EXHIBIT 10.7
MANAGEMENT SERVICES AGREEMENT
This Agreement is made as of January 1, 2000 between
GRANT BROTHERS SALES, LIMITED, a corporation
existing under the laws of Canada ("Grant Brothers"),
and
GRANT AUTOMOTIVE GROUP INC., a corporation existing
under the laws of Ontario ("Grant Auto"),
and
SPECTRE INDUSTRIES, INC., a corporation existing under the
laws of Nevada ("Spectre").
RECITALS
A. As at January 1, 1999, Grant Brothers, under the Asset Purchase Agreement,
transferred its wholesale automotive business group, consisting of its
traditional automotive division and the heavy duty division to Grant Auto.
B. As at the date of this Agreement, under a share purchase agreement, Grant
Brothers sold to Spectre all of the issued and outstanding shares of Grant Auto.
X. Xxxxx Auto wishes to have Grant Brothers provide certain services to Grant
Auto so that Grant Auto can continue to operate the Business and to maximize
Grant Auto's benefits from the operation of the Business.
For value received, the parties agree as follows.
SECTION 1 - INTERPRETATION
1.1 Definitions. In this Agreement the following terms have the meanings set out
below.
(a) Agreement means this management services agreement including any recitals
and schedules to this management services agreement, as amended, supplemented or
restated from time to time.
(b) Asset Purchase Agreement means the asset purchase agreement dated as of
January 1, 1999 between Grant Brothers and Grant Auto.
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(c) Business means the business transferred to Grant Auto under the Asset
Purchase Agreement, as it has changed to the date of this Agreement and as it
changes from time to time after the date of this Agreement, but which, for
greater certainty, does not include the business of any other agency which is
subsequently acquired by Grant Auto, whether by acquisition of shares or assets.
(d) Contracts has the meaning given to that term in the Asset Purchase
Agreement.
(e) Joint Account is defined in section 2.4.
(f) Management Committee means the management committee established in
accordance with section 2.5(a).
(g) Monthly Base Expenses means the amount of Grant Brothers' monthly operating
expenses jointly established by the parties before the date hereof with respect
to the first fiscal year of the term of this Agreement and by the Management
Committee with respect to any subsequent fiscal year, before the beginning of
such fiscal year (and as may be adjusted by the Management Committee during any
fiscal year).
(h) Net Cash Flow Increase Payment means the amount which is equal to
US$500,000:
(1) plus the amount, if any, by which the total gross income
attributable to the Business for 1999, as set out in the finalized
Currency Conversion Schedule referred to in the share purchase
agreement dated as of January 1, 2000 between Grant Brothers and
Spectre, exceeds US$1,000,000; or
(2) minus the amount, if any, by which the total gross income
attributable to the Business for 1999, as set out in the finalized
Currency Conversion Schedule referred to in the share purchase
agreement dated as of January 1, 2000 between Grant Brothers and
Spectre, is less than US$1,000,000.
(i) Net Cash Flow of the Business means the net cash flow of the Business
determined for any particular period in accordance with generally accepted
accounting principles in effect in Canada from time to time, including the
accounting recommendations published in the Handbook of the Canadian Institute
of Chartered Accountants and on a consistent basis with the preceding period.
(j) Shared Contracts has the meaning given to that term in the Asset Purchase
Agreement.
1.2 Headings and References. The division of this Agreement into sections and
the insertion of headings are for convenience of reference only and shall not
affect the construction or interpretation of this Agreement.
1.3 Extended Meanings. Words importing the singular include the plural and vice
versa and words importing gender include all genders. The term "including" means
"including without limitation".
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1.4 Currency. All amounts to be paid under this Agreement are to be paid in US
dollars.
SECTION 2 - SERVICES AND FEES
2.1 Services. Subject to the terms of this Agreement, Grant Brothers shall
provide the following services to Grant Auto:
(a) Supply of Personnel. Grant Brothers shall make available to the Business
such personnel as are reasonably required to operate the Business substantially
in the manner that the Business was conducted before the date of this Agreement
and subject to any changes in the operation of the Business as are agreed on
from time to time by the Management Committee and with a view to meeting the
various sales targets in the various territories agreed by the Management
Committee from time to time. Grant Brothers may also introduce such changes as
they desire from time to time to the extent that Grant Brothers believes that
the changes will improve the operations of the Business as approved by the
Management Committee.
(b) Provision of Office Space. Grant Brothers shall provide the necessary office
space, office equipment and office supplies for its personnel to carry out the
activities referred to in section 2.1(a).
(c) Strategic Advice. Grant Brothers shall provide all reasonable assistance to
management of Spectre in respect of strategic planning for, the capital
structure of, new business development for, and cost base management in
connection with, the Business.
(d) New Opportunities. Grant Brothers shall consider new opportunities for the
Business that would complement the Business (including the identification of
potential acquisitions and the making of introductions to potential
acquisitions). Grant Brothers shall communicate the result of such
considerations in a timely manner to Grant Auto from time to time. To this end,
Grant Brothers shall cause its Chief Operating Officer and its Vice President,
Finance to devote at least 15% of their time to the foregoing duties. Grant Auto
shall reimburse Grant Brothers for all reasonably incurred costs directly
attributable to the identification of potential acquisitions and the making of
introductions to potential acquisitions, such as travel and other similar
out-of-pocket expenses.
(e) Monthly Reporting. Grant Brothers shall deliver to Grant Auto within 30 days
of the end of each calendar month a report in respect of the Business for such
month containing:
(1) a profit and loss statement for such month;
(2) a balance sheet as at the end of such month;
(3) a cash flow statement for such month, including a line analysis in
respect of each manufacturer; and
(4) a detailed analysis indicating the reasons for all material
deviations from the quarterly financial forecast applicable to such
month.
(f) Quarterly Reporting. Grant Brothers shall deliver to Grant Auto within 30
days of the end of each calendar quarter a report in respect of the Business for
such quarter containing:
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(1) a profit and loss statement for such quarter;
(2) a balance sheet as at the end of such quarter;
(3) a cash flow statement for such quarter, including a line analysis in
respect of each manufacturer;
(4) a detailed analysis indicating the reasons for all material
deviations from the quarterly financial forecast applicable to such
quarter; and
(5) a financial forecast for the next three calendar quarters, including
projected profit and loss and projected cash flow for each such
quarter.
Representatives of Grant Brothers shall make themselves available at their
offices to meet with representatives of Spectre at a mutually agreeable time
during the 60 day period following the delivery to Grant Auto of the quarterly
report to discuss the contents of that report.
(g) Annual Reporting. Grant Brothers shall deliver to Grant Auto within three
months of the end of each year under this Agreement a report in respect of the
Business for such year containing:
(1) financial statements reviewed by the Grant Brothers' independent
accountants, for such year (containing a profit and loss statement
and a balance sheet for such year);
(2) a financial forecast and business plan for the next two years under
this Agreement; and
(3) a detailed financial budget for the then current year under this
Agreement.
Representatives of Grant Brothers shall make themselves available at their
offices to meet with representatives of Spectre at a mutually agreeable time
during the 60 day period following the delivery to Grant Auto of the annual
report to discuss the contents of that report. During the 180 day period
following the delivery of the annual report Grant Brothers shall provide to
Grant Auto access to the financial records which Grant Brothers maintains in
connection with the Business, including all materials used in the preparation of
the annual financial statements and all documents prepared by Grant Brothers'
independent accountants in respect of their review of such statements.
(h) Other Services. Grant Brothers shall provide to Grant Auto such other
services as the parties may agree from time to time.
2.2 Authorized Representative. To assist in fulfilling the obligations of Grant
Brothers set out in section 2.1(a), Grant Auto hereby appoints Grant Brothers as
its authorized representative to act in Grant Auto's name to carry on the
Business in its ordinary course, including with the power to sign any agreements
entered into in the ordinary course of business on behalf of Grant Auto. Copies
of any and all documents signed by GBS on behalf of GAG shall be delivered to
GAG at the earliest possible opportunity. Grant Auto shall ensure that its
by-laws or other corporate documents specifically authorize such signing of
documents by Grant Brothers. All new contracts respecting the Business shall be
entered into in the name of Grant Auto.
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2.3 Reimbursements, Fees and Bonuses. Grant Auto shall pay Grant Brothers the
following amounts at the times set out below.
(a) Reimbursements. By the 15th day of each month under this Agreement, Grant
Auto shall pay to Grant Brothers an amount to reimburse Grant Brothers for all
of its costs of that month associated directly with its services provided under
this Agreement, including all amounts paid to or in respect of employees of
Grant Brothers, plus agreed overhead for such employees and all amounts
reimbursed by Grant Brothers to any of its employees in respect of services
provided under this Agreement on behalf of Grant Auto, including all amounts to
be reimbursed in accordance with section 2.1(d). Prior to any initial payment to
Grant Brothers pursuant to this sub- paragraph shall be due upon the approval by
Grant Auto of the schedule of monthly base expense reimbursement to be prepared
by Grant Brothers no later than February 15. Approval of said schedule shall be
made by Grant Auto as soon as practicable after receipt of same.
(b) Net Cash Flow Distribution. With respect to any fiscal year, the Net Cash
Flow of the Business shall be distributed between Grant Auto and Grant Brothers
as follows.
(1) The first US$50,000 of the Net Cash Flow of the Business shall be
distributed to Grant Auto. Grant Brothers shall ensure that this
amount will be paid to Grant Auto for the fiscal periods ended
December 31, 2000 and December 31, 2001 (and in this respect Grant
Brothers will cause to be paid US$25,000 to Grant Auto on each of
June 30, 2000, December 31, 2000, June 30, 2001 and December 31,
2001 as a pre-payment of such distribution and failure to cause such
a distribution to be made shall require payment of penalty interest
by Grant Brothers to Grant Auto in the amount of 1.5% per month on
the outstanding payment).
(2) The second US$100,000 of the Net Cash Flow of the Business shall be
distributed to Grant Brothers.
(3) Any Net Cash Flow of the Business in excess thereof shall be
distributed 47.5% to Grant Auto and 52.5% to Grant Brothers. Grant
Auto shall have the right at any time before January 1, 2005 (but
not thereafter), upon payment to Grant Brothers of the Net Cash Flow
Increase Payment, to revise this section 2.3(b)(3) so that the first
sentence reads "Any Net Cash Flow of the Business in excess thereof
shall be distributed 95% to Grant Auto and 5% to Grant Brothers" and
to make the corresponding revision in section 2.3(c)(1). Any such
change in allocation will become effective only in the calendar year
immediately following the year in which the payment is made by Grant
Auto to Grant Brothers.
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(c) Distribution Mechanics.
(1) General. In respect of each fiscal year during the term hereof, as
at June 30 (and payable within 60 days thereafter) and December 31
(and payable within three business days of the determination of the
Management Committee under section 2.3(c)(3)) Grant Auto shall be
entitled to receive out of the Joint Account any excess funds
remaining after all costs and expenses with respect to such six
month period ending on June 30 or the 12 month period ending on
December 31, as applicable, including amounts payable under section
2.3(a), have been paid until Grant Auto shall have received
US$50,000 (the "Grant Auto Base Compensation") in respect of such
year. Thereafter, in respect of each fiscal year during the term
hereof as at each June 30 (and payable within 60 days thereafter)
and December 31 (and payable within three business days of the
determination of the Management Committee under section 2.3(c)(3))
Grant Brothers shall be entitled to receive out of the Joint Account
any excess funds remaining after all costs and expenses with respect
to such six month period ending on June 30 or the 12 month period
ending on December 31, as applicable, including amounts payable
under section 2.3(a), have been paid until Grant Brothers shall have
received US$100,000 (the "Grant Brothers Base Compensation") in
respect of such year. Thereafter, in respect of each fiscal year
during the term hereof as at each June 30 (and payable within 60
days thereafter) and December 31 (and payable within three business
days of the determination of the Management Committee under section
2.3(c)(3)) Grant Auto shall be entitled to receive out of the Joint
Account 47.5% of any excess funds remaining after all costs and
expenses with respect to such six month period ending on June 30 or
the 12 month period ending on December 31, as applicable, including
amounts payable under section 2.3(a) (the "Grant Auto Bonus") in
respect of such year, and Grant Brothers shall be entitled to
receive out of the Joint Account 52.5% of any excess funds remaining
after all costs and expenses with respect to such six month period
ending on June 30 or the 12 month period ending on December 31, as
applicable, including amounts payable under section 2.3(a) (the
"Grant Brothers Bonus") in respect of such year.
(2) Negative Cash Balance. If at any time in any fiscal year during the
term hereof, there shall be a negative cash balance in the Joint
Account, Grant Brothers will loan funds, on an interest-free basis,
to Grant Auto to eliminate the negative cash balance for such period
as the loan is required. Grant Auto will repay the loan to Grant
Brothers as soon as reasonably practicable. In such event, prior to
making any distribution pursuant to section 2.3(c)(1) during such
fiscal year (except regarding the required distributions to Grant
Auto for the fiscal periods ended December 31, 2000 and December 31,
2001), the Grant Brothers loan must be repaid in full before any
distribution is made under section 2.3(c). Grant Brothers will
forgive that portion of any loan advanced to Grant Auto which it is
not repaid within the one year period following the date on which
any loan is advanced.
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(3) Year End Reconciliation. Based on the annual financial statements,
GBS shall direct Grant Auto's independent accountants to prepare a
schedule (the Net Cash Flow Schedule") setting out Net Cash Flow of
the Business for such year setting out the distribution thereof in
accordance with this Agreement together with a report from the
independent accountant stating that the Net Cash Flow Schedule has
been prepared in accordance with this Agreement. Within 10 business
days of the receipt of the financial statements for Grant Auto
reviewed by the independent accountants for the previous fiscal year
and the Net Cash Flow Schedule, the Management Committee shall
determine the definitive Net Cash Flow distribution in accordance
with section 2.3(c)(1). To the extent any party shall have received
an amount in excess of the amount to which such party would be
entitled pursuant to such determination, such party shall pay to the
other an amount equal to such excess within 30 days of such
determination.
(d) Stock Incentive. As an additional incentive to GBS to manage GAG on a long
term basis, Spectre shall issue an aggregate of 450,000 shares of fully paid and
non-assessable Common Stock of Spectre to GBS free from all encumbrances, except
pursuant to the Securities Act and the rules and regulations promulgated by the
Securities and Exchange Commission thereunder. As of the date of this Agreement,
the authorized capital stock of Spectre consists of 100 million shares of common
stock, of which 12,496,450 shares of common stock are outstanding as of the date
hereof.
(1) Nature and Characteristics of Common Stock. GBS understands that the
Common Stock is or will be issued without registration under the Securities Act,
in reliance upon exemptions from registration under the Securities Act. GBS also
understands that such exemptions depend in part upon, and such shares will be
issued in reliance on, the representations and warranties made by the GBS in
this section 3.3. Accordingly, the GBS represents and warrants to Spectre, as of
the date of this Agreement as follows:
(i) GBS will acquire Spectre common stock for its own account for
investment purposes only and not with a view to resale or other
distribution thereof, in whole or in part in violation of the
Securities Act and GBS will not assign, sell, hypothecate or
otherwise transfer any of the common stock in the United States
unless,
(A) a registration statement is in effect under the Securities Act
and all applicable state securities laws with respect to the
common stock, or
(B) a written opinion of counsel reasonably acceptable to Spectre
is obtained to the effect that no such registration is
required.
(ii) GBS acknowledges, agrees and is aware that,
(A) no federal, state or any foreign agency has passed upon the
accuracy, validity or completeness of any materials provided
to GBS relating to Spectre and the Common Stock or made any
finding or determinations to the fairness of an investment in
the Common Stock,
(B) the Common Stock has not been registered under the Securities
Act or under the securities laws of any other jurisdiction in
the United States,
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(C) in the absence of registration under the Securities Act, an
offer or sale of any of the Common Stock by GBS in the United
States will require the availability of an exemption
thereunder,
(D) the following restrictive legend shall be placed on the
certificates representing the Common Stock,
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE FEDERAL SECURITIES LAWS OF THE UNITED
STATES OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. SUCH SECURITIES MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED IN THE UNITED STATES AT
ANY TIME WHATSOEVER, EXCEPT UPON SUCH REGISTRATION OR UPON
DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY
TO THE BOARD OF DIRECTORS OF THE COMPANY THAT REGISTRATION IS
NOT REQUIRED FOR SUCH TRANSFER AND/OR SUBMISSION TO THE BOARD
OF DIRECTORS OF THE COMPANY OF SUCH EVIDENCE AS MAY BE
SATISFACTORY TO THE BOARD OF DIRECTORS OF THE COMPANY TO THE
EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE
SECURITIES ACT OF 1933, AS AMENDED, APPLICABLE STATE
SECURITIES LAWS IN THE UNITED STATES AND ANY RULES OR
REGULATIONS PROMULGATED THEREUNDER.
(iii) Acknowledgments. GBS acknowledges that:
(A) GBS has been given the opportunity to ask questions of, and receive
answers from, Spectre and its officers and employees concerning the
terms and conditions of GBS's acquisition of the Common Stock and
other matters pertaining to an investment in the Common Stock, has
been given the opportunity to obtain such additional information
necessary to evaluate the merits and risks of acquiring the Common
Stock to the extent Spectre possesses such information, and has
received all documents and information that GBS has requested
relating to an investment in the Common Stock;
(B) GBS is familiar with the nature of and risks attendant to
investments in the business of Spectre and securities in general and
has carefully considered and has, to the extent GBS believes such
discussion necessary, discussed with GBS's professional legal,
financial and tax advisers the suitability of an investment in the
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Common Stock for GBS's particular financial and tax situation and
has determined that the Common stock is a suitable investment for
GBS;
(C) GBS has not relied upon any representations or other information
(whether oral or written) from Spectre or its directors, officers or
affiliates, or from any other persons, other than the
representations and warranties made in this Agreement and publicly
available information with respect to Spectre; and
(D) GBS has made, and is solely responsible for making, GBS's own
independent evaluation of the economic and other risks involved in
GBS's investment in the Common Stock and GBS's own independent
decision to make such investment.
(2) Exemption from Registration and Restrictions on Offer and Sale of Same
or Similar Securities. Assuming the representations and warranties of GBS set
out in section 3.3 are true and correct, the offer and sale of the Common Stock
made pursuant to this Agreement is exempt from the registration requirements of
the Securities Act and applicable state securities or "blue sky" laws. Neither
Spectre nor any person authorized to act on Spectre's behalf has, in connection
with the offering of the Common Stock, engaged in:
(a) any form of general solicitation or general advertising (as those
terms are used within the meaning of Rule 501(c) under the
Securities Act);
(b) any action involving a public offering within the meaning of section
4(2) of the Securities Act; or
(c) any action that would require the registration under the Securities
Act of the offering and sale of the Common Stock or that would
violate applicable state securities or "blue sky" laws.
Neither Spectre nor any person acting on behalf of Spectre has made, directly or
indirectly, any offer or sale of Common Stock or of securities of the same or a
similar class as the Common Stock that, if as a result of the offer and sale of
the Common Stock contemplated hereby, could fail to be entitled to exemption
from the registration requirements of the Securities Act. As used herein, the
terms "offer" and "sale" have the meanings specified in section 2(3) of the
Securities Act.
(3) Sale of Common Stock. Notwithstanding any other term in this
Agreement, GBS may assign, sell, hypothecate or otherwise transfer any of the
450,000 Common Stock in the United States at any time after the expiry of one
year following the date of this Agreement and this representation and warranty
shall survive the closing of the Purchase for a period of five years after the
date of this Agreement so long as such sales are made pursuant to an applicable
exemption from the registration requirements of the Securities Act.
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(4) Exemption from Registration and Restrictions on Offer and Sale of Same
or Similar Securities. Assuming the representations and warranties of GBS set
out in section 3.3 are true and correct, the offer and sale of the Common Stock
made pursuant to this Agreement is exempt from the registration requirements of
the Securities Act and applicable state securities or "blue sky" laws. Neither
Spectre nor any person authorized to act on Spectre's behalf has, in connection
with the offering of the Common Stock, engaged in:
(a) any form of general solicitation or general advertising (as those
terms are used within the meaning of Rule 501(c) under the
Securities Act);
(b) any action involving a public offering within the meaning of section
4(2) of the Securities Act; or
(c) any action that would require the registration under the Securities
Act of the offering and sale of the Common Stock or that would
violate applicable state securities or "blue sky" laws.
Neither Spectre nor any person acting on behalf of Spectre has made, directly or
indirectly, any offer or sale of Common Stock or of securities of the same or a
similar class as the Common Stock that, if as a result of the offer and sale of
the Common Stock contemplated hereby, could fail to be entitled to exemption
from the registration requirements of the Securities Act. As used herein, the
terms "offer" and "sale" have the meanings specified in section 2(3) of the
Securities Act.
(5) In the event this agreement is terminated prior to December 31,
2005, other than as a result of the bankruptcy of Spectre, and that
option referenced in Paragraph 6.2 of the Share Purchase Agreement
by and between GBS and Spectre of even date herewith, in favor of
GBS is exercised by GBS, then in addition to the $500,000 referenced
therein for the repurchase of the Business as defined therein, GBS
shall pay to Spectre an additional amount equal to 450,000 shares of
Spectre.
2.4 Joint Account. Grant Auto and Grant Brothers shall establish a joint bank
account (the "Joint Account") with a reputable financial institution in Toronto.
Any and all cash received from the accounts receivables of Grant Auto in respect
of the Business after January 1, 2000 shall be deposited in the Joint Account.
The Joint Account shall be administered by the Management Committee. Except as
otherwise set forth herein, any disposition of funds out of the Joint Account
shall require the signature of one Grant Auto representative and one Grant
Brothers representative on the Management Committee. During the term of this
Agreement, any and all amounts received by any party with respect to the
Business (other than any Net Cash Flow distribution pursuant to section
2.3(c)(1) or a repayment of a loan advanced under section 2.3(c)) shall be
deposited in the Joint Account and any and all expenses with respect to the
Business shall be paid out of funds available in the Joint Account. On or prior
to the 15th day of each month during the term of this Agreement (commencing on
or prior to January 15, 2000), an amount equal to the Monthly Base Expenses
shall be paid to Grant Brothers out of funds available in the Joint Account and,
in the event such amount is not so paid, each Grant Brothers representative on
the Management Committee shall be entitled to transfer from the Joint Account an
amount equal to any due and unpaid Monthly Base Expenses to Grant Brothers.
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2.5 Management Committee.
(a) Purpose and Membership. A Management Committee consisting of up to two
representatives from Grant Auto (each, an "Grant Auto Representative") and up to
two representatives from Grant Brothers (each a "Grant Brothers Representative")
shall be established for the purpose of overseeing the operation of the Business
during the term of this Agreement. A party may change its representatives from
time to time by delivering a notice to this effect to the other applicable
party.
(b) Rights and Duties. The Management Committee shall:
(1) administer the Joint Account;
(2) approve the payment of any expenses to Grant Brothers in excess of
the Monthly Base Expenses;
(3) determine or amend the annual budget, the amount of the overhead
referred to in section 2.3(a) and Monthly Base Expenses; and
(4) perform such other functions as the parties may delegate to it from
time to time.
In addition, the Management Committee shall be consulted prior to any material
decision by Grant Brothers affecting (or being likely to affect) the Business or
the expansion thereof contemplated hereby, including prior to the hiring or
firing of any member of senior management of the Grant Brothers division
administering the Business or of any other employees thereof other than in the
ordinary course of business. The Management Committee shall meet in person or by
telephone conference at such times and places as shall be necessary to perform
its function, but at least once a month.
SECTION 3 - TERM, RENEWAL AND TERMINATION
3.1 Term and Renewal. The term of this Agreement shall commence on the date
hereof and continue for five (5) years. At the expiration of such five-year
period, this Agreement shall automatically be renewed for successive one-year
periods unless it is terminated by any party giving the other parties at least
six months prior written notice effective on the last day of such five-year or
one-year period, as the case may be.
3.2 Termination. Notwithstanding section 3.1, Grant Brothers or Grant Auto, as
the case may be, may terminate this Agreement at any time on the occurrence of
any of the following events:
(a) the other party fails to pay any amount when due and fails to pay
such amount within five days of receipt of a notice indicating the
non-payment;
(b) the other party breaches any of its obligations under this Agreement
and such breach is not rectified within 30 days of receipt of a
notice indicating the breach;
(c) a proceeding in bankruptcy, receivership, insolvency,
reorganization, liquidation or winding-up of the other party is
instituted by or against such other party;
(d) the other party makes a general assignment for the benefit of its
creditors; or
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(e) the other party ceases to carry on business as a going concern for
more than five business days.
The expiration or termination of this Agreement shall not relieve or release a
party from any of its obligations to pay any amount due and payable or to
perform any obligation which by its nature shall survive such expiration or
termination (including the obligations set out in sections 3.5, 4.3, 5 and 6). A
party which terminates this Agreement in accordance with this section 3.2 shall
not be liable to any other party for any loss or damage of any kind whatsoever,
arising directly or indirectly from the termination of this Agreement.
3.3 Early Termination by Grant Auto. Grant Auto may terminate this Agreement if
Grant Brothers does not, within the first 12 months of this Agreement, introduce
Grant Auto to at least two reasonable potential acquisitions, as required by
section 2.1(d).
3.4 Performance of Certain Contracts. Upon the termination of this Agreement, if
any Contracts (including any Shared Contracts) remain subject to the terms of
the section in the Asset Purchase Agreement entitled "Certain Contracts Not
Assigned But Held in Trust", Grant Auto shall, from the date of the termination
of this Agreement cause all of the obligations of Grant Brothers to be satisfied
under those Contracts (except that in respect of Shared Contracts, Grant Auto
shall only be obliged to fulfil such obligations to the extent that they relate
to the Business). Grant Brothers shall, from the date of the termination of this
Agreement cause all of the obligations of Grant Brothers to be satisfied under
the Shared Contracts, but only to the extent that such obligations arise under
Shared Contracts and relate to matters not related to the Business. Except as
provided by the foregoing, the section in the Asset Purchase Agreement entitled
"Certain Contracts Not Assigned But Held in Trust" shall continue to apply to
all Contracts to which that section relates. Grant Auto shall reimburse Grant
Brothers for all direct expenses incurred in carrying out any obligations under
that section of the Asset Purchase Agreement.
3.5 Transfer of Business. As soon as commercially reasonable after the date
hereof, but in any event before the expiration of the term of this Agreement,
Grant Brothers shall use all commercially reasonable efforts to assign and/or
otherwise transfer to Grant Auto any and all Contracts not heretofore assigned
to Grant Auto and to obtain separate agreements for those parts of the Shared
Contracts which have been transferred to Grant Auto pursuant to the terms of the
Asset Purchase Agreement. Grant Brothers shall report semi-annually to the
Management Committee as to the progress of its efforts hereunder. To the extent
the Management Committee determines, with respect to a particular Contract, not
to seek the assignment or transfer thereof to Grant Auto or to obtain separate
agreements, the parties shall enter into an appropriate contractual relationship
which provides Grant Auto otherwise with the benefits of such Contract.
SECTION 4 - FORCE MAJEURE, LIABILITY AND INDEMNITY
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4.1 Force Majeure. No party shall be liable to another for any failure to
perform any obligation under this Agreement, to the extent that such failure is
beyond the reasonable control of such party (aside from lack of funds). A party
which is not able to so perform an obligation under this Agreement shall
promptly provide a notice in respect of such failure to the other parties and
take all commercially reasonable steps to mitigate the effects of such failure.
In such cases, the party so failing to perform shall not be responsible to the
other parties for any loss or damage of any kind whatsoever which may be
incurred by the other parties or any third parties as a result of any such
failure.
4.2 Liability. A party's liability to the other parties under this Agreement
shall be limited to any direct loss or damage to such other parties caused by
the first party's negligence or wilful misconduct. Notwithstanding the
foregoing, no term in this section 4.2 shall operate so as to limit the
liability of Grant Brothers in respect of any of its actions or failures to act,
to the extent that Grant Brothers would have been liable in respect of such
actions or failures to act had such taken place before the date of this
Agreement when Grant Brothers owned and operated the Business.
4.3 Indemnity. Subject to the limitation imposed by section 4.2, Grant Brothers
shall indemnify and save harmless Grant Auto on its behalf and as trustee for
its officers, directors, shareholders, employees and agents against all costs,
damages, claims and other liabilities (including legal fees and expenses)
arising out of any breach of an obligation of Grant Brothers under this
Agreement. Subject to the limitation imposed by section 4.2, Grant Auto shall
indemnify and save harmless Grant Brothers on its behalf and as trustee for its
officers, directors, shareholders, employees and agents against all costs,
damages, claims and other liabilities (including legal fees and expenses)
arising out of any breach of an obligation of Grant Auto under this Agreement.
SECTION 5 -- CONFIDENTIALITY, COMPETITION AND NEW AGENCIES
5.1 Confidential Information. Grant Brothers shall hold in confidence, and shall
not disclose to any third party or use any confidential information of Grant
Auto (other than in respect of the good faith performance of Grant Brothers'
duties under this Agreement) where such information was obtained by Grant
Brothers in the course of providing services to Grant Auto under this Agreement,
except as required by law (including any applicable securities laws or the rules
of any applicable securities commission) or legal process.
5.2 Non-Competition. Grant Brothers shall not directly or indirectly (through an
affiliate or otherwise) own, manage, operate, join, control or otherwise
participate in, whether as a partner, shareholder or otherwise, any enterprise
in the business of representing manufacturers in the sale of spare parts in the
automotive wholesale market (the "Competitive Activities"), in Canada during the
currency of this Agreement and (except where Grant Brothers terminates this
Agreement under section 3.2 other than by providing six months' notice or where
Grant Auto terminates this Agreement under section 3.2 by providing six months'
notice) during the one year period following the termination of this Agreement,
except that, notwithstanding the foregoing, such non-competition period shall
not terminate prior to the fifth anniversary of the date hereof. In addition,
Grant Brothers will not engage in e-commerce, to the extent that involves the
sale of auto parts, during the currency of this Agreement and (except where
Grant Brothers terminates
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this Agreement under section 3.2 other than by providing six months' notice or
where Grant Auto terminates this Agreement under section 3.2 by providing six
months' notice) during the one year period following the termination of this
Agreement.
5.3 Non-Solicitation. Without the consent of Grant Brothers, Grant Auto shall
not solicit for employment or employ any employee of Grant Brothers during the
currency of this Agreement and (except where Grant Auto terminates this
Agreement under section 3.2 other than by providing six months' notice) during
the one year period following the termination of this Agreement, except that on
the termination of this Agreement Grant Auto may offer employment to all, but
not less than all, Grant Brothers employees, at least 80% of whose business time
in the prior 12 months is allocable to the provision of services to Grant Auto
and any additional acquired agencies. Where Grant Auto makes any such offer of
employment, such offer must contain terms of employment that are no less
favourable to each such employee who is so offered employment when compared to
the terms of employment existing immediately prior to the making of the offer.
Without the consent of Grant Auto, Grant Brothers shall not solicit for
employment or employ any employee of Grant Auto during the currency of this
Agreement and during the one year period following the termination of this
Agreement.
5.4 Conflict of Interest. In the event a business opportunity, including changes
in representative agreements, raises a conflict of interest between the Grant
Brothers and Grant Auto, the Management Committee, less the representatives of
Grant Brothers, shall determine, acting reasonably and in good faith, the
resolution which shall bind the parties, except that nothing in this section 5.4
will affect in any manner the Shared Contracts and the terms applicable thereto
under the Asset Purchase Agreement and this Agreement.
5.5 New Agencies. In the event that any additional agency is acquired by
Spectre, directly or indirectly, Grant Brothers shall have the right of first
refusal to match any management services agreement offered by a third party to
manage such additional agency. In the event that no third party management
service is offered in respect of the new agency, Grant Brothers shall provide
(or in the case of any agency that Grant Brothers did not introduce to Spectre,
Grant Brothers may provide) such services for 5% of the Net Cash Flow of that
agency. Further in the event that an opportunity is located by Grant Brothers to
acquire 50% or more of a new agency in a transaction whereby such new agency can
be acquired over time with the purchase price payable solely from future
revenues, in addition to the right of first refusal referenced herein, Grant
Brothers shall have the right to participate in 50% of the ownership interest
acquired, directly or indirectly, by Spectre on the same terms and conditions as
Spectre.
5.6 Spectre's Indemnity. Spectre shall indemnify and save harmless Grant
Brothers on its behalf and as trustee for its officers, directors, shareholders,
employees and agents against all costs, damages, claims and other liabilities
(including legal fees and expenses) arising out of any breach of an obligation
of Grant Auto set out in the Management Services Agreement. Notwithstanding the
foregoing, Spectre is not liable under this section 5.6 for any amount that
Grant Auto would not be liable for under this Agreement. Accordingly, section
4.2 operates to limit Spectre's liability under this section 5.6 in the same
manner that it operates to limit Grant Auto's liability.
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SECTION 6 -- ARBITRATION
6.1 Scope. Any dispute or other controversy between the parties relating to this
Agreement (including any dispute as to whether an issue is arbitrable) shall be
referred to arbitration under the Arbitration Act, 1991 (Ontario), but subject
to the terms of this section 6.
6.2 Appointment of Arbitrators. A party desiring arbitration under this section
6 shall give a notice of arbitration to the other parties containing a concise
description of the matter submitted for arbitration. Within 10 business days
after a party gives a notice of arbitration, the parties shall jointly appoint a
single arbitrator (the "Arbitrator"), who shall be a retired judge of the
Ontario Court (General Division) or of any court of a province of Canada having
jurisdiction comparable to or higher than that of such court. If the parties
fail to appoint an Arbitrator within such time, an Arbitrator shall be
designated by a judge of the Ontario Court (General Division) upon application
by any party.
6.3 Powers of Arbitrator. The Arbitrator may determine all questions of law and
jurisdiction (including questions as to whether a dispute is arbitrable) and all
matters of procedure relating to the arbitration. The Arbitrator shall have the
right to grant legal and equitable relief (including injunctive relief) and to
award costs (including legal fees and the costs of the arbitration) and
interest.
6.4 Arbitration Procedure. The arbitration shall take place in the Municipality
of Metropolitan Toronto at such place therein and time as the Arbitrator may
fix. No later than 20 business days after hearing the representations and
evidence of the parties, the Arbitrator shall make his or her determination in
writing and deliver one copy to each of the parties. The decision of the
Arbitrator shall be final and binding upon the parties in respect of all matters
relating to the arbitration, the conduct of the parties during the proceedings,
and the final determination of the issues in the arbitration.
6.5 Awards and Appeal. There shall be no appeal from the determination of the
Arbitrator to any court under the Arbitration Act, 1991 (Ontario). Judgment upon
any award rendered by the Arbitrator may be entered in any court having
jurisdiction thereof.
6.6 Costs of Arbitration. The costs of any arbitration under this section 6
shall be borne by the parties in the manner specified by the Arbitrator in his
or her determination.
6.7 Rules. Insofar as they do not conflict with this section 6, the Rules of
Procedure For Commercial Arbitration of the Arbitration and Mediation Institute
of Canada Inc. in effect at the date of commencement of any arbitration held
under this section 6 shall be applicable to the arbitration, and the Arbitrator
shall have jurisdiction to take such action and make such orders as are
contemplated in such rules.
6.8 Condition Precedent. Submission to arbitration under this section 6 shall be
a condition precedent to bringing any action with respect to this Agreement.
SECTION 7 -- GENERAL
7.1 Notice. Unless otherwise specified, each notice to a party must be given in
writing and delivered personally or by overnight courier or transmitted by fax
to the party as follows:
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If to Grant Brothers: Grant Brothers Sales, Limited
000 Xxxxxxx Xxxxxx, Xxxx #0
Xxxxx Xxxx, Xxxxxxx X0X 0X0
Attention: President
Fax No: (000) 000-0000
If to Grant Auto: Grant Automotive Group Inc.
000 Xxxxxxx Xxxxxx, Xxxx #0
Xxxxx Xxxx, Xxxxxxx X0X 0X0
Attention: President
Fax No: (000) 000-0000
with a copy to:
If to Spectre: Spectre Industries, Inc.
c/o Xxx Xxxxx, Chief Executive Officer
0000 Xxxxxxxxxx Xxxxx
Xxxxx Xxxxxxxxx, X.X.
Xxxxxx X0X 0X0
with a copy to:
or to any other address, fax number or individual that the party designates. Any
notice, if delivered personally or by courier, will be deemed to have been given
when actually received, and if transmitted by fax before 3:00 p.m. (Toronto
time) on a business day, will be deemed to have been given on that business day,
and if transmitted by fax after 3:00 p.m. (Toronto time) on a business day, will
be deemed to have been given on the next business day.
7.2 Time. Time shall be of the essence of this Agreement.
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7.3 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the Province of Ontario, and each of the parties
irrevocably attorns to the non-exclusive jurisdiction of the courts of Ontario.
7.4 No Set-Off. Payments made under this Agreement shall be made without set-off
or counterclaim.
7.5 Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter and supersedes all prior
agreements, representations, negotiations and understandings, whether written or
verbal. No term of this Agreement may be amended or waived except in writing.
7.6 Severability. Any term of this Agreement which is invalid or unenforceable
shall not affect any other term and shall be deemed to be severable.
7.7 Assignment and Benefit. No party may assign this Agreement without the prior
written consent of the other parties, which consent may not be unreasonably
withheld or delayed. This Agreement enures to the benefit of and binds the
parties and their respective successors and permitted assigns.
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7.8 Counterparts and Fax Delivery. This Agreement and any amendment, supplement,
restatement or termination of any term of this Agreement may be executed and
delivered in any number of counterparts, each of which when executed and
delivered is an original but all of which taken together constitute one and the
same instrument. A party may deliver this Agreement and any amendment,
supplement, restatement or termination of any term of this Agreement by fax.
The parties have duly executed this Agreement.
GRANT BROTHERS SALES, LIMITED
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Xxxx X. Xxxxx
Chief Operating Officer
By: /s/ Xxx Xxxxx
-------------------------------------
Xxxxxxx Xxxxx
Vice President
GRANT AUTOMOTIVE GROUP INC.
By: /s/ Xxxx X. Xxxxx
-------------------------------------
Xxxx X. Xxxxx
President
SPECTRE INDUSTRIES, INC.
By: /s/ Xxxx Xxxxxxxxxx
-------------------------------------
Name: Xxxx Xxxxxxxxxx
Title: Chairman
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