Exhibit 10.29
STOCK PURCHASE AGREEMENT
BY AND AMONG
HDA PARTS SYSTEM, INC.
AND
THE SHAREHOLDERS OF
WHEELS AND BRAKES, INC.
OCTOBER 8, 1999
TABLE OF CONTENTS
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Page
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ARTICLE I. PURCHASE AND SALE................................................... 1
1.1 Purchase Price...................................................... 1
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1.2 Post-Closing Purchase Price Adjustment.............................. 1
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ARTICLE II. CLOSING............................................................. 2
2.1 Closing............................................................. 3
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2.2 Sale of Capital Stock of Wheels and Brakes.......................... 3
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2.3 Payment of Purchase Price........................................... 3
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE EXISTING SHAREHOLDERS......... 3
3.1 Corporate Organization and Standing................................. 3
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3.2 Authorization....................................................... 3
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3.3 No Conflict or Violation............................................ 3
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3.4 Capitalization of Wheels and Brakes................................. 4
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3.5 Subsidiaries........................................................ 4
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3.6 Title to Shares..................................................... 4
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3.7 Facilities.......................................................... 5
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3.8 Financial Statements................................................ 6
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3.9 Books and Records................................................... 7
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3.10 Litigation.......................................................... 7
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3.11 Licenses and Permits; Compliance with Laws.......................... 7
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3.12 Tax Matters......................................................... 7
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3.13 Brokers, Finders.................................................... 9
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3.14 Absence of Certain Changes.......................................... 9
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3.15 Material Contracts.................................................. 11
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3.16 Proprietary Rights.................................................. 12
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3.17 Labor Matters....................................................... 13
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3.18 Consents............................................................ 13
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3.19 Employee Benefit Plans; Employment Agreements....................... 13
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3.20 Compliance with Environmental Laws.................................. 16
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3.21 Certain Business Relationships with Wheels and Brakes............... 19
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3.22 Undisclosed Liabilities............................................. 19
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3.23 Insurance........................................................... 19
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3.24 Accounts Receivable................................................. 19
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3.25 Inventory........................................................... 20
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3.26 Payments............................................................ 20
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3.27 Customers, Distributors and Suppliers............................... 20
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3.28 Computer Systems.................................................... 20
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3.29 Material Misstatements Or Omissions................................. 21
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF HDA....................................... 21
4.1 Corporate Organization and Standing......................................... 21
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4.2 Authorization............................................................... 21
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4.3 No Conflict or Violation.................................................... 21
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ARTICLE V. POST-CLOSING COVENANTS...................................................... 22
5.1 Further Assurances.......................................................... 22
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5.2 Tax Matters................................................................. 22
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ARTICLE VI. CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS BY HDA....................... 25
6.1 No Injunctive Proceedings................................................... 25
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6.2 Representations and Warranties.............................................. 25
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6.3 Performance of Agreements................................................... 25
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6.4 Compliance Certificate...................................................... 25
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6.5 Stock Certificates.......................................................... 25
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6.6 Stock Books................................................................. 25
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6.7 Officers and Directors...................................................... 25
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6.8 Opinion of Counsel.......................................................... 25
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6.9 Consents, Etc............................................................... 25
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6.10 Ancillary Agreements........................................................ 26
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6.11 Nonforeign Affidavit........................................................ 26
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ARTICLE VII. CONDITIONS TO CONSUMMATION OF THE TRANSACTIONS BY THE EXISTING SHAREHOLDERS. 26
7.1 No Injunctive Proceedings................................................... 26
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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 Consents; Etc............................................................... 27
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ARTICLE VIII. ACTIONS BY THE PARTIES AFTER THE CLOSING.................................... 27
8.1 Indemnification by the Existing Shareholders................................ 27
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8.2 Indemnification by HDA...................................................... 27
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8.3 Survival of Representations, Warranties and Covenants....................... 27
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8.4 Threshold................................................................... 28
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8.5 Notice and Opportunity to Defend............................................ 28
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8.6 Indemnification Payments.................................................... 28
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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.................................................................... 30
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9.6 Assignment; Amendment of Agreement.......................................... 30
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9.7 Governing Law............................................................... 30
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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................................................................... 31
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of October
8, 1999, is entered into by and among HDA Parts System, Inc., an Alabama
corporation ("HDA"), and the shareholders of Wheels and Brakes, Inc., a Georgia
corporation ("Wheels and Brakes"), identified on Annex A hereto (the "Existing
Shareholders"). HDA and the Existing Shareholders are referred to herein as each
a "Party" and collectively, the "Parties."
RECITALS
WHEREAS, the Existing Shareholders own all of the capital stock of
Wheels and Brakes;
WHEREAS, HDA desires to acquire all of the capital stock of Wheels and
Brakes;
ARTICLE I.
PURCHASE AND SALE
1.1 Purchase Price. Upon the terms and subject to the conditions
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set forth herein, HDA will purchase from the Existing Shareholders all of the
capital stock of Wheels and Brakes for $8,266,120.95 in cash payable by wire
transfer of immediately available funds to the Existing Shareholders (the
"Estimated Purchase Price").
1.2 Post-Closing Purchase Price Adjustment.
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(a) Closing Balance Sheet. The Existing Shareholders will prepare at
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their expense a balance sheet of Wheels and Brakes dated the Closing Date (as
defined in Section 2.1) (the "Closing Balance Sheet"), prepared from the books
and records of Wheels and Brakes and prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied. The Existing
Shareholders will also prepare a calculation, as of the Closing Date based on
the Closing Balance Sheet, of Net Assets (as defined on Schedule 1.2 hereto)
("Closing Net Assets"), which calculation shall be prepared on a basis
consistent with the Net Assets calculations reflected on Schedule 1.2 hereto.
The Existing Shareholders will deliver such Closing Balance Sheet and such
calculation to HDA as soon as possible but in any event within 30 days after the
Closing.
(b) Closing Balance Sheet Notice.
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(i) Within 15 days of the receipt of the Closing Balance Sheet
and the calculation of Closing Net Assets, HDA will deliver to the Existing
Shareholders a written notice certifying that either (A) it agrees with
such Closing Balance Sheet and calculation or (B) it disagrees with such
Closing Balance Sheet and calculation, in which case it will also provide
therewith a reasonably detailed written report stating the basis for
disagreement with such Closing Balance Sheet and such calculation (the
"Closing
Balance Sheet Notice"). The Parties shall provide reasonable access to
their and their respective accountants' work papers and personnel and to
such historical financial information as the Existing Shareholders shall
reasonably request in order to review such Closing Balance Sheet and
prepare such calculation.
(ii) If the Closing Balance Sheet Notice is not timely given
as described in Section 1.2(b)(I), the Closing Balance Sheet and the
calculation of Closing Net Assets 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)(B), 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"), other than PricewaterhouseCoopers LLP,
selected by mutual agreement of HDA and the Existing Shareholders. The
costs of resolving such a dispute shall be borne equally by HDA and the
Existing Shareholders.
(iii) Upon appointment of a BFAF, such BFAF in consultation
with the Parties shall establish a schedule for resolution of the dispute
that 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 and the calculation of Closing Net Assets only with respect to the
issues raised in the Closing Balance Sheet Notice and only to the extent
necessary to make it conform to the practices, procedures and methods
described in Section 1.2(a) above. The decision of the BFAF shall be final
and binding on HDA and the Existing Shareholders in the absence of manifest
error.
(c) Post-Closing Adjustment. Within two business days after a final
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resolution by the BFAF of such disagreements as may arise out of the review of
the Closing Balance Sheet in accordance with Section 1.2(b) above, and an
appropriate adjustment to the Closing Balance Sheet and the calculation of
Closing Net Assets to reflect such resolution, or, if Section 1.2(b)(I)(A) or
the first sentence of Section 1.2(b)(ii) applies, two business days after
delivery of, or expiration of the period for delivering, the Closing Balance
Sheet Notice (as applicable), the actual Purchase Price will be determined. If
the Closing Net Assets are less than $5,842,423, the difference and interest
thereon will be due and payable to HDA by the Existing Shareholders; however, to
the extent the Closing Net Assets are more than $5,842,423, the excess and
interest thereon will be due and payable to the Existing Shareholders by HDA.
Any adjustment to the Estimated Purchase Price pursuant to the preceding
sentence shall be promptly paid to the Existing Shareholders by HDA, or to HDA
by the Existing Shareholders (as the case may be). Any amounts payable pursuant
to this paragraph shall bear interest from the Closing Date through the date of
payment at an annual rate equal to LIBOR as reported in The Wall Street Journal
on the Closing Date.
ARTICLE II.
CLOSING
2.1 Closing. The Closing of the transactions contemplated herein
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(the "Closing") shall be held at 10:00 a.m. local time on October 8, 1999 (the
"Closing Date") at the offices of Jones, Day, Reavis & Pogue, 77 West Wacker,
Chicago, Illinois 60601. The place of the Closing and the Closing Date may be
varied by agreement among the Parties.
2.2 Sale of Capital Stock of Wheels and Brakes. On the terms and
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subject to the conditions of this Agreement, on the Closing Date, the Existing
Shareholders shall sell, transfer and assign to HDA, and HDA shall purchase and
acquire from the Existing Shareholders, all of the capital stock of Wheels and
Brakes.
2.3 Payment of Purchase Price. At the Closing, HDA shall wire
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transfer the Purchase Price in immediately available funds in the amounts and to
the bank accounts designated by the Existing Shareholders on Annex B hereto
(less $500,000 (Five Hundred Thousand Dollars) to be delivered to the Escrow
Agent (as defined in Section 6.10) pursuant to Section 8.6 hereof.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF
THE EXISTING SHAREHOLDERS
The Existing Shareholders, jointly and severally, 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:
3.1 Corporate Organization and Standing. Wheels and Brakes is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia and has all requisite corporate power and authority to
own or lease its properties and to carry on its business as presently conducted.
Wheels and Brakes 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. Wheels and Brakes 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 (as
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defined in Section 6.10) and the transactions contemplated hereby and thereby
have been duly authorized (in the case of non-natural persons). This Agreement
and the Ancillary Agreements have been duly executed and delivered by the
Existing Shareholders party thereto and are the legal, valid and binding
obligations of the Existing Shareholders party thereto, enforceable against them
in accordance with their terms.
3.3 No Conflict or Violation. Neither the execution and delivery
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of this Agreement or the Ancillary Agreements nor the consummation of the
transactions contemplated hereby or thereby will (a) 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 agreement, obligation or liability ("Contractual Obligation") to
which Wheels and Brakes or any Existing Shareholder is a party or by which it,
he or she is bound or to which its, his or her assets are subject or result in
the creation of any lien or encumbrance upon any of said assets, (b) 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 Wheels and Brakes, (c) 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 Wheels and Brakes or any
Existing Shareholder is subject or (d) violate, conflict with or result in a
breach of any applicable rule or regulation of any federal, state, local or
other governmental authority.
3.4 Capitalization of Wheels and Brakes. The authorized capital
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stock of Wheels and Brakes consists of 100,000 shares of common stock, $.04 par
value per share (the "Common Stock"). As of the date of this Agreement, 68,934
shares of Common Stock are outstanding, all of which shares have been duly
authorized, validly issued and are fully paid and non-assessable and are owned
in the aggregate by the Existing Shareholders, and individually by the persons
in the amount specified on Annex A hereto (the "Shares"). There are (a) no
preemptive or similar rights on the part of any holder of any class of
securities of Wheels and Brakes and (b) no options, warrants, conversion or
other rights, agreements or commitments of any kind obligating Wheels and
Brakes, contingently or otherwise, to issue, sell or otherwise cause to be
outstanding any shares of its capital stock of any class or any securities
convertible into or exchangeable for any such shares.
3.5 Subsidiaries. Except for the capital stock of the subsidiaries
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of Wheels and Brakes listed on Schedule 3.5, Wheels and Brakes does not own any
capital stock of, or other securities evidencing an equity interest in, any
corporation, partnership or other entity. All of the issued and outstanding
shares of capital stock of such subsidiaries of Wheels and Brakes have been duly
authorized and validly issued, are fully paid and nonassessable and are owned by
Wheels an Brakes, free and clear of any claims, liens, security interests,
options, charges, restrictions and interests of others whatsoever. There are no
options, warrants, conversions or other rights, agreements or commitments of any
kind obligation any subsidiary of Wheels and Brakes, contingently or otherwise,
to issue, sell or otherwise cause to be outstanding any shares of its capital
stock of any class or any securities convertible into or exchangeable for any
such shares. Wheels and Brakes has not, at any time within the past five years,
repurchased, redeemed or otherwise acquired any shares of capital stock of any
subsidiary of Wheels and Brakes.
3.6 Title to Shares. The Existing Shareholders have, and at
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Closing will have, good and valid title to the Shares owned by them, free and
clear of any claims, liens, security interests, options, charges, restrictions
and interests of others whatsoever. Upon delivery to HDA at the Closing of
certificates representing the Shares owned by the Existing Shareholders, duly
endorsed by them for transfer to HDA, HDA will obtain good and valid title to
such Shares, free and clear of any claims, liens, security interests, options,
charges, restrictions and interests of
others whatsoever except for any restrictions created by HDA. There are no
voting trusts, proxies, or other agreements or understandings to which Wheels
and Brakes or any Existing Shareholder is a party with respect to the voting,
dividend rights or disposition of any of the Shares. The Existing Shareholders
have no obligation, absolute or contingent, to any other person or entity to
issue, sell or otherwise dispose of any capital stock of Wheels and Brakes or to
effect any merger, consolidation, reorganization or other business combination
of Wheels and Brakes or to enter into any agreement with respect thereto.
3.7 Facilities. Schedule 3.7 contains a complete and accurate list
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of all real property used in connection with the business of Wheels and Brakes
(the "Real Property"), identifying which are owned ("Owned Real Property") and
which are leased or subleased ("Leased Real Property"), and accurate and
complete copies of preliminary title reports covering all of the Owned Real
Property. The Owned Real Property and the Leased Real Property are sometimes
hereinafter referred to collectively as the "Facilities" and individually as a
"Facility."
(a) Owned Real Property. Wheels and Brakes has good and marketable
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fee simple title to all Owned Real property, free and clear of all encumbrances,
except for taxes and assessments that are not yet due and payable, building
codes and zoning ordinances and easements, restrictions, covenants, rights-of-
way and reservations of record, which do not interfere with the present use of
the property and have not arisen other than in the ordinary course of business
("Permitted Encumbrances"). Wheels and Brakes enjoys peaceful and undisturbed
possession of all Owned Real Property.
(b) Actions. There are no pending or, to the best knowledge of
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Wheels and Brakes, threatened, condemnation proceedings or other actions,
claims, suits, litigation, proceedings, notices of violation, inquiry or
investigations (collectively, "Actions") relating to any of the Facilities or to
any improvements constructed thereon.
(c) Leases or Other Agreements. There are no leases, subleases,
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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 Owned Real Property or any portion thereof, or interest in any
such Owned Real Property.
(d) Facility Leases and Leased Real Property. With respect to each of
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its Leased Real Property, Wheels and Brakes is the sole lessee or sublessee and
has an unencumbered interest in the leasehold estate related thereto. Wheels and
Brakes enjoys peaceful and undisturbed possession of all of its Leased Real
Property. To the best knowledge of Wheels and Brakes, each Facility lease or
sublease is valid, binding and enforceable in accordance with its terms. Wheels
and Brakes is not in default in any material respect under any Facility lease or
sublease, and, to the best knowledge of Wheels and Brakes, no event or condition
exists that with notice or lapse of time or both would constitute a default in
any material respect by Wheels and Brakes under any Facility lease or sublease.
True, correct and complete copies of all leases and subleases listed on Schedule
3.7, including all amendments, modifications, written waivers or supplemental
agreements thereto, have been delivered to, or made available for inspection by,
HDA or its representatives.
(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 (including,
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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 Wheels and Brakes 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 for the operation of Wheels and Brakes' business as
presently conducted and (vi) in conformity with all applicable regulations.
(h) No Special Assessment. Wheels and Brakes has not received notice
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of any special assessment relating to any Facility or any portion thereof, and
there is no pending or threatened special assessment.
3.8 Financial Statements.
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(a) The audited balance sheets and statements of income,
stockholders' equity and cash flows of Wheels and Brakes at and for the fiscal
years ended January 31, 1999 and 1998 were prepared in accordance with GAAP
consistently applied and fairly present the financial condition and results of
operations of Wheels and Brakes as of their respective dates and for each such
period. Wheels and Brakes has no liabilities of any nature, whether absolute,
accrued, asserted or unasserted or contingent or whether due or to become due
that should have been recorded or reserved for on any such balance sheet and
were not so recorded or reserved. The audited balance sheet of Wheels and Brakes
at January 31, 1999 is referred to herein as the "Balance Sheet."
(b) The unaudited balance sheet and statements of income,
stockholders' equity and cash flows of Wheels and Brakes at and for the six
months ended July 31, 1999 were prepared in accordance with GAAP consistently
applied and fairly present the financial condition and results of operations of
Wheels and Brakes as of its date and for such period and are consistent with the
financial statements described in Section 3.8(a).
(c) Copies of the financial statements described in Section 3.8(a)-
(b) have been provided to HDA or its representatives.
3.9 Books and Records. Wheels and Brakes has made and kept and
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given HDA and its representatives access to books and records and accounts,
which, in reasonable detail, accurately and fairly reflect the activities of
Wheels and Brakes. The minute books of Wheels and Brakes accurately and
adequately reflect all action taken by the shareholders, board of directors and
committees of the board of directors of Wheels and Brakes. The copies of the
stock book records of Wheels and Brakes are true, correct and complete, and
accurately reflect all transactions effected in Wheels and Brakes' equity
interests through and including the date hereof. Wheels and Brakes 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 Wheels and Brakes,
all of which have been provided or made available to HDA and its
representatives.
3.10 Litigation. There is no claim, action, suit, proceeding, or
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investigation pending or, to the best knowledge of Wheels and Brakes, threatened
against Wheels and Brakes or the directors, officers, agents or employees of
Wheels and Brakes (in their capacity as such), or any properties or rights of
Wheels and Brakes. There are no orders, writs, injunctions or decrees currently
in force against Wheels and Brakes or the directors, officers, agents or
employees of Wheels and Brakes (in their capacity as such) with respect to the
conduct of Wheels and Brakes' business.
3.11 Licenses and Permits; Compliance with Laws. Schedule 3.11
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sets forth a complete list of all licenses, franchises, permits, approvals and
other governmental authorizations (collectively, "Licenses and Permits") held by
Wheels and Brakes. Wheels and Brakes owns, holds or possesses all Licenses and
Permits necessary or appropriate 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. Wheels and Brakes is not 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. Wheels and
Brakes' conduct of its business has been and is in compliance with all
applicable laws, statutes, ordinances and regulations. Wheels and Brakes has not
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.
3.12 Tax Matters.
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(a) For purposes of this Agreement, (i) "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, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
(b) Wheels and Brakes 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 Wheels and Brakes (whether or
not shown on any Tax Return) have been paid. Wheels and Brakes is not currently
the beneficiary of any extension of time within which to file any Tax Return.
No claim has ever been made by an authority in a jurisdiction where Wheels and
Brakes does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction. There are no liens on any of the assets of Wheels and Brakes
that arose in connection with any failure (or alleged failure) to pay any Tax.
(c) Wheels and Brakes 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) There is no dispute or claim concerning any Tax Liability of
Wheels and Brakes either (i) claimed or raised by any authority in writing or
(ii) of which Wheels and Brakes has knowledge. To the knowledge of Wheels and
Brakes and each Existing Shareholder, no audit or examination of any Tax Return
is currently in progress, and Wheels and Brakes has not received notice of any
proposed audit or examination. Wheels and Brakes 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 Wheels and Brakes with respect to years ended on or before December 31,
1998. Wheels and Brakes 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) Wheels and Brakes has not filed a consent under Section 341(f) of
the Code concerning collapsible corporations (or any comparable state income tax
provision). Wheels and Brakes 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. Wheels and Brakes is not a party to any Tax
allocation, sharing or indemnity agreement. Wheels and Brakes (i) has not been
a member of an affiliated group of corporations filing a consolidated federal
income Tax Return and (ii) is not liable 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 3.12 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 Wheels and Brakes.
(f) The unpaid Taxes of Wheels and Brakes did not exceed the reserve
for Tax Liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the face of
the most recent balance sheet of Wheels and Brakes. Wheels and Brakes has made
provision, in conformity with GAAP consistently applied, on the Balance Sheet
and the interim financial statements for the payment of all Taxes
which may subsequently become due.
3.13 Brokers, Finders. Wheels and Brakes has not retained any
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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.
3.14 Absence of Certain Changes.
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Since January 31, 1999, Wheels and Brakes has conducted its business
in the ordinary course and there has not occurred with respect to Wheels and
Brakes:
(a) any material adverse effect on the business, operations, assets,
results of operations, financial condition or prospects of Wheels and
Brakes ("Material Adverse Effect");
(b) any revaluation of assets, including, without limitation, writing
down the value of inventory or writing off notes or accounts receivable;
(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 $10,000, 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;
(f) the failure to pay or satisfy when due any liability, except
where the failure would not have a Material Adverse Effect;
(g) any assets (whether real, personal or mixed, tangible or
intangible) of Wheels and Brakes 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, business and goodwill of
Wheels and Brakes' suppliers, customers, distributors and others having
business relations with it;
(i) the disposition or lapsing of any Proprietary Rights (as defined
in Section 3.16) or any disposition or disclosure to any person of any
Proprietary Rights not heretofore a matter of public knowledge;
(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 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;
(l) any amendment or change to any Employee Benefit Plan (as
hereinafter defined) or any actuarial or accounting standards applicable to
any such Employee Benefit Plan, or the establishment of or commitment to
establish any employee benefit plan (as defined in ERISA);
(m) 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
not to exceed 5% per annum 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;
(n) 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 of Wheels and Brakes
or the relationships between the employees of Wheels and Brakes and the
management of Wheels and Brakes;
(o) any change in any method of accounting or keeping books of
account or accounting practices other than changes necessary to conform to
changes in GAAP;
(p) any material damage, destruction or loss of any asset, whether or
not covered by insurance;
(q) 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;
(r) the declaration, payment or setting aside for payment of any
dividend or other distribution (whether in cash, stock or property or
otherwise), the redemption, purchase or other acquisition of any shares of
Common Stock, or the creation of any securities convertible into or
exchangeable for any shares of Common Stock or any options, warrants or
other rights to purchase or subscribe to any of the foregoing;
(s) the consummation or adoption of any plan of liquidation or
resolutions providing for the liquidation, dissolution, merger,
consolidation or other reorganization of Wheels and Brakes;
(t) 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; or
(u) an agreement to do any of the things described in the preceding
clauses (a) - (t) other than as expressly provided for herein.
3.15 Material Contracts. Schedule 3.15 attached hereto sets forth
------------------
a complete and correct list of all the Material Contracts to which Wheels and
Brakes or, in the case of Section 3.15(g), any Existing Shareholder, is a party.
As used in this Agreement, "Material Contracts" means:
(a) all such contracts not made in the ordinary course of business;
(b) all such leases or other agreements under which Wheels and Brakes
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 Wheels and Brakes, which entails annual payments, in the case of any
such lease or agreement, in excess of $10,000;
(c) all such options with respect to any property, real or personal,
whether Wheels and Brakes is the grantor or grantee thereunder;
(d) all such distribution, franchise, license, technical assistance,
sales, commission, consulting, agency or advertising contracts related to Wheels
and Brakes' assets or business and that are not cancelable on not more than 30
days notice and without cancellation penalties or severance payments, in the
case of any such contract or group of contracts, in excess of $10,000;
(e) all such mortgages, indentures, security agreements, pledges,
notes, loan agreements or guaranties relating to Wheels and Brakes;
(f) all such contracts and agreements to which Wheels and Brakes is a
party and which are (i) outstanding contracts with its officers, employees,
agents, consultants, advisors, salespeople, sales representatives, distributors,
sales agents or dealers of Wheels and Brakes other than contracts which by their
terms are cancelable by Wheels and Brakes with notice of not more than 30 days
and without cancellation penalties or severance payments, in the case of any
such contract or group of contracts, in excess of $10,000, (ii) collective
bargaining agreements and (iii) pension, profit-sharing, bonus, retirement,
stock option or employee benefit plans or other similar plans or arrangements of
Wheels and Brakes;
(g) any covenant not to compete or similar restriction on Wheels and
Brakes 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 $10,000; or
(i) any contract or agreement providing for the receipt or payment
(whether the obligations are fixed or contingent) of $10,000 or more after the
date of this Agreement, including, without limitation, agreements calling for
penalties or payments upon voluntary termination or withdrawal by Wheels and
Brakes.
The Existing Shareholders have furnished to HDA or its representatives true and
correct copies of all Material Contracts, including all amendments and
supplements thereto.
3.16 Proprietary Rights.
------------------
(a) Schedule 3.16(a) 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 Wheels
and Brakes. Schedule 3.16(a) 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 3.16(a) are
all those used by Wheels and Brakes 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 Wheels and Brakes or in which
Wheels and Brakes has any interest whatsoever have been provided to HDA or its
representatives.
(b) Wheels and Brakes has no obligation to compensate any person for
the use of any such Proprietary Rights nor has Wheels and Brakes 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) Wheels and Brakes 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 Wheels and Brakes 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. Wheels and Brakes has not received any notice of invalidity or
infringement of any rights of others with respect to such trademarks. Wheels and
Brakes 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 Proprietary Rights, (ii) has notified Wheels and Brakes that it is
claiming any ownership of or right to use such Proprietary Rights or (iii) to
the best knowledge of Wheels and Brakes, is infringing upon any such Proprietary
Rights in any way. Wheels and Brakes' 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 Wheels and Brakes that are presently
outstanding, alleging that Wheels and Brakes' use of the Wheels and Brakes name
and its variations used in the Wheels and Brakes business 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 the right of Wheels and Brakes to sell products
manufactured or remanufactured by Wheels and Brakes in connection with the
operation of its business.
3.17 Labor Matters. Wheels and Brakes 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.
Wheels and Brakes 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 Wheels and Brakes. There is no labor strike or labor
disturbance pending or, to the best knowledge of Wheels and Brakes, threatened
against Wheels and Brakes, nor is any grievance currently being asserted, and
Wheels and Brakes 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, Wheels and Brakes is 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.
3.18 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
Wheels and Brakes or any Existing Shareholder in connection with the execution
and delivery of this Agreement, the Ancillary Agreements or the consummation by
Wheels and Brakes and the Existing Shareholders of the transactions contemplated
herein and therein, except for (a) consents required under the Facility leases
and subleases as set forth on Schedule 3.18, (b) consents listed on Schedule
3.18 that are required to be made or obtained after the Closing under Licenses
and Permits and (c) filings, registrations, licenses and permits listed on
Schedule 3.18 generally applicable to businesses similar to those of Wheels and
Brakes required to be obtained or made by Wheels and Brakes after the Closing in
the ordinary course of business as a result of the consummation of the
transactions contemplated hereby.
3.19 Employee Benefit Plans; Employment Agreements.
---------------------------------------------
(a) Plans. Schedule 3.19(a) sets forth a true, complete and accurate
-----
list of: (i) any and all severance or employment agreements with any current or
former director, officer, independent contractor or employee of Wheels and
Brakes; (ii) any and all severance plans, programs or policies; (iii) any and
all plans, agreements or arrangements relating to current or former directors,
officers, independent contractors or employees of Wheels and Brakes containing
change in control provisions or currently established, maintained or contributed
to by Wheels and Brakes, including bonus, incentive compensation, stock
ownership, stock option, stock appreciation, stock purchase, phantom stock,
vacation, retirement, insurance, severance, supplemental unemployment,
disability, death benefit, hospitalization, medical, workers compensation,
pension, employee stock ownership, profit-sharing or deferred compensation
plans; (iv) collective bargaining agreements; (v) any employee welfare and
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 currently established, maintained or contributed
to by Wheels and Brakes and are applicable to Wheels and Brakes' former or
current employees (singularly, "Employee Benefit Plan" and collectively,
"Employee Benefit Plans"); and (vi) all Employee Benefit Plans, except those
disclosed above, previously established, maintained or contributed to by Wheels
and Brakes, or any one of them acting alone ("Terminated Employee Benefit
Plans").
(b) Pension and Welfare Benefit Plans. With respect to the Employee
---------------------------------
Benefit Plans and Terminated Employee Benefit Plans, each as described on
Schedule 3.19(a):
(i) each Employee Benefit Plan is in compliance with the
requirements provided by any and all statutes, orders or governmental rules
or regulations currently in effect and applicable to such Employee Benefit
Plans, including but not limited to ERISA and the Code, and each Employee
Benefit Plan has been administered in accordance with its terms;
(ii) with respect to any Employee Benefit Plan which is an
employee welfare benefit plan (which term shall have the meaning set forth
in Section 3(3) of the ERISA), any trust related thereto has been
determined to be tax-exempt by the IRS pursuant to Code (S) 501(c)(9) and
nothing has occurred since the time of such determination to cause the loss
of such trust's tax-exempt status. Each Employee Benefit Plan intended to
be qualified pursuant to Code (S) 401(a) and Code (S) 501(a) is qualified
under Code (S) 401(a) and Code (S) 501(a) and has received a favorable
determination letter from the IRS covering the Tax Reform Act of 1986, as
amended, that such ERISA Plans are so qualified and each trust established
in connection with any such plan is exempt from federal income taxation and
nothing (either in form or operation) has since occurred from the date of
the last favorable determination letter to cause the loss of such
qualification;
(iii) all required reports and disclosures (including without
limitation the IRS Form 5500 Annual Return/Report, summary annual report
and summary plan description) with respect to each Employee Benefit Plan
have been timely filed and distributed;
(iv) any notices required by ERISA or the Code or any other
state or federal law or any ruling or regulation of any state or federal
administrative agency with respect to such Employee Benefit Plans have been
appropriately given;
(v) all required contributions for all periods ending prior to
Closing (including periods from the first day of the current plan year to
Closing) will be made to such Employee Benefit Plans prior to the Closing
Date by Wheels and Brakes;
(vi) Wheels and Brakes has not taken any action directly or
indirectly that obligates Wheels and Brakes to institute, modify or change
any Employee Benefit
Plan, any change in the manner in which contributions are made or the basis
on which such contributions are determined;
(vii) all insurance premiums have been paid in full, subject
only to normal retrospective adjustments in the ordinary course, with
regard to such Employee Benefit Plans for policy years or other applicable
policy periods ending on or before Closing;
(viii) with respect to each such Employee Benefit Plan, neither
Wheels and Brakes, its affiliates, nor any fiduciary (as defined in ERISA
(S) 3(21)) of any Employee Benefit Plan have engaged in any prohibited
transactions (as defined in ERISA (S) 406 or Code (S) 4975); no penalty,
fine, tax, action, suit, grievance, arbitration, investigation, audit,
litigation or claim (other than routine claims for benefits made in the
ordinary course of plan administration for which plan administrative review
procedures have not been exhausted) are pending, threatened or imminent
against or with respect to any Employee Benefit Plans, Wheels and Brakes,
or any fiduciary (as defined in ERISA (S) 3(21)) of any such Employee
Benefit Plan (including without limitation any action, suit, grievance,
arbitration or other manner of litigation, or claim regarding conduct which
allegedly interferes with the attainment of rights under such plans);
neither Wheels and Brakes, nor any fiduciary with respect to any Employee
Benefit Plan has any knowledge of any facts that would give rise to or
could give rise to any penalty, fine, tax, action, suit, grievance,
arbitration or other manner of litigation, or claim; and Wheels and Brakes
has not incurred any lien under Section 401(a)(29) or any liability for any
tax or civil penalty imposed by Section 4971 or 4976 of the Code or Section
502 of ERISA and no condition or set of circumstances exists that presents
a risk to Wheels and Brakes of incurring any such lien or liability;
(ix) no Employee Benefit Plan is (A) a "defined benefit" plan
(as defined in Section 3(35) of ERISA, (B) a "multiemployer plan" within
the meaning of Section 3(37) of ERISA, (C) a "multiple employer" or a
"multiple employer welfare arrangement" within the meaning of Section
413(c) of the Code or Section 514(b)(6) of ERISA, respectively, or (D) a
"welfare benefit fund" as defined in Section 419(e) of the Code;
(x) neither Wheels and Brakes nor any of its affiliates is
subject to any liability under Title IV of ERISA, including without
limitation any withdrawal liability on behalf of a multiemployer plan;
(xi) none of Wheels and Brakes or any of its directors,
officers, employees or any fiduciary of any Employee Benefit Plan has any
liability for a breach of fiduciary responsibility imposed by ERISA for
failure to comply with ERISA or the Code for any action or failure to act
in connection with the administration or investment of such Employee
Benefit Plans;
(xii) except as disclosed on Schedule 3.19(a), none of such
Employee Benefit Plans has been completely or partially terminated, except
that the Wheels and
Brakes, Inc. Employee Stock Ownership Plan ("ESOP") has been validly
terminated prior to Closing, and such termination, and all actions taken to
effectuate or otherwise related to such termination, comply in all respects
with the terms of the ESOP and with ERISA, the Code and other applicable
law;
(xiii) no current or former employee of Wheels and Brakes will be
entitled to any payment, additional benefits or any acceleration of the
time of payment or vesting of any benefits under any Employee Benefit Plan
as a result of the transactions contemplated by this Agreement (either
alone or in conjunction with any other event such as a termination of
employment) and no trustee under any "rabbi trust" or similar arrangement
in connection with any Employee Benefit Plan will be entitled to payment as
a result of the transactions contemplated by this Agreement; and
(xiv) no Employee Benefit Plan provides medical, life or other
welfare benefits (whether or not insured), with respect to current or
former employees after retirement or other termination of service (other
than coverage mandated by applicable law). With respect to any contract or
arrangement with an insurance company providing funding under any Employee
Benefit Plan, there is no material liability for any retroactive rate
adjustment. Except as disclosed on Schedule 3.19(a), Wheels and Brakes has
the right to amend or to terminate its participation with respect to each
Employee Benefit Plan. Each Employee Benefit Plan that is a "group health
plan," as defined in Section 5000 of the Code has been operated in
accordance with Section 4980B of the Code, Section 9801 and the secondary
payor requirements of Section 1862(b) of the Social Security Act.
3.20 Compliance with Environmental Laws.
----------------------------------
(a) Definitions. The following terms, when used in this Section 3.20,
-----------
shall have the following meanings. Any of these terms may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference.
(i) "Wheels and Brakes" for the purposes of this Section, shall
include (A) Wheels and Brakes, (B) all partnerships, joint ventures and
other entities or organizations in which Wheels and Brakes was at any time
or is a partner, joint venturer, member or participant and (C) 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 Wheels and Brakes or
to which Wheels and Brakes has succeeded.
(ii) "Release" shall mean and include any existing or previously
existing spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing into the
environment or the workplace of any hazardous substance, and/or 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 laws, statutes,
regulations, rules, ordinances, by-laws, orders or determinations of any
governmental or judicial authority at the federal, state or local level,
whether existing as of the date hereof, previously enforced, or
subsequently enacted 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 and the Hazardous
Materials Transportation Act.
(v) "Environmental Conditions" means the introduction into the
environment, whether or not yet discovered, 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 has or
may become liable to any person or by reason of which any Facility, former
Facility or any of the assets of Wheels and Brakes may suffer or be
subjected to any lien or as a result of which Wheels and Brakes or HDA
could incur any damage, loss, cost, expense, claim, demand, order or
liability to a third party (including, without limitation, any governmental
authority).
(b) Notice of Violation. Wheels and Brakes 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 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. Wheels and Brakes 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 Wheels and
Brakes.
(c) Environmental Conditions. There are no present or past
------------------------
Environmental Conditions.
(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 Wheels and
Brakes, of all environmental audits or assessments which have been conducted at
any Facility or former Facility within the past five years, either by Wheels and
Brakes 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 Wheels and Brakes has knowledge is included in Schedule
3.20(d) hereto.
(e) Indemnification Agreements. Wheels and Brakes 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 Schedule 3.23) under which Wheels and Brakes 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. Wheels and Brakes 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. Wheels and Brakes has given all
-----------------------------
notices and warnings, made all reports, and has kept and maintained all records
required by and in compliance with all Environmental Laws.
(h) Compliance. Wheels and Brakes has never violated and is
----------
presently in compliance with all Environmental Laws.
(i) Hazardous Material. Wheels and Brakes has not generated,
------------------
manufactured, refined, transported, treated, disposed of, stored, handled,
transferred, produced or processed any Hazardous Material.
(j) Underground Storage Tanks. There are no underground storage
-------------------------
tanks at any Facility owned or operated by Wheels and Brakes. Wheels and Brakes
does not own or operate any underground storage tanks, whether currently in use
or formerly used.
(k) Asbestos Containing Material. There is no asbestos containing
----------------------------
material at any Facility owned or operated by Wheels and Brakes.
(l) Liens. No lien has been imposed on any Facility pursuant to any
-----
Environmental Law.
3.21 Certain Business Relationships with Wheels and Brakes. Except
-----------------------------------------------------
as disclosed on Schedule 3.21, none of the Existing Shareholders has been
involved in any business arrangement or relationship with Wheels and Brakes
within the past 12 months, and none of such Existing Shareholders owns any
assets, tangible or intangible, that are used in the business of Wheels and
Brakes.
3.22 Undisclosed Liabilities. Wheels and Brakes has no liabilities
-----------------------
or obligations, whether accrued, absolute, contingent or otherwise except (a) to
the extent reflected or reserved for on the Balance Sheet, (b) liabilities or
obligations incurred in the normal and ordinary course of business of Wheels and
Brakes since January 31, 1999, (c) liabilities or obligations disclosed in
Schedule 3.22 hereto and in the other Schedules attached hereto or (d)
liabilities or obligations disclosed elsewhere in this Agreement.
3.23 Insurance. Schedule 3.23 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 Wheels and Brakes on its
(a) business, (b) assets or (c) employees at any time since December 31, 1992.
All insurance coverage applicable to Wheels and Brakes, or its business or
assets is in full force and effect, insures Wheels and Brakes in reasonably
sufficient amounts against all risks usually insured against by persons
operating similar business or properties of similar size in the localities where
such business or properties are located, provides coverage as may be required by
applicable regulation and by any and all contracts to which Wheels and Brakes 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 premiums for any such insurance that are due or past due 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 Wheels and Brakes have been occurrence policies
and not claims made policies. There are no outstanding performance bonds
covering or issued for the benefit of Wheels and Brakes. 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 Wheels and Brakes that
it intends to reduce coverage, increase premiums or fail to renew any existing
policy or binder.
3.24 Accounts Receivable. The accounts receivable set forth on the
-------------------
Balance Sheet, and all accounts receivable arising since the date of the Balance
Sheet, represent bona fide claims of Wheels and Brakes 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 Sheet and, in the case of accounts receivable arising since the date of
the Balance Sheet, 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 Sheet.
3.25 Inventory. Schedule 3.25 contains a complete and accurate
---------
list of the addresses at which all inventory as set forth on the Balance Sheet,
and all inventory acquired since the date of the Balance Sheet, is located. The
inventory as set forth on the Balance Sheet or arising since the date of the
Balance Sheet was acquired and has been maintained in accordance with the
regular business practices of Wheels and Brakes consists of new and unused items
of a quality and quantity usable or saleable in the ordinary course of business,
and is valued using average cost at the lower of cost or market on a LIFO basis.
None of such inventory is obsolete, unusable, slow-moving, damaged or unsaleable
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 Sheet.
3.26 Payments. Wheels and Brakes 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 Wheels
and Brakes, that 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. Wheels and Brakes 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.
3.27 Customers, Distributors and Suppliers. Schedule 3.27 sets
-------------------------------------
forth a complete and accurate list of the names and addresses of Wheels and
Brakes' ten largest (in terms of dollar volume) (a) customers, distributors and
other agents and representatives during Wheels and Brakes' last fiscal year,
showing the approximate total sales in dollars by Wheels and Brakes to such
customer during such fiscal year; and (b) suppliers during Wheels and Brakes'
last fiscal year, showing the approximate total purchases in dollars by Wheels
and Brakes from such supplier during such fiscal year. Since January 31, 1999,
there has been no adverse change in the business relationship of Wheels and
Brakes with any customer, distributor or supplier named on Schedule 3.27. Wheels
and Brakes has not received any communication from any customer, distributor or
supplier named on Schedule 3.27 of any intention to terminate or materially
reduce purchases from or supplies to Wheels and Brakes.
3.28 Computer Systems. The computer systems used in Wheels and
----------------
Brakes' business are capable of the following before, during or after January 1,
2000 ("Year 2000 Compliant"): (a) handling date information involving all and
any dates before, during or after January 1, 2000, including accepting input,
providing output and performing date calculations in whole or in part; (b)
operating, accurately without interruption on and in respect of any and all
dates before, during or after January 1, 2000 and without any change in
performance;
(c) responding to and processing two digit year input without creating any
ambiguity as to the century; and (d) storing and providing date input
information without creating any ambiguity as to the century. Wheels and Brakes
has made appropriate inquiries of its material vendors or suppliers and has been
assured that such persons' computer systems are Year 2000 Compliant.
3.29 Material Misstatements Or Omissions. No representations or
-----------------------------------
warranties by any Existing Shareholder 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 to state any material fact necessary to make the statements or facts
contained therein not misleading. The Existing Shareholders have disclosed all
events, conditions and facts materially affecting the business, prospects and
financial condition of Wheels and Brakes, taken as a whole.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF HDA
HDA represents and warrants to the Existing Shareholders as follows:
4.1 Corporate Organization and Standing. HDA is a corporation,
-----------------------------------
duly incorporated and validly existing under the laws of its jurisdiction of
incorporation, 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 and the Ancillary Agreements
-------------
have been duly authorized. This Agreement and the Ancillary Agreements have been
duly executed and delivered by HDA, and are the legal, valid and binding
obligations of HDA, enforceable against it in accordance with their terms.
4.3 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 (a) 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, (b) conflict with or result in a breach
of or constitute a default under any provision of HDA's 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
which 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, (c) 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 (d) violate, conflict with or result in a breach of
any applicable federal or state rule or regulation.
ARTICLE V.
POST-CLOSING COVENANTS
The Existing Shareholders and HDA each covenant with the others as
follows:
5.1 Further Assurances. Upon the terms and subject to the
------------------
conditions contained herein, the Parties agree, after the Closing, (a) to use
all reasonable 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, (b) 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 (c) to cooperate with each other in
connection with the foregoing. Without limiting the foregoing, the Parties agree
to use their respective best efforts (i) 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; (ii) to obtain all necessary Licenses and Permits as are
required to be obtained under any regulations; (iii) to defend all Actions
challenging this Agreement or the consummation of the transactions contemplated
hereby; (iv) 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; (v) 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 (vi) to
fulfill all conditions to this Agreement.
5.2 Tax Matters.
-----------
(a) HDA shall prepare or complete, or cause to be prepared or
completed, and timely file, or cause to be timely filed, all Tax Returns of
Wheels and Brakes required to be filed after the Closing Date and, subject to
Section 5.2(b) hereof, shall timely pay, or cause to be timely paid, when due,
all Taxes relating to such Tax Returns. With respect to Tax Returns of Wheels
and Brakes not filed prior to the Closing Date that relate to a taxable period
that ends on or prior to or includes the Closing Date, such Tax Returns shall be
prepared or completed by HDA in a manner consistent with the prior practice of
Wheels and Brakes.
(b) Although Wheels and Brakes, as the taxpayer or in connection with
filing the Tax Returns specified in Section 5.2(a) above, may be required to pay
(i) Taxes relating to time periods ending on or before the Closing Date (the
"Pre-Closing Period"), and (ii) Taxes for any Straddle Period (as hereinafter
defined) that is allocated pursuant to this Section 5.2(b) to the Pre-Closing
Period (such liabilities collectively, the "Pre-Closing Taxes) it is the
intention of the Parties that, to the extent such Pre-Closing Taxes (including
any penalties, interest or additions to Tax) were not fully accrued on the
Balance Sheet, the Existing Shareholders will be responsible for such Pre-
Closing Taxes. In the case of any Tax period that includes but does not end on
the Closing Date (a "Straddle Period"), Taxes of Wheels and Brakes shall be
allocated to the Pre-Closing Period using an interim closing of the books method
assuming that such Tax period ended at the close of the Closing Date, except
that (i) exceptions, allowances or deductions that
are calculated on an annual basis shall be apportioned on a per diem basis and
(ii) real property, personal property and intangibles and other similar Taxes
shall be allocated in accordance with the principals of Section 164(d) of the
Code. The Existing Shareholders shall indemnify, defend and hold HDA and Wheels
and Brakes harmless from and against any and all liability for Pre-Closing Taxes
to the extent such Pre-Closing Taxes were not fully accrued on the Balance
Sheet. HDA shall provide the Existing Shareholders with a copy of any Tax Return
with respect to which the Existing Shareholders have agreed to indemnify HDA
pursuant to this Section 5.2(b), accompanied by a statement calculating in
reasonable detail the Existing Shareholders' indemnification obligation. The
Existing Shareholders shall pay to HDA the amount of such indemnification
obligation within 15 days of receipt of any such Tax Return and the accompanying
statement.
(c) The Existing Shareholders shall be liable for, and shall timely
pay, any and all gains, transfer, sales, use, bulk sales, recording,
registration, documentary, stamp and other Taxes that may result form, or be
incurred in connection with, the transactions contemplated by this Agreement
("Conveyance Taxes"). The Existing Shareholders shall, at their own expense,
properly complete, sign and timely file any and all required Tax Returns with
respect to Conveyance Taxes. The Existing Shareholders shall indemnify, defend
and hold HDA and Wheels and Brakes harmless from and against all liability for
Conveyance Taxes. HDA shall provide the Existing Shareholders with a copy of any
Tax Return with respect to which the Existing Shareholders have agreed to
indemnify HDA, accompanied by a statement calculating in reasonable detail the
Existing Shareholders' indemnification obligation pursuant to this Section
5.2(c). The Existing Shareholders shall pay to HDA the amount of such
indemnification obligation within 15 days of receipt of any such Tax Return and
the accompanying statement.
(d) The Existing Shareholders shall indemnify, defend and hold HDA
and Wheels and Brakes harmless from and against any and all liability for Taxes
or other Losses arising out of a breach or inaccuracy of any representation or
warranty contained in Section 3.12 and any and all liability for reasonable
legal, accounting and apprisal fees and expenses with respect to any liability
for Taxes described above in Section 5.2. HDA shall provide the Existing
Shareholders with a statement calculating in reasonable detail the Existing
Shareholders' indemnification obligation pursuant to this Section 5.2(d). The
Existing Shareholders shall pay to HDA the amount of such indemnification
obligation within 15 days of receipt of any such statement.
(e) HDA shall promptly notify the Existing Shareholders in writing
upon receipt by HDA or any affiliate of HDA of notice of any pending or
threatened proceeding relating to Taxes for which the Existing Shareholders may
be liable under a Tax proceeding ("Tax Proceeding"). The Existing Shareholders
shall have the sole right to control, conduct, and otherwise represent the
interests of Wheels and Brakes in any such Tax Proceeding; provided, however,
-------- -------
that without the prior written approval of HDA, which approval shall not be
unreasonably withheld or delayed, the Existing Shareholders shall not agree or
consent to compromise or settle any issue or claim arising in any such Tax
Proceeding to the extent that any such compromise, settlement, consent or
agreement could have an adverse effect on HDA for any period ending after the
Closing Date.
(f) Neither HDA nor any affiliate of HDA shall, without the prior
written consent of the Existing Shareholders, which consent shall not be
unreasonably withheld or delayed, file or cause to be filed, any amended Tax
Return or claim for Tax refund with respect to Wheels and Brakes relating to
Taxes for which the Existing Shareholders may be liable hereunder. Promptly
after the reasonable request of the Existing Shareholders, at the sole expense
of the Existing Shareholders, HDA shall, or cause Wheels and Brakes, to file any
amended Tax Return or claim for Tax refund relating to Taxes for which the
Existing Shareholders may be liable hereunder, provided that such amended Tax
--------
Returns or claims shall be prepared in a manner consistent with the prior
practice of Wheels and Brakes (including elections and accounting methods and
conventions) and, in the reasonable determination of HDA, shall conform to
applicable laws and regulations. If HDA or any affiliate of HDA shall receive a
Tax refund relating to a period or transaction for which the Existing
Shareholders are liable hereunder, HDA shall, within 30 days after receipt of
such Tax refund, remit such Tax refund (including any interest received on such
Tax refund and net of (i) any Tax cost relating to the receipt of such Tax
refund and (ii) any unreimbursed cost or expense incurred in obtaining such Tax
refund), to the Existing Shareholders. For purposes of this Section 5.2, the
term "Tax refund" shall include a reduction in Tax or the use of an overpayment
as a credit or other Tax offset, and the receipt of a refund shall be deemed to
be realized upon the earliest to occur of (i) the date on which HDA has actual
knowledge that a payment due to the relevant taxing authority (for which HDA
would be responsible under this Agreement) has been offset by such a refund and
(ii) the receipt of cash.
(g) After the date hereof, HDA and Wheels and Brakes shall provide
each other and the Existing Shareholders, with such cooperation and information
relating to Wheels and Brakes as either party reasonably may request in (i)
filing any Tax Return, amended Tax Return or claim for Tax refund, (ii)
determining any Tax liability or a right to a Tax refund, (iii) conducting or
defending any proceeding in respect of Taxes or (iv) effectuating the terms of
this Agreement. The Parties and Wheels and Brakes shall retain all Tax Returns,
schedules and work papers, and all material records and other documents relating
thereto, until the expiration of the statute of limitations (and, to the extent
notified by any party, any extensions thereof) of the taxable years to which
such Tax Returns and other documents relate and until the final determination of
any Tax in respect of such years. Any information obtained under this Section
5.2 shall be kept confidential, except as may be otherwise necessary in
connection with filing any Tax Return, amended Tax Return, or claim for Tax
refund, determining any Tax liability or right to a Tax refund, or in conducting
or defending any proceedings in respect of Taxes.
(h) The obligations of the parties set forth in this Section 5.2
shall be unconditional and absolute and shall remain in effect until the date
that is 90 days after the expiration of the relevant statute of limitations
applicable to the Taxes at issue, giving effect to all valid waivers or
extensions thereof. Claims for indemnification arising under or with respect to
Section 3.11 or this Section 5.2 may not be made unless notice of such claims
has been given on or prior to the date that is 90 days after the expiration of
the relevant statute of limitations applicable to the Taxes at issue, giving
effect to all valid waivers or extensions thereof.
(i) All rights and obligations of the parties hereto with respect to
Taxes, including all rights or either party to indemnification with respect to
Taxes, shall be governed
exclusively by the provisions of this Section 5.2 and 3.12, and in particular,
the provisions of Article VIII shall not apply to obligations arising under this
Section 5.2.
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
or federal court or other governmental agency which prevents the consummation of
the transactions that are the subject of this Agreement shall have been issued
and remain in effect.
6.2 Representations and Warranties. Except as otherwise
------------------------------
contemplated by this Agreement, all representations and warranties of the
Existing Shareholders contained in this Agreement shall be true and correct as
of the Closing Date.
6.3 Performance of Agreements. The Existing Shareholders shall
-------------------------
have performed in all material respects all obligations, agreements and
commitments required to be fulfilled by them pursuant to the terms hereof on or
prior to the Closing Date.
6.4 Compliance Certificate. The Existing Shareholders shall have
----------------------
delivered to HDA or its representatives, their respective certificates, dated
the Closing Date, as to the fulfillment of the conditions set forth in Sections
6.2 and 6.3 hereof.
6.5 Stock Certificates. The Existing Stockholders shall deliver to
------------------
HDA certificates representing all of the Shares, together with duly executed
transfer powers in favor of HDA.
6.6 Stock Books. HDA shall have received the stock books, stock
-----------
ledgers, minute books and corporate seals (if any) of Wheels and Brakes.
6.7 Officers and Directors. HDA shall have received the written
----------------------
resignation of all officers and directors of Wheels and Brakes in office
immediately prior to the Closing.
6.8 Opinion of Counsel. HDA shall have received the opinion of
------------------
Chambers, Mabry, McClelland & Brooks, LLP, counsel for Wheels and Brakes and the
Existing Shareholders, in the form set forth in Schedule 6.8 hereto.
6.9 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. Copies of
all such authorizations, consents or approvals shall have been delivered to HDA
or its representatives.
6.10 Ancillary Agreements. The following agreements (the
--------------------
"Ancillary Agreements") shall have been duly executed and delivered by all
parties thereto other than HDA: (a) an escrow agreement (the "Escrow
Agreement") by and among HDA, the Existing Shareholders and Chase Manhattan Bank
and Trust Company, National Association, as "Escrow Agent," substantially in the
form attached hereto as Exhibit C; and (b) noncompetition agreements, by and
between HDA and George W. Foote, III and HDA and Dennis J. Bailey.
6.11 Nonforeign Affidavit. Each Existing Shareholder 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 EXISTING SHAREHOLDERS
The obligations of the Existing Shareholders 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 Existing Shareholders:
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.
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 as of the Closing Date.
7.3 Performance of Agreements; Instruments of Transfer. HDA shall
--------------------------------------------------
have performed in all material respects all obligations, agreements and
commitments required to be fulfilled by HDA pursuant to the terms hereof on or
prior to the Closing Date.
7.4 Compliance Certificates. HDA shall have delivered to the
-----------------------
Existing Shareholders a 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 6.10
--------------------
shall be satisfied.
7.6 Consents; Etc. All authorizations, consents or approvals of
-------------
any and all third parties and governmental regulatory authorities necessary to
be obtained prior to the Closing in connection with the consummation by HDA of
the Closing shall have been obtained and be in full force and effect, except
where a failure to obtain an authorization, consent or approval is a result of a
breach by Wheels and Brakes or the Existing Shareholders.
ARTICLE VIII.
ACTIONS BY THE PARTIES AFTER THE CLOSING
8.1 Indemnification by the Existing Shareholders. Subject to the
--------------------------------------------
provisions of this Article VIII, the Existing Shareholders will jointly and
severally indemnify, defend and hold harmless HDA and its stockholders,
subsidiaries, affiliates, officers, directors, employees, agents, successors and
assigns, (such indemnified persons are collectively hereinafter referred to as
"HDA's Indemnified Persons") 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
any Existing Shareholder in this Agreement or in any Schedule hereto; (b) the
breach of any warranty of any Existing Shareholder in this Agreement or any
Schedule hereto; (c) environmental liabilities; or (d) the nonfulfillment of any
covenant, undertaking, agreement or other obligation of any Existing Shareholder
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.
8.2 Indemnification by HDA. Subject to the provisions of this
----------------------
Article VIII, HDA agrees to indemnify, defend and hold the Existing Shareholders
and their respective heirs, representatives, successors and assigns (such
persons are hereinafter collectively referred to as the "Existing Shareholders'
Indemnified Persons"), harmless from and against any and all Losses that the
Existing Shareholders' 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; and (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 Existing
Shareholders.
8.3 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 Article VIII shall survive the Closing Date
and shall remain in full force and effect for three years thereafter; provided,
however, that the representations and warranties set forth in Section 3.12
relating to tax matters, Section 3.19 relating to employee benefits matters and
Section 3.20 relating to environmental matters shall survive for the length of
the applicable statute of limitations; provided further that the representations
-------- -------
and warranties set forth in Sections 3.4, 3.5
and 3.6 shall survive indefinitely.
8.4 Threshold. No HDA's Indemnified Person or Existing Shareholders'
---------
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 $50,000 and then only to the
extent of such excess.
8.5 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 8.3 and 8.4 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 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.
8.6 Indemnification Payments. At the Closing, HDA will deliver by
------------------------
wire transfer of immediately available funds $500,000 (Five Hundred Thousand
Dollars) of the Purchase Price to the Escrow Agent to be held by the Escrow
Agent for one year pursuant to the terms of the Escrow Agreement and to serve as
partial security for the indemnification obligations of the Existing
Shareholders under this Agreement. Any indemnification obligations of the
Existing Shareholders under this Article VIII shall be first satisfied by
amounts held by the Escrow Agent pursuant to the terms of the Escrow Agreement.
ARTICLE IX.
MISCELLANEOUS
9.1 Expenses. Except as otherwise set forth in this Agreement, HDA
--------
shall pay all costs and expenses incurred by it or on its behalf, and the
Existing Shareholders shall pay all costs and expenses incurred by any Existing
Shareholder or Wheels and Brakes on such Existing Shareholder's or Wheels and
Brakes' behalf, in connection with this Agreement and the transactions
contemplated hereby, including fees and expenses of their financial consultants,
accountants and legal counsel.
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 any Existing Shareholder, at the address or telecopier number of
such Existing Shareholder set forth on Annex B hereto.
With a Copy to:
Chambers, Mabry, McClelland & Brooks, LLP
2200 Century Parkway, N.E.
Tenth Floor
Atlanta, Georgia 30345
Attn.: H.A. Stephens, Jr.
Telecopy No.: (404) 325-0596
And:
George W. Foote, III
2219 Bright Water Drive
Snellville, Georgia 30078
And:
Dennis J. Bailey
2780 Tucker Mill Road S.W.
Conyers, Georgia 30094
If to HDA:
HDA Parts System, Inc.
520 Lake Cook Road
Deerfield, Illinois 60015
Attn.: John J. Greisch
Telecopy No.: (847) 444-1096
With a Copy to:
Brentwood Associates
11150 Santa Monica Boulevard
Suite 1200
Los Angeles, California 90025
Attn.: Christopher A. Laurence
Telecopy No.: (310) 477-1011
And:
Jones, Day, Reavis & Pogue
77 West Wacker
Chicago, Illinois 60601-1692
Attn.: Timothy J. Melton
Telecopy No.: (312) 782-8585
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 and the other written agreements
----------------
entered into on the date hereof constitute the entire agreement of the Parties
with respect to the subject matter hereof and thereof and supersede all prior
negotiations, agreements and understandings, whether written or oral, of the
Parties.
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 Georgia
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 HDA, Wheels and
Brakes 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
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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 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"
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or similar phrase includes actual knowledge, after reasonable inquiry, of any
officer, director or shareholder of Wheels and Brakes and any employee of Wheels
and Brakes, whose job duties include the subject matter in question.
(Signature Page Follows)
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:
Name: John P. Miller
Title: Vice President, Chief Financial Officer
and Secretary
George W. Foote, III
Dennis J. Bailey
WHEELS AND BRAKES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
By:
Name: George W. Foote, III
Title: Trustee
ANNEX A
THE EXISTING SHAREHOLDERS
Name Shares
---- ------
George W. Foote, III 33,175
Dennis J. Bailey 12,975
Wheels and Brakes, Inc.
Employee Stock Ownership Plan 22,784
ANNEX B
PAYMENT OF PURCHASE PRICE
(See Attached Funds Flow Memorandum)