits otherwise payable under any Canadian Plan, or
result in any Canadian Plan becoming terminable other than at the discretion of
the Canadian Company.
(xi) As of the Closing, the Canadian Plans cover
only employees, or in the case of any registered pension plan, employees and
former employees, of the Canadian Company (and the dependents and beneficiaries
of any such employees and former employees).
4.15. Labor Relations.
(a) Except as set forth on Schedule 4.15(a), there are no
disputes, claims, negotiation or actions pending or threatened between either
Company and any employee that could reasonably be expected to result in a labor
strike, slow-down or work stoppage nor any outstanding grievances, arbitrations,
unfair labor practice complaints or labor board proceedings. To the Knowledge of
Sellers, no Company is engaged in or has engaged in any unfair labor practices.
The Companies have not experienced any labor stoppages during the past three (3)
years.
(b) Except as set forth on Schedule 4.15(b), neither of
the Companies is obligated by or subject to any collective bargaining agreement
or collective bargaining obligation (and has no obligations or liabilities with
respect to any collective bargaining agreement to which it was a party in the
past), or selection of a collective bargaining representative for employees or
any other obligation to a union whether arising by Contract or Law. To the
Knowledge of the Sellers, there is no on-going labor union organizing activity.
With respect to those collective bargaining agreements set forth on Schedule
4.15(b), the appropriate Company has complied in all material respects with each
such agreement and each such agreement is in full force and effect, and the
provisions thereof are consistent with historical benefits and pay grades.
(c) Schedule 4.15(c) contains a complete and accurate
list as of November 30, 2002, of the following information for each employee of
the Companies, including each employee on leave of absence or layoff status
(including, without limitation, employees on sick leave and workers
compensation): employer; name; job title; date of hiring or engagement; date of
commencement of employment or engagement; for field sales employees compensation
for the period January 1, 2002, through November 30, 2002, and for all others
the current annual compensation (including the type of compensation); sick and
vacation leave that is accrued but unused, if any; and service credited for
purposes of vesting and eligibility to participate under any Plan.
(d) Schedule 4.15(d) contains a complete and accurate
list as of December 31, 2001, of the following information for each retired
employee of the Companies, or their dependents, receiving benefits or scheduled
to receive benefits in the future: name; pension benefits; retiree medical
insurance coverage, if any; retiree life insurance coverage, if any; and other
benefits.
(e) Schedule 4.15(e) contains a complete and accurate
list of the following information for each employee of the Companies who has
been terminated, retired,
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laid off, or voluntarily resigned, or whose hours or work have been reduced by
more than fifty percent (50%) by the Companies, in the two (2) years prior to
November 30, 2002: (i) the date of such termination, layoff, resignation or
reduction in hours; (ii) the reason for such termination, retirement, layoff,
resignation or reduction in hours (for employees of the US Company only); (iii)
the date the employee was hired by the Companies; (iv) the employee's title; and
(v) with respect to any such employee who was a sales person, the amount of such
person's sales for the twelve month period prior to leaving the Companies.
(f) The US Company has not violated the Worker Adjustment
and Retraining Notification Act (the "WARN Act") or any similar state or local
Law.
(g) Schedule 4.15(g) contains a complete and accurate
list of and describes all sales incentive programs offered, to the Knowledge of
the Sellers, by the Companies at any time during the two (2) year period prior
to the date of this Agreement (other than incentive compensation paid to Sales
Employees in the ordinary course of business).
(h) Except as set forth on Schedule 4.15(h), all Sales
Employees have executed with one of the Companies, without material
modification, one of the form agreements attached hereto as Exhibit 4.15(h) (the
"Sales Employment Agreements"). Each of the Sales Employment Agreements contains
terms substantially similar to the provisions of one of such forms attached
hereto as Exhibit 4.15(h). Each Sales Employment Agreement and Executive
Employment Contracts (as defined in Section 6.4 hereof) is in full force and
effect and the consummation of the transactions contemplated by this Agreement
and the Ancillary Agreements will not cause a breach or default under any of the
Sales Employment Agreements or Executive Employment Contracts or result in any
right of any employee thereunder to terminate such agreements or otherwise
invalidate any provisions therein.
(i) Schedule 4.15(i) sets forth a true, complete and
accurate schedule by employee number of each Sales Employee's sales for the
calendar year ended December 31, 2001, and the nine (9) month period ended
September 30, 2002.
(j) Except as set forth on Schedule 4.15(j), no Company
has received any notice that any employee will be terminating his or her
employment.
(k) Each of the Companies is in substantial compliance
with Laws respecting employment and employment practices, terms and conditions
of employment and wages and hours, employment standards, human rights, workers
compensation, occupational health and safety, employment equity and pay equity.
Except as set forth on Schedule 4.15(k), neither Company is subject to any
material claims or potential material liability under these statutes.
(l) Except as set forth on Schedule 4.15(l), none of the
Companies has any liability outside the ordinary course of business to any
employee arising from accrued and unpaid salary, overtime, bonus or other
incentive compensation.
(m) To the Knowledge of the Sellers, all employees of the
US Company are citizens of, or are authorized in accordance with federal
immigration laws to be
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employed in the United States. To the Knowledge of the Sellers, all employees of
the Canadian Company are citizens of, or are authorized in accordance with
Canadian immigration laws to be employed in Canada.
(n) Each individual who has provided or is providing
services to the US Company and who has not or will not receive an IRS W-2 form
has been properly classified and treated as an independent contractor.
4.16. Environmental Matters.
(a) Each of the Companies and any predecessor has in all
material respects at all times in the past complied, and is in all material
respects in compliance, with all applicable Environmental Laws.
(b) Without limiting the generality of the foregoing,
each of the Companies (i) has obtained all Permits required pursuant to
Environmental Laws for the operation of the businesses of the Companies, and
(ii) has in all material respects at all times in the past complied, and is in
all material respects in compliance, with all terms and conditions of such
Permits. Such Permits are currently in full force and effect and there are no
proceedings pending or, to the knowledge of Seller Parties, threatened to revoke
or amend them.
(c) None of the Companies has (i) generated, handled,
manufactured, refined, transported, treated, stored, transferred, produced, or
processed any Hazardous Material or any solid waste at any Owned Real Property
or Leased Real Property or formerly owned, leased or operated real property,
except in compliance with all applicable Environmental Laws, (ii) disposed of or
Released any Hazardous Material or any solid waste at any Owned Real Property or
Leased Real Property or formerly owned, leased or operated real property, or
(iii) transported any Hazardous Material to, or arranged with a third party for
the treatment, storage, disposal, or transport of any Hazardous Material at or
to, any site.
(d) Except as set forth on Schedule 4.16(d), to the
Knowledge of the Sellers there is not, and has not been, any Release, threatened
Release, or presence of any Hazardous Material (i) on, in, under, adjacent to,
or affecting any Owned Real Property or Leased Real Property or formerly owned,
leased or operated real property, except in compliance with Environmental Laws,
or (ii) which requires reporting to any Governmental Entity or remediation
pursuant to applicable Environmental Laws. None of the Owned Real Property or
Leased Real Property or formerly owned, leased or operated real property has
been placed, or proposed for listing, on the National Priorities List under the
Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA")
or the CERCLA Information System List or on any state, national or provincial
list of contaminated properties or waste disposal sites or PCB storage
facilities.
(e) Except as set forth on Schedule 4.16(e), no
aboveground or underground storage tank, asbestos or asbestos-containing
material in any form or condition, material or equipment containing
polychlorinated biphenyls, landfill, Hazardous Materials surface impoundment, or
disposal area (i) exists at any Owned Real Property or Leased Real Property or
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formerly owned, leased or operated real property, or (ii) is being or has at any
time been used by any of the Companies.
(f) Neither this Agreement and the Ancillary Agreements
nor the consummation of the transactions that are contemplated hereby or thereby
will result in any obligation to conduct a site investigation or cleanup, or to
notify or obtain consent from any Governmental Entity or third party, pursuant
to any Environmental Law or any obligation of the Seller Parties.
(g) The Sellers have delivered to the Buyers true,
correct and complete copies of each of those environmental reports listed on
Schedule 4.16(g).
4.17. Legal Compliance. Except (a) with respect to the
Companies' compliance with laws related to the Plans and employee benefit
matters (as to which representations and warranties are made pursuant to Section
4.14), (b) with respect to the Companies' compliance with laws related to labor
matters (as to which representations and warranties are made pursuant to Section
4.15), and (c) with respect to the Companies' compliance with Environmental Laws
(as to which representations and warranties are made pursuant to Section 4.16),
each of the Companies has complied with all applicable Laws, except where the
failure to comply would not have a Material Adverse Effect on the Companies.
4.18. Permits. Each Company holds all Permits that are
required by any Government Entity to permit it to operate as it is presently
operated or contemplated to be operated, except for such Permits which the
failure to hold, own or possess would not reasonably be expected to have a
Material Adverse Effect on the Companies. Each such required Permit is listed on
Schedule 4.18.
4.19. Assets. The assets owned or leased by the Companies on
the Closing Date (including, without limitation, the Canadian Assets), together
with the Des Plaines Property, constitute all of the rights, interests, property
and assets used by, or necessary for the operation of, the Companies as
currently conducted. Except for the Canadian Excluded Assets and the Des Plaines
Property, the Companies have good and valid title to, or in the case of leased
or subleased assets, valid leasehold interests in, all such assets free and
clear of all Liens except Permitted Liens and those Liens set forth on Schedule
4.19.
4.20 Accounts Receivable. Except as set forth on Schedule
4.20, all accounts receivable of each of the Companies reflected on their
respective books and in the Financial Statements and, as of the Closing on the
Closing Balance Sheets, represent sales actually made in the ordinary course of
the business.
4.21. Machinery; Fixtures and Equipment. The machinery,
fixtures and equipment material to the operation of the Companies' businesses as
presently conducted are in satisfactory working condition and repair (subject to
ordinary wear and tear), and are adequate for the purposes for which they are
used.
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4.22. Inventory. Except as listed on Schedule 4.22, all of the
inventory shown on the Financial Statements, and as of the Closing on the
Closing Balance Sheets, is in good condition, without defects, and will be
usable and saleable in the ordinary course of the business of the Companies,
except to the extent of a reserve on the Financial Statements, or, from and
after Closing, on the Closing Balance Sheets. Except as set forth in Schedule
4.22, no inventories are held on consignment or are subject to any repurchase or
return agreement in favor of any customer other than in accordance with the
Companies' customary return policies and all of the inventories are located at
the Leased Real Property and the Owned Real Property or are in transit in the
ordinary course of business. The Companies have full recourse to claim, without
any right of set off from customers, all inventory held on consignment.
4.23 Insurance. Schedule 4.23 contains a complete and correct
list of all insurance policies maintained by the Companies as of the date hereof
and describes any self-insurance arrangements, as well as all state insurance
funds into which the Companies paid in calendar year 2002 and the period of such
payments. All such policies shall remain in full force and effect through the
Closing Date. The state insurance funds set forth on Schedule 4.23 represent all
of the state insurance funds into which the Companies are obligated to pay,
whether by Law or Contract, and, to the Knowledge of the Sellers, the Companies
have made all such payments in accordance with such obligations. Except as set
forth on Schedule 4.23, with respect to each such insurance policy: (i) the
policy is in full force and effect; (ii) neither the Companies nor, to the
Knowledge of the Sellers, any other party to the policy is in material breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification
or acceleration, under the policy; and (iii) to the Knowledge of the Sellers, no
party to the policy has repudiated any provision thereof. The Sellers have made
available to the Buyers complete and correct copies of all such policies
together with all riders and amendments thereto.
4.24. Brokers' Fees. Except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company, LLC,
no Seller Party has any liability or obligation to pay any fees or commissions
to any broker, finder or agent with respect to the transactions contemplated by
this Agreement and the Ancillary Agreements. The Sellers and Parents, and not
the Companies, are solely responsible for any payment, fee or commission due to
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company LLC.
4.25. Investment in ▇▇▇▇▇▇ Parent Common Stock.
(a) The US Seller has, during the course of this
transaction, had the opportunity to ask questions of, and has received answers
from, US Buyer and its representatives concerning the US Buyer and this
transaction.
(b) The US Seller is acquiring the ▇▇▇▇▇▇ Common Stock
for its own account, for investment, and not with a view to any resale or
"distribution" thereof within the meaning of the Securities Act.
(c) The US Seller understands that because the sale of
▇▇▇▇▇▇ Common Stock to the US Seller as US Stock Consideration has not been
registered under the
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Securities Act, the US Seller cannot dispose of any of such ▇▇▇▇▇▇ Common Stock
until such ▇▇▇▇▇▇ Common Stock is subsequently registered under the Securities
Act or an exemption from such registration is available.
(d) The US Seller is sufficiently knowledgeable and
experienced in financial matters so as to be able to evaluate the risks and
merits of the US Seller's investment in ▇▇▇▇▇▇ Common Stock, and the US Seller
is able to bear the economic risk of loss of the US Seller's entire investment
in ▇▇▇▇▇▇ Common Stock. The US Seller is an "accredited investor" as such term
is defined in Rule 501 promulgated under the Securities Act.
(e) The US Seller has been advised that the issuance of
the ▇▇▇▇▇▇ Common Stock by the US Seller pursuant to the transactions
contemplated in this Agreement and any Ancillary Agreement has not been
registered under the Securities Act or under the "blue sky" Laws of any
jurisdiction and that US Buyer is issuing ▇▇▇▇▇▇ Common Stock to the US Seller
pursuant to this Agreement in reliance upon, among other things, the
representations and warranties of the US Seller contained in this Section 4.25.
4.26 Banks; Powers of Attorney. Attached hereto as Schedule
4.26 is a true, correct and complete list setting forth the name of each bank in
which the US Company has an account or safe deposit box, the names of all
persons authorized to draw thereon or to have access thereto, and the names of
any person holding a power of attorney from the US Company, other than powers of
attorney granted in the ordinary course of the Company's business in connection
with customer matters.
4.27 Certain Payments. No Company nor any Affiliate, director,
officer, agent or employee of the Companies, or to the Knowledge of the Sellers,
any other Person associated with or acting on behalf of the Companies has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any Person, public or private,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing or maintaining business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of a Company or any
Affiliate of a Company, or (iv) in violation of any Law, or (b) established or
maintained any fund or asset that has not been recorded in the books and records
of one of the Companies.
4.28 Customers and Suppliers
(a) Schedule 4.28 (a) contains for each Company, as of
December 5, 2002, a true, accurate and correct list of (i) those twenty-five
(25) customers that purchased the most product (in terms of gross sales) since
December 31, 2001, and showing the gross sales of Company products to each such
customer during that period (the "Customers"), (ii) those customers who during
the course of any year in any of the past five (5) years have purchased products
from the Company equal to or in excess of $100,000 for which such Company is
currently in a competitive bid process, and (iii) those Customers for which such
Company is negotiating new terms and conditions (provided no pricing terms will
be disclosed to the Buyers prior to the Closing). The Seller Parties have
delivered to the Buyers a true, accurate and
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complete list, as of December 5, 2002, of any significant customers of the
Companies (including, without limitation, those of the type set forth in clauses
(i) or (ii) above) from whom, to the Knowledge of the Sellers, the Seller
Parties has received any written notice or any oral notice, that such Company
has ceased, or will cease, to do business with the Companies or will
substantially reduce its business with the Companies.
(b) Schedule 4.28(b)(1) contains for each Company, as of
December 5, 2002, a true and correct list of those twenty-five (25) suppliers
that have supplied the most product (in terms of amounts paid by a Company to a
supplier) since December 31, 2001, and showing the amounts paid to each such
supplier during that period (the "Suppliers"). None of the Seller Parties has
received any written notice or, to the Knowledge of the Sellers, any oral notice
(i) that any significant supplier of the Companies (including, without
limitation, the Suppliers) has ceased, or will cease, to supply products to the
Companies or will substantially reduce its supply of products to the Companies,
or (ii) except as set forth on Schedule 4.28(b)(2) that any Supplier is
instituting price increases.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE BUYER PARTIES
The Buyers, jointly and severally, represent and warrant to
the Sellers that the statements contained in this Article 5 are true, complete
and accurate:
5.1. Organization of the Buyers. The US Buyer and the Canadian
Buyer are each duly organized and validly existing corporations. The US Buyer is
in good standing under the laws of the State of Delaware and the Canadian Buyer
is validly existing under the laws of the Province of Nova Scotia. Each Buyer
has all corporate or company power and authority to own or lease all of its
properties and assets and to conduct its business as currently conducted, and
each are duly qualified and in good standing as a foreign corporation authorized
to do business in each of the jurisdictions in which the character of the
properties owned or held under lease by it or the nature of the business
transacted by it makes such qualification necessary, except where the failure to
be so qualified or licensed would not have a Material Adverse Effect on either
US Buyer or Canadian Buyer.
5.2. Authorization of Transaction. Each Buyer has all
requisite corporate power and authority to execute and deliver this Agreement
and each Ancillary Agreement to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance of this Agreement and each
Ancillary Agreement to which each Buyer is a party by such Buyers and the
consummation by such Buyers of the transactions contemplated hereby and thereby
have been duly and validly authorized by the Board of Directors of each Buyer,
as the case may be, and no other corporate proceedings on the part of any Buyer,
or their respective shareholders or any stock exchange or automated quotation
system upon which US Buyer's shares are listed, are necessary to authorize this
Agreement and each Ancillary Agreement to which the Buyers are parties or to
consummate the transactions contemplated hereby and thereby. This Agreement and
the Ancillary Agreements to which either Buyer is a party have been duly and
validly executed
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and delivered by such Buyer and constitute the legal, valid and binding
agreements of such Buyer, enforceable against such Buyer in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency and other similar Laws relating to or affecting
creditors' rights generally and general equitable principles.
5.3. Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement and each Ancillary Agreement to which
any Buyer is a party by such Buyer nor the performance by the Buyers of their
respective obligations hereunder and thereunder, nor the consummation of the
transactions contemplated hereby or thereby will (i) conflict with or result in
any breach of any provision of the Certificate of Incorporation or By-Laws of
the US Buyer or the Memorandum of Association or Articles of Association of the
Canadian Buyer, (ii) except as required by the ▇▇▇▇▇▇ Credit Facilities and
except for any filings required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, require any
consent, waiver, approval, authorization or Permit of, or filing with or
notification to, any Governmental Entity, (iii) except for the ▇▇▇▇▇▇ Credit
Facilities, violate, breach, be in conflict with or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or permit the termination of any provision of, or result in the
termination of, the acceleration of the maturity of, or the acceleration of the
performance of any obligation of either Buyer, or cause an indemnity payment to
be made by either Buyer under, or result in the creation or imposition of any
Lien upon any properties, assets or business of either Buyer under, any note,
bond, indenture, mortgage, deed of trust, lease, franchise, permit
authorization, license, contract, instrument or other agreement or commitment or
any order, judgment or decree to which a Buyer is a party or by which either
Buyer or any of their respective assets or properties is bound or encumbered, or
give any Person the right to require either Buyer to purchase or repurchase any
notes, bonds or instruments of any kind, or (iv) violate any Law applicable to
one or both of the Buyers or any of their respective properties or assets,
except, with respect to clauses (ii), (iii) and (iv) for any such failures,
violations or conflicts that would not reasonably be expected to result in a
Material Adverse Effect on either Buyer.
5.4. Litigation. There are no judicial or administrative
actions, proceedings or investigations pending or, to the Buyers' knowledge,
threatened that question the validity of this Agreement or any of the Ancillary
Agreements or any action taken or to be taken by the Buyers in connection with
this Agreement or any of the Ancillary Agreements or that, if adversely
determined, would have a Material Adverse Effect on the Buyers or material
adverse effect upon the Buyers' ability to enter into or perform their
obligations under this Agreement or any of the Ancillary Agreements to which
either Buyer is a party.
5.5. Brokers' Fees. Neither Buyer has any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which the Sellers
could become liable or obligated.
5.6. Investment Intent.
(a) The US Buyer has, during the course of this
transaction, had the opportunity to ask questions of, and have received answers
from, Sellers and their representatives concerning the Companies and this
transaction.
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(b) The US Buyer is acquiring the Interests for its own
account, for investment, and not with a view to any resale or "distribution"
thereof within the meaning of the Securities Act.
(c) The US Buyer understands that because the sale of the
Interests to the US Buyer has not been registered under the Securities Act, the
US Buyer cannot dispose of any of such Interests until such Interests are
subsequently registered under the Securities Act or an exemption from such
registration is available.
(d) The US Buyer is sufficiently knowledgeable and
experienced in financial matters so as to be able to evaluate the risks and
merits of its purchase of the Interests, and the US Buyer is able to bear the
economic risk of loss of its entire investment in such Interests. The US Buyer
is an "accredited investor" as such term is defined in Rule 501 promulgated
under the Securities Act.
(e) The US Buyer has been advised that the sale of the
Interests by the US Seller pursuant to the transactions contemplated in this
Agreement and any Ancillary Agreement has not been registered under the
Securities Act or under the "blue sky" Laws of any jurisdiction and that US
Seller is selling such Interests to the US Buyer pursuant to this Agreement in
reliance upon, among other things, the representations and warranties of the US
Buyer contained in this Section 5.6.
5.7. Financial Capability. The Buyers have, or on or before
the Closing the Buyers will have, cash on hand to provide sufficient monies to
fund the Closing Payment and to satisfy all other costs and expenses arising in
connection with the consummation of the transactions contemplated by this
Agreement.
5.8. Capitalization. US Buyer is authorized to issue shares of
capital stock as follows: (i) 60,000,000 shares of ▇▇▇▇▇▇ Common Stock,
18,937,237 shares of which were issued and outstanding and 3,100,532 of which
were held in treasury as of December 13, 2002, and (ii) 3,000,000 shares of
preferred stock, none of which is issued and outstanding. When issued in
accordance with the terms of this Agreement, the ▇▇▇▇▇▇ Common Stock to be
issued to the US Seller pursuant to the terms of this Agreement will be duly
authorized, validly issued, fully paid, nonassessable and free of any preemptive
or other similar rights.
5.9. SEC Reports. US Buyer has filed all forms, reports and
documents (including exhibits and other information incorporated therein)
required to be filed with the SEC since December 31, 2001 on a timely basis. All
such required forms, reports and documents (including those that US Buyer may
file after the date hereof until the Closing) together with any documents filed
since December 31, 2001 by US Buyer with the SEC on a voluntary basis on current
reports on Form 8-K, and all amendments, supplements, exhibits and schedules
thereto, are referred to herein as the "US Buyer SEC Reports." As of their
respective dates, the US Buyer SEC Reports were prepared in compliance in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such US Buyer SEC Reports.
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5.10. Financial Statements. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
US SEC Reports (the "US Buyer Financials"), including any US Buyer SEC Reports
filed after the date hereof until the Closing, (i) comply as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, (ii) was prepared in accordance with US generally accepted
accounting principles (except in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act)
and (iii) fairly present, in all material respects, the consolidated financial
position of the US Buyer and its subsidiaries as at the respective dates thereof
and the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements do not include
all of the information and footnotes generally required by US generally accepted
accounting principles for complete financial statements.
5.11. No Material Adverse Change. Between September 30, 2002,
and the date of this Agreement, there has not been a Material Adverse Change in
the Buyers.
5.12. Residence; GST Status. The Canadian Buyer is not a
"non-resident" of Canada within the meaning of the Income Tax Act. The Canadian
Buyer is registered for the purposes of the Excise Tax Act (Canada) and its
registration number is 100609503RT0001.
ARTICLE 6
PRE-CLOSING COVENANTS
6.1. General. Each of the parties will use all commercially
reasonable efforts to take all actions and to do all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement (including satisfying the Closing conditions set forth in Article 9).
6.2. Notices and Consents.
(a) The Seller Parties shall use their commercially
reasonable efforts to give all notices to third parties and to obtain all third
party approvals, consents, novations and waivers required to be obtained or made
by any of the Seller Parties prior to consummation of the transactions
contemplated herein. The Buyers hereby agree to provide all reasonably requested
assistance and to cooperate with any reasonable request made by the Seller
Parties' in the Seller Parties' efforts to obtain such third party consents. The
parties have filed a Notification and Report Form and related material with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, and will use commercially
reasonable efforts to obtain clearance to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements and will make all
further filings with the Federal Trade Commission or the Antitrust Division of
the United States Department of Justice pursuant thereto that may be necessary,
proper or advisable. The Seller Parties shall, prior to the Closing Date,
diligently pursue and complete any duties imposed upon the Companies or Sellers
under any applicable state or provincial environmental transfer act.
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(b) The Seller Parties and the Buyers agree that, in the
event any consent, approval or authorization necessary or desirable to preserve
for the US Company and the Canadian Buyer any right or benefit under any
Contract or arrangement to which any Seller Parties or either Company is a party
is not obtained prior to the Closing, the Seller Parties will, subsequent to the
Closing, cooperate with the Buyer Parties in attempting to obtain such consent,
approval or authorization as promptly thereafter as practicable. If such
consent, approval or authorization cannot be obtained, the Seller Parties shall
use commercially reasonable efforts to provide the US Company and the Canadian
Buyer with the rights and benefits of the affected Contract or arrangement for
the term of such Contract or arrangement, and, if the Seller Parties provide
such rights and benefits, the US Company and the Canadian Buyer shall assume the
obligations and burdens thereunder.
(c) The Buyers shall use their commercially reasonable
efforts to give all notices to third parties and to obtain all third party
approvals, consents, novations and waivers required to be obtained or made by
any of the Buyers prior to consummation of the transactions contemplated herein,
including, without limitation, with respect to the ▇▇▇▇▇▇ Credit Facilities.
6.3. Carry on in Regular Course. Except as contemplated by
this Agreement, the Companies will carry on the operations of their businesses
substantially in the same manner as heretofore conducted. Except as contemplated
by this Agreement, from the date hereof through the Closing, the Companies will
not, without the prior written consent of the Buyers (which consent will not be
unreasonably withheld, delayed or conditioned) in each case:
(a) with respect to the US Company only, issue, sell,
grant options or rights to purchase, pledge, or authorize or propose the
issuance, sale, grant of options or rights to purchase or pledge any securities
of the US Company, or grant or accelerate any right to convert or exchange any
membership interests or securities of the US Company;
(b) with respect to the US Company only, acquire or
redeem, directly or indirectly, or amend the terms of any membership interests
or securities of the US Company or declare, set aside or pay any dividend or
make any distribution with respect to its membership interests, as applicable,
provided that the Companies may (i) repay inter-company loans or (ii) make
dividends or distribution necessary to satisfy any tax obligations of the Seller
Parties or to its Affiliates or (iii) make any other distributions or dividends
in the ordinary course of its business;
(c) with respect to the US Company only, split, combine
or reclassify its membership interests declare, set aside, make or pay any
dividend or distribution (whether in cash, stock, membership interests or
property) on any of its membership interests;
(d) grant any stock-related or membership
interest-related performance or similar awards or bonuses;
(e) sell, lease, transfer, assign or otherwise dispose of
any of its assets, tangible or intangible, other than inventory or other assets
in the ordinary course of business;
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(f) enter into any Contract, or series of related
Contracts, either involving more than $50,000 or outside the ordinary course of
business;
(g) enter into any Contract of the type described in
Sections 4.10(a)(i)-(xi) or 4.10(b)(i)-(vi);
(h) enter into any Contract or engage in any transaction
with any other division, unit or Affiliate of the Seller Parties;
(i) accelerate, terminate, materially modify or cancel
any Contract (excluding Inventory Purchase Orders), or series of related
Contracts, involving more than $100,000 in the past twelve (12) months, to which
it is a party or by which it is bound;
(j) suffer the imposition of any Lien (other than
Permitted Liens) upon any of its assets;
(k) make any capital expenditure (or series of related
capital expenditures) involving more than $25,000 in the aggregate or outside
the ordinary course of business;
(l) make any capital investment in, any loan to, or any
acquisition of the securities or assets of any other Person, except, in each
case, in the ordinary course of that Company's business;
(m) issue any note, bond or other debt security or
create, incur, assume or guarantee any indebtedness for borrowed money or for a
capitalized lease obligation either involving more than $30,000 singly or
$50,000 in the aggregate or for any obligation of the Parents or any of their
Affiliates;
(n) delay or postpone the payment of accounts payable or
other liabilities outside the ordinary course of business;
(o) grant any extension of credit in the sale of
products, collection of receivables or otherwise, other than in the ordinary
course of business;
(p) cancel, compromise, waive or release any right or
claim (or series of related rights and claims) involving more than $25,000;
(q) grant any license or sublicense of any rights under
or with respect to any Intellectual Property owned or licensed by the Companies
and necessary and material to the operation of their business as currently
conducted (excluding proprietary software provided to customers of the Companies
in the ordinary course of business);
(r) authorize any change in its Certificate of Formation,
Operating Agreement, Articles of Incorporation, By-Laws, or other similar
charter document;
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(s) make any loan to, or enter into any other transaction
with, any director, manager or officer of any Seller Party or any relative by
blood or marriage thereof, or any of the Sellers, the Parents or any Affiliates
thereof, or any employee of the Companies (other than routine payroll and travel
advances and computer loans for employees of the Companies);
(t) enter into any employment or compensation agreements,
collective bargaining agreements, or any consulting agreements, or any similar
arrangements (written or oral) or materially modify the terms of any existing
such contract or agreement, in each case outside the ordinary course of such
Company's business;
(u) except as required by Law or the terms of any
Contract, grant any increase in the base compensation of any employee or officer
of the Companies such that the aggregate increases under this clause (u) exceed
4% of the Companies' combined annual payroll costs for base compensation for
employees;
(v) adopt, materially modify, or terminate any bonus of
any type, profit-sharing, incentive, severance or other plan, including a
retirement plan, Contract or commitment for the benefit of any of its directors,
officers and employees, or take any such action with respect to any other Plan,
except as required by Law or the terms of such Plan;
(w) make or pledge to make any charitable or other
capital contribution which, in the aggregate for all such pledges, is in excess
of $5,000; and
(x) engage in any methods of billing and collection,
purchase, sale, lease, accounting or operation that vary materially from its
usual and customary past practice, except if required by changes to the US
generally accepted accounting principles.
6.4. Assignment of Executive Employment Contracts. Prior to
Closing, Sellers and Parents shall use commercially reasonable efforts to cause
to be assigned to the US Company those executive employment contracts for
officers of the US Company set forth on Schedule 6.4 (the "Executive Employment
Contracts") on terms and conditions reasonably acceptable to the Buyers.
Notwithstanding the foregoing, with respect to the Executive Employment Contract
for ▇▇▇▇▇▇ San ▇▇▇▇▇▇, the US Company shall only assume the liability to pay
"Base Compensation" (as defined therein) for a period of twelve (12) months
commencing on the date of termination, if any, without "Cause" (as defined
therein) or for "Good Reason" (as defined therein).
6.5. Access. From the date hereof until the Closing, upon
reasonable notice, the Sellers shall cause the Companies and each of the
Companies' officers, directors, employees, agents, representatives, accountants
and counsel to: (i) afford the officers, employees and authorized agents,
accountants, counsel, financing sources and representatives of the Buyers
reasonable access, during normal business hours, to the offices, properties,
plants, other facilities, books and records of the Companies and to those
officers, directors, employees, agents, accountants and counsel of the Companies
who have any knowledge relating to the Companies (subject to the provision of
customary indemnification by Buyers in the case of any inspections or testing),
and (ii) furnish to the officers, employees and authorized agents, accountants,
counsel, financing sources and representatives of the Buyers such additional
financial and
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operating data and other information regarding the assets, properties and
goodwill of the Companies (or legible copies thereof) as the Buyers may from
time to time reasonably request. Notwithstanding the foregoing, prior to the
Closing, the Buyers shall not engage in any general employee communications
without the prior approval of the Sellers.
6.6 Benefit Plans. Except as contemplated by Section 7.7, the
Seller Parties shall use commercially reasonable efforts such that as of the
Closing the Plans will cover only employees and former employees of the
Companies and their dependents and beneficiaries, will not provide benefits to
any other employees or former employees of the Seller Parties or their
Affiliates, and, except for employees and former employees of the Companies and
their dependents and beneficiaries, no other individuals will have an interest
in or rights under the Plans.
6.7. Notice of Developments; Schedules; Updating Schedules.
(a) Each party will give prompt written notice to the
other of any development that adversely affects the ability or obligation of the
parties to consummate the transactions contemplated by this Agreement or any of
the Ancillary Agreements. No such written notice of a development will be deemed
to have amended the schedules hereto, to have qualified the representations and
warranties contained herein or to have cured any misrepresentation or breach of
warranty that otherwise might have existed hereunder by reason of such material
development.
(b) Complete copies of the schedules referred to herein
are being delivered simultaneously with the execution of this Agreement.
(c) The parties agree that, notwithstanding any provision
herein to the contrary, none of the actions permitted by this Agreement to be
taken by the Companies or any of the Selling Parties after the date hereof
through the Closing Date, including, without limitation, those actions permitted
under Section 6.3, shall constitute or give rise to any breach or alleged breach
of any of the representations or warranties made by any of the Companies or the
Selling Parties under this Agreement or any Ancillary Agreement.
6.8 No Solicitation or Negotiation. The Sellers agree that
between the date of this Agreement and the earlier of (a) the Closing and (b)
the termination of this Agreement, none of the Seller Parties, nor any of their
respective Affiliates, officers, directors, representatives or agents will (i)
initiate, encourage or solicit contacts regarding, or proposals or offers of any
kind for, the acquisition of all or a significant portion of the business of
either of the Companies, the Canadian Assets or the Interests (other than
inventory to be sold in the ordinary course of business consistent with past
practice or dispositions of assets or other property otherwise permitted under
this Article 6); (ii) engage in discussions about, or enter into any transaction
concerning, any such proposal, offer or acquisition of the business of either of
the Companies, the Canadian Assets or the Interests, or negotiate with other
possible buyers or their representatives regarding the acquisition of the
business of the Companies, the Canadian Assets or the Interests, or (iii)
directly or indirectly, provide any information about the business of either of
the Companies or the prospects thereof to anyone in connection with the
acquisition or
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potential acquisition of the business of the Companies, the Canadian Assets or
the Interests. The Seller Parties immediately shall cease and cause to be
terminated all existing discussions, conversations, negotiations and other
communications with any Persons conducted heretofore with respect to any of the
foregoing. The Sellers agrees to advise Buyers promptly of any unsolicited
contacts, offers or revised offers regarding the acquisition of all or a
significant portion of the business of either of the Companies, the Canadian
Assets or the Interests that it receives during such period. The Sellers agree
not to, and to cause the Companies not to, without the prior written consent of
the Buyers, release any Person from, or waive any provision of, any
confidentiality or standstill agreement to which the Sellers or the Companies
are a party.
6.9 Transfer of Owned Real Property. Prior to the Closing
Date, the Seller Parties shall use commercially reasonable efforts to (i) sell,
transfer, or convey the fee simple interest in the Des Plaines Property to one
or more of their Affiliates (the "Owned Real Property Buyer"), (ii) to assign
the Parking Lot Lease to (or cause a new Parking Lot Lease to be entered into
by) the Owned Real Property Buyer and (iii) to condition such transfer upon the
Owned Real Property Buyer agreeing to execute the Parking Lot Sublease and the
Owned Real Property Lease for the Des Plaines Property at the Closing.
6.10 Liens. At or prior to the Closing, the Seller Parties
shall undertake all commercially reasonable efforts to cause to be removed or
released all Liens set forth on Schedule 4.19.
6.11 Purchase Order List. No more than five (5) Business Days
prior to the Closing, the Seller Parties shall prepare and deliver to the Buyers
a true, accurate and complete list of Inventory Purchase Orders in excess of
$50,000 and other purchase orders in excess of $25,000 entered into by each
Company between December 5, 2002, and the date such list is prepared.
6.12 Customer List and Supplier List. No more than two (2)
days prior to the Closing, the Seller Parties shall prepare and deliver to the
Buyers for each Company (i) a true, accurate and correct list of those
twenty-five (25) customers that purchased the most product (in terms of gross
sales) since December 31, 2001, and showing the gross sales of Company products
to each such customer during that period, and (ii) a true and correct list of
those twenty-five (25) suppliers that have supplied the most product (in terms
of amounts paid by a Company to a supplier) since December 31, 2001, and showing
the amounts paid to each such supplier during that period.
6.13 Guarantees. At or prior to the Closing, the Seller
Parties shall undertake all commercially reasonable efforts to cause to be
released all guarantees of the type described in Section 4.10(a)(ii) or set
forth on Schedule 4.10(a).
6.14 No Hire. From the date of this Agreement through the
Closing, or, if this Agreement is terminated prior to the consummation of the
transactions contemplated hereby pursuant to Article 10 then for a period of
three (3) years from the date of this Agreement, neither Buyer nor any of their
respective Affiliates, successors or assigns, shall hire, engage, retain or
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agree to hire, engage or retain, directly or indirectly, any employee of the
Companies set forth on Schedule 4.15(c) or ▇▇▇ ▇▇▇▇▇▇▇▇.
6.15 Offer of Employment to Canadian Employees. The Canadian
Buyer shall offer employment, effective from the Closing Date, to all Canadian
Employees on substantially the same terms and conditions of employment including
salary, incentive compensation and benefits as the terms and conditions of each
such Canadian Employee's employment with Canadian Company immediately prior to
the Closing.
ARTICLE 7
POST-CLOSING COVENANTS
7.1 Use of Intellectual Property. The Selling Parties
acknowledge that from and after the Closing, the Trademarks and all similar
names, marks and logos shall be owned by the US Company and the Canadian Buyer,
that none of the Selling Parties or any of their Affiliates shall have any
rights in such Trademarks or similar names, marks or logos and that none of the
Sellers, the Parents, or any of their Affiliates will contest the ownership or
validity of any rights of the Buyers or the Companies in or to such Trademarks
or similar names, marks or logos. Immediately after the Closing, the Selling
Parties shall file all necessary amendments to their charter documents to
effectuate name changes to names which shall not include any of the Trademarks
or variants thereof and to file all necessary amendments to business
certificates to reflect such change in name.
7.2 Restrictive Covenants. The Sellers and Parents acknowledge
that the Companies have developed trade secrets and confidential information
concerning the Business and that the agreements and covenants contained in this
Section 7.2 are essential to protect the Business following the consummation of
the transactions contemplated by this Agreement. Accordingly,
(a) Definition of Business. The Companies are engaged in
the business of the distribution of maintenance and repair parts, fasteners,
electrical components, chemicals, fluid flow, tools and other related items in
the United States, and Canada and Mexico to original equipment manufacturers,
maintenance, repair and operation customers, and transportation-related
customers (the "Business").
(b) Confidentiality. The Sellers and Parents agree to,
and shall cause their agents, representatives, Affiliates, employees, officers
and directors to: (i) treat and hold as confidential (and not disclose or
provide access to any Person to) and not use for any purpose whatsoever all
information relating to trade secrets, processes, know how, patent and trademark
applications, product development, price, customer and supplier lists, pricing
and marketing plans, policies and strategies, details of client and consultant
contracts, operations methods, product development techniques, business
acquisition plans, new personnel acquisition plans and all other confidential
information with respect to the Companies and their operations, (ii) in the
event that the Sellers, the Parents, or any such agent, representative,
Affiliate, employee, officer or director becomes legally compelled to disclose
any such information, provide the Buyers with
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prompt written notice of such requirement so that the Buyers, the US Company or
any Affiliate, successor or assign thereof may seek a protective order or other
remedy or waive compliance with this Section 7.2(b), (iii) in the event that
such protective order or other remedy is not obtained, or the Buyers waive
compliance with this Section 7.2(b), furnish only that portion of such
confidential information which is legally required to be provided and exercise
their reasonable efforts to obtain assurances that confidential treatment will
be accorded such information, (iv) promptly furnish (prior to, at, or as soon as
practicable following, the Closing) to the US Company and the Canadian Buyer any
and all copies (in whatever form or medium) of all such confidential information
then in the possession of the Sellers or any of their agents, representatives,
Affiliates, employees, officers and directors and destroy any and all additional
copies then in the possession of the Sellers or any of their agents,
representatives, Affiliates, employees, officers and directors of such
information and of any analyses, compilations, studies or other documents
prepared, in whole or in part, on the basis thereof; provided, however, that
this sentence shall not apply to any information that, at the time of
disclosure, is available publicly and was not disclosed in breach of this
Agreement by the Sellers, the Parents, their agents, representatives,
Affiliates, employees, officers or directors; provided further that, with
respect to Intellectual Property, specific information shall not be deemed to be
within the foregoing exception merely because it is embraced in general
disclosures in the public domain. In addition, with respect to Intellectual
Property, any combination of features shall not be deemed to be within the
foregoing exception merely because the individual features are in the public
domain unless the combination itself and its principle of operation are in the
public domain. The Sellers and Parents agree and acknowledge that remedies at
law for any breach of their obligations under this Section 7.2(b) are inadequate
and that in addition thereto the Buyers and the US Company shall be entitled to
seek equitable relief, including in the form of an injunction and specific
performance, in the event of any such breach. Notwithstanding any provisions of
this Section 7.2(b) to the contrary, nothing herein shall prevent any party
hereto from disclosing such information as it deems necessary or advisable in
connection with the enforcement by such party of any of its rights or remedies
under this Agreement. Subject to the provisions of this Section 7.2(b), Sellers
shall be permitted to retain a copy of each of the Shared Records for use by
Sellers as Sellers may reasonably require, and Buyers shall be permitted to use
the copies of the books and records of the Canadian Company included in the
definition of Canadian Assets for use by the Buyers as Buyers may reasonably
require.
(c) No Solicitation. For a period of two (2) years
following the Closing Date, no Seller or Parent shall, and each shall cause
Brafasco Holdings, Inc., C&J Fasteners, Inc., Brampton Fastener Co. Limited and
each of its other subsidiaries not to, directly or indirectly, (i) solicit for
employment any officer, director or employee of, or encourage any officer,
director or employee to leave his or her employment with, the US Company,
Canadian Buyer, the ▇▇▇▇▇▇ Distribution division of the US Buyer or any of their
respective successors, or (ii) solicit or intentionally induce any customer,
supplier, lender or lessor to discontinue or reduce the extent of his, her or
its business with the US Company, Canadian Buyer, the ▇▇▇▇▇▇ Distribution
division of the US Buyer or any of their respective successors (except that
covenants under this Section 7.2(c)(ii) shall not prohibit C&J Fasteners, Inc.,
Brafasco Holdings, Inc., or Brampton Fastener Co. Limited in the conduct of
their businesses using those types of sales channels as
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they used in the conduct of their businesses over the twelve (12) month period
prior to the Closing Date).
(d) No Competition. Sellers and Parents each agree that
for a period of two (2) years following the Closing Date, no Seller, Parent or
any of their subsidiaries shall have any interest, either directly or
indirectly, in any entity, whether as shareholder (other than the ownership of
less than ten percent (10%) of the stock of a publicly-held corporation whose
stock is traded on a national securities exchange or in the over-the-counter
market), partner, member, manager, independent contractor, consultant, agent,
principal, franchisee, franchisor, creditor, officer, director, employee,
individual owner or proprietor, or otherwise, either on behalf of such Seller or
Parent or on behalf of any other Person, that engages, either directly or
indirectly in the Business; provided, however, that the Sellers and Parents or
any of their Affiliates shall be permitted to retain their ownership interests
in C&J Fasteners, Inc., Brafasco Holdings, Inc., and Brampton Fastener Co.
Limited provided C&J Fasteners, Inc., Brafasco Holdings, Inc., and Brampton
Fastener Co. Limited only conduct their business using those types of sales
channels as they have used in the conduct of their businesses over the twelve
(12) month period prior to the Closing Date. The restrictions in this Section
7.2(d) shall apply to a geographic region that coincides with the North
American-wide scope of the Business.
(e) Remedies Upon Breach. The Sellers and the Parents
each hereby acknowledge and agree that a material breach or threatened breach
thereby of any of the provisions contained in this Section 7.2 will cause
irreparable injury to the US Company and the Buyers. Sellers and Parents
therefore agree that, in addition to any other right or remedy the Buyer Parties
may have under this Agreement, the Buyer Parties shall be entitled to a
temporary restraining order and to a preliminary and permanent injunction
enjoining or restraining the breach or threatened breach of this Section 7.2 by
a Seller or Parent. The Sellers and the Parents further agree that the Buyer
Parties shall have the right to have the provisions of this Section 7.2
specifically enforced.
(f) Authority of the Court. Consistent with the intent of
the parties, if it is determined by the final judgment of a court of competent
jurisdiction that any covenant or agreement set forth in this Section 7.2, or
any part thereof, is invalid or unenforceable, the parties agree that the court
making the determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or geographic area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision. The parties agree that this Agreement shall be enforceable as
so modified, and that any covenants and agreements not subject to judicial
modification shall be given their full effect according to their terms.
(g) Termination. Notwithstanding any provision herein to
the contrary, the provisions of Sections 7.2(c) and 7.2(d) shall terminate with
respect to any Person otherwise bound thereby at such time as such Person ceases
to be affiliated with Glencoe Capital, LLC.
7.3 Acquisition Bonuses. Sellers shall pay directly any
bonuses to be paid to employees of the US Company in connection with completion
of the transaction contemplated by
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this Agreement and shall hold Buyers and US Company harmless from and indemnify
Buyers and US Company with respect to any Damages related to such bonuses
(including, without limitation, failure of Sellers to pay such bonuses).
7.4 Certain Financial Information. The Seller Parties shall,
at Buyer's expense and during reasonable business hours, provide the Buyers and
their representatives with access to relevant books and records of the Sellers
for, and cooperate with and assist the Buyers in, the preparation by Buyers of
audited and unaudited financial and other information required for the
preparation of selected and summary financial data and pro forma financial
information regarding the business of the Companies for all periods ending prior
to the Closing Date required by applicable provisions of Regulations S-X and S-K
promulgated under the Securities Act, and the Exchange Act, and the rules and
regulations thereunder, and shall provide such management representation letters
and shall use commercially reasonable efforts to cause the Seller Parties'
outside independent public accountants to deliver such consents and comfort as
are customary under applicable accounting standards, as promptly as reasonably
practicable but in no event later than forty-five days following the request of
Buyers therefore. The US Company and Canadian Buyer shall be responsible for the
preparation of and the costs and expenses incurred in connection with the
preparation, review and audit of the financial statements of the Companies for
the fiscal year ended December 31, 2002.
7.5 D&O Indemnitees.
(a) The US Company shall, to the maximum extent permitted
by Law, indemnify and hold harmless each Person set forth on Schedule 7.5
(collectively, the "D&O Indemnitees" and individually, a "D&O Indemnitee") from
and against any and all Damages that arise out of, relate to or are in
connection with the management or conduct of the business or affairs of the US
Company or the D&O Indemnitees' activities with respect thereto, except for any
such Damages that have resulted from willful misconduct or recklessness by the
D&O Indemnitee seeking indemnification.
(b) Nothing in clause (a) above shall limit the coverage
of or otherwise be deemed to replace or be in lieu of any insurance otherwise
available to any D&O Indemnitee. Any D&O Indemnitee shall make a good faith
effort to recover any insurance proceeds that may be available to cover any
Damages (including, without limitation, under the D&O Policy described in clause
(d) below). The amount which the US Company is required to pay to, for, or on
behalf of any D&O Indemnitee pursuant to this Section 7.5 shall be reduced
(including, without limitation, retroactively) by any insurance proceeds
actually recovered by or on behalf of such D&O Indemnitee and other amounts paid
by any person in reduction of the related Damages. If a D&O Indemnitee shall
have received or shall have paid on its behalf any amounts in respect of Damages
and shall subsequently receive directly or indirectly insurance proceeds or
other amounts in respect of such Damages, then such Indemnitee shall promptly
pay to the US Company a sum equal to the amount of such insurance proceeds or
other amounts provided the same does not exceed an amount equal to the payment
actually made by the US Company under this Section 7.5.
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(c) Effective upon consummation of the Closing, the Buyer
Parties, and each of their respective Affiliates, successors and assigns, shall
be deemed to have remised, released and forever discharged the D&O Indemnitees
of and from any and all Damages which the Buyer Parties, and each of their
respective Affiliates, successors and assigns, or any of them, has or ever had,
or hereafter can, shall or may have, arising out of the actions or inactions of
any such D&O Indemnitees in their capacities as officers, managers or directors
of the US Company; provided, however, that this Section 7.5(c) shall not apply
to Damages that (i) arise from the fraud or intentional misrepresentation of any
of the D&O Indemnitees, or (ii) may arise from the breach by any of the D&O
Indemnitees of, or the failure to perform, any obligation or duty arising on the
part of any of the D&O Indemnitees after the date hereof under this Agreement,
any of the Ancillary Agreements, or any other agreement to be entered into after
the date hereof and contemplated hereby to which any of the D&O Indemnitees is a
party.
(d) Sellers and the Parents, or any of them, shall
purchase or otherwise have in place, effective as of the Closing, a policy or
policies of insurance for errors and omissions of the D&O Indemnities in their
capacities as officers and directors of the Companies prior to the Closing with
limits of at least $3,000,000 (the "D&O Policy"). The D&O Policy shall be
maintained by the Sellers and the Parents, or any of them, for a period of not
less than six (6) years. The US Company shall be named as a named insured on a
direct and primary basis under such D&O Policy. The D&O Policy shall be written
such that the US Company will be notified by the insurer of the cancellation
(including cancellation for non-renewal) or restrictive amendment of the D&O
Policy at least thirty (30) days prior to the date that the cancellation or
restrictive amendment takes effect. Within thirty (30) days after the Closing,
Sellers shall provide the Buyers with certificates of insurance evidencing full
compliance with the above insurance requirements. Such certificates will be kept
current throughout the entire above-mentioned six (6) year period. Buyers'
acceptance of such certificates shall not relieve Sellers and the Parents of the
obligation to obtain and maintain the coverage set forth above, nor shall such
acceptance be deemed a waiver of the US Company's and Canadian Buyer's right to
such coverage.
7.6 Further Assurances. Each party hereto shall execute such
further documents and instruments and take such further actions as may
reasonably be requested by one or more of the other parties hereto to
consummate the transactions contemplated by this Agreement and the Ancillary
Agreements, to vest the US Buyer with full title to the Interests, to vest the
Canadian Buyer with full title to the Canadian Assets, to file all Tax Returns
and make any elections related to Taxes, and to otherwise effect the purposes
of this Agreement. Upon the reasonable request of the Canadian Buyer, the
Seller Parties shall provide the Canadian Buyer with copies of any books or
records of the Canadian Company related to the Canadian Assets or the business
of the Canadian Company.
7.7 Agreement Regarding Company 401(k) Plan. Notwithstanding
Section 6.6(a), it is understood that it may not be commercially reasonable for
the Seller Parties to cause the Kar Products LLC Savings and Investment Plan
(the "Company 401(k) Plan") to cover only employees and former employees of the
Companies and their beneficiaries on the Closing. As a result, in the event
employees and former employees of Affiliates of the Seller Parties, other than
employees and former employees of the Companies (the "Non-Company Participants")
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participate in the Company 401(k) Plan on and after the Closing, Buyer and the
Seller Parties shall cooperate and take such action as is necessary to spin-off
the assets and liabilities of the Company 401(k) Plan relating to the
Non-Company Participants, in accordance with Code Section 414(l), to a successor
plan to be established by the Seller Parties or an Affiliate thereof (the "Plan
Spin-Off") as soon as commercially reasonable following the Closing. Until the
date of the Plan Spin-Off the Buyer shall cause the Company 401(k) Plan to
continue to receive contributions and administer the Company 401(k) Plan on
behalf of the Non-Company Participants. It is specifically understood that after
the Closing Buyer and Kar shall have no obligation to make contributions to the
Company 401(k) Plan on behalf of any Non-Company Participant and that the Seller
Parties and their Affiliates shall be fully responsible for all contributions
for Non-Company Participants. Notwithstanding the foregoing, Buyer and the
Companies shall have no obligation to allow Non-Company Participants to
participate in the Company 401(k) Plan for payroll periods beginning 45 days
after the Closing and the Plan Spin-Off shall be completed within 60 days after
the Closing. Additionally, Seller Parties and their Affiliates shall pay and
indemnify Buyer, the Companies and the Company 401(k) Plan for all costs and
liabilities associated with covering Non-Company Participants, including but not
limited to on-going administrative costs associated with providing such
coverage, as well as the administrative, consulting and legal costs associated
with the Plan Spin-Off.
7.8 Transition Services. Effective upon the Closing, the
parties shall enter into the Transition Services Agreement, pursuant to which
they shall each provide certain services for a specified period following the
Closing and in consideration of the agreements, covenants and provisions
contained herein.
7.9 Misdirected Receivables. From and after the Closing,
Seller Parties shall remit promptly to Canadian Buyer any payments or other sums
received by the Canadian Company for an account receivable of the Canadian
Company that existed on or prior to Closing.
ARTICLE 8
TAX MATTERS
8.1 Indemnity.
(a) Subject to Section 11.6(f), the Sellers and Parents
agree from and after the Closing, to indemnify and hold harmless the Buyer
Parties against the following Taxes (except to the extent reserves for such
Taxes have been specifically established on the Closing Balance Sheets) and
against any Damages incurred in contesting or otherwise in connection with any
such Taxes: (i) Taxes (but excluding any expenses incurred by Buyers in
participation in any audit where Sections 8.4(b) and 8.4(c) specifically
provides that such expenses of participation be paid by the Buyers) imposed on
the Companies or any predecessor with respect to taxable periods of such Person
ending on or before the Closing Date; (ii) with respect to taxable periods
beginning before the Closing Date and ending after the Closing Date, (A) Taxes
imposed on the US Company which are allocable, pursuant to Section 8.1(b), to
the portion of such period ending on the Closing Date, and (B) all such Taxes
imposed on the Canadian Company, except for Taxes imposed on a periodic basis
with respect to the ownership or use of the Canadian
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Assets, then only such Taxes allocable, pursuant to Section 8.1(b)(ii), to the
portion of such period ending on the Closing Date; (iii) Taxes imposed on the
Canadian Buyer (or any of its Affiliates) under any bulk transfer law of any
jurisdiction or under common law doctrine of de facto merger or successor
liability as a result of the purchase, use and operation of the Canadian Assets;
(iv) Taxes imposed on any member of any affiliated group with which any of the
Companies or any predecessor file or have filed a Tax Return on a consolidated
or combined basis for a taxable period ending on or before the Closing Date; and
(v) Taxes imposed on the Buyer Parties as a result of any breach of warranty or
misrepresentation under Section 4.9. The Buyers shall indemnify and hold
harmless the Seller Parties for any Taxes of the Buyer Parties not allocated to
the Sellers pursuant to this Section 8.1(a).
(b) In the case of Taxes that are payable with respect to
a taxable period that begins prior to the Closing Date and ends after the
Closing Date, the portion of any such Tax that is allocable to the portion of
the period ending on the Closing Date shall be:
(i) in the case of Taxes that are either (x) based
upon or related to income or receipts, or (y) imposed in connection with any
sale or other transfer or assignment of property (real or personal, tangible or
intangible) (other than conveyances pursuant to this Agreement or any Ancillary
Agreement, as provided under Section 8.7), deemed equal to the amount which
would be payable if the taxable year ended with the Closing Date; and
(ii) in the case of Taxes imposed on a periodic
basis with respect to the real, personal or intangible property of the
Companies, deemed to be the amount of such Taxes for the entire period (or, in
the case of such Taxes determined on an arrears basis, the amount of such Taxes
for the immediately preceding period), multiplied by a fraction the numerator of
which is the number of calendar days from the beginning of the period through
the Closing Date and the denominator of which is the number of calendar days in
the entire period.
8.2 Returns and Payments.
(a) From the date of this Agreement through and after the
Closing Date, the Sellers shall prepare and file or otherwise furnish in proper
form to the appropriate Governmental Entity (or cause to be prepared and filed
or so furnished) in a timely manner all Tax Returns relating to the US Company
that are due on or before or relate to any taxable period ending on or before
the Closing Date (and the Buyers shall do the same for the US Company with
respect to any taxable period ending after the Closing Date). Tax Returns of the
US Company not yet filed for any taxable period that begins before the Closing
Date shall be prepared in a manner consistent with past practices employed with
respect to the US Company (except to the extent counsel for the Sellers or the
US Company renders a legal opinion that there is no reasonable basis in law
therefore or determines that a Tax Return cannot be so prepared and filed
without being subject to penalties). With respect to any Tax Return required to
be filed by the Buyers or the Sellers with respect to the US Company and as to
which an amount of Tax is allocable to the other party under Section 8.1(b), the
filing party shall provide the other party and its authorized representatives
with a copy of such completed Tax Return and a statement certifying the amount
of Tax shown on such Tax Return that is allocable to such other party pursuant
to Section 8.1(b), together with appropriate supporting information and
schedules at
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least twenty (20) Business Days prior to the due date (including any extension
thereof) for the filing of such Tax Return, and such other party and its
authorized representatives shall have the right to review and comment on such
Tax Return and statement prior the filing of such Tax Return.
(b) The Sellers shall pay or cause to be paid when due
and payable all Taxes with respect to the US Company for any taxable period
ending on or before the Closing Date to the extent such Taxes exceed the amount,
if any, accrued for such Taxes as current Taxes payable on the Closing Balance
Sheets (subject to Section 11.6(f)), and the Buyers shall so pay or cause to be
paid Taxes for any taxable period ending after the Closing Date (subject to its
right of indemnification from the Sellers by the date set forth in Section 8.5
for Taxes attributable to the portion of any Tax period that includes the
Closing Date pursuant to Sections 8.1(a) and 8.1(b)).
8.3 Refunds. Any Tax refund (including any interest with
respect thereto) relating to the US Company for any taxable period ending on or
before the Closing Date (except for any refund included on the Closing Balance
Sheets, which shall be the property of the Buyers, and if paid to the Sellers,
shall be paid over promptly to the Buyers) shall be the property of the Sellers
(and not the US Company), and if received by the Buyers or the US Company shall
be paid over promptly to the Sellers. Notwithstanding the foregoing sentence,
any Tax refund (or equivalent benefit to the Sellers through a reduction in Tax
liability) for a period ending on or before the Closing Date arising out of the
carryback of a loss or credit incurred by the US Company in a taxable year
ending after the Closing Date shall be the property of the Buyers and, if
received by the Sellers, shall be paid over promptly to the Buyers. The amount
or economic benefit of any refunds, credits or offsets of Taxes of the US
Company with respect to a taxable period that begins prior to the Closing Date
and ends after the Closing Date shall be equitably apportioned in a manner
consistent with the liability to pay such Taxes pursuant to Section 8.1(a).
8.4 Contests.
(a) After the Closing, each of the Buyers and the Sellers
shall promptly notify the other in writing of any written notice of a proposed
assessment, reassessment, or claim in an audit or administrative or judicial
proceeding which, if determined adversely to the taxpayer, would be grounds for
indemnification under this Article 8, provided, however, that a failure to give
such notice will not affect the indemnified party's right to indemnification
under this Article 8 except to the extent, if any, that, but for such failure,
the indemnified party could have avoided all or a portion of the Tax liability
in question.
(b) In the case of an audit or administrative or judicial
proceeding with respect to the US Company that relates to periods ending on or
before the Closing Date, provided that the Sellers acknowledge in writing their
liability under this Agreement to hold the Buyers and the US Company harmless
against the full amount of any adjustment which may be made as a result of such
audit or proceeding that relates to periods ending on or before the Closing Date
(or, in the case of any taxable year that includes the Closing Date, against an
adjustment allocable under Section 8.1(b) to the portion of such year ending on
or before the Closing Date), the Sellers shall have the right at their expense
to participate in and control the conduct of such audit or
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proceeding but only to the extent that such audit or proceeding relates solely
to a potential adjustment for which the Sellers have acknowledged their
liability; the Buyers also may participate in any such audit or proceeding at
their expense. If the Sellers do not assume the defense of any such audit or
proceeding, the Buyers may defend the same in such manner as they may deem
appropriate, including, but not limited to, settling such audit or proceeding
after giving five days' prior written notice to the Sellers setting forth the
terms and conditions of settlement (subject to Section 8.4(d)). In the event
that issues relating to a potential adjustment for which the Sellers have
acknowledged their liability pursuant to this Section 8.4(b) are required to be
dealt with in the same proceeding as separate issues relating to a potential
adjustment for which the Buyers would be liable, the Buyers shall have the
right, at their expense, to control the audit or proceeding with respect to the
latter issues. In such cases, Buyer and Seller will cooperate in deciding any
issue that must be decided jointly (including, without limitation, choice of
judicial forum).
(c) With respect to issues relating to a potential
adjustment in the Taxes of the US Company for which both the Sellers (as
evidenced by their acknowledgment under this Section 8.4) and the Buyers or the
Companies could be liable, (i) each party may participate in the audit or
proceeding, and (ii) the audit or proceeding shall be controlled by that party
which would bear the burden of the greater portion of the sum of the adjustment
and any corresponding adjustments that may reasonably be anticipated for future
Tax periods. The principle set forth in the immediately preceding sentence shall
govern also for purposes of deciding any issue that must be decided jointly
(including, without limitation, choice of judicial forum) in situations in which
separate issues are otherwise controlled under this Article 8 by the Buyers and
the Sellers.
(d) Neither the Buyers nor the Sellers shall enter into
any compromise or agree to settle any claim pursuant to any Tax audit or
proceeding with respect to the US Company which would adversely affect the other
party for such year or a subsequent year without the written consent of the
other party, which consent may not be unreasonably withheld. The Buyers and the
Sellers agree to cooperate, and the Buyers agree to cause the US Company to
cooperate, in the defense against or compromise of any claim in any audit or
proceeding.
(e) Notwithstanding anything to the contrary in this
Agreement, the Canadian Company or Sellers shall solely control any audit or
proceeding with respect to Taxes of the Canadian Company, and the Buyer Parties
shall have no right to participate in any such proceeding.
8.5 Time of Payment. Payment by the Sellers or Buyers of any
amounts due under this Article 8 in respect of Taxes shall be made (i) at least
three (3) Business Days before the due date of the applicable estimated or final
Tax Return, and (ii) within three (3) Business Days following an agreement
between the Sellers and the Buyers that an indemnity amount is payable pursuant
to an assessment of a Tax by a taxing authority or for any other reason, and
(iii) within seven (7) Business Days following a "determination" as defined in
section 1313(a) of the Code.
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8.6 Cooperation and Exchange of Information. The Sellers and
the Buyers will provide each other with such cooperation and information as
either of them reasonably may request of the other in filing any Tax Return,
amended Tax Return or claim for refund, determining a liability for Taxes or a
right to a refund of Taxes, participating in or conducting any audit or other
proceeding in respect of Taxes or making representations to or furnishing
information to parties subsequently desiring to purchase any of the Companies or
any assets of the Companies from the Buyers. Such cooperation and information
shall include providing copies of relevant Tax Returns or portions thereof,
together with accompanying schedules, related work papers and documents relating
to rulings or other determinations by Tax authorities. The Sellers, Buyers and
the Companies shall make their employees available on a basis mutually
convenient to both parties to provide explanations of any documents or
information provided hereunder. Each of the Sellers and the Buyers shall retain
all Tax Returns, schedules and work papers, records and other documents in its
possession relating to Tax matters of the Companies (collectively, "Tax
Documents") for each taxable period first ending after the Closing Date and for
all prior taxable periods in accordance with all record retention agreements
entered into with any Governmental Entity, but in any event until the later of
(i) the expiration of the statute of limitations of the taxable periods to which
such Tax Documents relate, without regard to extensions except to the extent
notified by the other party in writing of such extensions for the respective Tax
periods, or (ii) six years following the due date (without extension) for such
Tax Returns. Each party agrees to give the other party reasonable written notice
prior to transferring, destroying or discarding any such Tax Documents and, if
the other party so requests, shall allow the other party to take possession of
such Tax Documents. Buyer and the Sellers further agree, upon request, to use
their reasonable best efforts to obtain any certificate or other document from
any governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated by this Agreement). Any
information obtained under this Section 8.6 shall be kept confidential in
accordance with Section 7.2 except as may be otherwise necessary in connection
with the filing of Tax Returns or claims for refund or in conducting an audit or
other proceeding.
8.7 Conveyance Taxes. The Sellers shall be liable for and
shall hold the Buyers harmless against any sales, use, transfer (including,
without limitation, real property transfer or gains), value added, stock
transfer, and stamp taxes, recording, registration, and other fees, and any
similar Taxes which become payable in connection with the sale of the Interests,
and shall file such applications and documents as shall permit any such Tax to
be assessed and paid on or prior to the Closing Date in accordance with any
available pre-sale filing procedure. The US Buyer shall execute and deliver all
instruments and certificates necessary to enable the Sellers to comply with the
foregoing.
8.8 Accounts Receivable Election. Upon finalization of the
Closing Balance Sheets, the Canadian Buyer and the Canadian Seller shall,
pursuant to Section 22 of the Income Tax Act (Canada), jointly elect to have the
provisions of Section 22 apply to the purchase and sale of those receivables
that are part of the Canadian Assets by completing form T2022. This form will be
filed by the Canadian Buyer pursuant to Section 22 of the Income Tax Act
(Canada).
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8.9 Canadian Sales and Transfer Taxes. Each party shall pay
direct to the appropriate Governmental Entity all sales and transfer taxes,
registration charges and transfer fees, other than the goods and services tax
and harmonized sales tax imposed under Part IX of the Excise Tax Act (Canada),
payable by it in respect of the purchase and sale of the Canadian Assets under
this Agreement.
8.10 Goods and Services Tax and Harmonized Sales Tax Election.
The Canadian Buyer and the Canadian Seller shall jointly elect, under subsection
167(1) of Part IX of the Excise Tax Act (Canada), and any equivalent or
corresponding provision under any applicable provincial or territorial
legislation imposing a similar value added or multi-staged tax, that no tax be
payable with respect to the purchase and sale of the Canadian Assets under this
Agreement. The Canadian Buyer and the Canadian Seller shall make such
election(s) in prescribed form containing prescribed information and the
Canadian Buyer shall file such election(s) in compliance with the requirements
of the applicable legislation.
8.11 Self-Assessment of Goods and Services Tax and Harmonized
Sales Tax on Real Property. To the extent permitted under subsection 221(2) of
the Excise Tax Act (Canada) and any equivalent or corresponding provision under
any applicable provincial or territorial legislation, the Canadian Buyer shall
self-assess and remit directly to the appropriate Governmental Entity any goods
and services tax and harmonized sales tax imposed under the Excise Tax Act
(Canada) and any similar value added or multi-staged tax imposed by any
applicable provincial or territorial legislation payable in connection with the
transfer of any interest in real property. The Canadian Buyer shall make and
file a return(s) in accordance with the requirements of subsection 228(4) of the
Excise Tax Act (Canada) and any equivalent or corresponding provision under any
applicable provincial or territorial legislation.
8.12 Retail Sales Tax Certificate. Prior to the Closing Date,
the Canadian Seller will use commercially reasonable efforts to obtain a valid
certificate issued by the Minister of Finance in accordance with Section 6 of
the Retail Sales Tax Act (Ontario).
ARTICLE 9
CONDITIONS TO CLOSING
9.1. Conditions to Obligation of the Buyers. The obligation of
the Buyers to consummate the transactions contemplated hereunder is subject to
satisfaction of the following conditions:
(a) the representations and warranties of the Seller
Parties contained in Article 4, when read in conjunction with the applicable
schedules hereto, shall be true, complete and correct in all material respects
(except to the extent any such representation or warranty contains qualifiers
such as material, Material Adverse Effect, or Material Adverse Change in which
case such representation or warranty shall be true and correct in all respects
in accordance with its terms) on and as of the date of this Agreement and on and
as of the Closing Date with the same force and effect if made on the Closing
Date (other than those that are made as of a specific date, which shall be true
and correct in all material respects only as of such date);
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(b) the Seller Parties shall have performed and complied
in all material respects with all of their covenants hereunder required to be
performed and complied with by them prior to the Closing;
(c) the Seller Parties shall have delivered to the Buyers
certificates to the effect that each of the conditions specified in Section
9.1(a) and (b) above are satisfied in a form reasonably acceptable to Buyers;
(d) there shall not be any action, suit or proceeding
pending or threatened before any Governmental Entity or before any arbitrator
that would be reasonably likely to result in an unfavorable injunction,
judgment, order, decree, ruling or charge, which would (i) prevent consummation
of any of the transactions contemplated by this Agreement or any Ancillary
Agreement, or (ii) cause any of the transactions contemplated by this Agreement
or any Ancillary Agreement to be rescinded following consummation;
(e) all applicable waiting periods (and any extension
thereof) under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired or otherwise been
terminated without objection of the relevant Governmental Entity;
(f) the Seller Parties will have executed and/or
delivered to the Buyers the documents identified in Section 3.2, including,
without limitation, the Required Consents;
(g) the Companies shall have caused all intercompany
loans, payables, or receivables to or from Affiliates (other than with respect
to employees) to be cancelled upon the Closing;
(h) all Liens and guarantees set forth on Schedule 9.1(h)
shall be caused to be released upon the Closing;
(i) the Buyers shall have obtained the necessary consents
to amend, or otherwise obtain consent under, the ▇▇▇▇▇▇ Credit Facilities to
permit the consummation of the transactions contemplated by this Agreement and
any Ancillary Agreements and to permit the Buyers to institute and implement a
subordinated mezzanine credit facility, and the Buyers shall have implemented
such subordinated mezzanine credit facility;
(j) the Sellers and Parents shall have caused the
assignment to the US Company of the Executive Employment Contracts in accordance
with Section 6.4;
(k) the Seller Parties shall have caused the transfer of
the Des Plaines Property to the Owned Real Property Buyer on the conditions set
forth in Section 6.9;
(l) since the date of this Agreement there shall not have
been a Material Adverse Change in the Companies.
The Buyers may waive any condition specified in this Section
9.1 in whole or in part, other than Section 9.1(e), if they execute a writing so
stating at or prior to the Closing; provided, that no such waiver shall
constitute a waiver of any right to indemnification pursuant to
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Article 11 relating to the facts, circumstances, or conditions preventing such
condition from being satisfied.
9.2. Conditions to Obligation of the Seller Parties. The
obligation of the Seller Parties to consummate the transactions contemplated
hereunder is subject to satisfaction of the following conditions:
(a) the representations and warranties of the Buyers
contained in Article 5, when read in conjunction with the applicable schedules
hereto, shall be true, complete and correct in all material respects (except to
the extent any such representation or warranty contains qualifiers such as
material, Material Adverse Effect, or Material Adverse Change in which case such
representation or warranty shall be true and correct in all respects in
accordance with its terms) on and as of the date of this Agreement and on and as
of the Closing Date with the same force and effect if made on the Closing Date
(other than those that are made as of a specific date, which shall be true and
correct in all material respects only as of such date);
(b) the Buyers shall have performed and complied in all
material respects with all of their covenants hereunder required to be performed
and complied with by them prior to the Closing;
(c) the Buyers shall have delivered to the Sellers
certificates to the effect that each of the conditions specified in Section
9.2(a) and (b) above are satisfied in a form reasonably acceptable to Sellers;
(d) there shall not be any action, suit or proceeding
pending or threatened before any Governmental Entity or before any arbitrator
that would be reasonably likely to result in an unfavorable injunction,
judgment, order, decree, ruling or charge, which would (i) prevent consummation
of any of the transactions contemplated by this Agreement or any Ancillary
Agreement, or (ii) cause any of the transactions contemplated by this Agreement
or any Ancillary Agreement to be rescinded following consummation;
(e) all applicable waiting periods (and any extension
thereof) under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired or otherwise been
terminated without objection of the relevant Governmental Entity;
(f) the Buyers shall have executed and/or delivered to
the Seller Parties the documents identified in Section 3.3; and
(g) the Buyers shall have tendered delivery to the Seller
Parties of the Closing Payment and US Stock Consideration at the Closing.
The Seller Parties may waive any condition specified in this
Section 9.2 in whole or in part, other than Section 9.2(e), if it executes a
writing so stating at or prior to the Closing; provided, that no such waiver
shall constitute a waiver of any rights to indemnification pursuant to Article
11 relating to the facts, circumstances, or conditions preventing such condition
from being satisfied.
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ARTICLE 10
TERMINATION
10.1 Termination. This Agreement may be terminated and the
transaction contemplated hereby may be abandoned at any time prior to the
Closing:
(a) By mutual written consent of the Buyers and the
Sellers;
(b) By the Buyers, or by the Sellers, if the Closing
shall not have occurred on or before the later of March 31, 2003, and the fifth
(5th) Business Day following termination or expiration of the applicable waiting
periods pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act (provided that the right to
terminate this Agreement under this Section 10.1(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the transaction to be consummated
on or before such date);
(c) By the Buyers, or by the Sellers, if any court or
other Governmental Entity of competent jurisdiction shall have issued a final
order, decree or ruling or taken any other final action restraining, enjoining
or otherwise prohibiting the transactions contemplated hereby and such order,
decree, ruling or other action is or shall have become final and nonappealable;
(d) By the Sellers, upon five (5) Business Days notice to
the Buyers, if prior to the Closing Date (i) there shall have been a breach of
any of the representations or warranties on the part of the Buyers contained in
this Agreement which, individually or in the aggregate, has had or would
reasonably be expected to have a material adverse effect on the ability of the
Buyers to consummate the transactions contemplated hereby, or (ii) there shall
have been a breach of any covenant or agreement on the part of the Buyers
contained in this Agreement which, individually or in the aggregate has had or
would reasonably be expected to have a material adverse effect on the ability of
the Buyers to consummate the transactions contemplated hereby, in either case
(i) or (ii) which breach shall not have been cured within ten (10) days
following notice thereof to the Buyers, or (iii) there shall have been a
Bankruptcy Event with respect to either Buyer;
(e) By the Buyers, upon five (5) Business Days notice to
the Sellers, if prior to the Closing Date (i) there shall have been a breach of
any of the representations or warranties on the part of the Seller Parties
contained in this Agreement which, individually or in the aggregate, has had or
would reasonably be expected to have a Material Adverse Effect on any of the
Companies or materially adversely affects the ability of the Seller Parties to
consummate the transactions contemplated hereby, or (ii) there shall have been a
material breach of any covenant or agreement on the part of the Seller Parties
contained in this Agreement, in either case (i) or (ii) which breach shall not
have been cured within ten (10) days following notice thereof to the Company or
the Sellers, as applicable, or (iii) there shall have occurred any event or
circumstance that has had or, but for the passage of time, would reasonably be
expected to have, a Material Adverse Effect on the Companies.
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10.2 Effect of Termination. If this Agreement is terminated in
accordance with Section 10.1 hereof, this Agreement shall become null and void
and of no further force and effect, except that (i) the terms and provisions of
Sections 6.14, 7.2(b), 7.2(c)(i) and 10.2, and Article 12 shall remain in full
force and effect and (ii) any termination of this Agreement shall not relieve
any party hereto from any liability for any breach of its covenants hereunder
prior to such termination.
ARTICLE 11
INDEMNIFICATION
11.1 Survival of Representations. The parties hereto agree
that all representations, warranties and covenants made in this Agreement and
any Ancillary Agreement shall remain operative and in full force and effect as
follows, regardless of any investigation or audit made by or on behalf of the
party to whom made or any knowledge of the party to whom made before, at or
after the Closing: all representations and warranties made by any party in or
pursuant to this Agreement shall survive for a period of eighteen (18) months
following the Closing, except that the representations and warranties set forth
in Sections 4.1, 4.2, 4.3, 4.6, 4.12(a) (first sentence only), 4.19 (second
sentence only), 4.24, 5.1, 5.2, 5.3, 5.5, 5.6, and 5.8 shall survive
indefinitely, and the representations and warranties set forth in Sections 4.9,
4.14, and 4.16 shall survive until thirty (30) days after the applicable statute
of limitations has expired.
11.2 Indemnification of the Buyers. Except as otherwise
provided in Article 8, Section 6.9, and Section 7.3, each of Seller Parties
shall jointly and severally indemnify and hold harmless the Buyer Parties
(including the US Company) their respective directors, officers, employees,
stockholders, agents, successors and assigns (the "Buyer Indemnitees") from and
against any and all Damages which may be asserted against or sustained or
incurred by any Buyer Indemnitee in connection with, arising out of, or related
to or resulting from:
(a) the breach of any representation or warranty made by
the Seller Parties under Article 4 of this Agreement as of the date hereof;
(b) the breach of any representation or warranty made by
the Seller Parties under Article 4 of this Agreement as if such representation
or warranty were made on and as of the Closing Date (excluding each
representation and warranty that by its terms is made as of a date specified
therein); and
(c) any nonfulfillment or breach of any covenant or
agreement to be performed on the part of any Seller Party (including the US
Company prior to the Closing) under this Agreement;
(d) any Damages suffered or incurred by the Buyer Parties
by reason of or in connection with any claims or cause of action of any third
party to the extent arising out of any action, inaction, event, condition,
liability or obligation of the Sellers or the Parents other than to the extent
arising in connection with or related to any actions of the Sellers or the
Parents made in connection with the management of the business of the Companies;
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(e) the Canadian Retained Liabilities;
(f) any payments received by the US Company pursuant to
the Great Plains Settlement prior to Closing that are required to be returned to
Great Plains Software O.C., Inc., pursuant to the terms thereof and are returned
to Great Plains Software O.C., Inc. after Closing;
(g) any claims or liabilities incurred prior to, on, or
after Closing by Non-Company Participants and/or by dependents or beneficiaries
of Non-Company Participants to the extent such claims or liabilities relate to
coverage under the terms of the Plans (other than the Company 401(k) Plan);
(h) the participation of Non-Company Participants in the
Company 401(k) Plan following the Closing and the Spin-Off, but not including
any Damages arising out of negligent actions taken by Buyer or the Company (not
at the direction of Sellers or their Affiliates) following the Closing;
(i) any late contributions to the Kar Retirement Plan as
disclosed on Schedule 4.14(d); and
(j) all Environmental Claims related to the Owned Real
Property, other than for those Environmental Claims arising out of or relating
to any act or omission of the Buyer Parties.
11.3 Indemnification of the Seller Parties. Except as
otherwise provided in Article 8 and Section 7.5, each of the Buyers agrees to
jointly and severally indemnify and hold harmless the Seller Parties and their
respective directors, officers, employees, stockholders, partners, agents,
successors and assigns (the "Seller Indemnitees") from and against any and all
Damages which may be asserted against or sustained or incurred by the Seller
Indemnitees in connection with, arising out of or related to or resulting from:
(a) the breach of any representation or warranty made by
the Buyers under Article 5 of this Agreement as of the date hereof;
(b) the breach of any representation or warranty made by
the Buyers under Article 5 of this Agreement as if such representation or
warranty were made on and as of the Closing Date (excluding each representation
and warranty that by its terms is made as of a date specified therein);
(c) any nonfulfillment or breach of any covenant or
agreement to be performed on the part of any Buyer under this Agreement;
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(d) any Damages suffered or incurred by the Seller
Parties by reason of or in connection with any claims or cause of action of any
third party to the extent arising out of any action, inaction, event, condition,
liability or obligation of the Buyer Parties in connection with their operation
of the business of the Companies by the Buyer Parties after the Closing; and
(e) the Canadian Assumed Liabilities.
11.4 Intentionally Omitted.
11.5 Procedures. Except as otherwise provided in Article 8,
the following provisions shall apply to claims for Damages arising from claims
by a third party (each a "Claim"). Promptly after receipt by any Person entitled
to indemnification under this Article 11 of notice of the commencement of a
Claim in respect of which such Person will seek indemnification hereunder, such
Person shall notify in writing the Person(s) from whom indemnification hereunder
is sought, which notice shall specify the nature of such Claim, the amount of
Damages sought in such Claim, if known, and the provisions of this Agreement in
respect of which such right of indemnification is claimed or arises. Failure to
so notify the indemnifying party shall not relieve it from any liability that it
may have under this Article 11 except to the extent that the indemnifying
party's ability to defend such Claim is materially prejudiced by the failure to
give such notice. If the indemnifying party acknowledges in writing its
obligation to indemnify the indemnified party hereunder against any Damages that
may result from a Claim, the indemnifying party shall have the absolute right,
in its sole discretion and expense, to elect to defend, contest or otherwise
protect against any such Claim with legal counsel of its own selection so long
as the indemnifying party gives notice of its intention to so defend, contest or
otherwise protect against such Claim within five days of its receipt of notice
from the indemnified party regarding such Claim; provided that nothing herein
shall entitle the indemnifying party to control the defense or settlement of any
Claim to the extent the Claim if successful could materially interfere with the
business, operations, assets, conditions or prospects of the indemnified party.
The indemnified party shall have the right, but not the obligation, to
participate, at its own expense, in the defense thereof through counsel of its
own choice and shall have the right, but not the obligation, to assert any and
all cross-claims or counterclaims it may have. The indemnified party shall, and
shall cause its Affiliates (and their respective directors, officers, agents and
employees), to at all times cooperate in all reasonable ways with, make their
relevant files and records available for inspection and copying by, or otherwise
render reasonable assistance to, the indemnifying party in its defense of any
action for which indemnity is sought under this Article 11. In the event the
indemnifying party fails to timely defend, contest or otherwise protect against
any Claim, the indemnified party shall have the right, but not the obligation,
to defend, contest, assert cross-claims or counterclaims or otherwise protect
against the same at the indemnifying party's expense. The indemnifying party may
not, without the consent of the indemnified party settle or compromise any Claim
if the settlement or compromise imposes equitable remedies or material
obligations on the indemnified party other than financial obligations for which
such indemnified party will be indemnified hereunder.
11.6 Limitations on Indemnification; Additional
Indemnification Provisions.
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(a) The indemnifying party shall have no obligation to
pay any claim for indemnification pursuant to Sections 11.2(a) and (b) or
11.3(a) and (b) of this Agreement unless and until the aggregate amount of all
such claims exceeds One Million Dollars ($1,000,000) (the "Threshold Indemnity
Amount"). In the event the aggregate amount of all such claims for
indemnification pursuant to Sections 11.2(a) and (b) or 11.3(a) and (b) for
which an indemnified party seeks indemnification hereunder exceeds the Threshold
Indemnity Amount, the indemnifying party or parties shall be liable for the
entire indemnity amount with respect to such aggregated claims, including the
Threshold Indemnity Amount, up to a maximum amount equal to Ten Million Dollars
($10,000,000). The Threshold Indemnity Amount and the maximum amount of claim
for indemnification set forth herein shall not apply to any claims in the case
of fraud, an intentional misrepresentation or an intentional breach of any
warranty.
(b) The indemnification and equitable remedies provided
for in this Agreement shall be the sole and exclusive remedies of the parties
and their respective officers, directors, employees, Affiliates, agents,
representatives, successors and assigns for any breach of or inaccuracy in any
covenant, agreement, representation or warranty contained in this Agreement;
provided, however, that nothing herein is intended to waive or otherwise limit
any claims for Damages resulting or arising from fraudulent or willful
misconduct or to waive any equitable remedies to which a party may be entitled.
(c) The right to indemnification, payment of Damages or
other remedy based on any representations, warranties, covenants, and
obligations in this Agreement, any Ancillary Agreement or the Schedules attached
hereto will not be affected by any investigation conducted with respect to, or
any notice or knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant, or obligation. The waiver of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
(d) Notwithstanding anything to the contrary herein, upon
and after Closing, (i) the US Company shall cease to be a Seller Party and shall
cease to have any indemnification obligations as a Seller Party hereunder and
shall be treated as a Buyer Party, and the Seller Parties shall have no rights
of recourse, whether for contribution, by virtue of subrogation, section 2.2 of
that certain Second Amended and Restated Operating Agreement of KAR Products,
LLC, dated as of August 30, 2000, or otherwise, against the US Company for any
payments such Seller Party make, or are obligated to make, under this Article 11
or any other section of this Agreement, and (ii) the Seller Parties and each of
their respective Affiliates, successors and assigns shall be deemed to have
remised, released and forever discharged the D&O Indemnitees of and from any and
all Damages which the Seller Parties and each of their respective Affiliates,
successors and assigns, or any of them, has or ever had, or hereafter can, shall
or may have, arising out of the actions or inactions of any such D&O Indemnitees
in their capacities as officers or directors of the US Company; provided,
however, that this Section
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11.6(d)(ii) shall not apply to Damages that arise from the fraud or intentional
misrepresentation of any of the D&O Indemnitees.
(e) Subject to Section 11.6(d), upon making an indemnity
payment pursuant to this Agreement, the indemnifying party will, to the extent
of such payment, be subrogated to all rights of the indemnified party against
any third party in respect of the Damages to which the payment related. Without
limiting the generality of any other provision hereof, each such indemnified
party and indemnifying party will duly execute upon request all instruments
reasonably necessary to evidence and perfect the above described subrogation
rights.
(f) The Buyer Parties shall not be entitled to
indemnification with respect to any matters to the extent of a Purchase Price
adjustment under Section 2.5 for such matter.
(g) Notwithstanding anything herein to the contrary, no
party shall be entitled to indemnification or reimbursement under any provision
of this Agreement for any amount to the extent such party or its Affiliate has
been indemnified or reimbursed for such amount under any other provision of this
Agreement or the Schedules attached hereto (including, without limitation, any
adjustments to the Purchase Price under Section 2.5), or any document executed
in connection with this Agreement or otherwise. Furthermore, in the event any
Damages related to a claim by a party are covered by insurance, such party
agrees to use commercially reasonable efforts to seek recovery under such
insurance and such party shall not be entitled to recovery from any other party
(and shall refund amounts received up to the amount of indemnification actually
received) with respect to such Damages to the extent of such recovery under such
insurance policy.
(h) Each party agrees to use reasonable efforts to
mitigate any Damages which form the basis of any claim for indemnification
hereunder.
(i) In the case any event shall have occurred which would
otherwise entitle either party to assert a claim for indemnification hereunder,
no Damages shall be deemed to have been sustained by such party to the extent of
any actual Tax savings realized by such party with respect thereto (the "Tax
Benefit"). Where an indemnified party has Tax losses, deductions, credits or
other items available to it, the Tax Benefit from any Tax loses, deductions,
credits or other items result from Damages shall be deemed realized only after
the utilization of such Tax losses, deductions, credits or other items. Each
party shall use commercially reasonable efforts to mitigate any Damages for
which it is entitled to indemnification from any other party under this
Agreement.
(j) Unless otherwise required by applicable law, all
indemnification payments shall constitute adjustments to the Purchase Price for
all tax purposes, and no party shall take any position inconsistent with such
characterization.
ARTICLE 12
MISCELLANEOUS
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12.1. Press Releases and Announcements. No party will issue
any press release or announcement relating to the subject matter of this
Agreement prior to the Closing Date without the prior approval of the other
party; provided that any party may make any public disclosure it believes in
good faith is required in order to secure a Permit, consent or other third party
approval, by Law or the rules of any national securities exchange or any
automated inter-dealer quotation system on which the securities of either party
(or any Affiliate thereof) are listed or admitted for trading (in which case the
disclosing party will advise the other party at least one (1) Business Day prior
to making such disclosure).
12.2. Expenses. The Sellers or the Parents, with respect to
the Sellers, the Parents and the Companies, and the Buyers, with respect to the
Buyers, will bear all legal, accounting, investment banking and other expenses
incurred by the Sellers, the Parents and the Companies, or the Buyers,
respectively, in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated.
12.3. Amendments; Waivers. The provisions of this Agreement
may be amended or waived only by a written agreement executed and delivered by
the Sellers and the Buyers (which amendments shall be binding on the Companies
and the Parents). No other course of dealing between the parties to this
Agreement or any delay in exercising any rights hereunder will operate as a
waiver of any rights of such parties.
12.4. Successors and Assigns. No party hereto may assign or
delegate any of such party's rights or obligations under or in connection with
this Agreement without the prior written consent of the other parties hereto;
provided that the Buyers may assign to an Affiliate or Affiliates thereof the
obligation to purchase the Interests or the Canadian Assets, in which event the
Buyers shall have joint and several liability with such Affiliates with respect
to such obligation. Except as otherwise expressly provided herein, all covenants
and agreements contained in this Agreement by or on behalf of any of the parties
hereto will be binding upon and enforceable against the respective successors
and assigns of such party and will be enforceable by and will inure to the
benefit of the respective successors and permitted assigns of such party.
12.5. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable Law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable Law, such provision will be ineffective only to
the extent of such prohibition of invalidity, without invalidating the remainder
of this Agreement.
12.6. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
will constitute one and the same Agreement.
12.7. Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
12.8. Notices. All notices, demands or other communications to
be given or delivered under or by reason of the provisions of this Agreement
will be in writing and will be
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deemed to have been given when delivered personally to the recipient or when
sent to the recipient by telecopy or e-mail with confirmation of transmission by
the transmitting equipment, one (1) Business Day after the date when sent to the
recipient by reputable express courier service (charges prepaid) or two (2)
Business Days after the date when mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid. Such notices,
demands and other communications will be sent to the Buyers and the Sellers at
the respective address indicated below:
If to the Buyers:
▇▇▇▇▇▇ Group Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Senior Vice President, Corporate Development
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
With a copy to:
▇▇▇▇▇▇ Group Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Senior Vice President and General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
If to the Sellers:
c/o GC-SUN Investors, LLC
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
With a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇.▇▇▇▇▇▇▇▇@▇▇.▇▇▇
12.9. No Third-Party Beneficiaries. This Agreement will not
confer any rights or remedies upon any Person other than the parties hereto and
their respective successors and
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permitted assigns; provided, however, that the D&O Indemnitees shall be third
party beneficiaries of the rights to indemnification and release set forth in
Section 7.5 and Section 11.6(d) hereof.
12.10. Entire Agreement. This Agreement, the schedules hereto,
and the documents referred to herein, constitute the entire agreement and
understanding of the parties and supersede any previous agreement between the
parties relating to the subject matter of this Agreement. Each of the parties
acknowledges and agrees that in entering into this Agreement, and the documents
referred to in it, it does not rely on, and shall have no remedy in respect of
any statement, representation, warranty or understanding (whether negligently or
innocently made) of any Person (whether party to this Agreement or not) other
than as expressly set out in this Agreement.
12.11. Construction. The language used in this Agreement will
be deemed to be the language chosen by the parties to express their mutual
intent and no rule of strict construction will be applied against any party. The
use of the word "including" in this Agreement means "including without
limitation" and is intended by the parties to be by way of example rather than
limitation.
12.12. Incorporation of Schedules. The Schedules identified in
this Agreement are incorporated herein by reference and made a part hereof.
12.13. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York without
giving effect to any choice or conflict of law provision or rule that would
cause the application of the laws of any jurisdiction other than the State of
New York.
12.14. Submission to Jurisdiction. Each of the parties hereto
submits to the non-exclusive jurisdiction of any state or federal court sitting
in the State of Connecticut in any action or proceeding arising out of or
relating to this Agreement and agrees that all claims in respect of the action
or proceeding may be heard and determined in any such court. Each Party also
agrees not to bring any action or proceeding arising out of or relating to this
Agreement in any other court. Each of the parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety or other security that might be required of any other
party with respect thereto. Any party may make service on the other parties by
sending or delivering a copy of the process to the parties to be served at the
address and in the manner provided for the giving of notices in Section 12.8
above. Nothing in this Section 12.14, however, shall affect the right of any
party to serve legal process in any other manner permitted by law or in equity.
Each party agrees that a final judgment in any action or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment or in any other
manner provided by law or in equity.
12.15. Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY
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HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED
IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH
WAIVERS, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH
WAIVERS, (iii) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 12.15.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
-75-
IN WITNESS WHEREOF the parties hereto have executed and
delivered this Agreement on the date first written above.
▇▇▇▇▇▇ GROUP INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Its: Senior Vice President,Corporate
-------------------------------------
Development
-------------------------------------
▇▇▇▇▇▇ GROUP CANADA CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Its: Director
-------------------------------------
KAR PRODUCTS, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Its: Vice President and Assistant
-------------------------------------
Secretary
-------------------------------------
A. & H. BOLT & NUT COMPANY LTD.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Its: Vice President
-------------------------------------
-▇▇-
▇▇-▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇, ▇.▇.
By: GC-Sun ▇.▇. ▇▇, Inc., its General
Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------
Its: Vice President and Assistant
--------------------------------
Secretary
--------------------------------
A. & H. BOLT HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Its: Vice President and Assistant
-------------------------------------
Secretary
-------------------------------------
SUNSOURCE CANADA INVESTMENT
COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Its: President
-------------------------------------
GC-SUN, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Its: Vice President and Assistant
-------------------------------------
Secretary
-------------------------------------
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GC-SUN ▇.▇. ▇▇, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Its: Vice President and Assistant
-------------------------------------
Secretary
-------------------------------------
GC-SUN G.P., INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Its: Vice President and Assistant
-------------------------------------
Secretary
-------------------------------------
GC-SUN HOLDINGS, L.P.
By: GC-Sun G.P., Inc., its General
Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------------
Its: Vice President and Assistant
--------------------------------
Secretary
--------------------------------
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List of Omitted Schedules and Exhibits
--------------------------------------
The Registrant has omitted from this filing the Schedules and Exhibits listed
below. The Registrant will furnish supplementally to the Commission, upon
request, a copy of any omitted Schedule or Exhibit.
Omitted Disclosure Schedules:
-----------------------------
2.2(a) Canadian Assets
2.2(b) Canadian Excluded Assets
2.5 Accounting Methodology
3.2(k) Required Consents
4.1 Organization
4.5 Consent, Approvals and Notices
4.7(a) Financial Statements
4.8 Subsequent Events
4.9(a) Tax Returns
4.9(b) Audits
4.9(d) Tax Adjustments and Threatened Audits
4.9(e)(1) Tax Claims
4.9(e)(2) Taxing Jurisdictions
4.9(h) Timely Filing of Tax Returns
4.9(m) Threatened Investigation, Audit or Claims
4.10(a) Certain Contracts
4.10(b) Certain Contracts
4.10(c) Undisclosed Contracts
4.11(a) Real Property - Owned Real Property
4.11(b) Real Property - Leased Real Property
4.12(a) Intellectual Property - Trademarks
4.12(c) Intellectual Property - Licenses
4.13 Litigation
4.14(a) Plans
4.14(d) Plan Contributions
4.14(f) Transaction Payments
4.14(g) Benefits Beyond Retirement
4.14(n) Terminability of Plan
4.15(a) Threatened Strikes and Labor Slow downs
4.15(b) Collective Bargaining Agreements
4.15(c) Employees
4.15(d) Retired Employees
4.15(e) Terminated Employees
4.15(g) Sales Incentive Programs
4.15(i) Employee Sales
4.15(j) Notices of Termination
4.15(k) Liability Under Employment Laws
4.15(l) Unpaid Salary, etc.
4.16(d) Hazardous Releases
4.16(e) Hazardous Materials on Real Property
4.16(g) Environmental Reports
4.18 Permits
4.19 Liens
4.20 Accounts Receivable
4.22 Inventory
4.23 Insurance
4.26 Banks; Powers of Attorney
4.28(a) Customers
4.28(b)(1) Suppliers
4.28(b)(2) Supplier Price Increases
6.4 Executive Employment Contracts
7.5 D&O Indemnitees
9.1(h) Guarantees
Omitted Exhibits:
----------------
3.2(i) Form of Transition Services Agreement
3.2(j)(1) Form of Owned Real Property Lease - Des Plaines
Property
3.2(j)(2) Form of Owned Real Property Lease - Windsor
Property
4.15(h) Form of Sales Employment Agreements
