ASSET PURCHASE AGREEMENT

Exhibit 10.1

ASSET PURCHASE AGREEMENT

AMONG

CATERPILLAR INC., CATERPILLAR REMAN

ACQUISITION LLC,

AND

REMY INTERNATIONAL, INC.,

FRANKLIN POWER PRODUCTS, INC., AND

INTERNATIONAL FUEL SYSTEMS, INC.

January 29, 2007

TABLE OF CONTENTS:

 

EXHIBITS

 

DISCLOSURE SCHEDULE

 

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this “ Agreement ”) is entered into as of January 29, 2007, by and among Caterpillar Inc., a Delaware corporation (“ Buyer’s Parent ”), Caterpillar Reman Acquisition LLC, a Delaware limited liability company (“ Buyer ”) and a wholly owned subsidiary of Buyer’s Parent, Franklin Power Products, Inc. (“ FPP ”), an Indiana corporation, International Fuel Systems, Inc. (“ IFS ” and together with FPP, “ Sellers ”), an Indiana corporation and Remy International, Inc. (“ Remy ” or “ Sellers’ Parent ”) a Delaware corporation and the ultimate parent corporation of FPP and IFS.

This Agreement contemplates a transaction in which Buyer will purchase substantially all of the assets (and assume certain of the liabilities) of FPP and IFS in return for cash.

Now, therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree, intending to be legally bound, as follows:

SECTION 1  DEFINITIONS

In addition to terms defined elsewhere in this Agreement, the terms set forth on in this Section 1 , when utilized in this Agreement shall have the meanings indicated in this Section 1 , which meanings shall be equally applicable to both the singular and plural forms of such terms:

“ Accountants ” means Deloitte & Touche LLP, certified public accountants, and if such firms refuses to accept such engagement, then such other nationally or regionally recognized independent accounting firm as is chosen by the mutual agreement of Buyer and Sellers.

“ Accounts Receivable ” means all accounts, instruments, drafts, acceptances and other forms of receivables relating to the business of Sellers, and all rights earned under Sellers’ Contracts to sell goods or render services.

“ Acquired Assets ” means all right, title and interest in and to all of the assets of FPP and IFS used by Sellers primarily in the operation of the Target Business, including but not limited to (a) all of the assets listed on Exhibit A , (b) certain defined Leased Real Property listed on Exhibit A , (c) tangible personal property (such as machinery, equipment, inventories of raw materials and supplies, manufactured and purchased parts, goods in process and finished goods, furniture, automobiles, trucks, tractors, trailers, tools, jigs and dies) used by Sellers in the operation of the Target Business, including but not limited to all tangible personal property used in the Target Business and located at the listed Leased Real Property as of June 30, 2006, and all tangible personal property added for use in the Target Business and moved to the listed Leased Real Property since June 30, 2006, but excluding tangible personal property removed from use in the Target Business or removed from the listed Leased Real Property in the ordinary course of business since June 30, 2006, (d) Intellectual Property, including but not limited to all trademarks and trade names, used by Sellers in the operation of the Target Business, goodwill associated therewith, licenses and sublicenses granted and obtained with respect thereto, and rights thereunder, remedies against infringements thereof, and rights to protection of interests therein under the laws of all jurisdictions, (e) Leases and subleases used by Sellers in the operation of the Target Business, and rights thereunder, (f) subject to Section 5(f) , the Contracts, Liens, guaranties and other similar arrangements used by Sellers in the operation of the Target Business, and rights thereunder, (g) Accounts Receivable arising from Sellers’ operation of the Target Business, (h) FPP’s membership equity interest in Magnum, (i) claims, deposits, prepayments, refunds, causes of action, choses in action, rights of recovery, rights of set-off, and rights of recoupment related to the Acquired Assets (excluding any such item relating to insurance or to the payment of Taxes) in each case arising from Sellers’ operation of the Target Business,

(j) subject to Section 5(f) , franchises, approvals, Permits, licenses, orders, registrations, certificates, variances, and similar rights obtained from governments and governmental agencies and used by Sellers in the operation of the Target Business, (k) Bank Accounts, books, records, ledgers, files, documents, correspondence, lists, plats, architectural plans, drawings, and specifications, creative materials, advertising and promotional materials, studies, reports, and other printed or written materials to the extent arising from Sellers’ operation of the Target Business), and (l) copiers, data cabling and wiring, data communication circuits, desktop PCs, docking stations, external hard drives and other such storage devices, facsimile machines, firewalls, laptop PCs, printers, routers, servers, switches, wireless access points, and other such devices located in buildings leased by the Target Business along with the computer software, except where software licensing restrictions limit assignment, loaded on or used by the immediately preceding devices; provided , however , that the Acquired Assets shall not include (and shall specifically exclude) the Expressly Excluded Assets.

“ Affiliate ” means, with respect to a Person, any legal entity directly or indirectly controlling, controlled by or under common control with such Person, where “control” means a direct or indirect ownership interest of more than 50% in such legal entity.

“ Affiliated Group ” means any affiliated group within the meaning of Code Section 1504(a) or any similar group defined under a similar provision of state, local or foreign law.

“ Agreement ” means this Asset Purchase Agreement together with all exhibits and schedules contemplated hereby.

“ Applicable Rate ” means the blended prime rate as published daily in the Wall Street Journal.

“ Asbestos Liabilities ” means any Liabilities arising from, relating to, or based on the presence or alleged presence of asbestos or asbestos-containing materials in any product or item designed, manufactured, sold, marketed, installed, stored, transported, handled, or distributed, or otherwise based on the presence or alleged presence of asbestos or asbestos-containing materials at any property or facility or in any structure, including any Liabilities arising from, relating to or based on any personal or bodily injury or illness.

“ Assigned Contract ” means any Contract primarily related to the Target Business : (i) under which either Seller has acquired or may acquire any rights or benefits; (ii) under which either Seller has or may become subject to any obligation or Liability; or (iii) by which either Seller or any of the Acquired Assets is or may become bound, including all Material Contracts set forth on Section 3(p)(1) of the Disclosure Schedule and any other Contract or agreement necessary to conduct the Target Business, but excluding the Contracts designated as Expressly Excluded Assets and as not being assigned or transferred to Buyer at Closing.

“ Assignment and Assumption Agreement ” means that certain Assignment and Assumption Agreement, by and between Sellers (as assignor) and Buyer (as assignee) and attached hereto as Exhibit B , which will be executed and delivered on the Closing Date.

“ Assumed Liabilities ” means (a) Liabilities of the Target Business incurred on or before the date of the Most Recent Balance Sheet and set forth by specific ledger account number on Exhibit T , which ledger accounts are included on the Most Recent Balance Sheet(s), (b) Liabilities of the Target Business (of the type set forth in the specific ledger accounts listed on Exhibit T ) that have arisen after the date of the Most Recent Balance Sheet(s) in the Ordinary Course of Business and incurred in connection with the operation of the Target Business (including breach of warranty but excluding any Liability resulting from, arising out of, relating to, in the nature of or caused by any breach of contract, tort, infringement,

 

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violation of law, Asbestos Liability, Silica Liability, Welding Rod Liability or environmental matter, including those arising under Environmental, Health, and Safety Requirements as in effect on the Closing Date), (c) obligations of the Target Business under the Contracts and other arrangements referred to in the definition of Acquired Assets, (d) the Knopf Trade Payables, (e) the liabilities for accrued vacation pay, (f) any Liability for retention bonuses (for each Transferred Employee as set out on Section 6(g)(iv) of the Disclosure Schedule) and employee bonuses earned in 2006 but which are payable in 2007, (g) the Permitted Encumbrances, (h) payment of all drafts and checks that have been issued but have not been presented for payment to the extent the corresponding payable to which such draft or check relates has been eliminated on the books and records of Sellers; (i) all Liabilities to Sellers’ customers under written warranty agreements given by Sellers to their customers in the Ordinary Course of Business prior to the Closing Date; (j) all Liabilities included in the calculation of the Final Net Investment; (k) all Liabilities and obligations related to the portion of the Magnum Minority Interest that relates to Navistar’s interest in Magnum’s net working capital and fixed assets (but, expressly excluding the Liability for unpaid distributions through the Closing Date which are due and payable to Navistar in respect of Navistar’s thirty percent (30%) interest in Magnum, taking into account any applicable deductions or reserves in accordance with the terms of the Limited Liability Company Agreement of Magnum) and all Liabilities and obligations related to the Magnum Minority Interest arising out of or related to transactions entered into or events occurring after the Closing; and (l) all other Liabilities of the Target Business set forth on Exhibit C under an express statement (that Buyer has initialed) to the effect that the definition of Assumed Liabilities will include the Liabilities so disclosed (the “ Expressly Assumed Liabilities ”); provided , however , that, notwithstanding the above, the Assumed Liabilities shall not include (i) any Liability of Sellers or Remy for Taxes, (ii) any Liability of Sellers or Remy for the unpaid Taxes of any Person under Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise, (iii) any obligation of Sellers or Remy to indemnify any Person by reason of the fact that such Person was a director, officer, employee, or agent of Sellers or any of the Subsidiaries or was serving at the request of any such entity as a partner, trustee, director, officer, employee, or agent of another entity (whether such indemnification is for judgments, damages, penalties, fines, costs, amounts paid in settlement, losses, expenses, or otherwise and whether such indemnification is pursuant to any statute, charter document, bylaw, agreement, or otherwise), (iv) any Liability of Sellers or Remy for costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby; (v) any bonus related to successful completion of this transaction; (vi) any liabilities related to employees of the Target Business other than those included in Assumed Liabilities, including but not limited to any liabilities under any Target Business Employee Benefit Plan or Employee Pension Benefit Plan; (vii) any incurred insurance claim liability and any incurred but not reported liability for all claims incurred on or before the Closing Date; (viii) any liability for any pending litigation, or threatened or potential litigation within Sellers’ or Remy’s Knowledge; (ix) any Liability or obligation of Sellers or Remy under this Agreement (or under any side agreement between Sellers on the one hand and Buyer on the other hand entered into on or after the date of this Agreement); (x) any Liability of the Sellers or Remy under any note, bond, loan, guarantee or any other debt instrument of any kind; (xi) any Liability that both (a) results from, arises out of, relates to, is in the nature of or was caused by any breach of contract, tort, infringement, violation of law, Asbestos Liability, Silica Liability, Welding Rod Liability, environmental matter, including those arising under Environmental, Health, and Safety Requirements and (b) arises out of products manufactured or events occurring or actions taken by Sellers on or before the Closing Date; and (xii) any other Liability not expressly assumed hereunder; provided further, however, that in the case of clauses (i) and (ii) in the proviso above, Assumed Liabilities shall exclude such Taxes only to the extent that such Taxes exceed the amount, if any, reserved for such Taxes of Seller (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) on the Closing Financial Statements and taken into account in determining the Final Net Investment Adjustment.

 

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“ Basis ” means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that forms or could be reasonably expected to form the basis for any specified consequence.

“ Business Day ” means any day other than Saturday, Sunday, and any day on which commercial banks in Indiana or Illinois are authorized by Law to be closed.

“ Buyer Indemnified Parties ” means Buyer and its Affiliates and its and their directors, officers, employees, successors, and assigns.

“ Cash ” means cash and cash equivalents (including marketable securities and short-term investments) calculated in accordance with GAAP applied on a basis consistent with the preparation of the Financial Statements; provided , however , in no event shall any party be obligated to restore a negative balance to Cash and any negative balance in Cash shall be classified as an accounts payable.

“ Closing ” means consummation of the transactions contemplated by this Agreement.

“ Closing Date ” means (i) the later of (A) the second (2 ^nd ) Business Day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective Parties will take at the Closing itself), and (B) January 31, 2007 or (ii) such other date as Buyer and Sellers may mutually determine.

“ Closing Financial Statements ” means consolidated balance sheet and income statement of the Target Business as of the Closing Date and for the period from December 31, 2005 through the Closing Date, which Seller will prepare, all in conformity with the preparation of the June 30, 2006 Financial Statements and in accordance with GAAP (except the Closing Financial Statements (i) will not include a statement of cash flows, (ii) will not include a statement of changes in shareholders’ equity, (iii) will exclude footnote disclosures, (iv) will exclude immaterial customary recurring year-end adjustments, and (v) will be subject to the exceptions set forth on Section 3(g) of the Disclosure Schedule and pursuant to agreed upon procedures (to be undertaken by Buyer’s accountants at Buyer’s cost) needed to determine Net Investment). Sellers will provide a consolidated Net Investment statement that will be derived from the Closing Financial Statements.

“ Closing Net Investment Adjustment ” means the amount as reflected on the Closing Financial Statements and the Net Investment on the Closing Date, on a dollar-for-dollar basis, by which the Final Net Investment transferred at Closing exceeds or falls short of the Net Investment Peg Amount.

“ Closing Net Investment Adjustment Payment” means the amounts payable under the definition of “Closing Payment” subsection (b) below.

“ Closing Payment” means (a) One Hundred Fifty Million Dollars ($150,000,000), (b) plus (the lesser of eighty percent (80%) of the Estimated Net Investment Surplus or $3,200,000) or minus the Estimated Net Investment Deficiency, as applicable (amounts payable under subsection (b) hereinafter referred to as the “ Closing Net Investment Adjustment Payment ”).

“ COBRA ” means the requirements of Part 6 of Subtitle B of Title I of ERISA and Code Section 4980B and of any similar state law.

“ Code ” means the Internal Revenue Code of 1986, as amended.

 

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“ Confidential Information ” means any information that is “Confidential Information” pursuant to the terms and conditions of the Confidentiality Agreement.

“ Confidentiality Agreement ” means that certain confidentiality letter by and between the Parties dated as of August 5, 2006.

“ Contract ” means any contract, agreement, indenture, note, bond, loan, instrument, lease, conditional sale contract, mortgage, license, franchise, insurance policy, commitment or other arrangement or agreement, whether written or oral.

“ Disclosure Schedule ” means the disclosure schedule delivered by Sellers to Buyer on the date hereof and initialed by the Parties as contemplated by Section 3 hereof.

“ Employee Benefit Plan ” means any “employee benefit plan” (as such term is defined in ERISA Section 3(3) and all applicable regulations) and any other employee benefit plan, program or arrangement of any kind, including any defined benefit or defined contribution plan, stock ownership plan, executive compensation program or arrangement, bonus plan, incentive compensation plan or arrangement, profit sharing plan or arrangement, deferred compensation plan, agreement or arrangement, supplemental retirement plan or arrangement, vacation pay, sickness, disability, or death benefit plan (whether provided through insurance, on a funded or unfunded basis, or otherwise), medical or life insurance plan providing benefits to employees, retirees, or former employees or any of their dependents, survivors, or beneficiaries, employee stock option or stock purchase plan, severance pay, termination, salary continuation or employee assistance plan. For purposes of the definition of “Assumed Liability” the term “Employee Benefit Plan” shall not include bonus plans (including retention bonuses for Transferred Employees as listed on Section 6(g)(iv) of the Disclosure Schedule) or plans with respect to vacation pay.

“ Employee Pension Benefit Plan ” has the meaning set forth in ERISA Section 3(2) and all applicable regulations.

“ Employee Welfare Benefit Plan ” has the meaning set forth in ERISA Section 3(1) and all applicable regulations.

“ Encumbrance Documents ” means easements, covenants, conditions, restrictions, Liens, guaranties or similar provisions in any instrument of record or other unrecorded agreement affecting the Real Property.

“ Environmental, Health, and Safety Requirements ” means, as amended and as now in effect, all federal, state, local, and foreign statutes, regulations, ordinances, and other provisions having the force or effect of law, all judicial and administrative orders and determinations, all contractual obligations, and all common law concerning public health and safety, worker health and safety, pollution or protection of the environment, including all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any Hazardous Materials, substances, or wastes, chemical substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise, or radiation.

“ Environmental Insurance Company ” shall mean the insurance company (or collectively the insurance companies) issuing the Environmental Insurance Policy.

“ Environmental Insurance Policy ” shall mean the insurance policy (or collectively the insurance policies) purchased by the Buyer pursuant to Section 7(a)(xxx) .

 

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“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended, and all applicable regulations.

“ ERISA Affiliate ” means each entity that is treated as a single employer with Sellers for purposes of Code Section 414.

“ Expressly Excluded Assets ” shall mean those assets of Sellers listed on Exhibit E which are not part of the sale and purchase contemplated by this Agreement and which shall remain the property of Sellers after the Closing.

“ Fiduciary ” has the meaning set forth in ERISA Section 3(21) and all applicable regulations.

“ Final Net Investment ” means the Net Investment as of the date of Closing as determined pursuant to Section 2(g)(iv) hereto.

“ Final Net Investment Adjustment ” means the Net Investment Adjustment as determined pursuant to Section 2(g)(iv) hereto.

“ Financial Statements ” means the following documents for FPP, IFS and their Subsidiaries attached hereto as Exhibit F : (i) unaudited consolidated balance sheets and statements of income, as of and for the fiscal years ended December 31, 2004, and December 31, 2005 (the “ Most Recent Fiscal Year End ”); (ii) the unaudited consolidated balance sheets and statement of income for the six (6) months ending June 30, 2006; and (iii) the unaudited consolidated balance sheets and statements of income for the eleven (11) months ending November 30, 2006 ( subsection (iii)  above, the “ Most Recent Financial Statements ”).

“ GAAP ” means United States generally accepted accounting principles as in effect from time to time, consistently applied.

“ Hart-Scott-Rodino Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“ Hazardous Materials ” means any substances that are regulated under Law in effect as of the Closing Date as contaminants, or as threats or potential threats to human health, safety or the environment by any Environmental, Health, and Safety Requirements.

“ Improvements ” means buildings, structures, fixtures, building systems and equipment, and all components thereof, including the roof, foundation, load-bearing walls and other structural elements thereof, heating, ventilation, air conditioning, mechanical, electrical, plumbing and other building systems, environmental control, remediation and abatement systems, sewer, storm and waste water systems, irrigation and other water distribution systems, parking facilities, fire protection, security and surveillance systems, and telecommunications, computer, wiring and cable installations, utility installations and landscaping included in the Real Property.

“ Indemnified Party ” means whomever of the Buyer Indemnified Parties, on the one hand, or the Seller Indemnified Parties, on the other hand, is asserting a claim of indemnification pursuant to Section 8 .

“ Indemnifying Party ” means a Party against whom a claim of indemnification is or may be asserted pursuant to Section 8 .

 

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“ Intellectual Property ” means all of the following in any jurisdiction throughout the world: (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade names, corporate names, Internet domain names and rights in telephone numbers, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets and confidential business information (including ideas, research and development, Know-How, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (f) all computer software (including source code, executable code, data, databases, and related documentation), (g) all advertising and promotional materials, (h) all other proprietary rights, and (i) all copies and tangible embodiments thereof (in whatever form or medium).

“ Knopf Trade Payables ” means the accounts payable owed by Sellers to M.&M. Knopf Auto Parts, LLC, a Delaware limited liability company, with respect to purchases of products made within the thirty (30) day period ending on the Closing Date.

“ Knowledge ” (i) when applied to Sellers or any Subsidiary means the actual personal knowledge after reasonable investigation of David Key, John Kneebone, Keith Walls, Bill Roberts and Brian Yoder, and those additional individual employees identified herein as to specific representations and warranties, (ii) when applied in Section 3(k) , shall also mean the actual personal knowledge after reasonable investigation of John Fitzenberger, (iii) when applied in Section 3(m) shall also mean the actual personal knowledge after reasonable investigation of Dennis Faggioni, (iv) when applied in Section 3(t) shall also mean the actual personal knowledge after reasonable investigation of Quinn Williams and Sheila D.D. Cannon, (v) when applied in Section 3(u) shall also mean the actual personal knowledge after reasonable investigation of Craig Hart, (vi) when applied in Section 3(v) shall also mean the actual personal knowledge after reasonable investigation of Craig Hart, (vii) when applied in Section 3(w) or Section 3(x) shall also mean the actual personal knowledge after reasonable investigation of Joe Keever, (viii) when applied in Section 3(z) shall also mean the actual personal knowledge after reasonable investigation of Bob O’Neill and Jeff Nee, and (ix) when applied to the Sellers’ Parent means the actual personal knowledge, after reasonable investigation, of Kerry Shiba, and (x) when applied to Buyer or Buyer’s Parent means the actual personal knowledge, after reasonable investigation, of the executive officers of Buyer and Buyer’s Parent.

“ Know-How ” means business and technical information used or developed for use by or on behalf of Sellers in the operation of the Target Business, including without limitation core management and remanufacturing processes such as disassembly, cleaning, inspection, verification, salvage, reassembly, test and paint, (and all Intellectual Property rights therein, whether patent or unpatented).

“ Labor Organization ” means any organization of any kind, including any union or any agency or employee representation committee or plan, in which employees participate and which exists for the purpose, in whole or in part, of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours of employment, or conditions of work.

“Landlord Leases” means all Leased Real Property Subleases.

 

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“ Law ” means any law, statute, rule or regulation, and any judgment or order of any federal, state, local or foreign governmental regulatory agency, commission, bureau, authority, court or arbitration tribunal.

“ Lease Consents ” means written consents for the assignment of each of the Leases, and, if requested, a waiver of landlord liens, collateral assignment of lease or leasehold mortgage from the landlord or other party whose consent thereto is required under each such Lease.

“ Leased Real Property ” means all leasehold or subleasehold estates and other rights to use or occupy any land or Improvements held by Sellers or any of the Subsidiaries in the operation of the Target Business, together with all Leased Real Property Subleases, including the right to all security deposits and other amounts and instruments deposited by or on behalf of Sellers or any of the Subsidiaries thereunder.

“ Leased Real Property Subleases ” means all leases, subleases, licenses or other agreements (written or oral) pursuant to which Seller or any of the Subsidiaries has conveyed an interest in, or right to use, any portion of the Leased Real Property.

“ Leases ” means all leases, subleases, licenses, concessions and other agreements (written or oral), including all amendments, extensions, renewals, guaranties, and other agreements with respect thereto, pursuant to which Sellers or any of the Subsidiaries holds any Leased Real Property related to the Target Business, including the right to all security deposits and other amounts and instruments deposited by or on behalf of Sellers or any of the Subsidiaries thereunder.

“ Liabilities ” means any and all liabilities or obligations of whatever kind or nature (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due).

“ Lien ” means any mortgage, pledge, lien, encumbrance, charge, or other security interest other than (a) liens for Taxes not yet due and payable or for Taxes that the taxpayer is contesting in good faith through appropriate proceedings that are properly reflected in the Financial Statements, (b) purchase money liens and liens securing rental payments under capital lease arrangements, and (c) other liens arising in the Ordinary Course of Business and not incurred in connection with the borrowing of money.

“ Losses ” means losses, Liabilities, costs, claims, damages, actions, suits, proceedings, hearings, investigations, charges, complaints, demands, injunctions, judgments, orders, decrees, rulings, dues, penalties, fines, amounts paid in settlement, Taxes, liens, expenses and fees, including court costs and reasonable attorneys’ fees and expenses or any obligation to pay any of the foregoing; provided, in no event shall “ Losses ” include (and “ Losses ” shall specifically exclude) lost profits, diminution in value, amounts based on multiples of earnings (unless actually paid to a third party as damages) and consequential, indirect, punitive and other special damages, regardless of the legal theory, that the subject Person may sustain.

“ Magnum ” means Magnum Power Products, LLC, the Delaware Limited Liability Corporation formed by and between FPP (with a 70% equity interest therein) and Navistar (with a 30% equity interest therein).

“ Magnum Minority Interest ” means the thirty percent (30%) ownership interest of Navistar Aftermarket Products, Inc. in Magnum.

“ Material Adverse Effect ” or “ Material Adverse Change ” means any effect, change, or state of facts that would be (or could reasonably be expected to be) materially adverse to the business, assets,

 

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condition (financial or otherwise), operating results or operations of the Target Business, taken as a whole, or to the ability of Sellers to consummate timely the transactions contemplated hereby (regardless of whether or not such adverse effect or change can be or has been cured at any time or whether either Buyer has Knowledge of such effect or change on the date hereof), other than any adverse circumstance, change or effect arising out of (A) changes, events or developments affecting generally the industries or markets in which Sellers operate, including changes in the national or international markets for diesel engines or diesel engine components or in any other markets that supply raw materials to Sellers, or changes or developments in the use, adoption or non-adoption of technologies or industry standards, (B) changes in general economic or political conditions or the financing, currency or capital markets in general or changes in currency exchange rates or currency fluctuations, (C) this Agreement or the consummation of the transactions contemplated hereby, or the announcement hereof or thereof or any action taken by a party in accordance with this Agreement, (D) the enactment, repeal or change in any law, or any change in GAAP (or other applicable accounting standards) or any interpretation of any of the foregoing, (E) the announcement by Buyer or any of its Affiliates of its plans or intentions (including in respect of employees) with respect to Sellers, (F) the resignation or termination of any employee of Sellers, (G) any natural disaster, disease or pandemic, or any acts of terrorism, sabotage, military action or war (whether or not declared) or any escalation or worsening thereof, (H) any action required to be taken under this Agreement, any Law or any existing Contract by which either of the Sellers is bound or (I) any failure by Sellers to meet any internal projections or forecasts. For purposes of this definition, “the enactment, repeal or change in any Law” shall mean the adoption, implementation, promulgation, repeal, modification, reinterpretation or proposal of any Law, order, protocol, practice or measure or any other requirement of Law of or by any governmental authority which occurs subsequent to the date hereof.

“ Material Leased Real Property ” means Leased Real Property set forth on Exhibit G .

“ Microbial Matter ” means the presence of fungi or bacterial matter which reproduces through the release of spores or the splitting of cells, including mold and mildew, whether or not such Microbial Matter is living.

“ Most Recent Balance Sheet ” means the balance sheet contained within the Most Recent Financial Statements.

“ Most Recent Financial Statements ” means unaudited consolidated and consolidating balance sheets and statements of income as of and for the Most Recent Fiscal Month End for Sellers and its Subsidiaries.

“ Most Recent Fiscal Month End ” means November 30, 2006.

“ Most Recent Fiscal Year End ” means December 31, 2005.

“ Multiemployer Plan ” has the meaning set forth in ERISA Section 3(37) and all applicable regulations.

“ Navistar” means Navistar Aftermarket Products, Inc., its Affiliates and any successor corporations.

“ Net Investment ” is determined by subtracting Assumed Liabilities (including minority interests) from Acquired Assets, all determined in accordance with GAAP accounting policies and using the specific accounting policies and practices historically employed by Sellers and consistently applied in preparing the Target Business’ quarterly Financial Statements. The principles, procedures and methodologies for determining Net Investment are set forth in Exhibit H hereto.

 

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“ Net Investment Peg Amount ” means $28,234,053.67, the Net Investment amount calculated using the June 30, 2006 balance sheet, plus Two Million Five Hundred Thousand Dollars ($2,500,000.00). The calculation of the Net Investment Peg Amount is set forth in Exhibit I hereto.

“ Ordinary Course of Business ” means the ordinary course of business consistent with past custom and practice of each of the Sellers and the Subsidiaries in the operation of their respective businesses.

“ Outsourcing Asset Purchase Agreement ” means that certain Outsourcing Asset Purchase Agreement, by and between Remy and Caterpillar Inc., pursuant to which Caterpillar Inc. will purchase from Remy certain capital machinery, equipment and specified inventory used in the remanufacture of heavy duty starters and alternators, which will be executed and delivered on or before the Closing Date.

“ Outsourcing Supply Agreement ” means that certain Outsourcing Supply Agreement, by and between Remy and Caterpillar Inc., in the form attached hereto as Exhibit J , pursuant to which Remy will appoint Caterpillar Inc. as its exclusive provider of remanufactured heavy duty starters and alternators which will be executed and delivered on or before the Closing Date, and in conjunction with which Remy and Caterpillar would also have entered into the Outsourcing Asset Purchase Agreement.

“ Owned Real Property ” means all land, together with all Improvements thereon or thereto, and all easements and other rights and interests appurtenant thereto (including air, oil, gas, mineral, and water rights), owned by Sellers or any of the Subsidiaries and used in the operation of the Target Business.

“ Parent Assets ” means the assets of Parent used in the operation of the Target Business and which will not be transferred to Buyer at the Closing. A list of the Parent Assets is included as Exhibit K .

“ Party ” means Buyer and Buyer’s Parent on the one hand, and Sellers and Sellers’ Parent on the other hand.

“ Parties ” means Buyer, Buyer’s Parent, Sellers and Sellers’ Parent, collectively.

“ PBGC ” means the Pension Benefit Guaranty Corporation as described in ERISA Section 4002 and all applicable regulations.

“ Permits” means permits, approvals, consents or other authorizations required or granted by any governmental authority.

“ Permitted Encumbrances ” means (i) with respect to each parcel of Real Property: (a) real estate taxes, assessments and other governmental levies, fees, or charges imposed with respect to such Real Property that are (i) not due and payable as of the Closing Date or (ii) being contested in good faith and for which appropriate reserves have been established in accordance with GAAP; (b) mechanics’ liens and similar liens for labor, materials, or supplies provided with respect to such Real Property incurred in the Ordinary Course of Business for amounts that are (i) not due and payable as of the Closing Date or (ii) being contested in good faith and for which appropriate reserves have been established in accordance with GAAP; (c) zoning, building codes and other land use Laws regulating the use or occupancy of such Real Property or the activities conducted thereon which are imposed by any governmental authority having jurisdiction over such Real Property and are not violated by the current use or occupancy of such Real Property or the operation of the Target Business as currently conducted by Sellers and the Subsidiaries thereon; and (d) easements, covenants, conditions, restrictions, and other similar matters of record affecting title to such Real Property that do not or would not impair the use or occupancy of such Real Property in the operation of the Target Business as currently conducted by Sellers and the Subsidiaries thereon, and (ii) with respect to any personal property, the Liens set forth on Section 3(n) of the Disclosure Schedule which are set forth under the heading “ Permitted Encumbrances” .

 

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“ Person ” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, any other business entity, or a governmental entity (or any department, agency, or political subdivision thereof).

“ Prohibited Transaction ” has the meaning set forth in ERISA Section 406 and all applicable regulations and Code Section 4975 and all applicable regulations.

“ Real Estate Impositions ” means Taxes, assessments, fees, charges or similar costs or expenses imposed by any governmental authority, association or other entity having jurisdiction over the Real Property.

“ Real Property ” means all Owned Real Property and all Leased Real Property, collectively.

“ Real Property Laws ” means applicable building, zoning, subdivision, health and safety and other land use Laws, including the Americans with Disabilities Act of 1990, as amended, and all insurance requirements affecting the Real Property.

“ Real Property Permits ” means certificates of occupancy, Permits, licenses, franchises, approvals and authorizations of all governmental authorities, boards of fire underwriters, associations or any other entity having jurisdiction over the Real Property that are required or appropriate to use or occupy the Real Property or operate the Target Business as currently conducted thereon.

“ Reportable Event ” has the meaning set forth in ERISA Section 4043 and all applicable regulations.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Seller Indemnified Parties ” means Sellers, Sellers’ Affiliates and, to the extent applicable, Sellers’ Subsidiaries and its and their directors, officers, employees, successors, and assigns.

“ Silica Liability ” means any Liability arising from, relating to, or based on the presence or alleged presence of silica in any product or item designed, manufactured, sold, marketed, installed, stored, transported, handled, or distributed at any time, or otherwise based on the presence or alleged presence of silica at any property or facility or in any structure, including any Liability arising from, relating to or based on any personal or bodily injury or illness related to silica.

“ Subsidiary ” means each entity in which FPP or IFS has any ownership interest and that is in any way used in and/or is necessary to the operation of the Target Business as it is currently operated, all of which are listed on Exhibit L . Subsidiaries of FPP or IFS that are not used in and/or are necessary to the operation are assets excluded from this acquisition and are listed on Exhibit E (Expressly Excluded Assets) and will not be included in the definition of “ Subsidiary ” for any purpose under this Agreement.

“ Surveys ” means surveys prepared by a licensed surveyor in the jurisdiction where the real property is located, satisfactory to Buyer, and conforming to 1999 ALTA/ACSM Minimum Detail Requirements for Land Title Surveys, including Table A Items Nos. 1, 2, 3, 4, 6, 7(a), 7(b)(1), 7(c), 8, 9, 10, 11(b)(2), 13, 14, 15, and 16, and such other standards as the Title Company and Buyer require as a condition to the removal of any survey exceptions from the Title Policies, and certified to Buyer and the Title Company, in a form and with a certification satisfactory to each of such parties.

 

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“ Systems ” means all computer software, computer hardware (whether general or special purpose), telecommunications capabilities (including all voice, data and video networks) and other similar or related items of automated, computerized, and/or software systems and any other networks or systems and related services that are used by or relied on by Sellers and/or their Subsidiaries in the conduct of the Target Business but excluding any Parent Assets.

“ Target Business ” means the diesel engine remanufacturing business, the diesel engine component remanufacturing business, the distribution and packaging of new engine component business, and other related businesses, as conducted as of the Closing Date by FPP and IFS and their Subsidiaries.

“ Tax ” or “ Taxes ” means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs, duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, ad valorem, 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 including any obligations to indemnify or otherwise assume or succeed to the Tax liability of any other Person.

“ Tax Return ” means any return, declaration, report, form, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“ Third-Party Claim ” means a claim, suit, proceeding or investigation of a third-party (including a federal, state or local government agency (or any instrumentality thereof) concerning any matter that may give rise to a claim for indemnification against a Party pursuant to the terms of Section 8 .

“ Title Commitments ” means a commitment for a 1992 ALTA Owner’s Title Insurance Policy or other form of policy acceptable to Buyer, issued by the Title Company, together with a copy of all documents referenced therein.

“ Title Company ” means a title insurance company satisfactory to Buyer.

“ Title Policies ” means title insurance policies from the Title Company (which may be in the form of a mark-up of a pro forma of the Title Commitments) meeting the requirements set forth in Section 7(a) .

“ Transaction Agreements ” means the Transition Services Agreement, the Outsourcing Supply Agreement, the Outsourcing Asset Purchase Agreement and the Assignment and Assumption Agreement.

“ Transaction Insurance Company ” shall mean the insurance company (or collectively the insurance companies) issuing the Transaction Insurance Policy.

“ Transaction Insurance Policy ” shall mean the insurance policy (or collectively the insurance policies) purchased by the Buyer pursuant to Section 7(a)(xxix) .

“ Transition Services Agreement” means that certain Transition Services Agreement, by and between Buyer and Remy, in substantially the form attached hereto as Exhibit M , which will be executed and delivered on the Closing Date.

“ WARN Act ” the Worker Adjustment and Retraining Notification Act of 1988, as amended, or any similar foreign, state, or local Law, regulation, or ordinance.

 

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“ Welding Rod Liability ” means any Liability arising from, relating to, or based on the presence or alleged presence of welding rods or welding rod fumes in any product or item designed, manufactured, sold, marketed, installed, stored, transported, handled, or distributed at any time, or otherwise based on the presence or alleged presence of welding rods or welding rod fumes at any property or facility or in any structure, including any Liability arising from, relating to or based on any personal or bodily injury or illness related to welding rods or welding rod fumes.

In addition to terms defined above, the following terms shall have the respective meanings given to them in the sections set forth below:

 

 

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SECTION 2  BASIC TRANSACTION

(a) Purchase and Sale of Assets . On and subject to the terms and conditions of this Agreement, Buyer agrees to purchase from Sellers, and Sellers agree to sell, transfer, convey, and deliver to Buyer, all of the Acquired Assets at the Closing for the consideration specified in this Section 2 .

(b) Assumption of Liabilities . On and subject to the terms and conditions of this Agreement, Buyer agrees to assume and become responsible for the Assumed Liabilities from and after the Closing. Buyer will not assume or have any responsibility, however, with respect to any other Liability of Sellers not included within the definition of Assumed Liabilities.

(c) Purchase Price . Buyer agrees to pay to Sellers (i) One Hundred Fifty Million Dollars ($150,000,000), (ii) plus or minus, as applicable, the Final Net Investment Adjustment (collectively, the “ Purchase Price ”). Buyer agrees to pay to Sellers at the Closing the Closing Payment by wire transfer or delivery of other immediately available funds.

(d) Magnum Minority Interest . Prior to the Closing, FPP and Navistar shall enter into an agreement (the “ FPP/Navistar Agreement re Magnum Obligations”) , substantially in the form attached hereto as Exhibit D , whereby FPP shall agree to cause Magnum to satisfy all obligations to Navistar as soon as reasonably practicable following the Closing for unpaid distributions through the Closing Date which are due and payable to Navistar in respect of Navistar’s thirty percent (30%) interest in Magnum, taking into account any applicable deductions or reserves in accordance with the terms of the Limited Liability Company Agreement of Magnum. Buyer will assume as an Assumed Liability (i) all Liabilities and obligations related to the portion of the Magnum Minority Interest that relates to Navistar’s interest in Magnum’s net working capital and fixed assets and (ii) all Liabilities and obligations related to the Magnum Minority Interest arising out of or related to transactions entered into or events occurring after the Closing

(e) Closing . The Closing shall take place at the offices of Ice Miller LLP, in Indianapolis, Indiana, commencing at 9:00 a.m. local time on the Closing Date.

(f) Deliveries at Closing . At the Closing:

(i) Sellers will deliver to Buyer the various certificates, instruments, and documents referred to in Section 7(a) ;

(ii) Buyer will deliver to Sellers the various certificates, instruments, and documents referred to in Section 7(b) ;

(iii) Sellers will execute, acknowledge (if appropriate), and deliver to Buyer (A) assignments (including Real Property and Intellectual Property transfer documents) and (B) such other instruments of sale, transfer, conveyance, and assignment as Buyer and its counsel may reasonably request;

(iv) Buyer will execute, acknowledge (if appropriate), and deliver to Sellers (A) the Assignment and Assumption Agreement and (B) such other instruments of assumption as Sellers and its counsel may reasonably request; and

(v) Buyer will deliver to Sellers (or to such parties and in such amounts as designated by Sellers in writing prior to the Closing) the Closing Payment.

 

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(g) Net Investment Adjustment .

(i) At least five (5) Business Days prior to the Closing Date, Sellers shall deliver to Buyer a statement calculated in accordance with the policies, procedures and methodologies outlined in Exhibit H attached hereto and the schedule of accounts provided therein, setting forth their good faith estimate of the Net Investment as of the Closing Date (the “ Estimated Net Investment ”). If the Estimated Net Investment is greater than the Net Investment Peg Amount (such excess, the “ Estimated Net Investment Surplus ”), the amount of the Closing Payment shall be increased by an amount up to the lesser of eighty percent (80%) of the Estimated Net Investment Surplus or $3,200,000. In the event that the Estimated Net Investment is less than the Net Investment Peg Amount (such deficiency, the “ Estimated Net Investment Deficiency ”), the amount of the Closing Payment shall be reduced by the amount of such Estimated Net Investment Deficiency.

(ii) Within sixty (60) days after the Closing Date, Sellers shall cause to be prepared and shall deliver to Buyer: (a) Closing Financial Statements; (b) the Net Investment as of the Closing Date; and (c) the Closing Net Investment Adjustment. Buyer shall provide Sellers and their accountants full access to the books and records of the Target Business, any other information, including working papers of its accountants, and to any employees, to the extent necessary for Sellers to prepare the Closing Financial Statements, Net Investment as of the Closing Date and Closing Net Investment Adjustment. Buyer agrees that following the Closing they shall not take any actions with respect to the books and records of the Target Business on which the Closing Financial Statements, Net Investment as of the Closing Date and Closing Net Investment Adjustment are to be based that are inconsistent with the Target Business’ past practices and the accounting methodologies used in calculating Net Investment Peg Amount.

(iii) Each of the Buyer and the Sellers agree that it will, and it will use reasonable efforts to cause its respective agents and representatives to, cooperate and assist in the preparation of the Closing Financial Statements, the Net Investment as of the Closing Date and the Closing Net Investment Adjustment and in the conduct of the reviews and dispute resolution process referred to in this Section 2(g) .

(iv) During the thirty (30)-day period following Buyer’s receipt of the Closing Financial Statements, the Net Investment as of the Closing Date and the Closing Net Investment Adjustment as calculated by Sellers, Buyer and its independent accountants shall at their expense be permitted to review, and Sellers shall make available to them, the supporting schedules, analyses, working papers and other documentation of Sellers relating to the Closing Financial Statements, the Net Investment as of the Closing Date and the Closing Net Investment Adjustment and to ask questions, receive answers and request such other data and information from each of them as shall be reasonable under the circumstances. The Closing Financial Statements, the Net Investment as of the Closing Date and the Closing Net Investment Adjustment shall become final and binding upon the parties on the Business Day following the thirtieth (30 ^th ) day following delivery thereof (and the Net Investment as of the Closing shall be deemed the “ Final Net Investment ” and the Closing Net Investment Adjustment shall be deemed the “ Final Net Investment Adjustment ”), unless Buyer gives written notice of its good faith disagreement with Closing Financial Statements, the Net Investment as of the Closing Date or the Closing Net Investment Adjustment within such thirty (30) day period (“ Notice of Disagreement ”). Any Notice of Disagreement shall specify in reasonable detail the nature of any disagreement so asserted and the disputed amount, and Buyer shall make available all supporting schedules, analyses, working papers and other documentation.

 

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(v) During the fifteen (15)-day period following the delivery of a Notice of Disagreement that complies with the preceding paragraph or such longer period as Buyer and Sellers shall mutually agree in writing, Buyer and Sellers shall seek in good faith to resolve in writing any differences that they may have with respect to the matters specified in the Notice of Disagreement, and in the event Buyer and Sellers are able to reach such resolution then the Net Investment as of the Closing Date and Closing Net Investment Adjustment, so agreed by them in writing shall be deemed the Final Net Investment and the Final Net Investment Adjustment. If, at the end of such fifteen (15)-day period (or such longer period as mutually agreed in writing between Buyer and Sellers), Buyer and Sellers have not so resolved such differences, Buyer and Sellers shall submit the dispute for resolution by the Accountants. If the issues in dispute are submitted to the Accountants for resolution: (A) the Parties shall use reasonable efforts to cause the Accountants to make their determination as soon as possible, but in no event later than thirty (30) days after receipt of the disputed matters; (B) each Party will furnish to the Accountants such workpapers and other documents and information relating to the disputed issues as the Accountants may request and are available to that Party or its Affiliates (or its independent public accountants), and will be afforded the opportunity to present to the Accountants any material relating to the determination and to discuss the determination with the Accountants; (C) the Accountants’ determination shall be limited to only the matters of dispute which are raised in the Notice of Disagreement and the Accountants shall act solely as an arbitrator to determine, based solely on the information presented by the Parties and not by independent review, only those issues that remain in dispute; (D) the determination by the Accountants, as set forth in a written report delivered to the Parties by the Accountants, will be final, binding and conclusive on the Parties; and (E) the fees and any expenses of the Accountants be paid by Buyer and Sellers within fifteen (15) Business Days of such determination as follows: (1) if the Accountants adopt the position of Sellers, Buyer shall bear such fees and expenses; (2) if the Accountants adopt the position of Buyer, Sellers shall bear such fees and expenses; or (3) if the Accountants adopt a position within the range of the positions of Buyer and Sellers, each Party shall bear that percentage of such fees and expenses deemed reasonable by the Accountants in light of the final determination and the original positions of Buyer and Sellers. In the event a Party does not comply with the procedural and time requirements contained herein or such other procedural or time requirements as the Parties otherwise elect in writing, the Accountants shall render a decision based solely on the evidence they have which was timely filed by the Parties.

(vi) On the tenth (10 ^th ) Business Day following the final determination of the Final Net Investment as of the Closing Date:

(A) If the Final Net Investment is equal to the Net Investment Peg Amount plus or minus, as applicable, the Closing Net Investment Adjustment Payment, then there shall be no payments under this section;

(B) If the Final Net Investment is less than the Net Investment Peg Amount plus or minus, as applicable, the Closing Net Investment Adjustment Payment, then Sellers shall pay Buyer the amount by which the Net Investment Peg Amount, plus or minus, as applicable, the Closing Net Investment Adjustment Payment exceeds the Final Net Investment (the “ Final Net Investment Deficiency ”); and

(C) If the Final Net Investment is greater than the Net Investment Peg Amount plus or minus, as applicable, the Closing Net Investment Adjustment Payment, Buyer shall pay to Sellers the amount by which the Final Net Investment exceeds the Net Investment Peg Amount, plus or minus, as applicable, Closing Net Investment Adjustment Payment (the “ Final Net Investment Surplus ”).

 

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Payments to either Party will be made by wire transfer of immediately available funds to such bank account as such other party will specify. In the event a Notice of Disagreement is given in accordance with Section 2(g)(ii) above, all sums paid by Buyer to Sellers or by Sellers to Buyer under this Section 2(g) shall bear interest from any after the Closing Date until so paid, at the Applicable Rate as of the Closing Date, on the basis of a 360-day year and actual days elapsed.

(h) Allocation . Buyer shall prepare an allocation of the Purchase Price (and all other capitalized costs) among the Acquired Assets and the covenant not to compete in Section 6(f) in accordance with Code Section 1060 and the Treasury regulations thereunder (and any similar provision of state, local or foreign Law, as appropriate), the “ Allocation Schedule ”. Buyer shall deliver the Allocation Schedule to Sellers within ninety (90) days after the Closing Date. Sellers will have the right to raise reasonable objections to the Allocation Schedule within forty-five (45) days after its receipt thereof, in which event the Parties will negotiate in good faith to resolve such objections. If the Parties have not resolved such objections within thirty (30) days after the initiation of such attempts, such objections will be resolved by the Accountants, whose fees and expenses will be borne equally by the Buyer and the Sellers. The Parties will be bound by the determination of the Accountants. Buyer and Sellers and their Affiliates shall report, act and file Tax Returns (including Internal Revenue Service Form 8594) in all respects and for all purposes consistent with the Allocation Schedule. Sellers shall timely and properly prepare, execute, file and deliver all such documents, forms and other information as Buyer may reasonably request to prepare such allocation. Neither Buyer nor Sellers shall take any position (whether in audits, Tax returns or otherwise) that is inconsistent with the Allocation Schedule unless required to do so by applicable Law and only after notice to the other Party. In the event such allocation is disputed by any Tax authority, the Party receiving notice of such dispute shall promptly notify and consult with the other Party concerning the dispute.

SECTION 3 SELLERS’ REPRESENTATIONS AND WARRANTIES

Sellers and Remy represent and warrant to Buyer that the statements contained in this Section 3 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Section 3 ), except as set forth in the Disclosure Schedule accompanying this Agreement, as the same may be updated prior to the Closing in accordance with the terms of this Agreement. The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Section 3 , and items listed on any Section of the Disclosure Schedule pursuant to this Section 3 shall be broken down by reference to the applicable Seller or Subsidiary, as applicable. The inclusion of any information in the Disclosure Schedule to this Agreement shall not be deemed to be an admission or acknowledgment by either of Sellers, in and of itself, that such information is required to be listed on the Disclosure Schedule or is material to or outside the Ordinary Course of Business or that it has a Material Adverse Effect on Sellers and the Target Business. Items disclosed under any particular Section shall only be deemed as disclosed for that specific Section of the Disclosure Schedule and not generally. The specification of any dollar amount in the representations and warranties or otherwise in this Agreement or in the Disclosure Schedule is not intended and shall not be deemed to be an admission or acknowledgment of the materiality of such amounts or items, nor shall the same be used in any dispute or controversy between the parties to determine whether any obligation, item or matter (whether or not described herein or included in any schedule) is or is not material for purposes of this Agreement.

 

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(a) Organization, Qualification and Corporate Power . FPP and IFS are corporations duly organized and validly existing under the Laws of the State of Indiana, for which all reports required to be filed with the Indiana Secretary of State have been filed, and for which no articles of dissolution have been filed with the Indiana Secretary of State. Remy is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware.

(b) Authorization of Transaction . Each of the Sellers has full power and authority (including full corporate power and authority) to execute and deliver this Agreement and to perform its obligations hereunder. Without limiting the generality of the foregoing, the boards of directors of each Seller and the stockholders of each Seller have duly authorized the execution, delivery, and performance of this Agreement by each Seller. This Agreement constitutes the valid and legally binding obligation of each Seller, enforceable in accordance with its terms and conditions. FPP and IFS have all requisite corporate power and authority to own, lease and operate their respective properties and to conduct their respective businesses in the manner where now conducted and each of them is duly licensed or qualified to do business as a foreign corporation and is in good standing (or its equivalent) in each jurisdiction in which the nature of their respective properties and assets or the conduct of their respective businesses requires them to be so licensed or qualified. Section 3(b) of the Disclosure Schedule sets forth a list of each jurisdiction in which FPP and IFS are licensed or qualified to do business as a foreign corporation.

(c) Non-contravention . Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby (including the assignments and assumptions referred to in Section 2 , but subject to receiving the Material Consents and the Other Consents), will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which Sellers or any of the Subsidiaries is subject or any provision of the charter or bylaws of Sellers or any of the Subsidiaries or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any Contract to which Sellers or any of the Subsidiaries is a party or by which it is bound or to which any of its assets is subject (or result in the imposition of any Lien upon any of its assets). None of Sellers or the Subsidiaries needs to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency, other than (i) such filings and consents as may be required under the Hart-Scott-Rodino Act, in order for the Parties to consummate the transactions contemplated by this Agreement, (ii) the Material Consents, (iii) the Other Consents, (iv) the consents set forth in Section 7(b)(xii) of the Disclosure Schedule, and (v) except as set forth on Section 3(c) of the Disclosure Schedule.

(d) Brokers’ Fees . Sellers have no Liability to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which Buyer could become liable or obligated. No Subsidiary has any Liability to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement. Except for Sellers’ engagement of Brookwood Associates, LLC and for any transaction fee payable to Brookwood Associates, LLC, Sellers have not employed any broker or finder and have not incurred and will not incur any broker’s, finder’s or similar fees, commissions or expenses in connection with the transactions contemplated by this Agreement. Sellers will be responsible for paying all costs, transaction fees and expenses related to Sellers’ engagement of Brookwood Associates, LLC.

(e) Title to and Sufficiency of the Acquired Assets . Except as set forth in Section 3(n) of the Disclosure Schedule, Sellers and the Subsidiaries have good and marketable title to, or a valid and enforceable leasehold interest in the Acquired Assets, free and clear of all Liens, except for the Permitted Encumbrances. Except for the Parent Assets and the services to be provided to Buyer pursuant to the Transition Services Agreement, the Acquired Assets and the assets of the Subsidiaries are sufficient for the continued conduct of the Target Business by Buyer after the Closing in substantially the same manner as conducted by Sellers and the Subsidiaries prior to the Closing.

 

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(f) Subsidiaries . Except for as set forth in Section 3(f) of the Disclosure Schedule, neither FPP nor IFS has any direct or indirect equity interest by stock ownership or otherwise in any other corporation, limited liability company, partnership, joint venture, firm association or business enterprise. Additionally, Section 3(f) of the Disclosure Schedule sets forth for each Subsidiary (i) its name and jurisdiction of incorporation, (ii) the number of authorized shares for each class of its capital stock, (iii) the number of issued and outstanding shares of each class of its capital stock, the names of the holders thereof, and the number of shares held by each such holder, (iv) the number of shares of its capital stock held in treasury, and (v) its directors and officers. Each Subsidiary is a corporation duly organized, validly existing, and in good standing under the Laws of the jurisdiction of its incorporation. Each Subsidiary is duly authorized to conduct business and is in good standing under the Laws of each jurisdiction where such qualification is required. Each Subsidiary has full corporate power and authority and all licenses, Permits, and authorizations necessary to carry on the business in which it is engaged and to own and use the properties owned and used by it. Sellers have delivered to Buyer correct and complete copies of the charter and bylaws of each Subsidiary (as amended to date). All of the issued and outstanding shares of capital stock of each Subsidiary have been duly authorized and are validly issued, fully paid, and non-assessable. Except as set forth in Section 3(f) of the Disclosure Schedule:

(i) FPP, IFS or one or more of the Subsidiaries hold of record and own beneficially all of the outstanding shares (or equity interest) of each Subsidiary, free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities Laws), Taxes, Liens, options, warrants, purchase rights, Contracts, commitments, equities, claims, and demands.

(ii) There are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other Contracts or commitments that could require Sellers or any of the Subsidiaries to sell, transfer or otherwise dispose of any capital stock (or equity interest) of any of the Subsidiaries or that could require any Subsidiary to issue, sell or otherwise cause to become outstanding any of its own capital stock or equity interest (other than this Agreement).

(iii) There are no outstanding stock appreciation, phantom stock, profit participation, or similar rights with respect to any Subsidiary.

(iv) There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of any capital stock (or equity interest) of any Subsidiary.

(v) There are no dividends which have accrued or have been declared but which are unpaid on the equity interests of any joint venture or limited liability corporation.

The minute books (containing the records of meetings of the stockholders (or equity members), the board of directors, and any committees of the board of directors), the stock certificate books, and the stock record books of each Subsidiary are correct and complete. None of the Subsidiaries is in default under or in violation of any provision of its charter or bylaws. Neither FPP, IFS nor any of the Subsidiaries controls directly or indirectly or has any direct or indirect equity participation in any corporation, partnership, trust, or other business association that is not a Subsidiary. Except for the Subsidiaries set forth in Section 3(f) of the Disclosure Schedule, neither FPP, IFS nor any of the Subsidiaries owns or has any right to acquire, directly or indirectly, any outstanding capital stock of, or other equity interests in, any Person.

 

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(g) Financial Statements . The Financial Statements (A) have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby (except the Financial Statements (i) do not include a statement of cash flows, (ii) do not include a statement of changes in shareholders’ equity, (iii) are subject to the exceptions set forth on Section 3(g) of the Disclosure Schedule, (iv) exclude footnote disclosures, and (v) were prepared for the internal management purposes of Sellers and the Target Business was not consistently conducted on a full and complete stand-alone basis through separate entities), (B) present fairly in all material respects the consolidated financial condition of the Target Business including the Subsidiaries as of such dates and the results of operations of the Target Business including the Subsidiaries for such periods, and (C) are consistent with the books and records of the Target Business including the Subsidiaries; provided , however , that the Most Recent Financial Statements are subject to normal year-end and quarter-end adjustments (which will not be material individually or in the aggregate) and lack footnotes and other presentation items. Remy warrants that, at the time of its filing of the applicable 10K, the audited December 31, 2005 financial statement of Remy filed with the Securities and Exchange Commission did not contain any untrue statement of material fact or omit to state any material fact necessary in order to make the statements and information contained in the financial statement not misleading as of the date filed.

(h) Events Subsequent to June 30, 2006 Financial Statements . Since June 30, 2006, there has not been any Material Adverse Change. Without limiting the generality of the foregoing, since that date, except as set forth in Section 3(h) of the Disclosure Schedule:

(i) neither FPP, IFS, nor any of the Subsidiaries has sold, leased, transferred, or assigned any assets, tangible or intangible, involving more than $75,000;

(ii) neither FPP, IFS, nor any of the Subsidiaries has entered into any letter of intent, Contract (or series of related letters of intent or Contracts) either involving more than $75,000 or outside the Ordinary Course of Business;

(iii) no party (including Sellers and any of the Subsidiaries) has accelerated, terminated, modified, or cancelled any Contract (or series of related Contracts) involving more than $75,000 to which FPP, IFS or any of the Subsidiaries is a party or by which any of them is bound;

(iv) neither FPP, IFS nor any of the Subsidiaries has imposed or permitted to exist any Lien, other than Permitted Encumbrances, upon any of its assets, tangible or intangible;

(v) neither FPP, IFS nor any of the Subsidiaries has made any capital expenditure (or series of related capital expenditures) either involving more than $75,000 or outside the Ordinary Course of Business;

(vi) neither FPP, IFS nor any of the Subsidiaries has made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans, and acquisitions) either involving more than $75,000 or outside the Ordinary Course of Business;

(vii) neither FPP, IFS nor any of the Subsidiaries has issued any note, bond, or other debt security or created, incurred, assumed, or guaranteed any indebtedness for borrowed money or capitalized lease obligation either involving more than $75,000 singly;

(viii) neither FPP, IFS nor any of the Subsidiaries has delayed or postponed the payment of accounts payable or any other Liabilities outside the Ordinary Course of Business;

 

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(ix) neither FPP, IFS nor any of the Subsidiaries has cancelled, compromised, waived, or released any right or claim (or series of related rights and claims) either involving more than $75,000 or outside the Ordinary Course of Business;

(x) neither FPP, IFS nor any of the Subsidiaries has transferred, assigned, or granted any license or sublicense of any rights under or with respect to any Intellectual Property;

(xi) neither FPP, IFS nor any of the Subsidiaries has issued, sold, or otherwise disposed of any of its capital stock (or equity interest), or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its capital stock (or equity interest);

(xii) neither FPP, IFS nor any of the Subsidiaries has declared, set aside, or paid any dividend or made any distribution with respect to its capital stock or equity interest (whether in cash or in kind) or redeemed, purchased or otherwise acquired any of its capital stock or equity interest;

(xiii) neither FPP, IFS nor any of the Subsidiaries has experienced any damage, destruction or loss (whether or not covered by insurance) to its property in excess of $75,000;

(xiv) neither FPP, IFS nor any of the Subsidiaries has made any loan to, or entered into any other transaction with, any of its directors, officers, and employees outside the Ordinary Course of Business;

(xv) neither Sellers nor any of the Subsidiaries has entered into any employment Contract or collective bargaining agreement, written or oral, or modified the terms of any existing such Contract or agreement that relates to the Target Business;

(xvi) neither Sellers nor any of the Subsidiaries has granted any increase in the base compensation of any of its directors, officers, and employees of FPP, IFS or any of the Subsidiaries outside the Ordinary Course of Business;

(xvii) neither Sellers nor any of the Subsidiaries has adopted, amended, modified, or terminated any bonus, profit sharing, incentive, severance, or other plan, Contract, or commitment for the benefit of any of FPP’s, IFS’ or any Subsidiaries’ directors, officers, and employees (or taken any such action with respect to any other Target Business Employee Benefit Plan);

(xviii) neither Sellers nor any of the Subsidiaries has made any other change in the wages, rates of pay or other terms and conditions of employment of any of FPP’s, IFS’ or any Subsidiaries’ directors, officers, and employees outside the Ordinary Course of Business;

(xix) neither FPP, IFS nor any of the Subsidiaries has made or pledged to make any charitable or other capital contribution outside the Ordinary Course of Business;

(xx) there has not been any other material payment, occurrence, event, incident, action, failure to act, or transaction outside the Ordinary Course of Business involving FPP, IFS or any of the Subsidiaries;

(xxi) neither FPP, IFS nor any of the Subsidiaries has discharged any material Liability or Lien outside the Ordinary Course of Business;

 

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(xxii) neither FPP, IFS nor any of the Subsidiaries has made any loans or advances of money in an amount exceeding $75,000;

(xxiii) neither Sellers nor any of the Subsidiaries has entered into any agreement pertaining to the Target Business and concerning non-competition or exclusive dealing; and

(xxiv) neither Sellers nor any of the Subsidiaries has agreed or committed to any of the foregoing.

(i) Undisclosed Liabilities . Neither FPP, IFS nor any of the Subsidiaries has any Liability (and to Sellers’ and Remy’s Knowledge there is no Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, or demand against any of them giving rise to any Liability) of the nature required to be disclosed as of the Closing Date in the liabilities column of a balance sheet in accordance with GAAP, except for (i) Liabilities set forth on the Most Recent Balance Sheet, (ii) Liabilities that have arisen after the Most Recent Fiscal Month End in the Ordinary Course of Business (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of contract, tort, infringement, or violation of law), (iii) items disclosed in Section 3(i) of the Disclosure Schedule, (iv) Liabilities that will be reflected on the Closing Financial Statements, (v) obligations arising under the terms of this Agreement, and (vi) other non-material Liabilities.

(j) Legal Compliance . Each of the Sellers, the Subsidiaries, and their respective predecessors and Affiliates has complied in all material respects with all applicable Laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder and including the Foreign Corrupt Practices Act, 15 U.S.C. 78dd-1 et seq.) of federal, state, local, and foreign governments (and all agencies thereof), and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against any of them alleging any failure so to comply.

(k) Tax Matters . As of the Closing Date:

(i) Each of the Sellers and the Subsidiaries has timely filed all Tax Returns that it was required to file under applicable Laws and regulations. All such Tax Returns were correct and complete in all material respects and were prepared in compliance with all applicable Laws and regulations. All Taxes due and owing by Sellers or any of the Subsidiaries (as shown on any Tax Returns) have been paid. Neither Sellers nor any of the Subsidiaries currently is 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 Sellers or any of the Subsidiaries does not file Tax Returns that Sellers or any of the Subsidiaries is or may be subject to taxation by that jurisdiction. There are no Liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of Sellers or any of the Subsidiaries.

(ii) Each of the Sellers and the Subsidiaries has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.

(iii) Neither Remy, Sellers nor any Subsidiary has Knowledge of any Basis on which any authority may assess any additional Taxes for any period for which Tax Returns have been filed. No foreign, federal, state, or local Tax audits or administrative or judicial Tax proceedings are pending or being conducted with respect to Sellers or any of the Subsidiaries. Except as set forth in Section 3(k)(iii) of the Disclosure Schedule, neither Sellers nor any of the Subsidiaries has received from any foreign, federal, state, or local taxing authority (including jurisdictions where

 

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Sellers or the Subsidiaries have not filed Tax Returns) any (i) notice indicating an intent to open an audit or other review, (ii) request for information related to Tax matters, or (iii) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any taxing authority against Sellers or any of the Subsidiaries. Section 3(k)(iii) of the Disclosure Schedule lists all federal, state, local, and foreign income Tax Returns filed with respect to Sellers or any of the Subsidiaries for taxable periods ended on or after December 31, 2002, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. Sellers have delivered to Buyer correct and complete copies of all income Tax Returns, examination reports, and statements of deficiencies assessed against or agreed to by Sellers or any of the Subsidiaries filed or received since December 31, 2002.

(iv) Neither Sellers nor any of the Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

(v) The unpaid Taxes of Sellers and the Subsidiaries (A) did not, as of the Most Recent Fiscal Month End, 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 Most Recent Balance Sheet and (B) should not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of Sellers and the Subsidiaries in filing their Tax Returns.

(vi) Neither Sellers nor any of the Subsidiaries has made any payments, is obligated to make any payments or is a party to any agreement that under certain circumstances could obligate it to make any payments that are not deductible under Code Section 280G. Neither Sellers nor any of the Subsidiaries has been a United States real property holding corporation within the meaning of Code Section 897(c)(2) during the applicable period specified in Code Section 897(c)(1)(A)(ii). Each of the Sellers and the Subsidiaries has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code Section 6662. Neither Sellers nor any of the Subsidiaries is a party to or bound by any Tax allocation or sharing agreement. Neither Sellers nor any of the Subsidiaries (A) has been a member of an Affiliated Group filing a consolidated federal income Tax Return (other than a group the common parent of which was one of Sellers) or (B) has any Liability for the Taxes of any Person (other than Sellers or any of the Subsidiaries) under Regulation Section 1.1502-6 (or any similar provision of state, local, or foreign Law), as a transferee or successor, by contract, or otherwise.

(vii) Section 3(k)(vii) of the Disclosure Schedule sets forth the following information with respect to each of the Subsidiaries as of the most recent practicable date (as well as on an estimated pro forma basis as of the Closing giving effect to the consummation of the transactions contemplated hereby): (A) the basis of the Subsidiary in its assets; (B) the amount of any net operating loss, net capital loss, unused investment or other credit, unused foreign Tax, or excess charitable contribution allocable to the Subsidiary; (C) the amount of any deferred gain or loss allocable to the Subsidiary arising out of any intercompany transaction; and (D) the amount of any Excess Loss Account of the Subsidiary in the stock of another Subsidiary.

(viii) None of the Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Clo