Contribution And Purchase Agreement

Exhibit 10.4


CONTRIBUTION AND PURCHASE AGREEMENT


BY AND AMONG


CITY TRUCK HOLDINGS, INC.,


HDA PARTS SYSTEM, INC.


AND


TRUCK & TRAILER PARTS, INC.,


DHP LEASING, INC.


and


THE SHAREHOLDERS OF


TRUCK & TRAILER PARTS, INC. AND DHP LEASING, INC.


September 30, 1998


TABLE OF CONTENTS


Page
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ARTICLE I. CONTRIBUTION, PURCHASE AND SALE.....................................2


1.1. Purchase Price.......................................................2
1.2. Contribution.........................................................2
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1.3. Post-Closing Purchase Price Adjustment...............................3
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1.4. Transfer of Assets...................................................4
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1.5. Assumption of Liabilities............................................4
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1.6. Excluded Liabilities.................................................4
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ARTICLE II. CLOSING............................................................5


2.1. Closing..............................................................5
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2.2. Conveyances at Closing...............................................5
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ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE SELLING
PARTIES AND TURNER.............................................6


3.1. Corporate Organization and Standing..................................6
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3.2. Capitalization of Company............................................7
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3.3. Authorization........................................................7
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3.4. Title to Shares......................................................7
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3.5. No Conflict or Violation.............................................8
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3.6. Facilities...........................................................8
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3.7. Assets...............................................................9
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3.8. Financial Statements.................................................9
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3.9. Books and Records...................................................10
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3.10. Litigation.........................................................10
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3.11. Licenses and Permits; Compliance with Laws.........................10
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3.12. Tax Matters........................................................11
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3.13. Brokers, Finders...................................................12
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3.14. Absence of Certain Changes.........................................12
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3.15. Material Contracts.................................................14
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3.16. Proprietary Rights.................................................15
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3.17. Labor Matters......................................................16
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3.18. Consents...........................................................16
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3.19. Employee Benefit Plans; Employment Agreements......................17
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3.20. Compliance with Environmental Laws.................................18
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3.21. Certain Business Relationships with the Companies..................20
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3.22. Undisclosed Liabilities............................................20
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3.23. Insurance..........................................................21
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3.24. Accounts Receivable................................................21
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3.25. Inventory..........................................................21
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3.26. Customers, Distributors and Suppliers..............................22
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3.27. Banking Relationships..............................................22
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3.28. Investment.........................................................22
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3.29. Operations and Assets of DHP.......................................23
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3.30. Representations and Warranties of Charles R. Turner................23
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF HOLDINGS
AND HDA.........................................................24


4.1. Corporate Organization and Standing.................................24
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4.2. Authorization.......................................................24
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4.3. No Conflict or Violation............................................24
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4.4. Litigation..........................................................25
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4.5. Brokers, Finders....................................................25
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4.6. Approvals, Etc......................................................25
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4.7. Stock...............................................................25
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4.8. Investment..........................................................26
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4.9. Offering Memorandum.................................................26
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4.10. Absence of Certain Changes or Events...............................26
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4.11. Capitalization of Holdings and HDA.................................26
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4.12. Financial Statements...............................................27
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4.13. Shareholder Agreement; Other Agreements Relating to Holdings
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Capital Stock....................................................27
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ARTICLE V. CONDUCT OF BUSINESS PENDING CLOSING AND POST-
CLOSING COVENANTS................................................28


5.1. Further Assurances..................................................28
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5.2. Disclosures.........................................................28
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5.3. Tax Matters.........................................................28
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ARTICLE VI. CONDITIONS TO CONSUMMATION OF THE
TRANSACTIONS BY HOLDINGS AND HDA................................30


6.1. No Injunctive Proceedings...........................................30
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6.2. Representations and Warranties......................................30
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6.3. Performance of Agreements...........................................31
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6.4. Compliance Certificate..............................................31
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6.5. Material Changes....................................................31
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6.6. Opinion of Counsel..................................................31
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6.7. Consents, Etc.......................................................31
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6.8. Ancillary Agreements................................................31
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ARTICLE VII. CONDITIONS TO CONSUMMATION OF THE
TRANSACTIONS BY THE SELLING PARTIES............................32


7.1. No Injunctive Proceedings...........................................32
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7.2. Representations and Warranties......................................32
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7.3. Performance of Agreements; Instruments of Transfer..................32
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7.4. Compliance Certificates.............................................32
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7.5. Ancillary Agreements................................................32
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7.6. Material Changes....................................................32
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7.7. Opinion of Counsel..................................................32
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7.8. Consents, Etc.......................................................33
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ARTICLE VIII. ACTIONS BY THE PARTIES AFTER THE CLOSING........................33


8.1. Consents to Assignment..............................................33
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8.2. Indemnification by the Selling Parties..............................33
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8.3. Indemnification by HDA..............................................33
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8.4. Survival of Representations, Warranties and Covenants...............34
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8.5. Threshold; Deductible...............................................34
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8.6. Notice and Opportunity to Defend....................................34
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8.7. Indemnification Payments............................................35
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ARTICLE IX. MISCELLANEOUS.....................................................35


9.1. Expenses............................................................35
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9.2. Notices.............................................................35
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9.3. Counterparts........................................................37
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9.4. Entire Agreement....................................................37
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9.5. Headings............................................................37
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9.6. Assignment; Amendment of Agreement..................................37
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9.7. Governing Law.......................................................37
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9.8. No Third-Party Rights...............................................37
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9.9. Non-Waiver..........................................................37
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9.10. Severability.......................................................38
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9.11. Incorporation of Exhibits and Schedules............................38
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CONTRIBUTION AND PURCHASE AGREEMENT


THIS CONTRIBUTION AND PURCHASE AGREEMENT (this agreement and all schedules attached hereto, the "Agreement"), dated as of September 30, 1998, is entered into by and among City Truck Holdings, Inc., a Delaware corporation ("Holdings"), HDA Parts System, Inc., an Alabama corporation ("HDA"), Truck & Trailer Parts, Inc., a Georgia corporation ("Truck"), DHP Leasing, Inc., a Georgia corporation ("DHP," and together with Truck, each a "Company" and collectively, the "Companies"), and Robert L. Pope ("Pope"), Darlene H. Pope (together with Pope, the "Popes") and Charles R. Turner ("Turner" and individually, an "Existing Shareholder" and together with the Popes, the "Existing Shareholders.") The Companies and the Popes are each a "Selling Party" and collectively, the "Selling Parties"). HDA, Holdings, Truck, DHP and the Existing Shareholders are referred to herein as each a "Party" and collectively, the "Parties."


RECITALS


WHEREAS, Pope and Turner own all of the capital stock of Truck;


WHEREAS, Darlene H. Pope owns all of the outstanding stock of DHP;


WHEREAS, DHP owns certain assets listed on Annex A (the "Assets") which are used in connection with or useful to its business of distributing aftermarket parts and services to the domestic heavy duty vehicle market (the "Business");


WHEREAS, Holdings desires to acquire a portion of the capital stock of Truck in exchange for capital stock of Holdings pursuant to the Truck Stock Contribution (as defined in Section 1.2 below);


WHEREAS, in connection with the Truck Stock Contribution, the existing shareholders of HDA are contributing all of the capital stock of HDA to Holdings in exchange for the remaining capital stock of Holdings (the "HDA Stock Contribution");


WHEREAS, the Parties intend for the Truck Stock Contribution and the HDA Stock Contribution to qualify as a transaction described in Section 351(a) of the Internal Revenue Code of 1986, as amended (the "Code");


WHEREAS, HDA desires to purchase the Assets of DHP and all of the capital stock of Truck other than the portion thereof acquired by Holdings pursuant to the Truck Stock Contribution;


AGREEMENT


NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the Parties hereby agree as follows:


ARTICLE I.
CONTRIBUTION, PURCHASE AND SALE


1.1. Purchase Price.


(a) Immediately prior to the contribution described in Section 1.2 below, upon the terms and subject to the conditions set forth herein, HDA will purchase from Pope and Turner 887 shares of common stock, no par value, of Truck and from DHP the Assets for an aggregate price (the "Purchase Price") determined as follows: Fourteen Million Five Hundred Fifteen Thousand ($14,515,000) in cash payable by wire transfer of immediately available funds to the Selling Parties, less the amount of (x) any liabilities of the Companies in excess of
---- $80,000 in the aggregate to (a) any Existing Shareholder, (b) a person related directly or indirectly by blood or marriage to any Existing Shareholder, (c) an officer, director or employee of any of the Companies, or (d) an entity controlled by any of the foregoing, (y) any long-term indebtedness for borrowed money, including the current portion thereof (excluding any indebtedness under Truck's line of credit with SunTrust Bank), and (z) $30,000 representing payment by Pope for his purchase of the Lexus sport utility vehicle from Truck, plus an
---- amount equal to the Companies' undistributed S Corporation earnings for 1997 and 1998 through Closing (as defined). The Purchase Price will be estimated at Closing (the "Estimated Cash Purchase Price") by the Parties based on certificates provided by officers of the Companies regarding S Corporation earnings.


(b) On the Closing Date (as defined), (i) HDA shall pay to DHP an amount of cash equal to $628,000 and (ii) HDA shall pay to the Existing Shareholders an aggregate amount of cash equal to the Estimated Cash Purchase Price (less Eight Hundred Fifty Thousand Dollars ($850,000) to be delivered to the Escrow Agent (as defined) pursuant to Section 8.7 hereof) less $628,000.


1.2. Contribution.
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(a) In connection with and as part of the initial organization and capitalization of Holdings upon the terms and subject to the conditions set forth herein and in connection with the Stock Contribution Agreement dated September 30, 1998 among HDA's existing shareholders and Holdings, Pope and Turner will contribute to Holdings 182 shares of common stock, no par value, of Truck in exchange for the number of shares of Common Stock of Holdings, par value $.01 per share (the "Common Stock") and the number of shares of Series A Preferred Stock of Holdings, par value $.01 per share (the "Series A Preferred Stock") indicated on Schedule 1.2 attached hereto.


(b) On the Closing Date, Holdings shall deliver to Pope and Turner certificates representing the shares of Common Stock and Series A Preferred Stock acquired by them pursuant to Section 1.2(a) and in amounts as reflected on Schedule 1.2(a) attached hereto.


(c) The Parties agree that they intend to report the Truck Stock Contribution and the HDA Stock Contribution for federal and state income tax purposes as a tax-free exchange


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described in Section 351(a) of the Code. HDA and Holdings agree that the consummation of the HDA Stock Contribution will occur on the same day as the Closing Date.


1.3. Post-Closing Purchase Price Adjustment.
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(a) Determination of Earnings. The Selling Parties will prepare at
------------------------- the expense of Truck (i) a combined income statement of the Companies for the period from January 1, 1998 through the Closing (the "Closing Income Statement") and (ii) a balance sheet dated the Closing Date (as defined) (the "Closing Balance Sheet" and together with the Closing Income Statement, the "Closing Financial Statements"), prepared in accordance with generally accepted accounting principles ("GAAP") applied in the same manner as the Balance Sheet and the 1997 Income Statement (as defined in Section 3.8(a)). The Selling Parties will deliver such Closing Financial Statements to HDA as soon as possible but in any event within 45 days after the Closing. The Closing Financial Statements shall be audited by Ernst & Young at the expense of HDA.


(b) Closing Financial Statements Notice.
-----------------------------------


(i) Within 30 days of the receipt of such Closing Financial
Statements, HDA will deliver to the Existing Shareholders a written notice
certifying that either (x) it agrees with such Closing Financial
Statements, or (y) it disagrees with such Closing Financial Statements, in
which case it will also provide therewith a reasonably detailed written
report stating the basis for disagreement with the Closing Financial
Statements (the "Closing Financial Statements Notice"). The Companies
shall provide reasonable access to their respective accountants' work
papers, personnel and to such historical financial information as HDA shall
reasonably request in order to review such Closing Financial Statements.


(ii) If the Closing Financial Statements Notice is not timely
given as described in Section 1.3(b)(i), the Closing Financial Statements
shall be final, binding and conclusive upon the Parties. If the Existing
Shareholders disagree with the Closing Financial Statements Notice as
described in Section 1.3(b)(i)(y), and if the disagreement is not resolved
by mutual agreement among the Parties within 30 days following delivery of
the Closing Financial Statements Notice, such dispute will be resolved by a
"Big 5" accounting firm ("BFAF"), other than Ernst & Young or Coopers &
Lybrand, selected by HDA and the Selling Parties. The costs of resolving
such a dispute shall be borne equally by HDA and the Existing Shareholders.


(iii) Upon appointment of a BFAF, such BFAF in consultation
with the Parties shall establish a schedule for resolution of the dispute
which is reasonably calculated to result in a resolution as expeditiously
as practicable, and in any event, no later than six months after the
Closing Date. In resolving such dispute, the BFAF shall revise the Closing
Financial Statements only with respect to the issues raised in the Closing
Financial Statements Notice and only to the extent necessary to make it
conform to the practices, procedures and methods described in Section
1.3(a) above.


(c) Post-Closing Adjustment. After a final resolution by the
----------------------- BFAF of such


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disagreements as may arise out of the review of the Closing Financial Statements in accordance with Section 1.3(b) above, and an appropriate adjustment to the Closing Financial Statements to reflect such resolution, or if Section 1.3(b)(i)(x) or the first sentence of Section 1.3(b)(ii) applies, the actual year to date undistributed earnings of Truck will be determined, and the actual Purchase Price (the "Cash Purchase Price") will be calculated based on such, and to the extent that the Estimated Cash Purchase Price was less than the Cash Purchase Price, the difference and interest thereon due to the Selling Parties will promptly be paid to them by HDA. Similarly, to the extent the Estimated Cash Purchase Price was more than the Cash Purchase Price, the excess will be promptly returned by the Selling Parties to HDA. Any amounts payable pursuant to this paragraph shall bear interest from the Closing Date through the date of payment at an annual rate equal to the prime rate as reported in The Wall Street Journal on the Closing Date.


1.4. Transfer of Assets. Upon the terms and subject to the
------------------ conditions set forth herein, at the Closing, DHP will sell to HDA, and HDA will purchase from DHP, the Assets, free and clear of all encumbrances other than Permitted Encumbrances (as defined herein).


1.5. Assumption of Liabilities. Upon the terms and subject to the
------------------------- conditions contained herein, at the Closing, HDA shall assume all obligations and liabilities accruing, arising out of, or relating to events or occurrences happening after the Closing Date under, and only under, the Assumed Contracts (as defined) listed on Schedule 3.15, but not including any obligation or liability of DHP for any breach of any Contract (as defined) occurring on or prior to the Closing Date (together with the liabilities assumed pursuant to the Assumed Contracts, the "Assumed Liabilities").


1.6. Excluded Liabilities. Notwithstanding any other provision of
-------------------- this Agreement, except for the Assumed Liabilities expressly specified in Section 1.4 hereof, HDA shall not assume, or otherwise be responsible for, any of DHP's liabilities or obligations, whether actual or contingent, matured or unmatured, liquidated or unliquidated, known or unknown, or related or unrelated to the Business or the Assets, whether arising out of occurrences prior to, at or after the date hereof (collectively, "Excluded Liabilities"), which Excluded Liabilities include, without limitation:


(a) Any liability or obligation to or in respect of any employees or former employees of DHP including without limitation (i) any employment agreement, whether or not written, between DHP and any person, (ii) any liability under any Employee Plan (as defined) at any time maintained, contributed to or required to be contributed to by or with respect to DHP or under which DHP may incur liability, or any contributions, benefits or liabilities therefor, or any liability with respect to DHP's withdrawal or partial withdrawal from or termination of any Employee Plan and (iii) any claim of an unfair labor practice, or any claim under any state unemployment compensation or worker's compensation law or regulation or under any federal or state employment discrimination law or regulation, which shall have been asserted on or prior to the Closing Date or is based on acts or omissions which occurred on or prior to the Closing Date;


(b) Any liability or obligation of DHP in respect of any Tax (as defined);


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(c) Any liability arising from any injury to or death of any person or damage to or destruction of any property, whether based on negligence, breach of warranty, strict liability, enterprise liability or any other legal or equitable theory arising from defects in products sold or services performed by or on behalf of DHP or any other person or entity on or prior to the Closing Date, or arising from any other cause, including without limitation any liabilities arising (on a date of occurrence basis or otherwise) on or prior to the Closing Date relating to the use or misuse of equipment or to traffic accidents;


(d) Any liability or obligation of DHP arising out of or related to any Action (as defined) against DHP or any Action which adversely affects the Assets and which shall have been asserted on or prior to the Closing Date or to the extent the basis of which shall have arisen on or prior to the Closing Date;


(e) Any liability or obligation of DHP resulting from entering into, performing its obligations pursuant to or consummating the transactions contemplated by, this Agreement (including without limitation any liability or obligation of DHP pursuant to Article X hereof);


(f) Any liability or obligation related to the Facilities; and


(g) Any liability or obligation arising out of any Environmental Law, including but not limited to CERCLA (as defined) or any similar state law.


ARTICLE II.
CLOSING


2.1. Closing. The Closing of the transactions contemplated herein
------- (the "Closing") shall be held at 9:00 a.m. local time on September 30, 1998 (the "Closing Date"), unless the Parties otherwise agree, at a location mutually agreeable to the Parties.


2.2. Conveyances at Closing.
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