ASSET PURCHASE AGREEMENT

Exhibit 10.1

EXECUTION COPY

ASSET PURCHASE AGREEMENT

dated as of September 19, 2008

among

ARROW SPEED ACQUISITION CORP.

ARROW SPEED WAREHOUSE, INC.

STREETSIDE AUTO, LLC

BCGG REAL ESTATE COMPANY LLP

and

SOLELY FOR PURPOSES OF SECTION 3.3,

KEYSTONE AUTOMOTIVE OPERATIONS, INC.

TABLE OF CONTENTS

 

 

i

 

ii

 

iii

EXHIBITS

 

 

iv

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT is made and entered into as of this 19th day of September, 2008, by and between (i) Arrow Speed Acquisition Corp., a Delaware corporation (“ Purchaser ”), (ii) Arrow Speed Warehouse, Inc., a Missouri corporation (“ Arrow ”), Streetside Auto, LLC, a Kansas limited liability company (“ Streetside ”), and BCGG Real Estate Company LLP, a Missouri limited liability partnership (“ BCGG ” and with Arrow and Streetside, each a “ Seller ” and collectively, “ Sellers ”), and (iii) solely for purposes of Section 3.3 , Keystone Automotive Operations, Inc., a Pennsylvania corporation (“ Keystone ”).

In consideration of the mutual covenants, agreements and warranties herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION

1.1 Definitions . Unless otherwise defined herein, terms used herein shall have the meanings set forth below:

“ Accounting Firm ” shall have the meaning set forth in Section 3.1(d) .

“ Acquired Assets ” shall have the meaning set forth in Section 2.1(a) .

“ Acquired Vehicles ” shall have the meaning set forth in Section 2.1(a)(ix) .

“ Acquisition Proposal ” means a proposal (other than by Purchaser or its Affiliates) relating to any merger, consolidation, business combination, sale or other disposition of 10% or more of the Acquired Assets pursuant to one or more transactions, the sale of 10% or more of the outstanding shares of capital stock or equity interests of any Seller (including, by way of a tender offer, foreclosure or plan of reorganization, merger or liquidation) or a similar transaction or business combination involving one or more third parties and any Seller.

“ Affiliate ” of any particular Person means any other Person controlling, controlled by or under common control with such particular Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities or otherwise, or as otherwise defined in Section 101(2) of the Bankruptcy Code.

“ Affiliated Group ” means an affiliated group as defined in Section 1504 of the Code (or any analogous combined, consolidated or unitary group defined under state, local or foreign income Tax Law) of which any Seller is or has been a member.

“ Agreement ” means this Asset Purchase Agreement, including all the Exhibits and the Schedules, as the same may be amended from time to time in accordance with its terms.

“ Allocation ” shall have the meaning set forth in Section 12.7 .

“ Applicable Rate ” means the prime rate of interest reported from time to time in The Wall Street Journal.

“ Arrow ” shall have the meaning set forth in the preamble hereto.

“ Assignment and Assumption of Lease ” shall have the meaning set forth in Section 10.2(d) .

“ Assumption and Assignment Order ” means the Final Order of the Bankruptcy Court, in form and substance acceptable to Purchaser, (i) approving the assumption and assignment to Purchaser of the Assumed Executory Contracts, without adequate assurance of future performance liability pursuant to section 365(f)(2) of the Bankruptcy Code, except Purchaser’s promise to perform its obligations under the Assumed Executory Contracts following the Closing; (ii) transferring and assigning the Assumed Executory Contracts such that the Assumed Executory Contracts will be in full force and effect from and after the Closing with non-debtor parties being barred and enjoined from asserting against Purchaser, among other things, defaults, breaches or claims of pecuniary losses existing as of the Closing or by reason of the Closing; and (iii) providing that the provisions of Rules 6004(g) and 6006(d) are waived and there will be no stay of execution under Rule 62(a) of the Federal Rules of Civil Procedure.

“ Assumed Contracts ” means all Contracts identified in Schedule 2.1(a)(v) under the heading “ Assumed Contracts ”.

“ Assumed Equipment Leases ” means all equipment leases identified in Schedule 2.1(a)(v) under the heading “ Assumed Equipment Leases ”.

“ Assumed Executory Contracts ” means the Assumed Contracts and the Assumed Leases.

“ Assumed Facility Lease ” means the Amended Lease Agreement by and among Arrow and BCGG LLC, to be dated as of the Closing Date, with respect to the Kansas City Facility.

“ Assumed Leases ” means the Assumed Equipment Leases and the Assumed Facility Lease.

“ Assumed Obligations ” shall have the meaning set forth in Section 2.2(a) .

“ Auction ” means the auction conducted by Sellers pursuant to the Bidding Procedures Order and Section 8.2(c) for substantially all of the Acquired Assets.

“ Bankruptcy Code ” means title 11 of the United States Code.

“ Bankruptcy Court ” means the United States Bankruptcy Court for the Western District of Missouri.

“ Baseline Inventory Amount ” means $17,330,000.

 

2

“ BCGG ” has the meaning set forth in the preamble.

“ Bidding Procedures Order ” means the order of the Bankruptcy Court, substantially in the form of Exhibit A , or otherwise acceptable to Purchaser, (i) authorizing and directing the Sellers to assume this Agreement pursuant to section 365 of the Bankruptcy Code, (ii) setting a deadline for the filing of objections to the entry of the Sale Order, (iii) providing that the Auction shall be held on or one day prior to the Sale Hearing, (iv) scheduling the Sale Hearing, (v) providing for bidding procedures pursuant to which Qualifying Bids may be solicited, made and accepted and containing the terms specified in Sections 8.2(c) and 11.2 , and (vi) approving and implementing the provisions of Sections 6.6 , 8.2(c) and 11.2 .

“ Business ” means the activities carried on by Sellers and any of their Affiliates relating to the marketing, distribution and the sale of parts and supplies to the automotive aftermarket, including the Sellers’ business relationship with respect to O’Reilly Automotive, Inc., CSK Auto Corp and CARQUEST Corporation.

“ Cash ” shall have the meaning set forth in Section 2.3(d) .

“ Cash Portion ” shall have the meaning as set forth in Section 3.1(a) .

“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. §9601 et seq .) and any regulations promulgated thereunder.

“ Chapter 11 Cases ” means the cases commenced in the Bankruptcy Court by Sellers under chapter 11 of the Bankruptcy Code.

“ Claim ” shall have the meaning set forth in section 101(5) of the Bankruptcy Code.

“ Closing ” shall have the meaning set forth in Section 10.1 .

“ Closing Balance Sheet ” shall have the meaning set forth in Section 3.1(d) .

“ Closing Date ” shall have the meaning set forth in Section 10.1 .

“ Closing Inventory Amount ” means the amount of Inventory of Sellers (excluding all Inventory coded (or, in a manner consistent with past practice, that would have been coded) ADV, APA, CAT, DEF, KON, LIT, MTX, PCC, SUR, TBS or TOP) located at the Primary Facilities as of the Closing Date as shown on the closing Balance Sheet (as prepared in accordance with Section 3.1(d) ).

“ COBRA ” shall have the meaning set forth in Section 4.6(b) .

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

“ Confidentiality Agreement ” means the agreement, dated June 22, 2007, between Keystone and Arrow.

 

3

“ Contract ” means any agreement, contract, license, commitment or other binding arrangement or understanding, whether written or oral, to which any Seller is a party and which any Seller is permitted under the Bankruptcy Code to assume and assign.

“ Customer Records ” means all records and lists of Sellers including: (i) all merchandise, analysis reports, marketing reports and advertising, marketing and promotional and creative materials in whatever form or medium pertaining to the Acquired Assets, the Facilities or the Business, (ii) all records relating to customers, suppliers or personnel of Sellers (including, customer lists, mailing lists, e-mail address lists, recipient lists, sales records, correspondence with customers, customer files and account histories, supply lists and records of purchases from and correspondence with suppliers), (iii) all records relating to all product, business and marketing plans of any Seller, and (iv) all books, ledgers, files, reports, plans, drawings and operating records of every kind of Sellers; provided , however , that Customer Records shall not include the originals of any Seller’s minute books, stock books and Tax Returns.

“ Dallas Facility ” shall have the meaning set forth in Section 10.2(h).

“ Defective Inventory ” means, collectively, all Inventory as of the Closing Date that (i) does not conform to the specifications set forth in the applicable product documentation, (ii) has defects in design, workmanship, materials, or packaging, (iii) is not manufactured in a good, workmanlike manner, (iv) is not of good and merchantable quality, (v) is not fit or sufficient for its intended use or for the purposes stated on any packaging, labeling, or advertising materials, (vi) has been returned by a customer and identified as defective and for which a customer is seeking a credit or (vii) would be deemed defective based on the methodologies used by Sellers in accordance with their past customs and practices, in each case as determined by Purchaser in its reasonable discretion.

“ DIP Financing ” means any financing agreement entered into by Sellers as of or after the commencement of the Chapter 11 Cases, including any post-petition financing entered into pursuant to section 364 of the Bankruptcy Code.

“ Dollars ” or “ $ ” means dollars of the United States of America.

“ Employee Benefit Plan ” means each “employee benefit plan” (including each” employee benefit plan” as defined in ERISA §3(3)), profit sharing, deferred compensation, bonus, stock option, stock purchase, vacation pay, holiday pay, pension, retirement plans, medical and any other form of compensation or benefit plan, program or arrangement of any kind regardless of whether any such plan is written or oral or provided under an employment, collective bargaining or other similar arrangement maintained or contributed to by Sellers or any ERISA Affiliate or with respect to which Sellers or any of their ERISA Affiliates have any Liability.

“ Environmental Laws ” means, whenever in effect, all federal, state, provincial, local and foreign statutes, regulations, ordinances, directives and other provisions having the force or effect of Law, all judicial and administrative orders and determinations, all contractual obligations and all common law, in each case concerning public health and safety, worker health and safety, pollution or protection of the environment, including all those relating to the

 

4

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 (including CERCLA and analogous state laws), each as amended or in effect prior to, on or after Closing.

“ Environmental Permits ” shall have the meaning set forth in Section 4.14(a) .

“ ERISA Affiliate ” means each entity which is treated as a single employer with any Seller for purposes of Code §414.

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

“ Escrow Agent ” means UMB Bank, N.A. or any other escrow agent that is mutually acceptable to Purchaser and Sellers.

“ Escrow Agreement ” means an escrow agreement in form and substance reasonably satisfactory to Purchaser, Sellers and the Escrow Agent that is consistent with the terms of this Agreement (including Sections 3.1(e) and 11.3 ).

“ Escrow Deposit Amount ” means $1,166,000.

“ Escrow Funds ” means the amount of cash held from time to time by the Escrow Agent pursuant to the Escrow Agreement.

“ Estimated Inventory Amount ” shall have the meaning set forth in Section 3.1(b) .

“ Estimated Purchase Price ” shall mean the Cash Portion, as determined by using the Estimated Inventory Amount for purposes of making the calculations pursuant to Sections 3.1(a)(i)(B) and 3.1(a)(i)(C) .

“ Excluded Assets ” shall have the meaning set forth in Section 2.3 .

“ Excluded Contracts ” shall have the meaning set forth in Section 2.3(b) .

“ Excluded Environmental Liabilities ” means any Liability or investigatory, corrective or remedial obligation, whenever arising or occurring, arising under Environmental Laws with respect to Sellers or any predecessor or Affiliate of any Seller, the Business, the Acquired Assets or the Facilities (including any arising from the on-site or off-site Release, threatened Release, treatment, storage, disposal, or arrangement for disposal of Hazardous Substances) whether or not constituting a breach of any representation or warranty herein and whether or not set forth on any Schedule.

“ Excluded Leases ” shall have the meaning set forth in Section 2.3(b) .

“ Excluded Proceeds ” shall have the meaning set forth in Section 12.4 .

 

5

“ Executive Officer ” of a Person means its chairman, chief executive officer, financial officer, president, any vice president, controller, treasurer or general counsel.

“ Exhibit ” or “ Exhibits ” means the exhibit or exhibits attached hereto.

“ Facilities ” means any land, buildings, structures, improvements, fixtures or other interest in real property which is used or intended to be used by Sellers or used or intended to be used in, or otherwise related to, the Business.

“ Facility Leases ” means all of Sellers’ right, title and interest in all leases, subleases, licenses, concessions and other agreements (written or oral) and all amendments, extensions, renewals, guaranties and other agreements with respect thereto, pursuant to which Sellers hold a leasehold or subleasehold estate in, or are granted the right to use or occupy a Facility.

“ Final Determination ” shall have the meaning set forth in Section 3.1(d) .

“ Final Order ” means an Order as to which the time to file an appeal, a motion for rehearing or reconsideration or a petition for writ of certiorari has expired and no such appeal, motion or petition is pending.

“ Final Purchase Price ” shall have the meaning set forth in Section 3.1(e) .

“ Financial Statements ” shall have the meaning set forth in Section 4.4 .

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

“ Governmental Authority ” means any federal, state, local or foreign government, any subdivision, agency, commission or authority thereof, including any quasi-governmental or private body exercising any regulatory or taxing authority thereunder or any judicial authority (or any department, bureau or division thereof).

“ Hazardous Substances ” means any pollutants, contaminants or chemicals, and any industrial, toxic or otherwise hazardous materials, substances or wastes with respect to which Liability or standards of conduct are imposed under any Environmental Laws petroleum and petroleum-related substances, products, by-products and wastes, asbestos, urea formaldehyde and lead-based paint, noise and odors.

“ Indebtedness ” means, with respect to any Person, any obligation of such Person for borrowed money, and in any event shall include (i) any obligation incurred for all or any part of the purchase price of property or other assets or for the cost of property or other assets constructed or of improvements thereto, other than accounts payable included in current liabilities and incurred in respect of property purchased in the Ordinary Course of Business, (ii) the face amount of all letters of credit issued for the account of such Person, (iii) obligations (whether or not such Person has assumed or become liable for the payment of such obligation) secured by Liens, (iv) capitalized lease obligations, (v) all guarantees and similar obligations of such Person, (vi) all premium payments and any obligations under any insurance policy owned,

 

6

held, or maintained by the Sellers or insuring the Acquired Assets, (vii) all accrued interest, fees and charges in respect of any indebtedness and (viii) all prepayment premiums and penalties, and any other fees, expenses, indemnities and other amounts payable as a result of the prepayment or discharge of any indebtedness.

“ Insider ” means any Executive Officer, director, governing body member, stockholder, partner or Affiliate, as applicable, of any Seller (or any predecessor or Affiliate of any Seller) or any individual related by marriage or adoption to any such individual or any entity in which any such Person owns any beneficial interest or any other Person or entity identified in Bankruptcy Code Section 101(31).

“ Intellectual Property ” means all of the following in any jurisdiction throughout the world: (i) patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations-in-part, divisionals, revisions, extensions and reexaminations thereof, (ii) trademarks, service marks, trade dress, logos, slogans, trade names, internet domain names and corporate names, together with all goodwill associated therewith, and applications, registrations and renewals in connection therewith, (iii) copyrights, mask works and copyrightable works, and applications, registrations and renewals in connection therewith, (iv) trade secrets and confidential business information (including ideas, research and development, know-how, inventions, formulas, compositions, algorithms, industrial models, methods, processes and techniques, designs, drawings, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals), (v) computer software (including source code, executable code data, websites, databases and documentation, software enabling search engine optimization and capability, pay per click functionality, network infrastructure, switches, modems, APs and RF devices); (vi) copies and tangible embodiments of any of the foregoing in whatever form or medium; and (vii) all other intellectual property.

“ Inventory ” means all inventory of any kind or nature in any condition, whether or not prepaid, and wherever located, including items returned prior to the Closing, held or owned by any Seller including all raw materials, work in process, semi-finished and finished products, replacement and spare parts, packaging materials, operating supplies, and fuels and other and similar items. For all purposes of this Agreement, calculations of the amount of Inventory shall be determined on a “first-in, first-out” (FIFO) basis using a weighted average cost methodology in accordance with GAAP.

“ Inventory Financing ” means, at any time, any amounts due and payable to Keystone or its Affiliates pursuant to the vendor agreement pursuant to which Keystone agrees to act as a vendor to Arrow and provide Arrow with inventory and inventory financing, in order to sustain Arrow’s operations following the Petition Date.

“ Inventory Reduction ” means, as of the Closing Date and in each case as shown on the Closing Balance Sheet, an amount equal to the sum of (i) 50% of the amount (if any) by which the amount of the Slow Moving Inventory exceeds the lesser of $5,000,000 or 30.0% of the Closing Inventory Amount, (ii) 50% of the amount (if any) by which the amount of the Defective Inventory exceeds the lesser of $1,000,000 or 5.0% of the Closing Inventory Amount and (iii) 50% of the amount (if any) by which the amount of the Private Label Inventory exceeds the lesser of $2,000,000 or 10.0% of the Closing Inventory Amount.

 

7

“ Kansas City Facility ” shall mean the Facility located at 686 South Adams, Kansas City, Kansas.

“ Keystone ” shall have the meaning set forth in the preamble.

“ Knowledge of Sellers ” shall mean the actual knowledge (after reasonable inquiry and investigation) of any director, governing body member or Executive Officer of Sellers.

“ Latest Balance Sheet ” shall have the meaning set forth in Section 4.4 .

“ Law ” means any law, statute, regulation, ruling or Order of, administered or enforced by or on behalf of, any Governmental Authority, or common law.

“ Liability ” means any liability (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 and regardless of when asserted), including any liability for Taxes.

“ Lien ” or “ Liens ” means any lien (statutory or otherwise), hypothecation, encumbrance, Claim, Liability, security interest, interest, mortgage, pledge, restriction, charge, instrument, license, preference, priority, security agreement, easement, covenant, encroachment, option, right of recovery, Tax (including foreign, federal, state and local Tax), Order of any Governmental Authority, of any kind or nature (including (i) any conditional sale or other title retention agreement and any lease having substantially the same effect as any of the foregoing, (ii) any assignment or deposit arrangement in the nature of a security device, (iii) any claim based on any theory that Purchaser is a successor, transferee or continuation of Sellers or the Business, and (iv) any leasehold interest, license or other right, in favor of a Third Party or a Seller, to use any portion of the Acquired Assets), whether secured or unsecured, choate or inchoate, filed or unfiled, scheduled or unscheduled, noticed or unnoticed, recorded or unrecorded, contingent or non-contingent, material or non-material, known or unknown.

“ Material Adverse Change ” or “ Material Adverse Effect ” means any event, change, condition, development or effect that individually or in the aggregate, is or is reasonably likely to be materially adverse to (i) the Acquired Assets, Assumed Obligations, the Business or the operations, results of operations or condition (financial or otherwise) of Sellers or (ii) the ability of Sellers to perform their obligations under this Agreement; provided , however , that the filing of the Chapter 11 Cases and reasonably anticipated effects thereof shall not be taken into account in determining whether there has been or will be a Material Adverse Change or Material Adverse Effect.

“ Material Contract ” shall have the meaning set forth in Section 4.20(a) .

“ Motion to Shorten Time ” shall have the meaning set forth in Section 6.6(a)(ii) .

“ No Fee Event ” means Arrow’s termination of this Agreement pursuant to Section 11.1(c) .

“ Non Competition Agreement ” shall have the meaning set forth in Section 10.2(i) .

 

8

“ Notice of Disagreement ” shall have the meaning set forth in Section 3.1(d) .

“ Notice Parties ” shall have the meaning set forth in Section 6.6(a)(ii) .

“ Order ” means any decree, order, injunction, rule, judgment, consent of or by any Governmental Authority.

“ Ordinary Course of Business ” means the operation of the Business by Sellers in the usual and ordinary course in a manner substantially similar to the manner in which Sellers operated prior to the commencement of the Chapter 11 Cases (including with respect to quantity and frequency).

“ Owner ” shall mean Ronald L. Coppaken.

“ Permits ” means licenses, permits, approvals, certificates of occupancy, authorizations, operating permits, registrations, plans and the like.

“ Permitted Liens ” means easements, covenants, conditions, restrictions and other similar matters of record on real property, leasehold estates or personalty that do not, and would not reasonably be expected to, in any material respect detract from the value thereof and do not individually or in the aggregate in any material respect interfere with the present use of the real property subject thereto.

“ Person ” means any corporation, partnership, joint venture, limited liability company, organization, entity, authority or natural person.

“ Petition Date ” means the date on which the Chapter 11 Cases are commenced.

“ PNC ” means PNC Bank, National Association.

“ Primary Facilities ” means, collectively, (i) the Dallas Facility, (ii) the Kansas City Facility, (iii) the Facility located at 589 Golden Oaks Boulevard, Houston, Texas, (iv) the Facility located at 2525 Fairview Avenue North, St. Paul, Minnesota and (v) the Facility located at 3710 Vulcan Drive, Nashville, Tennessee.

“ Private Label Inventory ” means, collectively, the amount of all Inventory that constitutes a “private label” product of Seller (including all Inventory coded BLL-0 through BLL-25 or otherwise included in the “Bullet” line), as determined as of the Closing Date in a manner consistent with past practice.

“ Proceeding ” means any action, charge, complaint, suit, grievance, arbitration, investigation, inquiry, audit, or other proceeding of any kind whatsoever, whether at law or in equity.

“ Purchase Price ” shall have the meaning set forth in Section 3.1(a) .

“ Purchase Price Calculation ” shall have the meaning set forth in Section 3.1(d) .

 

9

“ Purchaser ” shall have the meaning set forth in the preamble hereto.

“ Release ” shall have the meaning set forth in CERCLA.

“ Residual Value ” means, with respect to the Acquired Vehicles, the lesser of (i) the aggregate amounts that would be owed by Sellers as of the Closing Date to the third party lessors under each of the leases (as in effect on the date hereof) for the Acquired Vehicles if Sellers had complied in all respects with its obligations under such leases and (ii) $350,000.

“ Rule ” or “ Rules ” means the Federal Rules of Bankruptcy Procedure.

“ Sale Hearing ” means the hearing of the Bankruptcy Court to approve this Agreement and the transactions contemplated herein.

“ Sale Motion ” shall have the meaning set forth in Section 6.6(a)(i) .

“ Sale Order ” means the Final Order of the Bankruptcy Court, substantially in the form of Exhibit B or otherwise reasonably acceptable to PNC and Purchaser, to be entered by the Bankruptcy Court pursuant to sections 363 and 365 of the Bankruptcy Code, (i) approving this Agreement and the transactions contemplated hereby, (ii) approving, with specific findings of fact in support thereof, the sale of the Acquired Assets to Purchaser free and clear of all Liens (other than Permitted Liens) pursuant to section 363(f) of the Bankruptcy Code, (iii) finding, with specific findings of fact in support thereof, that Purchaser is a good-faith purchaser entitled to the protections of section 363(m) of the Bankruptcy Code, (iv) confirming with specific findings of fact in support thereof, that Purchaser is acquiring the Acquired Assets free and clear of the Unassumed Liabilities and providing for a full release of Purchaser with respect to the Unassumed Liabilities, (v) providing that the provisions of Rules 6004(g) and 6006(d) are waived and there will be no stay of execution of the Sale Order under Rule 62(a) of the Federal Rules of Civil Procedure, (vi) retaining jurisdiction of the Bankruptcy Court to interpret and enforce the terms and provisions of this Agreement, and (vii) authorizing and approving the results of the Auction.

“ Schedule ” or “ Schedules ” means the schedule or schedules attached hereto.

“ Seller ” and “ Sellers ” shall have the meaning set forth in the preamble hereto; provided , that BCGG shall only constitute a Seller for purposes of Article I, Sections 2.1(a)(ix), 3.2, 4.1, 4.2, 4.3, 4.5, 4.20, 6.1, 6.3(a), 6.3(d), 6.3(e), 6.3(f), 6.3(k), 6.3(u), 6.5(b), 6.10, 10.2(f), 12.5 and Article XIII .

“ Seller Intellectual Property ” shall have the meaning set forth in Section 4.18(b) .

“ SKU ” means the classification used by the Sellers with respect to each item of Inventory held by the Sellers, as determined in a manner consistent with the past customs and practices of the Sellers.

“ Slow Moving ” means, with respect to each SKU, the excess of (i) the aggregate number of units of such SKU on hand as of the Closing Date over (ii) the aggregate number of

 

10

units of such SKU sold during the twelve month period ending on August 25, 2008, as reduced by the aggregate number of units of such SKU that had been returned (whether prior to, on or after the Closing Date) to the Sellers; provided , that if the aggregate number of units of any SKU returned during such twelve-month period exceeds the aggregate number of units sold during such twelve-month period, then, for purposes of this definition, the aggregate number of units of such SKU sold during the twelve month period ending on August 25, 2008 shall be deemed to be zero.

“ Slow Moving Inventory ” means, collectively, all Inventory (other than Defective Inventory and Private Label Inventory) that is Slow Moving as of the Closing Date.

“ Streetside ” shall have the meaning set forth in the preamble hereto.

“ Subsidiary ” means, with respect to any Person, any corporation a majority of the total voting power of shares of stock of which is entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or any partnership, limited liability company, association or other business entity a majority of the partnership or other similar ownership interest of which is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes of this definition, a Person is deemed to have a majority ownership interest in a partnership, limited liability company, association or other business entity if such Person is allocated a majority of the gains or losses of such partnership, limited liability company, association or other business entity or is or controls the managing director or general partner of such partnership, limited liability company, association or other business entity.

“ Systems ” shall have the meaning set forth in Section 4.18(i) .

“ Tax ” and, with correlative meaning, “ Taxes ” means all (i) United States federal, state or local or non-United States taxes, assessments, charges, duties, levies or other similar governmental charges of any nature, including all income, franchise, profits, capital gains, capital stock, transfer, sales, use, occupation, property, excise, severance, windfall profits, stamp, stamp duty reserve, license, payroll, withholding, ad valorem, value added, alternative minimum, environmental, customs, social security (or similar), unemployment, sick pay, disability, registration and other taxes, assessments, charges, duties, fees, levies or other similar governmental charges of any kind whatsoever, whether disputed or not, together with all estimated taxes, deficiency assessments, additions to tax, penalties and interest; (ii) any liability for the payment of any amount of a type described in clause (i) arising as a result of being or having been a member of any consolidated, combined, unitary or other group or being or having been included or required to be included in any Tax Return related thereto; and (iii) any liability for the payment of any amount of a type described in clause (i) or clause (ii) as a result of any obligation to indemnify or otherwise assume or succeed to the liability of any other Person.

“ Tax Return ” means any report, return, declaration, claim for refund or other information or statement supplied or required to be supplied by any Seller relating to Taxes, including any schedules or attachments thereto and any amendments thereof.

 

11

“ Third Party ” means any Person other than Sellers, Purchaser or any of their respective Affiliates.

“ Transaction Documents ” means this Agreement, and all other agreements, instruments, certificates and other documents to be entered into or delivered by any party in connection with the transactions contemplated to be consummated pursuant to this Agreement.

“ Transferred Employees ” shall mean each employee of Sellers hired by Purchaser.

“ Transition Services Agreement ” shall have the meaning set forth in Section 10.2(h) .

“ Unassumed Liabilities ” shall have the meaning set forth in Section 2.4(a) .

“ WARN Act ” shall have the meaning set forth in Section 12.2 .

1.2 Rules of Construction . Unless the context otherwise clearly indicates, in this Agreement:

 

(a)

the singular includes the plural;

 

(b)

“includes” and “including” are not limiting;

 

(c)

“may not” is prohibitive and not permissive; and

 

(d)

“or” is not exclusive.

ARTICLE II

PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES

2.1 Purchase and Sale of Assets .

(a) Subject to the terms and conditions set forth in this Agreement, at the Closing, Purchaser shall purchase, acquire and take assignment and delivery of, for the consideration specified in Section 3.1 , and Sellers shall sell, convey, assign, transfer and deliver to Purchaser, free and clear of all Liens, Claims, and other interests and encumbrances (whether arising prior to or subsequent to a petition for a Chapter 11 Case and prior to the Closing) (except for the Assumed Obligations and Permitted Liens), all rights, titles and interests of every kind and nature, owned, licensed or leased by Sellers (including indirect and other forms of beneficial ownership) as of the Closing Date, whether tangible or intangible, real or personal and wherever located and by whomever possessed all of the following assets (all of the assets to be sold, assigned, transferred and delivered to Purchaser hereunder herein called the “ Acquired Assets ”; provided , that, for purposes of clarity, the Acquired Assets shall not include the Excluded Assets retained by Sellers pursuant to Section 2.3 ):

(i) all Inventory;

(ii) all Customer Records;

 

12

(iii) all Intellectual Property (including all of the Intellectual Property set forth on Schedule 4.18 ), along with all goodwill associated therewith and the business symbolized thereby, all income, royalties, products, proceeds, damages and payments due or payable to Sellers as of the Closing or thereafter, including, damages and payments for past, present or future infringements, misappropriations or other conflicts therewith, in each case that now or hereafter, may be secured throughout the world and all copies and tangible embodiments of any such Intellectual Property in Sellers’ possession or control;

(iv) all telephone numbers, email addresses and business-to-business and business-to-customer points of contact (including all website addresses, URLs, and order points of entry);

(v) all of Sellers’ rights existing under the Assumed Executory Contracts including all claims, deposits, prepayments, warranties, guarantees, indemnities, refunds, reimbursements, causes of action, rights of recovery, rights of set-off and rights of recoupment of every kind and nature (whether or not known or unknown or contingent or non-contingent);

(vi) all of Sellers’ rights existing under the Assumed Facility Lease including all rights to security deposits held pursuant thereto;

(vii) all office supplies, production supplies, spare parts, other miscellaneous supplies, other tangible property of any kind, and all machinery, equipment (including all transportation and office equipment, WMS hardware and devices to interact with WMS systems, and marketing and publishing hardware), fixtures, trade fixtures, computer and information technology equipment (including disaster recovery systems, tapes, wireless equipment, passwords, firewall and security infrastructure, and catalog data and software) and related data, telephone systems and furniture owned by Sellers wherever located, including, all such items which are located in any building, warehouse, office or other space leased, owned or occupied by Sellers or used in connection with the Business as listed on Schedule 2.1(a)(vii) , including the book value attributable thereto;

(viii) all prepaid assets except as set forth on Schedule 2.3(j) ;

(ix) all rolling stock and other titled vehicles listed under “Vehicle Leases” on Schedule 4.20(a) (the “ Acquired Vehicles ”);

(x) the right to receive and retain mail, and other communications related to the Acquired Assets (other than mail and other communications solely related to accounts and notes receivable or collections thereof);

(xi) all transferable Permits, licenses, certifications and approvals from all permitting, licensing and certifying agencies, and the rights to all data and records held by such permitting, licensing and certifying agencies to the extent related to the Acquired Assets; and

 

13

(xii) all insurance policies relating to the Business or the Acquired Assets (other than any “key man” insurance policies and any rights relating to refunds from insurance policies for premiums paid prior to the Closing).

(b) Notwithstanding anything in this Agreement to the contrary, Purchaser may revise the Schedules setting forth the Acquired Assets and the Excluded Assets to (i) eliminate any Contract at any time on or before ten (10) days prior to the Sale Hearing (other than the Assumed Leases) or (ii) add any lease, Contract, or asset at any time before ten (10) days prior to the Sale Hearing, and to require Sellers to give notice to the parties to any such lease or Contract within twenty-four hours of such addition or elimination; provided , that such change shall not affect the amount of the Purchase Price; provided , further , that no revision, elimination or addition by Purchaser of any lease, Contract or asset by Purchaser pursuant to clause (ii) above shall increase any cure costs to Sellers.

2.2 Assignment and Assumption of Liabilities .

(a) Subject to the terms and conditions set forth in this Agreement, including Section 2.4 , Purchaser shall only assume from Sellers and thereafter be responsible for the payment, performance or discharge of the following Liabilities of Sellers or any of their respective predecessors in interest (all such Liabilities herein called the “ Assumed Obligations ”):

(i) obligations under the Assumed Executory Contracts first arising after the Closing; and

(ii) any cure obligations (pursuant to section 365 of the Bankruptcy Code) with respect to any Assumed Executory Contract assumed and assigned to Purchaser pursuant to Section2.7 .

(b) Notwithstanding anything in this Agreement to the contrary, Sellers hereby acknowledge and agree that Purchaser is not assuming from Sellers, or is in any way responsible for, the Unassumed Liabilities.

(c) Section 2.2(a) shall not limit any claims or defenses Purchaser may have against any party other than Sellers. The transactions contemplated by this Agreement shall in no way expand the rights or remedies of any Third Party against Purchaser or Sellers.

2.3 Excluded Assets . Notwithstanding anything to the contrary in this Agreement, the following assets of Sellers shall be retained by Sellers and are not being sold or assigned to Purchaser hereunder (all of the following are referred to collectively as the “ Excluded Assets ”):

(a) any and all rights under this Agreement and avoidance claims or causes of action arising under the Bankruptcy Code or applicable state Law, including all rights and avoidance claims of any Seller arising under chapter 5 of the Bankruptcy Code;

(b) all leases other than the Assumed Leases (the “ Excluded Leases ”) and all Contracts other than the Assumed Executory Contracts (the “ Excluded Contracts ”);

 

14

(c) all accounts and notes receivable (whether current or noncurrent), including accounts and notes receivable relating to products sold prior to Closing (whether or not billed prior to Closing), and all rights, claims and causes of action relating or pertaining to the collection thereof, including all records necessary for the collection thereof;

(d) all cash (including checking account balances, certificates of deposit and other time deposits and petty cash) net of overdrafts (“ Cash ”) and marketable and other securities;

(e) all Tax refunds, rebates, credits and similar items;

(f) income tax returns of Sellers and related materials;

(g) all assets maintained pursuant to or in connection with any Employee Benefit Plan;

(h) the equity securities or other ownership interest of any Seller;

(i) the equity securities or other ownership interest of any of Sellers’ Affiliates;

(j) all security deposits and advances and prepaid assets set forth on Schedule (j) ;

(k) any “key man” insurance policies;

(l) all records and documents to the extent relating to the Excluded Assets;

(m) any rights relating to refunds from insurance policies for premiums paid prior to the Closing; and

(n) any proceeds or payments received as a result of any of the causes of action or proceedings set forth in Schedule 2.3(n) .

2.4 No Other Liabilities Assumed .

(a) Subject to Section 2.2 , each Seller acknowledges and agrees that pursuant to the terms and provisions of this Agreement, Purchaser will not assume, or in any way be liable or responsible for, any Liability of any Seller (including Liabilities relating to the pre-petition or post-petition operation of the Business (including any warranty or products-related Liabilities), the Excluded Assets or the Acquired Assets (and the use thereof) or any outstanding checks), whether relating to or arising out of the Business, the Excluded Assets or the Acquired Assets or otherwise, other than the Assumed Obligations. In furtherance and not in limitation of the foregoing, neither Purchaser nor any of its Affiliates shall assume, and shall not be deemed to have assumed, any Indebtedness, Claim, Liability, Employee Benefit Plan, collective bargaining agreement, Excluded Environmental Liability, Tax Liability or other obligation of any Seller or any predecessor or Affiliate of any Seller whatsoever, other than the Assumed Obligations (collectively, the “ Unassumed Liabilities ”).

 

15

(b) The parties acknowledge and agree that disclosure of any obligation or Liability on any Schedule to this Agreement shall not create an Assumed Obligation or other Liability of Purchaser, except where such disclosed obligation has been expressly assumed by Purchaser as an Assumed Obligation in accordance with the provisions of Section 2.2 hereof.

2.5 Deemed Consents . For all purposes of this Agreement (including all representations and warranties of Sellers contained herein), Sellers shall be deemed to have obtained all consents required in respect of the assignment of any Assumed Executory Contract if, and to the extent that, pursuant to the Assignment and Assumption Order or other Bankruptcy Court Order, Sellers are authorized to assume and assign to Purchaser, and Purchaser is authorized to accept, such Assumed Executory Contracts pursuant to section 365 of the Bankruptcy Code.

2.6 Obligations in Respect of Required Consents . Except to the extent provided in Sections 2.1(b) and 2.7 , to the extent that any Assumed Executory Contract is subject to a cure pursuant to section 365 of the Bankruptcy Code, Sellers shall, jointly and severally, be responsible for such cure and pay any amounts related to such cure obligations.

2.7 Post-Closing Assignment of Contracts . With respect to any Contract which is not set forth on Schedule 2.1(a)(v) and to the extent such Contract has not been rejected by Sellers pursuant to section 365 of the Bankruptcy Code, upon written notice(s) from Purchaser, as soon as practicable, Sellers shall take all actions reasonably necessary to assume and assign to Purchaser pursuant to section 365 of the Bankruptcy Code any Contract(s) set forth in Purchaser’s notice(s), and any applicable cure cost shall be satisfied by Purchaser. Sellers agree and acknowledge that (i) they shall provide Purchaser with reasonable advance notice of any motion(s) to reject any Contract and (ii) the covenant set forth in this Section 2.7 shall survive the Closing. Notwithstanding anything in this Agreement to the contrary, on the date any Contract is assumed and assigned to Purchaser pursuant to this Section 2.7 , such Contract shall be deemed an Assumed Executory Contract and deemed scheduled on Schedule 2.1(a)(v) under the appropriate heading for all purposes under this Agreement.

ARTICLE III

BASIC TRANSACTION

3.1 Payment of Purchase Price .

(a) The aggregate purchase price (the “ Purchase Price ”) for the Acquired Assets (other than the Acquired Vehicles) shall be (i) an amount in cash equal to (A) $11,660,000, plus (or minus ) (B) 60% of the amount (if any) by which the Closing Inventory Amount is more (or less) than the Baseline Inventory Amount, minus (C) the Inventory Reduction (the amount determined pursuant to this clause (i) shall be referred to as the “ Cash Portion ”), and (ii) the assumption of the Assumed Obligations.

(b) At least three (3) business days prior to Closing, Sellers shall deliver to Purchaser a schedule setting forth a good faith estimate of the Closing Inventory Amount and the Inventory Reduction, in each case, as of the close of business on the immediately preceding day based on a true and correct derivation from the Sellers’ books and records and prepared in a

 

16

manner consistent with the determination of the Baseline Inventory Amount (“ Estimated Inventory Amount ”), which shall be certified by an Executive Officer of Arrow and otherwise shall be in form and substance satisfactory to Purchaser.

(c) At the Closing, Purchaser shall purchase the Acquired Assets and Assumed Obligations and, in exchange, shall pay PNC by wire transfer of immediately available funds, to an account designated by PNC no less than three (3) Business Days prior to the Closing Date, an amount in cash equal to the (A) Estimated Purchase Price minus (B) the Escrow Deposit Amount minus (C) the amount of cure payment made by Purchaser on behalf of Sellers with respect to Sellers’ obligations to pay all amounts related to cure obligations pursuant to Section 2.6 minus (D) the Inventory Financing; provided , that Sellers acknowledge and agree that (i) the payments described in this Section 3.1(c) shall be made directly to PNC (and not to Sellers), (ii) no payment shall be required to be made by Purchaser to Sellers at the Closing pursuant to this Agreement and (iii) none of Purchaser or its Affiliates shall have any liability or obligation to Sellers with respect to any payments under this Section 3.1(c) .

(d) Within 25 business days following the Closing Date, Purchaser shall deliver to Arrow a schedule (in its final and binding form, the “ Closing Balance Sheet ”), setting forth the Closing Inventory Amount, the Inventory Reduction and a certificate setting forth the resulting Cash Portion calculated with reference to the Closing Inventory Amount and the Inventory Reduction (in its final and binding form, together with the Closing Balance Sheet, the “ Purchase Price Calculation ”); provided , that Purchaser shall give Sellers prior notice, and Sellers shall be entitled, at their sole cost and expense, to designate one (1) representative reasonably acceptable to Purchaser, to observe any physical counting of Inventory at any of the Primary Facilities that is conducted by Purchaser (whether prior to or after the Closing Date) for purposes of preparing the Closing Balance Sheet so long as such representative does not interfere, or otherwise participate in any respect with such counting. The Closing Balance Sheet shall include all known adjustments required in a year-end closing of the books and shall be prepared in a manner consistent with GAAP. Sellers shall cooperate as reasonably requested in connection with the preparation of the Purchase Price Calculation. The Purchase Price Calculation shall become final and binding upon the parties on the twenty-fifth (25th) day following Arrow ‘s receipt thereof, unless Arrow gives written notice of its disagreement (a “ Notice of Disagreement ”) to Purchaser prior to such date. Any Notice of Disagreement shall specify in reasonable detail the nature and dollar amount of any disagreement so asserted and shall be delivered only if (and to the extent that) Arrow reasonably and in good faith determines that the Purchase Price Calculation and the resulting Cash Portion calculated with reference thereto delivered by Purchaser has not been determined in accordance with the guidelines and procedures set forth in this Agreement. If a timely Notice of Disagreement is received by Purchaser, then the Purchase Price Calculation (as revised in accordance with clause (x) or (y) below) shall become final and binding upon the parties on the earlier of (x) the date the parties resolve in writing any differences they have with respect to the matters specified in the Notice of Disagreement or (y) the date all matters in dispute are finally resolved in writing by the Accounting Firm. During the 10-day period following delivery of a Notice of Disagreement, the parties shall seek in good faith to resolve in writing any differences which they have with respect to the matters specified in the Notice of Disagreement. Following delivery of a Notice of Disagreement, Purchaser and its agents and representatives shall be permitted to review Arrow’s and its representatives’ working papers relating to the Notice of Disagreement. At the end of the

 

17

10-day period referred to above, the parties shall submit in writing to an independent auditing firm of national recognition mutually selected by Purchaser and Sellers (the “ Accounting Firm ”) for review and resolution of all matters (but only such matters) that remain in dispute and that were properly included in the Notice of Disagreement. The parties shall instruct the Accounting Firm to make a final determination (the “ Final Determination ”) of the Closing Inventory Amount, the Inventory Reduction and the resulting Purchase Price calculated with reference to such amounts to the extent such amounts are in dispute, solely in accordance with the guidelines and procedures set forth in this Agreement. The parties will cooperate with the Accounting Firm during the term of its engagement. The parties shall instruct the Accounting Firm to not assign a value to the Final Determination other than the value assigned by Purchaser, on the one hand, or Arrow, on the other hand. The parties shall also instruct the Accounting Firm to make the Final Determination based solely on presentations by Purchaser and Sellers which are in accordance with the guidelines and procedures set forth in this Agreement ( i.e. , not on the basis of an independent review). The Purchase Price Calculation, the determination of the Closing Inventory Amount and the Inventory Reduction, and the resulting Purchase Price calculated with reference thereto shall become final and binding on the parties on the date the Accounting Firm delivers the Final Determination in writing to the parties (which shall be requested by the parties to be delivered not more than 30 days following submission of such disputed matters). The fees and expenses of the Accounting Firm shall be allocated solely to the party whose value of the Purchase Price was determined to be unsuccessful (it being understood that the party whose value of the Purchase Price was determined to be successful shall not be responsible for any portion of the fees or expenses of the Accounting Firm).

(e) Promptly after the Purchase Price Calculation becomes final and binding on the parties under Section 3.1(d) above, the Estimated Purchase Price shall be recalculated by giving effect to the final and binding determination of the Closing Inventory Amount and the Inventory Reduction (as recalculated, the “ Final Purchase Price ”). If the Final Purchase Price is greater than the Estimated Purchase Price, Purchaser shall, within three business days after the Purchase Price Calculation becomes final and binding on the parties, make payment by wire transfer to Sellers, to an account designated by Sellers, in immediately available funds, of the amount of such difference, together with interest thereon at a rate per annum equal to the Applicable Rate, calculated on the basis of the actual number of days elapsed divided by 360, from the Closing Date to the date of payment. If the Estimated Purchase Price is greater than the Final Purchase Price, Sellers shall (or shall cause the Escrow Agent to), within three business days after the Purchase Price Calculation becomes final and binding on the parties, make payment by wire transfer to Purchaser in immediately available funds, to an account designated by Purchaser, of the amount of such difference, together with interest thereon at a rate per annum equal to the Applicable Rate, calculated on the basis of the actual number of days elapsed divided by 360, from the Closing Date to the date of payment; it being understood that, pursuant to the Sale Order, if any amounts are owed by Seller to Purchaser under this Agreement after the Closing Date in excess of the Escrow Deposit Amount, PNC shall, on behalf of Sellers, make such payment to Purchaser from proceeds received by PNC under this Agreement. Any Escrow Funds remaining after giving effect to any payment required to be made pursuant to this Section 3.1(e) shall be distributed by wire transfer to PNC, on behalf of Sellers, no later than five (5) business days after the Purchase Price Calculation becomes final and binding on the parties under Section 3.1(d) .

 

18

(f) At the Closing, Purchaser shall purchase the Acquired Vehicles and, in exchange, shall pay an aggregate purchase price of $350,000. Such payment shall be made in immediately available funds to (i) First State Bank, Ford Motor Credit and GMAC, in each case, in the amount (but not to exceed $350,000 in the aggregate) set forth in their respective pay-off letters, as delivered to Purchaser pursuant to Section 8.9 , with respect to the Acquired Vehicles and (ii) to the extent that the amount paid pursuant to clause (i) hereof is less than $350,000, the remaining balance shall be paid to BCGG.

(g) Payments made pursuant to this Section 3.1 shall be allocated among the assets purchased in accordance with Section 12.7 .

3.2 Further Assurances . From time to time after the Closing and without further consideration, (i) Sellers, upon the request of Purchaser, shall execute and deliver such documents and instruments of conveyance and transfer as Purchaser may reasonably request in order to consummate more effectively the purchase and sale of the Acquired Assets as contemplated hereby and to vest in Purchaser title to the Acquired Assets transferred hereunder, or to otherwise more fully consummate the transactions contemplated by this Agreement, and (ii) Purchaser, upon the request of Sellers, shall execute and deliver such documents and instruments of contract or lease assumption as Sellers may reasonably request in order to confirm Purchaser’s Liability for the Assumed Obligations or otherwise to more fully consummate the transactions contemplated by this Agreement.

3.3 Deposit . No later than 5:00 p.m. (Central time) on the second business day immediately following entry of the Bidding Procedures Order on the Bankruptcy Court’s docket, Keystone shall (or shall cause Purchaser to) deposit with the Escrow Agent an amount equal to the Escrow Deposit Amount. The fees and charges of the Escrow Agent shall be paid one-half by Sellers and one-half by Purchaser.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLERS

Sellers jointly and severally represent and warrant to Purchaser that the statements contained in this Article IV are correct and complete as of the date of this Agreement and as of the Closing Date, except as expressly set forth in the Schedules delivered by Sellers to Purchaser on the date hereof. The information disclosed in the Schedules shall be deemed to qualify only the particular subsection or subsections specified for such item; provided , however , that any item that is disclosed in a particular section or subsection of the Schedules shall be deemed to be disclosed in a particular section or subsection of the Schedules where such disclosure would otherwise be appropriate to the extent that it is reasonably apparent from the express language of such disclosure that it applies to such other section or subsection. Nothing in the Schedules shall be deemed adequate to disclose an exception to a representation or warranty made herein, however, unless the Schedule identifies the exception with reasonable particularity and describes the relevant facts in reasonable detail. The mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty has to do with the existence of the document or other item itself).

 

19

4.1 Validity of Agreement . Subject to any necessary authorization from the Bankruptcy Court, each Seller has full power and authority to execute and deliver the Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. The board of directors (or similar governing body) of each Seller has duly