Exhibit 10.6
ASSET PURCHASE AGREEMENT
BY AND AMONG
HDA PARTS SYSTEM, INC.
AND
CONNECTICUT DRIVESHAFT, INC.
AND
THE SHAREHOLDERS OF CONNECTICUT DRIVESHAFT, INC.
November 4, 1998
TABLE OF CONTENTS
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ARTICLE I. PURCHASE AND SALE.......................................................................................................1
1.1. Purchase Price...............................................................................................................1
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1.2. Closing Balance Sheet........................................................................................................2
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1.3. Transfer of Assets...........................................................................................................3
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1.4. Assumption of Liabilities....................................................................................................3
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1.5. Excluded Liabilities.........................................................................................................3
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ARTICLE II. CLOSING................................................................................................................4
2.1. Closing......................................................................................................................4
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2.2. Conveyances at Closing.......................................................................................................4
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................................5
AND THE SELLING PARTIES............................................................................................................5
3.1. Corporate Organization and Standing..........................................................................................6
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3.2. Authorization................................................................................................................6
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3.3. No Conflict or Violation.....................................................................................................6
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3.4. Facilities...................................................................................................................6
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3.5. Assets.......................................................................................................................8
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3.6. Financial Statements.........................................................................................................8
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3.7. Books and Records............................................................................................................9
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3.8. Litigation...................................................................................................................9
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3.9. Licenses and Permits; Compliance with Laws...................................................................................9
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3.10. Tax Matters.................................................................................................................9
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3.11. Brokers, Finders...........................................................................................................11
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3.12. Absence of Certain Changes.................................................................................................11
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3.13. Material Contracts.........................................................................................................13
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3.14. Proprietary Rights.........................................................................................................14
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3.15. Labor Matters..............................................................................................................15
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3.16. Consents...................................................................................................................15
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3.17. Employee Benefit Plans; Employment Agreements..............................................................................15
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3.18. Compliance with Environmental Laws.........................................................................................17
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3.19. Certain Business Relationships with the Company............................................................................19
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3.20. Undisclosed Liabilities....................................................................................................20
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3.21. Insurance..................................................................................................................20
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3.22. Accounts Receivable........................................................................................................20
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3.23. Inventory..................................................................................................................21
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3.24. Payments...................................................................................................................21
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3.25. Customers, Distributors and Suppliers......................................................................................21
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3.26. Material Misstatements Or Omissions........................................................................................21
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF HDA.................................................................................22
4.1. Corporate Organization and Standing.........................................................................................22
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4.2. Authorization...............................................................................................................22
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4.3. No Conflict or Violation....................................................................................................22
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ARTICLE V. CONDUCT OF BUSINESS PENDING CLOSING AND POST-CLOSING
COVENANTS.........................................................................................................................22
5.1. Further Assurances..........................................................................................................22
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5.2. No Solicitation and Confidentiality.........................................................................................23
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5.3. Disclosures.................................................................................................................24
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5.4. Employee Plans..............................................................................................................24
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ARTICLE VI. CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS BY
HDA...............................................................................................................................24
6.1. No Injunctive Proceedings...................................................................................................24
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6.2. Representations and Warranties..............................................................................................24
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6.3. Performance of Agreements...................................................................................................24
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6.4. Compliance Certificate......................................................................................................24
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6.5. Material Changes............................................................................................................25
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6.6. Opinion of Counsel..........................................................................................................25
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6.7. Consents, Etc...............................................................................................................25
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6.8. Ancillary Agreements........................................................................................................25
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6.9. Name Change.................................................................................................................25
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6.10. Nonforeign Affidavit.......................................................................................................25
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ARTICLE VII. CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS BY
THE COMPANY.......................................................................................................................25
7.1. No Injunctive Proceedings...................................................................................................25
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7.2. Representations and Warranties..............................................................................................26
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7.3. Performance of Agreements; Instruments of Transfer..........................................................................26
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7.4. Compliance Certificates.....................................................................................................26
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7.5. Ancillary Agreements........................................................................................................26
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7.6. Opinion of Counsel..........................................................................................................26
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ARTICLE VIII. ACTIONS BY THE PARTIES AFTER THE CLOSING............................................................................26
8.1. Collection of Accounts Receivable and Letters of Credit.....................................................................26
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8.2. Consents to Assignment......................................................................................................26
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8.3. Indemnification by the Company and the Existing Shareholders................................................................27
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8.4. Indemnification by HDA......................................................................................................27
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8.5. Survival of Representations, Warranties and Covenants.......................................................................27
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8.6. Threshold; Deductible.......................................................................................................28
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8.7. Notice and Opportunity to Defend............................................................................................28
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8.8. Payments Out of Escrow Amount...............................................................................................29
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ARTICLE IX. MISCELLANEOUS.........................................................................................................29
9.1. Expenses....................................................................................................................29
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9.2. Notices.....................................................................................................................29
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9.3. Counterparts................................................................................................................30
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9.4. Entire Agreement............................................................................................................30
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9.5. Headings....................................................................................................................31
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9.6. Assignment; Amendment of Agreement..........................................................................................31
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9.7. Governing Law...............................................................................................................31
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9.8. Further Assurances..........................................................................................................31
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9.9. No Third-Party Rights.......................................................................................................31
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9.10. Non-Waiver.................................................................................................................31
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9.11. Severability...............................................................................................................31
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9.12. Incorporation of Exhibits and Schedules....................................................................................31
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9.13 Knowledge...................................................................................................................32
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9.14 Arbitration.................................................................................................................32
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of November
4, 1998, is entered into by and among HDA Parts System, Inc., an Alabama
corporation ("HDA"), Connecticut Driveshaft, Inc., a Connecticut corporation
(the "Company"), each of the shareholders of the Company (all of whom are
identified on the signature page hereto (individually, an "Existing Shareholder"
and collectively, the "Existing Shareholders") and Xxxx Xxxxx (together with the
Existing Shareholders, the "Selling Parties"). HDA, the Company and the
Existing Shareholders are referred to herein as each a "Party" and collectively,
the "Parties."
RECITALS
WHEREAS, the Company owns certain assets listed on Annex A (the
"Assets") which are used in connection with or useful to its business of
distributing aftermarket parts and services to the domestic heavy duty vehicle
market (the "Business");
WHEREAS, HDA desires to acquire the Assets of the Company;
AGREEMENT
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements set forth herein, the Parties hereby agree as follows:
ARTICLE I.
PURCHASE AND SALE
1.1 Purchase Price. (a) Upon the terms and subject to the
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conditions set forth herein, HDA will purchase from the Company the Assets for a
price (the "Purchase Price") of Seven Million Three Hundred Thousand Dollars
($7,300,000) in cash payable by wire transfer of immediately available funds to
the Company, subject to the holdback deposited into escrow as set forth below in
Section 1.1(c).
(b) Schedule 1.1 sets forth the amount of the Purchase Price allocable
to the various Assets.
(c) The "Escrow Amount" shall be Eight Hundred Thousand Dollars
($800,000) of the Purchase Price which HDA, at the Closing, shall deposit with
the Escrow Agent (as defined below) subject to the terms and conditions of the
Escrow Agreement (as defined below) to be delivered pursuant to Section 2.2(c)
below. Such holdback deposited into escrow is for the purposes referred to in
Section 8.8 below.
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1.2 Closing Balance Sheet.
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(a) Closing Balance Sheet. The Existing Shareholders will prepare a
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balance sheet dated the Closing Date (as defined) (the "Closing Balance Sheet"),
prepared in accordance with generally accepted accounting principles ("GAAP"),
applied consistently with the Company's respective past practice to the extent
such practice is GAAP. The Existing Shareholders will deliver such Closing
Balance Sheet to HDA within 45 days after the Closing. The Closing Balance
Sheet shall be audited by McGladrey & Xxxxxx, LLP.
(b) Closing Balance Sheet Notice.
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(i) Within 30 days of the receipt of such Closing Balance Sheet,
HDA will deliver to the Existing Shareholders a written notice certifying
that either (x) it agrees with such Closing Balance Sheet, or (y) it
disagrees with such Closing Balance Sheet, in which case it will also
provide therewith a reasonably detailed written report stating the basis
for disagreement with the Closing Balance Sheet (the "Closing Balance Sheet
Notice"). The Existing Shareholders shall provide reasonable access to its
accountants' work papers, personnel and to such historical financial
information as HDA shall reasonably request in order to review such Closing
Balance Sheet.
(ii) If the Closing Balance Sheet Notice is not timely given as
described in Section 1.2(b)(i), the Closing Balance Sheet shall be final,
binding and conclusive upon the Parties. If HDA disagrees with the Closing
Balance Sheet Notice as described in Section 1.2(b)(i)(y), and if the
disagreement is not resolved by mutual agreement among the Parties within
30 days following delivery of the Closing Balance Sheet Notice, such
dispute will be resolved by a "Big 5" accounting firm ("BFAF") selected by
HDA and the Company.
(iii) Upon appointment of a BFAF, such BFAF in consultation with
the Parties shall establish a schedule for resolution of the dispute which
is reasonably calculated to result in a resolution as expeditiously as
practicable, and in any event, no later than six months after the Closing
Date. In resolving such dispute, the BFAF shall revise the Closing Balance
Sheet only to the extent necessary to make it conform to the practices,
procedures and methods described in Section 1.2(a) above.
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1.3 Transfer of Assets. Upon the terms and subject to the conditions
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set forth herein, at the Closing, the Company will sell to HDA, and HDA will
purchase from the Company, the Assets, free and clear of all encumbrances other
than Permitted Encumbrances (as defined herein).
1.4 Assumption of Liabilities. Upon the terms and subject to the
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conditions contained herein, at the Closing, HDA shall assume the following, and
only the following, obligations and liabilities of the Company (collectively,
the "Assumed Liabilities"):
(a) All obligations and liabilities accruing, arising out of, or
relating to events or occurrences happening after the Closing Date under, and
only under, the Assumed Contracts (as defined) listed on Schedule 3.13, but not
including any obligation or liability for any breach of any Contract (as
defined) occurring on or prior to the Closing Date (together with the
liabilities assumed pursuant to the Assumed Contracts, the "Assumed
Liabilities");
(b) All obligations and liabilities relating to accrued sick pay
and vacation reflected on the Closing Balance Sheet; and
(c) All liabilities listed on Schedule 1.4.
1.5 Excluded Liabilities. Notwithstanding any other provision of
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this Agreement, except for the Assumed Liabilities expressly specified in
Section 1.4 hereof, HDA shall not assume, or otherwise be responsible for, the
Company's liabilities or obligations, whether actual or contingent, matured or
unmatured, liquidated or unliquidated, known or unknown, or related or unrelated
to the Business or the Assets, whether arising out of occurrences prior to, at
or after the date hereof (collectively, the "Excluded Liabilities"), which
Excluded Liabilities include, without limitation:
(a) Except as set forth in Section 1.3 above, any liability or
obligation to or in respect of any employees or former employees of the Company
including without limitation (i) any employment agreement, whether or not
written, between the Company and any person, (ii) any liability arising prior to
the Closing (as defined below) under any Employee Plan (as defined) at any time
maintained, contributed to or required to be contributed to by or with respect
to the Company or under which the Company may incur liability, or any
contributions, benefits or liabilities therefor, or any liability with respect
to the Company's withdrawal or partial withdrawal from or termination of any
Employee Plan and (iii) any claim of an unfair labor practice, or any claim
under any state unemployment compensation or worker's compensation law or
regulation or under any federal or state employment discrimination law or
regulation, which shall have been asserted on or prior to the Closing Date or is
based on acts or omissions which occurred on or prior to the Closing Date;
(b) Any liability or obligation of the Company in respect of any Tax
(as defined), except any accrued sales taxes on the Closing Balance Sheet (as
defined in Section 1.2(a));
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(c) Any liability arising from any injury to or death of any person
or damage to or destruction of any property, whether based on negligence, breach
of warranty, strict liability, enterprise liability or any other legal or
equitable theory arising from defects in products sold or services performed by
or on behalf of the Company or any other person or entity on or prior to the
Closing Date, or arising from any other cause, including without limitation any
liabilities arising (on a date of occurrence basis or otherwise) on or prior to
the Closing Date relating to the use or misuse of equipment or to traffic
accidents;
(d) Any liability or obligation of the Company arising out of or
related to any Action (as defined) against the Company or any Action which
adversely affects the Assets and which shall have been asserted on or prior to
the Closing Date or to the extent the basis of which shall have arisen on or
prior to the Closing Date;
(e) Any liability or obligation of the Company resulting from
entering into, performing its obligations pursuant to or consummating the
transactions contemplated by, this Agreement (including without limitation any
liability or obligation of the Company pursuant to Article VIII hereof);
(f) Any liability or obligation related to the Facilities which
shall have been asserted on or prior to the Closing Date or to the extent the
basis of which shall have arisen on or prior to the Closing Date; and
(g) Any liability or obligation arising out of any Environmental Law
which shall have been asserted on or prior to the Closing Date or to the extent
the basis of which shall have arisen on or prior to the Closing Date
("Environmental Liabilities").
ARTICLE II.
CLOSING
2.1 Closing. The Closing of the transactions contemplated
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herein (the "Closing") shall be held at 9:00 a.m. local time on November 4, 1998
or such later date upon which the Parties otherwise agree (the "Closing Date").
2.2 Conveyances at Closing.
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(a) Instruments and Possession. To effect the sale and transfer of
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Assets referred to in Section 1.3 hereof, the Company will, at the Closing,
execute and deliver to HDA:
(i) one or more Bills of Sale, in the form attached hereto as
Exhibit A, conveying in the aggregate all of the personal property owned by
the Company included in the Assets;
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(ii) subject to Section 8.2, Assignments of Lease in the form
attached hereto as Exhibit B with respect to the Leases;
(iii) subject to Section 8.2, Assignments of Contract Rights in
the form attached hereto as Exhibit C with respect to those contracts which
HDA shall assume;
(iv) subject to Section 8.2, Assignments of Patents and
Trademarks and other Proprietary Rights (including an assignment of all
rights, title and interest of the Company to the name "Connecticut
Driveshaft" and all variations thereof) each in the form attached hereto as
Exhibit D, in recordable form to the extent necessary to assign such
rights; and
(v) such other instruments as shall be requested by HDA to
vest in HDA title in and to the Assets in accordance with the provisions
hereof.
(b) Assumption Document. Upon the terms and subject to the
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conditions set forth herein, at the Closing, HDA shall deliver to the Company an
instrument of assumption substantially in the form attached hereto as Exhibit E,
evidencing HDA's assumption of all liabilities of the Company, pursuant to
Section 1.4 hereof, excluding the Excluded Liabilities (the "Assumption
Document").
(c) Escrow Agreement. At or prior to the Closing, HDA, the Company
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and the Existing Shareholders will enter into an escrow agreement in
substantially the form attached hereto as Exhibit F (the "Escrow Agreement")
with Chase Trust Company of California (the "Escrow Agent").
(d) Form of Instruments. To the extent that a form of any document
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to be delivered hereunder is not attached as an Exhibit hereto, such documents
shall be in form and substance, and shall be executed and delivered in a manner
reasonably satisfactory to HDA and the Company.
(e) Consents. The Company shall deliver all Permits (as defined
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herein) and any other third party consents required for the valid transfer of
the Assets as contemplated by this Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SELLING PARTIES
The Company and the Existing Shareholders, and Xxxx Xxxxx with respect
to representations and warranties relating to the Owned Real Property (as
defined below), represent and warrant to HDA as follows, except as set forth in
a disclosure schedule ("Schedule") attached hereto and made a part hereof, the
number of each Schedule corresponding to the Section number to which it refers:
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3.1 Corporate Organization and Standing. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to own or lease its properties and to carry on its business as
presently conducted. The Company has delivered to HDA or its representatives
complete and correct copies of its Articles of Incorporation and Bylaws (or
other charter documents) and all amendments thereto. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which the nature of the business as now being conducted by
it or the property owned or leased by it makes such qualification necessary, all
of which are listed on Schedule 3.1.
3.2 Authorization. This Agreement, the Ancillary Agreements
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(as defined), and the transactions contemplated hereby and thereby have been
duly authorized, executed and delivered by the Company and each Selling Party
party thereto, and are the legal, valid and binding obligations of the Company
and each Existing Shareholder party thereto, enforceable against it, him or her
in accordance with their terms, except as enforcement may be limited by
equitable principles limiting the right to obtain specific performance or other
equitable remedies, or by applicable bankruptcy or insolvency laws and related
decisions affecting creditors' rights generally.
3.2 No Conflict or Violation. Neither the execution and delivery of
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this Agreement, the Ancillary Agreements nor the consummation of the
transactions contemplated hereby or thereby will (i) violate, conflict with or
result in or constitute a default under or result in the termination or the
acceleration of, or the creation in any party of any right (whether or not with
notice or lapse of time or both) to declare a default, accelerate, terminate or
cancel any indenture, contract, lease, sublease, loan agreement, note or other
obligation or liability ("Contractual Obligation") to which the Company or any
Selling Party is a party or by which it is bound or to which its assets is
subject or result in the creation of any lien or encumbrance upon any of said
assets, (ii) violate, conflict with or result in a breach of or constitute a
default under any provision of the Articles of Incorporation or Bylaws (or other
organizational documents) of the Company, (iii) violate, conflict with or result
in a breach of or constitute a default under any judgment, order, decree, rule
or regulation of any court or governmental agency to which the Company or any
Selling Party is subject or, in the case of clause (i), relates to a Material
Contract (as defined below) or (iv) violate, conflict with or result in a breach
of any applicable federal or state rule or regulation.
3.4 Facilities. Schedule 3.4 contains (i) a complete and accurate
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list of all real property used in connection with the businesses of the Company
("Real Property"), identifying which are owned by the Company or a Selling Party
("Owned Real Property") and which are leased ("Leased Real Property"), and (ii)
accurate and complete copies of preliminary title reports and title policies
covering all of the Owned Real Property ("Title Reports").
(a) Owned Real Property. The party listed as owning the property on
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the Title Reports has good and marketable fee simple title to all Owned Real
Property, free and clear of all
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encumbrances, except as set forth in the real estate purchase and sale agreement
by and between Xxxxxx Xxxxx, Xxxx Xxxxx, J. Xxxxx Xxxxx and HDA (the "Real
Estate Purchase Agreement") pursuant to which HDA will purchase simultaneously
with the Closing from Xxxxxx Xxxxx, Xxxx Xxxxx and J. Xxxxx Xxxxx the properties
located at (i) 458, 460, 470 and 000-000 Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxx,
(xx) 000 Xxxxxx Xxxx, Xxxxx Xxxxxxx, Connecticut, and (iii) 9 and 00 Xxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxxxxx ("Permitted Exceptions"). Each such party enjoys
peaceful and undisturbed possession of all Owned Real Property.
(b) Actions. Except as set forth on Schedule 3.4(b), there are no
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pending or, to the best knowledge of the Company or any Selling Party,
threatened, condemnation proceedings or other actions, claims, suits,
litigation, proceedings, notices of violation, inquiry or investigations
(collectively, "Actions") relating to any facility used in connection with the
business of the Company ("Facility") or any Real Property.
(c) Leases or Other Agreements. Except for Facility leases listed on
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Schedule 3.4(c), there are no leases, subleases, licenses, occupancy agreements,
options, rights, concessions or other agreements or arrangements, written or
oral, granting to any person the right to purchase, use or occupy any Facility
or any Real Property or any portion thereof, or interest in any such Facility or
Real Property.
(d) Facility Leases and Leased Real Property. With respect to each
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Facility lease, the Company has an unencumbered interest in the leasehold
estate. The Company enjoys peaceful and undisturbed possession of all Leased
Real Property.
(e) Certificate of Occupancy. All Facilities have received all
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required approvals of governmental authorities (including, without limitation,
permits and a certificate of occupancy or similar certificate permitting lawful
occupancy of the Facilities) required in connection with the operation thereof
and are and have been operated and maintained in accordance with applicable
regulations.
(f) Utilities. All Facilities are supplied with utilities
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(including, without limitation, water, sewage, disposal, electricity, gas and
telephone) and other services necessary for the operation of such Facilities as
currently operated, and there is no condition which would reasonably be expected
to result in the termination of the present access from any Facility to such
utility services.
(g) Improvements, Fixtures and Equipment. The improvements
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constructed on the Facilities, including, without limitation, all leasehold
improvements, and all fixtures and equipment and other tangible assets owned,
leased or used by the Company or any Selling Party at the Facilities are (i)
insured to the extent and in a manner customary in the industry, (ii)
structurally sound with no known material defects, (iii) in good operating
condition and repair, subject to ordinary wear and tear, (iv) not in need of
maintenance, repair or correction except for ordinary routine maintenance and
repair, the cost of which would not be material, (v) sufficient
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for the operation of the Company as presently conducted and (vi) in conformity
with all applicable regulations.
(h) No Special Assessment. Neither the Company nor any Selling Party
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has received notice of any special assessment relating to any Facility or any
portion thereof, and there is no pending or threatened special assessment.
3.5 Assets. The Company has and will transfer to HDA good and
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marketable title to the Assets, free and clear of any encumbrances, except for
minor liens which in the aggregate are not substantial in amount, do not
materially detract from the value or transferability of the Assets subject
thereto taken as a whole or interfere in any material respect with the present
use and have not arisen other than in the ordinary course of business
("Permitted Encumbrances"). All tangible assets and properties which are part of
the Assets are in good operating condition and repair, ordinary wear and tear
excepted, and are usable in the ordinary course of business and conform in all
material respects to all applicable regulations (including Environmental Laws
(as defined herein)) relating to their use and operation. The Assets include
without limitation all assets necessary for the conduct of the Business as
presently conducted.
3.6 Financial Statements. Except as set forth on Schedule 3.6,
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(a) The balance sheets of the Company dated June 30, 1998 (the "June
1998 Balance Sheet") and December 31, 1997 (together with the June 1998 Balance
Sheet, the "Balance Sheets"), were prepared in accordance with GAAP consistently
applied and fairly present the financial condition of the Company as of their
respective dates. The Company has no liabilities of any nature, whether
absolute, accrued, asserted or unasserted or contingent or whether due or to
become due which should have been recorded or reserved for on the Balance Sheets
and were not so recorded or reserved.
(b) The statements of operations, statements of changes in
shareholder's equity and statements of cash flows of the Company for the fiscal
year ended December 31, 1997 were prepared in accordance with GAAP consistently
applied and fairly present the results of operations, changes in shareholder's
equity and cash flows of the Company for such period.
(c) The unaudited balance sheet, statements of operations,
statements of changes in shareholder's equity and statements of cash flows of
the Company at and for the eight months ended August 31, 1998, were prepared in
accordance with GAAP consistently applied and fairly present the results of
operations, changes in shareholder's equity and cash flows of the Company for
each such period and are consistent with the financial statements described in
Section 3.6(a) and (b).
(d) Copies of the financial statements described in Section 3.6(a)
and (b) have been provided to HDA or its representatives.
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3.7 Books and Records. The Company has made and kept and given
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HDA and its representatives access to books and records and accounts, which, in
reasonable detail, accurately and fairly reflect the activities of the Company.
The Company has not engaged in any transaction, maintained any bank account or
used any corporate funds except for the transactions, bank accounts and funds
which have been and are reflected in the normally maintained books and records
of the Company.
3.8 Litigation. Except as set forth on Schedule 3.8, there
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is no claim, action, suit, proceeding, or investigation pending or, to the best
knowledge of the Company, threatened against the Company or the directors,
officers, agents or employees of the Company (in their capacity as such), or any
owner of any Owned Real Property, or any properties or rights of the Company.
There are no orders, writs, injunctions or decrees currently in force against
the Company or the directors, officers, agents or employees of the Company (in
their capacity as such) or any Selling Party with respect to the conduct of the
Company's business.
3.9 Licenses and Permits; Compliance with Laws. Schedule 3.9 sets
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forth a complete list of all licenses, franchises, permits, approvals and other
governmental authorizations (collectively, "Licenses and Permits") held by the
Company or any owner of any Owned Real Property. The Company owns, holds or
possesses all Licenses and Permits necessary to entitle it to use its corporate
name, to own or lease, operate and use its assets and properties and to carry on
and conduct its business and operations as presently conducted. Neither the
Company nor any owner of any Owned Real Property is in violation of or default
under any Licenses or Permits or any judgment, order, writ, injunction or decree
of any court or administrative agency issued against it or any law, ordinance,
rule or regulation applicable to it, except for such violations or defaults
which, in the aggregate would not have a material adverse effect on the Assets,
the Business, the Owned Real Property or on the ability of the Selling Parties
or the Company to consummate the transactions contemplated hereby. The Company's
conduct of its business has been and is in compliance with all applicable laws,
statutes, ordinances and regulations, except for such breaches which, in the
aggregate would not have a material adverse effect on the Assets, the Business
or on the ability of the Existing Shareholders or the Company to consummate the
transactions contemplated hereby. Neither the Company nor any owner of any Owned
Real Property has received any notice asserting a failure to comply with any
law, statute, ordinance, regulation, rule or order of any foreign, federal,
state or local government or any other governmental department or agency.
3.10 Tax Matters. (a) For purposes of this Agreement, (i)
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"Tax" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security, unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not, and (ii) "Tax
Return" means any return, declaration, report,
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claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
(b) The Company has timely filed, or caused to be timely filed, all
Tax Returns that it was required to file. All such Tax Returns were correct and
complete in all respects. All Taxes owed by the Company (whether or not shown
on any Tax Return) have been paid. The Company currently is not the beneficiary
of any extension of time within which to file any Tax Return. Except as set
forth on Schedule 3.10(b), no claim has ever been made by an authority in a
jurisdiction where the Company does not file Tax Returns that the Company is or
may be subject to taxation by that jurisdiction. There are no liens on any of
the assets of the Company that arose in connection with any failure (or alleged
failure) to pay any Tax.
(c) The Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(d) Except for the Sales and Use Tax Audit as of June 30, 1998, there
is no dispute or claim concerning any Tax Liability of the Company either (i)
claimed or raised by any authority in writing or (ii) of which the Company or
any Existing Shareholder has knowledge. To the knowledge of the Company and
each Existing Shareholder, except for the Sales and Use Tax Audit as of June 30,
1998, no audit or examination of any Tax Return is currently in progress, and
the Company has not received notice of any proposed audit or examination. The
Company has furnished to HDA or its representatives correct and complete copies
of all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company with respect to years
ended on or before December 31, 1997. The Company has not waived any statute
of limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(e) The Company has not filed a consent under Section 341(f) of the
Code concerning collapsible corporations (or any comparable state income tax
provision). The Company has not made any payments, is not obligated to make any
payments, and is not a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under Section
280G of the Code. The Company is not a party to any Tax allocation, sharing or
indemnity agreement. The Company (i) has not been a member of an affiliated
group of corporations filing a consolidated federal income Tax Return or (ii)
has no liability for the Taxes of any person under Reg. Sec. 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract, or otherwise. Schedule 3.10(e) hereto sets forth all material
elections (e.g., accelerated depreciation, Sec. 263(a) regarding the allocation
of overhead to inventory, and LIFO election for inventory accounting) in effect
as of the date hereof with respect to Taxes affecting the Company.
10
(f) The Company has been a validly electing S corporation within the
meaning of Sections 1361 and 1362 of the Code at all times since January 1,
1987, and the Company will be an S corporation up to and including the Closing
Date. No Income Taxes will be payable by the Company with respect to the
taxable year beginning on January 1, 1998 and ending on the day immediately
preceding the Closing Date.
(g) The Company has not, in the past ten (10) years, (i) acquired
assets from another corporation in a transaction in which the Company's Tax
basis for the acquired assets was determined, in whole or in part, by reference
to the Tax basis of the acquired assets (or any other property) in the hands of
the transferor or (ii) acquired the stock of any corporation which is a
qualified subchapter S subsidiary.
3.11. Brokers, Finders. Neither the Company nor any Existing
----------------
Shareholder has retained any broker or finder in connection with the
transactions contemplated herein, and is not obligated and has not agreed to pay
any brokerage or finder's commission, fee or similar compensation.
3.12. Absence of Certain Changes. Since December 31, 1997, the
--------------------------
Company has conducted its business in the ordinary course and there has not
occurred with respect to the Company:
(a) any material adverse effect on the business, operations, assets,
results of operations or financial condition of the Company, taken as a whole
("Material Adverse Effect");
(b) any revaluation of assets, including, without limitation, writing
down the value of inventory or writing off notes or accounts receivable, except
as set forth on Schedule 3.12(b);
(c) any payment, discharge or satisfaction of any liabilities or
obligations, other than in the ordinary course of business;
(d) any incurrence of liabilities, except liabilities incurred in the
ordinary course of business, or increase or change in any assumptions underlying
or methods of calculating, any doubtful account contingency or other reserves;
(e) any capital expenditure exceeding $5,000, the execution of any
lease or the incurring of any obligation to make any capital expenditure or
execute any lease other than in the ordinary course of business, except as set
forth on Schedule 3.12(e);
(f) the failure to pay or satisfy when due any liability, except
where the failure would not have a material adverse effect on the assets or the
business;
11
(g) any assets (whether real, personal or mixed, tangible or
intangible) becoming subject to any mortgage, pledge, lien, security interest,
encumbrance, restriction or charge of any kind, except in the ordinary course of
business;
(h) the failure to carry on diligently the business in the ordinary
course so as to preserve for HDA the assets, the business and the goodwill of
the Company's suppliers, customers, distributors and others having business
relations with it;
(i) the disposition or lapsing of any Proprietary Rights (as defined
below) or any disposition or disclosure to any person of any Proprietary Rights
not theretofore a matter of public knowledge, except as set forth on Schedule
3.12(i);
(j) any cancellation or waiver of any material claims or rights of
value, or any sale, lease, transfer, assignment, distribution or other
disposition of any assets, except for sales of finished goods inventory in the
ordinary course of business, or any disposal of any material assets for any
amount;
(k) an amendment, cancellation or termination of any contract,
commitment, agreement, lease, transaction or Permit relating to assets or the
business or entry into any contract, commitment, agreement, lease, transaction
or Permit which is not in the ordinary course of business, including, without
limitation, any employment or consulting agreements, except as set forth on
Schedule 3.12(k);
(l) any bonus paid or promised, an increase in the base compensation,
or other payment or loan to any director, officer or employee, whether now or
hereafter payable or granted (other than increases in base compensation in the
ordinary course consistent in timing and amount with past practices), or entry
into or variation of the terms of any employment or incentive agreement with any
such person, except as set forth on Schedule 3.12(l);
(m) an adverse change in employee relations which has or is
reasonably likely to have an adverse effect on the productivity, the financial
condition, results of operations or business or the relationships between the
employees of the Company and the management of the Company;
(n) any change in any method of accounting or keeping books of
account or accounting practices, except as set forth on Schedule 3.12(n);
(o) any material damage, destruction or loss of any asset, whether or
not covered by insurance.
(p) the issuance, delivery or sale of any equity securities, or
alteration in terms of any outstanding securities issued by it or any increase
in its indebtedness for borrowed money (other than borrowings under its
revolving credit facility in the ordinary course of business), except as set
forth on Schedule 3.12(p);
12
(q) the adoption of any plan of liquidation or resolutions providing
for the liquidation, dissolution, merger, consolidation or other reorganization;
(r) the existence of any other event or condition which, in any one
case or in the aggregate, has been or might reasonably be expected to have a
Material Adverse Effect, except as set forth on Schedule 3.12(r); or
(s) an agreement to do any of the things described in the preceding
clauses (a) - (r) other than as expressly provided for herein.
3.13. Material Contracts. Schedule 3.13 attached hereto sets
------------------
forth a complete and correct list of all the Material Contracts to which the
Company or, in the case of Section 3.13(b), (c) and (e), Xxxxxx Xxxxx, Xxxx
Xxxxx and J. Xxxxx Xxxxx, or, in the case of Section 3.13(g), any Existing
Shareholder, is a party. As used in this Agreement, "Material Contracts" means:
(a) all contracts not made in the ordinary course of business;
(b) all leases or other agreements under which the Company, Xxxxxx
Xxxxx, Xxxx Xxxxx or J. Xxxxx Xxxxx is a lessor or lessee of any real property
or any machinery, equipment, vehicle or other tangible personal property owned
by a third party and used in the business of the Company, which entails annual
payments, in the case of any such lease or agreement, in excess of $5,000;
(c) all options with respect to any property, real or personal,
whether the Company shall be the grantor or grantee thereunder;
(d) all distribution, franchise, license, technical assistance,
sales, commission, consulting, agency or advertising contracts related to assets
or the business and which are not cancelable on thirty (30) calendar days
notice;
(e) all mortgages, indentures, security agreements, pledges, notes,
loan agreements or guaranties relating to the Company or the Owned Real Property
in a principal amount (or with maximum availability) in excess of $5,000;
(f) all contracts and agreements to which the Company is a party and
which are (i) outstanding contracts with its officers, employees, agents,
consultants, advisors, salesmen, sales representatives, distributors, sales
agents or dealers of the Company other than contracts which by their terms are
cancelable by the Company with notice of not more than 30 days and without
cancellation penalties or severance payments, in the case of any such contract,
in excess of $5,000, (ii) collective bargaining agreements of the Company which
relate to the business of the Company, and (iii) pension, profit-sharing, bonus,
retirement, stock option or employee benefit plans or other similar plans or
arrangements of the Company;
13
(g) any covenant not to compete or similar restriction on the Company
or any Existing Shareholder;
(h) any contract with the United States, state or local government or
any agency or department thereof, involving expenditures or liabilities in
excess of $5,000; or
(i) any contract or agreement providing for the receipt or payment
(whether the obligations are fixed or contingent) of $5,000 or more after the
date of this Agreement, including, without limitation, agreements calling for
penalties or payments upon voluntary termination or withdrawal by the Company.
The Company has furnished or will furnish to HDA or its representatives true and
correct copies of all Material Contracts prior to the Closing, including all
amendments and supplements thereto.
3.14. Proprietary Rights.
------------------
(a) Schedule 3.14 lists the material patents, trademarks (whether
registered or unregistered), service marks, trade names, service names, brand
names, logos and copyrights (collectively, the "Proprietary Rights") for the
Company. Schedule 3.14 also sets forth: (i) for each patent, the number,
normal expiration date and subject matter for each country in which such patent
has been issued, or, if applicable, the application number, date of filing and
subject matter for each country, (ii) for each trademark, the application serial
number or registration number, the class of goods covered and the expiration
date for each country in which a trademark has been registered and (iii) for
each copyright, the number and date of filing for each country in which a
copyright has been filed. The Proprietary Rights listed in Schedule 3.14 are
all those used by the Company in connection with its businesses. True and
correct copies of all patents (including all pending applications) owned,
controlled, created or used by or on behalf of the Company or in which the
Company has any interest whatsoever have been provided to HDA or its
representatives.
(b) The Company has no obligation to compensate any person for the
use of any such Proprietary Rights nor has the Company granted to any person any
license, option or other rights to use in any manner any of its Proprietary
Rights, whether requiring the payment of royalties or not.
(c) The Company owns or has a valid right to use each of the
Proprietary Rights, and the Proprietary Rights will not cease to be valid rights
of the Company by reason of the execution, delivery and performance of this
Agreement, the Ancillary Agreements or the consummation of the transactions
contemplated hereby and thereby. All of the pending patent applications have
been duly filed. The Company has not received any notice of invalidity or
infringement of any rights of others with respect to such trademarks. The
Company has taken all reasonable and prudent steps to protect the Proprietary
Rights from infringement by any other person. No other person (i) has the right
to use any trademarks the Company on the goods on which they are now being used
either in identical form or in such near resemblance thereto as to
14
be likely, when applied to the goods of any such person, to cause confusion with
such trademarks or to cause a mistake or to deceive, (ii) has notified the
Company that it is claiming any ownership of or right to use such Proprietary
Rights, or (iii) to the best knowledge of the Company, is infringing upon any
such Proprietary Rights in any way. The Company's use of any Proprietary Rights
does not and will not conflict with, infringe upon or otherwise violate the
valid rights of any third party in or to such Proprietary Rights, and no Action
has been instituted against or notices received by the Company that are
presently outstanding, alleging that the Company's use of the Proprietary Rights
infringes upon or otherwise violates any rights of a third party in or to such
Proprietary Rights. There are not, and it is reasonably expected that after the
Closing there will not be, any restrictions on right of the Company to sell
products manufactured by the Company in connection with the operation of its
business.
3.15. Labor Matters. The Company is not a party to any labor
-------------
agreement with respect to its employees with any labor organization, union,
group or association, and there are no employee unions (nor any other similar
labor or employee organizations) under local statutes, custom or practice. The
Company has not experienced any attempt by organized labor or its
representatives to make it conform to demands of organized labor relating to its
employees or to enter into a binding agreement with organized labor that would
cover the employees of the Company. There is no labor strike or labor
disturbance pending or, to the best knowledge of the Company, threatened against
the Company, nor is any grievance currently being asserted, and the Company has
not experienced a work stoppage or other labor difficulty, and is not and has
not engaged in any unfair labor practice. Without limiting the foregoing, the
Company are in compliance with the Immigration Reform and Control Act of 1986
and maintains a current Form I-9, as required by such Act, in the personnel file
of each employee hired after November 9, 1986.
3.16. Consents. No consent, approval, authorization, order, filing,
--------
registration or qualification (each a "Consent") of or with any court,
governmental authority or third person is required to be made or obtained by the
Company in connection with the execution and delivery of this Agreement, the
Ancillary Agreements or the consummation by the Company and the Existing
Shareholders of the transactions contemplated herein and therein, which
Consent(s), if not obtained, would have a Material Adverse Effect.
3.17. Employee Benefit Plans; Employment Agreements.
---------------------------------------------
(a) Schedule 3.17 hereto sets forth a complete and correct list of
all (i) employment contracts, employment arrangements and other arrangements
that provide benefits to employees or former employees of the Company and that
are not Plans (as defined below) (collectively, the "Employment Contracts") and
(ii) all "employee welfare benefit plans" or "employee pension benefit plans,"
as such terms are defined in Sections 3(1) and 3(2), respectively, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which are
maintained, administered or contributed to by the Company and cover employees or
15
former employees of the Company or under which the Company could incur any
liability (collectively, the "Plans").
(b) None of the Plans is subject to Title VII of ERISA. In the past
six years, the Company has not maintained, sponsored, or been required to
contribute to, has withdrawn from (either completely or partially), nor has it
incurred any unpaid withdrawal liability with respect to, any plan subject to
Title VII of ERISA or the minimum funding requirements of Section 412 of the
Code.
(c) The Plans have been administered in compliance in all material
respects with their terms and with all filings, reporting, disclosure, and other
requirements of ERISA, the Code and any other applicable law. The only Plan
which is an "employee pension benefit plan," as such term is defined in Section
3(2) of ERISA is the Company's 401(k) profit sharing plan (the "401(k) Plan").
The 401(k) Plan is and has been for all the years of the Plan the subject of a
favorable determination letter issued by the Internal Revenue Service. The
Company has no knowledge of any facts which might adversely affect the
qualifying status of the 401(k) Plan.
(d) None of the Company nor any of its respective employees or
directors, nor, to the knowledge of the Company, any plan fiduciary of any of
the Plans, has engaged in any transaction in violation of Section 406(a) or (b)
of ERISA or any "prohibited transaction" (as defined in Section 4975(c)(1) of
the Code) for which no exemption exists under Section 4975(d) of the Code.
(e) Other than routine claims for benefits made in the ordinary
course of business, there are no pending claims, investigations or causes of
action ("Claims"), and to the best knowledge of the Company, no such Claims are
threatened, against any Plan or fiduciary of any such Plan by any participant,
beneficiary or governmental agency with respect to the qualification or
administration of any such Plan.
(f) The Company has provided to HDA or its representatives a copy of
the Employment Contracts, the Plans, related trust agreements, all amendments
thereto together with the annual report for the last three years (Form 5500,
including Schedule B thereto). The Company has provided HDA or its
representatives with true and complete age, salary, service and related data for
employees, former employees and beneficiaries thereof covered under the 401(k)
Plan as of the Closing Date.
(g) No entity which is required to be aggregated with the Company
under Sections 414(b), (c), (m) or (o) of the Code (the "Company ERISA
Affiliates") has incurred any liability under or with respect to any benefit
plan, policy or arrangement for the benefit of its employees or former employees
that could become a liability of HDA or the Company. Neither HDA nor any
Company ERISA Affiliate will incur any liability under Section 411(d)(3) of the
Code for vested accrued benefits arising from a partial termination of the
401(k) Plan prior to the Closing Date.
16
(h) All amounts required to be contributed to any Plan by the Company
will, as of the Closing Date, have been paid or properly accrued on the books of
the Company. The Company shall either contribute or accrue on its books the
amount of any employer matching contributions or discretionary contributions (in
an amount determined in accordance with the Company's past practices) to the
401(k) Plan which in the ordinary course of business would be contributed for or
attributable to the period prior to the Closing Date.
(i) None of the assets of the 401(k) Plan is invested in property
constituting employer real property or employer security (within the meaning of
Section 407(d) of ERISA).
(j) Neither the execution and delivery of this Agreement, the
Ancillary Agreements nor any of the transactions contemplated herein and
therein, will terminate or modify, or give a third person a right to terminate
or modify, the provisions or terms of any Employment Contract or Plan (including
employment agreements) and will not constitute a stated triggered event under
any Employment Contract or Plan or any other agreement with any person or entity
that will result in any payment or the acceleration of the right to receive any
payment (including parachute payments, severance payments or any similar
payments) that would not be deductible becoming due to any employees of the
Company.
(k) Neither the Company nor any Plan which is a "welfare benefit
plan," as such term is defined in Section 3(1) of ERISA has any present or
future obligation to provide medical or other welfare benefits to, or to make
any payment to or with respect to medical or other welfare benefits of, any
present or former employee of the Company or any ERISA Subsidiary.
(l) No Company ERISA Affiliate has incurred any liability with
respect to which the Company has incurred or could incur any liability.
3.18. Compliance with Environmental Laws.
----------------------------------
(a) Definitions. The following terms, when used in this Section
-----------
3.18, shall have the following meanings. Any of these terms may, unless the
context otherwise requires, used in the singular or the plural depending on the
reference.
(i) "Company" for the purposes of this Section, shall include
(i) the Company and all owners of all of the Owned Real Property, (ii) all
partnerships, joint ventures and other entities or organizations in which
the Company was at any time or is a partner, joint venturer, member or
participant and (iii) all predecessor or former corporations, partnerships,
joint ventures, organizations, businesses or other entities, whether in
existence as of the date hereof or at any time prior to the date hereof,
the assets or obligations of which have been acquired or assumed by the
Company or to which the Company has succeeded.
17
(ii) "Release" shall mean and include any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing into the environment or the workplace of any
hazardous substance, and otherwise as defined in any Environmental Law.
(iii) "Hazardous Substance" shall mean any pollutant,
contaminant, chemical, waste and any toxic, infectious, carcinogenic,
reactive, corrosive, ignitable or flammable chemical or chemical compound
or hazardous substance, material or waste, whether solid, liquid or gas,
including, without limitation, any quantity of asbestos in any form, urea
formaldehyde, PCB's, radon gas, crude oil or any fraction thereof, all
forms of natural gas, petroleum products or by-products or derivatives,
radioactive substance or material, pesticide waste waters, sludges, slag
and any other substance, material or waste that is subject to regulation,
control or remediation under any Environmental Laws.
(iv) "Environmental Laws" shall mean all Regulations which
regulate or relate to the protection or clean-up of the environment, the
use, treatment, storage, transportation, generation, manufacture,
processing, distribution, handling or disposal of, or emission, discharge
or other release or threatened release of, Hazardous Substances or
otherwise dangerous substances, wastes, pollution or materials (whether,
gas, liquid or solid), the preservation or protection of waterways,
groundwater, drinking water, air, wildlife, plants or other natural
resources, or the health and safety of persons or property, including
without limitation protection of the health and safety of employees.
Environmental Laws shall include, without limitation, the Federal
Insecticide, Fungicide, Rodenticide Act, Resource Conservation & Recovery
Act, Clean Water Act, Safe Drinking Water Act, Atomic Energy Act,
Occupational Safety and Health Act, Toxic Substances Control Act, Clean Air
Act, Comprehensive Environmental Response, Compensation and Liability Act,
Emergency Planning and Community Right-to-Know Act, Hazardous Materials
Transportation Act and all analogous or related federal, state or local
law, each as amended.
(v) "Environmental Conditions" means the introduction into the
environment of any pollution, including, without limitation, any
contaminant, irritant or pollutant or other Hazardous Substance (whether or
not upon any Facility or former Facility or other property and whether or
not such pollution constituted at the time thereof a violation of any
Environmental Law as a result of any Release of any kind whatsoever of any
Hazardous Substance) as a result of which the Company has or may become
liable to any person or by reason of which any Facility, former Facility or
any of the assets of the Company may suffer or be subjected to any lien.
(b) Notice of Violation. The Company has not received a notice of
-------------------
alleged, actual or potential responsibility for, or any inquiry or investigation
regarding, (i) any Release or threatened Release of any Hazardous Substance at
any location, whether at the Facilities, the
18
former Facilities or otherwise or (ii) an alleged violation of or non-compliance
with the conditions of any Permit required under any Environmental Law or the
provisions of any Environmental Law. The Company has not received notice of any
other claim, demand or Action by any individual or entity alleging any actual or
threatened injury or damage to any person, property, natural resource or the
environment arising from or relating to any Release or threatened Release of any
Hazardous Substances at, on, under, in, to or from any Facilities or former
Facilities, or in connection with any operations or activities of the Company.
(c) Environmental Conditions. Except as set forth on Schedule
------------------------
3.18(c), there are no present or past Environmental Conditions in any way
relating to the business of the Company or at any Facility owned by the Company
or a Selling Party and, to the knowledge of the Company and the Selling Parties,
there are no present or past Environmental Conditions at any Facility leased by
the Company.
(d) Environmental Audits or Assessments. True, complete and correct
-----------------------------------
copies of the written reports, and all parts thereof, including any drafts of
such reports if such drafts are in the possession or control of the Company, of
all environmental audits or assessments which have been conducted at any
Facility or former Facility within the past five years, either by the Company or
any attorney, environmental consultant or engineer engaged for such purpose,
have been delivered to HDA or its representatives and a list of all such
reports, audits and assessments and any other similar report, audit or
assessment of which the Company has knowledge is included in Schedule 3.18(d)
hereto.
(e) Indemnification Agreements. Except as set forth on Schedule
--------------------------
3.18(e), the Company is not a party, whether as a direct signatory or as
successor, assign or third party beneficiary, or otherwise bound, to any lease
or other contract (excluding insurance policies disclosed on the Schedule) under
which the Company is obligated by or entitled to the benefits of, directly or
indirectly, any representation, warranty, indemnification, covenant, restriction
or other undertaking concerning environmental conditions.
(f) Releases or Waivers. The Company has not released any other
-------------------
person from any claim under any Environmental Law or waived any rights
concerning any Environmental Condition.
(g) Notices, Warnings and Records. The Company has given all notices
-----------------------------
and warnings, made all reports, and has kept and maintained all records required
by and in substantial compliance with all Environmental Laws.
3.19. Certain Business Relationships with the Company. Except as
-----------------------------------------------
set forth on Schedule 3.19, none of the Existing Shareholders of the Company
owning more than 5% of its outstanding voting securities have been involved in
any business arrangement or relationship
19
with the Company within the past 12 months, and none of such Existing
Shareholders own any assets, tangible or intangible, which are used in the
business of the Company.
3.20. Undisclosed Liabilities. Except as set forth on Schedule 3.20,
-----------------------
the Company has no liabilities or obligations, whether accrued, absolute,
contingent or otherwise except (i) to the extent reflected or reserved for on
the Balance Sheets, (ii) liabilities or obligations incurred in the normal and
ordinary course of business of the Company since December 31, 1997, (iii)
liabilities or obligations disclosed in Schedule 3.20 hereto and in the other
Schedules attached hereto, or (iv) liabilities or obligations disclosed
elsewhere in this Agreement.
3.21. Insurance. Schedule 3.21 contains a complete and accurate list of
---------
all policies or binders of fire, liability, title, worker's compensation,
product liability and other forms of insurance (showing as to each policy or
binder the carrier, policy number, coverage limits, expiration dates, annual
premiums, a general description of the type of coverage provided, loss
experience history by line of coverage) maintained by the Company on its
respective (i) businesses, (ii) assets or (iii) employees at any time since
December 31, 1993. All insurance coverage applicable to the Company or its
respective businesses or assets is in full force and effect, insures the Company
in reasonably sufficient amounts against all risks usually insured against by
persons operating similar businesses or properties of similar size in the
localities where such businesses or properties are located, provides coverage as
may be required by applicable regulation and by any and all contracts to which
the Company is a party and has been issued by insurers of recognized
responsibility. There is no default under any such coverage nor has there been
any failure to give notice or present any claim under any such coverage in a due
and timely fashion. There are no outstanding unpaid premiums except in the
ordinary course of business and no notice of cancellation or nonrenewal of any
such coverage has been received. There are no provisions in such insurance
policies for retroactive or retrospective premium adjustments. All products
liability, general liability and workers' compensation insurance policies
maintained by the Company have been occurrence policies and not claims made
policies. There are no outstanding performance bonds covering or issued for the
benefit of the Company. There are no facts upon which an insurer might be
justified in reducing coverage or increasing premiums on existing policies or
binders. No insurer has advised the Company that it intends to reduce coverage,
increase premiums or fail to renew existing policy or binder.
3.22. Accounts Receivable. Except as set forth on Schedule 3.22, the
-------------------
accounts receivable set forth on the Balance Sheets, and all accounts receivable
arising since the date of the Balance Sheets, represent bona fide claims of the
Company against debtors for sales, services performed or other charges arising
on or before the date hereof, and all the goods delivered and services performed
which gave rise to said accounts were delivered or performed in accordance with
the applicable orders, contracts or customer requirements. Said accounts
receivable are subject to no defenses, counterclaims or rights of setoff and are
fully collectible in the ordinary course of business without cost in collection
efforts therefor, except to the extent of the appropriate reserves for bad debts
on accounts receivable as set forth on the Balance Sheets
20
and, in the case of accounts receivable arising since the date of the Balance
Sheets, to the extent of a reasonable reserve rate for bad debts on accounts
receivable which is not greater than the rate reflected by the reserve for bad
debts on the Balance Sheets.
3.23 Inventory. Schedule 3.23 contains a complete and accurate list of
---------
all inventory set forth on the Balance Sheets and the addresses at which such
inventory is located. The inventory as set forth on the Balance Sheets or
arising since the date of the Balance Sheets was acquired and has been
maintained in accordance with the regular business practices of the Company,
consists of new and unused items of a quality and quantity usable or salable in
the ordinary course of business, and is valued at the lower of cost or market.
None of such inventory is obsolete, unusable, slow-moving, damaged or unsalable
in the ordinary course of business, except for such items of inventory which
have been written down to realizable market value, or for which adequate
reserves have been provided in the Balance Sheets.
3.24 Payments. The Company has not, directly or indirectly, paid or
--------
delivered any fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, client, customer, supplier, government
official or other party, in the United States or any other country, which is in
any manner related to the business, assets or operations of the Company, which
is, or may be with the passage of time or discovery, illegal under any federal,
state or local laws of the United States (including, without limitation, the
U.S. Foreign Corrupt Practices' Act) or any other country having jurisdiction.
The Company has not participated, directly or indirectly, in any boycotts or
other similar practices affecting any of its actual or potential customers and
has at all times done business in an open and ethical manner.
3.24 Customers, Distributors and Suppliers. Schedule 3.25 sets forth a
-------------------------------------
complete and accurate list of the names and addresses of the Company's (i) ten
largest (in terms of dollar volume) customers, distributors and other agents and
representatives during the Company's last fiscal year, showing the approximate
total sales in dollars by the Company to such customer during such fiscal year;
and (ii) suppliers during the Company's last fiscal year, showing the
approximate total purchases in dollars by the Company from such supplier during
such fiscal year. Except as set forth on Schedule 3.25, since the date of the
Balance Sheets, there has been no adverse change in the business relationship of
the Company with any customer, distributor or supplier named on Schedule 3.25.
Except as set forth on Schedule 3.25, the Company has not received any
communication from any customer, distributor or supplier named on Schedule 3.25
of any intention to terminate or materially reduce purchases from or supplies to
the Company.
3.26 Material Misstatements Or Omissions. No representations or
-----------------------------------
warranties by the Company in this Agreement, nor any document, exhibit,
statement, certificate or Schedule heretofore or hereinafter furnished to HDA or
its representatives pursuant hereto, or in connection with the transactions
contemplated hereby, including, without limitation, the Schedules, contains or
will contain any untrue statement of a material fact, or omits or will omit
21
to state any material fact necessary to make the statements or facts contained
therein not misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF HDA
HDA represents and warrants to the Company and the Existing Shareholders as
follows:
4.1 Corporate Organization and Standing. HDA is a corporation, duly
-----------------------------------
incorporated and validly existing under the laws of the State of Alabama, with
all requisite corporate power and authority to execute and deliver this
Agreement, the Ancillary Agreements and to consummate the transactions
contemplated hereby and thereby.
4.2 Authorization. This Agreement has been duly authorized,
-------------
executed and delivered by HDA, and is its valid and binding obligation,
enforceable against it in accordance with its terms, except as enforcement may
be limited by equitable principles limiting the right to obtain specific
performance or other equitable remedies, or by applicable bankruptcy or
insolvency laws and related decisions affecting creditors' rights generally.
4.4 No Conflict or Violation. Neither the execution and delivery
------------------------
of this Agreement, the Ancillary Agreements, nor the consummation of the
transactions contemplated hereby or thereby, will (i) result in the acceleration
of, or the creation in any party of any right to accelerate, terminate, modify
or cancel any indenture, contract, lease, sublease, loan agreement, note or
other obligation or liability to which HDA is a party or by which it is bound or
to which any of its assets is subject, (ii) conflict with or result in a breach
of or constitute a default under any provision of its Articles of Incorporation
or Bylaws (or other charter documents), or a default under or violation of any
material restriction, lien, encumbrance or any contract to HDA is a party or by
which it is bound or to which any of its assets is subject or result in the
creation of any lien or encumbrance upon any of said assets, (iii) violate or
result in a breach of or constitute a default under any judgment, order, decree,
rule or regulation of any court or governmental agency to which HDA is subject,
or (iv) violate, conflict with or result in a breach of any applicable federal
or state rule or regulation.
ARTICLE V.
CONDUCT OF BUSINESS PENDING CLOSING
AND POST-CLOSING COVENANTS
The Company, the Existing Shareholders and HDA each covenant with the
other as follows:
5.1 Further Assurances. Upon the terms and subject to the
------------------
conditions contained herein, the Parties agree, both before and after the
Closing, (i) to use all reasonable
22
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement or the Ancillary Agreements,
(ii) to execute any documents, instruments or conveyances of any kind which may
be reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder, and (iii) to cooperate with each other in connection
with the foregoing. Without limiting the foregoing, the Parties agree to use
their respective best efforts (A) to obtain all necessary waivers, consents and
approvals from other parties (including, without limitation, governmental
entities) to the consummation of the transactions contemplated by this
Agreement; (B) to obtain all necessary Permits as are required to be obtained
under any regulations; (C) to defend all Actions challenging this Agreement or
the consummation of the transactions contemplated hereby; (D) to lift or rescind
any injunction or restraining order or other court order adversely affecting the
ability of the parties to consummate the transactions contemplated hereby; (E)
to give all notices to, and make all registrations and filings with third
parties, including, without limitation, submissions of information requested by
governmental authorities; and (F) to fulfill all conditions to this Agreement.
If not previously done, within five (5) calendar days after the execution and
delivery of this Agreement, HDA shall make all filings required under the Xxxx-
Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the Company
shall cooperate with HDA with respect to such filings.
5.2 No Solicitation and Confidentiality
-----------------------------------
(a) From the date hereof through the Closing or the earlier
termination of this Agreement, none of the Parties nor their representatives
(including, without limitation, investment bankers, attorneys and accountants)
shall, directly or indirectly, enter into, solicit, initiate or continue any
discussions or negotiations with, or encourage or respond to any inquiries or
proposals by, or participate in any negotiations with, or provide any
information to, or otherwise cooperate in any other way with, any corporation,
partnership, person or other entity or group, concerning any sale of all or a
portion of the Company, or of any shares of capital stock of the Company or any
merger, consolidation, liquidation, dissolution or similar transaction involving
the Company (each such transaction being referred to herein as a "Proposed
Acquisition Transaction") other than with (i) another Party hereto and its
representatives (ii) as required by law, or (iii) employees of the Company
regarding such employees' possible investments in HDA. The Company shall not,
directly or indirectly, through any officer, director, employee, representative,
agent or otherwise, solicit, initiate or encourage the submission of any
proposal or offer from any person (including, without limitation, a "person" as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended)
or entity relating to any Proposed Acquisition Transaction. The Company
represents that it is not now engaged in discussions or negotiations with any
party other than HDA with respect to any of the foregoing.
(b) Notification. The Company will immediately notify HDA if any
------------
discussions or negotiations are sought to be initiated, any inquiry or proposal
is made, or any
23
information is requested with respect to any Proposed Acquisition Transaction
and notify HDA of the identity of the prospective purchaser or soliciting party.
5.3 Disclosures. Except as required by law or occurring after the
-----------
Closing, none of the Parties, without the prior written consent of the other
Parties, will make any press release or any similar public announcement
concerning the transactions contemplated hereby.
5.4 Employee Plans. After the Closing, the Company shall, if
--------------
requested by HDA, (i) terminate its 401(k) Plan and cooperate with HDA in
allowing rollover contributions by the former employees of the Company and (ii)
give or cause to be given COBRA notices to the employees of the Company whose
employment terminates at Closing in connection with this transaction.
ARTICLE VI.
CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS
BY HDA
The obligations of HDA under this Agreement are subject to the
fulfillment prior to or at the Closing of each of the following conditions, any
one or more of which may be waived by HDA.
6.1 No Injunctive Proceedings. No preliminary or permanent
-------------------------
injunction or other order (including a temporary restraining order) of any state
for federal court or other governmental agency which prevents the consummation
of the transactions which are the subject of this Agreement shall have been
issued and remain in effect (provided that HDA has acted in accordance with the
--------
requirements of Section 5.1 hereof).
6.2 Representations and Warranties. All representations and
------------------------------
warranties of the Company and the Existing Shareholders contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date, except as otherwise contemplated by this Agreement.
6.3 Performance of Agreements. The Company and the Existing
-------------------------
Shareholders shall have fully performed in all material respects all
obligations, agreements, conditions and commitments required to be fulfilled by
it pursuant to the terms hereof on or prior to the Closing Date.
6.4 Compliance Certificate. The Company and the Existing
----------------------
Shareholders shall have delivered to HDA or its representatives, their
respective certificates, dated the Closing Date, executed on their behalf by
their respective duly authorized representatives, as to the fulfillment of the
conditions set forth in Sections 6.2 and 6.3 hereof.
24
6.5 Material Changes. There shall not have been any Material
----------------
Adverse Effect from the date hereof to the Closing Date.
6.6 Opinion of Counsel. HDA shall have received the opinion of
------------------
Xxxxx and Xxxxxxxx, counsel for the Company and the Existing Shareholders, in
the form set forth in Schedule 6.6 hereto.
6.7 Consents, Etc. All authorizations, consents or approvals of any
--------------
and all third parties and governmental regulatory authorities necessary in
connection with the consummation of the Closing shall have been obtained and be
in full force and effect.
6.8 Ancillary Agreements. The following agreements (the "Ancillary
--------------------
Agreements") shall have been executed and delivered by all parties thereto other
than HDA: (i) employment agreements, containing non-competition clauses, by and
between HDA and each of J. Xxxxx Xxxxx and Xxxxxx X. Xxxxx (the "Employment
Agreements"), substantially in the form attached hereto as Exhibit G, (ii) non-
competition agreements by and between HDA and each of Xxxxxx X. Xxxxx, J. Xxxxx
Xxxxx and Xxxxxx X. Xxxxx containing non-competition clauses identical to the
non-competition clauses contained in the Employment Agreements, (iii) the Real
Estate Purchase Agreement and (iv) the Escrow Agreement.
6.9 Name Change. The Company shall have delivered to HDA for
-----------
filing post-Closing an amendment to its Articles of Incorporation to change its
corporate name so as not to include the words "Connecticut Driveshaft" or any
other name or xxxx that has such a near resemblance thereto as may be likely to
cause confusion or mistake to the public, or to otherwise deceive the public.
6.10 Nonforeign Affidavit. Each of Xxxxxx X. Xxxxx, Xxxx Xxxxx and J.
--------------------
Xxxxx Xxxxx shall furnish to HDA an affidavit, stating, under penalty of
perjury, its United States taxpayer identification number and that it is not a
foreign person, pursuant to Section 1445(b)(2) of the Code.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS BY THE COMPANY
The obligations of the Company under this Agreement are subject to the
fulfillment prior to the Closing of each of the following conditions, any one or
more of which may be waived by the Company:
7.1 No Injunctive Proceedings. No preliminary or permanent injunction
-------------------------
or other order (including a temporary restraining order) of any state or federal
court or other governmental agency which prevents the consummation of the
transactions which are the subject of this Agreement shall have been issued and
remain in effect.
25
7.2 Representations and Warranties. Except as otherwise contemplated
------------------------------
by this Agreement, all representations and warranties of HDA contained in this
Agreement shall be true and correct in all material respects as of the Closing
Date.
7.3 Performance of Agreements; Instruments of Transfer. HDA shall
--------------------------------------------------
have fully performed in all material respects all obligations, agreements,
conditions and commitments required to be fulfilled by HDA on or prior to the
Closing Date and shall have tendered to the Company and the Existing
Shareholders the documents, instruments and certificates required by Article 7
hereof.
7.4 Compliance Certificates. HDA shall have delivered to the Company
-----------------------
and the Existing Shareholders its certificate, dated the Closing Date, executed
on its behalf by its President or a Vice President, as to the fulfillment of the
conditions set forth in Sections 7.2 and 7.3 hereof.
7.5 Ancillary Agreements. The condition set forth in Section 6.8
--------------------
shall be satisfied, except that such documents shall be signed by all parties
other than the Existing Shareholders and/or entities controlled by them.
7.6 Opinion of Counsel. The Company shall have received the opinion
------------------
of Xxxxxxx Xxxxx Xxxx & White, LLP counsel for HDA, in the form set forth in
Schedule 7.6 hereto.
ARTICLE VIII.
ACTIONS BY THE PARTIES AFTER THE CLOSING
8.1 Collection of Accounts Receivable and Letters of Credit. At the
-------------------------------------------------------
Closing, HDA will acquire hereunder the right and authority to collect all
receivables, letters of credit and other items which constitute a part of the
Assets, and the Company shall within forty-eight (48) hours after receipt of any
payment in respect of any of the foregoing, properly endorse and deliver to HDA
any letters of credit, documents, cash or checks or other consideration received
on account of or otherwise relating to any such receivables, letters of credit
or other items.
8.2 Consents to Assignment. Anything in this Agreement to the
----------------------
contrary notwithstanding, this Agreement shall not constitute an agreement to
assign any lease, contract or license, or any claim or right or any benefit
arising thereunder or resulting therefrom if any attempted assignment thereof,
without the consent of a third party thereto, would constitute a breach thereof
or in any way adversely affect the rights of the Company thereunder. If such
consent is not obtained, or if an attempted assignment thereof would be
ineffective or would affect the rights thereunder so that HDA would not receive
all such rights. The Company will cooperate with HDA, in all reasonable
respects, to provide to HDA with the benefits under any
26
such lease, contract, license, claim or right, including, without limitation,
enforcement for the benefit of HDA of any and all rights of the Company against
a third party thereto arising out of the breach or cancellation by such third
party or otherwise.
8.3 Indemnification by the Company and the Existing Shareholders.
------------------------------------------------------------
Subject to the provisions of this Article VIII, the Company and the Existing
Shareholders will jointly and severally indemnify, defend and hold HDA and its
respective stockholders, subsidiaries, officers, directors, employees, agents,
successors and assigns (such indemnified persons are collectively hereinafter
referred to as "HDA's Indemnified Persons"), harmless from and against any and
all loss, liability, damage (excluding consequential, indirect special,
exemplary and punitive damages) or deficiency (including interest, penalties,
judgments, costs of preparation and investigation, and reasonable attorneys'
fees) (collectively, "Losses") that HDA's Indemnified Persons may suffer,
sustain, incur or become subject to arising out of or due to: (a) any inaccuracy
of any representation of the Company and the Existing Shareholders in this
Agreement or in any Schedule hereto; (b) the breach of any warranty of the
Company and the Existing Shareholders in this Agreement or any Schedule hereto,
(c) Environmental Liabilities, including without limitation any Losses to the
extent they arise from events or conditions which existed before the Closing
Date and relate to any Environmental Condition, any Release, threatened Release,
or disposal of any Hazardous Substance at the Leased Real Property located at
00X Xxxxx Xxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxxx and located at 00 0/0 Xxxx Xxxxx
Xxxx, Xxxxxxx, Xxxxxxxxxxx or the operation or violation of any Environmental
Law at such leased properties or (d) the nonfulfillment of any covenant,
undertaking, agreement or other obligation of the Company and the Existing
Shareholders under this Agreement or any Schedule hereto, not otherwise waived
by HDA. "Losses" as used herein is not limited to matters asserted by third
parties, but includes Losses incurred or sustained in the absence of third party
claims. Payment is not a condition precedent to recovery of indemnification for
Losses.
8.4 Indemnification by HDA. Subject to the provisions of this Article
----------------------
VIII, HDA agrees to indemnify, defend and hold the Company and the Existing
Shareholders and their respective employees, agents, directors, officers, heirs,
representatives, successors and assigns (such persons are hereinafter
collectively referred to as the "Company's Indemnified Persons"), harmless from
and against any and all Losses that the Company's Indemnified Persons may
suffer, sustain, incur or become subject to arising out of or due to: (a) any
inaccuracy of any representation of HDA in this Agreement or in any Schedule
hereto; (b) the breach of any warranty of HDA in this Agreement or any Schedule
hereto; (c) the nonfulfillment of any covenant, undertaking, agreement or other
obligation of HDA under this Agreement or any Schedule hereto, not otherwise
waived by the Company and the Existing Shareholders; and (d) any act or
occurrence related to the Business and the Assets accruing or arising after the
Closing, except the Excluded Liabilities.
8.5 Survival of Representations, Warranties and Covenants. The
-----------------------------------------------------
several representations, warranties, covenants of the Parties contained in this
Agreement or in any document delivered pursuant hereto and the Parties' right to
indemnity in accordance with this
27
Article VIII shall survive the Closing Date and shall remain in full force and
effect for one (1) year thereafter; provided, however, that the representations
and warranties set forth in Section 3.10 relating to tax matters and Section
3.17 relating to employee benefits matters shall survive for the length of the
applicable statute of limitations.
8.6 Threshold; Deductible. Except as provided in this Section 8.6, no
---------------------
HDA's Indemnified Person or Company's Indemnified Person shall be entitled to
any recovery in accordance with this Article VIII unless and until the amount of
such Losses suffered, sustained or incurred by such party, or to which such
party becomes subject, by reason of such inaccuracy, breach or nonfulfillment
exceeds $100,000 and then only to the extent of such excess. EXCEPT FOR WILLFUL
AND INTENTIONAL FRAUD, LIABILITY FOR BREACH OF REPRESENTATIONS AND WARRANTIES
UNDER THIS AGREEMENT SHALL NOT EXCEED THE $800,000 ESCROW AMOUNT, EXCEPT THAT
LIABILITY OF THE EXISTING SHAREHOLDERS FOR BREACH OF THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN SECTION 3.10 (TAX MATTERS) AND SECTION 3.17 (EMPLOYEE
BENEFIT PLANS; EMPLOYMENT AGREEMENTS) AND ENVIRONMENTAL LIABILITIES RELATED TO
THE PROPERTIES TO BE PURCHASED BY HDA PURSUANT TO THE REAL ESTATE PURCHASE
AGREEMENT AND THE ENVIRONMENTAL LIABILITIES DESCRIBED IN SECTION 8.3(C) ABOVE
SHALL NOT BE SUBJECT TO THE $800,000 ESCROW AMOUNT CEILING.
8.7 Notice and Opportunity to Defend. If a claim for Losses (a
--------------------------------
"Claim") is to be made by a party seeking indemnification hereunder, such party
seeking indemnification (the "Indemnitee") shall notify the party obligated to
provide indemnification (the "Indemnitor") promptly. If such event involves (a)
any claim or (b) the commencement of any action or proceeding by a third person,
the Indemnitee shall give the Indemnitor written notice of such claim or the
commencement of such action or proceeding. Delay or failure to so notify the
Indemnitor shall only relieve the Indemnitor of its obligations to the extent,
if at all, that it is prejudiced by reasons of such delay or failure. The
Indemnitor shall have a period of 30 days within which to respond thereto. If
the Indemnitor accepts responsibility or does not respond within such 30-day
period, then the Indemnitor shall be obligated to compromise or defend, at its
own expense and by counsel chosen by the Indemnitor, such matter, and the
Indemnitor shall provide the Indemnitee with such assurances as may be
reasonably required by the Indemnitee to assure that the Indemnitor will assume
and be responsible for the entire liability at issue, subject to the limitations
set forth in Sections 8.5 and 8.6 hereof. If the Indemnitor fails to assume the
defense of such matter within said 30-day period, the Indemnitee against which
such matter has been asserted will (upon delivering notice to such effect to the
Indemnitor) have the right to undertake, at the Indemnitor's cost and expense,
the defense, compromise or settlement of such matter on behalf of the
Indemnitee. The Indemnitee agrees to cooperate fully with the Indemnitor and its
counsel in the defense against any such asserted liability. In any event, the
Indemnitee shall have the right to participate at its own expense in the defense
of such asserted liability. Any compromise of such asserted liability by the
Indemnitor shall require the prior
28
written consent of the Indemnitee, which consent will not be unreasonably
withheld and in the event the Indemnitee defends any such asserted liability,
then any compromise of such asserted liability by the Indemnitee shall require
the prior written consent of the Indemnitor, which consent shall not be
unreasonably withheld.
8.8 Payments Out of Escrow Amount. At the Closing, HDA will deposit
-----------------------------
into escrow, in accordance with the terms and conditions of the Escrow
Agreement, $800,000 of the Purchase Price (referred to above as the "Escrow
Amount") to serve as security for the indemnification obligations of the Company
and the Existing Shareholders under this Agreement. The Escrow Agreement will
provide that at the end of the one year survival period set forth in Section 8.5
above the Existing Shareholders will be paid an amount equal to $800,000 plus
any interest earned thereon, less any amount previously paid out of the Escrow
Amount to HDA and less any amount which is the subject of an unresolved,
disputed or pending claim, in accordance with the terms and conditions of the
Escrow Agreement.
ARTICLE IX.
MISCELLANEOUS
9.1 Expenses. Except as otherwise set forth in this Agreement, each
--------
Party shall bear its own expenses and costs incurred by it in preparing,
negotiating and closing this Agreement.
9.2 Notices. All notices, requests, demands and other communications
-------
given hereunder (collectively, "Notices") shall be in writing and delivered
personally or by overnight courier to the Parties at the following addresses or
sent by telecopier or telex, with confirmation received, to the telecopy
specified below:
If to the Company or the Existing Shareholders, at
Connecticut Driveshaft, Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
29
With a Copy to:
Xxxxx and Xxxxxxxx
0 Xxxxxxxx Xxxx
X.X. Xxx 000
Xxxx Xxxxx, Xxxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxx
If to HDA:
HDA Parts System, Inc.
000 Xxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx
With a Copy to:
Brentwood Associates
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxxxxxx X. Xxxxxxxx
And:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxxxxx X. Xxxxxxxx, Esq.
All Notices shall be deemed delivered when actually received if
delivered personally or by overnight courier, sent by telecopier or telex
(promptly confirmed in writing), addressed as set forth above. Each of the
Parties shall hereafter notify the other in accordance with this Section 9.2 of
any change of address or telecopy number to which notice is required to be
mailed.
9.3 Counterparts. This Agreement may be executed simultaneously in
------------
one or more counterparts, and by different parties hereto in separate
counterparts, each of which when executed shall be deemed an original, but all
of which taken together shall constitute one and the same instrument.
9.4 Entire Agreement. This Agreement constitutes the entire agreement
----------------
of the Parties with respect to the subject matter hereof and supersedes all
prior negotiations, agreements and understandings, whether written or oral, of
the Parties.
30
9.5 Headings. The headings contained in this Agreement and in the
--------
Schedules and Exhibits hereto are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
9.6 Assignment; Amendment of Agreement. This Agreement shall be
----------------------------------
binding upon the respective successors and assigns of the Parties hereto. This
Agreement may not be assigned by any Party hereto without the prior written
consent of all other Parties hereto. This Agreement may be amended only by
written agreement of the Parties hereto, duly executed and delivered by an
authorized representative of each of the Parties hereto.
9.7 Governing Law. This Agreement shall be governed by and construed
-------------
and enforced in accordance with the internal laws of the State of Connecticut
applicable to contracts made in that State, without giving effect to the
conflicts of laws principles thereof.
9.8 Further Assurances. Each Party agrees that it will execute and
------------------
deliver, or cause to be executed and delivered, on or after the date of this
Agreement, all such other instruments and will take all reasonable actions as
may be necessary in order to consummate the transactions contemplated hereby,
and to effectuate the provisions and purposes hereof.
9.9 No Third-Party Rights. This Agreement is not intended, and shall
---------------------
not be construed, to create any rights in any parties other than the Company,
HDA and the Existing Shareholders, and no person shall assert any rights as
third-party beneficiary hereunder.
9.10 Non-Waiver. The failure in any one or more instances of a Party
----------
hereto to insist upon performance of any of the terms, covenants or conditions
of this Agreement, to exercise any right or privilege in this Agreement
conferred, or the waiver by said Party of any breach of any of the terms,
covenants or conditions of this Agreement shall not be construed as a subsequent
waiver of any such terms, covenants, conditions, rights or privileges, but the
same shall continue and remain in full force and effect as if no such
forbearance or waiver had occurred.
9.11 Severability. If any term or other provision of this Agreement
------------
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any Party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the Parties hereto shall negotiate in
good faith to modify this Agreement so as to affect the original intent of the
Parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
9.12 Incorporation of Exhibits and Schedules. The Exhibits and
---------------------------------------
Schedules hereto are incorporated into this Agreement and shall be deemed a part
hereof as if set forth herein in full. References herein to "this Agreement" and
the words "herein," "hereof" and
31
words of similar import refer to this Agreement (including its Exhibits and
Schedules) as an entirety. In the event of any conflict between the provisions
of this Agreement and any such Exhibit or Schedule, the provisions of this
Agreement shall control.
9.13 Knowledge. As used herein, to the "knowledge" or "best
---------
knowledge" or similar phrase includes (i) actual knowledge of any officer,
director or shareholder of the Company and any employee of the Company whose job
duties include the subject matter in question and (iii) such knowledge as would
have been obtained by any of the foregoing individuals after inquiring of the
appropriate personnel and after conducting, or having had conducted by such
appropriate personnel, a diligent search of files, computer records and other
available data.
9.14 Arbitration. To the extent that that Parties are unable to
-----------
resolve their disputes or controversies arising out of or relating to this
Agreement, or the performance, breach, validity, interpretation or enforcement
of this Agreement, through discussion and negotiation, all disputes and
controversies will be resolved by binding arbitration in accordance with rules
of the JAMS/Endispute, and judgment upon the award rendered by the arbitrator
may be entered in any court having jurisdiction thereof. A Party may initiate
arbitration by sending written notice of its intention to arbitrate to the other
Parties and to the JAMS/Endispute office located in Milford, Connecticut or in
closest proximity to Milford, Connecticut. Such written notice will contain a
description of the dispute and the remedy sought. The arbitration will be
conducted at the offices of the JAMS/Endispute office located in Milford,
Connecticut or the office located in closest proximity to Milford, Connecticut
before an independent and impartial arbitrator (who shall be a retired judge)
acceptable to all Parties. The arbitrator shall agree to apply the internal laws
of the State of Connecticut (without regard to conflicts of laws) in
interpreting this Agreement. The arbitrator will have the power to award any
party all or any portion of its costs and expenses of arbitration. The decision
of the arbitrator will be final and binding on the Parties and their successors
and assignees. The Parties intend that this agreement to arbitrate be
irrevocable.
(Signature Page Follows)
32
IN WITNESS WHEREOF, the Parties have duly executed and delivered this
Agreement as of the day and year first above written.
HDA PARTS SYSTEM, INC.
By: /s/ Xxxx Xxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxx
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
CONNECTICUT DRIVESHAFT, INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxx
-------------------------------------
Title: President
-------------------------------------
/s/ Xxxxxx X. Xxxxx
--------------------------------------------
XXXXXX X. XXXXX
/s/ J. Xxxxx Xxxxx
--------------------------------------------
J. XXXXX XXXXX
/s/ Xxxxxx X. Xxxxx
--------------------------------------------
XXXXXX X. XXXXX
/s/ Xxxx Xxxxx
--------------------------------------------
XXXX XXXXX
S-1
ANNEX A
"Assets" shall mean all of the right, title and interest in and to the
business, properties, assets and rights of any kind, whether tangible or
intangible, real or personal and constituting, or used or useful in connection
with, or related to, the Business or in which the Company has any interest,
including, without limitation, all of the rights, titles and interests of the
company in the following:
(a) all cash and cash equivalents;
(b) all accounts and notes receivable (whether current or
noncurrent), refunds, deposits, prepayments or prepaid expenses;
(c) all contract rights, to the extent transferable;
(d) all leases;
(e) all leasehold estates, to the extent transferable;
(f) all leasehold improvements and fixtures;
(g) all equipment;
(h) all inventory;
(i) all books and records, excluding originals of the minute books
and other organizational documents;
(j) all Proprietary Rights relating to the Business, to the extent
transferable;
(k) all Permits, to the extent transferable;
(l) all computers and, to the extent transferable, software;
(m) all insurance policies, to the extent assignable, except the
life insurance policy with respect to Xxxxxx X. Xxxxx owned by the Company; and
(n) all available supplies, sales literature, promotional
literature, customer, supplier and distributor lists, art work, display units,
telephone and fax numbers and purchasing records related to the Business.
(o) all rights under or pursuant to all warranties, representations
and guarantees made by suppliers in connection with the Assets or services
furnished to the Company pertaining to the Business or affecting the Assets, to
the extent such warranties, representations and guarantees are assignable;
(p) all deposits and prepaid expenses of the Company; and
(q) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind, against any person or entity,
including without limitation any liens, security interests, pledges or other
rights to payment or to enforce payment in connection with products delivered by
the Company on or prior to the Closing Date;
A-1
but excluding all of the rights, titles and interests of the Company
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in the following:
(a) the 1994Bobcat, Model #753, VIN #512716327, Wgt. 4700 lbs. with
bucket; and
(b) the golf cart and certain woodshop equipment owned by Xxxxxx
Xxxxx that has been stored on the Company's premises.
A-2
