EXHIBIT 2.1
AUTOSPECIALTY ASSET PURCHASE AGREEMENT
THIS IS THE AUTOSPECIALTY ASSET PURCHASE AGREEMENT ("this Agreement") by and
between ▇▇▇▇▇▇-▇▇▇▇▇ Company, a Delaware Corporation ("Seller"), and Universal
Automotive, Inc., an Illinois Corporation ("Purchaser") effective this 23rd day
of December, 2003. Seller and Purchaser in consideration of the mutual
agreements set forth below (the mutuality, adequacy and sufficiency of which are
hereby acknowledged), hereby agree with the intent to be legally bound as
follows:
ARTICLE 1
RECITALS
1.1 BUSINESS. Seller owns and operates a business unit that distributes,
manufactures and sells braking, steering, suspension and clutch products for
passenger car, light trucks, and light and medium commercial vehicle
applications exclusively into the independent aftermarket ("IAM") in North
America with its principal office located in Carson, California (hereinafter
sometimes referred to as "Autospecialty" or the "Business").
1.2 TRANSACTION. Seller desires to sell and assign and Purchaser desires
to purchase and assume substantially all of the assets, property and agreements
used in the Business.
1.3 TRANSITIONAL SERVICES AGREEMENT. Seller and Purchaser wish to enter
into the Transitional Services Agreement (in the form of SCHEDULE 1.3) whereby
Seller will provide Purchaser with certain agreed services at a certain price
for a limited period of time.
1.4 SUPPLY AGREEMENT. Purchaser wishes to enter into the Supply
Agreement (in the form of SCHEDULE 1.4) with Seller's affiliate REMSA of America
("ROA") for the supply of friction materials from ROA to Purchaser.
1.5 TRADEMARK LICENSE. TRW Intellectual Property Corp and Purchaser wish
to enter into the Trademark License Agreement (in the form of SCHEDULE 1.5, the
"Trademark License Agreement") allowing Purchaser to use the TRW trademark in
connection with the sale of premium rotors and drums in North America in the IAM
pursuant to the terms of the Trademark License Agreement.
1.6 CHASSIS SUPPLY AGREEMENT WITH FEDERAL MOGUL. Purchaser wishes to
enter into the Supply Agreement (in the form of SCHEDULE 1.6) with Federal Mogul
Corporation for the supply of TRW branded chassis components.
ARTICLE 2
PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES
2.1 AGREEMENT TO PURCHASE AND SELL. At the Closing Time, subject to the
terms and conditions of this Agreement, Seller hereby agrees to sell, and
Purchaser hereby agrees to purchase, the Purchased Assets (as defined in Section
2.2 below), and Purchaser hereby agrees to assume the Assumed Liabilities (as
defined in Section 2.7 below). For purposes of this Agreement, "Closing" means
the completion of the purchase and sale of the Purchased Assets and transfer of
the Assumed Liabilities in accordance with the provisions of this Agreement.
"Closing Date" means the date of Closing and "Closing Time" mean the time of
Closing on the Closing Date both as specified in Article 3 hereof.
2.2 PURCHASED ASSETS. At the Closing Time, subject to the terms of this
Agreement, Seller hereby agrees to sell, convey, transfer, assign, and deliver
to Purchaser, and Purchaser agrees to purchase and assume the following assets
of the Business exclusive of the Excluded Assets as defined in Section 2.3 below
(the "Purchased Assets"):
(a) Seller's interest as lessee under the leases of real property
(the "Leases") described in SCHEDULE 2.2(a) to this Agreement, including
Seller's interest in the land and the structures, improvements, buildings and
facilities located thereon (the "Real Property");
(b) All of the assets included in the Balance Sheet of the
Business attached hereto as SCHEDULE 2.2(b) including, without limitation:
i. machinery, equipment, tools, tooling, vehicles,
furniture, pallet racking, fixtures, office
equipment, supplies, spare parts, jigs, patterns,
dies, molds, computers and other tangible personal
property owned by the Business which is located at
the Business' locations in Carson, California,
Itasca Illinois, and Parsippany, New Jersey and at
fee warehouses, together with all brake rotor
tooling located at AB&I Foundry and other vendors
of the Business (collectively, the "Machinery and
Equipment") and listed on SCHEDULE 2.2 (b)(i);
ii. All inventories of raw materials, cores,
work-in-process, finished product service parts
and supplies, packaging materials and marketing
materials of the Business which are located at the
Business' locations in Carson, California, Itasca
Illinois, and Parsippany, New Jersey and at fee
warehouses and suppliers (excluding brake
components located at New Jersey American) or
which are in transit, on the Closing Date (as
defined in Section 3.1), as described in SCHEDULE
2.2(b)(ii) (the "Inventory");
iii. All trade and sundry receivables, which are
non-intercompany and are more completely described
on SCHEDULE 2.2(b)(iii) ("Accounts Receivable");
iv. The computer hardware, software and other items
that are identified on SCHEDULE 2.2(b)(iv); and
v. all prepaid expenses, deposits, advance payments,
security deposits, down payments, and similar
items all of which are specifically related to and
historically recorded on the books and records of
Autospecialty, other than with respect to the
Excluded Assets (as defined in Section 2.3) or the
Retained
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Liabilities (as defined in Section 2.8);
(c) All of Seller's interest (to the extent transferable) in the
customer contracts, distribution contracts, consignment
agreements, commitments, customer orders, personal property
leases and other agreements which are described on SCHEDULE
2.2(c) (the "Contract Rights" and each document evidencing
such Contract Right(s), a "Contract") and all of Seller's
interest in the Leases;
(d) All personnel and payroll records of the Acquired Employees
(as defined in Section 4.4), all customer lists, customer
files, supplier files, and all surveys of real property,
appraisals, valuations, consulting studies, production
records, engineering records, environmental compliance
records, credit data, accounting records, parts lists,
manuals, and correspondence relating to the Business (the
"Files and Records");
(e) All licenses and permits of Seller to the extent transferable
or assignable by their terms or pursuant to applicable law
which are described on SCHEDULE 2.2(e) (the "Permits");
(f) all rights, claims, and choses in action against third parties
related to the Purchased Assets and/or the Assumed Liabilities
other than with respect to the Retained Liabilities and/or the
Excluded Assets, including, but not limited to, all rights
against suppliers under warranties covering any of the
Inventory or Machinery and Equipment;
(g) all know-how solely related to the Business and all of
Seller's right, title and interest in the domain names and
trademarks listed in the Trademark Assignment and Domain Name
Assignment attached hereto as SCHEDULE 2.2(g), except that
Seller and its affiliates retain the right to use the ▇▇▇▇
SUPER KIT in connection with the sale of drum brakes in the
United States. Buyer agrees not to oppose or otherwise
challenge the right of Seller and its affiliates to own,
register and use the ▇▇▇▇ SUPER KIT outside the United States.
2.3 EXCLUDED ASSETS. Subject to the terms of this Agreement and the
Trademark License Agreement, the Purchased Assets shall not include the
following assets (collectively, the "Excluded Assets"):
(a) cash and cash equivalent items;
(b) the computer hardware, software, and other items identified on
SCHEDULE 2.3(b);
(c) the following trademarks and tradenames: TRW, ▇▇▇▇▇,
▇▇▇▇▇▇-▇▇▇▇▇, ▇-▇, ▇▇▇▇▇▇ and any other trademark which (1) is owned by
▇▇▇▇▇▇-▇▇▇▇▇, its indirect parent TRW Automotive Inc. or any of its or their
affiliates or subsidiaries and (2) is not listed in SCHEDULE 2.2(g);
(d) trade and sundry receivables, which are intercompany;
(e) surplus reserve amounts or prepaid premiums in connection with
employee group insurance policies;
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(f) all insurance policies held by Seller and all recoveries or
rights to the same which relate to or are in reimbursement of any expenses
incurred by Seller in respect of damages to or loss of the Purchased Assets;
(g) all income tax installments paid by Seller and the right to
receive any refund of income taxes paid by Seller and deferred tax credits
refundable to Seller and all interest thereon;
(h) all claims and rights to deposits, royalties, prepaid
expenses, and similar relating to any of the assets described in (a) through (g)
in this Section 2.3;
(i) reimbursable customer tooling and unbilled tooling as listed
on SCHEDULE 2.3(i);
(j) all inventories of raw materials, work-in-process, finished
product service parts and supplies, and packaging materials that are on
consignment from vendors and located at Autospecialty on the Closing Date as
described in SCHEDULE 2.3(j) (the "Consigned Inventory"). A copy of all
consignment agreements relating to the Consigned Inventory and all sums owed to
the related consignors (the "Consignors") as of Closing are included in SCHEDULE
2.3(j);
(k) all brake components located at New Jersey American in
Somerdale, New Jersey and at FASA in ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇;
(l) all claims and rights to receivables and/or other assets from
BLV L.L.C. d/b/a APR, its affiliates, and their officers, directors,
shareholders, employees, agents and assigns; and
(m) all rights including rights to payment in connection with Case
# A-570-846 under the U.S. Customs Service pursuant to the Continued Dumping and
Subsidy Offset Act ("CDSOA") accruing from activities and goods sold prior to
closing.
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2.4 PAYMENT OF PURCHASE PRICE. The consideration given to Seller at
Closing for the Purchased Assets shall equal the "Net Asset Value" or "NAV" of
the Business as at the month end prior to Closing. At November 28, 2003, the NAV
equaled Ten Million Six Hundred Forty Thousand Eight Hundred Fifty-Two Dollars
($10,640,852) consisting of Eighteen Million Nine Hundred Thirty Five Thousand
Five Hundred Seventy Eight Dollars ($18,935,578) in Purchased Assets reduced by
Purchaser's assumption of Eight Million Two Hundred Ninety Four Thousand Seven
Hundred Twenty Five Dollars ($8,294,725) in Assumed Liabilities (as defined in
Section 2.7) (the "Purchase Price"). Using identical methodology, the NAV as at
the month-end prior to the Closing has been calculated using the worksheets
presented in SCHEDULE 2.4(a). The Purchase Price shall be subject to two
Post-Closing Adjustments (as defined in Section 2.10).
2.5 ALLOCATION. Seller and Purchaser agree that the Purchase Price shall
be allocated and reported for all federal and local tax purposes in accordance
with SCHEDULE 2.5. The provisions of this Section 2.5 shall survive the Closing.
2.6 PRORATIONS. Seller and Purchaser shall apportion, with respect to
the Purchased Assets as of the date of the Closing, real and personal property
taxes and/or assessments, prorated upon the basis of the tax year for which
assessed (unless undeterminable as of the date of the Closing and then based
upon the previous year's real and personal property taxes) and payable and
apportioned upon the basis of the actual number of days elapsed in such year as
of the Closing Date.
2.7 ASSUMED LIABILITIES. Except for the "Retained Liabilities" defined
in Section 2.8 below, from and after the date of the Closing, Purchaser shall
assume and agree to perform and discharge the following obligations and
liabilities (collectively, the "Assumed Liabilities"):
(i) the duties, liabilities and obligations of Seller under the
Contract Rights and the Permits, regardless of when asserted;
(ii) all other duties, obligations and liabilities of Seller
related to the Business and/or the Purchased Assets, including any
warranty claims and including the following: (a) Purchaser's liabilities
for workers' compensation claims as provided in Section 7.3, and (b) all
liabilities and obligations arising out of, resulting from or relating to
claims for products sold to end users on or after the Closing Date which
are founded upon any theory of liability, including but not limited to
negligence, breach of warranty, strict liability in tort and/or other
similar legal theory, seeking compensation or recovery for or relating to
injury to person or damage to property;
(iii) all duties, obligations and liabilities relating to the
Acquired Employees other than Seller's liabilities and obligations as set
forth in Article 7 below;
(iv) subject to Sections 5.9 and 8.2, all obligations and
liabilities under Environmental Laws relating to or arising from the
Business and/or the Purchased Assets;
(v) all obligations and covenants of Purchaser pursuant to the
terms of this Agreement, including but not limited to Sections 2.4, 2.10,
and 4.4 of this Agreement; and
(vi) trade and sundry payables of the Business (other than
intercompany payables) to the extent disclosed on the Closing Date
Statement (as such term is defined in Section 2.10.1.2(a) below).
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2.8 RETAINED LIABILITIES. Seller shall retain and be solely responsible
for the following "Retained Liabilities":
(i) trade and sundry payables which are intercompany or are not
disclosed on the Closing Date Statement;
(ii) liabilities for workers' compensation claims as specified in
Section 7.3 hereof;
(iii) all liabilities relating to past employees of the Business who
are not employed by Purchaser on the Closing Date, tort and employment
discrimination liabilities relating to Acquired Employees (to the extent
such liabilities arise from periods of employment under Seller and are
asserted within ninety (90) days of the Closing Date), and all liabilities
relating to the Excluded Employees as defined in 4.4 infra;
(iv) all obligations and covenants of Seller pursuant to the terms
of this Agreement, including but not limited to, Seller's liabilities and
obligations under Article 7;
(v) all product liability claims of third party end users arising
out of the sale of products to said claimants prior to the Closing Date;
(vi) those liabilities or obligations arising out of those
litigation matters more particularly described on SCHEDULE 2.8(vi);
(vii) those liabilities or obligations arising out of third party
personal injury and/or wrongful death claims relating to the sale of any
asbestos-containing products by the Business prior to the Closing Date;
and(viii) any liabilities related to Section 2.3(m) above.
2.9 TAX MATTERS. Purchaser shall pay all sales and use taxes, as
applicable, arising out of or attributable to the sale of the Purchased Assets
from Seller to Purchaser.
2.10 POST-CLOSING ADJUSTMENTS.
2.10.1 The cash portion of the Purchase Price (as specified in
Section 2.4) may be increased or decreased via either or
both of two Post-Closing Adjustments. The first
Post-Closing Adjustment shall be determined by the
difference between the Purchase Price and the NAV of the
Business as at Closing (but determined after the Closing).
The second Post-Closing Adjustment shall be determined as
follows:
2.10.1.1 Within fifteen (15) days of March 31, 2004, the Purchaser
shall pay to the Seller the amount of Two-Hundred Fifty
Thousand and No/100 ($250,000.00).
2.10.1.2 Thereafter within fifteen (15) days of each of June 30,
2004, September 30, 2004, December 31, 2004, March 31,
2005, June 30, 2005, September 30, 2005 and December 31,
2005 (the foregoing to be known as the "Quarterly
Payments"), Purchaser shall pay to Seller further amounts
based on its collection of Category B Accounts Receivable
(as defined on Schedule 2.4(a)) purchased by Purchaser at
Closing (that is, collections arising from Category B
Accounts Receivable that existed prior to Closing). The
Quarterly Payments shall be equal to ___ (___%) of: the
total amount collected on Category B Accounts Receivable
less that portion of the Purchase Price allocated to such
Accounts Receivable less
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Five Hundred Thousand and No/100 ($500,000.00) Dollars less
the product of two (2) multiplied by the prior Quarterly
Payments. In addition to and contemporaneous with the
Quarterly Payments above, Purchaser shall pay to Seller ___
(___%) of all collections of Category A Accounts Receivable as
defined on Schedule 2.4(a) (the "Category A Payments").
Category A Accounts Receivable and Category B Accounts
Receivable shall be referred to herein as the "Pre-Closing
Accounts". If and to the extent that Seller receives payment
on any Pre-Closing Account, it shall turn over such amount to
Purchaser within five (5) business days of receipt. Any such
amount not timely turned over to Purchaser may be credited by
Purchaser against any Quarterly Payment or Category A Payment
due Seller, provided that the failure of Purchaser to take
such credit shall not relieve Seller of its obligation to turn
over such amount to Purchaser.
(a) Adjustment Calculation. (i) Within thirty (30) calendar days
of the Closing Date, Purchaser shall deliver to Seller a
balance sheet for the Business in a form consistent with
SCHEDULE 2.10(a) as of the close of business on the Closing
Date (the "Closing Date Statement"). Within thirty (30)
calendar days after delivery, the Seller shall provide
Purchaser with a calculation of the NAV of the Business as at
the Closing. Seller shall present a Post-Closing Adjustment
amount equal to the change in NAV between the month-end prior
to Closing and Closing (the "First Adjustment"). To the extent
NAV has increased by more than Fifty Thousand ($50,000.00),
then Purchaser shall owe to Seller the amount of the
difference. To the extent NAV has decreased by more than Fifty
Thousand ($50,000.00), then Seller shall owe to Purchaser the
amount of the difference.
(b) Purchase Price Adjustment Dispute Procedure.
(i) Purchaser shall be provided with a fifteen (15)-calendar
day review period upon receipt of the First Adjustment amount
furnished pursuant to (a) above. If Purchaser fails to submit, in
writing, a Dispute Notice contesting the First Adjustment within ten
(10) calendar days, the First Adjustment, as presented, shall be
deemed accepted.
(ii) If, within ten (10) calendar days of receipt by Seller
of a Dispute Notice, Purchaser and Seller, or their respective
representatives, are unable to agree on the First Adjustment,
Purchaser or Seller, as the case may be, shall provide to the other,
in writing ("Irreconcilable Dispute Notice") listing elements of the
First Adjustment which remain in dispute, and Purchaser's or
Seller's, as the case may be, position as to each one.
(iii) If the parties cannot agree within an additional 30 day
period, Purchaser and Seller shall then engage an independent
accounting firm which they may mutually agree (the "Arbitrator") to
resolve the conflict. The Arbitrator shall be furnished with a copy
of this Agreement and relevant correspondence and information
regarding the First Adjustment from the parties, including their
respective Dispute Notice(s) and/or Irreconcilable Dispute Notices
(in each case, the "Closing Information".) Such submission shall
include each party's calculation of the First Adjustment. Provided
however that the only decision to be made by the Arbitrator is the
accuracy of the calculation of the First Adjustment. For purposes of
such determination, the Arbitrator shall only consider the amount of
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the Purchased Assets and the Assumed Liabilities and shall not be
permitted to consider any arguments regarding their worth and/or
collectability. In such regard the parties agree that the intention
of the parties was the sale and purchase of the Purchased Assets
"as-is, where is" and that Purchaser was given ample time to conduct
inventory test counts, inventory evaluation procedures, and
otherwise examine the assets during its due diligence, and that such
examination led to an agreement of the Purchase Price. Neither party
shall make any additional submission to the Arbitrator, except
pursuant to the Arbitrator's specific request. The Arbitrator shall
review the Closing Information, each party's proposed First
Adjustment, and such other information as the Arbitrator deems
appropriate, for a period of fifteen (15) days. Within such fifteen
(15) day period, the Arbitrator shall furnish both parties with its
written determination with respect to each of the unresolved
adjustments. The parties acknowledge and agree that the award of the
Arbitrator shall be final and binding on the parties and a judgment
of any circuit court in Michigan may be rendered upon the award. The
fee of the Arbitrator shall be borne by the party whose calculation
is rejected by the arbitrator.
(iv) Upon request, each party shall grant the other and the
Arbitrator reasonable access to the records of the Business and any
work papers, including auditor's work papers, prepared with respect
to the First Adjustment.
(c) Adjustment to the Purchase Price. Within five (5) business
days of final determination of the First Adjustment, the owing party shall pay
such amount to the other party by wire transfer.
ARTICLE 3
THE CLOSING
3.1 THE CLOSING. The closing of the transactions contemplated herein
(the "Closing") shall be held at 10:00 a.m. ("Closing Time") local time on
December 29, 2003 ("Closing Date"), at the offices of Seller at ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, unless the parties agree to another time, date
or place. The term "Closing Date" shall mean the date on which the Closing
occurs.
3.2 DELIVERIES. Seller and Purchaser shall deliver at the Closing, in
addition to all other items specified elsewhere in this Agreement, the following
to each other.
(a) General Transfer Instruments. The general instrument of
conveyance, together with the bills of sale, in the form attached as SCHEDULE
3.2(a), duly executed by Seller and Purchaser.
(b) Assignment and Assumption Agreement. The Assignment and
Assumption Agreement with respect to the Assumed Liabilities and Contract Rights
in the form attached as SCHEDULE 3.2(b) and assignments and assumption of the
Leases, duly executed by Seller and Purchaser.
(c) Motor Vehicle Title Certificates. Title certificates,
registrations and other documentation necessary to transfer motor vehicles and
other certificated assets, if any, included in the Purchased Assets, duly
completed in favor of Purchaser and duly executed by Seller and Purchaser.
(d) Transition Services Agreement. The Transition Services
Agreement, in the
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form attached as SCHEDULE 1.3, duly executed by Seller and Purchaser.
(e) Supply Agreement. The Supply Agreement in the form of SCHEDULE
1.4.
(f) Trademark License Agreement. The Trademark License Agreement
in the form of SCHEDULE 1.5.
(g) Additional Requests. Such other documents or instruments of
conveyance and transfer as Seller or Purchaser may reasonably request for the
purpose of assigning, transferring, granting, conveying, and confirming the sale
of the Business and the Purchased Assets, or any part thereof, to Purchaser.
3.3 POSSESSION. The transactions contemplated by this Agreement,
including possession of the Purchased Assets and assumption of the Assumed
Liabilities, shall be effective as of 12:01 a.m., Eastern Standard Time, on the
Closing Date, once all conditions precedent, including but not limited to
receipt of funds into Seller's account and receipt of all closing and transfer
documents by Purchaser, have been met .
3.4 RISK OF LOSS. Risk of loss with respect to the Purchased Assets
shall remain with Seller until the Closing Time, at which time it shall pass to
Purchaser.
ARTICLE 4
OTHER AGREEMENTS
4.1 THIRD PARTY ASSIGNMENTS. To the extent that any of the Contract
Rights and Permits that this Agreement contemplates are to be assigned to
Purchaser are not assignable without the consent of a third party (for purposes
of this Section 4.1, "Special Agreements and Rights"), neither this Agreement
nor any agreement, document or instrument delivered pursuant to this Agreement
shall constitute an assignment or an attempted assignment of such Special
Agreements and Rights if such consent is not obtained. If such consent shall not
be obtained, Seller shall cooperate in any reasonable arrangement designed to
provide for Purchaser the benefits under any such Special Agreements and Rights,
provided, however, any third party expense associated with acquiring such rights
or permits will be for the sole account of Purchaser. Specifically, Seller and
Purchaser agree to work cooperatively to assign Seller's interest in the Leases
for the Business' locations at Carson, California and Parsippany, New Jersey. If
the landlords at either of said locations refuse to consent to such an
assignment, Seller and Purchaser will work to provide an assignment (or
sublease) of said Leases to Purchaser on substantially the same terms and
conditions governing Seller's tenancy. If within 90 days following the Closing
Date, Seller is unable to obtain such an assignment (or sublease) of the Leases
or any other significant contract, Seller shall notify Buyer and the parties
agree to negotiate in good faith to achieve an equitable resolution.
4.2 POST-CLOSING ASSISTANCE. From time to time after the date of this
Agreement, Seller and Purchaser (on mutually acceptable terms and conditions)
shall cause their appropriate employees and representatives: (i) to provide the
other with information and data (including work papers and personnel and
employee benefit records) reasonably requested which are necessary or useful to
the requesting party in connection with its current or former operation of the
Business, or the preparation of all accounting and related reports and all tax
returns with respect to the Business; and (ii) to provide each other with
assistance as may be reasonably requested in connection with its current or
former operation of the Business (including the administration or defense of any
third party claims or litigation, audit or other examination by any taxing
authority or any judicial or administrative proceedings relating to any party's
liability for taxes) with respect to the Business.
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4.3 TRANSITIONAL SERVICES AGREEMENT. At the Closing, Seller and
Purchaser will enter into and perform the Transitional Services Agreement in the
form attached as SCHEDULE 1.3.
4.4 ACQUIRED EMPLOYEES. Listed on SCHEDULE 4.4 are all of the active and
inactive employees of the Business, including without limitation those on
layoff, any type of medical leave (including on family and medical leave,
workers' compensation or other), or any other leave (collectively, the
"Autospecialty Employees"). Subject to the provisions contained in Article 7 of
this Agreement and except for any excluded employees listed on Schedule 4.4 (the
"Excluded Employees"), Purchaser shall hire and shall otherwise assume all
post-Closing liability for all Autospecialty Employees (the Autospecialty
Employees, excluding the Excluded Employees, are hereinafter collectively
referred to as the "Acquired Employees"). Notwithstanding the foregoing, nothing
in this Agreement shall be deemed in any way to modify the at-will employment
status of any Acquired Employee who maintains such at-will employment status
immediately prior to the Closing.
4.5 CERTIFIED BACK AUDITS. On or before 60 days following Closing,
Seller shall deliver to Purchaser certified audits of the Business for years
2001 and 2002 and for January through December 2003, prepared by Ernst & Young.
4.6 BULK TRANSFER. Seller and Purchaser agree to waive compliance with
any bulk transfer notice requirements in connection with the transactions
contemplated by this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLER
AS TO THE PURCHASED ASSETS
Except for the Retained Liabilities, Seller shall have no liability, obligation
or duty to Purchaser with respect to the contents of, and matters disclosed in,
(a) the documents contained in the "data room" relating to Autospecialty or the
Business (the "Data Room") and more particularly described as ▇▇▇▇▇ Stamped
Pages 000001 through 2,622, inclusive, (b) the electronic data provided on three
CD's included as part and parcel to the "data room" and (c) all information and
matters known, from whatever source, by Purchaser as of the Closing Date,
whether or not disclosed in the Schedules pursuant to this Article 5. Subject to
the foregoing, Seller hereby represents and warrants to Purchaser as of the
Closing Date only to the extent that a breach of any representation or warranty
has a Material Adverse Effect (as defined in Section 9.6 below):
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5.1 ORGANIZATION AND STANDING OF SELLER.
(a) Organization and Status. Seller is a corporation duly
organized and validly existing under the laws of the State of Delaware. Seller
has qualified as a foreign corporation and is in good standing in every other
state where the failure to so qualify would have a Material Adverse Effect.
Seller has all corporate power and authority necessary to own and operate its
properties and otherwise to conduct the Business as it is presently conducted
and to enter into this Agreement and the other agreements to be executed and
delivered by it pursuant to this Agreement and to perform its obligations
hereunder and thereunder.
(b) Authority. The execution and delivery of this Agreement and
the other agreements to be executed and delivered by Seller pursuant to this
Agreement and the consummation by Seller of the transactions contemplated by,
and other compliance with or performance under, them have been duly authorized
by all necessary action on the part of Seller and its Board of Directors, in
compliance with applicable law.
(c) Consents. Except as provided under Section 4.6 above and
except as set forth on SCHEDULE 5.1(c), all filings, consents, and approvals of
third parties and governmental authorities required in connection with the
execution and delivery by Seller of this Agreement and the consummation by
Seller of the transactions contemplated by this Agreement have been obtained.
5.2 NO VIOLATION. Except as provided in SCHEDULE 5.2, the execution and
delivery by Seller of this Agreement and the other agreements to be executed and
delivered by Seller pursuant to this Agreement and the consummation by Seller of
the transactions contemplated hereby and thereby do not and will not; (i)
violate or conflict with any provision of the Articles of Incorporation or the
Bylaws of Seller; (ii) violate or conflict with, or result (with the giving of
notice or lapse of time or both) in a violation of or constitute a default (or
give rise to any right of termination, cancellation, or acceleration) under any
of the terms, conditions or provisions of any note, license, agreement or other
instrument or obligation to which Seller is a party or by which any of its
assets (including the Purchased Assets) may be bound, except for such violations
or defaults (or rights of termination, cancellation, or acceleration) as to
which requisite waivers or consents have been obtained or which will be cured by
Seller prior to, Closing; or (iii) violate any law, ordinance, order, writ,
injunction, decree, statute, rule or regulation applicable to Seller, or any of
the Purchased Assets.
5.3 ENFORCEABILITY. This Agreement and the agreements and instruments
contemplated by this Agreement to which Seller is a party or a signatory
constitute the legal, valid and binding obligations of Seller, and are
enforceable in accordance with their terms. The transfer documents executed and
delivered by Seller pursuant to this Agreement effectively convey to, and vest
in, Purchaser the full right, title and interest of Seller in and to the
Purchased Assets (to the extent transferable).
5.4 FINANCIAL MATTERS. Seller has delivered to Purchaser true and
complete copies of (a) unaudited financial statements of the Business for each
of the fiscal years-ended December 31, 2001 and 2002, and (b) the unaudited
balance sheets of the Seller as of November 28, 2003 and the related statements
of revenues and expenses of the Business for the eleven-month period ended
November 28,2003. The financial statements described in the preceding sentence,
are collectively referred to in this Agreement as the "Financial Statements."
The Financial Statements are correct and complete, and prepared in accordance
with the books and records of Seller and the accounting policies disclosed in
the Data Room and fairly present Seller's assets, liabilities, equity, revenues
and expenses as of the date or periods thereof. The reserves on the Financial
Statements are calculated consistent with the accounting policies disclosed in
the "data room" and past practice. The Business has no liability or obligation
of any
11
nature, whether due or to become due, fixed, contingent, accrued, or otherwise,
including liabilities for or in respect of federal, state, local, or foreign
taxes and any interest or penalties relating thereto, except (a) to the extent
fully reflected as a liability on the Financial Statements, and (b) liabilities
incurred in the ordinary course of business since November 28, 2003, and fully
reflected as liabilities on the books of account of the Business, none of which,
individually or in the aggregate, would have a Material Adverse Effect.
5.5 INVENTORIES. The value of the Inventory presented in the Bid Balance
Sheet was calculated in accordance with the TRW policies provided in the Data
Room.
5.6 PROPERTIES.
(a) Leased Real Property. Seller does not hold legal title to any
of the Real Property used in connection with the Business. SCHEDULE 2.2(a) sets
forth all the Real Property leases of the Business.
(b) Owned Personal Properties. SCHEDULE 2.2(b) (i) lists items of
depreciable Machinery and Equipment of the Business, (ii) lists motor vehicles
which are owned and used by Seller in the conduct of the Business, and (iii)
contains a summarized description of other tangible property comprising the
Purchased Assets. Except as set forth in SCHEDULE 5.6(B), there are no liens on
(other than those which shall be fully discharged on or before Closing) and
Seller at Closing shall convey and transfer to Purchaser good title to all
Machinery and Equipment, Inventory, Accounts Receivable and all other non-leased
Assets identified in Section 2.2(b) above. All of the personal property,
including the Machinery and Equipment, is used and is being sold "AS IS, WHERE
IS", without any representations or warranties of any nature other than title
(as provided above), including, without any representation or warranty as to
merchantability or fitness for a particular purpose. Subject at all times to
Section 8.6 below, recovery for a claim pursuant to Section 8.2 alleging a
breach of the representations and warranties contained in this Section 5.6(b)
will be limited to a credit for the actual out-of-pocket expenses incurred by
Purchaser up to the price paid by Purchaser in connection with the particular
asset in question.
5.7 CONTRACTS. SCHEDULE 5.7 sets forth as of the date hereof significant
customer and supplier contracts and quotations for the sale of products of the
Business which have not been fully performed by Seller, copies of which have
been made available to Purchaser. Except as disclosed on SCHEDULE 5.7, neither
Seller nor any other party to such contracts is in material default of its
obligations thereunder. Except as set forth on SCHEDULE 5.7, with respect to the
Business, Seller is not a party to:
(i) any indenture, mortgage, note, guaranty, letter of
credit, installment obligation, agreement, or other instrument relating to
financing or the guarantee of any financing obligation;
(ii) any agreement, contract, or other commitment limiting
the ability of the Business to (A) compete in the business of sale of
braking, steering, clutch or suspension components for passenger vehicles
and light trucks in the independent aftermarket ("IAM"), with any person,
or in any geographic area, (B) conduct the Business as presently
conducted, or (C) use or disclose any proprietary information in the
possession of the Business;
(iii) any license agreement, including any agreement with
respect to any manufacturing rights granted to or by the Business; or
(iv) any joint venture or similar agreement.
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5.8 NO LITIGATION. Except as described on SCHEDULE 5.8(a), there is no
litigation, action, claim (including material warranty, charge-back, product
liability, or workers' compensation claims), proceeding or governmental
investigation pending or threatened in writing against Seller; (i) relating to
the Business or the Purchased Assets, or (ii) which may affect Seller's ability
to perform its obligations under this Agreement or under any agreement or
instrument contemplated by this Agreement.
5.9 ENVIRONMENTAL.
With respect to the operations of the Business and except as otherwise
disclosed in the Data Room:
(a) Seller has all permits and approvals currently required by
applicable Environmental Laws ("Environmental Permits");
(b) Seller is in substantial compliance in all material respects
with all applicable Environmental Laws and Environmental Permits;
(c) The Business is not the subject of any pending or threatened
federal, state, or local action or investigation evaluating whether Seller has
materially violated any Environmental Law or Environmental Permit, or whether
any Remedial Action (as hereinafter defined) is needed to respond to a Release
(as hereinafter defined) at the Real Property of any Contaminant (as hereinafter
defined) into the environment; and
(d) There are no Releases at the Real Property caused by the Business
which require Remedial Action under the Environmental Laws or under any of the
Leases.
For purposes of this Agreement:
"Environmental Law(s)" means all applicable federal, state,
and local laws, regulations, rules, judgments, consent orders,
or ordinances relative to air quality, water quality, solid
waste management, hazardous or toxic substances, or the
protection of health or the environment including, but not
limited to, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C.
Section 9601, et seq.), the Federal Water Pollution Control
Act (33 U.S.C. Section 1251, et seq.), the Resource
Conservation and Recovery Act of 1976, as amended (42 U.S.C.
Section 6901, et seq.) ("RCRA"), the Clean Air Act, as amended
(42 U.S.C. Section 7401, et seq.), and the Clean Water Act of
1977, as amended (33 U.S.C. Section 1251, et seq.);
"Release" means any release, spill, emission, leaking,
pumping, pouring, emitting, escaping, dumping, injection,
deposit, disposal, discharge, dispersal, leaching, or
migration into the environment, including the movement of any
Contaminant through or in the air, soil, surface water, or
groundwater; and
"Remedial Action" means any action required under any
Environmental Law to (i) clean up, remove, or treat any
Contaminant, and (ii) prevent the Release, threat of Release,
or minimize the further Release or migration of any
Contaminant to inhibit migration or endangerment to public
health, welfare, or the environment.
13
"Contaminant" means substances or materials regulated as
hazardous, toxic, explosive, dangerous, flammable or
radioactive under any Environmental Law.
5.10 PERMITS. Attached as SCHEDULE 2.2(g) is a listing of all permits
used in the conduct of the Business all of which are in full force and effect.
5.11 TAX RETURNS AND TAXES. Except as otherwise disclosed on SCHEDULE
5.11, (1) all tax returns required to be filed by Seller prior to the Closing
with respect to the Business have been or will be filed on or before the Closing
Date; (2) all taxes indicated as due and payable prior to the Closing on such
returns have been or will be paid when required by law; and (3) the Purchased
Assets are not encumbered by any liens arising out of unpaid taxes that are due
and payable.
5.12 ACCOUNTS RECEIVABLE. The accounts receivable presented in the Bid
pBalance Sheet were incurred in the normal course and accounts receivable
reserves were calculated in accordance with the TRW policies depicted on page 66
of the Offering Memorandum.
5.13 ACCOUNTS PAYABLE. The accounts payable presented on the Bid Balance
Sheet provide a true and correct summation of the payments owed to trade
vendors.
5.14 EMPLOYEE BENEFIT PLANS.
(a) SCHEDULE 5.14(a) contains a true and complete list of each
contract, agreement, plan, or arrangement which is an "employee benefit plan,"
as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended, together with all regulations thereunder ("ERISA"), maintained
by or on behalf of Seller or to which Seller contributes, providing benefits to
the Acquired Employees; and, whether or not described in the preceding clause,
any pension, profit sharing, severance, employment, change in control, bonus,
deferred or supplemental compensation, stock purchase or stock option,
retirement or thrift plan, or any other employee benefit arrangement,
obligation, custom, or practice which provides benefits, other than salary, as
compensation for services rendered to current and former employees of the
Business (collectively, the "Employee Benefit Plans").
5.15 EMPLOYEES, CONSULTANTS, AND INDEPENDENT CONTRACTORS.
(a) Set forth on SCHEDULE 5.15(a) is a true and complete list of
each person employed by the Business as of the Closing Date, which identifies
each such person by name, date of hire, service date, status as an hourly or
salaried employee, and location of employment.
(b) SCHEDULE 5.15(b) sets forth a true and complete list and
description of (i) the current status of any pending or threatened, charges,
complaints, investigations, or grievances relating to the Acquired Employees,
including unfair labor practices, wage and hour complaints, complaints regarding
vacations, time off, or pay in lieu of vacation or time off, and employment
discrimination charges, affecting the Business, and (ii) all investigations,
orders, decrees, settlements, and judgments to which the Business was a party,
which are still binding upon the Business, all as ofNovember 28, 2003.
5.16 BROKERS. Except for W.Y. ▇▇▇▇▇▇▇▇ & Co., no broker, finder or
investment banker is entitled to any brokerages, finders or other fee or
commission in connection with the transactions contemplated by this Agreement,
based upon arrangements made by or on behalf of Seller.
14
5.17 OPERATIONS IN THE NORMAL COURSE. Except for the process engaged
through W.Y. ▇▇▇▇▇▇▇▇ & Company to sell the assets of the Business, the Business
has been run in the normal course, including but not limited to the ordering of
inventory, fulfillment of customer orders, recording of transactions, and
payment of vendors.
5.18 NO MATERIAL ADVERSE CHANGE. Except as disclosed in SCHEDULE 5.18,
from the period of November 28, 2003 through the Closing, to the Knowledge of
Seller, after due inquiry, and except as has been disclosed, there has been no
material adverse change in (i) the customer base or (ii) the operation of the
Business. Specifically, Seller shall make due inquiries and disclose whether a
material customer or a sufficient quantity of smaller customers who in the
aggregate are material: (a) has ceased buying from Autospecialty; (b) threatens
to cease buying from Autospecialty which threat is believed to be true; (c)
there is a material adverse change in ability to make payments for previously
purchased merchandise or (d) there is any other material adverse change in the
relationship with material customer(s). Except as disclosed in SCHEDULE 5.18,
from the period of November 28, 2003 through the Closing, there has been no
material adverse change in the profit/loss conditions of Autospecialty based
upon financial statements utilizing Seller's consistently applied methods.
5.19 ASBESTOS. None of the Inventory contains any asbestos containing
materials.
5.20 SOLVENCY. Seller is not insolvent, as such term is defined in the
United States Bankruptcy Code, nor, as a result of this transaction, will it be
rendered insolvent, have unreasonably small capital or be unable to pay its
debts as they mature.
Other than the representations and warranties set forth in Sections 5.1,
5.2, 5.3, 5.6(b) and 5.20 above, the foregoing representations and warranties of
Seller are made to its Knowledge (as defined in Section 9.6 below).
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as of the Closing Date
that, in all material respects:
6.1 ORGANIZATION AND STANDING OF PURCHASER.
(a) Organization and Status. Purchaser is a corporation duly
organized and validly existing under the laws of the State of Illinois.
Purchaser has qualified as a foreign corporation and is in good standing in
every state where the failure to so qualify would have a material adverse effect
on the financial condition, business, assets, or results of operations of
Purchaser taken as a whole. Purchaser has all corporate power and authority
necessary to own and operate its properties and otherwise to conduct its
business as it is presently conducted and to enter into this Agreement and the
other agreements to be executed and delivered by it pursuant to this Agreement
and to perform its obligation hereunder and thereunder.
(b) Authority. The execution and delivery of this Agreement and the
other agreements to be executed and delivered by Purchaser pursuant to this
Agreement and the consummation by Purchaser of the transactions contemplated by,
and other compliance with or performance under, them have been duly authorized
by all necessary action on the part of Purchaser and its Board of Directors in
compliance with applicable law.
15
(c) Consents. Except as set forth on SCHEDULE 6.1(c), all filings,
consents, and approvals of third parties and governmental authorities required
in connection with the execution and delivery by Purchaser of this Agreement and
the consummation by Purchaser of the transactions contemplated by this Agreement
have been obtained.
6.2 NO VIOLATION. The execution and delivery by Purchaser of this
Agreement and the other agreements to be executed and delivered by Purchaser
pursuant to this Agreement and the consummation by Purchaser of the transactions
contemplated hereby and thereby do not and will not (i) violate or conflict with
any provision of the Articles of Incorporation or the Bylaws of Purchaser, (ii)
violate or conflict with, or result (with the giving of notice or lapse of time
or both) in a violation of or constitute a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, license, agreement or other instrument or obligation to
which Purchaser is a party or by which any of its assets may be bound, except
for such violations or defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained or
which will be cured by Purchaser prior to, or as soon as practicable after,
Closing, or (iii) violate any law, ordinance, order, writ, injunction, decree,
statute, rule or regulation applicable to Purchaser, or any of its assets.
6.3 ENFORCEABILITY. This Agreement and the agreements and instruments
contemplated by this Agreement to which Purchaser is a party or a signatory
constitute or will constitute the legal, valid and binding obligations of
Purchaser, and are enforceable in accordance with their terms.
6.4 BROKERS. No broker, finder or investment banker is entitled to any
brokerages, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Purchaser.
6.5 LITIGATION. There is no litigation, action, claim, proceeding or
governmental investigation pending or threatened in writing against Purchaser or
affecting Purchaser which materially affects or would materially affect
Purchaser's ability to complete the transactions contemplated in this Agreement.
6.6 ASBESTOS. To its Knowledge none of the Purchaser's inventory
contains any asbestos containing materials.
6.7 SOLVENCY. Purchaser is not insolvent, as such term is defined in the
United States Bankruptcy Code, nor, as a result of this transaction, will it be
rendered insolvent, have unreasonably small capital or be unable to pay its
debts as they mature.
ARTICLE 7
EMPLOYEE BENEFITS
7.1 BENEFIT PLANS.
(a) Except as otherwise agreed to by Seller, from the Closing until at
least one year following the Closing, Purchaser will provide the Acquired
Employees with compensation (including salary and the opportunity to earn
performance based incentive compensation, if any) which is reasonably comparable
to the compensation which was being provided by Seller immediately prior to the
Closing.
(b) Except as otherwise agreed to by Seller, from the Closing until at
least one year following the Closing, Purchaser will provide to the Acquired
Employees with the following
16
benefits:
(i) Medical and Dental Benefits. Purchaser will offer medical
(through ▇▇▇▇▇▇ Permanente) and dental (through Delta Dental)
benefits (collectively, "Purchaser Health Benefits") which are
reasonably comparable to those which were offered to such
Acquired Employees and their covered dependents by Seller
immediately prior to the Closing. Purchaser will not increase
materially the amounts which such Acquired Employees must
contribute for themselves and their covered dependents for
Purchaser Health Benefits compared to what they had been
contributing for medical and dental benefits while employed by
Seller immediately prior to the Closing. Current medical and
dental contribution levels for Acquired Employees are set
forth on SCHEDULE 7.1(b). Waiting periods and pre-existing
coverage restrictions for Purchaser Health Benefits will apply
to any such Acquired Employee or his or her covered dependent
only to the extent they would have applied to any such person
under the medical and dental plans provided by Seller if the
transaction contemplated by this Agreement had not occurred.
Amounts expended by such Acquired Employees or their covered
dependents to satisfy annual deductibles, co-payments and
out-of-pocket maximums under the medical and dental plans
provided by Seller will be credited for purposes of Purchaser
Health Benefits to the extent such amounts were expended in
the benefit determination year of the plan or plans providing
the Purchaser Health Benefits which includes the Closing Date.
Notwithstanding anything in this Section or Agreement to the
contrary, medical and dental coverage (as applicable) in
effect for the Acquired Employees on the day immediately prior
to the Closing Date under the welfare plan maintained by
Seller shall remain in effect for such Acquired Employees
through December 31, 2003. Purchaser shall reimburse Seller
for the cost of such coverage for the period commencing on
Closing through January 31, 2004.
(ii) Vision Benefits. Such Acquired Employees and their covered
dependents will be offered vision benefits only to the extent
included in Purchaser Health Benefits; provided, however, that
Purchaser will offer coverage to such Acquired Employees under
any stand-alone vision plan to the same extent and on the same
terms and conditions as it offers such coverage to its
similarly-situated other employees.
(iii) Life Insurance Benefits. Such Acquired Employees will be
offered life insurance benefits to the same extent and on the
same terms and conditions as Purchaser offers such coverage to
its similarly-situated other employees.
(iv) Retirement Benefits. As soon as practicable following the
Closing, Purchaser will provide all Acquired Employees hired
by Purchaser with coverage under a defined contribution plan,
which offers a cash or deferred arrangement and which is
similar in form and substance to that which is provided to
Purchaser's similarly situated employees. For all purposes
under such Plan, including eligibility to participate and
vesting in benefits thereunder, the Acquired Employees shall
receive credit for all periods of service with Seller and the
members of Seller's controlled group (as defined in Section
414 of the Internal Revenue Code of 1986, as amended (the
"Code")) as of the Closing. Such plan will permit the
17
Acquired Employees participating thereunder to roll over their
vested benefits under any retirement plan maintained by Seller
only if Seller provides evidence reasonably satisfactory to
counsel for Purchaser as to the tax-qualified status of such
retirement plan, as determined in accordance with applicable
Treasury Regulations. Purchaser's plan will not be obligated
to accept the rollover of any loan made to such Acquired
Employees by any retirement plan sponsored by Seller unless
(I) such loan is current at the time of the rollover and (II)
Purchaser permits its other employees who are similarly
situated to such Acquired Employees to borrow from one or more
tax-qualified retirement plans sponsored by PURCHASER. Except
for any such rollover, no assets held in trust for any
Employee Benefit Plan applicable to such Acquired Employees,
specifically including, but not limited to, the TRW Automotive
Salaried Pension Plan and the TRW Automotive Retirement
Savings Plan, will be transferred to Purchaser or to any plan
adopted or maintained by Purchaser.
(v) Severance Benefits. Purchaser will provide severance benefits
to such Acquired Employees in the amount of one week of base
compensation for each year of service with Purchaser
(including any prior service with Seller) in the event
Purchaser terminates the employment of any such Acquired
Employee without cause (except for terminations without cause
which are part of a sale of assets by Purchaser under
circumstances where the employee is offered comparable
employment by the purchaser of such assets).
(vi) Vacation Benefits. Purchaser will honor any vacation benefits
of such Acquired Employees which were accrued at the time of
the Closing and will permit such benefits to be taken 2003 or
in 2004, subject to Purchaser's reasonable procedures
applicable to similarly-situated employees as to when vacation
time may be taken. Any vacation policy which Purchaser may
apply to such Acquired Employees will give them credit for
their prior service with Seller.
Purchaser will not be required to provide such Acquired Employees with any
short-term or long-term disability benefits.
(c) Purchaser is not assuming, and will not have responsibility for the
continuation of, any Employee Benefit Plan of Seller applicable to any of the
Acquired Employees, and Purchaser will not be deemed a successor employer to
Seller with respect to any Employee Benefit Plan. No plan adopted or maintained
by Purchaser with respect to the Acquired Employees hired by it will be deemed a
successor plan of Seller.
(d) Seller will be responsible for providing continued group health plan
coverage pursuant to Section 4980B of the Code and Sections 601 through 609 of
ERISA ("COBRA Continuation Coverage") in accordance with Treasury Regulation
Section 54.4980B-9 and other applicable laws and regulations, to all of its
employees, and to their respective covered dependents, electing such coverage
who incurred qualifying events (for COBRA Continuation Coverage purposes) prior
to the Closing or who incur qualifying events in connection with the Closing;
provided, however, that if any Acquired Employee elects COBRA Continuation
Coverage under Seller's group health plan, Purchaser shall pay for the cost of
such coverage until the Acquired Employee becomes covered under Purchaser Health
Benefits, as provided in paragraph (b)(i) above, and Purchaser shall notify
Seller of the date on which the Acquired Employee becomes covered under
Purchaser Health Benefits. Purchaser will be responsible for providing COBRA
Continuation Coverage in accordance with Treasury Regulation Section 54.4980B-9
18
and other applicable laws and regulations, to all Acquired Employees, and to
their respective covered dependents, electing such coverage who incur qualifying
events after the Closing and Purchaser will provide all required notices to
individuals entitled to such notices pursuant to the requirements of ERISA and
the Code.
(e) No employee of Seller, and no dependent of any such employee, will
be a third-party beneficiary of the obligations of Purchaser under this Section
7.1.
7.2 ACQUIRED EMPLOYEES.
(a) ITASCA EMPLOYEES. With respect to the Itasca facility,
Purchaser and Seller shall agree to offer a "stay-bonus" to encourage the Itasca
Acquired Employees to remain through a transition period with Purchaser.
Eligible Itasca Acquired Employees who are still employed at the end of such
transition period will be paid a "stay-bonus" by Purchaser in exchange for a
signed release of liability (for Seller's as well as Purchaser's benefit) in a
form approved by Seller. Seller will pay to Purchaser the amount of said
"stay-bonuses" up to an aggregated maximum of $10,000.00 as a reduction to the
purchase price.
(b) ▇▇▇▇▇▇ EMPLOYEES. With respect to the ▇▇▇▇▇▇ facility,
effective as of the time of Closing, Purchaser will offer employment to all
remaining employees, the number of which shall not exceed 175. Seller shall be
responsible for severance pay (in accordance with the terms of the Seller's
applicable severance pay policy) and pay-in-lieu-of-notice (including any WARN
(as defined in Section 7.2(d) below) or state-mandated WARN-type liability), if
any, to all ▇▇▇▇▇▇ employees severed by Seller as of or before the time of
Closing. Purchaser shall be responsible for any and all such costs to all ▇▇▇▇▇▇
employees severed by Purchaser as of or after the time of Closing.
(c) KEY MANAGERS. With respect to the key managers identified on
Schedule 7.2(c) hereof, in the event Purchaser terminates (for any reason) the
employment of up to three of them within the period between sixty and
one-hundred-twenty days following the Closing, Purchaser shall notify Seller. At
the time of termination of each such key manager, Purchaser shall pay such
employee severance under Purchaser's policy plus such additional amount as would
in total equal the severance benefit such employee would have received from
Seller and Purchaser shall obtain a release from such employee including on
behalf of Seller. Seller shall reimburse Purchaser for the total amount of the
severance paid to such employee (but not exceeding what such employee would have
received under Seller's severance policy) plus the amount of salary and cost of
benefits for the period between the sixty-first day following Closing and the
date of termination of such employee's employment with Purchaser.
(d) SUBSEQUENT TERMINATIONS OR LAYOFFS. Other than as specifically
referenced in this Section 7.2, with respect to any termination or layoff by
Purchaser of any Acquired Employee after Closing, Purchaser will comply fully
with all applicable laws, including without limitation any laws relating to
employee notification (such as with the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN") and any related state laws in the United
States), and all laws relating to discrimination in employment or unfair
employment practices. Purchaser will be solely responsible for all costs related
to such termination or lay off of any Acquired Employee, including but not
limited to severance expenses, penalties, damages and attorney's fees related
thereto. Notwithstanding the preceding sentence, Seller will reimburse Purchaser
for any of the Acquired Employees at Itasca and up to five (5) of the Acquired
Employees at ▇▇▇▇▇▇ who are terminated by Purchaser prior to January 31, 2004.
Said reimbursement will be based on the payment of severance benefits actually
paid in accordance with Seller's severance policy and will be made following
submission of an invoice by Purchaser along with a signed release of liability
(for Seller's as well as Purchaser's benefit) by the terminated Acquired
Employee in a form approved by Seller.
19
7.3 WORKERS' COMPENSATION. Notwithstanding anything to the contrary in
this Agreement:
(a) Seller will bear the entire cost and expense of all workers'
compensation claims arising out of injuries identifiably sustained by Acquired
Employees on or before the Closing as identified in SCHEDULE 7.3
(b) Purchaser will bear the entire cost and expense of all workers'
compensation claims arising out of injuries identifiably sustained by Acquired
Employees after the Closing.
(c) Seller will bear the entire cost and expense of all workers'
compensation claims arising out of injuries without an identifiable date of
occurrence and which are alleged to have arisen either before or during a period
before and after the Closing which are filed within sixty (60) calendar days
after the Closing Date.
(d) Purchaser shall bear the entire cost and expense of all workers'
compensation claims arising out of injuries sustained by Acquired Employees
without an identifiable date of occurrence and which are alleged to have arisen
either before or during a period before and after the Closing which are filed
more than sixty (60) calendar days after the Closing Date.
7.4 NO RIGHTS. Neither Purchaser nor Seller intend this Article 7 or
other provisions of this Agreement to create any rights or obligations, except
as between the parties hereto, and no present or future employee of Purchaser or
Seller (or any dependents of such employee) will be treated as a third party
beneficiary under this Agreement. Nothing in this Agreement is intended to
state, suggest or imply that Acquired Employees are being employed by the
Purchaser for any specific duration or on a basis that is other than terminable
at will.
ARTICLE 8
INDEMNIFICATION
8.1 INDEMNITY BY PURCHASER. Subject to the limitations provided in
Section 8.6, Purchaser shall indemnify, defend, and hold harmless Seller against
any loss, damage, injury, liability, duty, obligation, cost or expense,
including attorneys' fees and expenses, whether or not related to claims by
third parties, (each of the foregoing, a "Loss") suffered by Seller, or its
affiliates, shareholders, officers, directors, employees and agents, and their
respective legal representatives, successors and assigns (the "Seller
Indemnitees"), arising out of, in connection with or resulting from:
(a) any breach of or failure to comply with any covenant or
agreement made by Purchaser in this Agreement or in any schedule, exhibit, or
certificate delivered pursuant hereto;
(b) the Assumed Liabilities and any failure to perform the Assumed
Liabilities; or
(c) any inaccuracy in, misrepresentation, or breach of any of the
representations or warranties made by Purchaser herein or in any schedule,
exhibit, or certificate delivered pursuant hereto.
8.2 INDEMNITY BY SELLER. Subject to the limitations provided in Section
8.6 of this Agreement, Seller shall indemnify, defend, and hold harmless
Purchaser against any Loss (as defined in Section 8.1) suffered by Purchaser, or
its affiliates, shareholders, officers, directors,
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employees and agents, and their respective legal representatives, successors and
assigns (the "Purchaser Indemnitees"), arising out of, in connection with or
resulting from:
(a) the failure by Seller to perform any of its obligations under
this Agreement or in any schedule, exhibit, or certificate delivered pursuant
hereto;
(b) the Retained Liabilities and any failure to perform the
Retained Liabilities;
(c) any misrepresentation or breach of the representations and
warranties of Seller contained in this Agreement or in any schedule, exhibit or
certificate delivered pursuant hereto; or
(d) the noncompliance with bulk transfer laws as provided in
Section 4.6 above (excluding however any liability which is part of the Assumed
Liabilities).
8.3 CLAIMS PROCEDURE.
(a) Notice. A party seeking indemnification pursuant to this
Agreement (the "Indemnitee") shall, within a reasonable time after receiving
notice of a Loss, notify the indemnifying party (the "Indemnitor") in writing of
the facts that are the basis of such Loss which the Indemnitee has determined
has given rise to a right of indemnification under this Agreement (a "Claim"),
and the Indemnitor shall have 30 days from receipt of such notice to elect to
conduct and control any legal or administrative action or suit with respect to a
Claim, by giving written notice to the Indemnitee within such 30 day period.
Notwithstanding the foregoing, a delay in providing any notice of a Claim shall
not prejudice any right to indemnification under this Agreement except to the
extent that the Indemnitor is actually prejudiced by such failure. The amount of
the Claim as set forth in the notice shall be based upon the Indemnitee's good
faith opinion of the reasonable maximum exposure to the Indemnitor but shall not
limit the Indemnitee's right to indemnification if the Loss resulting exceeds
the amount set forth in the notice.
(b) Other Claims. If the Indemnitee suffers a Loss other than that
arising from a claim or demand asserted by a third party, the Indemnitee shall
in its notice of Claim propose a course of remedial action. The Indemnitor shall
notify the Indemnitee whether it disputes its obligation to indemnify the
Indemnitee or the amount of the Indemnitee's Loss, and shall propose a course of
remedial action to satisfy the Claim. If the Indemnitor disputes such Claim or
any portion thereof, the Indemnitor shall specify in detail the portion of such
Loss (if less than all) which is disputed and the facts relied upon by the
Indemnitor as a basis for such dispute.
8.4 DEFENSE OF CLAIMS. If the Indemnitor does not give such notice
referred to in Section 8.3(a), the Indemnitee shall have the right to defend,
contest, settle, or compromise such action or suit in the exercise of its
exclusive discretion. If the Indemnitor gives such notice, it shall have the
right to undertake, conduct, and control, through counsel of its own choosing,
at its sole expense, the conduct and settlement of such action or suit, and the
Indemnitee shall cooperate with the Indemnitor in connection therewith;
provided, however, (a) the Indemnitor shall not thereby permit to exist any
lien, encumbrance, or other adverse charge securing the claims indemnified
hereunder upon any asset of the Indemnitee, (b) the Indemnitor shall not thereby
consent to the imposition of any injunction against the Indemnitee without the
written consent of the Indemnitee, (c) the Indemnitor shall permit the
Indemnitee to participate in such conduct or settlement through counsel chosen
by the Indemnitee, but the fees and expenses of such counsel shall be borne by
the Indemnitee, except as provided in clause (d) below, and (d) upon a final
determination of such action or suit, the Indemnitor shall agree promptly to
reimburse to the extent required under this Article 8 (subject to the
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provisions of Section 8.6) the Indemnitee for the full amount of any Loss
resulting from such action or suit and all reasonable and related expenses
incurred by the Indemnitee, except fees and expenses of counsel for the
Indemnitee incurred after the assumption of the conduct and control of such
action or suit by the Indemnitor. So long as the Indemnitor is contesting any
action in good faith, the Indemnitee shall not pay or settle any such action or
suit. Notwithstanding the foregoing, the Indemnitee shall have the right to pay
or settle any such action or suit; provided, however, in such event, the
Indemnitee shall waive any right to indemnity therefor from the Indemnitor and
no amount in respect therefor shall be claimed as Losses under this Article 8.
8.5 COOPERATION. If requested by the Indemnitor, the Indemnitee shall
cooperate with the Indemnitor and its counsel in contesting any claim which the
Indemnitor elects to contest or, if appropriate, in making any counterclaim
against the person asserting the claim, or any cross-complaint against any
person. Further, the Indemnitee shall take such other action as may reasonably
be requested by the Indemnitor to reduce or eliminate any loss or expense for
which the Indemnitor would have responsibility; provided, however, the
Indemnitor shall reimburse the Indemnitee for any out of pocket expenses
incurred by it in so cooperating or acting at the request of the Indemnitor. In
addition to the foregoing, in the event that either party is sued or legal
action or proceeding is instituted against either party (and whether or not
indemnification applies), the other party shall cooperate by providing
information, documents, witnesses and sample products and the like in order to
assist such party with defense of the litigation.
8.6 LIMITATIONS.
(a) Subject to the provisions of subpart (c) below, no Indemnitor
shall have any liability to any Indemnitee for indemnification under this
Article 8: (1) unless and until a Claim is greater than Twenty-Five Thousand
($25,000.00) dollars in value and the aggregate amount of such Claims exceeds
Two-Hundred Fifty Thousand ($250,000.00) dollars, and (2) the maximum aggregate
amount of indemnification for which any Indemnitor shall be liable under this
Article 8 shall be Five Million ($5,000,000.00) dollars for a period of nine (9)
months following the Closing Date and, subject to Section 8.6(b) below, shall be
Two Million Five Hundred Thousand ($2,500,000.00) dollars thereafter.
Notwithstanding the above, the maximum aggregate amount of indemnification for
which Seller shall be liable under this Article 8 shall be reduced by an amount
equal to the trade and sundry payables not paid by Purchaser in accordance with
Section 2.7(vi) above.
(b) Subject to the provisions of subpart (a) above and subpart (c)
below, all representations and warranties made by Seller and Purchaser contained
in this Agreement, and any indemnification obligation of Seller and/or Purchaser
for breach of same, shall survive the Closing Date for a period of eighteen (18)
months, at which time such representations and warranties and indemnification
obligation shall expire. Notwithstanding anything to the contrary contained in
this Agreement, any notice of a Claim (as provided in Section 8.3(a)) with
respect to indemnification for breach of a warranty or representation shall be
received by the Indemnitor prior to the second anniversary of the Closing Date,
and if such notice of a Claim is not received by the Indemnitor prior to such
date, the Indemnitor shall not bear any indemnification obligation to the
Indemnitee with respect to such Claim. Notwithstanding anything to the contrary
contained in this Agreement, the indemnification obligations of the parties
shall not expire as to any Claim for breach of warranty or representation
asserted by either party on or before the eighteen (18) month anniversary of the
Closing Date, until such Claim has been resolved completely, to the requirements
of this Agreement.
(c) The monetary limitations provided in subpart (a) above and the
survival limitations provided in subpart (b) above shall not apply to the
following indemnification
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obligations:
(i) any obligation of Seller pursuant to Sections 8.2(a), 8.2(b)
and 8.2(d); and
(ii) any obligation of Purchaser pursuant to Sections 8.1(a) and
(b).
8.7 PAYMENT OF DAMAGES. Each Indemnitor shall promptly pay to any
Indemnitee, in immediately available funds, any Loss to which such Indemnitee is
entitled by reason of the provisions of this Agreement. The parties covenant any
payment made pursuant to this Article 8 shall be treated, for income tax
purposes, as an adjustment to the Purchase Price.
8.8 MINIMIZATION OF INDEMNITIES RELATED TO INSURANCE. The parties shall
use reasonable efforts to minimize the obligation of the other to indemnify by
taking all reasonable efforts (not including the payment of money) to (a) secure
reimbursement from insurance carriers under applicable insurance policies
covering any such liability and (b) secure a waiver of subrogation from the
applicable insurer for the benefit of the indemnitor. An Indemnitee shall only
be required to make insurance claims (1) if the Indemnitor was not provided an
adjustment for such item on the Closing Date Statement or other financials used
to compute the Purchase Price, (2) such insurance proceeds exceed and are netted
against any expenses of the Indemnitee of making such a claim, including without
limitation, self insurance, deductibles or captive insurance premiums or
charges, and (3) net of the effect of tax burdens or benefits conferred upon
such Indemnitee.
8.9 NO OFFSET. If Seller or Purchaser, for any reason, fails or refuses
to perform fully its obligations of indemnification under this Article 8, Seller
and Purchaser will have no right of offset with respect to any payments which
are due or will become due pursuant to Section 2.10 of this Agreement except to
the extent that the amounts owing under such indemnification obligations are
noncontingent and liquidated.
ARTICLE 9
GENERAL PROVISIONS
9.1 NOTICES. All notices, requests, demands, and other communications
hereunder shall be in writing, and shall be deemed to have been duly given if
(i) delivered in person, (ii) made by facsimile transmission, or (iii) sent by
overnight courier service (with all fees prepaid), as follows:
Notices to Seller: TRW Automotive
12025 Tech Center Drive - Tech II
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Vice President & General Counsel
TRW Automotive
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ - ▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇ ▇▇▇▇
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Notices to Purchaser: Universal Automotive, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇, President and CEO
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a Copy to: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
McGuireWoods LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Any such notice, request, demand or other communication shall be deemed to be
given if delivered in person, on the date delivered, if made by facsimile
transmission, on the date transmitted, or, if sent by overnight courier service,
on the date sent as evidenced by the date of the ▇▇▇▇ of lading; and shall be
deemed received if delivered in person, on the date of personal delivery, if
made by facsimile transmission, upon confirmation of receipt (including
electronic confirmation), or if sent by overnight courier service, on the first
business day after the date sent. Any party sending a notice, request, demand or
other communication by facsimile transmission shall also send a hard copy of
such notice, request, demand or other communication by one of the other means of
providing notice set forth in this Section 9.1. Any notice, request, demand or
other communication shall be given to such other representative or at such other
address as a party to this Agreement may furnish to the other parties in writing
pursuant to this Section 9.1.
9.2 EXPENSES. Except as provided herein each party shall pay its own
legal fees and costs incurred in connection with the transactions contemplated
hereby and the performance of its obligations hereunder regardless of whether
the transactions are ultimately consummated.
9.3 REMEDIES CUMULATIVE; COSTS. The rights and remedies specified in any
provision of this Agreement are in addition to all the rights and remedies a
party may have under any other provision of this Agreement, any other agreement
or applicable law, including any right to equitable relief and any right to ▇▇▇
for damages under this Agreement, and all such rights and remedies are
cumulative; provided, however, that a party shall not be entitled to multiple
recoveries of the same loss, nor to any consequential loss of profit or loss of
business damages. Without limiting the foregoing, no exercise of a remedy shall
be deemed an election excluding any other remedy (any such claim by any other
party being hereby waived). A party who prevails in enforcing rights and
remedies under this Agreement shall (in addition to any other relief hereunder)
be paid by the other party all costs, fees and expenses, including reasonable
attorneys' fees, incurred by the prevailing party in enforcing such rights and
remedies.
9.4 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. Seller and Purchaser
agree that they will bring any action or proceeding for the enforcement of any
right, remedy, obligation or liability arising under or in connection with this
Agreement solely in the District Court for the Eastern District of Michigan or
the Michigan Circuit Court for the County of Oakland. Each party hereby
irrevocably waives its right to bring any action or proceeding against the other
except in accordance with the preceding sentences. EACH OF THE PARTIES
IRREVOCABLY WAIVES ANY RIGHT TO A JURY TRIAL WITH RESPECT TO ANY MATTER ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT. If any party seeks to enforce its
right to indemnification under this Agreement for any Loss resulting from a
Third Party Claim by joining another party to a judicial proceeding before a
jury in which such third party is a party, the
24
parties shall request the court to try the claims between the parties to this
Agreement without submitting the matters to the jury.
9.5 ASSIGNMENT; SUCCESSORS IN INTEREST. This Agreement may not be
assigned by either party without the prior written consent of the other party.
This Agreement shall be binding upon the parties to this Agreement and their
respective successors and assigns, shall inure to the benefit of the parties to
this Agreement and their respective permitted successors and assigns (and to or
for the benefit of no other person or entity, whether an employee or otherwise,
whatsoever), and any reference to a party to this Agreement shall also be in
reference to a successor or assign. Nothing in this Agreement shall be construed
to give any person other than the parties to this Agreement any legal or
equitable right, remedy or claim under or with respect to this Agreement or any
provisions of this Agreement.
9.6 CONSTRUCTION.
(a) This Agreement shall be construed and enforced in accordance
with the laws of the State of Michigan.
(b) "Knowledge" of Seller shall mean the direct, actual knowledge
of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and/or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
(c) "Knowledge" of Purchaser shall mean the direct actual
knowledge of ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and/or ▇▇▇▇▇▇▇ ▇▇▇▇▇.
(d) "Material Adverse Effect" shall mean a material adverse effect
on the Purchased Assets and the financial condition of the Business taken as a
whole except as a result of (i) the seasonal and cyclical nature of the
automotive and IAM (including commercial and off-highway vehicles) supplier
industry (the "Industry"), (ii) any change in the general economic or financial
conditions in the Industry, (iii) the occurrence or continuance of any material
disruption of, or material adverse change in, United States banking or capital
markets since the date of this Agreement, or (iv) any change resulting from
developments in the Industry which affects the Business and also affects or is
capable of affecting in a substantially similar manner other companies or
businesses in the Industry, including without limitation any strike or other
labor disruption at a customer or supplier.
9.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. For purposes here,
facsimile signatures may be delivered, and any such facsimile signature shall be
treated in all respects as if it was an original signature.
9.8 SEVERABILITY. If any term or other provision of this Agreement is
determined by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced by any rule of law or public policy, all of the
terms and provisions of this Agreement will 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 or adverse to any party
hereto.
9.9 EXHIBITS AND SCHEDULES. Each exhibit, schedule and certificate
referred to in this Agreement, each attachment to any exhibit or schedule, and
each other attachment to this Agreement is hereby incorporated by reference into
this Agreement and is made a part of this Agreement as if set out in full in the
first place that reference is made to it.
9.10 CONSULTATION. The parties shall consult with each other before
issuing any press release or making any other public announcement with respect
to this Agreement or the transactions contemplated hereby and, except as
required by any applicable law or regulatory
25
requirement, neither of them shall issue any such press release or make any such
public announcement without the prior written consent of the other, which
consent shall not be unreasonably withheld or delayed.
9.11 DISCLOSURE. Except for any public announcements of the transactions
contemplated pursuant to Section 9.11, neither party shall disclose this
Agreement or any aspects of such transaction except to its board of directors,
its senior management, its legal, accounting, financial or other professional
advisors, any financial institutions contacted by it with respect to any
financing required in connection with such transactions and counsel to such
institutions, or as may be required by any applicable law or any regulatory
authority or stock exchange having jurisdiction.
9.12 ENTIRE AGREEMENT. This Agreement, which is deemed to include all
exhibits, schedules and certificates delivered pursuant to the terms hereof,
embodies the entire agreement of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, whether expressed or implied, by any officer, employee or
representative of any party hereto with respect thereto.
9.13 AMENDMENT; WAIVER. This Agreement may be amended, and any provision
hereof waived, but only in a writing signed by the party against whom such
amendment or waiver is sought to be enforced. The granting of any waiver with
respect to any failure to comply with any provision of this Agreement shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure to comply with any provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first set forth
above.
▇▇▇▇▇▇-▇▇▇▇▇ COMPANY UNIVERSAL AUTOMOTIVE, INC.
By: ______________________ By: ______________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
Vice President and Treasurer President
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