STOCK PURCHASE AGREEMENT

 

EXECUTION COPY

 

TABLE OF CONTENTS

 

				Page
1.	Purchase and Sale of the Shares			1
2.	Purchase Price			1
	2.1	Amount of the Purchase Price		1
	2.2	Valuation of LKQ Shares		2
	2.3	Calculation of the Purchase Price at the Closing		2
	2.4	Post-Closing Adjustment of the Purchase Price		3
	2.5	LKQ Shares Delivered to Neu Group		5
3.	Closing			7
	3.1	Closing		7
	3.2	Procedure at the Closing		7
4.	Representations and Warranties of the Shareholders			8
	4.1	Organization		8
	4.2	Ownership		8
	4.3	Authority		9
	4.4	No Conflict; Required Filings and Consents		9
	4.5	Brokers		10
	4.6	Spousal Consent		10
	4.7	Prospectus		10
	4.8	California Tax Returns		10
5.	Representations and Warranties of the Company and the Shareholders			10
	5.1	Organization, Power and Authority of the Company		10
	5.2	Capital Stock of the Company		11
	5.3	Subsidiaries		11
	5.4	No Conflict; Required Filings and Consents		11
	5.5	Financial Statements		12
	5.6	Liabilities; Debt Amount		13
	5.7	Tax Matters		13
	5.8	Real Estate		14
	5.9	Title to and Condition of Assets		17
	5.10	Receivables		17
	5.11	Licenses and Permits		18
	5.12	Proprietary Rights		18
	5.13	Adequacy of Assets; Customers		18
	5.14	Certain Documents and Information		19
	5.15	Insurance		20
	5.16	Litigation		21
	5.17	Records		21
	5.18	No Material Adverse Change		21
	5.19	Absence of Certain Acts or Events		21
	5.20	Compliance with Laws		22
	5.21	Environmental Matters		22

 

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	5.22	Labor Relations		24
	5.23	Employee Benefits		25
	5.24	Warranties		26
	5.25	Product Liability		26
	5.26	[Intentionally Omitted]		26
	5.27	Internal Controls		26
	5.28	Investment Bankers’ and Brokers’ Fees		27
6.	Representations and Warranties of LKQ			27
	6.1	Organization, Power and Authority of LKQ		27
	6.2	Due Authorization; Binding Obligation		27
	6.3	No Conflict; Required Filings and Consents		27
	6.4	Investment Bankers’ and Brokers’ Fees		28
	6.5	LKQ Common Stock		28
	6.6	SEC Matters		28
	6.7	Financing		29
	6.8	Investment Intent		29
	6.9	Access to Information; LKQ’s Own Investigation; No Other Representations or Warranties		30
7.	Covenants			30
	7.1	Conduct of Business Prior to the Closing		30
	7.2	Covenants Regarding Information		32
	7.3	Notification of Certain Matters; Update of Disclosure Schedules		32
	7.4	Confidentiality		33
	7.5	Further Action; Reasonable Best Efforts		33
	7.6	Employee Matters		35
	7.7	Public Announcements		36
	7.8	Maintenance of Insurance		36
	7.9	Indemnification		36
	7.10	Broker Fees		37
	7.11	Termination of Shareholder Agreements		37
	7.12	Certain Assets of the Company		37
	7.13	Insurance Proceeds for Events Between Signing and Closing		37
8.	Termination			37
	8.1	Termination		37
	8.2	Notice of Termination		38
	8.3	Effect of Termination		38
9.	Conditions to the Obligations of LKQ			39
	9.1	Receipt of Necessary Consents		39
	9.2	No Restraint		39
	9.3	No Adverse Litigation		39
	9.4	Releases		39
	9.5	Corporate Documents		39
	9.6	Transfer of Title and Assets		39
	9.7	Leases		39
	9.8	HSR Act		39

 

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	9.9	Escrow Agreement		40
	9.10	Representations and Warranties		40
	9.11	Performance of Agreements		40
	9.12	Corporate Action		40
10.	Conditions to Obligation of the Shareholders			40
	10.1	Receipt of Necessary Consents		40
	10.2	No Restraint		40
	10.3	No Adverse Litigation		40
	10.4	Leases		41
	10.5	HSR Act		41
	10.6	Escrow Agreement; Indemnification Agreements		41
	10.7	Representations and Warranties		41
	10.8	Performance of Agreements		41
	10.9	Corporate Action		41
11.	Survival and Indemnification			41
	11.1	Indemnification by the Shareholders		41
	11.2	Survival		43
	11.3	Indemnification by LKQ		43
	11.4	Additional Indemnification by LKQ		43
	11.5	Exclusivity; No Special Damages; Damages Net of Taxes		45
	11.6	Indemnification Procedures		46
12.	Certain Additional Agreements			47
	12.1	Restrictive Covenants		47
	12.2	Tax Matters		48
13.	Miscellaneous			51
	13.1	Amendment and Modification		51
	13.2	Expenses		51
	13.3	Certain Definitions		51
	13.4	Binding Effect		58
	13.5	Entire Agreement		58
	13.6	Headings		58
	13.7	Execution in Counterpart		58
	13.8	Notices		58
	13.9	Governing Law		59
	13.10	Venue and Submission to Jurisdiction		59
	13.11	Further Assurances		60
	13.12	Drafting		60
	13.13	Interpretation		61
	13.14	Attorneys’ Fees and Expenses		61
	13.15	Specific Performance		61
	13.16	Shareholder Representatives		61
	13.17	Legal Representation		62
	13.18	Forward-Looking Statements		63
	13.19	Obligations of G. McElroy		63

 

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STOCK PURCHASE AGREEMENT

 

This Stock Purchase Agreement (this “ Agreement ”) is made and entered into as of August 15, 2008, by and among the following parties:  (i) LKQ Corporation, a Delaware corporation (“ LKQ ”); (ii) Glenn C. McElroy, as Trustee of the Glenn C. McElroy Family Trust dated October 14, 1992, Phillip B. McElroy, Thomas C. Hutton, John L. Neu, Robert T. Neu and Jeffrey P. Neu (each, a “ Shareholder ” and collectively, the “ Shareholders ”); (iii) Glenn C. McElroy, as an individual (“ G. McElroy ”); and (iv) Pick-Your-Part Auto Wrecking, a California corporation (the “ Company ”).  The closing of the transactions contemplated by this Agreement is referred to herein as the “ Closing .”

 

Recitals

 

The Shareholders own all of the issued and outstanding shares of capital stock of the Company.  The Shareholders desire to sell such shares to LKQ, and LKQ desires to purchase such shares from the Shareholders, all as herein provided and on the terms and conditions hereinafter set forth.  Certain capitalized terms used herein, and not otherwise defined or cross-referenced where first used, are defined in Section 13.3 .

 

Agreement

 

In consideration of the mutual representations, warranties and covenants and subject to the conditions contained herein, the parties hereto agree as follows:

 

1.                                       Purchase and Sale of the Shares

 

The Shareholders agree to and will sell, transfer, assign and deliver to LKQ at the Closing, and LKQ agrees to and will purchase and accept from the Shareholders, on the terms and subject to the conditions set forth in this Agreement, an aggregate of 1,582.22695 shares of Class A common stock, no par value, of the Company and 14,245.042 shares of Class B common stock, no par value, of the Company (collectively, the “ Shares ”).

 

2.                                       Purchase Price

 

2.1                                Amount of the Purchase Price .  As consideration for the Shares (the “ Purchase Price ”), LKQ agrees, subject to the terms, conditions and limitations set forth in this Agreement:

 

2.1.1   At the Closing, to pay to the Shareholders, in cash, thirty-five percent (35%) of the Closing Payment (as defined in Section 2.3.2 ) minus $50,000, allocated among each of the Shareholders as set forth on Schedule 2.1.1 hereto;

 

2.1.2   At the Closing, to pay to the Shareholders sixty percent (60%) of the Closing Payment, allocated among each of the Shareholders as set forth on Schedule 2.1.1 hereto, payable in cash, shares of common stock of LKQ (“ LKQ Shares ”) or a combination thereof (as determined by LKQ in its sole discretion);

 

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2.1.3   At the Closing, to deliver to the Escrow Agent five percent (5%) of the Closing Payment to be held in the Escrow Account and $50,000 to be held in the Representative Expense Account, in each case governed by the Escrow Agreement (the form of which is attached hereto as Exhibit 2.1 ) (the “ Escrow Agreement ”);

 

2.1.4   At the Closing, to pay to the person identified on Schedule 2.1.4 hereto, in cash, the amount set forth opposite such person’s name on Schedule 2.1.4 hereto (the aggregate of such amounts, the “ Non-Compete Payment Amount ”);

 

2.1.5   At the Closing or as soon thereafter as practicable, to cause the Company to pay to the Company’s creditors identified on Schedule 2.1.5 hereto the Debt Amount, allocated among such creditors as set forth on Schedule 2.1.5 hereto; provided , however , that such allocation will be updated to reflect the amounts set forth in the final payoff letters provided to the Company by such creditors; and

 

2.1.6   At the Closing, to pay on behalf of the Company to the Company’s officers identified on Schedule 2.1.6 hereto, in cash, the Success Bonus Amount (subject to applicable taxes, withholdings and other required, normal or elected deductions as set forth in the Success Bonus Agreements), allocated among such officers as set forth on Schedule 2.1.6 hereto.

 

2.2                                Valuation of LKQ Shares .   In the event that LKQ chooses to pay any part of the amount due under Section 2.1.2 in LKQ Shares, the value of each such share shall be equal to the average of the closing prices of such shares on the Nasdaq Global Select Market (as reported in the Wall Street Journal ) on the ten (10) consecutive trading days ending on the second (2nd) Business Day prior to the Closing Date (as defined in Section 3.1 ) (such average, the “ LKQ Share Value ”).  The number of LKQ Shares payable by LKQ to each Shareholder at the Closing shall equal:  (a) the aggregate dollar amount LKQ determines to pay in LKQ Shares under Section 2.1.2 , divided by (b) the LKQ Share Value, multiplied by (c) the allocation percentage applicable to such Shareholder as set forth on Schedule 2.1.1 ; provided that, to the extent the foregoing calculation results in a fraction of an LKQ Share, LKQ shall not deliver such fractional LKQ Share to the Shareholder but instead shall pay to such Shareholder, in cash, an amount equal to the product of (i) such fraction and (ii) the LKQ Share Value.  The number of LKQ Shares payable by LKQ to the Shareholders in the Neu Group shall be further subject to the calculations and adjustments (to the extent applicable) set forth in Sections 2.5.1 through 2.5.3 .

 

2.3                                Calculation of the Purchase Price at the Closing .

 

2.3.1   At least three (3) Business Days prior to the Closing, the Company shall prepare and deliver to LKQ an estimated Closing Balance Sheet (as defined in Section 2.4.1 ), setting forth, among other matters, good faith estimates of the Cash Amount and the Working Capital Amount (together, the “ Estimated Balance Sheet ”), which Estimated Balance Sheet shall be to the reasonable satisfaction of LKQ.

 

2.3.2   For purposes of payment of the Purchase Price by LKQ at the Closing pursuant to Sections 2.1 and 3.2 , the “ Closing Payment ” shall be:  (i) $72,880,000; plus (ii) the Cash Amount; plus (iii) the Working Capital Difference, if the

 

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Working Capital Amount equals or exceeds the Working Capital Target; minus (iv) the Working Capital Difference, if the Working Capital Target exceeds the Working Capital Amount; minus (v) the Non-Compete Payment Amount; minus (vi) the Debt Amount; minus (vii) 60% of the Success Bonus Amount.  The Cash Amount and the Working Capital Amount set forth in the Estimated Balance Sheet shall be used for purposes of the foregoing calculation of the Closing Payment.  The Closing Payment shall be subject to post-Closing adjustment as set forth in Section 2.4 .

 

2.4                                Post-Closing Adjustment of the Purchase Price .

 

2.4.1   Within 45 days after the Closing Date, the Shareholder Representatives (as defined in Section 13.16.1 ) shall deliver to LKQ a consolidated balance sheet of the Company and the Subsidiary, including all notes thereto, dated as of the Closing Date (the “ Closing Balance Sheet ”), prepared in accordance with GAAP and in a manner consistent with the preparation of the Balance Sheet (as defined in Section 5.5 ) with no changes in classifications, methods or accounting policies; provided , however , that no purchase accounting adjustments in respect of the transactions contemplated by this Agreement shall be made; and provided , further , that the Closing Balance Sheet will reflect the transfer of certain assets by Hayward Associates to the Company and the Company’s transfer of all Owned Real Property, provided that such transferred assets and Owned Real Property shall not be included in the calculation of the Working Capital Amount.  The Company’s inventory at Closing shall be valued in a manner consistent with the preparation of the Balance Sheet with no changes in classifications, methods or accounting policies.  With respect to all other assets and liabilities of the Company, in the event of a conflict between preparation in accordance with GAAP or on a basis consistent with the Balance Sheet, the Closing Balance Sheet shall be prepared in accordance with GAAP.  The Closing Balance Sheet shall set forth, among other matters, the final Cash Amount and the final Working Capital Amount, and the calculation thereof.  All expenses of the Company relating to any period prior to the Closing Date, including all California income and franchise taxes payable by the Company for any period ending on or before the Closing Date, shall be accrued for on the Closing Balance Sheet.

 

2.4.2   During the 20 Business Day period following LKQ’s receipt of the Closing Balance Sheet, the Shareholder Representatives shall provide LKQ and its representatives with access to the working papers of the Shareholder Representatives and their representatives relating to the Closing Balance Sheet, and the Shareholder Representatives shall cooperate with LKQ and its representatives to provide them with any other information used in preparing the Closing Balance Sheet reasonably requested by LKQ and its representatives.  The Closing Balance Sheet shall become final and binding on the 20th Business Day following delivery thereof, unless prior to the end of such period, LKQ delivers to the Shareholder Representatives written notice of its disagreement (a “ Notice of Disagreement ”) specifying the nature, amount and reasonable detail of any disputed item.  LKQ shall be deemed to have agreed with all items and amounts in the Closing Balance Sheet not specifically referenced in the Notice of Disagreement, and such items and amounts shall not be subject to review in accordance with Section 2.4.3 .

 

2.4.3   During the ten (10) Business Day period following delivery of a Notice of Disagreement by LKQ to the Shareholder Representatives, the parties in good faith shall seek to resolve any differences that they may have with respect to the matters specified therein.  During such ten (10) Business Day period, LKQ shall provide the Shareholder Representatives and their

 

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representatives with access to the working papers of LKQ and its representatives relating to such Notice of Disagreement, and LKQ and its representatives shall cooperate with the Shareholder Representatives and their representatives to provide them with any other information used in preparation of such Notice of Disagreement reasonably requested by the Shareholder Representatives or their representatives.  Any disputed items resolved in writing between LKQ and the Shareholder Representatives within such ten (10) Business Day period shall be final and binding with respect to such items.  If LKQ and the Shareholder Representatives have not resolved all such differences by the end of such ten (10) Business Day period, LKQ and the Shareholder Representatives shall submit, in writing, to an independent public accounting firm (the “ Independent Accounting Firm ”) their briefs detailing their views as to the correct nature and amount of each item remaining in dispute, and the Independent Accounting Firm shall make a written determination as to each such disputed item, which determination shall be final and binding on the parties for all purposes hereunder.  The Independent Accounting Firm shall be authorized to resolve only those items remaining in dispute between the parties in accordance with the provisions of this Section 2.4 within the range of the difference between the Shareholder Representatives’ position with respect thereto and LKQ’s position with respect thereto.  The determination of the Independent Accounting Firm shall be accompanied by a certificate of the Independent Accounting Firm that it reached such determination in accordance with the provisions of this Section 2.4 .  The Independent Accounting Firm shall be Moss Adams LLP or, if such firm is unable or unwilling to act or is no longer independent during the time the dispute is pending, such other independent public accounting firm as shall be agreed in writing by LKQ and the Shareholder Representatives.  LKQ and the Shareholder Representatives shall use their commercially reasonable efforts to cause the Independent Accounting Firm to render a written decision resolving the matters submitted to it within 20 Business Days following the submission thereof.  Judgment may be entered upon the written determination of the Independent Accounting Firm in any court referred to in Section 13.10 .  The costs of any dispute resolution pursuant to this Section 2.4.3 , including the fees and expenses of the Independent Accounting Firm and of any enforcement of the determination thereof, shall be borne by the parties in inverse proportion as they may prevail on the matters resolved by the Independent Accounting Firm, which proportionate allocation shall be calculated on an aggregate basis based on the relative dollar values of the amounts in dispute and shall be determined by the Independent Accounting Firm at the time the determination of such firm is rendered on the merits of the matters submitted.  The fees and disbursements of the representatives of each party incurred in connection with their preparation or review of the Closing Balance Sheet and preparation or review of any Notice of Disagreement, as applicable, shall be borne by such party.

 

2.4.4   The final Closing Payment shall be adjusted, upwards or downwards, as follows:

 

(i)  if the final Closing Payment as finally determined pursuant to this Section 2.4 is greater than the Closing Payment as determined pursuant to the Estimated Balance Sheet, the Closing Payment shall be adjusted upwards in an amount equal to the difference between the former amount and the latter amount;

 

(ii)  if the Closing Payment as determined pursuant to the Estimated Balance Sheet is greater than the final Closing Payment as finally determined pursuant to this

 

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Section 2.4 , the Closing Payment shall be adjusted downwards in an amount equal to the difference between the former amount and the latter amount; and

 

(iii)  if the final Closing Payment as finally determined pursuant to this Section 2.4 is equal to the Closing Payment as determined pursuant to the Estimated Balance Sheet, no adjustment shall be made to the Closing Payment.

 

In case of clause (i), (A) the Shareholder Representatives shall deliver a joint written notice to LKQ, specifying the amount of the upward adjustment of the Closing Payment, and (B) LKQ shall pay, in cash, to each Shareholder such Shareholder’s allocable portion of the amount of such upward adjustment of the Closing Payment pursuant to the allocation set forth in Schedule 2.1.1 hereto.  In case of clause (ii), (A) LKQ shall deliver written notice to the Shareholder Representatives, specifying the amount of the downward adjustment of the Closing Payment, and (B) each Shareholder shall pay, in cash, to LKQ such Shareholder’s allocable portion of such downward adjustment of the Closing Payment pursuant to the allocation set forth in Schedule 2.1.1 hereto, provided that the foregoing payment obligation of such Shareholder shall be joint and several with all other Shareholders’ payment obligations under this Section 2.4.4 .

 

2.4.5   Amounts to be paid pursuant to Section 2.4.4 shall bear interest from the Closing Date to the date of such payment at a rate equal to the rate of interest from time to time announced publicly as the prime rate by the Wall Street Journal , calculated on the basis of a year of 365 days and the number of days elapsed.

 

2.4.6   Notwithstanding anything to the contrary in this Section 2.4 , for purposes of preparing the Closing Balance Sheet (including the calculation of the Working Capital Amount), good faith estimates shall be used for the amounts of accounts receivable attributable to converters and catalysts sold by the Company, with respect to which sales totals have not been finalized at least five (5) Business Days prior to the date on which the Shareholder Representatives are required to deliver the Closing Balance Sheet pursuant to Section 2.4.1 .  The parties agree that, upon finalization of such sales totals, appropriate adjustments (if any) shall be made to the Closing Payment generally pursuant to the procedures set forth elsewhere in this Section 2.4 .  To the extent that the final aggregate amount of accounts receivable determined based on the final sales totals exceeds the estimate thereof, LKQ shall promptly pay to each Shareholder such Shareholder’s allocable portion of such excess amount pursuant to the allocation set forth in Schedule 2.1.1 hereto.  To the extent that the final aggregate amount of accounts receivable determined based on the final sales totals is less than the estimate thereof, each Shareholder shall pay, in cash, to LKQ such Shareholder’s allocable portion of such shortfall pursuant to the allocation set forth in Schedule 2.1.1 hereto, provided that the foregoing payment obligation of such Shareholder shall be joint and several with all other Shareholders’ payment obligations under this Section 2.4.6 .

 

2.5                                LKQ Shares Delivered to Neu Group .

 

2.5.1   Subject to Section 2.5.5 , to the extent that LKQ elects to pay any amount of the Closing Payment in LKQ Shares, the number of LKQ Shares payable by LKQ to each Shareholder in the Neu Group at the Closing shall equal:  (a) the aggregate dollar amount LKQ

 

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determines to pay in LKQ Shares under Section 2.1.2 , divided by (b) the LKQ Share Value, multiplied by (c) the allocation percentage applicable to such Shareholder as set forth on Schedule 2.1.1 , multiplied by (d) 97.5%; provided that, to the extent the foregoing calculation results in a fraction of an LKQ Share, LKQ shall not deliver such fractional LKQ Share to the Shareholder but instead shall pay to such Shareholder, in cash, an amount equal to the product of (i) such fraction and (ii) the LKQ Share Value.  The LKQ Shares deliverable by LKQ to the Shareholders in the Neu Group pursuant to the foregoing sentence are referred to hereinafter as the “ Neu Group Shares .”

 

2.5.2   During the period beginning with the Closing and ending at the close of business on the Business Day immediately following the Closing Date, any Shareholder in the Neu Group may instruct a broker selected by the Shareholder Representative representing the Shareholders in the Neu Group and consented to in writing by LKQ prior to the date hereof, which consent shall not be unreasonably withheld or conditioned (the “ Broker ”), to cause any or all of the Neu Group Shares allocable to him to be sold at not less than prevailing market prices therefor through the Broker, provided that such sales must be completed five (5) Business Days after the Closing Date (the “ Section 2.5 Period ”).  If the Broker determines that sales requested by such Shareholder cannot be completed without adversely affecting the price at which such sales occur or otherwise affecting the market for LKQ Shares generally, the Section 2.5 Period shall automatically be extended for a period not to exceed five (5) Business Days.

 

2.5.3   If any Neu Group Shares are sold in accordance with Sections 2.5.1 and 2.5.2 during the Section 2.5 Period (as such period may have been extended pursuant to Section 2.5.2 ) and the aggregate proceeds from such sales (before deduction of any commissions, fees or expenses) to the Shareholders of the Neu Group (the “ Neu Group Proceeds Amount ”) is less than the product equal to (a) the number of such Neu Group Shares multiplied by (b) the LKQ Share Value, then LKQ shall promptly deliver additional cash to the Shareholders in the Neu Group to make up for the amount by which such product exceeds the Neu Group Proceeds Amount (such excess amount, the “ Neu Group Shortfall Amount ”).

 

2.5.4   The Shareholders agree that from the date hereof until three (3) Business Days following the Closing, they will not engage, directly or indirectly, in any transactions in LKQ securities or any derivatives thereof other than sales of the Neu Group Shares through one or more Brokers.

 

2.5.5   By the close of business Central Time on the first (1st) Business Day prior to the Closing Date, the Shareholder Representative representing the Shareholders in the Neu Group may, at his option, provide written notice to LKQ that the above provisions of this Section 2.5 shall no longer be applicable to some or all of the Neu Group Shares.

 

2.5.6   The following is for illustrative purposes:

 

(a)  If (i) the Closing Payment equals $73,000,000.00, (ii) LKQ elects to pay the entire 60% of the Closing Payment (or $43,800,000.00) in LKQ Shares, (iii) the LKQ Share Value equals $20.00 per share, and (iv) the Shareholders in the Neu Group are entitled to receive 58.2997% of the proceeds (and thus, the Shareholders not

 

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in the Neu Group are entitled to receive 41.7003% of the proceeds), then the Shareholders not in the Neu Group would be entitled to receive 913,236 LKQ Shares at the Closing ($43,800,000.00, divided by $20.00 per share, multiplied by 41.7003%), with an additional $11.40 being paid by LKQ in cash.

 

(b)  If the Shareholder Representative representing the Shareholders in the Neu Group exercises his option with respect to all Neu Group Shares pursuant to Section 2.5.5 , then the Shareholders in the Neu Group would be entitled to receive 1,276,763 LKQ Shares at the Closing ($43,800,000.00, divided by $20.00 per share, multiplied by 58.2997%), with an additional $8.60 being paid by LKQ in cash.

 

(c)  If the Shareholder Representative representing the Shareholders in the Neu Group does not exercise his option pursuant to Section 2.5.5 , then the Shareholders in the Neu Group would be entitled to receive 1,244,844 LKQ Shares at the Closing ($43,800,000.00, divided by $20.00 per share, multiplied by 58.2997%, multiplied by 97.5%), with an additional $6.89 being paid by LKQ in cash.  If (i) the Shareholders in the Neu Group sell such LKQ Shares through one or more Brokers pursuant to Section 2.5.2 and (ii) the Neu Group Proceeds Amount resulting therefrom is less than $24,896,880.00 (1,244,844 shares multiplied by $20.00 per share), thus resulting in a Neu Group Shortfall Amount, then LKQ shall deliver cash to such Shareholders in an amount equal to such Neu Group Shortfall Amount.

 

3.                                       Closing

 

3.1                                Closing .  Upon and subject to the terms of this Agreement, the sale and purchase of the Shares shall take place at the Closing to be held at the offices of Bell, Boyd & Lloyd LLP, 70 West Madison, Suite 3100, Chicago, Illinois 60602, at 10:00 a.m. local time on the second (2nd) Business Day following the satisfaction of all conditions to the obligations of the parties set forth in Sections 9 and 10 hereof (other than such conditions (i) that are waived in accordance with the terms of this Agreement or (ii) as may, by their terms, only be satisfied at the Closing or on the Closing Date), or at such other place or at such other time or on such other date as the Shareholder Representatives and LKQ mutually may agree in writing.  Throughout this Agreement, such date is referred to as the “ Closing Date .”  For the purposes of this Agreement, the Closing shall be deemed to have occurred as of 11:59 p.m. on the Closing Date.

 

3.2                                Procedure at the Closing .  At the Closing, the parties agree to take the following steps in the order listed below ( provided , however , that upon their completion all such steps shall be deemed to have occurred simultaneously):

 

3.2.1   The Shareholders shall deliver to LKQ the certificates, instruments and other documents required to be delivered by the Shareholders pursuant to Section 9 .

 

3.2.2   LKQ shall deliver to the Shareholders the certificates, instruments and other documents required to be delivered by LKQ pursuant to Section 10 .

 

3.2.3   The Shareholders shall deliver to LKQ certificates evidencing the Shares, duly endorsed in blank or accompanied by duly executed stock powers.

 

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3.2.4   LKQ shall make the following payments:  (i) to the Shareholders by wire transfer, in immediately available funds, of the amounts contemplated by Section 2.1.1 ; (ii) to the Shareholders by delivery of LKQ Shares or by wire transfer, in immediately available funds, of amounts payable in cash, to the extent applicable, pursuant to Section 2.1.2 ; (iii) to the Escrow Agent by wire transfer, in immediately available funds, the amounts contemplated by Section 2.1.3 ; (iv) to the person identified on Schedule 2.1.4 hereto by wire transfer, in immediately available funds, of the amount contemplated by Section 2.1.4; (v)  to the Company’s creditors listed on Schedule 2.1.5 hereto, on behalf of the Company, by wire transfer, in immediately available funds, the amounts contemplated by Section 2.1.5 ; and (vi) to the Company’s officers listed on Schedule 2.1.6 hereto, on behalf of the Company, by wire transfer, in immediately available funds, the amounts contemplated by Section 2.1.6 .

 

3.2.5   LKQ and the Shareholders shall execute and deliver a cross receipt acknowledging receipt from the other, respectively, of the Shares and the Purchase Price.

 

4.                                       Representations and Warranties of the Shareholders

 

Except as specifically set forth in the Disclosure Schedules attached hereto (collectively, the “ Disclosure Schedules ”), in order to induce LKQ to enter into this Agreement and to consummate the transactions contemplated hereby, each of the Shareholders makes the following representations and warranties on a several but not joint basis.  The Disclosure Schedules shall be arranged in sections and paragraphs corresponding to the sections and paragraphs contained in Section 4 or Section 5 , as the case may be.  Notwithstanding the foregoing, the information and disclosures contained in any section or paragraph of the Disclosure Schedules shall be deemed to be disclosed and incorporated by reference in any other section or paragraph of the Disclosure Schedules as though fully set forth in such section or paragraph for which the applicability of such information and disclosure is reasonably apparent on its face.  No reference to or disclosure of any item or other matter in the Disclosure Schedules shall be construed as an admission or indication that such item or other matter is material or that such item or other matter is required to be referred to or disclosed in the Disclosure Schedules.  No disclosure in the Disclosure Schedules relating to any possible breach or violation of any Contract or Law shall be construed as an admission or indication that any such breach or violation occurred or exists.

 

4.1                                Organization .  Such Shareholder is a natural person residing in the applicable State as set forth in Section 4.1 of the Disclosure Schedules.

 

4.2                                Ownership .  Such Shareholder holds of record and owns beneficially the number of Shares set forth next to his name in Section 4.2 of the Disclosure Schedules, free and clear of any Encumbrance (other than any restrictions under the Securities Act and state securities laws).  Except as set forth in Section 4.2 of the Disclosure Schedules, such Shareholder (i) is not a party to any option, warrant, purchase right or other contract or commitment (other than this Agreement) that could require such Shareholder to sell, transfer or otherwise dispose of any capital stock of the Company, and (ii) is not a party to any voting trust, proxy or other agreement or understanding with respect to the voting of any capital stock.  Upon delivery to LKQ of certificates for such Shares at the Closing, LKQ’s payment of the Purchase Price and registration of such Shares in the name of LKQ in the stock records of the Company, LKQ, assuming it shall have purchased such Shares without notice of any adverse claim, shall acquire good and valid

 

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title to such Shares, free and clear of any Encumbrance (other than any restrictions under the Securities Act and state securities laws).

 

4.3                                Authority .  Such Shareholder has full power and authority to execute and deliver this Agreement and each of the Ancillary Agreements to which such Shareholder will be a party, to perform such Shareholder’s obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby.  The execution and delivery by such Shareholder of this Agreement and each of the Ancillary Agreements to which such Shareholder will be a party, and the consummation by such Shareholder of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary action.  This Agreement has been, and upon execution and delivery each of the Ancillary Agreements to which such Shareholder will be a party will have been, duly executed and delivered by such Shareholder.  Assuming due authorization, execution and delivery by the other parties, this Agreement constitutes, and upon execution and delivery each of the Ancillary Agreements to which such Shareholder will be a party will constitute, the legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with their respective terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).

 

4.4                                No Conflict; Required Filings and Consents .

 

4.4.1   The execution, delivery and performance by such Shareholder of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not:  (i) conflict with or violate any Law applicable to such Shareholder or by which any property or asset of such Shareholder is bound or affected; (ii) conflict with, result in any breach of, constitute a default (or an event that, with notice or lapse of time or both, would become a default) under, result in the acceleration of, create in any party the right to accelerate, suspend, terminate, modify, cancel or require any notice or consent of any third party pursuant to, any contract, agreement, lease, license, instrument or other arrangement to which such Shareholder is a party (except as set forth in Section 4.4.1 of the Disclosure Schedules); or (iii) result in the creation or imposition of any Encumbrance (other than any restrictions under the Securities Act and state securities laws) with respect to the Shares; except, with respect to clauses (i) and (ii), for matters that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect with respect to such Shareholder or, with respect to clauses (i), (ii) and (iii), for matters that arise as a result of any action by LKQ or any of its affiliates.

 

4.4.2   Such Shareholder is not required to file, seek or obtain any notice, authorization, approval, order, permit or consent of or with any Governmental Authority in connection with the execution, delivery and performance by such Shareholder of this Agreement or the consummation of the transactions contemplated hereby, except (i) for any filings required to be made under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), (ii) for such filings as may be required by any applicable federal or state securities or “blue sky” laws, and (iii) where failure to obtain such consent, approval, authorization or action, or to make such filing or notification, would not prevent or materially delay or impede performance by such Shareholder of any of his obligations under this Agreement.

 

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4.5                                Brokers .  Except for Sagent Advisors Inc., no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission from the Company in connection with the transactions contemplated hereby based upon any arrangement made by or on behalf of such Shareholder.

 

4.6                                Spousal Consent .  Unless the signature of such Shareholder’s spouse appears on the spousal consent attached hereto as Exhibit 4.6 , such Shareholder is not married.

 

4.7                                Prospectus .  Such Shareholder acknowledges that he (a) received prior to the date hereof a copy of LKQ’s prospectus dated May 16, 2006 relating to the LKQ Shares (the “ Prospectus ”), which incorporates by reference LKQ’s Reports on Form 10-K for the years ended December 31, 2006 and 2007, its Reports on Form 10-Q and Form 8-K filed after December 31, 2007 and prior to the date hereof and the definitive proxy statements filed with the SEC for its annual meeting of stockholders in 2007 and 2008 (collectively, the “ SEC Reports ”), as filed pursuant to the Securities Exchange Act of 1934 and the rules and regulations thereunder, as amended (the “ Exchange Act ”); and (b) has reviewed and understands the Prospectus.

 

4.8                                California Tax Returns .  Such Shareholder has timely filed all California Tax Returns required to be filed by him and has paid in full all California state and local Taxes that have become due, whether or not shown on any such Tax Return.

 

5.                                       Representations and Warranties of the Company and the Shareholders

 

Except as set forth in the Disclosure Schedules, in order to induce LKQ to enter into this Agreement and to consummate the transactions contemplated hereunder, the Company and each of the Shareholders makes the following representations and warranties with regard to the Company on a several but not joint basis:

 

5.1                                Organization, Power and Authority of the Company .

 

5.1.1   The Company is a corporation duly organized and validly existing in good standing under the laws of the State of California with corporate power and authority necessary to own, lease or operate its properties and to carry on its business as it is now being conducted.  The Company is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except, in each case, for any such failures that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect with respect to the Company.

 

5.1.2   The Subsidiary is a limited liability company duly organized and validly existing in good standing under the laws of the State of California with limited liability company power and authority necessary to own or lease its properties and to carry on its business as it is now being conducted.  The Subsidiary is duly qualified or licensed as a foreign entity to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except, in each case, for any such failures that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect with respect to the Company.

 

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5.1.3   The Company has full power and authority to execute and deliver this Agreement and the Ancillary Agreements to which the Company will be a party, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby.  The execution and delivery by the Company of this Agreement and each of the Ancillary Agreements to which the Company will be a party and the consummation by the Company of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action.  This Agreement has been, and upon execution and delivery each of the Ancillary Agreements to which the Company will be a party will have been, duly executed and delivered by the Company.  Assuming due authorization, execution and delivery by the other parties, this Agreement constitutes, and upon execution each of the Ancillary Agreements to which the Company will be a party will constitute, the legal, valid and binding obligations of the Company, enforceable against it in accordance with their respective terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law).

 

5.2                                Capital Stock of the Company .

 

5.2.1   The authorized, issued and outstanding capital stock of the Company is set forth in Section 5.2.1 of the Disclosure Schedules.  All of the Company’s outstanding capital stock has been duly authorized and validly issued and is fully paid and nonassessable.  The Shares constitute all of the issued and outstanding capital stock of the Company.

 

5.2.2   Except as set forth in Section 5.2.2 of the Disclosure Schedules:

 

(a)  all voting rights in the Company are vested exclusively in its shares of common stock, and there are no voting trusts, proxies or other agreements or understandings with respect to the voting of the capital stock of the Company;

 

(b)  there are no outstanding warrants, options or rights of any kind to acquire from the Company or the Shareholders any shares of common stock of the Company or securities of any kind, and there are no preemptive rights with respect to the issuance or sale of shares of capital stock of the Company; and

 

(c)  the Company does not have any obligation to acquire any of its issued and outstanding shares of common stock or any other security issued by it from any holder thereof.

 

5.3                                Subsidiaries .  Except for the Subsidiary and as set forth in Section 5.3 of the Disclosure Schedules, the Company does not, directly or indirectly, own any equity, partnership, membership or similar interest in, or any interest convertible into, exercisable for the purchase of or exchangeable for any such equity, partnership, membership or similar interest in any person or entity.

 

5.4                                No Conflict; Required Filings and Consents .

 

5.4.1   The execution, delivery and performance by the Company of this Agreement and each of the Ancillary Agreements to which the Company will be a party, and the

 

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consummation of the transactions contemplated hereby and thereby, do not and will not (i) conflict with or violate the articles of incorporation or bylaws of the Company or any equivalent organizational or governing documents of the Subsidiary; (ii) conflict with or violate any Law applicable to the Company or the Subsidiary or by which any property or asset of the Company or the Subsidiary is bound or affected; (iii) conflict with, result in any breach of, constitute a default (or an event that, with notice or lapse of time or both, would become a default) under, result in the acceleration of, create in any party the right to accelerate, suspend, terminate, modify, cancel or require any notice or consent of any third party pursuant to, any contract, agreement, lease, license, instrument or other arrangement to which the Company or the Subsidiary is a party or by which any of their properties or assets are bound (except as set forth in Section 5.4.1 of the Disclosure Schedules); or (iv) result in the creation or imposition of any Encumbrance on any property or asset of the Company or the Subsidiary; except, with respect to clauses (ii), (iii) and (iv), for matters that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect with respect to the Company or that arise as a result of any action by LKQ or any of its affiliates.

 

5.4.2   Except as set forth in Section 5.4.2 of the Disclosure Schedules, the Company is not required to file, seek or obtain any notice, authorization, approval, order, permit or consent of or with any Governmental Authority in connection with the execution, delivery and performance by the Company of this Agreement and each of the Ancillary Agreements to which the Company will be a party, or the consummation of the transactions contemplated hereby or thereby, except (i) for any filings required to be made under the HSR Act, (ii) for such filings as may be required by any applicable federal or state securities or “blue sky” laws, or (iii) where failure to obtain such consent, approval, authorization or action, or to make such filing or notification, would not (a) prevent or materially delay or impede performance by the Company of any of its obligations under this Agreement or (b) individually or in the aggregate, reasonably be expected to have a Material Adverse Effect with respect to the Company.

 

5.5                                Financial Statements .  Copies of the audited consolidated balance sheets of the Company and its subsidiaries as at December 31, 2006 and December 31, 2007, and the related audited consolidated statements of income, retained earnings, stockholders’ equity and changes in financial position of the Company and its subsidiaries, together with all related notes and schedules thereto, accompanied by the reports thereon of the Company’s independent auditors (collectively, the “ Financial Statements ”), and the unaudited consolidated balance sheet of the Company and the Subsidiary for the three months ended March 31, 2008 (the “ Balance Sheet ”) and the related unaudited consolidated statements of income, retained earnings, stockholders’ equity and changes in financial position of the Company and its subsidiaries, together with, if any, all related notes and schedules thereto (collectively, including the Balance Sheet, the “ Interim Financial Statements ”) are attached hereto as Section 5.5 of the Disclosure Schedules.  Except as set forth in Section 5.5 of the Disclosure Schedules, each of the Financial Statements and the Interim Financial Statements (i) has been prepared based on the books and records of the Company and its subsidiaries (except as may be indicated in the notes thereto), (ii) has been prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto), and (iii) fairly presents, in all material respects, the consolidated financial position, results of operations and cash flows of the Company and its subsidiaries as at the respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein and subject, in the case of the Interim Financial

 

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Statements, to normal and recurring year-end adjustments and the absence of notes that will not, individually or in the aggregate, be material to the Company and the Subsidiary, taken as a whole.

 

5.6                                Liabilities; Debt Amount .  The Company has no liabilities or obligations of any nature, either accrued, absolute, contingent or otherwise, that would be required by GAAP to be reflected on a balance sheet of the Company except:  (i) to the extent reflected or taken into account in the Interim Financial Statements or the notes thereto and not heretofore paid or discharged; (ii) to the extent clearly disclosed and specifically set forth in or incorporated by express reference in Section 5.6 of the Disclosure Schedules; (iii) normal liabilities that are not past due and that were incurred in the ordinary course of business, consistent with prior practice, since the date of the Balance Sheet; and (iv) for Taxes.  The creditors listed on Schedule 2.1.5 hereto represent all of the creditors with respect to whom the Company has Debt as of June 30, 2008, the amount of Debt (excluding interest accrued thereon) shown on such schedule is accurate as of June 30, 2008, and Schedule 2.1.5 , as updated through the Closing as contemplated by Section 2.1.5 , shall contain a complete and accurate list of all creditors to whom the Company has Debt, and the amount of such Debt (including interest accrued thereon), as of the Closing Date.

 

5.7                               Tax Matters .  Except as set forth in Section 5.7 of the Disclosure Schedules:

 

5.7.1   Each of the Company and the Subsidiary has timely filed all Tax Returns required to be filed by it and has paid in full all Taxes that have become due, whether or not shown on any such Tax Return.  The Company has not been a member of any affiliated group of corporations within the meaning of Section 1504 of the Code or of any group that has filed a combined, consolidated or unitary state or local Tax Return and the Company has no liability for the Taxes of any other person under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise.

 

5.7.2   The Company has been a validly existing S corporation within the meaning of Code Sections 1361 and 1362 at all times since 1987 and the Company will be an S corporation up to and including the Closing Date.  The Shareholders have the authority to consent to the Section 338(h)(10) Election (as defined in Section 12.2.4 ) and similar state elections with respect to the purchase and sale of the Shares pursuant to this Agreement.  The Company will not be liable for any Tax under Code Section 1374 in connection with the deemed sale of the Company’s assets caused by the Section 338(h)(10) Election.  The Company has not, in the past 10 years, (A) acquired assets from another corporation in a transaction in which the Company’s Tax basis of the acquired assets was determined, in whole or in part, by reference to the Tax basis of the acquired assets (or any other property) in the hands of the transferor or (B) acquired the stock of any corporation that is a qualified subchapter S subsidiary.

 

5.7.3   All Taxes that the Company and the Subsidiary were required by law to withhold or collect have been duly withheld and collected, and have been paid over to the proper governmental entity or are being held by the Company for such payment.

 

5.7.4   There is no Tax deficiency proposed or, to the knowledge of the Company, threatened against the Company or the Subsidiary.  None of the Tax Returns of the Company or

 

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the Subsidiary is under audit or examination by a Tax authority, and there are no outstanding agreements or waivers extending the statute of limitations applicable to any Tax Return of the Company for any period.  The Company has not received any claim by a Tax authority in a jurisdiction where the Company does not file Tax Returns that the Company is or may be subject to taxation by that jurisdiction.

 

5.8                                Real Estate .

 

5.8.1   Section 5.8.1 of the Disclosure Schedules accurately and completely sets forth the address and description of each parcel of Owned Real Property.  Except as set forth in Section 5.8.1 of the Disclosure Schedules, with respect to each parcel of Owned Real Property:

 

(a)  the Company has good and marketable indefeasible fee simple title, free and clear of all Encumbrances, except Permitted Encumbrances;

 

(b)  neither the Company nor the Subsidiary is presently leasing or otherwise has granted to any Person the right, which is presently in effect or may become effective in the future, to use or occupy such Owned Real Property or any portion thereof; and

 

(c)  there are no outstanding options, rights of first offer or rights of first refusal to purchase such Owned Real Property or any portion thereof or interest therein.

 

5.8.2    Section 5.8.2 of the Disclosure Schedules accurately and completely sets forth, with respect to every parcel of Leased Real Property:  (i) the lessor and lessee thereof and the date(s) of the lease (including any amendment(s) thereto) governing such property; and (ii) the location, including address, thereof.  The Company has previously made available to LKQ accurate and complete copies of each of the Leases, and none of such Leases has been amended or modified except to the extent that such amendments or modifications are disclosed in such copies and in Section 5.8.2 of the Disclosure Schedules.  Except as set forth in Section 5.8.2 of the Disclosure Schedules, with respect to each of the Leases:

 

(a)  such Lease is legal, valid, binding, enforceable and in full force and effect, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law), provided that the foregoing exception shall apply only to the extent that the relevant bankruptcy, insolvency, reorganization, moratorium or similar event occurs after the Closing Date;

 

(b)  the Company or the Subsidiary has a valid leasehold interest in each Leased Real Property, which leasehold interest is free and clear of all Encumbrances (except for Permitted Encumbrances);

 

(c)  the transactions contemplated by this Agreement do not require the consent of any other party to such Lease, will not result in a breach of or default under such Lease, and will not otherwise cause such Lease to cease to be legal, valid, binding, enforceable and in full force and effect on identical terms following the Closing;

 

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(d)  neither the Company’s nor the Subsidiary’s possession and quiet enjoyment of the Leased Real Property under such Lease is currently being disturbed and there are no pending disputes between the Company or its Subsidiary, on the one hand, and the applicable lessor, on the other hand, with respect to such Lease;

 

(e)  neither the Company nor the Subsidiary, nor to the knowledge of the Company, any other party to the Lease is in breach of or default under such Lease, and to the knowledge of the Company, no event has occurred or circumstance exists that, with the delivery of notice, the passage of time or both, would constitute such a breach or default, or permit the termination, modification or acceleration of rent under such Lease, and the Company has no knowledge of any anticipated breach by the other parties to any such Lease;

 

(f)  the Company has not received written notice from any lessor under a Lease that any security deposit or portion thereof deposited with respect to such Lease has been applied in respect of a breach of or default under such Lease that has not been re-deposited in full;

 

(g)  neither the Company nor the Subsidiary owes, or will owe in the future, any brokerage commissions or finder’s fees with respect to such Lease;

 

(h)  the other party to such Lease is not an affiliate of, and otherwise does not have any economic interest in, the Company or the Subsidiary;

 

(i)  neither the Company nor the Subsidiary has subleased, licensed or otherwise granted to any Person (in each case, where the sublease, license or grant is currently in effect or may become effective in the future) the right to use or occupy the Leased Real Property or any portion thereof; and

 

(j)  neither the Company nor the Subsidiary has collaterally assigned or granted any other Encumbrance in such Lease or any interest therein.

 

5.8.3   The Owned Real Property identified in Section 5.8.1 of the Disclosure Schedules and the Leased Real Property identified in Section 5.8.2 of the Disclosure Schedules (collectively, the “ Real Property ”), comprise all of the real property used in or otherwise related to, the Company’s and the Subsidiary’s business; and neither the Company nor the Subsidiary is a party to any agreement or option to purchase any real property or interest therein.

 

5.8.4   Except as set forth in Section 5.8.4 of the Disclosure Schedules, the structural elements of the buildings, structures and fixtures, including the roof, bearing walls and foundation of any building on any parcel of Real Property, are free from material defects, and the building systems, including heating, ventilation, air conditioning, mechanical, electrical, plumbing, 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, included in the Real Property (the “ Improvements ”) are in working condition and are sufficient for the current operating needs of the Company and the Subsidiary.’’

 

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5.8.5   Except as set forth in Section 5.8.5 of the Disclosure Schedules, neither the Company nor the Subsidiary has received written notice of any condemnation, expropriation or other proceeding in eminent domain, pending or threatened, affecting any parcel of Real Property or any portion thereof or interest therein, and to the knowledge of the Company, no proceeding is contemplated by any Governmental Authority.  Except as set forth in Section 5.8.5 of the Disclosure Schedules, there is no injunction, decree, order, writ or judgment outstanding, or any claim, litigation, administrative action or similar proceeding that is pending or, to the knowledge of the Company, threatened, relating to the ownership, lease, use or occupancy of the Real Property or any portion thereof, or the operation of the Company’s or the Subsidiary’s business as currently conducted thereon.

 

5.8.6   Except as set forth in Section 5.8.6 of the Disclosure Schedules, neither the Company nor the Subsidiary has received any written notice of violation of any applicable building, zoning, subdivision and other land use laws, which violation has not heretofore been resolved; and, to the knowledge of the Company, there is no basis for the issuance of any such notice or the taking of any action for such violation, except as would not reasonably be expected to result in material liability for the Company or the Subsidiary.

 

5.8.7   Except as set forth in Section 5.8.7 of the Disclosure Schedules, none of the Shareholders, the Company or the Subsidiary has received any written notice of the violation of any easement, covenant, condition, restriction or similar provision in any instrument of record or other unrecorded agreement affecting such Real Property (the “ Encumbrance Documents ”), which violation has not heretofore been resolved, and to the knowledge of the Company, there is no basis for the issuance of any such notice or the taking of any action for such violation.  To the knowledge of the Company, there is no pending or anticipated change in any Law that will materially impair the ownership, lease, use or occupancy of any Real Property or any portion thereof in the continued operation of the Company’s or the Subsidiary’s business as currently conducted thereon.

 

5.8.8   Except as set forth in Section 5.8.8 of the Disclosure Schedules, each parcel of Real Property has direct vehicular and pedestrian access to a public street adjoining the Real Property, or has vehicular and pedestrian access to a public street via an insurable, permanent, irrevocable and appurtenant easement benefiting such parcel of Real Property, such access being sufficient for the current operation of the Company’s or the Subsidiary’s business.  Except as set forth in Section 5.8.8 of the Disclosure Schedules, none of the Improvements or any portion thereof is dependent for its access, use or operation on any land, building, improvement or other real property interest that is not included in the Real Property.

 

5.8.9   Except as set forth in Section 5.8.9 of the Disclosure Schedules, all water, gas, electrical, telecommunications, sewer, storm and waste water systems and other utility services or systems for the Real Property have been installed and are operational and sufficient for the current operation of the Company’s or the Subsidiary’s business.  Except as set forth in Section 5.8.9 of the Disclosure Schedules, each such utility service enters the Real Property from an adjoining public street or valid private easement in favor of the supplier of such utility service or appurtenant to such Real Property, and is not dependent for its access, use or operation on any land, building, improvement or other real property interest that is not included in the Real Property.

 

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5.8.10   Except as set forth in Section 5.8.10 of the Disclosure Schedules, the classification of each parcel of Real Property under applicable zoning laws, ordinances and regulations (after giving effect to any zoning variances and conditional use permits applicable to any parcel of Real Property) permits the use and occupancy of such parcel and the operation of the Company’s and the Subsidiary’s business as currently conducted thereon.  Except as set forth in Section 5.8.10 of the Disclosure Schedules, there are sufficient parking spaces, loading docks and, to the knowledge of the Company, other facilities at such parcel to comply with such zoning laws, ordinances and regulations.  To the knowledge of the Company, except as set forth in Section 5.8.10 of the Disclosure Schedules, the Company’s and the Subsidiary’s use or occupancy of the Real Property or any portion thereof or the operation of the Company’s or the Subsidiary’s business as currently conducted thereon is not dependent on a “permitted non-conforming use” or “permitted non-conforming structure” or similar variance, exemption or approval from any Governmental Authority.

 

5.8.11   Except as set forth in Section 5.8.11 of the Disclosure Schedules, none of the Improvements encroaches on any land that is not included in the Real Property or on any easement affecting such Real Property, or violates any building lines or set-back lines, and there are no encroachments onto the Real Property, or any portion thereof, that would materially interfere with the use or occupancy of such Real Property or the continued operation of the Company’s or the Subsidiary’s business as currently conducted thereon.

 

5.8.12   Each parcel of Real Property is a separate lot for real estate tax and assessment purposes, and no other real property is included in such tax parcel.  There are no Taxes, assessments, fees, charges or similar costs or expenses imposed by any governmental authority, association or other entity having jurisdiction over the Real Property (collectively, the “ Real Estate Impositions ”) with respect to any Real Property or portion thereof that are delinquent.  Except as set forth in Section 5.8.12 of the Disclosure Schedules, to the knowledge of the Company, there is no pending or threatened increase or special assessment or reassessment of any Real Estate Impositions for such parcel.

 

5.8.13   Except as set forth in Section 5.8.13 of the Disclosure Schedules, none of the Real Property or any portion thereof is located in a “Special Flood Hazard Area” designated by the Federal Emergency Management Agency (FEMA) as a “high risk area” (as such term is defined by the FEMA) as of the date of this Agreement.

 

5.9                                Title to and Condition of Assets .  The Company and the Subsidiary have good and marketable title to each of their respective assets (other than the Real Property) that has a book value of more than $1,000, free and clear of all Encumbrances, except Permitted Encumbrances and as set forth in Section 5.9 of the Disclosure Schedules.  Each fixed asset of the Company and the Subsidiary that has a book value of more than $1,000 is in working condition, normal wear and tear excepted.  Section 5.9 of the Disclosure Schedules sets forth the following information regarding each such fixed asset owned by the Company or the Subsidiary as of the date of this Agreement:  (i) a description of each fixed asset; (ii) the date on which each fixed asset was acquired; and (iii) the original cost of each fixed asset.

 

5.10                         Receivables .  The Company has previously made available to LKQ a complete list of all receivables of the Company and the Subsidiary as of March 31, 2008, including the due

 

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dates thereof.  Except as set forth in Section 5.10 of the Disclosure Schedules, all of the receivables listed thereon or set forth or reflected in the Balance Sheet were, as of the dates as of which the information was given therein, and as of the Closing Date all of the receivables of the Company and the Subsidiary set forth or reflected in the Closing Balance Sheet will be, valid accounts receivable which are or will be current and collectible and which have been or will be, within 120 days after the Closing Date, collected in full.

 

5.11                        Licenses and Permits .  Except (a) as set forth in Section 5.11 of the Disclosure Schedules, and (b) as pertaining to Environmental Law and Environmental Permits, each of the Company and the Subsidiary possesses each and every license, approval, permit, franchise, certificate, waiver, consent, exemption, registration or authorization of any Governmental Authority that is required for the Company or the Subsidiary, as the case may be, to own, lease or operate its properties and to carry on its business as it is now being conducted, except where the failure to have, or the suspension or cancellation of, such license, approval, permit, franchise, certificate, waiver, consents, exemption, registration or authorization would not, in each individual case, reasonably be expected to have a Material Adverse Effect with respect to the Company.  All such licenses, approvals, permits, franchises, certificates, waivers, consents, exemptions, registrations and authorizations are collectively referred to herein as the “ Permits .”  Section 5.11 of the Disclosure Schedules contains an accurate and complete list of all Permits.  Except as set forth in Section 5.11 of the Disclosure Schedules, the Permits are in full force and effect, the Company and the Subsidiary are in compliance with their requirements, and no proceeding is pending or, to the knowledge of the Company, threatened to revoke or amend any of them.  Except as set forth in Section 5.11 of the Disclosure Schedules, none of the Permits are or will be impaired or in any way affected by the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.

 

5.12                         Proprietary Rights .  The Company and the Subsidiary possess all proprietary rights, including patents, trade secrets, technology, know-how, copyrights, trademarks, trade names, assumed or “doing business as” names, and rights to any of the foregoing, necessary to conduct the Company’s and the Subsidiary’s business as currently being conducted without, to the knowledge of the Company, conflict with valid proprietary rights of others.  Section 5.12 of the Disclosure Schedules contains an accurate and complete list of all registered patents, copyrights, trademarks, service marks, trade names and assumed or “doing business as” names, in each case, that are owned or licensed by the Company or the Subsidiary (but excluding shrink-wrap or click-wrap licenses for commercially available software entered into in the ordinary course of business at a cost of less than $25,000 per such software) (collectively, the “ Proprietary Rights ”).  Except as set forth in Section 5.12 of the Disclosure Schedules, (i) the Company or the Subsidiary has a right to use all of the Proprietary Rights, (ii) within the previous three (3) year period, there have been no claims made against the Company or the Subsidiary for the assertion of the invalidity, abuse, misuse or unenforceability of any of such Proprietary Rights, and to the knowledge of the Company, there are no grounds for the same, and (iii) the Company and the Subsidiary have not received any written notice of conflict with the asserted rights of others within the previous three (3) year period.

 

5.13                         Adequacy of Assets; Customers .  Except as set forth in Section 5.13 of the Disclosure Schedules, the assets and properties of the Company and the Subsidiary constitute, in the aggregate, all of the property necessary for the conduct of the business of the Company

 

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and the Subsidiary in the manner in which and to the extent it has been conducted since December 31, 2007.  Except as set forth in Section 5.13 of the Disclosure Schedules, no current customer of the Company or the Subsidiary that accounted for over two percent (2%) of the total consolidated net sales of the Company and the Subsidiary for the twelve (12) months ended December 31, 2007, and no current supplier to the Company or the Subsidiary of items essential to the conduct of their business, which items cannot be replaced by the Company or the Subsidiary at comparable cost, and the loss of which customer or supplier would have a Material Adverse Effect with respect to the Company, has notified the Company (whether orally or in writing) within the 90 days prior to the date of this Agreement that said customer or supplier will terminate its business relationship with the Company or the Subsidiary.  None of the customer accounts of the Company or the Subsidiary have been designated by the appropriate governmental authorities as a “small business set-aside” contract.  None of the Shareholders or any officer or director or, to the knowledge of the Company, any employee of the Company or the Subsidiary, or any affiliate of any of them, has any direct or indirect interest in any customer, supplier or competitor of the Company or the Subsidiary or in any person from whom or to whom the Company or the Subsidiary leases real or personal property, or in any other person with whom the Company or the Subsidiary is doing business, except as set forth in Section 5.13 of the Disclosure Schedules.

 

5.14                         Certain Documents and Information .

 

5.14.1    Section 5.14.1 of the Disclosure Schedules accurately and completely lists the following:  (i) each loan, credit agreement, guarantee or security agreement to which the Company or the Subsidiary is a party or by which it is bound; (ii) other than the Leases, any other agreement, contract or commitment to which the Company or the Subsidiary is a party or by which it is bound that involves a future commitment by the Company or the Subsidiary in excess of $50,000 and which cannot be terminated without liability on ninety (90) days or less notice; (iii) each power of attorney executed by or on behalf of the Company or the Subsidiary, which power of attorney is currently in effect; (iv)(A) the name and current annual compensation of each employee of the Company or the Subsidiary whose current annual compensation is in excess of $75,000 per annum, (B) any profit sharing, year-end bonus or any other form of compensation (other than base compensation) paid or payable by the Company or the Subsidiary to or for the benefit of each such person for the year ending December 31, 2008 or any period thereafter, and (C) any employment or other agreement of the Company or the Subsidiary with any of their respective officers or employees; (v) any agreement with respect to any joint venture or partnership arrangements or the purchase of any equity interests in any other entity; (vi) any agreement that contains covenants expressly limiting the ability of the Company or the Subsidiary to engage in any line of business or to compete with any person or entity or operate in any geographic location or for any period of time with respect to any line of business; (vii) the name of each of the officers and directors of the Company and the Subsidiary; and (viii) the name of each bank in which the Company or the Subsidiary has an account or safe-deposit box, the name in which the account or box is held and the names of all persons authorized to draw thereon or to have access thereto.  The Company has previously made available to LKQ an accurate and complete copy of each such agreement, contract or commitment listed in Section 5.14.1 of the Disclosure Schedules (the “ Contracts ”).

 

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5.14.2   Except for matters that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect with respect to the Company, (i) each Contract is a valid and binding obligation of the Company or the Subsidiary, as applicable, in full force and effect and enforceable against the Company or the Subsidiary, as applicable, in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law) ( provided that the foregoing exception shall apply only to the extent that the relevant bankruptcy, insolvency, reorganization, moratorium or similar event occurs after the Closing Date), (ii) to the knowledge of the Company, each Contract is a valid and binding obligation of the counterparty thereto, in full force and effect and enforceable against such counterparty in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether considered in a proceeding in equity or at law) ( provided that the foregoing exception shall apply only to the extent that the relevant bankruptcy, insolvency, reorganization, moratorium or similar event occurs after the Closing Date), (iii) the Company and the Subsidiary, and, to the knowledge of the Company, each other party thereto, has performed in all material respects all obligations required to be performed by it under each Contract (excluding performance obligations not yet due), and (iv) neither the Company nor the Subsidiary has received written notice of a default under any Contract or of any event or condition that, after notice or lapse of time or both, will constitute a default on the part of the Company or the Subsidiary under any Contract.

 

5.15                         Insurance .  Section 5.15 of the Disclosure Schedules accurately and completely lists each policy of insurance in force with respect to the Company, the Subsidiary or their respective assets and properties, and each of the performance or other surety bonds maintained by the Company or the Subsidiary in the conduct of their businesses.  All premiums and other payments that have become due under the policies of insurance listed in Section 5.15 of the Disclosure Schedules have been paid in full, all of such policies are now in full force and effect and neither the Company nor the Subsidiary has received written notice from any insurer, agent or broker of the cancellation of, or any material increase in premium with respect to, any of such policies or bonds.  Section 5.15 of the Disclosure Schedules sets forth the claims experience (including all open and closed claims) of the Company and the Subsidiary over the last three (3) years, for workers’ compensations claims, general liability claims, auto liability claims, products liability claims and any other claims covered by any insurance policy.  Except as set forth in Section 5.15 of the Disclosure Schedules, to the knowledge of the Company, there has been no occurrence that would reasonably be expected to give rise to any claim against any of the Company’s or the Subsidiary’s insurers under any of such policies.  Except as set forth in Section 5.15 of the Disclosure Schedules, neither the Company nor the Subsidiary has received any written notification from any insurer, agent or broker denying or disputing any claim made by either of them or denying or disputing any coverage for any such claim or the amount of any claim.

 

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5.16                         Litigation .  Except as set forth in Section 5.16 of the Disclosure Schedules, as of the date hereof:

 

5.16.1   There are no actions, suits, claims, governmental investigations or arbitration proceedings pending or, to the knowledge of the Company, threatened, against or affecting the Company or the Subsidiary or any of the assets or properties of the Company or the Subsidiary and, to the knowledge of the Company, there is no basis for any of the foregoing.

 

5.16.2   There are no outstanding orders, decrees or stipulations issued by any U.S. federal, state, local or foreign judicial or administrative authority in any proceeding to which either of the Company or the Subsidiary is or was a party.

 

5.17                         Records .  The Company has previously made available to LKQ copies of the Company’s articles of incorporation and bylaws and the equivalent organizational or governing documents of the Subsidiary and all amendments thereto to date, and such copies are correct and complete in all respects.  A record of all actions taken by the owners and boards of directors of the Company and the Subsidiary and all minutes of their meetings are contained in the minute books of the Company and the Subsidiary and are accurate and complete in all material respects.  The record books, stock ledgers and membership ledgers of the Company and the Subsidiary contain a materially accurate and complete record of all issuances, transfers and cancellations of shares of capital stock of the Company and the Subsidiary.

 

5.18                         No Material Adverse Change .  Except as set forth in Section 5.18 of the Disclosure Schedules, since December 31, 2007, there have not been any changes in the business or properties of the Company or the Subsidiary, or in their financial condition, other than changes occurring in the ordinary course of business which in the aggregate have not had a Material Adverse Effect with respect to the Company.  There is not, to the knowledge of the Company, any threatened event or condition that could reasonably be expected to have a Material Adverse Effect with respect to the Company.

 

5.19                         Absence of Certain Acts or Events .  Except for the transactions contemplated hereby or as disclosed in Section 5.19 of the Disclosure Schedules, since December 31, 2007, each of the Company and the Subsidiary has, in all material respects, conducted its business in the ordinary course consistent with past practice and has not:  (i) authorized or issued any of its shares of capital stock, units of membership interests or any other securities (including any held in its treasury); (ii) declared or paid any dividend or made any other distribution of or with respect to its shares of capital stock or other securities or purchased or redeemed any shares of its capital stock or other securities or paid any bonus to its employees; (iii) increased the rate of compensation of any of its employees (except any regularly scheduled annual pay increases consistent with past practices); (iv) sold, leased, transferred or assigned any of its assets, other than in the ordinary course of business; (v) made or obligated itself to make capital expenditures aggregating more than $100,000; (vi) incurred any material obligations or liabilities (including any indebtedness) or entered into any material transaction; (vii) suffered any theft, damage, destruction or casualty loss in excess of $100,000; (viii) deferred the payment of any liabilities or accounts payable or deferred the acquisition of any inventory outside the ordinary course of business or in a manner inconsistent with past practices; or (ix) accelerated the collection of any accounts receivable in a manner inconsistent with past practices.  As of the Closing Date, none of

 

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the Company’s or the Subsidiary’s accounts payable will be past due in any material respect.  All net cash generated by the Company and the Subsidiary (after payment of their accounts payable and expenses consistent with past practices) between December 31, 2007 and the Closing is or will be deposited in a bank account registered in the name of the Company or the Subsidiary, as applicable.

 

5.20                         Compliance with Laws .  Except as set forth in Section 5.20 of the Disclosure Schedules:

 

5.20.1   Each of the Company and the Subsidiary is in compliance, in all material respects, with all Laws (excluding Environmental Laws and Environmental Permits) applicable to it, its assets, properties and business; provided , however , that each Shareholder (other than the Glenn C. McElroy Family Trust dated October 14, 1992 (and its trustee)) makes the foregoing representation and warranty only to the extent of his actual knowledge without investigation.

 

5.20.2   In the past five (5) years, the Company and the Subsidiary have not received written notification of any asserted past or present failure to comply with any Laws (excluding Environmental Laws and Environmental Permits), which failure has not heretofore been resolved, and, to the knowledge of the Company, no proceeding with respect to any such violation is contemplated.

 

5.20.3   Neither the Company nor the Subsidiary, nor to the knowledge of the Company, any employee of the Company or the Subsidiary, has made any payment of funds in connection with the business of the Company or the Subsidiary prohibited by Law, and no funds have been set aside to be used in connection with its business for any payment prohibited by Law.

 

5.20.4   Notwithstanding the foregoing, nothing in this Section 5.20 shall constitute a representation or warranty with respect to any matter relating to Laws or Permits, or any Governmental Authority in regard to the enforcement of such Laws or Permits, to the extent that such matter is expressly covered by another representation or warranty in this Section 5 (including Sections 5.4.1 , 5.7 , 5.8 , 5.11 , 5.21 and 5.22 ).

 

5.21                         Environmental Matters .

 

5.21.1   For purposes of this Agreement, the terms listed below shall mean the following:

 

“ Tank ” shall mean that term as defined in 40 C.F.R. § 260.10, without regard to the character of Tank contents.

 

“ Environmental Law ” shall mean any federal, state, regional, county and local administrative rules, statutes, codes, ordinances, regulations, licenses, permits, approvals, plans, authorizations, directives, rulings, injunctions, decrees, orders, judgments and any similar items in effect on or prior to the Closing Date, relating to the protection of human health, safety or the environment, and common law theories of nuisance, trespass, waste, negligence and abnormally dangerous activities arising out of or relating to the presence of any Hazardous Substance (as defined below) in the environment or workplace.

 

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“ Environmental Permit ” shall mean any approval, covenant, waiver, exception, order, permit, authorization, site-specific limitation or license of any Governmental Authority relating to any Environmental Law.

 

“ Hazardous Substance ” shall mean and be construed broadly to include any gas, liquid or solid that is defined as a “hazardous waste,” “hazardous material,” “hazardous substance,” “extremely hazardous substance,” “restricted hazardous waste,” “pollutant,” “contaminant,” “toxic waste,” “toxic substance” or “special waste” under any Environmental Law and includes petroleum, petroleum by-products (including crude oil and any fraction thereof), waste oils, any hydrocarbon-based substance, asbestos, asbestos-containing materials, urea formaldehyde and polychlorinated biphenyls.

 

“ Release ” shall mean releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping into the indoor or outdoor environment, including the abandonment or discarding of barrels, drums, containers, tanks and other receptacles containing or previously containing any Hazardous Substance.

 

The representations and warranties in this Section 5.21 shall each be qualified as being to Actual Knowledge as defined in Section 13.3.1 .  Notwithstanding anything herein to the contrary, except for the representations and warranties contained in this Section 5.21 , the Shareholders and the Company do not make any representation or warranty of any kind or nature (whether express, implied or otherwise) relating to any matter involving any Environmental Law, Environmental Permit, Hazardous Substance, Release or other environmental issue.

 

5.21.2   Except as set forth in Section 5.21.2 of the Disclosure Schedules, neither the Company nor the Subsidiary:  (i) has transported, stored, treated or disposed, nor have they allowed or arranged for any third parties to transport, store, treat or dispose any Hazardous Substance to or at any location or in a manner that has resulted or could reasonably be expected to result in a liability under any Environmental Law; or (ii) has disposed, or allowed or arranged for any third parties to dispose, any Hazardous Substance upon property owned or leased by them currently or in the past.

 

5.21.3   Except as set forth in Section 5.21.3 of the Disclosure Schedules, there has not occurred, nor is there currently occurring, a Release or threatened Release of any Hazardous Substance on, into or beneath the surface of, or adjacent to, any parcel of the Real Property.

 

5.21.4   Except as set forth in Section 5.21.4 of the Disclosure Schedules, neither  the Company nor the Subsidiary has:  (i) received any written notice that the Company or the Subsidiary is potentially responsible for a response action or corrective action under any Environmental Law; (ii) submitted or was required to submit any notice pursuant to Section 103(c) of CERCLA; and (iii) received any request for information in connection with any environmental response under any Environmental Law.

 

5.21.5   Except as set forth in Section 5.21.5 of the Disclosure Schedules, neither the Company nor the Subsidiary uses, nor have they ever used, any Tanks on the Real Property nor has there been a Release from any Tank on the Real Property.

 

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5.21.6   Except as set forth in Section 5.21.6 of the Disclosure Schedules, (i) the Company and the Subsidiary are in compliance with all Environmental Laws governing the Real Property and the operations of the Company and the Subsidiary; (ii) the Company and the Subsidiary have obtained and maintained in effect all Environmental Permits necessary for operation of their business; (iii) no action to revoke or modify such Environmental Permits is pending; and (iv) the Company and the Subsidiary are in compliance with such Environmental Permits.

 

5.21.7   The Company has made available to LKQ all material written information in its possession, or materially accurate written summaries of such information, that concerns the Company or the Subsidiary with regard to:  (i) all environmental audits, assessments or occupational health studies relating to the assets, Real Property or business of the Company and the Subsidiary undertaken by a Governmental Authority or the Company, the Subsidiary or any of their agents; (ii) the results of any groundwater, soil, air or asbestos monitoring undertaken with respect to the Real Property; (iii) any actual or alleged violation of, or liability under, any Environmental Law or any health and safety requirements; and (iv) any investigatory, remedial or corrective obligations, including those assumed or undertaken with respect to any other person, relating to any Real Property or any off-site location, arising under any Environmental Law or health and safety requirements.

 

5.22                         Labor Relations .  Except as set forth in Section 5.22 of the Disclosure Schedules:

 

5.22.1   The Company and the Subsidiary are not a party to or bound by any collective bargaining agreement or any other agreement with a labor union, and to the knowledge of the Company, since December 31, 2004, there has been no effort by any labor union to organize any employees of the Company or the Subsidiary into one or more collective bargaining units.

 

5.22.2   There is not any pending or, to the knowledge of the Company, threatened labor dispute, strike or work stoppage involving any of the employees of the Company or the Subsidiary that affects or that may affect the business of the Company or the Subsidiary or that may interfere with the Company’s continued operations.

 

5.22.3   Neither the Company nor the Subsidiary nor, to the knowledge of the Company, any agent, representative or employee of the Company or the Subsidiary committed any unfair labor practice as defined in the National Labor Relations Act, as amended, and there is not now any pending or, to the knowledge of the Company, threatened charge or complaint against the Company or the Subsidiary by or with the National Labor Relations Board or any representative thereof.

 

5.22.4   There has been no strike, walkout or work stoppage involving any of the employees of the Company or the Subsidiary during the five-year period prior to the date hereof.

 

5.22.5   The Company is not aware that any executive or key employee or group of employees has any plans to terminate his, her or their employment with the Company or the Subsidiary.

 

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5.23                         Employee Benefits .

 

5.23.1   None of the Company, the Subsidiary, nor any corporation or business that is now or at the relevant time was a member of a controlled group of corporations or trades or businesses including the Company, within the m