| Item 1.01 | Entry into a Material Definitive Agreement. |
Purchase Agreement
On August 17, 2022, Dorman Products, Inc., a Pennsylvania corporation (the “Company”), entered into a Unit Purchase Agreement (the “Purchase Agreement”) with Super ATV, LLC, an Indiana limited liability company (“SuperATV”), the Sellers listed on the signature pages thereto (the “Sellers”), and Lindsay Hunt, in her capacity as the Sellers’ Representative, pursuant to which, subject to the terms and conditions thereof, among other things, the Company will acquire 100% of the issued and outstanding equity interests of SuperATV (the “Transaction”), for aggregate consideration of $490 million, subject to certain customary adjustments based on, among other things, the amount of cash, debt and working capital in the business of SuperATV as of the closing of the Transaction, plus a potential earn-out payment to Sellers not to exceed $100 million in the aggregate, which remains subject to the achievement by SuperATV of certain revenue and gross margin targets in fiscal years 2023 and 2024. Assuming the satisfaction of the conditions set forth in the Purchase Agreement, the Company expects the Transaction to close in the second half of 2022.
Conditions to the Transaction
The completion of the Transaction is subject to the satisfaction or waiver of certain conditions, including the expiration or earlier termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. In addition, each of the Company’s, SuperATV’s, and the Sellers’ obligations to complete the Transaction are subject to certain other conditions, including (a) the accuracy of the representations and warranties of the other parties, subject to certain bring-down standards, (b) material performance of the parties’ obligations under the Purchase Agreement, and (c) with respect to the Company’s obligation to complete the Transaction, the absence of a material adverse effect on SuperATV.
Other Terms of the Transaction
The Purchase Agreement contains representations and warranties of the parties customary for a transaction of this nature. The Company’s primary recourse with respect to breaches of SuperATV’s representations and warranties will be against a customary representations and warranties insurance policy, subject to certain policy limits, exclusions, deductibles and other terms and conditions.
In addition, the Purchase Agreement contains covenants of the parties customary for a transaction of this nature. Among other things, until the earlier of the termination of the Purchase Agreement and the closing of the Transaction, SuperATV has agreed to operate its business in the ordinary course consistent with past practice and has agreed to certain other operating covenants, as set forth fully in the Purchase Agreement.
A copy of the Purchase Agreement is filed as Exhibit 2.1 to this Form 8-K and is incorporated herein by reference. The description of the Purchase Agreement in this report is a summary and is qualified in its entirety by the terms of the Purchase Agreement. The Purchase Agreement and the above description have been included to provide investors with information regarding the terms of the Transaction. They are not intended to provide any other factual information about SuperATV or any parties to the Purchase Agreement or their respective affiliates or equityholders. The representations, warranties and covenants contained in the Purchase Agreement were made only for the purpose of the Purchase Agreement and as of specific dates, were solely for the benefit of the parties thereto, may have been used for purposes of allocating risk between each party rather than establishing matters of fact, may be subject to a contractual standard of materiality different from that generally applicable to investors and may be subject to qualifications or limitations agreed upon by the parties in connection with the negotiated terms of the Transaction, including being qualified by schedules and other disclosures made by each party. Accordingly, investors should not rely on the representations, warranties and covenants in the Purchase Agreement as statements of factual information.
| Item 7.01 | Regulation FD Disclosure. |
Financing of the Transaction
In connection with entering into the Purchase Agreement, the Company has entered into a commitment letter (the “Commitment Letter”), dated as of August 17, 2022, with Bank of America, N.A., BofA Securities, Inc., PNC Bank, National Association, PNC Capital Markets LLC, Wells Fargo Bank, National Association, Wells Fargo Securities, LLC, BMO Harris Bank, N.A., and BMO Capital Markets Corp. (collectively, the “Lenders”) with respect to a $500 million senior secured incremental term loan facility (the “Incremental Facility”) under the Company’s current Credit Agreement, dated as of August 10, 2021 (the “Existing Facility”), by and among the Company, the lenders party thereto and Bank of America, N.A., as administrative agent. Funding of the Incremental Facility is contingent on the satisfaction of customary conditions, including the execution and delivery of definitive
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