<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1996
REGISTRATION NO. 333-06601
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
DURA AUTOMOTIVE SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 3465 38-2961431
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
4508 IDS CENTER
MINNEAPOLIS, MINNESOTA 55402
TELEPHONE: (612) 332-2335
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
DAVID R. BOVEE
DURA AUTOMOTIVE SYSTEMS, INC.
2791 RESEARCH DRIVE, ROCHESTER HILLS, MICHIGAN 48309
TELEPHONE: (810) 299-7500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
H. KURT VON MOLTKE DEWEY B. CRAWFORD
KIRKLAND & ELLIS GARDNER, CARTON & DOUGLAS
200 EAST RANDOLPH DRIVE 321 NORTH CLARK STREET
CHICAGO, ILLINOIS 60601 CHICAGO, ILLINOIS 60610
(312) 861-2000 (312) 245-8422
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] _______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] ________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC.
Cross Reference Sheet Pursuant to Item 501(b) of Regulation S-K Showing
Location in Prospectus of Information Required by Items of Part I of Form S-1.
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM NUMBER
AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
---------------------------------- ---------------------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus...... Outside Front Cover Page of Registration
Statement; Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus..... Inside Front Cover Page of Prospectus;
Outside Back Cover Page of Prospectus;
Additional Information
3. Summary Information and Risk
Factors....................... Prospectus Summary; Risk Factors
4. Use of Proceeds................ Prospectus Summary; Use of Proceeds;
Management's Discussion and Analysis of
Results of Operations and Financial
Condition
5. Determination of Offering
Price......................... Outside Front Cover Page of Prospectus;
Underwriting
6. Dilution....................... Dilution
7. Selling Security Holders....... Inapplicable
8. Plan of Distribution........... Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to be
Registered.................... Prospectus Summary; Dividend Policy;
Description of Capital Stock
10. Interests of Named Experts and
Counsel....................... Legal Matters
11. Information with Respect to the
Registrant.................... Outside Front Cover Page of Prospectus;
Prospectus Summary; Risk Factors; The
Company; Use of Proceeds; Dividend Policy;
Dilution; Capitalization; Selected
Consolidated Financial Data; Management's
Discussion and Analysis of Results of
Operations and Financial Condition;
Business; Management; Principal
Stockholders; Certain Transactions;
Description of Capital Stock; Shares
Eligible for Future Sale
12. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... Inapplicable
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 23, 1996
PROSPECTUS
, 1996
LOGO
2,700,000 SHARES
DURA AUTOMOTIVE SYSTEMS, INC.
CLASS A COMMON STOCK
All of the shares of Class A Common Stock, par value $.01 per share ("Class A
Common Stock"), offered hereby are being sold by Dura Automotive Systems, Inc.
(the "Company").
Prior to this offering, there has been no public market for other Class A
Common Stock of the Company. It is currently estimated that the initial public
offering price will be between $14.00 and $16.00 per share. See "Underwriting"
for information relating to the factors considered in determining the initial
public offering price.
Application has been made for quotation of the Class A Common Stock on the
Nasdaq National Market under the symbol "DRRA."
Upon completion of the offering contemplated hereby, the Company will have
2,700,000 shares of Class A Common Stock and 4,998,254 shares of Class B Common
Stock, par value $.01 per share ("Class B Common Stock"), outstanding. The
Company's Class A Common Stock and Class B Common Stock are substantially
identical except with respect to voting power and conversion rights. The Class
A Common Stock is entitled to one vote per share and the Class B Common Stock
is entitled to ten votes per share. The Class B Common Stock is convertible at
the option of the holder, and mandatorily convertible upon the transfer thereof
(except to affiliates) and upon the occurrence of certain other events, into
Class A Common Stock on a share-for-share basis. The Class A Common Stock and
Class B Common Stock will generally vote together as a single class on all
matters submitted to a vote of stockholders. Following the completion of the
offering, existing stockholders will retain approximately 97% of the voting
power. See "Description of Capital Stock." A portion of the proceeds from the
offering will be used to repay $4 million of subordinated promissory notes held
by the principal stockholders. See "Use of Proceeds" and "Certain
Transactions."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share...................................... $ $ $
Total(3)....................................... $ $ $
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</TABLE>
(1) See "Underwriting" for indemnification arrangements with the Underwriters.
(2) Before deducting estimated expenses of $600,000 which will be paid by the
Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
405,000 additional shares at the Price to the Public, less Underwriting
Discounts and Commissions, solely to cover over-allotments, if any. If such
option is exercised in full, the total Price to the Public, Underwriting
Discounts and Commissions and Proceeds to the Company will be $ , $
and $ , respectively. See "Underwriting."
The shares offered hereby are offered by the several Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York,
on or about , 1996.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
INCORPORATED
ROBERT W. BAIRD & CO.
INCORPORATED
<PAGE>
[Diagram of car]
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A
COMMON STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING MAY BE EFFECTED ON THE NASDAQ
NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements, and
the related notes thereto, included elsewhere in this Prospectus. As used in
this Prospectus, unless the context otherwise requires, the term "Company"
includes Dura Automotive Systems, Inc. and all of its subsidiaries and its and
their respective predecessors and subsidiaries. Except as otherwise indicated,
(a) all information in this Prospectus assumes (i) that the over-allotment
option granted to the Underwriters is not exercised and (ii) that the
conversion of the Company's existing classes of common stock into shares of
Class B Common Stock and a 17.625 to 1 stock split thereof have occurred and
(b) the information presented herein on a pro forma basis gives effect to the
sale of the net assets of the Company's window regulator business (the "Window
Regulator Business") as if such sale had occurred on January 1, 1995. See "The
Recapitalization" and "The Company." The Class A Common Stock and Class B
Common Stock to be outstanding immediately after completion of the Offering are
collectively referred to herein as the "Common Stock."
THE COMPANY
Dura Automotive Systems, Inc. (the "Company") is a leading designer and
manufacturer of mechanical assemblies and integrated systems for the global
automotive industry. The Company believes that it is the largest supplier of
both parking brake mechanisms and parking brake cables to original equipment
manufacturers ("OEMs") in North America, with market shares of over 60% and
over 40%, respectively. The Company supplies both parking brake mechanisms and
cables, as well as complete parking brake systems, which consist of parking
brake mechanisms and the cables that connect the brake mechanism to the brake
drum. In addition, the Company designs and manufactures a variety of automotive
cables, latches, transmission shifter mechanisms and other mechanical
assemblies. The Company's products are sold to almost every major North
American automotive OEM, including Ford Motor Company ("Ford"), General Motors
Corporation ("GM") and Chrysler Corp. ("Chrysler"), as well as to foreign OEMs
such as Toyota Motor Corp. ("Toyota"). On a pro forma basis, the Company had
revenues of $239.6 million, operating income of $17.2 million and net income of
$7.6 million in 1995.
The Company has supplied parking brake components and automotive cables to
OEMs since 1961 and 1970, respectively, and was granted its first parking brake
patent in 1967. The Company has continually increased its design capabilities,
allowing it to capitalize on the desire of its customers to shift total design
responsibilities to their suppliers. The Company believes it is the only North
American supplier with the capability to design, manufacture and assemble a
complete parking brake system for its customers. As a result of the Company's
significant design, engineering and project management capabilities, the
Company has been designated as the only Full Service Supplier of parking brake
systems to Ford and is the largest supplier of such systems to GM. In 1995, the
Company estimates that it supplied approximately 78% and 93%, respectively, of
Ford's and GM's parking brake mechanism purchases and approximately 88% and
56%, respectively, of Ford's and GM's parking brake cable purchases.
On a pro forma basis, the Company's four largest customers, Ford, GM,
Chrysler and Toyota, accounted for approximately 50%, 37%, 6% and 5%,
respectively, of the Company's 1995 revenues. The Company manufactures products
for many of the most popular car, light truck, sport utility and mini-van
models, including eight of the top ten selling vehicles in the United States
for 1995: the Ford Taurus, Escort, Explorer, Ranger and F-Series pickups, GM
C/K pickups, Saturn and Toyota Camry. The Company is generally the sole
supplier of the parts it sells to OEMs and will ordinarily continue to supply
parts for a particular model for the life of the model, which usually ranges
from three to seven years.
The automotive components supply industry is undergoing significant
consolidation and globalization as OEMs seek to reduce their supplier base. An
important factor in this trend is the OEMs' awarding of sole-source contracts
to full-service suppliers that are capable of manufacturing products in
multiple geographic markets.
3
<PAGE>
The principal objective of the Company is to capitalize on this trend through
both internal development and strategic acquisitions. From an internal
perspective, the Company seeks to utilize its design, engineering and project
management capabilities, as well as its advanced product technology and high-
quality, low-cost manufacturing capabilities, to compete for new business. The
Company competes for new business early in the development of new models and in
the redesign of existing models. The Company has become a long-term preferred
supplier to its major customers and believes that this status provides it with
a strategic advantage in securing new business.
The Company also believes that the continuing trend toward supplier
consolidation provides attractive opportunities to acquire high-quality
companies. The Company's acquisition strategy focuses on identifying companies
whose acquisition will allow the Company to expand into new geographic markets,
add new customers, provide new product, manufacturing and service capabilities
or increase model penetration with existing customers.
The Company was formed by an investor group organized by Hidden Creek
Industries ("Hidden Creek") to acquire the Dura Automotive Hardware and
Mechanical Components divisions (the "Dura Divisions") from Wickes
Manufacturing Company ("Wickes"). Following this acquisition in November 1990,
Hidden Creek hired a new management team that implemented a series of strategic
changes designed to improve product quality and reduce manufacturing costs
through, among other things, the introduction of cellular manufacturing
methods, consolidation of manufacturing facilities, improvement in inventory
management and reduction of scrap. The Company also embarked upon a strategic
acquisition program. In August 1994, the Company combined its operations with
the automotive parking brake cable and lever business and light duty cable
business (the "Brake and Cable Business") of Alkin Co., formerly known as
Orscheln Co. ("Alkin"), which significantly expanded the Company's size and
capabilities. Since that acquisition, the Company has achieved significant cost
savings through the consolidation of manufacturing facilities, sales,
engineering and design functions and the reduction of administrative personnel.
The Company has substantially completed the integration of the Brake and Cable
Business and is now positioned to further expand its capabilities.
The Company's leadership team has an average of 20 years of experience in the
automotive supply industry and has a significant stake in the Company's
success. The Company's management team will beneficially own approximately 13%
of the Common Stock after the Offering. The Company plans to provide further
ownership-related incentives to other managers and salaried and hourly
employees through grants under its 1996 Key Employee Stock Option Plan (the
"Stock Option Plan") and participation in its Employee Stock Discount Purchase
Plan (the "Employee Stock Purchase Plan").
4
<PAGE>
THE OFFERING(1)
<TABLE>
<S> <C>
Class A Common Stock Offered by
the Company...................... 2,700,000 shares
Total Common Stock to be
Outstanding after the Offering:
Class A Common Stock............ 2,700,000 shares
Class B Common Stock............ 4,998,254 shares
----------------
Total (2)..................... 7,698,254 shares
Use of Proceeds................... The net proceeds to be received by the
Company from the Offering will be used to
repay certain outstanding indebtedness of
the Company. See "Use of Proceeds."
Voting Rights..................... Upon completion of the Offering, the
Company will have two classes of
outstanding Common Stock. The Class A
Common Stock and Class B Common Stock are
substantially identical, except with
respect to voting power and conversion
rights. Each holder of Class A Common Stock
is entitled to one vote per share and each
holder of Class B Common Stock is entitled
to ten votes per share, on all matters
submitted to a vote of stockholders. Except
as required by law or in the Company's
Amended and Restated Certificate of
Incorporation (the "Restated Certificate"),
holders of the Class A Common Stock and
Class B Common Stock vote together as a
single class. See "Risk Factors--Control by
Existing Stockholders" and "Description of
Capital Stock."
Proposed Nasdaq National Market
symbol........................... DRRA
</TABLE>
- --------------------
(1) Does not include the Underwriters' over-allotment option granted by the
Company for an aggregate of 405,000 shares of Class A Common Stock.
(2) Does not include 32,045 shares of Class B Common Stock reserved for
issuance upon the exercise of outstanding options as of June 30, 1996 or
1,200,000 shares of Class A Common Stock reserved for issuance under the
Company's Stock Option Plan, Employee Stock Purchase Plan and the
Company's Independent Director Stock Option Plan (the "Director Option
Plan"). See "Management."
5
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------------- ----------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995(2) 1995 1995(2) 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA(1):
Revenues............... $116,183 $125,412 $129,328 $189,675 $253,726 $239,598 $142,866 $128,738 $127,357
Gross profit........... 11,776 10,367 12,367 18,927 33,452 32,645 18,136 17,329 18,216
Operating income....... 1,876 2,824 3,587 7,875 17,560 17,172 10,843 10,455 10,158
Net income............. 238 415 1,118 2,580 10,126 7,602 7,426 4,905 4,954
Net income per common
and common equivalent
share(3).............. $ 2.03 $ 1.52 $ .99
======== ======== ========
Weighted average common
and common equivalent
shares
outstanding(3)........ 4,989 4,989 5,026
SUPPLEMENTAL INCOME PER
SHARE DATA(4):
Net income, as
adjusted(4)........... $ 11,830 $ 9,306 $ 5,806
======== ======== ========
Net income per common
and common equivalent
share, as
adjusted(4)........... $ 1.54 $ 1.21 $ .75
======== ======== ========
Weighted average common
and common equivalent
shares outstanding, as
adjusted(4)........... 7,689 7,689 7,726
OTHER DATA:
Net cash provided by
(used in) operating
activities............ $ 2,575 $ 190 $ 3,724 $ (6,156) $ 13,138 $ 16,856 $ 9,583
Net cash provided by
(used in) investing
activities............ (4,961) (5,602) (2,951) (46,878) 11,428 15,692 (2,381)
Net cash provided by
(used in) financing
activities............ 2,386 5,440 (787) 53,037 (22,851) (28,495) (5,695)
EBITDA(5).............. 3,821 5,024 5,996 11,600 23,138 13,809 13,231
Depreciation and
amortization.......... 1,945 2,200 2,409 3,725 5,578 2,966 3,073
Capital expenditures,
net................... 1,650 2,066 2,951 5,406 6,116 2,009 2,076
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------
AS
ACTUAL ADJUSTED(4)
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital........................................... $ 14,000 $ 19,373
Total assets.............................................. 139,362 139,362
Long-term debt, net of current maturities................. 40,555 8,863
Total stockholders' investment............................ 32,627 69,692
</TABLE>
- --------------------
(1) In August 1994, the Company acquired the Brake and Cable Business of Alkin
for (i) 2,206,890 shares of Class B Common Stock, (ii) an option to
purchase up to 14,420 additional shares of Class B Common Stock at an
exercise price of $1.45 per share and (iii) cash consideration, net of
assumed indebtedness, of approximately $40 million. The results of
operations of the acquired business have been included in the consolidated
financial statements of the Company from August 31, 1994, the date of
acquisition. In April 1995, the Company sold the net assets of its Window
Regulator Business to Rockwell International Corporation ("Rockwell") for
$18.0 million in cash, resulting in a pretax gain of $4.2 million. The
results of operations of the Window Regulator Business have been included
in the consolidated financial statements of the Company through April 2,
1995, the date of divestiture.
(2) The pro forma statements of operations data for the year ended December 31,
1995 and the six months ended June 30, 1995 give effect to the sale of the
Window Regulator Business as if such sale had occurred on January 1, 1995
and exclude the pretax gain recorded in connection with this transaction.
6
<PAGE>
(3) Gives effect to the recapitalization of the Common Stock, contingent upon
and to occur immediately prior to the consummation of the Offering. See
"The Recapitalization."
(4) Supplemental income per share data has been adjusted to give effect to (i)
the transactions described under "The Recapitalization," and (ii) the
issuance and sale by the Company of 2,700,000 shares of Class A Common
Stock pursuant to the Offering (at an assumed initial public offering price
of $15.00 per share, the midpoint of the range set forth on the cover
hereof) and the application of the net proceeds therefrom as described
under "Use of Proceeds." Net income for the year ended December 31, 1995
was increased by $1,704,000 and net income for each of the six-month
periods ended June 30, 1995 and 1996 was increased by $852,000 to reflect
the reduction of interest expense, net of income taxes, resulting from the
application of the proceeds from the Offering to reduce outstanding
indebtedness.
(5) "EBITDA" is operating income plus depreciation and amortization. EBITDA
does not represent and should not be considered as an alternative to net
income or cash flow from operations as determined by generally accepted
accounting principles. The Company, however, believes it is generally
accepted that EBITDA provides useful information regarding a company's
ability to service and/or incur indebtedness.
7
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed in
this Prospectus as a result of the risk factors set forth below and the
matters set forth in the Prospectus generally. The Company cautions the
reader, however, that this list of factors may not be exhaustive. In analyzing
an investment in the Class A Common Stock, prospective investors should
carefully consider, together with the other matters referred to herein, the
risk factors described below.
RELIANCE ON MAJOR CUSTOMERS
On a pro forma basis, the Company's net sales to Ford and GM represented
approximately 50% and 37%, respectively, of the Company's revenues in 1995 and
approximately 41% and 41%, respectively, of the Company's revenues in 1994. In
addition, the Company's top four customers accounted for approximately 98% and
97% of the Company's revenues on a pro forma basis in 1995 and 1994,
respectively. Thus, the loss of Ford, GM or any of the Company's other
significant customers could have a material adverse effect on the Company. See
"Business." The contracts the Company has entered into with many of its
customers provide for supplying the customers' requirements for a particular
model, rather than for manufacturing a specific quantity of products. Such
contracts range from one year to the life of the model, which is generally
three to seven years, and do not require the purchase by the customer of any
minimum number of parts. Therefore, the loss of any one of such customers or a
significant decrease in demand for certain key models or group of related
models sold by any of its major customers could have a material adverse effect
on the Company. The Company also competes to supply parts for successor models
and is subject to the risk that the OEM will not select the Company to produce
parts on a successor model, which could have a material adverse effect on the
Company. The Company is also involved in claims with Ford involving alleged
failures of certain self-adjust parking brakes originally manufactured by the
Brake and Cable Business of Alkin. Ford has maintained that the Company or
Alkin is responsible for all damages or liabilities incurred by Ford as a
result of these claims. As a result of these claims, it is possible that the
Company's relationship with Ford could be adversely affected. See "Business--
Legal Proceedings." There is substantial and continuing pressure from the
major OEMs to reduce costs, including the cost of products purchased from
outside suppliers such as the Company. If the Company were unable to generate
sufficient production cost savings in the future to offset price reductions,
the Company's gross margin could be adversely affected.
RISK OF CUSTOMER LABOR INTERRUPTIONS
Substantially all of the hourly employees of North American OEMs are
represented by the United Automobile, Aerospace and Agricultural Implement
Workers of America (the "UAW") under similar collective bargaining agreements.
The collective bargaining agreements applicable to Ford and GM are both
scheduled to expire in September 1996. The failure of Ford, GM or any other
significant customer of the Company to reach agreement with the UAW relating
to the terms of a new agreement resulting in either a work stoppage or strike
at any of their production facilities could have a material adverse effect on
the Company. In March 1996, GM experienced a 17-day work stoppage due to a
labor dispute between GM and the UAW, which negatively impacted the Company's
results of operations for the first half of 1996. See "Management's Discussion
and Analysis of Results of Operations and Financial Condition."
INDUSTRY CYCLICALITY AND SEASONALITY
The automotive market is highly cyclical and is dependent on consumer
spending. Economic factors adversely affecting automotive production and
consumer spending could adversely impact the Company. In addition, the
Company's business is somewhat seasonal. The Company typically experiences
decreased revenues and operating income during the third calender quarter of
each year due to the impact of OEM plant shutdowns in July for vacations and
new model changeovers. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition--Quarterly Results of Operations and
Seasonality."
8
<PAGE>
FAILURE TO OBTAIN BUSINESS RELATED TO NEW AND REDESIGNED MODEL INTRODUCTIONS
The Company principally competes for new business both at the beginning of
the development of new models and upon the redesign of existing models by its
major customers. New model development generally begins two to five years
prior to the marketing of such models to the public. The failure of the
Company to obtain new business on new models or to retain or increase business
on redesigned existing models could adversely affect the Company.
PRODUCT LIABILITY EXPOSURE
The Company faces an inherent business risk of exposure to product liability
claims in the event that the failure of its products results in personal
injury or death, and there can be no assurance that the Company will not
experience any material product liability losses in the future. In addition,
if any of the Company's products prove to be defective, the Company may be
required to participate in a recall involving such products. In late 1994,
Ford issued a recall of a series of manual-transmission Ford F-Series pickups
to repair the self-adjust parking brakes originally manufactured by the Brake
and Cable Business of Alkin. The Company's share of such costs, which was
fully reserved at the time of the acquisition of the Brake and Cable Business
from Alkin, has reached the full $6.0 million limit agreed to by the Company
and Ford. The Company is also involved in a product recall relating to the
same issue with respect to the Ford Contour/Mystique in Europe. The Company
has agreed to pay 50% of the costs of that recall not to exceed $1 million,
which payments totalled $0.4 million at June 30, 1996. The types of alleged
failures that prompted the F-Series recall have also led to a number of claims
and lawsuits filed against Ford. Currently, two cases are pending directly
against the Company or Alkin relating to personal injury claims, and Ford has
received over 400 claims (generally for property damage) relating to alleged
defects in the self-adjust parking brakes. Ford has maintained that the
Company or Alkin is responsible for all damages or liabilities incurred by
Ford as a result of these claims, and in July 1996, Ford tendered its defense
of 17 such claims to Dura and Alkin. Dura and Alkin have submitted these
claims to their insurance carriers. The Company maintains insurance against
product liability claims, but there can be no assurance that such coverage
will be adequate for liabilities ultimately incurred or that it will continue
to be available on terms acceptable to the Company. A successful claim brought
against the Company in excess of available insurance coverage or a requirement
to participate in any product recall may have a material adverse effect on the
Company's results of operations or financial condition. See "Business--Legal
Proceedings."
INDUSTRY CONSOLIDATION; RISKS ASSOCIATED WITH FUTURE ACQUISITIONS
The automotive component supply industry has undergone, and is likely to
continue to experience, consolidation, as OEMs seek to reduce costs and reduce
their supplier base. The Company intends to actively pursue acquisition
targets that will allow the Company to expand into new geographic markets, add
new customers, provide new product, manufacturing and service capabilities or
increase model penetration with existing customers. There can be no assurance
that the Company will find attractive acquisition candidates or successfully
integrate acquired businesses into the Company's existing business. If the
expected synergies from such transactions do not materialize or the Company
fails to successfully integrate new businesses into its existing businesses,
the Company's results of operations could be adversely affected. To the extent
that the Company may be considered as an acquisition candidate by a third
party, certain provisions in the Restated Certificate and the Amended and
Restated By-laws ("By-laws") described below may inhibit a change in control
of the Company. See "Anti-Takeover Effects of Certain Charter, By-law and
Statutory Provisions."
DEPENDENCE ON KEY PERSONNEL
The Company's continued success largely will depend on the efforts and
abilities of its executive officers and certain other key employees. The
Company currently does not have employment agreements with any of its
executive officers and other key employees. The Company's operations could be
adversely affected if, for any reason, such executive officers or key
employees do not remain with the Company. See "Management."
9
<PAGE>
COMPETITION
The automotive component supply industry is highly competitive. Some of the
Company's competitors are companies, or divisions or subsidiaries of
companies, that are larger and have greater financial and other resources than
the Company. In addition, with respect to certain of its products, some of the
Company's competitors are divisions of its OEM customers. There can be no
assurance that the Company's products will be able to compete successfully
with the products of these other companies. See "Business--Competition."
IMPACT OF ENVIRONMENTAL REGULATION
The Company is subject to the requirements of federal, state and local
environmental and occupational health and safety laws and regulations. There
can be no assurance that the Company is at all times in complete compliance
with all such requirements. The Company has made and will continue to make
capital and other expenditures to comply with environmental requirements. If a
release of hazardous substances occurs on or from the Company's properties or
any associated offsite disposal location, or if contamination is discovered at
any of the Company's current or former properties, the Company may be held
liable, and the amount of such liability could be material. The Company is
currently involved in environmental proceedings at its Mancelona facility, and
at two landfill sites in Toledo, Ohio. See "Business--Environmental Matters."
CONTROL BY EXISTING STOCKHOLDERS
Upon completion of the Offering, Onex DHC LLC (together with its affiliates,
"Onex"), Alkin and the other existing stockholders will beneficially own all
of the outstanding shares of Class B Common Stock. Each share of Class B
Common Stock has ten votes as compared to one vote for each share of Class A
Common Stock, and thus this amount will represent 94.9% of the combined voting
power of the outstanding Common Stock after the completion of the Offering
(94.2% if the Underwriters' over-allotment option is exercised in full). In
addition, all of the Company's existing stockholders have entered into
agreements to vote their shares for the election of directors designated by
certain of the existing stockholders. As a result of such stock ownership and
voting agreements, the existing stockholders will be able to control the vote
on all matters submitted to a vote of the holders of Common Stock, including
the election of Directors, amendments to the Restated Certificate and the By-
laws and approval of significant corporate transactions. See "Description of
Capital Stock." Such consolidation of voting power could also have the effect
of delaying, deterring or preventing a change in control of the Company that
might be otherwise beneficial to stockholders. See "Principal Stockholders."
DIVIDEND POLICY; RESTRICTIONS ON PAYMENT OF DIVIDENDS
The Company currently intends to retain earnings to support its growth
strategy and does not anticipate paying dividends in the foreseeable future.
As a holding company, the ability of the Company to pay dividends in the
future is dependent upon the receipt of dividends or other payments from its
principal operating subsidiary. The payment of dividends by such subsidiary to
the Company for the purpose of paying dividends to holders of Common Stock is
restricted by the Bank Credit Agreement (as defined). The Company expects that
the New Credit Agreement (as defined) will likewise restrict the payment of
dividends. See "Dividend Policy."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
No prediction can be made as to the effect, if any, that future sales of
shares of Class A Common Stock or the availability of such shares for future
sale will have on the market price of the Class A Common Stock prevailing from
time to time. Sales of substantial amounts of Class A Common Stock, or the
perception that such sales could occur, could adversely affect prevailing
market prices for the Class A Common Stock. Upon consummation of the Offering,
the Company will have 7,698,254 shares of Common Stock issued and outstanding.
The shares of Class A Common Stock sold in the Offering will be freely
tradeable without restriction or further registration under the Securities Act
of 1933, as amended (the "Securities Act"), unless such shares are acquired by
an "affiliate" of the Company as that term is defined under Rule 144 under the
Securities Act ("Rule 144"). Other than the shares of Class A Common Stock
being offered hereby, the
10
<PAGE>
currently outstanding shares of Common Stock have not been registered under
the Securities Act and may not be sold unless they are registered or unless an
exemption from registration, such as the exemption provided by Rule 144, is
available. Subject to the expiration of certain 180-day "lock up" agreements
described herein, 4,854,317 shares of Class B Common Stock convertible into
shares of Class A Common Stock will be eligible for sale beginning 90 days
from the date of this Prospectus, subject to certain limitations under Rule
144. Beginning 180 days after the date of this Prospectus, the holders of an
aggregate of 4,998,254 shares of Class B Common Stock convertible into shares
of Class A Common Stock will have certain rights to register their shares of
Class A Common Stock under the Securities Act at the Company's expense. See
"Shares Eligible for Future Sale."
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Class A
Common Stock, and there can be no assurance given as to the liquidity of the
trading market for the Class A Common Stock, that an active public market will
develop for the Class A Common Stock or that the Class A Common Stock will
trade in the public market subsequent to the Offering at or above the initial
public offering price. If an active public market for the Class A Common Stock
does not develop, the market price and liquidity of the Class A Common Stock
may be materially adversely affected. The initial public offering price of the
Class A Common Stock will be determined by negotiations between the Company
and the Underwriters and may not be indicative of the market price for the
Class A Common Stock after the Offering. See "Underwriting." The trading price
of the Class A Common Stock could be subject to wide fluctuations in response
to variations in the Company's quarterly operating results, changes in
earnings estimates by analysts, conditions in the Company's businesses or
general market or economic conditions. In addition, in recent years the stock
market has experienced extreme price and volume fluctuations. These
fluctuations have had a substantial effect on the market prices for many
emerging growth companies, often unrelated to the operating performance of the
specific companies. Such market fluctuations could have a material adverse
effect on the market price for the Class A Common Stock.
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER, BY-LAW AND STATUTORY PROVISIONS
Certain provisions of the Restated Certificate and the By-laws, to be
effective upon consummation of the Offering, may inhibit changes in control of
the Company not approved by the Company's Board of Directors (the "Board").
These provisions include (i) disparate voting rights per share between the
Class A Common Stock and the Class B Common Stock, (ii) a prohibition on
stockholder action through written consents, (iii) a requirement that special
meetings of stockholders be called only by the Board, (iv) advance notice
requirements for stockholder proposals and nominations, (v) limitations on the
ability of stockholders to amend, alter or repeal the By-laws and (vi) the
authority of the Board to issue without stockholder approval preferred stock
with such terms as the Board may determine. The Company will also be afforded
the protections of Section 203 of the Delaware General Corporation Law, which
could have similar effects. See "Description of Capital Stock."
11
<PAGE>
THE COMPANY
The Company is a holding company whose predecessor, MC Holding Corp.
("MCHC"), was formed by Hidden Creek, Onex, J2R Corporation ("J2R") and
certain others for the purpose of acquiring the Dura Divisions from Wickes in
November 1990. In August 1994, the Company entered into a transaction that
combined the operations of the Company's operating subsidiary, Dura Operating
Corp., with the Brake and Cable Business of Alkin. In April 1995, the Company
sold all of the assets and liabilities associated with the Window Regulator
Business to Rockwell for $18.0 million in cash, resulting in a pretax gain of
$4.2 million.
The Company was incorporated in Delaware in August 1994. The principal
executive offices of the Company are located at 4508 IDS Center, Minneapolis,
Minnesota 55402, and its telephone number is (612) 332-2335.
USE OF PROCEEDS
The estimated net proceeds to the Company from the sale of 2,700,000 shares
of Class A Common Stock in the Offering (at an assumed initial public offering
price of $15.00 per share), after deducting the estimated offering expenses
and the underwriting discounts, will be approximately $37 million. The Company
expects to use the net proceeds and $2.0 million of additional borrowings
under the revolving credit facility portion of the Credit Agreement dated as
of August 31, 1994, among the Company and certain commercial lending
institutions (the "Bank Credit Agreement"), to repay in full approximately $35
million of a term loan incurred by the Company under the Bank Credit Agreement
and $4.0 million to repay in full the Company's subordinated promissory notes
(the "Notes").
The term loan portion of the Bank Credit Agreement is due in quarterly
installments through June 30, 2001 and the revolving credit facility portion
expires on August 31, 2000. On June 30, 1996, the average interest rates for
borrowings under the term loan and revolving credit facility were 6.7% and
7.2%, respectively.
The Notes mature on December 31, 2001 and bear interest at a fixed rate of
6.93% per annum. The Notes are held by Onex, J2R and Alkin. See "Certain
Transactions."
Following the completion of the Offering, the Company expects to enter into
a new bank credit agreement (the "New Credit Agreement"), providing for
borrowings of up to $50.0 million on more favorable pricing terms than the
Bank Credit Agreement. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition--Liquidity and Capital Resources."
DIVIDEND POLICY
The Company has not declared or paid any dividends on its Common Stock in
the past and currently intends to retain its earnings to support its growth
strategy and does not anticipate paying dividends in the foreseeable future.
As a holding company, the ability of the Company to pay dividends in the
future is dependent upon the receipt of dividends or other payments from its
subsidiaries. Any future payment of dividends is within the discretion of the
Board and will depend upon, among other factors, the capital requirements,
operating results and financial condition of the Company from time to time. In
addition, the Company expects that its ability to pay cash dividends will be
limited by the terms of its New Credit Agreement. See "Management's Discussion
and Analysis of Results of Operations and Financial Condition--Liquidity and
Capital Resources."
12
<PAGE>
THE RECAPITALIZATION
The Company currently has four classes of Common Stock outstanding.
Immediately prior to and contingent upon the Offering, the Company's four
classes of Common Stock will be converted into Class B Common Stock (the
"Recapitalization"). The Class A Common Stock being offered hereby and the
Class B Common Stock will be identical except with respect to voting and
conversion rights. Each share of Class A Common Stock is entitled to one vote
and each share of Class B Common Stock is entitled to ten votes. Except as
otherwise required by law or the Restated Certificate, the Class A Common
Stock and the Class B Common Stock will vote together as a single class on all
matters submitted to a vote of the stockholders, including the election of
Directors. In addition, the Class B Common Stock is convertible at any time at
the option of any holder thereof, and is mandatorily convertible upon any
transfer thereof (except to affiliates) and at any time that the MC
Stockholders and their affiliates, in the aggregate, do not hold at least 10%
of the total outstanding shares of Common Stock, into shares of Class A Common
Stock on a share-for-share basis. All of the Company's existing stockholders
will receive shares of Class B Common Stock in the Recapitalization. The
number of shares of Class B Common Stock that will be issued as a result of
the conversion of the Company's existing classes of Common Stock will be
determined according to the relative preference rankings of such existing
Common Stock and the initial public offering price of the Class A Common
Stock. See "Principal Stockholders."
13
<PAGE>
DILUTION
The net tangible book value (deficit) of the Company as of June 30, 1996 was
$(10.1) million or $(2.02) per share based on 4,998,254 shares of Common Stock
outstanding after giving effect to the Recapitalization. After giving effect
to the sale of shares of Class A Common Stock and the application by the
Company of the net proceeds from the Offering (at an assumed initial public
offering price of $15.00 per share) as set forth under "Use of Proceeds," the
pro forma net tangible book value of the Company at June 30, 1996 would have
been $27.0 million or $3.51 per share of Common Stock outstanding. This
represents an immediate dilution of $11.49 per share to purchasers of shares
at the initial public offering price.
The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $15.00
Deficit in net tangible book value per share before the
Offering (1)............................................. $(2.02)
Increase in net tangible book value per share attributable
to new investors......................................... 5.53
------
Pro forma net tangible book value per share after the
Offering................................................... 3.51
------
Dilution per share to new investors (2)..................... $11.49
======
</TABLE>
- ---------------------
(1) Net tangible book value (deficit) per share of Common Stock is determined
by dividing the Company's tangible net worth (tangible assets less
liabilities) at June 30, 1996 by the number of shares of Common Stock (of
all classes) that will be outstanding prior to the Offering and after
giving effect to the Recapitalization.
(2) Dilution is computed by subtracting pro forma net tangible book value per
share of Common Stock after the Offering from the assumed initial public
offering price per share.
The following table summarizes, on a pro forma basis at June 30, 1996, the
differences between the number of shares purchased from the Company, the total
consideration given and the average price per share paid by the existing
stockholders and by the new investors purchasing shares of Class A Common
Stock in the Offering.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------- ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
<S> <C> <C> <C> <C> <C>
Current stockholders (1)....... 4,998,254 64.9% $13,733,149 25.3% $ 2.75
New investors.................. 2,700,000 35.1 40,500,000 74.7 15.00
--------- ----- ----------- -----
Total........................ 7,698,254 100.0% $54,233,149 100.0%
========= ===== =========== =====
</TABLE>
- ---------------------
(1) Excludes 32,045 shares of Class B Common Stock reserved for issuance upon
the exercise of options outstanding as of June 30, 1996. Such options
have an exercise price of $1.45 per share.
14
<PAGE>
CAPITALIZATION
The following table sets forth the actual consolidated capitalization of the
Company at June 30, 1996, and as adjusted to give effect to the
Recapitalization and the sale by the Company of the 2,700,000 shares of Class
A Common Stock in the Offering (at an assumed initial public offering price of
$15.00 per share) and the application of the proceeds therefrom (after
deducting the underwriting discounts and estimated expenses of the Offering)
as set forth under "Use of Proceeds." This table should be read in conjunction
with the consolidated financial statements and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
<S> <C> <C>
Long-term debt:
Term loan.......................................... $ 35,021 $ --
Revolving credit facility (1)...................... 6,500 8,456
Subordinated promissory notes...................... 4,000 --
Other.............................................. 570 570
Less: current maturities........................... (5,536) (163)
---------- ----------
Total long-term debt............................. 40,555 8,863
---------- ----------
Stockholders' investment:
Old Class A, Class A non-voting, Class B and Class
C Common Stock.................................... 3 --
Preferred stock, $1 par value per share; 5,000,000
shares authorized; none issued or outstanding..... -- --
New Class A Common Stock, $.01 par value per share;
30,000,000 shares authorized; 2,700,000 shares
issued and outstanding on an as adjusted basis.... -- 27
New Class B Common Stock, $.01 par value per share;
10,000,000 shares authorized; 4,998,254 shares
issued and outstanding on an as adjusted basis.... -- 50
Additional paid-in capital......................... 13,571 50,562
Retained earnings.................................. 19,212 19,212
Common stock subscriptions receivable.............. (159) (159)
---------- ----------
Total stockholders' investment................... 32,627 69,692
---------- ----------
Total capitalization........................... $ 73,182 $ 78,555
========== ==========
</TABLE>
- ---------------------
(1) Following the closing of the Offering, and the application of the
proceeds therefrom as described under "Use of Proceeds," the New Credit
Agreement, if entered into, is expected to have maximum availability of
$50.0 million.
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data with
respect to the Company for each of the periods indicated. The selected
historical financial data for the Company for the years ended December 31,
1991 through 1995 have been derived from the Company's consolidated financial
statements which have been audited by Arthur Andersen LLP, independent public
accountants. The data as of and for the six months ended June 30, 1995 and
1996 have been derived from the Company's unaudited consolidated financial
statements which, in the opinion of the Company's management, contain all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the financial condition and results of operations for these
periods. The results of operations for the six months ended June 30, 1996 are
not necessarily indicative of the results that may be expected for the entire
year. The following pro forma consolidated financial data for the year ended
December 31, 1995 and the six months ended June 30, 1995, which give effect to
the sale of the Window Regulator Business as if such sale had occurred on
January 1, 1995, are presented for informational purposes only and are not
necessarily indicative of the results of the future operations of the Company
or the actual results that would have been achieved had the sale occurred on
such date. The selected historical and pro forma consolidated financial data
should be read in conjunction with "Management's Discussion and Analysis of
Results of Operations and Financial Condition" and the consolidated financial
statements and notes thereto all included elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------------- ----------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995(2) 1995 1995(2) 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA(1):
Revenues............... $116,183 $125,412 $129,328 $189,675 $253,726 $239,598 $142,866 $128,738 $127,357
Cost of sales.......... 104,407 115,045 116,961 170,748 220,274 206,953 124,730 111,409 109,141
-------- -------- -------- -------- -------- -------- -------- -------- --------
Gross profit........... 11,776 10,367 12,367 18,927 33,452 32,645 18,136 17,329 18,216
Selling, general and
administrative
expenses.............. 9,464 7,036 8,293 10,362 14,798 14,379 6,745 6,326 7,586
Amortization expense... 436 507 487 690 1,094 1,094 548 548 472
-------- -------- -------- -------- -------- -------- -------- -------- --------
Operating income....... 1,876 2,824 3,587 7,875 17,560 17,172 10,843 10,455 10,158
Interest expense, net.. 1,590 1,268 1,533 3,473 4,822 4,422 2,631 2,231 1,900
Other (income)
expense............... -- 500 -- -- (4,240) -- (4,240) -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income before income
taxes................. 286 1,056 2,054 4,402 16,978 12,750 12,452 8,224 8,258
Provision for income
taxes................. 48 641 936 1,822 6,852 5,148 5,026 3,319 3,304
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income............. $ 238 $ 415 $ 1,118 $ 2,580 $ 10,126 $ 7,602 $ 7,426 $ 4,905 $ 4,954
======== ======== ======== ======== ======== ======== ======== ======== ========
Net income per common
and common equivalent
share (3)............. $ 2.03 $ 1.52 $ .99
======== ======== ========
Weighted average common
and common equivalent
shares outstanding
(3)................... 4,989 4,989 5,026
SUPPLEMENTAL INCOME PER
SHARE DATA(4):
Net income, as
adjusted(4)........... $ 11,830 $ 9,306 $ 5,806
======== ======== ========
Income per common and
common equivalent
share, as adjusted
(4)................... $ 1.54 $ 1.21 $ .75
======== ======== ========
Weighted average common
and common equivalent
shares outstanding, as
adjusted (4).......... 7,689 7,689 7,726
OTHER DATA:
Net cash provided by
(used in) operating
activities............ $ 2,575 $ 190 $ 3,724 $ (6,156) $ 13,138 $ 16,856 $ 9,583
Net cash provided by
(used in) investing
activities............ (4,961) (5,602) (2,951) (46,878) 11,428 15,692 (2,381)
Net cash provided by
(used in) financing
activities............ 2,386 5,440 (787) 53,037 (22,851) (28,495) (5,695)
EBITDA (5)............. 3,821 5,024 5,996 11,600 23,138 13,809 13,231
Depreciation and
amortization.......... 1,945 2,200 2,409 3,725 5,578 2,966 3,073
Capital expenditures,
net................... 1,650 2,066 2,951 5,406 6,116 2,009 2,076
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1996
----------------------------------------- ---------------------
AS
1991 1992 1993 1994 1995 ACTUAL ADJUSTED (4)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital........ $ 2,796 $ 3,801 $ 3,287 $ 18,631 $ 13,701 $ 14,000 $ 19,373
Total assets........... 51,520 56,213 52,823 159,133 140,531 139,362 139,362
Long-term debt,
net of current
maturities............ 12,823 18,242 16,792 70,112 46,639 40,555 8,863
Total stockholders'
investment............ 3,019 3,327 4,369 17,418 27,683 32,627 69,692
</TABLE>
- ---------------------
(1) In August 1994, the Company acquired the Brake and Cable Business from
Alkin for (i) 2,206,890 shares of Class B Common Stock, (ii) an option to
purchase up to 14,420 additional shares of Class B Common Stock at an
exercise price of $1.45 per share and (iii) cash consideration, net of
assumed indebtedness, of approximately $40 million. The results of
operations of the acquired business have been included in the consolidated
financial statements of the Company from August 31, 1994, the date of
acquisition. Separate statements of operations and cash flows of the Brake
and Cable Business (formerly the "Orscheln Automotive Business Unit") have
been included elsewhere herein for the year ended December 31, 1993 and
the eight-month period ended August 31, 1994. In April 1995, the Company
sold the Window Regulator Business to Rockwell for $18.0 million in cash,
resulting in a pretax gain of $4.2 million. The results of operations of
the Window Regulator Business have been included in the consolidated
financial statements of the Company through April 2, 1995, the date of
divestiture.
(2) The pro forma statement of operations data for the year ended December 31,
1995 and the six-month period ended June 30, 1995 give effect to the sale
of the Window Regulator Business as if such sale had occurred on January
1, 1995 and exclude the pretax gain recorded in connection with this
transaction.
(3) Gives effect to the Recapitalization, contingent upon and to occur
immediately prior to the consummation of the Offering. See "The
Recapitalization."
(4) Supplemental income per share data has been adjusted to give effect to (i)
the Recapitalization and (ii) the issuance and sale by the Company of
2,700,000 shares of Class A Common Stock pursuant to the Offering (at an
assumed initial public offering price of $15.00 per share) and the
application of the net proceeds therefrom as described under "Use of
Proceeds." Net income for the year ended December 31, 1995 was increased
by $1,704,000 and net income for each of the six month periods ended June
30, 1995 and 1996 was increased by $852,000 to reflect the reduction of
interest expense, net of income taxes, resulting from the application of
the proceeds from the Offering to reduce outstanding indebtedness.
(5) "EBITDA" is operating income plus depreciation and amortization. EBITDA
does not represent and should not be considered as an alternative to net
income or cash flow from operations as determined by generally accepted
accounting principles. The Company, however, believes it is generally
accepted that EBITDA provides useful information regarding a company's
ability to service and/or incur indebtedness.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
The Company was organized to effect the acquisition of the Dura Divisions
from Wickes, which was completed in November 1990. In August 1994, the Company
completed the acquisition of the Brake and Cable Business from Alkin. In
connection with the acquisition of the Brake and Cable Business, the Company
entered into certain transition services agreements with Alkin pursuant to
which the Company currently receives data processing and payroll services from
Alkin. Each such agreement is terminable by either party upon 30 to 90 days
notice. The Company's payments to Alkin under such agreements were $1,788,000
in 1995, and the minimum commitment under such agreements will be
approximately $400,000 in 1996. The Company expects to terminate all such
service agreements during 1997 and is in the process of developing internal
replacement systems. In addition, the Company is party to a supply agreement
with Alkin through 1999 pursuant to which each party supplies certain items
necessary for the manufacture of the other party's products. The Company is
required to purchase such supplies from Alkin only so long as the supply terms
remain no less favorable than could be obtained from an independent third
party.
In order to focus on its higher margin products, the Company sold its Window
Regulator Business to Rockwell in April 1995 for $18.0 million in cash,
resulting in a pretax gain of $4.2 million. The results of operations of the
Window Regulator Business have been included in the consolidated financial
statements of the Company through the date of divestiture, April 2, 1995. The
unaudited pro forma data for the year ended December 31, 1995 and the six
months ended June 30, 1995 give effect to the sale of the Window Regulator
Business as if such sale had occurred on January 1, 1995.
The Company ordinarily begins working on products awarded for new or
redesigned models two to five years prior to the marketing of such models to
the public. During such period, the Company incurs (i) costs related to the
design and engineering of such product, (ii) costs related to the production
of the tools and dies used to manufacture the new product and (iii) start-up
costs associated with the initial production of such product. In general,
design and engineering costs are expensed in the period incurred unless they
are reimbursed by the customer, in which case they are capitalized and
amortized over the life of such product. Costs incurred in the production of
the tools and dies are generally capitalized and reimbursed by the customer
prior to production. Start-up costs, which are generally incurred 30 to 60
days immediately prior to and immediately after initial production, are
expensed as incurred.
The following table sets forth the percentage relationship of certain items
to revenues for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------------ ----------------------
PRO FORMA PRO FORMA
1993 1994 1995 1995 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........... 90.4 90.0 86.8 86.4 87.3 86.5 85.7
----- ----- ----- ----- ----- ----- -----
Gross profit........... 9.6 10.0 13.2 13.6 12.7 13.5 14.3
Selling, general and
administrative
expenses............... 6.4 5.4 5.9 6.0 4.7 4.9 5.9
Amortization expense.... 0.4 0.4 0.4 0.4 0.4 0.5 0.4
----- ----- ----- ----- ----- ----- -----
Operating income....... 2.8 4.2 6.9 7.2 7.6 8.1 8.0
Interest expense, net... 1.2 1.8 1.9 1.9 1.9 1.7 1.5
Gain on sale of Window
Regulator Business..... -- -- 1.7 -- (3.0) -- --
----- ----- ----- ----- ----- ----- -----
Income before provision
for income taxes...... 1.6 2.4 6.7 5.3 8.7 6.4 6.5
Provision for income
taxes.................. 0.7 1.0 2.7 2.1 3.5 2.6 2.6
----- ----- ----- ----- ----- ----- -----
Net income ............ 0.9% 1.4% 4.0% 3.2% 5.2% 3.8% 3.9%
===== ===== ===== ===== ===== ===== =====
</TABLE>
18
<PAGE>
COMPARISON OF SIX MONTH PERIOD ENDED JUNE 30, 1996 TO SIX MONTH PERIOD ENDED
JUNE 30, 1995
Revenues. Revenues for the first half of 1996 decreased by $15.5 million, or
10.9%, to $127.4 million from $142.9 million in the same period of 1995. The
divestiture of the Window Regulator Business in April 1995 accounted for $14.1
million of the decrease. The remaining decrease was the result of the decline
in North American automotive production, including the effects of the 17-day
work stoppage at GM in the first quarter of 1996, which adversely impacted the
Company's operations. Total production of cars and light trucks in North
America decreased by approximately 4.0% in the first half of 1996 as compared
to the same period of 1995.
Cost of Sales. Cost of sales for the first half of 1996 decreased by $15.6
million, or 12.5%, to $109.1 million from $124.7 million in the same period of
1995. As a percentage of revenues, cost of sales decreased to 85.7% in the
first half of 1996 from 87.3% in the same period of 1995, resulting in an
improved gross margin of 14.3% in the first half of 1996 from 12.7% in the
same period in 1995. The improvement in gross margin is a result of the
divestiture of the Window Regulator Business, which had lower margins, and the
Company's cost reduction efforts, which included the implementation of more
flexible cellular manufacturing methods and the closing of an underutilized
manufacturing facility.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $0.8 million, or 12.5%, to $7.6 million
in the first half of 1996 from $6.8 million for the same period in 1995. The
increase was primarily a result of costs incurred as a result of providing a
greater level of design and engineering services to the Company's customers,
partially offset by the sale of the Window Regulator Business. As a percentage
of revenues, selling, general and administrative expenses increased to 5.9% in
the first half of 1996 from 4.7% for the same period of 1995.
Amortization Expense. Amortization expense decreased to $472,000 in the
first half of 1996 from $548,000 for the same period in 1995. The amortization
expense results from goodwill related to the acquisitions of the Dura
Divisions and the Brake and Cable Business of Alkin in November 1990 and
August 1994, respectively.
Interest Expense. Interest expense for the six months ended June 30, 1996
decreased by $731,000, or 27.8%, to $1.9 million from $2.6 million for the
same period in 1995. The decrease was primarily the result of the repayment of
debt with the net proceeds from the sale of the Window Regulator Business in
April 1995.
Other Income. Other income of $4.2 million for the six months ended June 30,
1995 represents the pre-tax gain on the sale of the Window Regulator Business.
The Company received cash proceeds of $18.0 million from the sale, which were
used to reduce outstanding indebtedness.
Income Taxes. The effective income tax rate for the first half of 1996 was
40.0% compared to 40.4% for the same period in 1995. The effective income tax
rates were higher than federal statutory rates primarily as a result of state
income taxes and nondeductible goodwill amortization.
Net Income. As a result of the foregoing, net income decreased by $2.4
million, or 33.3%, to $5.0 million in the first half of 1996 from $7.4 million
for the same period in 1995.
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994
Revenues. Revenues for 1995 increased by $64.0 million, or 33.8%, to $253.7
million from $189.7 million for 1994. This increase was primarily due to the
full year impact of the August 1994 acquisition of the Brake and Cable
Business of Alkin, which added approximately $100 million of revenues in 1995,
and the addition of approximately $12 million of incremental new business
relating to the liftgate and hood latches for the Ford Taurus/Sable, parking
brakes for the Toyota Avalon and the tailgate latch replacement program for
the Chrysler mini-van, all of which began production in the fourth quarter of
1994 or early 1995. This was partially offset by the April 1995 divestiture of
the Window Regulator Business, which had accounted for $62.1 million of
revenues in 1994 compared to $14.1 million in 1995.
Cost of Sales. Cost of sales for 1995 increased by $49.6 million, or 29.0%,
to $220.3 million from $170.7 million for 1994. As a percentage of revenues,
cost of sales decreased to 86.8% for 1995 from 90.0% for 1994,
19
<PAGE>
resulting in an improved gross margin of 13.2% from 10.0% in the preceding
year. The improvement in gross margin was the result of (i) the divestiture of
the Window Regulator Business, which generated lower margins, (ii) the
synergies resulting from consolidation of the Brake and Cable Business of
Alkin within the Company, (iii) the integration of the Company's business,
which included relocating production activities and the closing of certain
facilities, and (iv) the Company's efforts to improve its production
processes, including the implementation of more flexible cellular
manufacturing techniques. These improvements were partially offset by launch
costs associated with new liftgate and hood latch business on the redesigned
1996 model year Ford Taurus/Sable and the tailgate latch replacement for the
Chrysler mini-van.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $4.4 million, or 42.8%, to $14.8 million
for 1995 from $10.4 million for 1994. The increased expenses were the result
of the full year impact of the acquisition of the Brake and Cable Business
from Alkin, as well as costs incurred in providing a greater level of design
and engineering services to the Company's customers. As a percentage of
revenues, selling, general and administrative expenses increased to 5.9% for
1995 from 5.4% for 1994, primarily a result of the increased costs incurred in
providing a greater level of design and engineering services to customers. The
increases were partially offset by reduced costs as a result of the sale of
the Window Regulator Business.
Amortization Expense. Amortization expense increased by $404,000, or 58.6%,
to $1.1 million for 1995 from $690,000 for 1994. The increase was the result
of the full year of amortization related to the acquisition of the Brake and
Cable Business from Alkin.
Interest Expense. Interest expense for 1995 increased by $1.3 million, or
38.8%, to $4.8 million from $3.5 million for 1994. The increase was the result
of increased borrowings in the fourth quarter of 1994 as a result of the
acquisition of the Brake and Cable Business from Alkin. Partially offsetting
this increase was a reduction from the repayment of borrowings upon the sale
of the Window Regulator Business in April 1995.
Other Income. Other income of $4.2 million for 1995 represents the pre-tax
gain on the sale of the Window Regulator Business. The Company received cash
proceeds of $18.0 million from the sale, which were used to reduce outstanding
indebtedness.
Income Taxes. The effective income tax rate for 1995 was 40.4% compared to
41.4% for 1994. The decrease is due principally to the lower percentage impact
of permanent differences on pretax income. The effective rates were higher
than federal statutory rates primarily as a result of state income taxes and
nondeductible goodwill amortization.
Net Income. As a result of the foregoing, net income increased by $7.5
million, to $10.1 million for 1995 from $2.6 million for 1994.
COMPARISON OF YEAR ENDED DECEMBER 31, 1994 TO YEAR ENDED DECEMBER 31, 1993
Revenues. Revenues for 1994 increased $60.4 million, or 46.7%, to $189.7
million from $129.3 million for 1993. Approximately $50 million of the
increase was the result of the August 1994 acquisition of the Brake and Cable
Business from Alkin. The remaining increase was the result of incremental
business that began production in 1994, including the GM Cavalier/Sunfire
transmission shifters and parking brakes, the Ford Continental hood latches,
the Toyota Avalon parking brakes and hood latches and the Chrysler Neon
parking brakes. The Company also benefited from the overall increase in North
American automotive production in 1994.
Cost of Sales. Cost of sales for 1994 increased by $53.7 million, or 46.0%,
to $170.7 million from $117.0 million for 1993. As a percentage of revenues,
cost of sales decreased slightly to 90.0% for 1994 from 90.4% for 1993,
resulting in an improved gross margin of 10.0% from 9.6% in the preceding
year. The improvement was a result of the Company's continuing cost reduction
initiatives and the improvement in fixed cost absorption from higher sales.
Additionally, the Company began to realize cost savings associated with its
integration efforts following the acquisition of the Brake and Cable Business
in the third quarter. These improvements were partially offset by increases in
the cost of certain raw materials used by the Company, including steel.
20
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $2.1 million, or 24.9%, to $10.4 million
for 1994 compared to $8.3 million for 1993. The aggregate amount of selling,
general and administrative expenses increased in 1994 principally as a result
of incremental costs associated with the acquisition of the Brake and Cable
Business from Alkin. As a percentage of revenues, selling, general and
administrative expenses decreased to 5.4% for 1994 from 6.4% for 1993,
primarily due to the consolidation of Alkin's engineering, design and
administrative center into the Company's existing facility.
Amortization Expense. Amortization expense increased by $203,000, or 41.7%,
to $690,000 for 1994 from $487,000 for 1993. The increase was the result of
amortization of goodwill resulting from the August 1994 acquisition of the
Brake and Cable Business.
Interest Expense. Interest expense increased by $2.0 million, to $3.5
million for 1994 from $1.5 million for 1993. The increase is the result of
increased borrowings during 1994, primarily as a result of the indebtedness
incurred to finance the acquisition of the Brake and Cable Business.
Income Taxes. The effective income tax rate decreased to 41.4% for 1994 from
45.6% for 1993. The decrease is due principally to the lower percentage impact
of permanent differences on pretax income. The effective income tax rates were
higher than federal statutory rates primarily as a result of state income
taxes and nondeductible goodwill amortization.
Net Income. As a result of the foregoing, net income increased by $1.5
million, to $2.6 million in 1994 from $1.1 million in 1993.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
Net cash provided by (used in) operating activities was $13.1 million,
$(6.2) million and $3.7 million in 1995, 1994 and 1993, respectively. The
changes in cash provided by (used in) operating activities were primarily due
to changes in working capital and improvements in net income. During 1995, the
Company collected certain outstanding receivables related to Brake and Cable
Business pricing matters. This source of cash was offset by reductions in
accrued liabilities and other of $13.3 million, which were primarily due to
payments on product recalls and integration and acquisition obligations.
Net cash provided by operating activities was $9.6 million in the first half
of 1996 compared to $16.9 million in the first half of 1995. The decrease in
net cash provided by operating activities resulted primarily from a net
decrease of $2.5 million in net income and changes in working capital,
particularly a net increase in accounts receivable of $5.8 million in 1996 as
compared to a net decrease of $12.1 million in 1995. During the first half of
1995, the Company collected certain outstanding receivables related to Brake
and Cable Business pricing matters.
Investing and Financing
On August 31, 1994, the Company completed the acquisition of the Brake and
Cable Business for (i) 2,206,890 shares of Class B Common Stock, (ii) an
option to purchase up to an additional 14,420 shares of Class B Common Stock
at an exercise price of $1.45 per share and (iii) cash consideration, net of
assumed indebtedness, of approximately $40 million. In addition to borrowings
under the Bank Credit Agreement, the Company financed a portion of the
acquisition of the Brake and Cable Business by borrowing $4.0 million from
certain stockholders of the Company, including Onex ($1.8 million), J2R ($0.2
million) and Alkin ($2.0 million). See "Certain Transactions."
21
<PAGE>
On April 2, 1995, the Company completed the sale of the Window Regulator
Business for net cash consideration of $18.0 million, resulting in a pretax
gain of $4.2 million.
The Bank Credit Agreement consists of a term loan, which matures on June 30,
2001, of approximately $35 million, and a revolving credit facility of $30.0
million (of which $6.5 million was outstanding as of June 30, 1996) which
expires on August 31, 2000. The Notes mature on December 31, 2001 and bear
interest at a fixed rate of 6.93% per annum. The Notes currently have an
outstanding balance of $4.0 million. The Company intends to use the proceeds
from the Offering, along with the additional $2.0 million borrowed under the
revolving credit facility, to repay the term loan and the Notes. The Bank
Credit Agreement contains various restrictive covenants, which, among other
matters, require the Company to maintain certain financial ratios, including
minimum liquidity, net worth and fixed charge coverage. The Bank Credit
Agreement also limits additional indebtedness, capital expenditures and cash
dividends. The Company was in compliance with all such covenants as of
December 31, 1995 and June 30, 1996. The Company has also entered into an
interest expense limitation agreement ("Cap Agreement") and an interest rate
swap agreement ("Swap Agreement") related to the Bank Credit Agreement. The
Cap Agreement has a notional amount of $10 million and provides for payment to
the Company to offset interest expense should interest rates exceed a defined
level. The Swap Agreement exchanges the variable interest rate on the Bank
Credit Agreement for a fixed rate.
Based upon discussions with its principal lender, following the completion
of the Offering, the Company intends to enter into the New Credit Agreement,
and expects that the New Credit Agreement, which would replace the Bank Credit
Agreement, will provide for borrowings of up to $50.0 million and have a
scheduled maturity in 2001. The Company anticipates the New Credit Agreement
will be secured by all assets of the Company and will generally contain less
restrictive covenants and better pricing terms than the Bank Credit Agreement.
To date, no definitive agreements have been executed and no assurance can be
given that the New Credit Agreement will be executed on such terms or entered
into at all.
The Company's principal source of funds has been, and is anticipated to
continue to be, its cash flows from operations. During 1995, the Company
generated $16.5 million from operations before the effects of changes in
working capital compared to $7.8 million in 1994. The cash generated from
operations combined with the net proceeds of $18.0 million from the sale of
the Window Regulator Business were used to fund capital expenditures of $6.1
million and to reduce outstanding indebtedness by $22.9 million in 1995.
The Company estimates that it will fund approximately $8 million in capital
expenditures in each of 1996 and 1997. These capital expenditures will be used
primarily for the purchase of machinery and equipment to support new business
awards, as well as to finance continued cost reduction efforts.
The Company believes that funds available under the New Credit Agreement,
together with funds generated by the Company's operations, will provide the
Company with sufficient liquidity and capital resources for working capital,
capital expenditures and other needs. However, any significant acquisitions
may require additional debt or equity financing. The Company believes
additional financing will be available from bank lenders, through the issuance
of public or private debt securities or through the additional public
offerings of equity securities.
QUARTERLY RESULTS OF OPERATIONS AND SEASONALITY
The Company typically experiences decreased revenues and operating income
during the third calendar quarter of each year due to production shutdowns at
the automotive manufacturers for model changeovers and vacations. See Note 12
of Notes to Consolidated Financial Statements for unaudited quarterly
financial data.
EFFECTS OF INFLATION
Inflation generally affects the Company by increasing the interest expense
of floating rate indebtedness and by increasing the cost of labor, equipment
and raw materials. Management believes that inflation has had an effect on the
Company's business over the past 18 months due to rising labor costs and raw
material costs,
22
<PAGE>
primarily steel, although at a rate below the producer price index. Although
certain of the Company's customer contracts provide that increases in the
Company's cost of raw materials in certain circumstances may be passed through
to its customers, prevailing industry practices have not allowed the Company
to pass such costs on to its customers.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
During the first quarter of 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of" which requires
companies to review long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. The adoption of SFAS
No. 121 did not have a significant impact on the financial condition or
results of operations of the Company.
SFAS No. 123, "Accounting for Stock-Based Compensation" encourages, but does
not require, a fair value based method of accounting for employee stock
options, the sale of stock under the Company's Employee Stock Purchase Plan or
similar equity instruments. The Company has elected to continue to measure
compensation cost under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" as was previously required, and to
comply with pro forma disclosure of net income and earnings per share as if
the fair value based method of accounting had been applied.
23
<PAGE>
BUSINESS
GENERAL
The Company is a leading designer and manufacturer of mechanical assemblies
and integrated systems for the global automotive industry. The Company
believes that it is the largest supplier of both parking brake mechanisms and
parking brake cables to OEMs in North America, with market shares of over 60%
and over 40%, respectively. The Company supplies both parking brake mechanisms
and cables, as well as complete parking brake systems, which consist of
parking brake mechanisms and the cables that connect the brake mechanism to
the brake drum. In addition, the Company designs and manufactures a variety of
automotive cables, latches, transmission shifter mechanisms and other
mechanical assemblies. The Company's products are sold to almost every major
North American automotive OEM, including Ford, GM and Chrysler, as well as to
foreign OEMs such as Toyota. On a pro forma basis, the Company had revenues of
$239.6 million, operating income of $17.2 million and net income of $7.6
million in 1995.
The Company has supplied parking brake components and automotive cables to
OEMs since 1961 and 1970, respectively, and was granted its first parking
brake patent in 1967. The Company has continually increased its design
capabilities, allowing it to capitalize on the desire of its customers to
shift total design responsibilities to their suppliers. The Company believes
it is the only North American supplier with the capability to design,
manufacture and assemble a complete parking brake system for its customers. As
a result of the Company's significant design, engineering and project
management capabilities, the Company has been designated as the only Full
Service Supplier of parking brake systems to Ford and is the largest supplier
of such systems to GM. In 1995, the Company estimates that it supplied
approximately 78% and 93%, respectively, of Ford's and GM's parking brake
mechanism purchases and approximately 88% and 56%, respectively, of Ford's and
GM's parking brake cable purchases.
On a pro forma basis, the Company's four largest customers, Ford, GM,
Chrysler and Toyota, accounted for approximately 50%, 37%, 6% and 5%,
respectively, of the Company's 1995 revenues. The Company manufactures
products for many of the most popular car, light truck, sport utility and
mini-van models, including eight of the top ten selling vehicles in the United
States for 1995: the Ford Taurus, Escort, Explorer, Ranger and F-Series
pickups, GM C/K pickups, Saturn and Toyota Camry. The Company is generally the
sole supplier of the parts it sells to OEMs and will ordinarily continue to
supply parts for a particular model for the life of the model, which usually
ranges from three to seven years.
The Company was formed by an investor group organized by Hidden Creek to
acquire the Dura Divisions from Wickes. Following this acquisition in November
1990, Hidden Creek hired a new management team that implemented a series of
strategic changes designed to improve product quality and reduce manufacturing
costs through, among other things, the introduction of cellular manufacturing
methods, consolidation of manufacturing facilities, improvement in inventory
management and reduction of scrap. The Company also embarked upon a strategic
acquisition program. In August 1994, the Company combined its operations with
the Brake and Cable Business of Alkin, which significantly expanded the
Company's size and capabilities. Since that acquisition, the Company has
achieved significant cost savings through the consolidation of manufacturing
facilities, sales, engineering and design functions and the reduction of
administrative personnel. The Company has substantially completed the
integration of the Brake and Cable Business and is now positioned to further
expand its capabilities.
INDUSTRY TRENDS
The Company's performance and growth is directly related to certain trends
within the automotive market, including the consolidation of the component
supply industry, the growth of system sourcing and the increase in global
sourcing.
24
<PAGE>
Supplier Consolidation. During the 1980s, Ford, GM and Chrysler began to
reduce their supplier base in certain product segments, including mechanical
assemblies, awarding sole-source contracts to full-service suppliers. As a
result, OEMs currently work with a smaller number of full-service suppliers,
each of which supply a greater proportion of the total vehicle. These
requirements can best be met by suppliers with sufficient size and financial
resources to meet such demands. For full-service suppliers such as the
Company, the new environment provides an opportunity to grow by obtaining
business previously provided by other non-full service suppliers and by
acquiring suppliers that further enhance product, manufacturing and service
capabilities. OEMs rigorously evaluate suppliers on the basis of product
quality, cost control, reliability of delivery, product design capability,
financial strength, new technology implementation, quality and condition of
facilities and overall management. Suppliers that obtain superior ratings are
considered for sourcing new business; those that do not may continue their
existing contracts, but normally do not receive additional business. Although
these new supplier policies have already resulted in significant consolidation
of component suppliers in certain segments, the Company believes that
opportunities exist for further consolidation within the Company's segment.
This is particularly true in Europe which has many suppliers in this segment,
each with relatively small market share.
System Sourcing. OEMs increasingly seek suppliers capable of manufacturing
complete systems of a vehicle rather than suppliers who only produce the
separate parts that comprise a system. By outsourcing complete systems, OEMs
are able to reduce their costs associated with the design and integration of
different components and improve quality by enabling their suppliers to
assemble and test major portions of the vehicle prior to beginning production.
The Company has capitalized on this trend by designing its mechanisms and
cable systems to function together and by providing cable and mechanism
designs that are integrated into the design of the entire vehicle. The Company
believes it is the only North American supplier with the capability to design,
manufacture and assemble a complete parking brake system and a complete hood
latch system for its customers.
Global Sourcing. Regions such as Asia, Latin America and Eastern Europe are
expected to experience significant growth in vehicle demand over the next ten
years. OEMs are positioning themselves to reach these emerging markets in a
cost-effective manner by seeking to design and produce "world cars" which can
be designed in one vehicle center but produced and sold in many different
geographic markets, thereby allowing OEMs to reduce design costs and take full
advantage of low-cost manufacturing locations. OEMs increasingly are requiring
their suppliers to have the capability to design and manufacture their
products in different geographic markets.
The Company has formed, or is in the process of forming, strategic alliances
with other suppliers throughout the world, including in Europe, Latin America
and India, and is also exploring opportunities for affiliations in Asia. These
strategic alliances, which range from investments in other manufacturers to
informal understandings, should not only give the Company access to new
geographic markets and customers, but also the capability of offering
complementary products. The Company also has relocated technical personnel
resources to locations in which OEMs will develop "world cars." By
participating in the design of these vehicles and through implementation of
manufacturing processes near the international facilities of the OEMs, the
Company believes it can continue to develop its international presence.
BUSINESS STRATEGY
The principal objective of the Company is to capitalize on opportunities
created by the consolidation of the automotive mechanical assembly industry
and the growth of systems sourcing on a global basis through both internal
development and strategic acquisitions. The key elements of the Company's
strategy include:
Technical Design and Engineering Capabilities. The Company has maintained a
technological advantage through its investment in product development and
advanced engineering. The Company's Advanced Technology Group has developed
many innovative features utilized in the Company's products, including self-
adjust features in parking brakes and automotive cables, vacuum and electric
releasing parking brake mechanisms and selector brackets on transmission
shifters. The Company was the first to provide a brake cable with a ten-year-
life and will manufacture and assemble the industry's first plastic pedal for
the 1998 model year Chrysler
25
<PAGE>
Intrepid/Concorde parking brake. The Company also designed a combination
transmission shifter/four-wheel drive selector into a dual-function unit that
will be manufactured for the 1999 model year Chrysler Grand Cherokee. The
Company works with OEMs throughout the product development process from
concept vehicle and prototype development through the design and
implementation of manufacturing processes. The Company's computer-aided design
systems are compatible with its major customers, enabling the Company to
communicate design developments with customer engineers throughout the design
and development stage.
Efficient Manufacturing/Continuous Improvement Programs. Following the
acquisition of the Dura Divisions, new management implemented a series of
strategic changes designed to improve product quality and reduce manufacturing
costs through, among other things, the introduction of cellular manufacturing
methods, consolidation of manufacturing facilities, improvement in inventory
management and reduction of scrap. The Company has also achieved significant
cost savings subsequent to the acquisition of the Brake and Cable Business by
implementing similar improvements to its operations as well as through the
consolidation of manufacturing facilities and sales, engineering and design
functions and reduction of administrative personnel. As one example of the
efficiency improvements implemented by new management after the acquisition of
the Dura Divisions, the Company increased inventory turnover from fewer than
five times per year as of December 1990 to over 18 times per year as of June
1994. In August 1994, the Company acquired the Brake and Cable Business of
Alkin. Despite the disproportionately higher level of inventories maintained
in the Brake and Cable Business, the Company further increased inventory
turnover to over 20 times per year as of June 1996. The improvements
implemented by management can be further illustrated in the improved gross
margin levels from 10.1% in 1991 to 14.3% for the six months ended June 30,
1996. The Company believes it can continue to improve its manufacturing
processes in the future.
Strategic Acquisitions. The Company believes that the continuing trend
toward supplier consolidation in certain product segments, together with
recent system and global sourcing trends, will provide attractive
opportunities to acquire high-quality companies whose acquisition will allow
the Company to expand into new geographic markets, add new customers, provide
new product, manufacturing and service capabilities or increase model
penetration with existing customers. The Company's acquisition of the Brake
and Cable Business from Alkin is a result of this initiative, providing
additional product capabilities such as automotive cables, enhanced system
capabilities including both mechanisms and cables and new customers such as
Nissan Motor Co. Ltd. The Company currently is targeting acquisitions that
will strengthen its ability to supply its products in Europe and other markets
outside of North America. In addition, the Company also is seeking to acquire
transmission shifter cable technology, which will further enhance the
Company's complete system capabilities. The Company is also focused on
expanding its product lines to include pedal boxes (gas, brake and clutch
pedal units) or other latching mechanisms. The Company is focusing on
automotive assemblies that utilize the Company's assembly and design
capabilities and, preferably, use attaching cables to capitalize on the
Company's system knowledge.
Expanding Customer Relationships. The Company has developed strong customer
relationships based on its long history of high-quality manufacturing,
significant investment in design and engineering capabilities, access to and
relationships with OEMs' engineering and purchasing personnel and ability to
produce complete systems. Strong customer relationships allow the Company to
identify business opportunities and react to customer needs in the early
stages of vehicle design and, therefore, maintain and increase its volume with
particular customers. The Company's strategy is to increase volume by
marketing a broader range of its products to existing customers and by
developing new products that complement its existing product lines. In
addition to its continuing strong relationships with Ford and GM, the Company
has developed a strong relationship with Toyota, which relationship has grown
substantially from limited model coverage in 1991 to a full range of Toyota
vehicles in 1995, including two models manufactured in Japan. The Company has
also experienced significant success at Chrysler in recent months, including
the award of business for the 1998 model year Intrepid/Concorde and the 1999
model year Grand Cherokee. These customer relationships are also expanding
outside the North American market as the Company supplies its products on a
global basis.
Management and Workforce Incentives. The Company's leadership team has an
average of 20 years of experience in the automotive supply industry and has a
significant stake in the Company's success. The
26
<PAGE>
Company's management team will beneficially own approximately 13% of the
Common Stock after the Offering. The Company plans to provide further
ownership-related incentives to other managers and salaried and hourly
employees through grants under the Stock Option Plan and participation in the
Employee Stock Purchase Plan. See "Management."
PRODUCTS
The Company's products consist primarily of parking brake systems,
transmission shifters, automotive cables and latches. The Company's product
offerings include foot and hand operated parking brakes; manual and automatic
floor mounted transmission shifters; parking brake, throttle, oil level, hood
release and fuel door cables; and primary, secondary and combination hood,
deck lid and tail gate latches. The Company offers parking brake and latch
systems (which consist of mechanisms and cables), allowing OEMs to capitalize
on the Company's expertise in manufacturing both components individually and
as an integrated system.
The following table sets forth the approximate composition by product
category of the Company's revenues on a pro forma basis for the last three
fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
PRODUCT CATEGORY 1993 1994 1995
<S> <C> <C> <C>
Parking brakes................................... 52% 45% 40%
Automotive cables................................ -- 27 40
Latches.......................................... 14 9 7
Transmission shifters............................ 9 6 4
Other body hardware.............................. 25 13 9
------- ------- -------
Total.......................................... 100% 100% 100%
======= ======= =======
</TABLE>
CUSTOMERS AND MARKETING
The North American automotive market is dominated by Ford, GM and Chrysler,
with Japanese and foreign manufacturers capturing approximately 26% of the
market. The Company supplies its products primarily to Ford, GM, Chrysler and
Toyota.
The following is a summary of the Company's customers that accounted for at
least 3% of revenues in the past three fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
PRO FORMA
CUSTOMER 1993 1994 1995 1995
<S> <C> <C> <C> <C>
Ford................................................ 46% 57% 52% 50%
GM.................................................. 35 29 35 37
Chrysler............................................ 14 9 6 6
Toyota.............................................. 3 3 5 5
Other............................................... 2 2 2 2
--- --- --- ---
Total............................................. 100% 100% 100% 100%
=== === === ===
</TABLE>
The Company's customers award contracts for a particular car model. Such
contracts range from one year to the life of the model, which is generally
three to seven years, and do not require the purchase by the customer of any
minimum number of parts. The Company also competes for new business to supply
parts for successor models and therefore is subject to the risk that the OEM
will not select the Company to produce parts on a successor model. Because the
Company supplies parts for a broad cross-section of both new and mature
models, its reliance on any particular model is minimized. The Company
manufactures products for many of the most popular car, light truck, sport
utility and mini-van models, including eight of the top ten selling vehicles
in the United States for 1995: the Ford Taurus, Escort, Explorer, Ranger and
F-Series pickups, GM C/K pickups, Saturn and Toyota Camry. Although not
comprehensive, the following table presents an overview of the major models
for which the Company has orders to supply products on current or new model
vehicles:
27
<PAGE>
<TABLE>
<CAPTION>
CUSTOMER CAR MODELS TRUCK MODELS
<S> <C> <C>
Ford............... Contour/Mystique/Mondeo, Aerostar, Bronco, Econoline,
Continental/Town Car, Mark/ Expedition,
Mark VIII, Taurus/Sable, Explorer/Mountaineer, F-
Thunderbird/Cougar Series, Ranger, Villager,
Windstar
GM................. Achieva/Grand Am, Century, Safari/Astro, Blazer/Jimmy,
Corsica/Beretta, Corvette, C/K Truck/Tahoe/Sierra/Yukon,
Deville/Seville, Silhouette/TransSport/Lumina,
Firebird/Camaro, S-10 Pick-up/Sonoma/Bravada,
Lumina/Grand Prix/Regal, Suburban
Aurora/Riviera, Caprice,
Olds 98/Park Avenue, Olds
88/Bonneville/LeSabre, all
Saturn models,
Sunfire/Cavalier
Chrysler........... Intrepid/Concorde, Neon, Caravan, Dakota, Grand
Prowler, Viper Cherokee, Ram Van, Voyager
Toyota............. Avalon, Camry, Corolla, Previa
Lexus, Prizm
</TABLE>
Most of the parts the Company produces have a lead time of two to five years
from product development to production. Examples of recently awarded new
business include parking brakes and hood latches for Ford's 1999 model year
DEW98, parking brakes and parking brake cables for GM's 1999 model year GMT800
Truck, parking brakes, shifters and hood release cables for Chrysler's 1999
model year Grand Cherokee, parking brakes for Chrysler's 1998 model year
Intrepid/Concorde and parking brakes, hood latches and service brake pedals
for Toyota's 1997 model year Previa.
DESIGN AND ENGINEERING SUPPORT
The Company believes that engineering service and support are key factors in
successfully obtaining new business. The Company utilizes program management
with customer-dedicated program teams, which have full design, development,
test and commercial issues under the operational control of a single manager.
In addition, cross-functional teams are established for each new program to
ensure proper management from program conception through product launch.
Advanced technology development is used to maintain product and process
technology for the Company's products, with customers often included in the
product development teams.
The Company's Technical Center is located in Rochester Hills, Michigan,
which is near the development centers of each of the Company's top four
customers. A separate Advanced Technology Group has been established to
maintain the Company's position as a technology leader. The Advanced
Technology Group has developed many innovative features in the Company's
products, many of which features were developed in conjunction with the
Company's customers. The Company utilizes Computer Aided Designs ("CAD") in
the design process, which enables the Company to share data files with its
customers' compatible systems during the design stage, improving function, fit
and performance within the total vehicle. The Company also utilizes CAD links
with its manufacturing facilities to assure manufacturability and quality of
the designs through early involvement of the manufacturing engineers.
The Company has more than 100 patents granted or in the application process.
The patents granted expire over several years commencing in late 1996.
Although the Company believes that, taken together, the patents are
significant, the loss or expiration of any particular patent would not be
material to the Company.
MANUFACTURING
In manufacturing its products, the Company utilizes two different
manufacturing processes, one for mechanisms and one for cables that will
ultimately attach to such mechanisms, creating a system. The Company
28
<PAGE>
utilizes flexible manufacturing cells in both the mechanism and cable assembly
processes. Manufacturing cells are clusters of individual manufacturing
operations and work stations grouped in a cylindrical configuration, with the
operators placed centrally within the configuration. This provides flexibility
by allowing efficient changes to the number of operations each operator
performs. When compared to the more traditional, less flexible assembly line
process, cell manufacturing allows the Company to maintain its production
output consistently with its customers' requirements and reduce the level of
inventory.
Mechanical assemblies consist of between five and 50 individual components,
which are attached to form an integrated mechanism. The Company's assembly
operations are performed on either dedicated, high-volume, automated assembly
machines or on low capital-intensive, flexible, cell-oriented assembly units
capable of low or high volume production runs. The assembly operations
construct the final product through welding, staking and riveting the
component parts. A large portion of the component parts are purchased from
outside suppliers to the Company. However, the Company manufactures its own
stampings, which process consists of passing sheet metal through dies in a
stamping press to form the metal into three-dimensional parts. The Company
produces stamped parts using single-stage and progressive dies in presses,
ranging in size from 150 to 600 tons. Through cell teams, which stress
employee involvement, the Company's processes are continuously upgraded to
increase flexibility, improve operating safety and minimize changeover times
of the dies.
Cables are manufactured using a variety of processes, including plastic
injection molding, extrusion, wire flattening, spring making and zinc
diecasting. Wire is purchased from outside suppliers and then formed into
contra-twisted layers on tubular stranders and bunching machines to produce
19-wire stranded cable. Corrosion resistance is provided by a proprietary,
ceramic coating applied during the stranding process. The cable then is
plastic-coated by an extrusion process to provide a smooth, low coefficient
surface that results in high efficiency and durability. Conduit is then
produced by flattening and coiling wire, which is then extruded with a
protective coating. Proprietary strand and conduit cutting machines enable
efficient processing. Assembly operations are arranged in cells to minimize
inventory, improve quality, reduce scrap, improve productivity and enhance
employee involvement. The cables are assembled with various attachments and
end fittings that allow the customer to install the cables to the appropriate
mating mechanisms.
The Company utilizes frequent communication meetings at all levels of
manufacturing to provide training and instruction as well as to assure a
cohesive, focused effort toward common goals. The Company encourages employee
involvement in all production activity and views such involvement as a key
element toward the success of the Company. The Company also aggressively
pursues involvement from its suppliers, which is necessary to assure a
consistent flow of raw materials and components on a timely basis with
consistently high quality. The Company utilizes the component suppliers where
practical in the design and prototype stages of the new product development to
facilitate the most comprehensive, state-of-the-art designs available. The
Company has made substantial investments in manufacturing technology and
product design capability to support its products, including modern
manufacturing equipment, fineblanking, sophisticated computer-aided design
systems and highly-trained engineering personnel. These advanced capabilities
have helped to further reduce scrap rates, ensure superior product quality and
increase efficiency.
OEMs have established quality rating systems involving rigorous inspections
of suppliers' facilities and operations. OEMs' factory rating programs provide
a quantitative measure of a company's success in improving the quality of its
operations. The Company's facilities in Mancelona, Michigan; Hannibal (South)
and Brookfield, Missouri and Matamoros, Mexico were all certified as Ford Q-1
suppliers, and the Company's remaining plants were in the process of being so
certified, when the automotive industry adopted a quality rating system known
as QS-9000. The Company has completed three of the five phases toward QS-9000
Company-wide registration and expects to complete the remaining phases by the
end of 1996. The Q-1 and QS-9000 awards were designed by OEMs to measure
quality of products and manufacturing systems. The Company believes that
qualifying for such awards will make it more likely that OEMs will purchase
the Company's products.
The Company's plants have been recognized by its customers with various
awards, such as the Chrysler Pentastar Award, GM Target for Excellence, Nummi
Delivery Performance Award, Isuzu Quality Achievement Award and Calsonic
Supplier of the Year Award.
29
<PAGE>
FACILITIES
The following table provides information regarding the Company's principal
facilities. The Company believes that the productive capacity and utilization
of its facilities are sufficient to allow the Company to conduct its
operations in accordance with its business strategy. All of the owned
facilities are subject to liens under the Bank Credit Agreement. The Company
expects that all of the owned facilities will likewise be subject to liens
under the New Credit Agreement.
<TABLE>
<CAPTION>
SQUARE TYPE OF
LOCATION FOOTAGE INTEREST DESCRIPTION OF USE
<S> <C> <C> <C>
Mancelona, Michigan..................... 167,000 Owned Manufacturing
Moberly, Missouri....................... 165,000 Owned Manufacturing
East Jordan, Michigan................... 135,000 Owned Manufacturing
Hannibal, Missouri (South).............. 90,000 Owned Manufacturing
Rochester Hills, Michigan............... 65,000 Leased Product Development/
Operating Headquarters
Hannibal, Missouri (North).............. 64,000 Owned Manufacturing
Brookfield, Missouri.................... 51,000 Owned Manufacturing
Moberly, Missouri(1).................... 46,000 Leased Manufacturing
Matamoros, Mexico....................... 42,000 Owned Manufacturing
Minneapolis, Minnesota.................. 5,700 Leased Corporate Headquarters
</TABLE>
- ---------------------
(1) Will be vacated by July 1, 1997.
Management believes that substantially all of its property and equipment is
in good condition and that it has sufficient capacity to meet its current
manufacturing needs.
COMPETITION
The Company operates in a highly competitive environment. The number of the
Company's competitors has decreased due to the supplier consolidation
resulting from changing OEM policies. The Company currently estimates that it
has over 60% of the North American parking brake market. Its competitors for
parking brakes include Magna International Inc. and Atwood Industries Inc., a
division of Excel Corporation. The Company estimates it has over 40% of the
brake cable market. Dominion Controls Company is the Company's largest
competitor in brake cables. In the hood latch market, the Company estimates it
has approximately 20% of the market. Competitors in the hood latch market
include Magna International Inc. and the Inland Fisher Guide Division of GM.
In the North American shifter market, the Company believes its share is under
5%. The Company's largest competitors in the shifter market are Grand Haven
Stamped Products Co., Sparton Corp. and Atwood Industries Inc.
The Company principally competes for new business both at the beginning of
the development of new models and upon the redesign of existing models. New
model development generally begins two to five years before the marketing of
such models to the public. Once a producer has been designated to supply parts
for a new program, an OEM usually will continue to purchase those parts from
the designated producer for the life of the program, although not necessarily
for a redesign. Competitive factors in the market for the Company's products
include product quality and reliability, cost, timely delivery, technical
expertise and development capability, new product innovation and customer
service.
SUPPLIERS AND RAW MATERIALS
The principal raw materials purchased by the Company are steel, wire and
resin. The types of steel the Company purchases include hot and cold rolled,
galvanized, organically coated and aluminized steel. In general the wire used
by the Company is produced from steel with many of the same characteristics
with the exception that it has a higher carbon content. The Company utilizes
plastic resin to produce the protective coating for its cables. The Company
employs just-in-time manufacturing and sourcing systems enabling it to meet
customer requirements for faster deliveries while minimizing its need to carry
significant inventory levels. The Company has not experienced any significant
shortages of raw materials and normally does not carry inventories of raw
materials or finished products in excess of those reasonably required to meet
production and shipping schedules.
30
<PAGE>
The Company typically negotiates blanket purchase orders or 12-month supply
agreements with integrated steel suppliers, mini-mills and service centers
that have demonstrated timely delivery, quality steel and competitive prices.
These relationships allow the Company to order precise quantities and types of
steel for delivery on short notice, thereby permitting the Company to maintain
low inventories. In addition, the Company occasionally must "spot buy" steel
from service centers to meet unexpected customer demand, engineering changes
or new part tool trials.
Other raw materials purchased by the Company include dies, fasteners,
springs, rivets and rubber products, all of which are available from numerous
sources.
EMPLOYEES
As of June 30, 1996, the Company employed 2,584 persons, 432 of whom are
salaried and the balance of whom are paid on an hourly basis. Approximately
500 employees located at the Company's facilities in Matamoros, Mexico and
East Jordan and Mancelona, Michigan are currently covered by collective
bargaining agreements. The collective bargaining agreement at the Michigan
facilities is with the UAW and expires in December 2000. The collective
bargaining agreement at the Matamoros facility is with the Confederacion de
Trabajadores de Mexico and expires in August 1997. Although management
believes that the Company's relationship with its union employees at these
facilities is good, there can be no assurance that the Company will be able to
negotiate new agreements on favorable terms. In the event the Company is
unsuccessful in negotiating new agreements, these facilities could be subject
to work stoppages, which would have a material adverse effect on the
operations of the Company. The Company has not experienced any work stoppages
and considers its relations with its employees to be good.
ENVIRONMENTAL MATTERS
The Company is subject to the requirements of federal, state, and local
environmental and occupational health and safety laws and regulations. There
can be no assurance that the Company is at all times in complete compliance
with all such requirements. Although the Company has made and will continue to
make capital and other expenditures to comply with environmental requirements,
the Company does not expect to incur material capital expenditures for
environmental controls in 1996 or 1997. If a release of hazardous substances
occurs on or from the Company's properties or any associated offsite disposal
location, or if contamination is discovered at any of the Company's current or
former properties, the Company may be held liable for remediation costs and
expenses, and the amount of such liability could be material.
In 1995, the Michigan Department of Environmental Quality ("MDEQ") requested
that Wickes and the Company investigate environmental conditions at the
Company's Mancelona facility and at certain adjacent property retained by
Wickes. Wickes and the Company jointly completed the requested investigation
and, in January of 1996, submitted the results to MDEQ. The Company is
awaiting MDEQ's response to the sampling results. The Company could incur
additional costs to further investigate or conduct cleanup at the facility. In
1993, the Company received requests for information pursuant to CERCLA from
the U.S. EPA with respect to two landfill sites located in Toledo, Ohio. In
1994, the Company received a notice of potential liability under CERCLA from
the EPA with respect to one of the sites. The Company responded to the
requests and notice by explaining to the EPA that it had no involvement with
these sites, which apparently ceased operations prior to the formation of the
Company in 1990. The Company has received no further communications from the
EPA with respect to either site.
In connection with the Company's acquisition of certain assets from Wickes
in 1990, and subject to certain limitations, Wickes agreed to indemnify the
Company for environmental liabilities arising from the operation of the
acquired facilities prior to the acquisition. The Company and Wickes
subsequently agreed that the Company had provided Wickes with timely and
adequate notice with respect to such matters (including the matters described
in the immediately preceding paragraph) and that, subject to the limitations
set forth in the agreement, those matters are covered by the Wickes
indemnification. There can be no assurance, however, that all costs associated
with such matters will ultimately be reimbursed by Wickes. The Company does
not currently believe that any liability associated with the foregoing matters
will be material to the Company.
31
<PAGE>
LEGAL PROCEEDINGS
The Company faces an inherent business risk of exposure to product liability
claims in the event that the failure of its products results in personal
injury or death, and there can be no assurance that the Company will not
experience any material product liability losses in the future. In addition,
if any Company-designed products prove to be defective, the Company may be
required to participate in a recall involving such products.
In late 1994, Ford issued a recall of a series of manual-transmission Ford
F-Series pick-ups to repair the self-adjust parking brakes originally
manufactured by the Brake and Cable Business of Alkin. Ford had received
several reports that the brakes failed. Pursuant to a letter agreement entered
into in connection with the acquisition of the Brake and Cable Business, the
Company agreed to reimburse Ford for up to $6.0 million of Ford's costs of the
recall. The Company has reimbursed Ford for the full amount under this
agreement. The Company is also involved in a product recall relating to the
same issue with respect to the Ford Contour/Mystique in Europe. The Company
has agreed to pay 50% of the costs of that recall not to exceed $1.0 million,
which payments totalled $0.4 million as of June 30, 1996.
The type of alleged failures that prompted the F-Series recalls have also
led to a number of claims and lawsuits filed against Ford and, in certain
instances, against the Company and/or Alkin. The Company may be subject to
claims brought directly against the Company by injured occupants of Ford
vehicles and to claims for contribution or indemnification asserted by Ford.
The agreement relating to the acquisition of the Brake and Cable Business
provided that the Company is liable for claims arising out of accidents that
take place on or after August 31, 1994 and that the Company will be liable for
other claims only to the extent any losses by Alkin relating to such claims
are not paid by Alkin's insurance policies (either because they are not over
the deductible amount, because Alkin's policy limits have been exceeded or
because they are not covered by Alkin's insurance policies for other reasons).
Two cases are currently pending directly against the Company or Alkin relating
to personal injury claims, and Ford has received over 400 claims (generally
for property damage) relating to alleged defects in the self-adjust parking
brakes. Ford has maintained that the Company or Alkin is responsible for all
damages or liabilities arising out of these claims. The Company disputes this
position. In July 1996, Ford tendered its defense of 17 such claims to Dura
and Alkin, and indicated that it would look to Dura and Alkin for
indemnification were Ford ultimately found to be liable and required to make
any payments relating to such claims. Dura and Alkin have submitted these
claims to their insurance carriers. The Company has attempted to work together
with Ford to address the claims arising from the self-adjust parking brakes
originally manufactured by the Brake and Cable Business of Alkin and does not
believe that these claims have adversely affected its business relationship
with Ford.
From time to time, in the ordinary course of its business, the Company
receives notice from a customer that a product may not be properly
functioning. For example, in November 1995, the Company was notified by
Chrysler that it had received reports of a number of parking brake failures in
manual transmission vehicles, particularly in Europe. The Company's
investigation of this matter remains in preliminary stages, and the Company
has had no further contacts from Chrysler regarding this matter. It is
possible that Chrysler could seek contribution from the Company for costs it
incurs if a recall were undertaken or for costs associated with possible
repairs.
In January 1996, the Company was served with a complaint alleging a wrongful
death as the result of injuries purportedly caused by a defectively-designed
manual release for an emergency brake on a 1990 Cadillac Fleetwood. The
lawsuit is in preliminary stages and has been referred to the Company's
insurance carrier.
In June 1996, the Company was served with a complaint alleging a wrongful
death as the result of injuries purportedly caused by a defectively designed
rear latch on a Chrysler mini-van. Chrysler and two other suppliers to
Chrysler were also named as defendants in the complaint. The lawsuit is in
preliminary stages and has been referred to the Company's insurance carrier.
In addition, Chrysler has agreed to assume the defense of, and to indemnify
the Company with respect to, this claim as long as the plaintiffs do not make
any claim alleging a manufacturing defect as it relates to the Company. There
can be no assurance that the plaintiffs will not make such an allegation.
The Company believes it maintains adequate insurance, including product
liability coverage, to cover the claims described above. The Company has also
established reserves in amounts it believes adequate to cover any adverse
judgments. However, any adverse judgment in excess of its insurance coverage
and such reserves could result in a material adverse effect on the Company.
32
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
Directors and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
<S> <C> <C>
S.A. (Tony) Johnson............ 56 Chairman and Director
President, Chief Executive Officer and
Karl F. Storrie................ 58 Director
David R. Bovee................. 46 Vice President, Chief Financial Officer and
Assistant Secretary
Joe A. Bubenzer................ 44 Senior Vice President
Robert R. Hibbs................ 34 Vice President and Director
David P. Klosterman............ 59 Vice President
John J. Knappenberger.......... 49 Vice President
Milton D. Kniss................ 48 Vice President
Craig L. Lamiman............... 41 Vice President
Scott D. Rued.................. 39 Vice President
Neil Anderson.................. 45 Director
W. H. Clement.................. 68 Director
James L. O'Loughlin............ 52 Director
William L. (Barry) Orscheln.... 45 Director
Eric J. Rosen.................. 35 Director
Barbara A. Westhues............ 35 Director
</TABLE>
S.A. (Tony) Johnson has served as Chairman and a Director of the Company
since November 1990. Mr. Johnson is the founder, Chief Executive Officer and
President of Hidden Creek, a private industrial management company based in
Minneapolis, Minnesota, which has provided certain management and other
services to the Company. Mr. Johnson is also the President of J2R. Prior to
forming Hidden Creek, Mr. Johnson served from 1985 to 1989 as Chief Operating
Officer of Pentair, Inc., a diversified industrial company. From 1981 to 1985,
Mr. Johnson was President and Chief Executive Officer of Onan Corp., a
diversified manufacturer of electrical generating equipment and engines for
commercial, defense and industrial markets. Mr. Johnson served as Chairman and
a director of Automotive Industries Holding, Inc., a supplier of interior trim
components to the automotive industry, from May 1990 to August 1995. Mr.
Johnson is also Chairman and a director of Tower Automotive, Inc., a
manufacturer of engineered metal stampings and assemblies for the automotive
industry.
Karl F. Storrie has served as President, Chief Executive Officer and a
Director of the Company since March 1991. Prior to joining the Company and
from 1986, Mr. Storrie was Group President of a number of aerospace
manufacturing companies owned by Coltec Industries, a multi-divisional public
corporation. Prior to becoming a Group President, Mr. Storrie was a Division
President of two aerospace design and manufacturing companies for Coltec
Industries from 1981 to 1986. During his thirty-five year career, Mr. Storrie
has held a variety of positions in technical and operations management. Mr.
Storrie is also a director of Argo-Tech Corporation, a manufacturer of
aircraft fuel, boost and transfer pumps.
David R. Bovee has served as Vice President and Chief Financial Officer of
the Company since November 1990. Mr. Bovee also serves as Assistant Secretary
for the Company. Prior to joining the Company, Mr. Bovee served as Vice
President at Wickes in its Automotive Group from 1987 to 1990.
Joe A. Bubenzer has served as Vice President Sales/Engineering since joining
the Company in October 1993 and was named Senior Vice President in 1995. Prior
to joining the Company, Mr. Bubenzer filled various executive positions with
ITT Automotive, a supplier of components to the automotive industry, where he
worked for six years, and, prior to such time, at GM, where he worked for 14
years.
Robert R. Hibbs has served as a Director of the Company since August 1994
and as Vice President since November 1990. Mr. Hibbs, a stockholder of J2R,
has also served as Vice President-Corporate Development of
33
<PAGE>
Hidden Creek since January 1994 and as its Director from April 1990 through
December 1993. Prior thereto, Mr. Hibbs worked in the corporate finance area
with Drexel Burnham Lambert, an investment banking firm, in New York from 1988
to 1990. Mr. Hibbs is also Chairman of the Audit Committee of the Board.
David P. Klosterman has served as Vice President of Advanced Technology
Development since September 1994. Mr. Klosterman served as Vice President of
Engineering for Alkin since December 1991 and prior thereto served as General
Manager of Engineering for Orscheln since January 1979.
John J. Knappenberger has served as Vice President of Quality and Materials
of the Company since December 1995. Prior to joining the Company, Mr.
Knappenberger was Director of Quality for Carrier Corporation's North American
Operations, manufacturers of heating and air conditioning systems, from
February 1992. From 1985 to 1991, Mr. Knappenberger was employed by TRW Inc.,
a supplier of components to the automotive industry, beginning as Director of
Quality in 1985 for the Steering and Suspension Division and becoming Vice
President, Quality for the Automotive Sector in 1990.
Milton D. Kniss has served as Vice President of Operations of the Company
since January 1994. From April 1991 until January 1994, Mr. Kniss served as
Director of Michigan Operations for the Company. Mr. Kniss joined the
predecessor in 1981 as a Divisional Purchasing Manager, served as Plant
Manager of East Jordan, Michigan from 1982 until 1986, and Plant Manager of
Gordonsville, Tennessee until 1991.
Craig L. Lamiman has served as Vice President of the Company since August
1994. Prior to joining the Company, Mr. Lamiman served as Director of
Industrial Relations at United Technologies Corporation, a diversified
publicly-held corporation, and President and CEO of his own company in
Connecticut. Mr. Lamiman served in several positions while at Pepsico, Inc.
from 1980 to 1988, the most recent being as Regional Personnel Director for
Pepsi-Cola International Limited (U.S.A.).
Scott D. Rued has served as Vice President of the Company since November
1990. Mr. Rued, a stockholder of J2R, has also served as Executive Vice
President and Chief Financial Officer of Hidden Creek since January 1994 and
served as its Vice President--Finance and Corporate Development from June 1989
through 1993. Mr. Rued has served as Vice President, Corporate Development and
a director of Tower Automotive, Inc. since April 1993. Mr. Rued served as Vice
President, Chief Financial Officer and a director of Automotive Industries
Holding, Inc. from April 1990 to August 1995. Mr. Rued is also a director of
The Rottlund Company, Inc., a corporation engaged in the development and sale
of residential real estate.
Neil Anderson has served as a Director of the Company since August 1994. Mr.
Anderson has also served as Vice President of Finance for Orscheln Management
Co. since March 1991 and was named Senior Vice President of Finance in October
1995. Mr. Anderson has also served as a director for Analytical Bio Chemistry
Laboratories, Inc. since June 1995.
W. H. Clement has served as a Director of the Company since 1993. Mr.
Clement serves as a consultant to Hidden Creek. From 1975 until May 1994, Mr.
Clement served as Chief Executive Officer or as President of Automotive
Industries Holding, Inc. and its predecessor. Mr. Clement is also a director
of F&M National Corporation, a bank holding company, and Tower Automotive,
Inc.
James L. O'Loughlin has served as a Director of the Company since August
1994. Mr. O'Loughlin has also served as Vice President and General Counsel to
Orscheln Management Co. since December 1987 and was named Senior Vice
President in October 1995.
William L. (Barry) Orscheln has served as a Director of the Company since
August 1994. Mr. Orscheln has also served as President of Alkin (and its
predecessors) since March 1994, as President of Orscheln Farm and Home since
September 1995, as President of Orscheln Properties Co., L.L.C., since October
1994 and as President of Orscheln Management Co. since December 1987. Mr.
Orscheln has served as a director of UMB Bank, a bank holding company, since
July 1989 and as a director of Orscheln Management Co. since 1987.
Eric J. Rosen has served as a Director of the Company since January 1994.
Mr. Rosen is Managing Director of Onex Investment Corp., a diversified
industrial corporation and an affiliate of Onex, and served as a Vice
34
<PAGE>
President of Onex Investment Corp. from 1989 to February 1994. Prior thereto,
Mr. Rosen worked in the merchant banking group at Kidder, Peabody & Co.
Incorporated from 1987 to 1989. Mr. Rosen is also a director of Tower
Automotive, Inc.
Barbara A. Westhues has served as a Director of the Company since August
1994. Ms. Westhues has served on the Audit Committee since August 1994. Ms.
Westhues has also served as the Controller of Orscheln Management Co. since
December 1987 and was named Senior Vice President in October 1995.
The Company currently has nine Directors, all of whom were elected pursuant
to the terms of the Stockholders Agreement. Promptly following consummation of
the Offering, the Company intends to appoint two additional Directors who are
not otherwise affiliated with the Company or any of its stockholders. Such
nominees have not been selected as of the date hereof. Each Director is
elected to serve until the next annual meeting of stockholders or until a
successor is duly elected and qualified. Executive officers of the Company are
duly elected by the Board to serve until their respective successors are
elected and qualified. There are no family relationships between any of the
Directors or executive officers of the Company.
The Company has letter agreements with Messrs. Lamiman, Klosterman and
Knappenberger with respect to their employment with the Company. The
agreements provide for an annual base salary of $125,000 for Mr. Lamiman,
$95,000 for Mr. Klosterman and $135,000 for Mr. Knappenberger. The agreements
provide that each individual is eligible for an annual bonus of up to 50% of
his annual base salary and certain other benefits customary for agreements of
this type.
Certain of the Company's existing stockholders have entered into agreements
pursuant to which such stockholders have agreed to vote their shares of the
Company's voting stock for the election of directors designated by certain of
the existing stockholders. See "--Stockholders Agreement."
There are three Committees of the Board: the Executive Committee, the
Compensation Committee and the Audit Committee. The Executive Committee, which
is currently composed of Messrs. Johnson, Storrie and Orscheln, exercises the
powers of the Board of Directors during intervals between Board meetings and
acts as an advisory body to the Board by reviewing various matters prior to
their submission to the Board. The Compensation Committee, which is currently
composed of Messrs. Johnson and Orscheln, reviews and makes recommendations to
the Board of Directors regarding salaries, compensation and benefits of
executive officers and key employees of the Company and grants all options to
purchase Common Stock of the Company. The Audit Committee is currently
composed of Messrs. Hibbs, Clement, Anderson and Rosen and Ms. Westhues. Among
other duties, the Audit Committee reviews the internal and external financial
reporting of the Company, reviews the scope of the independent audit and
considers comments by the auditors regarding internal controls and accounting
procedures and management's response to these comments. The Company does not
have a nominating committee. The Company intends to appoint one of the new
independent directors to each of the Audit Committee and the Compensation
Committee.
DIRECTOR COMPENSATION
Directors who are not employees of the Company or any of its affiliates each
receive an annual fee of $14,400 for serving as a director of the Company. In
addition, each non-employee director receives $1,000 for each Board of
Directors meeting attended, $500 for each committee meeting attended and
reimbursement of out of pocket expenses incurred to attend such meetings.
EXECUTIVE COMPENSATION
The following table sets forth certain information for the Company's chief
executive officer and its four other most highly compensated executive
officers (the "Named Executive Officers") for 1995. The Named Executive
Officers did not exercise and were not granted any stock options in 1995 and
did not hold any stock options as of December 31, 1995.
35
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------
OTHER ANNUAL ALL OTHER
SALARY BONUS COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(1) ($)(2) ($)(3)
<S> <C> <C> <C> <C> <C>
Karl F. Storrie............... 1995 $258,340 $260,000 $11,775 $3,600
President and Chief Executive
Officer
Joe A. Bubenzer............... 1995 157,333 120,000 8,322 2,616
Senior Vice President
David R. Bovee................ 1995 130,833 100,000 4,389 2,832
Vice President
Milton D. Kniss............... 1995 122,000 86,000 6,250 2,776
Vice President
Craig L. Lamiman.............. 1995 125,000 28,000 8,417 231
Vice President
</TABLE>
- ---------------------
(1) Includes amounts deferred by employees under the Company's 401(k) employee
savings plan.
(2) Includes the value of personal benefits and perquisites.
(3) Includes the dollar value of premiums paid by the Company for term life
insurance on behalf of the Named Executive Officers and the Company's
matching 401(k) contributions.
1996 KEY EMPLOYEE STOCK OPTION PLAN
Prior to consummation of the Offering, the Board and stockholders of the
Company will approve the Stock Option Plan. The Stock Option Plan will be
administered by a Compensation Committee (the "Committee") composed of non-
management members of the Board, who will be appointed by the Board. Certain
people who are full-time, salaried employees of the Company will be eligible
to participate in the Stock Option Plan (an "Employee Participant"). The
Committee will select the Employee Participants and determine the terms and
conditions of the options. The Stock Option Plan will provide for the issuance
of options to Employee Participants covering 600,000 shares of Class A Common
Stock of the Company, subject to certain adjustments reflecting changes in the
Company's capitalization.
Options granted under the Stock Option Plan may be either incentive stock
options ("ISOs") or such other forms of non-qualified stock options ("NQOs")
as the Committee may determine. ISOs are intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"). The exercise price of (i) an ISO granted to
an individual who owns shares possessing more than 10% of the total combined
voting power of all classes of stock of the Company (a "10% Owner") will be at
least 110% of the fair market value of a share of common stock on the date of
grant and (ii) an ISO granted to an individual other than a 10% Owner and an
NQO will be at least 100% of the fair market value of a share of Common Stock
on the date of grant.
Options granted under the Stock Option Plan may be subject to time vesting
and certain other restrictions at the Committee's sole discretion. Subject to
certain exceptions, the right to exercise an option generally will terminate
at the earlier of (i) the first date on which the initial grantee of such
option is not employed by the Company for any reason other than termination
without cause, death or permanent disability or (ii) the expiration date of
the option. If the holder of an option dies or suffers a permanent disability
while still employed by the Company, the right to exercise all unexpired
installments of such option shall be accelerated and shall vest as of the
latest of the date of such death, the date of such permanent disability and
the date of the discovery of such permanent disability, and such option shall
be exercisable, subject to certain exceptions, for 90 days after such date. If
the holder of an option is terminated without cause, to the extent the option
has vested, such option will be exercisable for 30 days after such date.
36
<PAGE>
All outstanding options under the Stock Option Plan will terminate
immediately prior to consummation of a liquidation or dissolution of the
Company, unless otherwise provided by the Board. In the event of the sale of
all or substantially all of the assets of the Company or the merger of the
Company with another corporation, all restrictions on any outstanding options
will terminate and Employee Participants will be entitled to the full benefit
of their options immediately prior to the closing date of such sale or merger,
unless otherwise provided by the Board.
The Board generally will have the power and authority to amend the Stock
Option Plan at any time without approval of the Company's stockholders;
however, the Board may not amend the Stock Option Plan to materially alter the
plan eligibility requirements, number of shares issuable under the plan or
benefits to participants in the plan without the approval of the Company's
stockholders. No options have been granted under the Stock Option Plan to
date.
EMPLOYEE STOCK DISCOUNT PURCHASE PLAN
The Employee Stock Purchase Plan will be approved by the Board and
stockholders prior to the consummation of the Offering. The Employee Stock
Purchase Plan will be established to give employees desiring to do so a
convenient means of purchasing shares of Common Stock through payroll
deductions. The Employee Stock Purchase Plan will provide an incentive to
participate by permitting purchases at a discounted price. The Company
believes that ownership of stock by employees will foster greater employee
interest in the success, growth and development of the Company.
Subject to certain restrictions, each employee of the Company will be
eligible to participate in the Employee Stock Purchase Plan if he or she has
been employed by the Company for more than one year. Participation will be
discretionary with each eligible employee. The Company will reserve 500,000
shares of Class A Common Stock for issuance in connection with the Employee
Stock Purchase Plan. Each eligible employee will be entitled to purchase a
maximum of 200 shares per year. Elections to participate and purchases of
stock will be made on a quarterly basis. Each participating employee
contributes to the Employee Stock Purchase Plan by choosing a payroll
deduction in any specified amount, with a minimum deduction of $10 per week. A
participating employee may increase or decrease the amount of his/her payroll
deduction, including a change to a zero deduction as of the beginning of any
calendar quarter. Elected contributions will be credited to participants'
accounts at the end of each calendar quarter. In addition, employees may make
lump sum contributions at the end of the year to enable them to purchase the
maximum number of shares available for purchase during the plan year.
Each participating employee's contributions will be used to purchase shares
for the employee's share account within 15 days after the last day of each
calendar quarter. The cost per share is 85% of the lower of the closing price
of the Company's Class A Common Stock on the Nasdaq National Market on the
first or the last day of the calendar quarter. The number of shares purchased
on each employee's behalf and deposited in his/her share account will be based
on the amount accumulated in such participant's cash account and the purchase
price for shares with respect to any calendar quarter. Shares purchased under
the Employee Stock Purchase Plan carry full rights to receive dividends
declared from time to time. Under the Employee Stock Purchase Plan any
dividends attributable to shares in the employee's share account will be
automatically used to purchase additional shares for such employee's share
account. Share distributions and share splits will be credited to the
participating employee's share account as of the record date and effective
date, respectively. A participating employee will have full ownership of all
shares in his/her share account and may withdraw them for sale or otherwise by
written request to the Committee following the close of each calendar quarter.
Subject to applicable federal securities and tax laws, the Board of Directors
will have the right to amend or to terminate the Employee Stock Purchase Plan.
Amendments to the Employee Stock Purchase Plan will not affect a participating
employee's right to the benefit of the contributions made by such employee
prior to the date of any such amendment. In the event the Employee Stock
Purchase Plan is terminated, the Committee will be required to distribute all
shares held in each participating employee's share account plus an amount of
cash equal to the balance in each participating employee's cash account.
37
<PAGE>
INDEPENDENT DIRECTOR STOCK OPTION PLAN
The Director Option Plan will be approved by the Board and stockholders
prior to the consummation of the Offering. The Director Option Plan will be
established to encourage stock ownership by certain Directors of the Company
and to provide those individuals with an additional incentive to manage the
Company and to provide a form of compensation that will attract and retain
highly qualified individuals as members of the Board. The Director Option Plan
will provide for the issuance of options to independent Directors, as defined,
covering 100,000 shares of Class A Common Stock of the Company, subject to
certain adjustments reflecting changes in the Company's capitalization.
The terms of each option granted under the Director Option Plan may not
exceed ten years from the date of grant. The option price for each option must
equal 100% of the fair market value of the Company's Class A Common Stock on
the date the option is granted. In general, no option may be exercised in
whole or in part prior to the expiration of at least six months from the date
of grant of the option. In consideration of the grant of an option, an
optionee is required to agree to continue to serve as a director of the
Company for the lesser of 12 months from the date the option is granted or for
the remainder of the optionee's term as a Director of the Company.
Notwithstanding this requirement, nothing contained in the Director Option
Plan or any agreement to be executed pursuant to the Director Option Plan will
obligate the Company, its Board or its stockholders to retain an optionee as a
Director of the Company. No options have been granted under the Director
Option Plan to date.
STOCKHOLDERS AGREEMENT
On August 31, 1994, the Company, Onex, J2R, Alkin and certain individuals
named therein (including members of the Company's management) entered into a
Stockholders Agreement (as amended, the "Stockholders Agreement").
Concurrently with the Offering, the Stockholders Agreement will be amended and
restated to require all the parties thereto to vote their shares of Common
Stock and take any other action necessary to ensure the Board will be
comprised of eleven persons, seven of whom, including the two independent
directors, shall be designated by Onex, J2R and certain stockholders
affiliated with Hidden Creek (collectively, the "MC Stockholders") and four of
whom shall be designated by Alkin (the "Alkin Stockholders"). The voting
provision terminates automatically when the Alkin Stockholders cease to own at
least 10% of the outstanding Common Stock. The Stockholders Agreement also
contains provisions granting the parties thereto certain tag-along rights
allowing them to sell their shares in certain private sales of Common Stock
initiated by the other parties to the Stockholders Agreement. The Stockholders
Agreement also provides that the affirmative vote of two-thirds of the Board
is required to issue any Preferred Stock (as defined below) of the Company.
The Stockholders Agreement also binds subsequent transferees who have acquired
their shares in private sales from the parties to the Stockholders Agreement.
Subject to certain exemptions, each of Alkin, Onex, J2R and the MC
Stockholders have agreed not to compete with the business of the Company for a
period of five years after the date of the original Stockholders Agreement and
Onex, J2R, the MC Stockholders and the Company have agreed not to compete with
the business of Alkin during that period. J2R, Onex and Messrs. Johnson, Rued
and Hibbs have also entered into an agreement requiring the parties to vote
their shares of Common Stock as directed by Onex, and providing Onex with
certain first offer rights in connection with private sales of Common Stock.
38
<PAGE>
CERTAIN TRANSACTIONS
On August 31, 1994, MCHC, Alkin and all of the existing stockholders of MCHC
entered into an agreement whereby stockholders of MCHC contributed all shares
of MCHC common stock to the Company in return for shares of Class A Common
Stock. Alkin contributed the Brake and Cable Business to the Company in return
for (i) 2,206,890 shares of Class B Common Stock, (ii) an option to purchase
up to an additional 14,420 shares of Class B Common Stock at an exercise price
of $1.45 per share and (iii) cash consideration, net of assumed indebtedness,
of approximately $40 million. In addition to borrowings under the Bank Credit
Agreement, in financing such transaction, the Company borrowed an aggregate of
$4.0 million, evidenced by the Notes, from certain stockholders of the
Company, including Onex ($1.8 million), J2R ($0.2 million) and Alkin ($2.0
million). See "Use of Proceeds."
In connection with the acquisition of the Brake and Cable Business, the
Company entered into agreements with Alkin whereby the Company receives
services related to data processing, payroll, personnel administration and
other administrative matters. Amounts paid under these agreements were
$570,000 in 1994, $1,788,000 in 1995 and $370,000 in the six-month period
ended June 30, 1996. In addition, the Company and Alkin agreed to supply each
other's operations with certain items necessary for the manufacture of their
respective products. These supply agreements are for periods of up to five
years and the Company is required to purchase such supplies from Alkin only so
long as the supply terms remain no less favorable than could be obtained from
an independent party.
In November 1990, the Company's predecessor entered into a Management
Agreement with Hidden Creek, an affiliate of the Company. On August 31, 1994,
the Company and Hidden Creek entered into a new Management Agreement, and the
prior agreement was terminated. Pursuant to the Management Agreements, Hidden
Creek has provided strategic direction, management and financial and
administrative services to the Company. In exchange for such services, the
Company has paid monthly management fees to Hidden Creek. Total management
fees under such agreements were approximately $500,000 for 1993, $554,000 for
1994, $733,000 for 1995 and $500,000 for the six months ended June 30, 1996.
Although the current Management Agreement will be terminated upon completion
of the Offering, certain officers and employees of Hidden Creek will continue
to provide services to the Company. A portion of the salaries and expenses of
the Hidden Creek officers and employees will be allocated to the Company. The
Company also paid to Hidden Creek fees of approximately $500,000 in connection
with the acquisition of the Brake and Cable Business from Alkin and fees of
approximately $250,000 in connection with the sale of the Window Regulator
Business to Rockwell.
On June 26, 1995, the Company sold an aggregate of 78,819 shares of Class B
Common Stock to certain management employees at a purchase price of $2.69 per
share and 70,500 shares of Class B Common Stock to certain management
employees at a purchase price of $1.96 per share, pursuant to agreements
entered into in May 1995 and August 1994, respectively. In connection
therewith, Messrs. Klosterman, Kniss and Lamiman, each an executive officer of
the Company, purchased 35,250, 8,812 and 35,250 shares, respectively. In
connection with such sale, the Company loaned funds to finance up to half of
the purchase price for such shares at an interest rate equal to the base rate
of the Company's senior lender plus 1.5% (9.75% at June 30, 1996) and a
scheduled maturity on the earlier of (i) June 26, 2000 or (ii) the date such
employee sells such shares.
The Company has granted registration rights to certain of its existing
stockholders, including Onex, J2R, Alkin and Messrs. Johnson, Storrie,
Bubenzer, Bovee, Kniss, Klosterman and Lamiman. See "Shares Eligible for
Future Sale--Registration Agreement."
39
<PAGE>
PRINCIPAL STOCKHOLDERS
The Company currently has four classes of Common Stock outstanding.
Immediately prior to and contingent upon the Offering, the Company's four
classes of Common Stock will be converted into Class B Common Stock. The Class
A Common Stock being offered hereby and the Class B Common Stock will be
substantially identical except with respect to voting and conversion rights.
Each share of Class A Common Stock is entitled to one vote and each share of
Class B Common Stock is entitled to ten votes. Except as otherwise required by
law or by the Restated Certificate, the Class A Common Stock and the Class B
Common Stock will vote together as a single class on all matters submitted to
a vote of the stockholders, including the election of Directors. In addition,
the Class B Common Stock is convertible at any time at the option of the
holder thereof, and is mandatorily convertible upon any transfer thereof
(except to affiliates) and at any time that the MC Stockholders and their
affiliates, in the aggregate, do not hold at least 10% of the total
outstanding shares of Common Stock, into shares of Class A Common Stock on a
share-for-share basis. All of the Company's existing stockholders will receive
shares of Class B Common Stock in the Recapitalization. The number of shares
of Class B Common Stock that will be issued as a result of the conversion of
the Company's existing classes of Common Stock will be determined according to
the relative preference rankings of such existing Common Stock and the initial
public offering price of the Class A Common Stock.
The table below sets forth certain information regarding the equity
ownership of the Company as of June 30, 1996 and immediately following the
Offering (in each case giving effect to the Recapitalization at an assumed
initial public offering price of $15.00 per share), by (i) each person or
entity known to the Company who beneficially owns five percent or more of the
Common Stock of the Company, (ii) each Director and Named Executive Officer
and (iii) all Directors and executive officers of the Company as a group.
Unless otherwise stated, each of the persons named in the table has sole
voting and investment power with respect to the securities beneficially owned
by it or him as set forth opposite its or his name. Beneficial ownership of
the Common Stock listed in the table has been determined in accordance with
the applicable rules and regulations promulgated under the Exchange Act. The
actual number of shares to be issued to each existing stockholder in the
Recapitalization is subject to change based upon changes in the assumed
initial public offering price.
<TABLE>
<CAPTION>
COMMON STOCK OWNED COMMON STOCK OWNED
PRIOR TO THE OFFERING AFTER THE OFFERING
------------------------- -------------------------------------------
NUMBER PERCENTAGE NUMBER PERCENTAGE
OF SHARES OF SHARES OF SHARES OF SHARES
OF CLASS A OF CLASS A OF CLASS B OF CLASS B
NUMBER PERCENTAGE COMMON COMMON COMMON COMMON
NAME AND ADDRESS OF SHARES OF SHARES STOCK STOCK STOCK STOCK
<S> <C> <C> <C> <C> <C> <C>
Onex DHC LLC (1)(2)..... 2,791,364 55.7% -- -- 2,791,364 55.7%
Alkin Co. (2)(3)........ 2,221,310 44.3 -- -- 2,221,310 44.3
J2R Corporation (2)(4).. 409,291 8.2 -- -- 409,291 8.2
S. A. Johnson (2)(4).... 468,959 9.4 -- -- 468,959 9.4
Karl F. Storrie (2)..... 139,531 2.8 -- -- 139,531 2.8
David R. Bovee (2)...... 41,308 * -- -- 41,308 *
Joe A. Bubenzer (2)..... 35,814 * -- -- 35,814 *
Robert R. Hibbs (2)(5).. 432,240 8.6 -- -- 432,240 8.6
David P. Klosterman
(2).................... 35,250 * -- -- 35,250 *
John J. Knappenberger... -- -- -- -- -- --
Milton D. Kniss (2)..... 17,992 * -- -- 17,992 *
Craig L. Lamiman (2).... 35,250 * -- -- 35,250 *
Neil Anderson (2)(3).... 2,221,310 44.3 -- -- 2,221,310 44.3
W. H. Clement (2)....... -- -- -- -- -- --
James L. O'Loughlin
(2)(3)................. 2,221,310 44.3 -- -- 2,221,310 44.3
William L. Orscheln
(2)(3)................. 2,221,310 44.3 -- -- 2,221,310 44.3
Eric J. Rosen (1)(2).... 2,791,364 55.7 -- -- 2,791,364 55.7
Scott D. Rued (2)(6).... 455,189 9.1 -- -- 455,189 9.1
Barbara A. Westhues
(2)(3)................. 2,221,310 44.3 -- -- 2,221,310 44.3
All Directors and
executive officers as a
group
(16 persons)........... 4,858,094 96.9 -- -- 4,858,094 96.9
</TABLE>
- ---------------------
*Less than one percent.
40
<PAGE>
(1) Reflects shares of Class B Common Stock held by Onex DHC LLC, which has
shared voting power over 2,791,364 shares of Common Stock (see footnote
(2)) and sole dispositive power over 1,793,833 shares of Class B Common
Stock. Mr. Rosen, a Director of the Company, is Managing Director of Onex
Investment Corp. and disclaims beneficial ownership of all shares of
Common Stock owned by Onex DHC LLC. Onex DHC LLC and Onex Investment
Corp. are both wholly owned subsidiaries of Onex Corporation. The address
for Onex DHC LLC and Mr. Rosen is c/o Onex Investment Corp., 712 Fifth
Avenue, 40th Floor, New York, New York 10019.
(2) Onex, J2R, Messrs. Johnson, Storrie, Bovee, Bubenzer, Hibbs, Klosterman,
Kniss, Lamiman, Clement, Rosen and Rued and certain of the Company's other
existing stockholders have entered into agreements pursuant to which such
stockholders agreed to vote their shares of Common Stock in the same
manner as Onex votes its shares on all matters presented to the Company's
stockholders for a vote and, to the extent permitted by law, granted to
Onex a proxy to effectuate such agreement. As a result, Onex will have
voting control of approximately 53.0% of the Common Stock following the
completion of the Offering (52.6% if the Underwriters' over-allotment
option is exercised in full). All of the Company's existing stockholders,
including Alkin, have entered into an agreement providing for the election
of the Board. As a result, such stockholders will collectively have voting
control over 94.9% of the Common Stock following the completion of the
Offering (94.2% if the Underwriters' over-allotment option is exercised in
full).
(3) Includes 14,420 shares issuable upon the exercise of a currently
exercisable option issued to Alkin in connection with the Company's
acquisition of the Brake and Cable Business. Alkin has granted each of
Messrs. Anderson and O'Loughlin and Ms. Westhues options to acquire 13,218
shares of the Class B Common Stock owned by Alkin. Messrs. Anderson,
O'Loughlin and Orscheln and Ms. Westhues are officers of Alkin and, other
than Mr. Orscheln, each disclaims beneficial ownership of the shares owned
by Alkin other than the shares subject to each of their outstanding
options. The address for Alkin is 2000 U.S. Highway 63 South, Moberly,
Missouri 65270, and the address of each such individual is c/o Alkin at
the same address.
(4) Includes 409,291 shares owned by J2R, of which Mr. Johnson is President,
and 59,668 shares owned by Mr. Johnson. The address for Mr. Johnson and
J2R is c/o Dura Automotive Systems, Inc., 4508 IDS Center, Minneapolis,
Minnesota 55402.
(5) Includes 409,291 shares owned by J2R, of which Mr. Hibbs is a stockholder,
and 22,949 shares owned by Mr. Hibbs. Mr. Hibbs disclaims beneficial
ownership of the shares owned by J2R. The address for Mr. Hibbs is c/o
Dura Automotive Systems, Inc., 4508 IDS Center, Minneapolis, Minnesota
55402.
(6) Includes 409,291 shares owned by J2R, of which Mr. Rued is a stockholder,
and 45,898 shares owned by Mr. Rued. Mr. Rued disclaims beneficial
ownership of the shares owned by J2R. The address for Mr. Rued is c/o Dura
Automotive Systems, Inc., 4508 IDS Center, Minneapolis, Minnesota 55402.
41
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS
The Company currently has four classes of Common Stock outstanding.
Immediately prior to and contingent upon the Offering, the Company's four
classes of Common Stock will be converted into Class B Common Stock. All of
the Company's existing stockholders will receive shares of Class B Common
Stock in the Recapitalization. The number of shares of Class B Common Stock
that will be issued as a result of the conversion of the Company's existing
classes of Common Stock will be determined according to the relative
preference rankings of such existing Common Stock and the initial public
offering price of the Class A Common Stock.
At the time of the Offering, after giving effect to the Recapitalization,
the total amount of authorized capital stock of the Company will consist of
30,000,000 shares of Class A Common Stock, par value $0.01 per share,
10,000,000 shares of Class B Common Stock, par value $0.01 per share and
5,000,000 shares of Preferred Stock, par value $1.00 per share (the "Preferred
Stock"). Giving effect to the Recapitalization and upon completion of the
Offering, 2,700,000 shares of Class A Common Stock, 4,998,254 shares of Class
B Common Stock and no shares of Preferred Stock will be issued and
outstanding. The discussion herein describes the Company's capital stock, the
Restated Certificate and By-laws as anticipated to be in effect upon
consummation of the Offering. The following summary of certain provisions of
the Company's capital stock describes all material provisions of, but does not
purport to be complete and is subject to, and qualified in its entirety by,
the Restated Certificate and the By-laws of the Company that are included as
exhibits to the Registration Statement of which this Prospectus forms a part
and by the provisions of applicable law. As of June 30, 1996 (without giving
effect to the Recapitalization), the Company had 283,589 shares of Common
Stock outstanding held by 35 holders of record.
The Restated Certificate and By-laws will contain certain provisions that
are intended to enhance the likelihood of continuity and stability in the
composition of the Board and which may have the effect of delaying, deferring
or preventing a future takeover or change in control of the Company unless
such takeover or change in control is approved by the Board.
CLASS A COMMON STOCK
The shares of Class A Common Stock being offered by the Company will be,
upon payment therefor, validly issued, fully paid and nonassessable. Subject
to the prior rights of the holders of any Preferred Stock, the holders of
outstanding shares of Class A Common Stock will be entitled to receive
dividends out of assets legally available therefor at such time and in such
amounts as the Board may from time to time determine. See "Dividend Policy."
The shares of Class A Common Stock will not be convertible and the holders
thereof will have no preemptive or subscription rights to purchase any
securities of the Company. Upon liquidation, dissolution or winding up of the
Company, the holders of Class A Common Stock will be entitled to receive pro
rata the assets of the Company which are legally available for distribution,
after payment of all debts and other liabilities and subject to the prior
rights of any holders of Preferred Stock then outstanding. Each outstanding
share of Class A Common Stock will be entitled to one vote on all matters
submitted to a vote of stockholders. Except as otherwise required by law or
the Restated Certificate, the Class A Common Stock and Class B Common Stock
will vote together on all matters submitted to a vote of the stockholders,
including the election of Directors.
Application has been made for quotation of the Class A Common Stock on the
Nasdaq National Market under the symbol "DRRA."
CLASS B COMMON STOCK
The issued and outstanding shares of Class B Common Stock generally will
have identical rights to those of the Class A Common Stock except with respect
to voting power and conversion rights. Each share of Class B Common Stock will
be entitled to ten votes on all matters submitted to a vote of stockholders,
as compared to
42
<PAGE>
one vote for each share of Class A Common Stock. Class B Common Stock will be
convertible at the option of the holder, and mandatorily convertible upon any
transfer thereof (except to affiliates) and at any time that the MC
Stockholders and their affiliates, in the aggregate, do not beneficially own
at least 10% of the total outstanding shares of Common Stock, into Class A
Common Stock on a share-for-share basis. The Class B Common Stock will not be
registered under the Securities Act and will not be listed for trading on any
national securities exchange or on the Nasdaq National Market.
PREFERRED STOCK
The Board may, without further action by the Company's stockholders, from
time to time, direct the issuance of shares of Preferred Stock in series and
may, at the time of issuance, determine the rights, preferences and
limitations of each series. Satisfaction of any dividend preferences of
outstanding shares of Preferred Stock would reduce the amount of funds
available for the payment of dividends on shares of Common Stock. Holders of
shares of Preferred Stock may be entitled to receive a preference payment in
the event of any liquidation, dissolution or winding-up of the Company before
any payment is made to the holders of shares of Common Stock. Under certain
circumstances, the issuance of shares of Preferred Stock may render more
difficult or tend to discourage a merger, tender offer or proxy contest, the
assumption of control by a holder of a large block of the Company's securities
or the removal of incumbent management. Upon the affirmative vote of a
majority of the total number of Directors then in office, the Board, without
stockholder approval, may issue shares of Preferred Stock with voting and
conversion rights which could adversely affect the holders of shares of Common
Stock. Upon consummation of the Offering, there will be no shares of Preferred
Stock outstanding, and the Company has no present intention to issue any
shares of Preferred Stock. The Stockholders Agreement provides that the
affirmative vote of two-thirds of the Board is required to issue any Preferred
Stock.
CERTAIN PROVISIONS OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
AND BY-LAWS
The Restated Certificate will provide that stockholder action can be taken
only at an annual or special meeting of stockholders and cannot be taken by
written consent in lieu of a meeting. The Restated Certificate and the By-laws
will provide that, except as otherwise required by law, special meetings of
the stockholders can only be called by the Chairman of the Board or the
President of the Company, or pursuant to a resolution adopted by a majority of
the Board. Stockholders will not be permitted to call a special meeting or to
require the Board to call a special meeting.
The By-laws will establish an advance notice procedure for stockholder
proposals to be brought before an annual meeting of stockholders of the
Company, including proposed nominations of persons for election to the Board.
Stockholders at an annual meeting may only consider proposals or nominations
specified in the notice of meeting or brought before the meeting by or at the
direction of the Board or by a stockholder who was a stockholder of record on
the record date for the meeting, who is entitled to vote at the meeting and
who has given to the Company's Secretary timely written notice, in proper
form, of the stockholder's intention to bring that business before the
meeting. Although the By-laws will not give the Board the power to approve or
disapprove stockholder nominations of candidates or proposals regarding other
business to be conducted at a special or annual meeting, the By-laws may have
the effect of precluding the conduct of certain business at a meeting if the
proper procedures are not followed or may discourage or defer a potential
acquiror from conducting a solicitation of proxies to elect its own slate of
Directors or otherwise attempting to obtain control of the Company.
The Restated Certificate and By-laws will provide that the affirmative vote
of holders of at least 80% of the total votes eligible to be cast in the
election of Directors will be required to amend, alter, change or repeal
certain of their provisions. This requirement of a super-majority vote to
approve amendments to the Restated Certificate and By-laws could enable a
minority of the Company's stockholders to exercise veto power over any such
amendments. In addition, the Class B Common Stock has ten votes, as compared
to one vote for each share of
43
<PAGE>
Class A Common Stock, on all matters, including the election of Directors, to
come before the stockholders. By virtue of such stock ownership, the holders
of the Class B Common Stock will be able to control the vote on all matters
submitted to a vote of the holders of Common Stock, including the election of
Directors, amendments to the Restated Certificate and By-laws and approval of
significant corporate transactions. Such concentration of ownership could also
have the effect of delaying, deterring or preventing a change in control of
the Company that might otherwise be beneficial to stockholders. See "Risk
Factors--Controlling Stockholder."
CERTAIN PROVISIONS OF DELAWARE LAW
Following the consummation of the Offering, the Company will be subject to
the "business combination" provisions of the Delaware General Corporation Law.
In general, such provisions prohibit a publicly held Delaware corporation from
engaging in various "business combination" transactions with any "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an "interested stockholder," unless (i) the
transaction is approved by the Board of Directors prior to the date the
"interested stockholder" obtained such status, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an "interested
stockholder," the "interested stockholder," owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding those
shares owned by (a) persons who are directors and also officers and (b)
employee stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer, or (iii) on or subsequent to such date
the "business combination" is approved by the board of directors and
authorized at an annual or special meeting of stockholders by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the "interested stockholder." A "business combination" is defined to include
mergers, asset sales and other transactions resulting in financial benefit to
a stockholder. In general, an "interested stockholder" is a person who,
together with affiliates and associates, owns (or within three years, did own)
15% or more of a corporation's voting stock. The statute could prohibit or
delay mergers or other takeover or change in control attempts with respect to
the Company and, accordingly, may discourage attempts to acquire the Company.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Restated Certificate will limit the liability of Directors to the
fullest extent permitted by the Delaware General Corporation Law. In addition,
the Restated Certificate will provide that the Company shall indemnify
Directors and officers of the Company to the fullest extent permitted by such
law. The Company anticipates entering into indemnification agreements with its
current Directors and executive officers prior to the completion of the
Offering.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Class A Common Stock will be
Firstar Trust Company.
44
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering there has been no market for the Common Stock of the
Company. The Company can make no predictions as to the effect, if any, that
sales of shares or the availability of shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of significant amounts
of the Class A Common Stock in the public market, or the perception that such
sales may occur, could adversely affect prevailing market prices. See "Risk
Factors--Shares Eligible for Future Sale."
Upon completion of the Offering, the Company expects to have 7,698,254
shares of Common Stock outstanding. Of these shares, the 2,700,000 shares of
Class A Common Stock sold in the Offering (3,105,000 shares if the
Underwriters' over-allotment option is exercised in full) will be freely
tradeable without restriction under the Securities Act, except for any such
shares which may be acquired by an "affiliate" of the Company (an "Affiliate")
as that term is defined in Rule 144 under the Securities Act, which shares
will be subject to the resale limitations of Rule 144. The remaining
outstanding shares of Common Stock held by existing stockholders upon
completion of the Offering will be "restricted securities" (as that phrase is
defined in Rule 144) and may not be resold in the absence of registration
under the Securities Act or pursuant to exemptions from such registration,
including among others, the exemptions provided by Rule 144 under the
Securities Act.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, if a period of at least two years has elapsed
since the later of the date the restricted securities were acquired from the
Company and the date they were acquired from an Affiliate, then the holder of
such restricted securities (including an Affiliate) is entitled to sell a
number of shares within any three-month period that does not exceed the
greater of 1% of the then outstanding shares of the Class A Common Stock
(approximately 27,000 shares immediately after the Offering) or the average
weekly reported volume of trading of the Class A Common Stock on the Nasdaq
National Market during the four calendar weeks preceding such sale. The holder
may only sell such shares through unsolicited brokers' transactions. Sales
under Rule 144 are also subject to certain requirements pertaining to the
manner of such sales, notices of such sales and the availability of current
public information concerning the Company. Affiliates may sell shares not
constituting restricted shares in accordance with the foregoing volume
limitations and other requirements but without regard to the two-year holding
period. Under Rule 144(k), if a period of at least three years has elapsed
between the later of the date restricted securities were acquired from the
Company and the date they were acquired from an Affiliate, as applicable, a
holder of such restricted securities who is not an Affiliate at the time of
the sale and has not been an Affiliate for at least three months prior to the
sale would be entitled to sell the shares immediately without regard to the
volume limitations and other conditions described above. In June 1995, the
Commission proposed reducing the two and three-year holding period under Rule
144 described above to one and two years, respectively.
Without giving effect to the contractual restrictions described below,
4,854,317 shares of Class A Common Stock (represented by currently outstanding
shares of Class B Common Stock) will be eligible for sale in the public market
under Rule 144, subject to the volume limitations and the other conditions
described above, 90 days after the date of this Prospectus.
The Company and certain of its existing stockholders, who in aggregate own
4,998,254 shares of Common Stock, will agree that, for a period of 180 days
after the date of this Prospectus, they will not, without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation, offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
other than sales of Class A Common Stock under the Underwriting Agreement (as
defined) or the issuance of shares of Class A Common Stock upon the exercise
of outstanding options.
REGISTRATION AGREEMENT
The Company, Onex, J2R, Alkin and the management stockholders named therein
(the "Management Stockholders") are parties to a registration agreement (the
"Registration Agreement") dated August 31, 1994. Under the Registration
Agreement, the holders of a majority of shares of Common Stock held by Onex,
J2R and
45
<PAGE>
the Management Stockholders, as a group, or the holders of a majority of
shares of Common Stock held by Alkin, each have the right at any time, subject
to certain conditions, to require the Company to register any and all of their
shares of Common Stock under the Securities Act on Form S-1 (a "Long-Form
Registration") on four occasions at the Company's expense and on Form S-2 or
Form S-3 (a "Short-Form Registration") on an unlimited number of occasions at
the Company's expense. The Company is not required, however, to effect any
such Long-Form Registration or Short-Form Registration within six months after
the effective date of a prior demand registration or a registration in which
the holders of registrable securities were given piggyback rights with no
cutbacks and may postpone the filing of such registration for up to six months
if the holders of a majority of the registrable securities agree that such a
registration would likely have a material adverse effect on the Company. In
addition, such parties are entitled to request the inclusion of any Common
Stock subject to the Registration Agreement in any registration statement at
the Company's expense whenever the Company proposed to register any of its
securities under the Securities Act, subject to certain conditions. In
connection with all registrations, the Company has agreed to indemnify all
holders of registerable securities against certain liabilities, including
liabilities under the Securities Act. Beginning 180 days after the date of the
Prospectus, the holders of an aggregate of 4,998,254 shares of Common Stock
will have registration rights pursuant to the Registration Agreement.
46
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters") for whom Donaldson, Lufkin
& Jenrette Securities Corporation, Morgan Stanley & Co. Incorporated and
Robert W. Baird & Co. Incorporated are acting as representatives (the
"Representatives"), have severally agreed, subject to the terms and conditions
of an underwriting agreement (the "Underwriting Agreement"), to purchase from
the Company the respective number of shares of Class A Common Stock set forth
opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF CLASS A
UNDERWRITER COMMON STOCK
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation........
Morgan Stanley & Co. Incorporated..........................
Robert W. Baird & Co. Incorporated.........................
---------
Total.............................................. 2,700,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of the Class A
Common Stock offered hereby are subject to approval of certain legal matters
by counsel and to certain other conditions. The Underwriters are obligated to
take and pay for all the shares of the Class A Common Stock if any are taken.
The Representatives have advised the Company that the Underwriters propose
to offer the shares of the Class A Common Stock in part directly to the public
initially at the public offering price set forth on the cover page of this
Prospectus and in part to certain dealers at such price less a concession not
in excess of $ per share; that the Underwriters may allow, and such dealers
may reallow, a concession not in excess of $ per share on sales to other
dealers; and that after the initial public offering, the public offering price
and other selling terms may be changed by the Representatives. The
Underwriters have informed the Company that they do not intend to confirm
sales to any accounts over which they exercise discretionary authority.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an aggregate of
405,000 additional shares of Class A Common Stock at the initial public
offering price less underwriting discounts and commissions. The Underwriters
may exercise such option only for the purpose of covering over-allotments, if
any, incurred in connection with the sales of Class A Common Stock offered
hereby. To the extent that the Underwriters exercise such option, each
Underwriter will become obligated, subject to certain conditions, to purchase
the same percentage of such additional shares as the number of other shares to
be purchased by that Underwriter bears to the total number of shares set forth
on the cover page of this Prospectus.
At the request of the Company, the Underwriters have reserved up to 135,000
shares of Class A Common Stock for sale at the initial public offering price
to directors, officers, employees and business associates of the Company. Any
reserved shares which are not so purchased will be offered by the Underwriters
to the general public on the same basis as the other shares offered hereby.
The Company and certain of its existing stockholders, who own an aggregate
of 4,998,254 shares of Common Stock, have agreed prior to the consummation of
the offering with the Underwriters, not to offer, sell, contract to sell,
grant any other option to purchase or otherwise dispose of any shares of the
Common Stock or
47
<PAGE>
any securities convertible into or exercisable for, or warrants, rights or
options to acquire, shares of Common Stock for a period of 180 days without
the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation, other than sales of Class A Common Stock under the Underwriting
Agreement or the issuance of shares of Class A Common Stock upon the exercise
of outstanding options.
The Company and its principal operating subsidiary have agreed to indemnify
the Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that they may be required to make
in respect thereof.
The initial public offering price for the shares of Class A Common Stock
will be determined through negotiations between the Company and the
Representatives. Among the factors to be considered in such negotiations are
the future prospects of the Company and its industry in general, the
experience of management, the demand for similar securities of companies
considered comparable to the Company, the prevailing conditions in the equity
securities market and other relevant factors. There can be no assurance that
an active trading market will develop for the shares of Class A Common Stock
or that the shares of Class A Common Stock will trade in the public market
subsequent to the Offering at or above the initial offering price.
LEGAL MATTERS
The validity of the Class A Common Stock being offered hereby will be passed
upon for the Company by Kirkland & Ellis (a partnership which includes
professional corporations), Chicago, Illinois, and for the Underwriters by
Gardner, Carton & Douglas, Chicago, Illinois.
EXPERTS
The audited financial statements included in this Prospectus and elsewhere
in the Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm
as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Class A Common Stock being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto, certain
items of which are omitted in accordance with the rules and regulations of the
Commission. Statements contained in this Prospectus concerning the provisions
of documents filed with the Registration Statement as exhibits are necessarily
summaries of such documents, and each such statement is qualified in its
entirety by reference to the copy of the applicable document filed as an
exhibit to the Registration Statement. The Registration Statement can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; at its Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511; and at its New York Regional Office, Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material can be obtained from
the public reference section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of the prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission, and the address of such site is http://www.sec.gov. For further
information pertaining to the Company and the Common Stock being offered
hereby, reference is made to the Registration Statement, including the
exhibits thereto and the financial statements, notes and schedules filed as a
part thereof.
As a result of the Offering, the Company will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). So long as the Company is subject to the periodic
reporting requirements of the Exchange Act, it will continue to furnish the
reports and other information required thereby to the Commission. The Company
intends to furnish holders of the Class A Common Stock with annual reports
containing, among other information, audited financial statements certified by
an independent public accounting firm and quarterly reports containing
unaudited condensed financial information for the first three quarters of each
fiscal year. The Company also intends to furnish such other reports as it may
determine or as may be required by law.
48
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
DURA AUTOMOTIVE SYSTEMS, INC.
Report of Independent Public Accountants................................ F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June
30, 1996 (unaudited)................................................... F-3
Consolidated Statements of Operations for the years ended December 31,
1993, 1994 and 1995 and for the six months ended June 30, 1995 and 1996
(unaudited)............................................................ F-4
Consolidated Statements of Stockholders' Investment for the years ended
December 31, 1993, 1994 and 1995 and for the six months ended June 30,
1996 (unaudited)....................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994 and 1995 and for the six months ended June 30, 1995 and 1996
(unaudited)............................................................ F-6
Notes to Consolidated Financial Statements.............................. F-7
ORSCHELN AUTOMOTIVE BUSINESS UNIT
Report of Independent Public Accountants................................ F-20
Statements of Operations for the year ended December 31, 1993 and the
eight-month period ended August 31, 1994............................... F-21
Statements of Cash Flows for the year ended December 31, 1993 and the
eight-month period ended August 31, 1994............................... F-22
Notes to Financial Statements........................................... F-23
</TABLE>
F-1
<PAGE>
After the recapitalization and stock split discussed in Notes 10 and 11 to
Dura Automotive Systems, Inc.'s consolidated financial statements are
effected, we expect to be in a position to render the following audit report.
ARTHUR ANDERSEN LLP
July 22, 1996
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Dura Automotive Systems, Inc.
We have audited the accompanying consolidated balance sheets of Dura
Automotive Systems, Inc. (a Delaware corporation--See Note 1 of Notes to
Consolidated Financial Statements) and Subsidiaries as of December 31, 1994
and 1995 and the related consolidated statements of operations, stockholders'
investment and cash flows for each of the three years in the period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dura Automotive Systems,
Inc. and Subsidiaries as of December 31, 1994 and 1995, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1995 in conformity with generally accepted
accounting principles.
Minneapolis, Minnesota,
January 26, 1996
(except for the matters
discussed in Notes 10 and 11
for which the date is
August , 1996)
F-2
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents..................... $ 17 $ 1,732 $ 3,239
Accounts receivable, net...................... 46,762 34,990 40,760
Inventories................................... 16,348 11,916 10,278
Other current assets.......................... 9,922 10,661 6,203
-------- -------- --------
Total current assets....................... 73,049 59,299 60,480
-------- -------- --------
Property, Plant and Equipment:
Land and buildings............................ 10,665 9,333 9,771
Machinery and equipment....................... 35,681 34,889 36,298
Construction in progress...................... 4,538 2,731 2,960
Less--Accumulated depreciation................ (8,175) (10,246) (12,847)
-------- -------- --------
Net property, plant and equipment.......... 42,709 36,707 36,182
-------- -------- --------
Other Assets:
Goodwill...................................... 40,287 42,388 40,730
Other......................................... 5,219 5,362 5,667
Less--Accumulated amortization................ (2,131) (3,225) (3,697)
-------- -------- --------
Total other assets......................... 43,375 44,525 42,700
-------- -------- --------
$159,133 $140,531 $139,362
======== ======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable.............................. $ 27,353 $ 24,865 $ 22,756
Accrued liabilities........................... 22,411 15,596 18,188
Current maturities of long-term debt.......... 4,654 5,137 5,536
-------- -------- --------
Total current liabilities.................. 54,418 45,598 46,480
Long-Term Debt, net of current maturities...... 70,112 46,639 40,555
Other Noncurrent Liabilities................... 17,185 20,611 19,700
-------- -------- --------
Commitments and Contingencies (Notes 4, 7, 8
and 9)
Stockholders' Investment:
Preferred stock, par value $1; 5,000,000
shares authorized;
none issued or outstanding................... -- -- --
Common stock, Class A; par value $.01;
30,000,000 shares authorized; none issued or
outstanding.................................. -- -- --
Common stock, Class B; par value $.01;
10,000,000 shares authorized; 4,904,186,
5,007,307 and 4,998,254 shares issued and
outstanding.................................. 49 50 50
Additional paid-in capital.................... 13,368 13,563 13,524
Retained earnings............................. 4,132 14,258 19,212
Common stock subscriptions receivable......... (131) (188) (159)
-------- -------- --------
Total stockholders' investment............. 17,418 27,683 32,627
-------- -------- --------
$159,133 $140,531 $139,362
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------- -----------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues......................... $129,328 $189,675 $253,726 $142,866 $127,357
Cost of sales.................... 116,961 170,748 220,274 124,730 109,141
-------- -------- -------- -------- --------
Gross profit.................... 12,367 18,927 33,452 18,136 18,216
Selling, general and
administrative expenses......... 8,293 10,362 14,798 6,745 7,586
Amortization expense............. 487 690 1,094 548 472
-------- -------- -------- -------- --------
Operating income................ 3,587 7,875 17,560 10,843 10,158
Interest expense................. 1,533 3,473 4,822 2,631 1,900
Gain on sale of window regulator
business........................ -- -- 4,240 4,240 --
-------- -------- -------- -------- --------
Income before income taxes...... 2,054 4,402 16,978 12,452 8,258
Provision for income taxes....... 936 1,822 6,852 5,026 3,304
-------- -------- -------- -------- --------
Net income...................... $ 1,118 $ 2,580 $ 10,126 $ 7,426 $ 4,954
======== ======== ======== ======== ========
Net income per common and common
equivalent share after giving
effect to recapitalization
(Notes 2 and 10)................ $ 2.03 $ .99
======== ========
Weighted average common and
common equivalent shares
outstanding after giving effect
to recapitalization (Notes 2 and
10)............................. 4,989 5,026
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------
CLASS A CLASS B ADDITIONAL COMMON STOCK
------------- ----------------- PAID-IN RETAINED SUBSCRIPTIONS
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS RECEIVABLE TOTAL
------ ------ --------- ------ ---------- -------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1992................... -- -- 2,764,907 $28 $ 2,979 $ 434 $(114) $ 3,327
Repurchase of common
stock, net............ -- -- (64,701) (1) (86) -- 11 (76)
Net income............. -- -- -- -- -- 1,118 -- 1,118
--- --- --------- --- ------- ------- ----- -------
BALANCE, December 31,
1993................... -- -- 2,700,206 27 2,893 1,552 (103) 4,369
Repurchase of common
stock, net............ -- -- (2,910) -- (3) -- (28) (31)
Issuance of common
stock for
acquisition........... -- -- 2,206,890 22 10,478 -- -- 10,500
Net income............. -- -- -- -- -- 2,580 -- 2,580
--- --- --------- --- ------- ------- ----- -------
BALANCE, December 31,
1994................... -- -- 4,904,186 49 13,368 4,132 (131) 17,418
Repurchase of common
stock, net............ -- -- (46,204) -- (155) -- 19 (136)
Issuance of common
stock................. -- -- 149,325 1 350 -- (76) 275
Net income............. -- -- -- -- -- 10,126 -- 10,126
--- --- --------- --- ------- ------- ----- -------
BALANCE, December 31,
1995................... -- -- 5,007,307 50 13,563 14,258 (188) 27,683
Repurchase of common
stock, net
(unaudited)........... -- -- (9,053) -- (39) -- 29 (10)
Net income
(unaudited)........... -- -- -- -- -- 4,954 -- 4,954
--- --- --------- --- ------- ------- ----- -------
BALANCE, June 30, 1996
(unaudited)............ -- -- 4,998,254 $50 $13,524 $19,212 $(159) $32,627
=== === ========= === ======= ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------- ------------------
1993 1994 1995 1995 1996
------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income................... $ 1,118 $ 2,580 $ 10,126 $ 7,426 $ 4,954
Adjustments required to
reconcile net income to net
cash provided by (used in)
operating activities--
Depreciation and
amortization.............. 2,409 3,725 5,578 2,966 3,073
Deferred income tax
provision................. 681 1,507 5,067 2,608 1,658
Gain on sale of window
regulator business........ -- -- (4,240) (4,240) --
Change in other operating
items:
Accounts receivable, net.. 5,505 (6,997) 11,772 12,137 (5,770)
Inventories............... 900 1,821 2,167 375 1,638
Other current assets...... (3,183) (3,261) (1,405) (1,771) 4,458
Accounts payable.......... 3,962 (6,813) (2,656) (663) (2,109)
Accrued liabilities and
other.................... (7,668) 1,282 (13,271) (1,982) 1,681
------- -------- -------- -------- --------
Net cash provided by
(used in) operating
activities.............. 3,724 (6,156) 13,138 16,856 9,583
------- -------- -------- -------- --------
Investing activities:
Capital expenditures, net.... (2,951) (5,406) (6,116) (2,009) (2,076)
Acquisition, net............. -- (39,428) -- -- --
Sale of window regulator
business, net............... -- -- 18,006 18,006 --
Other, net................... -- (2,044) (462) (305) (305)
------- -------- -------- -------- --------
Net cash provided by
(used in) investing
activities.............. (2,951) (46,878) 11,428 15,692 (2,381)
------- -------- -------- -------- --------
Financing activities:
Borrowings under revolving
credit facility............. 92,748 91,625 95,500 34,750 62,500
Repayment of revolving credit
facility.................... (92,898) (83,550) (105,750) (52,000) (65,750)
Proceeds from issuance of
debt........................ -- 66,500 -- -- --
Repayments of debt........... (1,300) (22,660) (12,740) (11,437) (2,435)
Sale (repurchase) of common
stock, net.................. (87) (3) 139 192 (10)
Proceeds from notes payable
to stockholders............. 750 1,125 -- -- --
------- -------- -------- -------- --------
Net cash provided by
(used in) financing
activities.............. (787) 53,037 (22,851) (28,495) (5,695)
------- -------- -------- -------- --------
Net change in cash and
cash equivalents........ (14) 3 1,715 4,053 1,507
Cash and cash equivalents,
beginning of period.......... 28 14 17 17 1,732
------- -------- -------- -------- --------
Cash and cash equivalents, end
of period.................... $ 14 $ 17 $ 1,732 $ 4,070 $ 3,239
======= ======== ======== ======== ========
Supplemental cash flow
information:
Cash paid for--
Interest.................... $ 1,504 $ 2,781 $ 4,822 $ 2,962 $ 2,153
======= ======== ======== ======== ========
Income taxes................ $ 245 $ 145 $ 2,285 $ 475 $ 1,052
======= ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996 IS
UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION:
The consolidated financial statements include the accounts of Dura
Automotive Systems, Inc. (Systems or Parent; formerly Dura Automotive Holding,
Inc.) and its subsidiaries, Dura Operating Corp. (formerly Dura Automotive
Systems, Inc.) and Dura de Mexico S.A. de C.V. (a Mexican corporation),
collectively referred to as Dura or the Company. Dura designs and manufactures
mechanical assembly systems, components and hardware for use in the automotive
industry. Dura has eight manufacturing facilities located in Michigan,
Missouri and Mexico.
2. SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Systems and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation.
FISCAL YEAR:
The Company has adopted a 52-/53-week fiscal year. For presentation
purposes, the Company uses December 31 as the fiscal year end.
USE OF ESTIMATES:
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Ultimate results could differ from those
estimates.
CASH EQUIVALENTS:
Cash equivalents consist of money market instruments with original
maturities of three months or less and are stated at cost which approximates
fair value.
INVENTORIES:
Inventories are valued at the lower of first-in, first-out (FIFO) cost or
market.
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
1994 1995 1996
------- ------- -----------
<S> <C> <C> <C> <C>
Raw materials................................... $ 6,762 $ 5,841 $ 4,915
Work in process................................. 7,220 3,883 3,401
Finished goods.................................. 2,366 2,192 1,962
------- ------- -------
$16,348 $11,916 $10,278
======= ======= =======
</TABLE>
Effective December 31, 1995, the Company adopted the FIFO method of
inventory valuation for all locations. Prior to that date, the Company used
the last-in, first-out (LIFO) method of inventory valuation for certain
locations. The effect of this change in accounting method, if it had been
retroactively reflected in the accompanying consolidated financial statements,
would not have been material to the Company's consolidated financial position
or results of operations.
F-7
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
OTHER CURRENT ASSETS:
Other current assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- JUNE 30,
1994 1995 1996
------ ------- --------
<S> <C> <C> <C>
Excess of cost over billings on uncompleted
tooling projects................................ $8,851 $ 8,653 $4,960
Prepaid expenses................................. 762 1,699 934
Deferred tooling and design costs................ 309 309 309
------ ------- ------
$9,922 $10,661 $6,203
====== ======= ======
</TABLE>
The Company ordinarily begins working on products awarded for new or
redesigned models two to five years prior to the marketing of such models to
the public. During such period, the Company incurs (i) costs related to the
design and engineering of such product, (ii) costs related to the production
of the tools and dies used to manufacture the new product and (iii) start-up
costs associated with the initial production of such product. In general,
design and engineering costs are expensed in the period incurred unless they
are reimbursed by the customer, in which case they are capitalized and
amortized over the life of such product. Costs incurred in the production of
the tools and dies are generally capitalized and reimbursed by the customer
prior to production. Start-up costs, which are generally incurred 30 to 60
days immediately prior to and immediately after initial production, are
expensed as incurred.
Excess of cost over billings on uncompleted tooling projects represents
costs incurred by the Company in the development of new tooling used in the
manufacture of the Company's products. Once customer approval is obtained for
the manufacture of a new product, the Company is reimbursed by its customers
for the cost of the tooling, at which time the tooling becomes the property of
the customer. Generally, reimbursement is received before production of the
related part commences. Certain costs will be reimbursed as the related
product is sold through an incremental increase in each product's unit selling
price. At December 31, 1995 and June 30, 1996, deferred tooling and design
costs of $2,128,000 and $2,302,000 were included in other assets, as this
realization is expected to occur beyond the current operating period.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment acquired in connection with the acquisition
discussed in Note 3 are stated at fair value as of the acquisition date.
Additions to property, plant and equipment are stated at cost. For financial
reporting purposes, depreciation is provided on the straight-line method over
the following estimated useful lives:
<TABLE>
<S> <C>
Buildings...................... 30 years
Machinery and equipment........ 3 to 20 years
</TABLE>
Accelerated depreciation methods are used for tax reporting purposes.
Maintenance and repairs are charged to expense as incurred. Major
betterments and improvements which extend the useful life of the item are
capitalized and depreciated. The cost and accumulated depreciation of
property, plant and equipment retired or otherwise disposed of are removed
from the related accounts and any residual values are charged or credited to
income.
OTHER ASSETS:
Goodwill represents the excess of the purchase price over the fair value of
the net assets acquired and is being amortized on a straight-line basis over a
40-year period from the date of the related acquisition. Other assets
principally consist of transaction costs, representing costs incurred related
to the acquisitions and are being amortized over five to seven years.
F-8
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company periodically evaluates whether events and circumstances have
occurred which may affect the estimated useful life or the recoverability of
the remaining balance of its goodwill. If such events or circumstances
indicate that the carrying amount of goodwill may not be recoverable, the
Company estimates the future cash flows expected to result from the use of the
net assets acquired and their eventual disposition. If the sum of the expected
future cash flows (undiscounted and without interest charges) is less than the
carrying amount of goodwill, the Company will recognize an impairment loss in
accordance with Statement of Financial Accounting Standards (SFAS) No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of."
ACCRUED LIABILITIES:
Accrued liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Compensation and benefits........................... $ 3,681 $ 4,256 $ 4,014
Medical insurance................................... 2,904 4,016 5,467
Product warranty.................................... 7,000 1,125 616
Interest............................................ 641 763 552
Other............................................... 8,185 5,436 7,539
------- ------- -------
$22,411 $15,596 $18,188
======= ======= =======
</TABLE>
OTHER NONCURRENT LIABILITIES:
Other noncurrent liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Legal and environmental............................. $ 1,600 $ 8,568 $ 8,502
Post-retirement medical benefits.................... 5,404 5,724 5,930
Accrued pension liability........................... 1,697 1,782 1,832
Other............................................... 8,484 4,537 3,436
------- ------- -------
$17,185 $20,611 $19,700
======= ======= =======
</TABLE>
INCOME TAXES:
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes," which requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using currently enacted tax rates.
COMMON STOCK:
As discussed in Note 3, the stockholders of MC Holding Corp. (MCHC)
contributed all shares of MCHC to Systems in return for shares of Systems
common stock. As a result of the related-party nature of this
recapitalization, the accompanying consolidated financial statements are
presented as though this transaction had occurred as of the beginning of the
earliest period presented. During 1995, the Company sold 149,325 shares of
Class A common stock to certain employees for approximately $351,000.
The holder of each share of Class A common stock outstanding is entitled to
one vote per share and the holder of each share of Class B common stock
outstanding is entitled to ten votes per share.
F-9
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS:
The Company's only involvement with derivative financial instruments, none
of which are used for trading purposes, consists of an interest rate cap
agreement and a swap agreement used to hedge against exposure to fluctuations
in interest rates on the Company's term loan and revolving credit facility.
The Company manages exposure to counterparty credit risk by entering into such
transactions with major financial institutions that are expected to perform
under the terms of such agreements. Costs of such agreements are amortized
over the period of the related borrowings and were not material to the Company
as of or for the years ended December 31, 1993, 1994, 1995 and the six months
ended June 30, 1995 and 1996. In addition, at no time during such periods were
such transactions material nor did the Company have a material risk of off-
balance sheet accounting loss.
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE AFTER GIVING EFFECT TO
RECAPITALIZATION:
Net income per common and common equivalent share is computed by dividing
net income by the weighted average number of shares of common and common stock
equivalent shares outstanding, after giving effect to the recapitalization
discussed in Note 10. Common stock issued and common stock options granted
within one year immediately preceding the initial public offering of common
stock, discussed in Note 11, at prices below the public offering price have
been reflected in the net income per share calculation as if they had been
outstanding for all periods presented. Historical net income per common and
common equivalent share is not presented as it is no longer relevant due to
the recapitalization discussed in Note 10.
INTERIM FINANCIAL INFORMATION (UNAUDITED):
The accompanying consolidated balance sheet as of June 30, 1996, and the
consolidated statements of operations, stockholders' investment and cash flows
for the six-month periods ended June 30, 1995 and 1996, are unaudited. In the
opinion of management, such consolidated financial statements include all
adjustments, consisting solely of normal recurring adjustments, necessary for
a fair presentation of results for these interim periods. The results of
operations for the six-month period ended June 30, 1996 are not necessarily
indicative of results to be expected for the entire year.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
During the first quarter of 1996, the Company adopted SFAS No. 121 which
requires companies to review long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable. The
adoption of SFAS No. 121 did not have a significant impact on the financial
condition or results of operations of the Company.
SFAS No. 123, "Accounting for Stock-Based Compensation" encourages, but does
not require, a fair value based method of accounting for employee stock
options, the sale of stock under the Company's employee stock purchase plan or
similar equity instruments. The Company has elected to continue to measure
compensation cost under Accounting Principles Board Opinion No. 25 (APB No.
25), "Accounting for Stock Issued to Employees" as was previously required,
and to comply with pro forma disclosure of net income and earnings per share
as if the fair value based method of accounting had been applied.
F-10
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. ACQUISITION AND DIVESTITURE:
ACQUISITION:
On August 31, 1994, Orscheln Co. (Orscheln), a manufacturer of parking brake
cables and levers and light duty cables, transferred certain assets and
liabilities to Systems. Orscheln received total consideration of approximately
$50.5 million, consisting of 2,206,890 shares of Systems common stock and an
option to purchase up to 14,420 additional shares of Systems Class A common
stock at an exercise price of $1.45 per share with a combined value of
approximately $10.5 million and cash consideration, net of assumed
indebtedness, of approximately $40 million.
The acquisition of Orscheln was accounted for as a purchase. Accordingly,
the assets acquired and liabilities assumed have been recorded at fair value
as of the date of the acquisition. The purchase price in excess of the fair
value of the net assets acquired is included in goodwill in the accompanying
consolidated balance sheets. In July 1995, the Company increased goodwill and
other noncurrent liabilities by approximately $7 million, based on additional
information received about certain purchase contingencies. The results of
operations of the acquired business have been included in the accompanying
consolidated financial statements from August 31, 1994, the date of
acquisition.
DIVESTITURE:
On April 2, 1995, the Company sold the net assets of its window regulator
business to Rockwell International Corporation for approximately $18 million
in cash, resulting in a pretax gain of approximately $4.2 million. The results
of operations of the window regulator business have been included in the
accompanying consolidated financial statements through April 2, 1995, the date
of divestiture.
Following are the unaudited pro forma results of operations for the years
ended December 31, 1994 and 1995 and the six months ended June 30, 1995 as if
the aforementioned acquisition and divestiture had occurred at the beginning
of the respective period. The following unaudited pro forma financial
information does not purport to represent what the Company's consolidated
results of operations would actually have been if such transactions in fact
had occurred at such date or to project the Company's results of future
operations (in thousands):
<TABLE>
<CAPTION>
PRO FORMA RESULTS FOR THE PRO FORMA RESULTS
YEARS ENDED DECEMBER 31, FOR THE SIX
------------------------- MONTHS ENDED
1994 1995 JUNE 30, 1995
------------ ------------ -----------------
<S> <C> <C> <C>
Revenues....................... $ 231,509 $ 239,598 $128,738
============ ============ ========
Operating income............... $ 12,787 $ 17,172 $ 10,455
============ ============ ========
Net income..................... $ 6,045 $ 7,602 $ 4,905
============ ============ ========
Net income per common and
common equivalent share....... $ 1.76 $ 1.52 $ .99
============ ============ ========
</TABLE>
F-11
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. DEBT:
Debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1994 1995 1996
------- ------- --------
<S> <C> <C> <C> <C>
Term loan, principal and interest due in
quarterly installments through June 30,
2001, interest at the lender's prevailing
reference rate plus up to 0.50% or the
Eurodollar rate plus 0.75% to 1.75% at the
discretion of the Company (6.94% to 8.5%
at December 31, 1995 and 6.6% to 8.25% at
June 30, 1996)............................ $50,000 $37,408 $35,021
Revolving credit facility, due August 31,
2000, interest at the lender's prevailing
reference rate plus up to 0.50% or the
Eurodollar rate plus 0.75% to 1.75% at the
discretion of the Company (6.81% to 8.5%
at December 31, 1995 and 8.25% at June 30,
1996)..................................... 20,000 9,750 6,500
Subordinated promissory notes, payable to
stockholders, due December 31, 2001,
interest due semiannually at 6.93%........ 4,000 4,000 4,000
Other...................................... 766 618 570
------- ------- -------
74,766 51,776 46,091
Less--Current maturities................... (4,654) (5,137) (5,536)
------- ------- -------
$70,112 $46,639 $40,555
======= ======= =======
</TABLE>
Future maturities of long-term debt as of December 31, 1995 are as follows
(in thousands):
<TABLE>
<S> <C>
1996............................. $ 5,137
1997............................. 5,652
1998............................. 5,831
1999............................. 8,023
2000............................. 15,390
Thereafter....................... 11,743
-------
$51,776
=======
</TABLE>
The revolving credit facility provides for borrowings of up to $30 million
and is collateralized by substantially all assets of the Company. Borrowings
are limited to eligible accounts receivable, inventories and tooling work in
process, as defined. The borrowing base limit was $30 million at December 31,
1995 and June 30, 1996. The weighted average interest rate for borrowings
under the revolving credit facility was 8.3 percent for the year ended
December 31, 1994, 8.8 percent for the year ended December 31, 1995 and 7.2
percent for the six months ended June 30, 1996.
The term loan and revolving credit facility contain various restrictive
covenants which, among other matters, require the Company to maintain certain
financial ratios, as defined. The agreement also limits additional
indebtedness, capital expenditures and cash dividends. The Company was in
compliance with all such covenants as of December 31, 1995 and June 30, 1996.
In September 1994, the Company entered into an Interest Expense Limitation
Agreement (Cap Agreement) and an Interest Rate Swap Agreement (Swap Agreement)
related to its term loan and revolving credit facility.
F-12
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Cap Agreement has a notional amount of $10 million, provides for payment
to the Company to offset interest expense, in the event the quoted LIBOR rate
exceeds 7.0%, and expires March 30, 1997. The Swap Agreement has a decreasing
notional amount of $20 million at inception, decreasing to $8.6 million at its
September 30, 1999 expiration. The Swap Agreement exchanges the variable
interest rate under the term loan and revolving credit facility described
above for a fixed rate of 6.95% on the notional amount, as defined. Fees paid
under the Cap and Swap Agreements are being amortized over the period of the
related term loan and revolving credit facility. The impact of the Cap and
Swap Agreements were not material to the Company.
The Company issued subordinated promissory notes to certain stockholders of
Systems in connection with the acquisition discussed in Note 3. Proceeds from
the notes were used to pay a portion of the purchase price. The notes are
unsecured.
The Company also has outstanding letters of credit totaling $600,000 at
December 31, 1995 and $1,310,000 at June 30, 1996 for the benefit of its
insurance companies related to workers' compensation coverage.
5. INCOME TAXES:
The provision for income taxes consisted of the following (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------ --------------
1993 1994 1995 1995 1996
--------------- -------- ------- ------
<S> <C> <C> <C> <C> <C>
Current............................... $ 255 $ 315 $ 1,785 $ 1,309 $1,646
Deferred.............................. 681 1,507 5,067 3,717 1,658
------ -------- -------- ------- ------
Total................................. $ 936 $ 1,822 $ 6,852 $ 5,026 $3,304
====== ======== ======== ======= ======
</TABLE>
A reconciliation of the provision for income taxes at the statutory rates to
the reported income tax provision is as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------ ---------------
1993 1994 1995 1995 1996
--------------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Federal provision at statutory
rates............................. $ 698 $ 1,497 $ 5,898 $ 4,358 $ 2,890
Amortization of non-deductible
goodwill.......................... 70 115 255 130 140
State taxes, net of federal
benefit........................... 168 210 685 531 314
Other, net......................... -- -- 14 7 (40)
------ -------- -------- ------- -------
Total.............................. $ 936 $ 1,822 $ 6,852 $ 5,026 $ 3,304
====== ======== ======== ======= =======
</TABLE>
The benefit from the utilization of preacquisition net deferred income tax
assets has been reflected as a reduction of goodwill in the accompanying
consolidated financial statements. As of December 31, 1995 and June 30, 1996,
the Company had remaining acquired net operating loss and alternative minimum
tax credit carryforwards for income tax reporting purposes of approximately $2
million. The Company will record further reductions in goodwill to the extent
such carryforwards are realized in future periods.
F-13
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of December 31, 1994 and 1995 and June 30, 1996, the Company had provided
a valuation allowance for its net deferred income taxes as, based on available
evidence, it is more likely than not that net deferred tax assets will not be
realized. A summary of deferred tax assets (liabilities) is as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Accrued legal and insurance costs............ $ 4,368 $ 5,387 $ 5,253
Accrued integration reserves................. 2,825 2,078 1,789
Net operating loss and alternative minimum
tax credit carryforwards.................... 1,836 1,375 1,375
Accrued compensation costs................... 767 868 1,017
Post retirement benefit obligations.......... 570 668 686
Inventory.................................... 441 344 366
Other reserves and accruals not deductible
for tax purposes............................ 3,039 1,805 2,403
-------- -------- --------
Deferred tax assets........................ 13,846 12,525 12,889
-------- -------- --------
Depreciation and property basis differences.. (1,306) (1,459) (1,683)
Deferred research and development costs...... (515) (833) (899)
-------- -------- --------
Deferred tax liabilites.................... (1,821) (2,292) (2,582)
-------- -------- --------
Valuation allowance........................ (12,025) (10,233) (10,307)
-------- -------- --------
Net deferred income taxes................ $ -- $ -- $ --
======== ======== ========
</TABLE>
6. MAJOR CUSTOMERS:
The Company sells directly to each of the three major North American
automobile manufacturers and to certain automobile manufacturers operating in
Europe. Following is a summary of customers that accounted for a significant
percentage of consolidated revenues:
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
-------------- --------------
1993 1994 1995 1995 1996
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Ford.......................................... 46% 57% 52% 54% 48%
GM............................................ 35 29 35 34 35
Chrysler...................................... 14 9 6 5 10
Toyota........................................ -- 3 5 4 5
--- --- --- ------- -------
95% 98% 98% 97% 98%
=== === === ======= =======
</TABLE>
As of December 31, 1994 and 1995 and June 30, 1996, receivables from these
customers represented 92%, 91% and 95% of total accounts receivable.
The Company had export sales, principally to customers in Canada and Mexico,
of $30,138,000 in 1993, $36,343,000 in 1994, $34,807,000 in 1995 and
$24,307,000 for the six months ended June 30, 1996. These sales require
payment in U.S. dollars.
7. MANAGEMENT AGREEMENT:
Under the terms of a management agreement, the Company paid Hidden Creek
Industries (HCI), an affiliate of the Company, monthly management fees for
certain administrative services. Total management fees of approximately
$500,000 for the year ended December 31, 1993, $554,000 for the year ended
December 31, 1994, $733,000 for the year ended December 31, 1995, $300,000 for
the six months ended June 30, 1995 and $500,000 for the six months ended June
30, 1996 are included in selling, general and administrative expenses in the
accompanying consolidated statements of operations. In addition, the Company
paid fees to HCI of approximately $500,000 in connection with the acquisition
and $250,000 in connection with the divestiture discussed in Note 3.
F-14
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. EMPLOYEE BENEFIT PLANS:
PENSION PLANS:
The Company sponsors two defined benefit pension plans which cover certain
employees. The Company's policy is to make annual contributions to the plans
to fund the normal cost plus an amount equal to the unfunded actuarial accrued
liability amortized over a period of 15 years.
Net pension expense consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost-benefits
earned during the year... $ 388 $ 394 $ 413
Interest cost on projected
benefit obligation....... 194 242 277
Return on plan assets..... (73) (116) (150)
Net amortization and
deferral................. 26 26 26
------- -------- --------
Net pension expense..... $ 535 $ 546 $ 566
======= ======== ========
</TABLE>
Pursuant to Statement of Financial Accounting Standards No. 87, "Employers'
Accounting for Pensions," the Company has recorded deferred pension costs of
$246,000, $220,000 and $194,000 at December 31, 1993, 1994 and 1995 related to
the minimum pension liability, which are classified as other assets in the
accompanying consolidated balance sheets.
The funded status of the Company's plans is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1994 1995
------ ------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation............................... $1,369 $2,164
====== ======
Accumulated benefit obligation.......................... $2,115 $2,855
====== ======
Projected benefit obligation............................ $3,473 $3,987
Plan assets at fair value................................. 1,704 2,305
------ ------
Projected benefit obligation in excess of plan assets... 1,769 1,682
Unrecognized net loss..................................... (201) (18)
Prior service cost........................................ (220) (194)
Adjustment to recognize minimum liability................. 349 312
------ ------
Accrued pension costs................................... $1,697 $1,782
====== ======
</TABLE>
The accumulated and projected benefit obligations were determined using an
assumed discount rate of 8% at December 31, 1994 and 7.5% at December 31,
1995. The assumed long-term rate of return on assets was 8% at December 31,
1994 and 7.5% at December 31, 1995. Plan assets consist principally of common
stock, fixed income securities and guaranteed investment contracts.
RETIREMENT SAVINGS PLANS:
The Company sponsors employee retirement savings plans which allow qualified
employees to provide for their retirement on a tax-deferred basis. In
accordance with the terms of the retirement savings plans, the Company is
required to match certain of the participants' contributions and/or provide
employer contributions
F-15
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
based on the Company's performance. Such matching contributions totaled
$95,000, $419,000 and $976,000 during fiscal 1993, 1994 and 1995 and $525,000
and $665,000 for the six months ended June 30, 1995 and 1996.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:
The Company has various postretirement medical benefit plans for certain
employee groups and has recorded a liability for its estimated obligations
under these plans.
Net periodic postretirement benefit cost is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost-benefits earned during the year...... $ 45 $ 54 $ 74
Interest cost on projected benefit obligation..... 424 529 679
Net amortization and deferral..................... -- 93 124
-------- -------- --------
Net periodic postretirement benefit cost........ $ 469 $ 676 $ 877
======== ======== ========
</TABLE>
The funded status of the Company's plans is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1995
------- -------
<S> <C> <C>
Accumulated benefit obligation......................... $ 7,527 $ 7,738
Plan assets at fair value.............................. -- --
------- -------
Projected benefit obligation in excess of plan
assets.............................................. 7,527 7,738
Unrecognized net loss.................................. (2,123) (2,014)
------- -------
Accrued postretirement benefits...................... $ 5,404 $ 5,724
======= =======
</TABLE>
For measurement purposes, a 9% annual rate of increase for the healthcare
cost trend was assumed for 1995. The rate was assumed to decrease 1% annually
to 5% at 2000 and remain level thereafter. Increasing the assumed healthcare
cost trend assumption by one percentage point would increase the accumulated
postretirement benefit obligation by approximately $491,000 and the net
periodic postretirement expense by approximately $46,000 for the year ended
December 31, 1995.
9. COMMITMENTS AND CONTINGENCIES:
ORSCHELN SERVICE AND SUPPLY AGREEMENTS:
In connection with the acquisition discussed in Note 3, the Company entered
into agreements with Orscheln whereby the Company is to receive services
related to data processing, payroll and personnel administration, and other
administrative matters. Amounts paid under these service agreements were
$570,000 and $1,788,000 for the years ended December 31, 1994 and 1995 and
$370,000 for the six months ended June 30, 1996. Future minimum commitments
under the service agreements are approximately $400,000 in 1996. In addition,
the Company and Orscheln have mutually agreed to supply each other's
operations with certain items necessary for the manufacture of their products.
These supply agreements are for periods of up to five years and are at terms
which the Company believes are no less favorable than could be obtained from
an independent party.
F-16
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
LEASES:
The Company leases office and manufacturing space and certain equipment
under operating lease agreements which require it to pay maintenance,
insurance, taxes and other expenses in addition to annual rentals. Future
annual rental commitments at December 31, 1995 under these operating leases
are as follows (in thousands):
<TABLE>
<CAPTION>
AMOUNT
YEAR ------
<S> <C>
1996................................................................ $1,091
1997................................................................ 689
1998................................................................ 534
1999................................................................ 401
2000................................................................ 423
Thereafter.......................................................... 1,569
------
$4,707
======
</TABLE>
STOCK PURCHASE PLAN:
The Company maintains a plan which allows for the sale of shares of the
Company's Class B common stock, either directly or through the granting of
options to certain employees. Eligible employees and the terms of such sales
or options are as determined by the Company's board of directors. During 1994,
1995 and the six months ended June 30, 1996, the Company sold 42,070, 149,325
and 0 shares of its common stock to management and repurchased 44,980, 46,204
and 9,053 shares of its common stock from management at estimated fair market
value, as determined under the terms of this plan.
STOCK OPTIONS:
During 1993, MCHC issued an option to purchase 17,625 shares of Class B
common stock to an outside consultant who can exercise the options at any time
while still associated with the Company for up to ten years, at a price of
$1.45 per share. In connection with the acquisition discussed in Note 3, this
option was exchanged for an option to purchase 17,625 shares of Systems common
stock at terms similar to those discussed above.
As discussed in Note 3, an option to purchase up to 14,420 shares of Systems
Class B common stock, at a price of $1.45 per share, was granted to Orscheln
in connection with the acquisition. The option is exercisable for up to ten
years or the date of exercise of the option discussed above, which ever occurs
earlier.
PRODUCT WARRANTY:
In connection with the acquisition discussed in Note 3, the Company agreed
to assume the liability for two potential product recalls by a customer,
related to two parking brake systems manufactured by Orscheln. The customer
has agreed to limit the liability of the Company in connection with the
potential recalls to $7 million. In fiscal 1994, the Company recorded a
reserve for its full obligation related to the liability associated with these
recalls in the accounting for the purchase of Orscheln. In addition, the
Company has agreed to indemnify Orscheln for certain product liability claims
associated with the recalled parking brake systems. Based upon claims
initiated against the customer and/or Orscheln to date and an estimate of
claims to be initiated, the Company has established reserves that it believes
are adequate to cover any potential future liabilities.
LITIGATION:
The Company is party to certain claims arising in the ordinary course of
business. In the opinion of management, based upon the advice of legal
counsel, the outcomes of such claims are not expected to be material to the
Company.
F-17
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ENVIRONMENTAL MATTERS:
Due to the nature of its business, the Company may, from time to time, be
exposed to potential liabilities to clean up environmental contaminants. The
Company has been named as one of four potentially responsible parties related
to groundwater contamination in East Jordan, Michigan, that was in existence
at the date of the Company's formation. The Company has provided reserves
which management believes are adequate to cover any exposure related to this
matter, and the Company's former owners have agreed to indemnify the Company
for any costs in excess of the provided reserves.
10. RECAPITALIZATION:
In connection with the Offering discussed in Note 11, the Company's board of
directors and stockholders have approved a 17.625 for 1 stock split and
approved a recapitalization pursuant to which the shares of the Company's
Class A, B and C common stock were converted into shares of new Class B Common
Stock. The allocation of shares of Common Stock among existing stockholders
was in accordance with the resolutions of the Company's stockholders
containing conversion ratios which were arrived at by applying an established
formula based upon the stockholders' initial capital contributions, relative
preference ranking and the initial public offering price of the Common Stock.
The Company's board of directors and stockholders also approved an increase in
the number of authorized shares to 30,000,000 Class A common shares and
10,000,000 Class B common shares. These actions were contingent upon and
occurred immediately prior to the Offering. The accompanying consolidated
financial statements have been retroactively restated to give effect to the
stock split.
11. INITIAL PUBLIC OFFERING AND STOCK OPTION AND PURCHASE PLANS:
INITIAL PUBLIC OFFERING:
On June 21, 1996, the Company's board of directors approved the filing of a
Form S-1 Registration Statement with the Securities and Exchange Commission
for the sale of 2,700,000 shares of the Company's Class A common stock to the
public (the Offering).
The Company intends to use the proceeds of the Offering to repay certain
outstanding indebtedness.
STOCK OPTION PLAN:
In May 1996, the Company's board of directors approved an employee stock
option plan that provides for the issuance of options to acquire up to 600,000
shares of the Company's Class A common stock. The exercise price of the
options will be at least 100% of the fair market value of the Company's Class
A common stock at the time of the issuance of options.
EMPLOYEE STOCK PURCHASE PLAN:
In May 1996, the Company's board of directors approved an employee stock
discount purchase plan that reserves 500,000 shares of the Company's Class A
common stock for sale to employees at discounted purchase prices, subject to
certain limitations. The cost per share under this plan will be 85% of the
market value of the Company's Class A common stock, as defined.
INDEPENDENT DIRECTOR STOCK OPTION PLAN:
In May 1996, the Company's board of directors approved an independent
director stock option plan that provides for the issuance of options to
acquire up to 100,000 shares of the Company's Class A common stock. The
exercise price of the options will be at least 100% of the fair market value
of the Company's Class A common stock at the time of the issuance of the
options.
F-18
<PAGE>
DURA AUTOMOTIVE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following is a condensed summary of actual quarterly results of
operations for 1994, 1995 and the first half of 1996 (in thousands except per
share amounts):
<TABLE>
<CAPTION>
NET INCOME
PER COMMON
AND COMMON
GROSS OPERATING EQUIVALENT
REVENUES PROFIT INCOME NET INCOME SHARE
-------- ------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1994:
First........................ $ 33,881 $ 2,381 $ 513 $ 64 $ .02
Second....................... 37,732 3,558 1,305 455 .17
Third........................ 43,973 3,836 1,393 210 .06
Fourth....................... 74,089 9,152 4,664 1,851 .38
-------- ------- ------- -------
$189,675 $18,927 $ 7,875 $ 2,580 $ .75
======== ======= ======= =======
1995:
First........................ $ 80,707 $ 9,019 $ 5,607 $ 2,442 $ .50
Second....................... 62,159 9,117 5,236 4,984 1.00
Third........................ 51,426 5,568 1,833 417 .08
Fourth....................... 59,434 9,748 4,884 2,283 .45
-------- ------- ------- -------
$253,726 $33,452 $17,560 $10,126 $2.03
======== ======= ======= =======
1996:
First........................ $ 59,303 $ 7,462 $ 3,336 $ 1,347 $ .27
Second....................... 68,054 10,754 6,822 3,607 .72
-------- ------- ------- -------
$127,357 $18,216 $10,158 $ 4,954 $ .99
======== ======= ======= =======
</TABLE>
The sum of net income per common and common equivalent share for each of the
fiscal 1994 quarters does not agree with the total per share for the year due
to the timing of the Offering and its effects on the computation of weighted
average number of shares outstanding.
F-19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Orscheln Co.:
We have audited the accompanying statements of operations and cash flows of
Orscheln Automotive Business Unit (an operating unit of Orscheln Co.--see Note
1 of Notes to Financial Statements) for the year ended December 31, 1993 and
the eight-month period ended August 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, Orscheln Automotive Business Unit's results of
operations and its cash flows for the year ended December 31, 1993 and the
eight-month period ended August 31, 1994, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Kansas City, Missouri,
May 20, 1996
F-20
<PAGE>
ORSCHELN AUTOMOTIVE BUSINESS UNIT
(AN OPERATING UNIT OF ORSCHELN CO.)
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
EIGHT-MONTH
PERIOD
YEAR ENDED ENDED
DECEMBER 31, AUGUST 31,
1993 1994
------------ -----------
<S> <C> <C>
Revenues (Notes 2 and 3)............................... $132,873 $104,816
Cost of sales.......................................... 125,183 93,220
-------- --------
Gross profit......................................... 7,690 11,596
Selling, general and administrative expenses........... 10,492 6,979
-------- --------
Operating income (loss).............................. (2,802) 4,617
Interest expense (Notes 3 and 4)....................... (1,167) (1,113)
Other expense, net..................................... (245) --
-------- --------
Net income (loss).................................... $ (4,214) $ 3,504
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
ORSCHELN AUTOMOTIVE BUSINESS UNIT
(AN OPERATING UNIT OF ORSCHELN CO.)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
EIGHT-MONTH
PERIOD
YEAR ENDED ENDED
DECEMBER 31, AUGUST 31,
1993 1994
------------ -----------
<S> <C> <C>
Operating Activities:
Net income (loss)................................... $(4,214) $ 3,504
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities--
Depreciation and amortization..................... 4,744 2,782
Change in operating items:
Accounts receivable, net........................ (2,731) (4,222)
Receivables from affiliates..................... (826) 655
Unbilled customer tooling....................... (496) 1,597
Inventories..................................... (595) 2,471
Other assets.................................... 312 157
Accounts payable and accrued liabilities........ 2,092 1,849
------- --------
Net cash provided by (used in) operating
activities................................... (1,714) 8,793
------- --------
Investing Activities:
Capital expenditures, net........................... (7,533) (2,601)
Increase in pooled investments...................... -- (8,503)
------- --------
Net cash used in investing activities......... (7,533) (11,104)
------- --------
Financing Activities:
Principal payments on long-term debt................ (4,449) (2,328)
Proceeds from issuance of long-term debt............ 13,500 --
Increase (decrease) in line of credit............... (1,750) 3,450
Increase in affiliate notes payable................. 1,949 1,190
------- --------
Net cash provided by financing activities..... 9,250 2,312
------- --------
Net increase in cash and cash equivalents..... 3 1
Cash and Cash Equivalents, beginning of period........ 7 10
------- --------
Cash and Cash Equivalents, end of period.............. $ 10 $ 11
======= ========
Supplemental Disclosure--
Cash paid for interest.............................. $ 1,099 $ 1,043
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
ORSCHELN AUTOMOTIVE BUSINESS UNIT
(AN OPERATING UNIT OF ORSCHELN CO.)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993 AND AUGUST 31, 1994
1. ORGANIZATION AND BASIS OF PRESENTATION:
Orscheln Automotive Business Unit (the Company) is an operating unit of
Orscheln Co., a Delaware corporation. The Company's principal operations
include the manufacture and marketing of mechanical control assemblies and
component parts to North American original equipment manufacturers of
automotive vehicles, after market distributors and first tier suppliers to
automotive manufacturers.
On August 31, 1994, Orscheln Co. entered into an agreement whereby
stockholders of MC Holding Corp. (MCHC) contributed all shares of MCHC common
stock to Dura Automotive Holding, Inc. (Dura) in return for shares of Dura
common stock. Orscheln Co. transferred certain assets and liabilities of the
Company to Dura in return for 125,214 shares of Dura common stock, an option
to purchase up to 818.18 additional shares of Dura common stock and cash
consideration, net of assumed indebtedness, of approximately $40 million.
In February 1996, Orscheln Co. changed its name to Alkin Co.
2. SIGNIFICANT ACCOUNTING POLICIES:
Fiscal Year:
The Company has adopted a 52-/53-week fiscal year. For presentation
purposes, the Company uses December 31 as the fiscal year end.
Use of Estimates:
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Ultimate results could differ from those estimates.
Inventories:
Inventories are valued at the lower of cost or market. The last-in, first-
out (LIFO) method of determining costs is used. Cost includes material, labor
and manufacturing overhead required in the production of the Company's
products. During 1994, inventory quantities were reduced, which resulted in a
liquidation of LIFO quantities recorded at lower costs prevailing in prior
years as compared to the cost of 1994 purchases. The effect was not material
to the results of operations for 1994.
Property, Plant and Equipment:
Property, plant and equipment are stated at cost. Predominately all
depreciation is computed using the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements.................................. 3 to 20 years
Machinery and equipment..................................... 3 to 10 years
Office furniture and fixtures............................... 3 to 10 years
Vehicles.................................................... 3 to 5 years
</TABLE>
Income Taxes:
The Company is an operating unit of Orscheln Co., a subchapter S corporation
as defined under the Internal Revenue Code. Under S status, the taxable income
or loss of Orscheln Co. is included in the taxable income of its stockholders.
F-23
<PAGE>
ORSCHELN AUTOMOTIVE BUSINESS UNIT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Research and Development:
Research and development expenses were approximately $1,986,000 and
$1,212,000 for the year ended December 31, 1993 and the eight-month period
ended August 31, 1994, respectively, and were charged to expense as incurred.
Major Customers:
The Company sells directly to two major North American automobile
manufacturers. Sales to these customers for the year ended December 31, 1993
and the eight-month period ended August 31, 1994, accounted for a significant
percentage of revenue.
<TABLE>
<CAPTION>
1993 1994
---- ----
<S> <C> <C>
Ford.......................... 66% 62%
General Motors................ 28 32
--- ---
94% 94%
=== ===
</TABLE>
Statements of Cash Flows:
Cash equivalents consist of money market instruments with original
maturities of three months or less and are stated at cost which approximates
fair value.
3. TRANSACTIONS WITH AFFILIATES:
The Company has transactions with stockholders and companies that are
affiliated through common ownership and management. A summary of significant,
related-party transactions not disclosed elsewhere in the financial statements
or notes is as follows:
Interest Expense:
Interest expense incurred on notes payable to affiliates was approximately
$403,000 and $327,000 for the year ended December 31, 1993 and for the eight-
month period ended August 31, 1994, and respectively.
Payments to Affiliated Companies
Significant payments to affiliated companies for the year ended December 31,
1993 and the eight-month period ended August 31, 1994, were as follows:
. Orscheln Management Co. provides administrative, management, payroll,
human resources and other services to the Company, for which the Company
paid $4,496,000 for the year ended December 31, 1993 and $3,097,000 for
the eight-month period ended August 31, 1994.
. Computerized Business Systems, Inc., provides data processing services
to the Company, for which the Company paid $1,099,000 for the year ended
December 31, 1993 and $1,151,000 for the eight-month period ended August
31, 1994.
. Suratco Products Co. supplies the Company with component parts, for
which the Company paid $1,811,000 for the year ended December 31, 1993
and $0 for the eight-month period ended August 31, 1994.
. Utility Air, Inc., provides air transportation services and other travel
services to the Company, for which the Company paid $850,000 for the
year ended December 31, 1993 and $424,000 for the eight-month period
ended August 31, 1994.
F-24
<PAGE>
ORSCHELN AUTOMOTIVE BUSINESS UNIT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
. American Third Century Co. provides risk-management services and sells
insurance to the Company, for which the Company paid $560,000 for the
year ended December 31, 1993 and $386,000 for the eight-month period
ended August 31, 1994.
. The Company paid Orscheln Industries Health Plan Trust $2,928,000 for
the year ended December 31, 1993 and $1,967,000 for the eight-month
period ended August 31, 1994.
. The Company made payments to other affiliated companies of $906,000 for
the year ended December 31, 1993 and $511,000 for the eight-month period
ended August 31, 1994. These payments were primarily for building
improvements, employee payroll deductions, production tooling and
miscellaneous transportation costs.
Sales to Affiliates
Sales to affiliated companies were $3,859,000 for the year ended December
31, 1993 and $2,000,000 for the eight-month period ended August 31, 1994.
4. NOTES PAYABLE:
The Company has a bank line of credit and a term loan with an institutional
lender that bears interest at the prime rate and notes payable and capitalized
lease obligations which bear interest at rates ranging from 5 percent to 10.85
percent.
<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
1993 1994
------------ ----------
(IN THOUSANDS)
<S> <C> <C>
10.85% unsecured note payable, payable in monthly
installments of principal and interest of $33,000
through February 1994................................ $ 64 $ --
6% capitalized lease obligation secured by lease
improvements, interest payable semiannually and
principal payable annually in amounts varying from
$60,000 to $80,000 through September 30, 1996........ 230 230
5% unsecured notes payable to a municipality payable
in monthly installments of principal and interest of
less than $1,000 maturing in March 1996 and November
2000................................................. 73 64
5% notes payable to a state agency secured by a deed
of trust, payable in monthly installments of
principal and interest varying form $2,000 to $3,000
maturing August 1997 through August 2002............. 340 308
5% subordinated note payable to a municipality,
secured by a deed of trust payable in monthly
installments of principal and interest of $3,000
beginning February 1995 through February 2005........ 270 270
Unsecured note payable to an institutional lender,
payable in equal monthly principal installments of
$278,000 through July 1996 plus interest at prime
(7.75% at August 31, 1994)........................... 9,167 6,944
------- ------
10,144 7,816
Less--Current maturities.............................. 3,535 3,485
------- ------
Total............................................. $ 6,609 $4,331
======= ======
</TABLE>
F-25
<PAGE>
ORSCHELN AUTOMOTIVE BUSINESS UNIT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. LEASES:
The Company leases certain equipment and facilities under operating leases
which expire through 1998. Rental expense was $525,000 and $374,000 for the
year ended December 31, 1993 and the eight-month period ended August 31, 1994,
respectively. Future minimum lease payments for noncancelable leases as of
August 31, 1994, are as follows (in thousands):
<TABLE>
<S> <C>
1995................................ $171
1996................................ 160
1997................................ 118
1998................................ 100
----
$549
====
</TABLE>
6. EMPLOYEE BENEFIT PLAN:
The Company participates in the Orscheln Industries Retirement Program, a
defined contribution plan (the Plan). Employees who have completed one year of
service may participate in the Plan. Participants may contribute 1 percent to
15 percent of their gross earnings and the Company is required to match 50
percent of the contribution up to 2 percent of gross earnings. The Company
contributes an additional 3 percent of the participant's gross earnings to
those employees who have completed two years or more of service.
Company contributions to the Plan were approximately $880,000 and $675,000
during the year ended December 31, 1993 and the eight-month period ended
August 31, 1994, respectively.
7. PRO FORMA FINANCIAL INFORMATION (UNAUDITED):
The unaudited pro forma financial information is provided to show the
significant effects on the historical financial information had the Company
operated as a C corporation throughout all periods presented. Income taxes
have been computed at the federal statutory rate of 34 percent.
<TABLE>
<CAPTION>
EIGHT-MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1993 AUGUST 31, 1994
----------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Unaudited pro forma information--
Income (loss) before provision for
income taxes....................... $(4,214) $3,504
Provision for income taxes.......... -- 1,191
------- ------
Net income (loss)................. $(4,214) $2,313
======= ======
</TABLE>
F-26
<PAGE>
Graphic Appendix
The inside front cover of the Prospectus contains a multi-colored,
three-dimensional diagram of an automobile, with several of the various
mechanical assemblies and systems manufactured by the Company graphically
depicted within the automobile and labeled accordingly. Specifically identified
(with the following labels) are examples of (in clockwise rotation) the "Primary
& Secondary Hood Latch," "Dipstick Cable," "Shift Mechanism," "Hand Brake,"
"Park Brake Cables," "Rear Deck Latch," "Rear Deck Cable," "Suspension Arms,"
"Fuel Filler Door Cable," "Foot Brake," and "Hood Latch Cable."
The inside back cover of the Prospectus contains a series of multi-colored
pictures of certain of the mechanical assemblies and systems manufactured by the
Company. The pictures depict and the captions read (in clockwise rotation)
"Hand-Operated Parking Brakes," "Manual Transmission Shifter," "Integrated
Primary and Secondary Hood Latch," "Foot-Operated Parking Brake," "Automotive
Cables," and "Automatic Transmission Shifter." Behind the pictures is an
enlarged, computer-aided-design blueprint of a manual transmission shifter. In
the upper right corner of the inside back cover, the "Dura" logo appears in red.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDER-
WRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITA-
TION OF AN OFFER TO BUY THE SHARES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OF-
FER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 8
The Company.............................................................. 12
Use of Proceeds.......................................................... 12
Dividend Policy.......................................................... 12
The Recapitalization..................................................... 13
Dilution................................................................. 14
Capitalization........................................................... 15
Selected Consolidated Financial Data..................................... 16
Management's Discussion and Analysis of Results of Operations and
Financial Condition..................................................... 18
Business................................................................. 24
Management............................................................... 33
Certain Transactions..................................................... 39
Principal Stockholders................................................... 40
Description of Capital Stock............................................. 42
Shares Eligible for Future Sale.......................................... 45
Underwriting............................................................. 47
Legal Matters............................................................ 48
Experts.................................................................. 48
Additional Information................................................... 48
Index to Financial Statements............................................ F-1
</TABLE>
-------------
UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL DEAL-
ERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT PARTIC-
IPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,700,000 SHARES
LOGO
DURA AUTOMOTIVE
SYSTEMS, INC.
CLASS A COMMON STOCK
----------------
PROSPECTUS
----------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY & CO.
INCORPORATED
ROBERT W. BAIRD & CO.
INCORPORATED
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of the expenses of the issuance and
distribution of the securities being registered other than underwriting
compensation, all of which are estimates with the exception of the Securities
and Exchange Commission fee and the National Association of Securities Dealers
fee and all of which will be paid by the Company:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $17,131
National Association of Securities Dealers, Inc. fee............. 5,468
Nasdaq National Market listing fee............................... 20,525
Blue sky fees and expenses (including attorneys' fees and
expenses)....................................................... *
Printing and engraving expenses.................................. *
Transfer agent's fees and expenses............................... *
Accounting fees and expenses..................................... *
Legal fees and expenses.......................................... *
Miscellaneous expenses........................................... *
-------
Total.......................................................... $ *
=======
</TABLE>
- ---------------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware. Section
145 of the General Corporation Law of the State of Delaware ("Section 145")
provides that a Delaware corporation may indemnify any persons who are, or are
threatened to be made, parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of
the fact that such person was an officer, director, employee or agent of
another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action
or proceeding, had no reasonable cause to believe that his conduct was
illegal. A Delaware corporation may indemnify any persons who are, or are
threatened to be made, a party to any threatened, pending or completed action
or suit by or in the right of the corporation by reason of the fact that such
person was a director, officer, employee or agent of such corporation, or is
or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnification
may include expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection with the defense or settlement of such
action or suit, provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best
interests except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses which such officer or director has actually
and reasonably incurred.
The Company's Restated Certificate will provide for the indemnification of
directors and officers of the Company to the fullest extent permitted by
Section 145.
In that regard, the Restated Certificate will provide that the Company shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, administrative or investigative (other than action by or in the right
of the corporation) by reason of the fact that he is or was a director or
officer of the Company, or is or was serving at the request of the Company as
a director, officer or member of another corporation, partnership, joint
venture, trust or other
II-1
<PAGE>
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of such corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Indemnification in connection with an action or suit by or in the right of
such corporation to procure a judgment in its favor will be limited to payment
of expenses (including attorneys' fees) actually and reasonably incurred in
connection with the defense or settlement of such an action or suit except
that no such indemnification may be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his duty to the indemnifying
corporation unless and only to the extent that the Court of Chancery of
Delaware or the court in which such action or suit was brought shall determine
that, despite the adjudication of liability but in consideration of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
The Company has in effect insurance policies covering all of the Company's
directors and officers in certain instances where by law they may not be
indemnified by the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since its incorporation in August 1994, the Company has not sold any
securities not registered under the Securities Act, except as follows:
(i) On August 31, 1994 and in connection with its initial capitalization,
after giving effect to the Recapitalization (as defined in the Prospectus),
the Company issued an aggregate of 494,185 shares of Class A Common Stock,
1,762,500 shares of Class B Common Stock and 440,625 shares of Class C
Common Stock to the former stockholders of MC Holding Corp. ("MCHC") in
exchange for all of their outstanding MCHC common stock. Concurrently, the
Company issued 2,206,890 shares of Class B Common Stock together with an
option to purchase 14,420 additional shares of Class B Common Stock to
Alkin Co. as partial consideration for its Brake and Cable Business (as
defined in the Prospectus).
(ii) On June 26, 1995, after giving effect to the Recapitalization, the
Company sold an aggregate of 78,819 shares of its Class B Common Stock to
certain employees of the Company at a price equal to $2.69 per share and
70,500 shares of its Class B Common Stock to certain employees of the
Company at a price equal to $1.96 per share, pursuant to agreements entered
into in May 1995 and in August and September 1994, respectively.
The sale and issuances of the securities listed above in paragraphs (i) and
(ii) were deemed to be exempt from registration under the Securities Act by
virtue of Section 4(2) thereof and Regulation D promulgated thereunder as
transactions not involving a public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
1* Form of Underwriting Agreement
3.1 Form of Amended and Restated Certificate of Incorporation of the
Company
3.2 Form of Amended and Restated By-laws of the Company
4.1** Stockholders Agreement, dated as of August 31, 1994, by and among
the Company, Onex U.S. Investments, Inc., J2R, Alkin, the HCI
Stockholders (as defined therein) and the Management
Stockholders (as defined therein)
4.2** Amendment to Stockholders Agreement, dated May 17, 1995, by and
between the Company, Onex DHC LLC, J2R, Alkin, the HCI
Stockholders (as defined therein) and the Management
Stockholders (as defined therein)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
4.3** Registration Agreement, dated as of August 31, 1994, among the
Company, Alkin and the MC Stockholders (as defined therein)
4.4** Amendment to Registration Agreement, dated May 17, 1995, by and
between the Company, the MC Stockholders (as defined therein) and
Alkin
4.5** Investor Stockholder Agreement, dated as of August 31, 1994, by and
among the Company, Onex U.S. Investments, Inc., J2R and certain
other stockholders party thereto
5** Opinion and Consent of Kirkland & Ellis
10.1** Joint Venture Agreement, dated as of August 31, 1994, by and among
the Company, Alkin, MCHC, Onex and J2R. The Company agrees to
furnish supplementally to the Commission a copy of any omitted
schedule or exhibit to the Agreement upon request by the
Commission.
10.2** Management Contribution Agreement, dated as of August 31, 1994, by
and among the Company, Kim B. Clark and the Management Stockholders
(as defined therein)
10.3** Management Agreement, dated as of August 31, 1994, by and between
Hidden Creek and Dura Operating Corp. (formerly known as Dura
Automotive Systems, Inc.) ("Dura Operating")
10.4** Stock Option Agreement, dated as of August 31, 1994, between the
Company and Alkin
10.5** Stock Option Agreement, dated as of August 31, 1994, between the
Company and Kim B. Clark
10.6** Subordinated Promissory Note, dated August 31, 1994, of the Company
in the amount of $2,000,000 in favor of Alkin
10.7** Subordinated Promissory Note, dated August 31, 1994, of MCHC in the
amount of $1,800,000 in favor of Onex Ohio Holdings, Inc.
10.8** Subordinated Promissory Note, dated August 31, 1994, of MCHC in the
amount of $200,000 in favor of J2R
10.9 Credit Agreement, dated as of August 31, 1994, among Dura Operating,
certain commercial lending institutions, The Bank of Nova Scotia,
Comerica Bank, The Chase Manhattan Bank and Continental Bank
10.10 Security Agreement, dated as of August 31, 1994, between Dura
Operating and Continental Bank, as agent
10.11 Pledge Agreement, dated as of August 31, 1994, entered into by Dura
Operating in favor of Continental Bank, as agent
10.12 Guaranty, dated August 31, 1994, by Dura de Mexico S.A. de C.V.
("Dura Mexico") in favor of the Agents, the Co-Agents and the
Lenders (each as defined therein)
10.13 Accounts Receivable Pledge Agreement, dated as of August 31, 1994,
by and between Continental Bank, as agent, and Dura Mexico
10.14 Corporate Guaranty, dated August 31, 1994, by MCHC in favor of the
Agent, Co-Agents and Lenders (each as defined therein)
10.15 Pledge Agreement, dated as of August 31, 1994, by MCHC in favor of
Continental Bank, as agent
10.16** Letter Agreement, dated August 25, 1994, between the Company and
Ford
10.17** Promissory Note, dated December 31, 1991, of Karl F. Storrie in
favor of Continental Bank, as agent
10.18** Asset Purchase Agreement, dated March 23, 1995, by and among Dura
Operating, the Company and Rockwell International Corporation. The
Company agrees to furnish supplementally to the Commission a copy
of any omitted schedule or exhibit to the Agreement upon request by
the Commission.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
10.19** Subscription Agreement, dated as of June 26, 1995, by and between
the Company and the persons listed on the signature pages thereto
10.20** Subscription Agreement, dated as of June 26, 1995, by and between
the Company, David P. Klosterman and Craig L. Lamiman
10.21** Letter Agreement, dated November 9, 1995, between the Company and
John J. Knappenberger
10.21.1 Letter Agreement, dated August 16, 1994, between the Company and
Craig L. Lamiman
10.21.2 Letter Agreement, dated September 1, 1994, between the Company and
David P. Klosterman
10.22** Lease, entered into as of January 5, 1988, between the City of
Moberly, Missouri and Alkin
10.23** Net Lease, made as of March 16, 1995, by and between First
Industrial Financing Partnership, L.P. ("First Industrial") and
Dura Operating
10.24** First Addendum to Net Lease, dated April 24, 1995, between First
Industrial and Dura Operating
10.25** Lease of Office Space, dated June 14, 1991, between 80 South Eighth
Street Limited Partnership ("Eighth Street") and Hidden Creek
10.26** Amendment and Renewal of Lease, made as of April 30, 1993, by and
between Eighth Street and Hidden Creek
10.27* Form of 1996 Key Employee Stock Option Plan
10.28* Form of Independent Director Stock Option Plan
10.29* Form of Employee Stock Discount Purchase Plan
10.30 Form of Amended and Restated Stockholders Agreement
10.31 Form of Amended and Restated Investor Stockholders Agreement
21** Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP, Minneapolis, Minnesota
23.2 Consent of Arthur Andersen LLP, Kansas City, Missouri
23.3** Consent of Kirkland & Ellis (included in Exhibit 5)
24** Powers of Attorney
27* Financial Data Schedule
</TABLE>
- ---------------------
*To be filed by amendment.
**Previously filed.
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions, are inapplicable or not material, or the information
called for thereby is otherwise included in the financial statements and
therefore has been omitted.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter
at closing specified in the underwriting agreement certificates in such
denominations and registered in such names as requested by the underwriter to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
II-4
<PAGE>
(2) For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ROCHESTER HILLS, STATE OF MICHIGAN ON JULY 22, 1996.
Dura Automotive Systems, Inc.
/s/ Karl F. Storrie
By: __________________________________
KARL F. STORRIE
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
* * * *
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE CAPACITY DATE
/s/ Karl F. Storrie President, Chief Executive
_________________________________ Officer and Director July 22,
KARL F. STORRIE (principal executive 1996
officer)
/s/ David R. Bovee Vice President and Chief
_________________________________ Financial Officer (principal July 22,
DAVID R. BOVEE financial officer) 1996
/s/ S.A. Johnson Chairman of the Board and
_________________________________ Director July 22,
S.A. JOHNSON 1996
/s/ Robert R. Hibbs Vice President and Director
_________________________________ July 22,
ROBERT R. HIBBS 1996
/s/ Neil Anderson Director
_________________________________ July 22,
NEIL ANDERSON 1996
/s/ W. H. Clement Director
_________________________________ July 22,
W. H. CLEMENT 1996
/s/ James O'Loughlin Director
_________________________________ July 22,
JAMES O'LOUGHLIN 1996
/s/ William L. Orscheln Director
_________________________________ July 22,
WILLIAM L. ORSCHELN 1996
/s/ Eric J. Rosen Director
_________________________________ July 22,
ERIC J. ROSEN 1996
/s/ Barbara A. Westhues Director
_________________________________ July 22,
BARBARA A. WESTHUES 1996
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
PAGE
NUMBER DESCRIPTION NUMBER
------ ----------- ----------
<C> <S> <C>
1* Form of Underwriting Agreement
3.1 Form of Amended and Restated Certificate of Incorporation
of the Company
3.2 Form of Amended and Restated By-laws of the Company
4.1** Stockholders Agreement, dated as of August 31, 1994, by
and among the Company, Onex U.S. Investments, Inc., J2R,
Alkin, the HCI Stockholders (as defined therein) and the
Management Stockholders (as defined therein)
4.2** Amendment to Stockholders Agreement, dated May 17, 1995,
by and between the Company, Onex DHC LLC, J2R, Alkin, the
HCI Stockholders (as defined therein) and the Management
Stockholders (as defined therein)
4.3** Registration Agreement, dated as of August 31, 1994, among
the Company, Alkin and the MC Stockholders (as defined
therein)
4.4** Amendment to Registration Agreement, dated May 17, 1995,
by and between the Company, the MC Stockholders (as
defined therein) and Alkin
4.5** Investor Stockholder Agreement, dated as of August 31,
1994, by and among the Company, Onex U.S. Investments,
Inc., J2R and certain other stockholders party thereto
5** Opinion and Consent of Kirkland & Ellis
10.1** Joint Venture Agreement, dated as of August 31, 1994, by
and among the Company, Alkin, MCHC, Onex and J2R. The
Company agrees to furnish supplementally to the
Commission a copy of any omitted schedule or exhibit to
the Agreement upon request by the Commission.
10.2** Management Contribution Agreement, dated as of August 31,
1994, by and among the Company, Kim B. Clark and the
Management Stockholders (as defined therein)
10.3** Management Agreement, dated as of August 31, 1994, by and
between Hidden Creek and Dura Operating Corp. (formerly
known as Dura Automotive Systems, Inc.) ("Dura
Operating")
10.4** Stock Option Agreement, dated as of August 31, 1994,
between the Company and Alkin
10.5** Stock Option Agreement, dated as of August 31, 1994,
between the Company and Kim B. Clark
10.6** Subordinated Promissory Note, dated August 31, 1994, of
the Company in the amount of $2,000,000 in favor of Alkin
10.7** Subordinated Promissory Note, dated August 31, 1994, of
MCHC in the amount of $1,800,000 in favor of Onex Ohio
Holdings, Inc.
10.8** Subordinated Promissory Note, dated August 31, 1994, of
MCHC in the amount of $200,000 in favor of J2R
10.9 Credit Agreement, dated as of August 31, 1994, among Dura
Operating, certain commercial lending institutions, The
Bank of Nova Scotia, Comerica Bank, The Chase Manhattan
Bank and Continental Bank
10.10 Security Agreement, dated as of August 31, 1994, between
Dura Operating and Continental Bank, as agent
10.11 Pledge Agreement, dated as of August 31, 1994, entered
into by Dura Operating in favor of Continental Bank, as
agent
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
PAGE
NUMBER DESCRIPTION NUMBER
------ ----------- ----------
<C> <S> <C>
10.12 Guaranty, dated August 31, 1994, by Dura de Mexico S.A.
de C.V. ("Dura Mexico") in favor of the Agents, the Co-
Agents and the Lenders (each as defined therein)
10.13 Accounts Receivable Pledge Agreement, dated as of August
31, 1994, by and between Continental Bank, as agent, and
Dura Mexico
10.14 Corporate Guaranty, dated August 31, 1994, by MCHC in
favor of the Agent, Co-Agents and Lenders (each as
defined therein)
10.15 Pledge Agreement, dated as of August 31, 1994, by MCHC in
favor of Continental Bank, as agent
10.16** Letter Agreement, dated August 25, 1994, between the
Company and Ford
10.17** Promissory Note, dated December 31, 1991, of Karl F.
Storrie in favor of Continental Bank, as agent
10.18** Asset Purchase Agreement, dated March 23, 1995, by and
among Dura Operating, the Company and Rockwell
International Corporation. The Company agrees to furnish
supplementally to the Commission a copy of any omitted
schedule or exhibit to the Agreement upon request by the
Commission.
10.19** Subscription Agreement, dated as of June 26, 1995, by and
between the Company and the persons listed on the
signature pages thereto
10.20** Subscription Agreement, dated as of June 26, 1995, by and
between the Company, David P. Klosterman and Craig L.
Lamiman
10.21** Letter Agreement, dated November 9, 1995, between the
Company and John J. Knappenberger
10.21.1 Letter Agreement, dated August 16, 1994, between the
Company and Craig L. Lamiman
10.21.2 Letter Agreement, dated September 1, 1994, between the
Company and David P. Klosterman
10.22** Lease, entered into as of January 5, 1988, between the
City of Moberly, Missouri and Alkin
10.23** Net Lease, made as of March 16, 1995, by and between
First Industrial Financing Partnership, L.P. ("First
Industrial") and Dura Operating
10.24** First Addendum to Net Lease, dated April 24, 1995,
between First Industrial and Dura Operating
10.25** Lease of Office Space, dated June 14, 1991, between 80
South Eighth Street Limited Partnership ("Eighth
Street") and Hidden Creek
10.26** Amendment and Renewal of Lease, made as of April 30,
1993, by and between Eighth Street and Hidden Creek
10.27* Form of 1996 Key Employee Stock Option Plan
10.28* Form of Independent Director Stock Option Plan
10.29* Form of Employee Stock Discount Purchase Plan
10.30 Form of Amended and Restated Stockholders Agreement
10.31 Form of Amended and Restated Investor Stockholders
Agreement
21** Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP, Minneapolis, Minnesota
23.2 Consent of Arthur Andersen LLP, Kansas City, Missouri
23.3** Consent of Kirkland & Ellis (included in Exhibit 5)
24** Powers of Attorney
27* Financial Data Schedule
</TABLE>
- ---------------------
*To be filed by amendment.
**Previously filed.
<PAGE>
Draft: July 19, 1996
AMENDED AND RESTATED
--------------------
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
DURA AUTOMOTIVE SYSTEMS, INC.
-----------------------------
ARTICLE ONE
-----------
The name of the Corporation is DURA AUTOMOTIVE SYSTEMS, INC.
ARTICLE TWO
-----------
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Center. The registered office and/or registered agent of the
Corporation may be changed from time to time by action of the Board of
Directors.
ARTICLE THREE
-------------
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware (the "Delaware
General Corporation Law") either alone or with others through wholly or
partially owned subsidiaries, as a partner (limited or general) in any
partnership, as a joint venturer in any joint venture, or otherwise.
ARTICLE FOUR
------------
SECTION 1. The aggregate number of shares of stock which the
Corporation has authority to issue is 45,000,000, consisting of 5,000,000 shares
of Series Preferred Stock, par value $1.00 per share (the "Series Preferred
Stock"), 30,000,000 shares of Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"), and 10,000,000 shares of Class B Common Stock, par
value $.01 per share (the "Class B Common Stock"). The Class A Common Stock and
the Class B Common Stock are collectively referred to herein as the "Common
Securities." All of such shares shall be
<PAGE>
issued as fully paid and non-assessable shares, and the holder thereof shall not
be liable for any further payments in respect thereof.
SECTION 2. The preferences, limitations, designations and relative
rights of the shares of each class and the qualifications, limitations or
restrictions thereof shall be as follows:
A. Series Preferred Stock.
1. Authorization; Series; Provisions.
(a) The Board of Directors of the Corporation is authorized, subject
to limitations prescribed by law and the provisions of this Article Four, to
provide for the issuance of shares of the Series Preferred Stock in series, and
by filing a certificate pursuant to the General Corporation Law of the State of
Delaware, to establish from time to time the number of shares to be included in
each such series and to fix the designations, powers, preferences and rights of
the shares of each such series and the qualifications, limitations or
restrictions thereof.
(b) The Series Preferred Stock may be issued from time to time in one
or more series, the shares of each series to have such powers, designations,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as are stated and expressed
herein or in a resolution or resolutions providing for the issuance of such
series, adopted by the Board of Directors as hereinafter provided.
(c) Authority is hereby expressly granted to the Board of Directors,
subject to the provisions of this Section 2, to authorize the issuance of one or
more series of Series Preferred Stock, and with respect to each such series to
fix by resolution or resolutions providing for the issuance of such series:
(i) the maximum number of shares to constitute such series and the
distinctive designation thereof;
(ii) whether the shares of such series shall have voting rights, in
addition to any voting rights provided by law, and, if so, the terms of such
voting rights;
(iii) the dividend rate, if any, on the shares of such series, the
conditions and dates upon which such dividends shall be payable, the preference
or relation which such dividends shall bear to the dividends payable on any
other class or classes or on any other series of capital stock, and whether such
dividends shall be cumulative or noncumulative;
-2-
<PAGE>
(iv) whether the shares of such series shall be subject to redemption
by the Corporation and, if made subject to redemption, the times, prices and
other terms and conditions of such redemption;
(v) the rights of the holders of shares of such series upon the
liquidation, dissolution or winding up of the Corporation;
(vi) whether or not the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to and manner
in which any such retirement or sinking fund shall be applied to the purchase or
redemption of the shares of such series for retirement or to other corporate
purposes and the terms and provisions relative to the operation thereof;
(vii) whether or not the shares of such series shall be convertible
into, or exchangeable for, shares of stock of any other class or classes, or of
any other series of the same class, and if so convertible or exchangeable, the
price or prices or the rate or rates of conversion or exchange and the method,
if any, of adjusting the same;
(viii) the limitations and restrictions, if any, to be effective while
any shares of such series are outstanding upon the payment of dividends or
making of other distributions on, and upon the purchase, redemption or other
acquisition by the Corporation of, Common Securities or any other class or
classes of stock of the Corporation ranking junior to the shares of such series
either as to dividends or upon liquidation;
(ix) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issue of any additional stock
(including additional shares of such series or of any other series or of any
other class) ranking on a parity with or prior to the shares of such series as
to dividends or distribution of assets on liquidation, dissolution or winding
up; and
(x) any other preference and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof as
shall not be inconsistent with this Section 2.
2. Series Identical; Rank. All shares of any one series of Series
Preferred Stock shall be identical with each other in all respects, except that
shares of any one series issued at different times may differ as to the dates
from which dividends, if any, thereon shall be cumulative; and all series shall
rank equally
-3-
<PAGE>
and be identical in all respects, except as permitted by the foregoing
provisions of paragraph 1(c) hereof; and all shares of Series Preferred Stock
shall rank senior to the Common Securities both as to dividends and upon
liquidation.
3. Liquidation. In the event of any liquidation, dissolution or winding
up of the Corporation, before any payment or distribution of the assets of the
Corporation (whether capital or surplus) shall be made to or set apart for the
holders of any class or classes of stock of the Corporation ranking junior to
the Series Preferred Stock upon liquidation, the holders of the shares of the
Series Preferred Stock shall be entitled to receive payment at the rate fixed
herein or in the resolution or resolutions adopted by the Board of Directors
providing for the issue of such series, plus (if dividends on shares of such
series of Series Preferred Stock shall be cumulative) an amount equal to all
dividends (whether or not earned or declared) accumulated to the date of final
distribution to such holders; but they shall be entitled to no further payment.
If, upon any liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation or proceeds thereof, distributable among the holders
of the shares of the Series Preferred Stock shall be insufficient to pay in full
the preferential amount aforesaid, then such assets, or the proceeds thereof,
shall be distributed among such holders ratably in accordance with the
respective amounts which would be payable on such shares if all amounts payable
thereon were paid in full.
4. Voting Rights. Except as shall be otherwise stated and expressed
herein or in the resolution or resolutions of the Board of Directors providing
for the issue of any series and except as otherwise required by the laws of the
State of Delaware, the holders of shares of Series Preferred Stock shall have,
with respect to such shares, no right or power to vote on any question or in any
proceeding or to be represented at, or to receive notice of, any meeting of
stockholders.
5. Reacquired Shares. Shares of any Series Preferred Stock which
shall be issued and thereafter acquired by the Corporation through purchase,
redemption, exchange, conversion or otherwise shall return to the status of
authorized but unissued Series Preferred Stock unless otherwise provided in the
resolution or resolutions of the Board of Directors.
6. Increase/Decrease in Authorized Shares of a Series. Unless otherwise
provided in the resolution or resolutions of the Board of Directors providing
for the issuance thereof, the number of authorized shares of stock of any such
series may be
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<PAGE>
increased or decreased (but not below the number of shares thereof outstanding)
by resolution or resolutions of the Board of Directors. In case the number of
shares of any such series of Series Preferred Stock shall be decreased, the
shares representing such decrease shall, unless otherwise provided in the
resolution or resolutions of the Board of Directors providing for the issuance
thereof, resume the status of authorized but unissued Series Preferred Stock,
undesignated as to series.
B. Common Securities.
Except as otherwise provided in this Section 2B of Article Four or as
otherwise required by applicable law, all shares of Class A Common Stock and
Class B Common Stock shall be identical in all respects and shall entitle the
holders thereof to the same rights and privileges, subject to the same
qualifications, limitations and restrictions.
1. Voting Rights. Except as otherwise provided in this Section 2B
of Article Four or as otherwise required by applicable law, holders of Class A
Common Stock shall be entitled to one (1) vote per share on all matters to be
voted on by the stockholders of the Corporation, and the holders of Class B
Common Stock shall be entitled to ten (10) votes per share on all such matters.
The holders of Class A Common Stock and Class B Common Stock shall vote together
as a single class on all matters to be voted on by the stockholders of the
Corporation; provided, that for any matter to be voted on by the stockholders
which independently affects only one class of Common Securities, without such an
effect on the other class, the affected class of Common Securities shall vote as
a separate class on such matters.
2. Dividends. Subject to the rights of each series of the Series
Preferred Stock, dividends may be declared and paid or set apart for payment
upon the Common Securities out of any assets or funds of the Corporation legally
available for the payment of dividends, and the holders of Class A Common Stock
and Class B Common Stock shall be entitled to participate in such dividends
ratably on a per share basis; provided, that if dividends are declared which are
payable in shares of Class A Common Stock or Class B Common Stock, dividends
shall be declared which are payable at the same rate on both classes of Common
Securities and the dividends payable in shares of Class A Common Stock shall be
payable to holders of that class of stock and the dividends payable in shares of
Class B Common Stock shall be payable to holders of that class of stock.
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<PAGE>
3. Liquidation. Upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, and after the holders of the
Series Preferred Stock of each series shall have been paid in full the amounts
to which they respectively shall be entitled in accordance with Section 2A of
Article Four, the terms of any outstanding Series Preferred Stock and applicable
law, or an amount sufficient to pay the aggregate amount to which the holders of
the Series Preferred Stock of each series shall be entitled shall have been
deposited with a bank or trust company having capital, surplus and undivided
profits of at least Twenty-Five Million Dollars ($25,000,000) as a trust fund
for the benefit of the holders of such Series Preferred Stock, the remaining net
assets of the Corporation shall be distributed pro rata to the holders of the
Common Securities, to the exclusion of the holders of such Series Preferred
Stock.
4. Conversion.
4A. Conversion of Class B Common Stock.
(a) Upon the occurrence of a Conversion Event as set forth in
paragraph (b)(i) of this subsection 4A of Article Four, Section 2B, each share
of Class B Common Stock transferred in connection with such Conversion Event
shall automatically convert into the same number of shares of Class A Common
Stock. Upon the occurrence of a Conversion Event as set forth in paragraph
(b)(ii) of this subsection 4A of Article Four, Section 2B, all shares of Class B
Common Stock issued and outstanding at the time of such Conversion Event shall
automatically convert into the same number of shares of Class A Common Stock.
Upon the occurrence of any Conversion Event, the holder or holders of Class B
Common Stock affected thereby shall promptly comply with the procedures for
conversion of Class B Common Stock to Class A Common Stock as set forth in
subsection 4B of this Article Four, Section 2B. Each holder of Class B Common
Stock shall also be entitled at any time to convert into the same number of
shares of Class A Common Stock any or all of the shares of such holder's Class B
Common Stock pursuant to the provisions of paragraph (c) of subsection 4A of
this Article Four, Section 2B.
(b) For purposes of this subsection 4A of Article Four, Section 2B, a
"Conversion Event" shall mean:
(i) any transfer of Class B Common Stock to a person who, immediately
prior to such transfer, is not an affiliate of the transferor; or
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<PAGE>
(ii) the time at which the MC Stockholders, as defined in the
Stockholders Agreement, dated as of August 31, 1994, and amended on May 17,
1995, and their affiliates cease to beneficially own, in the aggregate, at least
ten percent (10%) of the total outstanding shares of Common Securities.
For purpose of this subsection 4A of Article Four, Section 2B,
"person" shall include any natural person and any corporation, partnership,
joint venture, trust, unincorporated organization and any other entity or
organization, and "affiliate" shall have the meaning as set forth under Rule
12b-2 of the Regulations promulgated under the Securities Exchange Act of 1934.
(c) Each holder of Class B Common Stock is entitled at any time to
convert any or all of the shares of such holder's Class B Common Stock into the
same number of shares of Class A Common Stock by electing to do so in accordance
with the procedures set forth in subsection 4B of this Article Four, Section 2B.
4B. Conversion Procedure.
(a) Unless otherwise provided in connection with a Conversion Event,
each conversion of shares of Class B Common Stock into shares of Class A Common
Stock shall be effected by the surrender of the certificate or certificates
representing the shares to be converted at the principal office of the
Corporation at any time during normal business hours. In the case of an
elective conversion pursuant to subsection 4A(c) of this Article Four, the
surrender of the certificate or certificates representing such Class B Common
Stock shall be accompanied by a written notice by the holder of such shares
stating that the holder desires to convert the shares, or a stated number of the
shares, of such Class B Common Stock represented by such certificate or
certificates into shares of Class A Common Stock (and such statement will
obligate the Corporation to issue such shares of Class A Common Stock).
Each conversion pursuant to a Conversion Event under subsection 4A(b)
shall be deemed to have been effected as of the point in time at which such
Conversion Event was consummated. Each conversion pursuant to subsection 4A(c)
shall be deemed to have been effected as of the close of business on the date on
which such certificate or certificates have been surrendered and the
corresponding notice has been received. Immediately upon the conversion of
Class B Common Stock to Class A Common Stock, the rights of the holder of the
converted Class B Common Stock as such holder shall cease and the person or
persons in whose name or names the certificate or certificates for shares of
Class A Common Stock
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<PAGE>
are to be issued upon such conversion shall be deemed to have become the holder
or holders of record of the shares of Class A Common Stock represented thereby.
(b) For each conversion effected pursuant to a Conversion Event under
subsection 4A(b), promptly after the surrender of certificates, the Corporation
shall issue and deliver the certificate or certificates for the Class A Common
Stock issuable upon such conversion. For each conversion effected pursuant to
an elective conversion under subsection 4A(c), promptly after the surrender of
certificates and the receipt of written notice, the Corporation shall issue and
deliver in accordance with the surrendering holder's instructions (i) the
certificate or certificates for the Class A Common Stock issuable upon such
conversion and (ii) a certificate representing any Class B Common Stock which
was represented by the certificate or certificates delivered to the Corporation
in connection with such conversion but which was not converted.
(c) The issuance of certificates for Class A Common Stock upon
conversion of Class B Common Stock will be made without charge to the holders of
such shares for any issuance tax in respect thereof or other cost incurred by
the Corporation in connection with such conversion and the related issuance of
Class A Common Stock.
(d) The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Class A Common Stock, solely for the
purpose of issuance upon the conversion of the Class B Common Stock, such
number of shares of Class A Common Stock issuable upon the conversion of all
outstanding Class B Common Stock. All shares of Class A Common Stock which are
so issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges. The Corporation shall
take all such actions as may be necessary to assure that all such shares of
Class A Common Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
or automatic quotation system upon which shares of Class A Common Stock may be
listed or quoted (except for official notice of issuance which will be
immediately transmitted by the Corporation upon issuance).
(e) The Corporation shall not close its books against the transfer of
shares of Common Securities in any manner which would interfere with the timely
conversion of any shares of Class B Common Stock.
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<PAGE>
4C. Stock Splits. If the Corporation in any manner subdivides or combines
the outstanding shares of one class of Common Securities, the outstanding shares
of the other class of Common Securities shall be proportionately subdivided or
combined in a similar manner.
C. General Provisions
1. Nonliquidating Events. A consolidation or merger of the Corporation
with or into another corporation or corporations or a sale, whether for cash,
shares of stock, securities or properties, or any combination thereof, of all or
substantially all of the assets of the Corporation shall not be deemed or
construed to be a liquidation, dissolution or winding up of the Corporation
within the meaning of this Article Four.
2. No Preemptive Rights. No holder of Series Preferred Stock or Common
Securities of the Corporation shall be entitled, as such, as a matter of right,
to subscribe for or purchase any part of any new or additional issue of stock of
any class or series whatsoever or of securities convertible into stock of any
class whatsoever, whether now or hereafter authorized and whether issued for
cash or other consideration, or by way of dividend.
ARTICLE FIVE
------------
The Corporation is to have perpetual existence.
ARTICLE SIX
-----------
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, and the directors need not be
elected by ballot unless required by the By-laws of the Corporation. In
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of the Corporation is expressly authorized to make, alter, amend,
change, add to or repeal the By-laws of the Corporation.
ARTICLE SEVEN
-------------
Meetings of stockholders may be held within or without the State of
Delaware, as the By-laws of the Corporation may
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<PAGE>
provide. The books of the Corporation may be kept outside the State of Delaware
at such place or places as may be designated from time to time by the Board of
Directors or in the By-laws of the Corporation. The Board of Directors shall
from time to time decide whether and to what extent and at what times and under
what conditions and requirements the accounts and books of the Corporation, or
any of them, except the stock book, shall be open to the inspection of the
stockholders, and no stockholder shall have any right to inspect any books or
documents of the Corporation except as conferred by the laws of the State of
Delaware or as authorized by the Board of Directors.
ARTICLE EIGHT
-------------
Subject to the rights of the holders of any series of Preferred Stock, from
and after the date on which the Class A Common Stock of the Corporation is
registered pursuant to the Securities Exchange Act of 1934, as amended, (A) any
action required or permitted to be taken by the stockholders of the Corporation
must be effected at an annual or special meeting of stockholders of the
Corporation and may not be effected in lieu thereof by any consent in writing by
such stockholders, and (B) special meetings of stockholders of the Corporation
may be called only by the Chairman of the Board, the President or the Board of
Directors pursuant to a resolution adopted by the affirmative vote of at least a
majority of the members then in office.
ARTICLE NINE
------------
Section 1. The number of directors which shall constitute the whole
board shall be such as from time to time shall be fixed by the Board of
Directors in the manner as provided in the by-laws, except that such number
shall not be less than one (1) nor more than fifteen (15). The term of office
of each director shall be one year, and shall expire at the following year's
annual election of directors by the stockholders of the Corporation; subject,
however, to prior death, resignation, retirement, disqualification or removal
from office for cause. At each succeeding annual election of directors by the
stockholders of the Corporation, beginning in 1997, the directors chosen to
succeed those whose terms have expired shall be identified and elected for a
term expiring one year from such election date.
Vacancies and newly created directorships resulting from any increase in
the number of directors may be filled only by the
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affirmative vote of the majority of the Board of Directors then in office,
although less than quorum, or by a sole remaining director. Any director elected
to fill a vacancy resulting from an increase in the number of directors shall
have an initial term the same as those of the other directors then serving on
the Board of Directors. Any director elected to fill a vacancy not resulting
from an increase in the number of directors shall have the same remaining term
as that of his predecessor.
Notwithstanding anything to the contrary, whenever the holders of any one
or more classes or series of Preferred Stock issued by the Corporation shall
have the right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office, filing
of vacancies and other features of such directorships shall be governed by the
terms of this Certificate of Incorporation applicable thereto.
Subject to the rights of any class or series of stock having a preference
over the Common Securities as to dividends or upon liquidation to elect
directors under specified circumstances, no director may be removed from office
without cause.
Section 2. Except to the extent prohibited by law, the Board of Directors
shall have the right (which, to the extent exercised, shall be exclusive) to
establish the rights, powers, duties, rules and procedures that from time to
time shall govern the Board of Directors and each of its members, including
without limitation the vote required for any action by the Board of Directors,
and that from time to time shall affect the directors' power to manage the
business and affairs of the Corporation; and no by-law shall be adopted by
stockholders which shall impair or impede the implementation of the foregoing.
ARTICLE TEN
-----------
ARTICLE EIGHT, ARTICLE NINE and this ARTICLE TEN of this Amended and
Restated Certificate of Incorporation and Sections 2 and 11 of Article II,
Sections 2, 3, 4 and 5 of Article III and Article V of the By-laws of the
Corporation shall not be altered, amended or repealed by, and no provision
inconsistent therewith shall be adopted by, the stockholders without the
affirmative vote of the holders of at least 80% of the Common Securities, voting
together as a single class.
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ARTICLE ELEVEN
--------------
Section 1. To the fullest extent permitted by the Delaware General
Corporation Law as it now exists or may hereafter be amended (but, in the case
of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), no director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages arising from a breach of fiduciary duty
owed to the Corporation or its stockholders.
Section 2. Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ARTICLE TWELVE
--------------
The Corporation expressly elects to be governed by Section 203 of the
Delaware General Corporation Law.
ARTICLE THIRTEEN
----------------
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation in
the manner now or hereafter prescribed herein and by the laws of the State of
Delaware, and all rights conferred upon stockholders herein are granted subject
to this reservation.
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<PAGE>
Draft: July 19, 1996
AMENDED AND RESTATED BY-LAWS
OF
DURA AUTOMOTIVE SYSTEMS, INC.
A Delaware Corporation
ARTICLE I
---------
OFFICES
-------
Section 1. Registered Office. The registered office of the Corporation in
the State of Delaware shall be located at 1209 Orange Street, Wilmington,
Delaware, County of New Castle. The name of the Corporation's registered agent
at such address is The Corporation Trust Center. The registered office and/or
registered agent of the Corporation may be changed from time to time by action
of the board of directors.
Section 2. Other Offices. The Corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
----------
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year for the purpose of electing directors and
conducting such other proper business as may come before the meeting. Unless
otherwise directed by the board of directors, annual meetings of stockholders
shall be held on the fourth Tuesday in April beginning in 1997, if not a legal
holiday and, if a legal holiday, then on the first preceding regular business
day. At the annual meeting stockholders shall elect directors and transact such
other business as properly may be brought before the meeting pursuant to Article
II, Section 11 hereof.
Section 2. Special Meetings. Special meetings of stockholders may be
called for any purpose and may be held at such
<PAGE>
time and place, within or without the State of Delaware, as shall be stated in a
notice of meeting or in a duly executed waiver of notice thereof. Such meetings
may be called at any time by the chairman of the board, the president, or
pursuant to a resolution adopted by a majority of the members of the board of
directors then in office. The only matters that may be considered at any
special meeting of the stockholders are the matters specified in the notice of
the meeting.
Section 3. Place of Meetings. The board of directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the principal executive office of the
Corporation.
Section 4. Notice. Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice stating the place, date,
time, and, in the case of special meetings, the purpose or purposes, of such
meeting, shall be given to each stockholder entitled to vote at such meeting not
less than ten (10) nor more than sixty (60) days before the date of the meeting.
All such notices shall be delivered, either personally or by mail, by or at the
direction of the board of directors, the chairman of the board, the president or
the secretary, and if mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, addressed to the
stockholder at his, her or its address as the same appears on the records of the
Corporation. Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when the person attends for the express purpose
of objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened.
Section 5. Stockholders List. The officer having charge of the stock
ledger of the Corporation shall make, at least 10 days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least 10 days
prior to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the
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meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
Section 6. Quorum. The holders of a majority of the outstanding
stockholder votes entitled to vote, present in person or represented by proxy,
shall constitute a quorum at all meetings of the stockholders, except as
otherwise provided by statute or by the certificate of incorporation. If a
quorum is not present, the holders of a majority of the stockholder votes
present in person or represented by proxy at the meeting, and entitled to vote
at the meeting, may adjourn the meeting to another time and/or place. When a
specified item of business requires a vote by a class or series (if the
Corporation shall then have outstanding shares of more than one class or series)
voting as a class, the holders of a majority of the shares of such class or
series shall constitute a quorum (as to such class or series) for the
transaction of such item of business.
Section 7. Adjourned Meetings. When a meeting is adjourned to another
time and place, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote
of the majority of shares present in person or represented by proxy at the
meeting and entitled to vote on the subject matter shall be the act of the
stockholders, unless (i) by express provisions of an applicable law or of the
certificate of incorporation a different vote is required, in which case such
express provision shall govern and control the decision of such question, or
(ii) the subject matter is the election of directors, in which case Section 2 of
Article III hereof shall govern and control the approval of such subject matter,
or the amendment of any provision listed in Article VIII, in which case Article
VIII hereof shall govern and control the approval of such subject matter.
Section 9. Voting Rights. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by the certificate of incorporation
of the Corporation or any amendments thereto and subject to Section 3 of Article
VI hereof, every stockholder shall at every meeting of the stockholders be
entitled
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<PAGE>
to one (1) vote in person or by proxy for each share of Class A common stock
held by such stockholder. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by the certificate of incorporation
of the Corporation or any amendments thereto and subject to Section 3 of Article
VI hereof, every stockholder shall at every meeting of the stockholders be
entitled to ten (10) votes in person or by proxy for each share of Class B
common stock held by such stockholder. Together, the Class A common stock and
the Class B common stock are herein referred to as the "Common Stock."
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him or her by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period. A duly executed proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the Corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the
stockholders, and before any voting commences, all proxies filed at or before
the meeting shall be submitted to and examined by the secretary or a person
designated by the secretary, and no shares may be represented or voted under a
proxy that has been found to be invalid or irregular.
Section 11. Business Brought Before a Meeting. At an annual meeting of
the stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the board of directors, (b)
brought before the meeting by or at the direction of the board of directors, or
(c) otherwise properly brought before the meeting by a stockholder. For
business to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the secretary of
the Corporation. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation, not
less than sixty (60) days nor more
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<PAGE>
than ninety (90) days prior to the meeting; provided, however, that in the event
that less than seventy (70) days' notice or prior public disclosure of the date
of the meeting is given or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the tenth
(10) day following the date on which such notice of the date of the annual
meeting was mailed or such public disclosure was made. A stockholder's notice
to the secretary shall set forth as to each matter the stockholder proposes to
bring before the annual meeting (a) a brief description of the business desired
to be brought before the annual meeting, (b) the name and address, as they
appear on the Corporation's books, of the stockholder proposing such business,
(c) the class and number of shares of the Corporation which are beneficially
owned by the stockholder, and (d) any material interest of the stockholder in
such business. Notwithstanding anything in these by-laws to the contrary, no
business shall be conducted at an annual meeting except in accordance with the
procedures set forth in this Section 11 of Article II. The presiding officer of
an annual meeting shall, if the facts warrant, determine that the business was
not properly brought before the meeting and in accordance with the provisions of
this Section 11 of Article II; and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
ARTICLE III
-----------
DIRECTORS
---------
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the board of directors. In
addition to such powers as are herein and in the certificate of incorporation
expressly conferred upon it, the board of directors shall have and may exercise
all the powers of the Corporation, subject to the provisions of the laws of
Delaware, the certificate of incorporation and these by-laws.
Section 2. Number, Election and Term of Office. The number of directors
which shall constitute the board shall be eleven (11), but the number of
directors may be changed and established from time to time by resolution of the
board. The directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote in
the election of directors; provided that, whenever the holders of any class or
series of capital stock of the Corporation are entitled to elect one or more
directors pursuant to the provisions of the certificate of incorporation of the
Corporation (including, but not
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limited to, for purposes of these by-laws, pursuant to any duly authorized
certificate of designation), such directors shall be elected by a plurality of
the votes of such class or series present in person or represented by proxy at
the meeting and entitled to vote in the election of such directors. The
directors shall be elected in this manner at the annual meeting of the
stockholders, except as provided in Section 4 of this Article III. Each
director elected shall hold office until a successor is duly elected and
qualified or until his or her earlier death, resignation or removal as
hereinafter provided.
Section 3. Removal and Resignation. No director may be removed at any
time without cause; provided, however, that if the holders of any class or
series of capital stock are entitled by the provisions of the Corporation's
certificate of incorporation to elect one or more directors, such director or
directors so elected may be removed without cause only by the vote of the
holders of a majority of the outstanding shares of that class or series entitled
to vote. Any director may resign at any time upon written notice to the
Corporation.
Section 4. Vacancies. Vacancies and newly created directorships resulting
from any increase in the total number of directors established by the board
pursuant to Section 2 of this Article III may be filled only by the affirmative
vote of the majority of the total number of directors then in office, though
less than a quorum, or by a sole remaining director. Any director elected to
fill a vacancy resulting from an increase in the number of directors shall hold
office for a term that shall coincide with the remaining term of the class of
directors to which he is elected. A director elected to fill a vacancy not
resulting from an increase in the number of directors shall have the same
remaining term as that of his predecessor. Each director so chosen shall hold
office until a successor is duly elected and qualified or until his or her
earlier death, resignation or removal as herein provided. Whenever holders of
any class or classes of stock or series thereof are entitled by the provisions
of the certificate of incorporation to elect one or more directors, vacancies
and newly created directorships of such class or classes or series may only be
filled by the affirmative vote of the majority of the total number of directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
Section 5. Nominations.
(a) Only persons who are nominated in accordance with the procedures
set forth in these by-laws shall be eligible to serve as directors. Nominations
of persons for election to the
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board of directors of the Corporation may be made at a meeting of stockholders
(i) by or at the direction of the board of directors or (ii) by any stockholder
of the Corporation who was a stockholder of record at the time of giving of
notice provided for in this by-law, who is entitled to vote for the election of
directors at the meeting and who shall have complied with the notice procedures
set forth below in Section 5(b) of this Article III.
(b) In order for a stockholder to nominate a person for election to
the board of directors of the Corporation at a meeting of stockholders, such
stockholder shall have delivered timely notice of such stockholder's intent to
make such nomination in writing to the secretary of the Corporation. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation (i) in the case of an annual
meeting, not less than sixty (60) nor more than ninety (90) days prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is changed by more than
thirty (30) days from such anniversary date, notice by the stockholder to be
timely must be so received not later than the close of business on the tenth
(10) day following the earlier of the day on which notice of the date of the
meeting was mailed or public disclosure of the meeting was made, and (ii) in the
case of a special meeting at which directors are to be elected, not later than
the close of business on the tenth (10) day following the earlier of the day on
which notice of the date of the meeting was mailed or public disclosure of the
meeting was made. Such stockholder's notice shall set forth (i) as to each
person whom the stockholder proposes to nominate for election as a director at
such meeting all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to being named
in the proxy statement as a nominee and to serving as a director if elected);
(ii) as to the stockholder giving the notice (A) the name and address, as they
appear on the Corporation's books, of such stockholder and (B) the class and
number of shares of the Corporation which are beneficially owned by such
stockholder and also which are owned of record by such stockholder; and (iii) as
to the beneficial owner, if any, on whose behalf the nomination is made, (A) the
name and address of such person and (B) the class and number of shares of the
Corporation which are beneficially owned by such person. At the request of the
board of directors, any person nominated by the board of directors for election
as a director shall furnish to the secretary of the Corporation that information
required to be set
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forth in a stockholder's notice of nomination which pertains to the nominee.
(c) No person shall be eligible to serve as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 5 of Article III. The chairman of the meeting shall, if the facts
warrant, determine that a nomination was not made in accordance with the
procedures prescribed by this Section 5 of Article III, and if he should so
determine, he shall so declare to the meeting and the defective nomination shall
be disregarded. A stockholder seeking to nominate a person to serve as a
director must also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder with
respect to the matters set forth in this Section 5 of Article III.
Section 6. Annual Meetings. The annual meeting of the board of directors
shall be held without other notice than this by-law immediately after, and at
the same place as, the annual meeting of stockholders.
Section 7. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be held with at least three days'
notice to each director at such time and at such place as shall from time to
time be determined by resolution of the board. Any director may require the
Corporation, by notice given not less than 10 days in advance of any regularly
scheduled meeting of the board of directors, to include in the business to be
discussed at the meeting any one or more proposals submitted by such director.
Special meetings of the board of directors may be called by the chairman of the
board or, upon the written request of at least a majority of the directors then
in office, by the secretary of the Corporation on at least three days' notice to
each director, either personally, by telephone, by mail, or by telecopy.
Special meetings of the board of directors may also be called by the holders of
at least 10% of the voting power of the Corporation's outstanding Common Stock
upon at least 10 days' notice to each director, stating the purpose of the
meeting and proposing an agenda therefor, which meetings will be held at the
registered office of the Corporation.
Section 8. Chairman of the Board, Quorum, Required Vote and Adjournment.
The board of directors shall elect, by the affirmative vote of the majority of
the total number of directors then in office, a chairman of the board, who shall
preside at all meetings of the stockholders and board of directors at which he
or she is present. If the chairman of the board is not present at a meeting of
the stockholders or the board of directors, the
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president (if the president is a director and is not also the chairman of the
board) shall preside at such meeting, and, if the president is not present at
such meeting, a majority of the directors present at such meeting shall elect
one of their members to so preside. A majority of the total number of directors
then in office shall constitute a quorum for the transaction of business,
provided that, so long as the Amended and Restated Stockholders Agreement is in
effect, at least one MC Director (as defined in the Amended and Restated
Stockholders Agreement) and one Alkin Director (as defined in the Amended and
Restated Stockholders Agreement) must be present at any meeting of the Board for
a quorum to exist. Unless by express provision of an applicable law, the
Corporation's certificate of incorporation or these by-laws a different vote is
required, the vote of a majority of directors present at a meeting at which a
quorum is present shall be the act of the board of directors. If a quorum shall
not be present at any meeting of the board of directors, the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 9. Committees. The board of directors may, by resolution passed
by a majority of the total number of directors then in office, designate one or
more committees, each committee to consist of one or more of the directors of
the Corporation, which to the extent provided in such resolution or these by-
laws shall have, and may exercise, the powers of the board of directors in the
management and affairs of the Corporation, except as otherwise limited by law.
The board of directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the board
of directors. Each committee shall keep regular minutes of its meetings and
report the same to the board of directors when required.
Section 10. Committee Rules. Each committee of the board of directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. Unless otherwise provided in such a
resolution, in the event that a member and that member's alternate, if
alternates are designated by the board of directors as provided in Section 9 of
this Article III, of such committee is or are absent or disqualified, the member
or members thereof present at any meeting and not disqualified from voting,
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whether or not such member or members constitute a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in place
of any such absent or disqualified member.
Section 11. Communications Equipment. Members of the board of directors
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
and speak with each other, and participation in the meeting pursuant to this
Section 11 shall constitute presence in person at the meeting.
Section 12. Waiver of Notice and Presumption of Assent. Any member of the
board of directors or any committee thereof who is present at a meeting shall be
conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have assented
to any action taken unless his or her dissent shall be entered in the minutes of
the meeting or unless his or her written dissent to such action shall be filed
with the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action. Any
member of the board of directors or any committee thereof may also waive notice
of any meeting by providing a written statement of such waiver.
Section 13. Action by Written Consent. Unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any meeting of the board of directors, or of any committee thereof, may be taken
without a meeting if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
ARTICLE IV
----------
OFFICERS
--------
Section 1. Number. The officers of the Corporation shall be elected by
the board of directors and shall consist of a chairman of the board, chief
executive officer, president, one or more vice-presidents, a chief operating
officer, a chief financial officer, a senior vice president, a secretary, a
treasurer and such other
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officers and assistant officers as may be deemed necessary or desirable by the
board of directors. Any number of offices may be held by the same person. In
its discretion, the board of directors may choose not to fill any office for any
period as it may deem advisable, except that the offices of president and
secretary shall be filled as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the Corporation
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as convenient.
Vacancies may be filled or new offices created and filled at any meeting of the
board of directors. Each officer shall hold office until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal
as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
directors may be removed by the board of directors at its discretion, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed.
Section 4. Vacancies. Any vacancy occurring in any office because of
death, resignation, removal, disqualification or otherwise, may be filled by the
board of directors.
Section 5. Compensation. Compensation of all officers shall be fixed by
the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the Corporation.
Section 6. Chairman of the Board. The chairman of the board shall be,
subject to the powers of the board of directors, in the general and active
charge of the entire business and affairs of the Corporation, and shall be its
chief policy-making officer. He or she shall preside at all meetings of the
board of directors and stockholders and shall have such other powers and perform
such other duties as may be prescribed by the board of directors or provided in
these by-laws. The chairman of the board is authorized to execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the Corporation. Whenever the president is unable to serve, by reason of
sickness, absence or otherwise, the chairman of the board shall perform all the
duties and responsibilities and exercise all the powers of the president.
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Section 7. The President. The president of the Corporation shall be the
chief executive officer of the Corporation, and shall have the powers and
perform the duties incident to that position. Subject to the powers of the board
of directors and the chairman of the board, the president shall have general
charge of the business, affairs and property of the Corporation, and control
over its officers, agents and employees; and shall see that all orders and
resolutions of the board of directors and the chairman of the board are carried
into effect. The president shall, in the absence or disability of the chairman
of the board, act with all of the powers and be subject to all the restrictions
of the chairman of the board. The president is authorized to execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the Corporation. The president shall have such other powers and perform such
other duties as may be prescribed by the chairman of the board or the board of
directors or as may be provided in these by-laws.
Section 8. Chief Operating Officer. The chief operating officer of the
Corporation, subject to the powers of the board of directors, shall have general
and active management of the business of the Corporation; and shall see that all
orders and resolutions of the board of directors are carried into effect. The
chief operating officer shall have such other powers and perform such other
duties as may be prescribed by the chairman of the board and chief executive
officer or the board of directors or as may be provided in these by-laws.
Section 9. Chief Financial Officer. The chief financial officer of the
Corporation shall, under the direction of the chairman of the board and chief
executive officer, be responsible for all financial and accounting matters and
for the direction of the offices of treasurer and controller. The chief
financial officer shall have such other powers and perform such other duties as
may be prescribed by the chairman of the board and chief executive officer or
the board of directors or as may be provided in these by-laws.
Section 10. Vice-presidents. The vice-president, or if there shall be
more than one, the vice-presidents in the order determined by the board of
directors or the chairman of the board, shall, in the absence or disability of
the president, act with all of the powers and be subject to all the restrictions
of the president. The vice-presidents shall also perform such other duties and
have such other powers as the board of directors, the chairman of the
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board, the president or these by-laws may, from time to time, prescribe. The
vice-presidents may also be designated as executive vice-presidents or senior
vice-presidents, as the board of directors may from time to time prescribe.
Section 11. The Secretary and Assistant Secretaries. The secretary shall
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose or shall ensure that
his or her designee attends each such meeting to act in such capacity. Under the
chairman of the board's supervision, the secretary shall give, or cause to be
given, all notices required to be given by these by-laws or by law; shall have
such powers and perform such duties as the board of directors, the chairman of
the board, the president or these by-laws may, from time to time, prescribe; and
shall have custody of the corporate seal of the Corporation. The secretary, or
an assistant secretary, shall have authority to affix the corporate seal to any
instrument requiring it and when so affixed, it may be attested by his or her
signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his or her signature. The
assistant secretary, or if there be more than one, any of the assistant
secretaries in the order determined by the board of directors, shall, in the
absence or disability of the secretary, perform the duties and exercise the
powers of the secretary and shall perform such other duties and have such other
powers as the board of directors, the chairman of the board, the president, or
secretary may, from time to time, prescribe.
Section 12. The Treasurer and Assistant Treasurer. The treasurer shall
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation; shall deposit all monies and other valuable effects in the name
and to the credit of the Corporation as may be ordered by the chairman of the
board, the chief financial officer or the board of directors; shall cause the
funds of the Corporation to be disbursed when such disbursements have been duly
authorized, taking proper vouchers for such disbursements; and shall render to
the chairman of the board, the chief financial officer and the board of
directors, at its regular meeting or when the board of directors so requires, an
account of the Corporation; shall have such powers and perform such duties as
the board of directors, the chairman of the board, the chief financial officer
or these by-laws may, from time to time, prescribe. If required by the board of
directors, the treasurer shall give the Corporation a bond (which shall be
rendered every
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six years) in such sums and with such surety or sureties as shall be
satisfactory to the board of directors for the faithful performance of the
duties of the office of treasurer and for the restoration to the Corporation, in
case of death, resignation, retirement, or removal from office, of all books,
papers, vouchers, money, and other property of whatever kind in the possession
or under the control of the treasurer belonging to the Corporation. The
assistant treasurer, or if there are more than one, the assistant treasurers in
the order determined by the board of directors shall, in the absence or
disability of the treasurer, perform the duties and exercise the powers of the
treasurer. The assistant treasurers shall perform such other duties and have
such other powers as the board of directors, the chairman of the board, the
chief financial officer, treasurer or these by-laws may, from time to time,
prescribe.
Section 13. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
Section 14. Absence or Disability of Officers. In the case of the absence
or disability of any officer of the Corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person selected by it.
ARTICLE V
---------
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
-------------------------------------------------
Section 1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved (including
involvement as a witness) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a director or officer of the
Corporation or, while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter, an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director or officer or in any
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other capacity while serving as a director or officer, shall be indemnified and
held harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than permitted
prior thereto), against all expense, liability and loss (including attorneys'
fees, judgments, fines, ERISA exercise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators; provided,
however, that, except as provided in Section 2 of ARTICLE V with respect to
proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the board of directors of the Corporation. The right to
indemnification conferred in this Section 1 of ARTICLE V shall be a contract
right and shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advance of expenses"); provided, however, that, if and to the
extent that the Delaware General Corporation Law requires, an advance of
expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Section 1 of ARTICLE V or otherwise. The Corporation may,
by action of its board of directors, provide indemnification to employees and
agents of the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
Section 2. Procedure for Indemnification. Any indemnification of a
director or officer of the Corporation or advance of expenses under Section 1 of
this ARTICLE V shall be made promptly, and in any event within forty-five (45)
days (or, in the case of an advance of expenses, twenty (20) days), upon the
written request of the director or officer. If a determination by the
Corporation that the director or officer is entitled to indemnification pursuant
to this ARTICLE V is required, and the Corporation fails
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to respond within sixty (60) days to a written request for indemnity, the
Corporation shall be deemed to have approved the request. If the Corporation
denies a written request for indemnification or advance of expenses, in whole or
in part, or if payment in full pursuant to such request is not made within
forty-five (45) days (or, in the case of an advance of expenses, twenty (20)
days), the right to indemnification or advances as granted by this ARTICLE V
shall be enforceable by the director or officer in any court of competent
jurisdiction. Such person's costs and expenses incurred in connection with
successfully establishing his or her right to indemnification, in whole or in
part, in any such action shall also be indemnified by the Corporation. It shall
be a defense to any such action (other than an action brought to enforce a claim
for the advance of expenses where the undertaking required pursuant to Section 1
of this ARTICLE V, if any, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of such defense shall be on the
Corporation. Neither the failure of the Corporation (including its board of
directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its board of
directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct. The procedure for indemnification of other employees and agents for
whom indemnification is provided pursuant to Section 1 of this ARTICLE V shall
be the same procedure set forth in this Section 2 for directors or officers,
unless otherwise set forth in the action of the board of directors providing
indemnification for such employee or agent.
Section 3. Service for Subsidiaries. Any person serving as a director,
officer, employee or agent of a Subsidiary shall be conclusively presumed to be
serving in such capacity at the request of the Corporation.
Section 4. Reliance. Persons who after the date of the adoption of this
provision become or remain directors or officers of the Corporation or who,
while a director or officer of the Corporation, become or remain a director,
officer, employee or agent of a Subsidiary, shall be conclusively presumed to
have relied on the rights to indemnity, advance of expenses and other
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rights contained in this ARTICLE V in entering into or continuing such service.
The rights to indemnification and to the advance of expenses conferred in this
ARTICLE V shall apply to claims made against an indemnitee arising out of acts
or omissions which occurred or occur both prior and subsequent to the adoption
hereof.
Section 5. Non-Exclusivity of Rights. The rights to indemnification and
to the advance of expenses conferred in this ARTICLE V shall not be exclusive of
any other right which any person may have or hereafter acquire under this
Certificate of Incorporation or under any statute, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 6. Insurance. The Corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director, officer,
employee or agent of the Corporation or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss asserted against him or her and incurred by him or her in any
such capacity, whether or not the Corporation would have the power to indemnify
such person against such expenses, liability or loss under the Delaware General
Corporation Law.
ARTICLE VI
----------
CERTIFICATES OF STOCK
---------------------
Section 1. Form. Every holder of stock in the Corporation shall be
entitled to have a certificate, signed by, or in the name of the Corporation by
the chairman of the board, the president or a vice-president and the secretary
or an assistant secretary of the Corporation, certifying the number of shares
owned by such holder in the Corporation. If such a certificate is countersigned
(1) by a transfer agent or an assistant transfer agent other than the
Corporation or its employee or (2) by a registrar, other than the Corporation or
its employee, the signature of any such chairman of the board, president, vice-
president, secretary, or assistant secretary may be facsimiles. In case any
officer or officers who have signed, or whose facsimile signature or signatures
have been used on, any such certificate or certificates shall cease to be such
officer or officers of the Corporation whether because of death, resignation or
otherwise before such certificate or certificates have been delivered by the
Corporation, such certif icate or certificates may nevertheless be issued and
delivered as though the person or persons who signed such certificate or
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certificates or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the Corporation. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the books of the
Corporation. Shares of stock of the Corporation shall only be transferred on
the books of the Corporation by the holder of record thereof or by such holder's
attorney duly authorized in writing, upon surrender to the Corporation of the
certificate or certificates for such shares endorsed by the appropriate person
or persons, with such evidence of the authenticity of such endorsement,
transfer, authorization, and other matters as the Corporation may reasonably
require, and accompanied by all necessary stock transfer stamps. In that event,
it shall be the duty of the Corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate or certificates, and record the
transaction on its books. The board of directors may appoint a bank or trust
company organized under the laws of the United States or any state thereof to
act as its transfer agent or registrar, or both in connection with the transfer
of any class or series of securities of the Corporation.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the Corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the Corporation
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the Corporation a bond
sufficient to indemnify the Corporation against any claim that may be made
against the Corporation on account of the loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that
the Corporation may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which record date shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting. If no record date is fixed by
the board of directors, the record date for
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determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be the close of business on the next day preceding the day on
which notice is first given. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the board of directors may
fix a new record date for the adjourned meeting.
Section 4. Fixing a Record Date for Other Purposes. In order that the
Corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange
of stock, or for the purposes of any other lawful action, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is fixed,
the record date for determining stockholders for any such purpose shall be at
the close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 5. Registered Stockholders. Prior to the surrender to the
Corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the Corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The Corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
Section 6. Subscriptions for Stock. Unless otherwise provided for in the
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any installment
or call when such payment is due, the Corporation may proceed to collect the
amount due in the same manner as any debt due the Corporation.
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<PAGE>
ARTICLE VII
-----------
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, in accordance with applicable law. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
certificate of incorporation. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
any other purpose and the directors may modify or abolish any such reserve in
the manner in which it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders
for the payment of money by or to the Corporation and all notes and other
evidences of indebtedness issued in the name of the Corporation shall be signed
by such officer or officers, agent or agents of the Corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. In addition to the powers otherwise granted to
officers pursuant to Article IV hereof, the board of directors may authorize any
officer or officers, or any agent or agents, of the Corporation to enter into
any contract or to execute and deliver any instrument in the name of and on
behalf of the Corporation, and such authority may be general or confined to
specific instances.
Section 4. Loans. The Corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
Corporation or of its subsidiaries, including any officer or employee who is a
director of the Corporation or its subsidiaries, whenever, in the judgment of
the directors, such loan, guaranty or assistance may reasonably be expected to
benefit the Corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the Corporation at
common law or under any statute.
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<PAGE>
Section 5. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the Corporation and the words "Corporate Seal, Delaware."
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities in
any other corporation held by the Corporation shall be voted by the chairman of
the board, the chief executive officer, the president or a vice-president,
unless the board of directors specifically confers authority to vote with
respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.
Section 8. Inspection of Books and Records. Any stockholder of record, in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the Corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the Corporation at its registered
office in the State of Delaware or at its principal place of business. The
Corporation shall have a reasonable amount of time to respond to any such
request.
Section 9. Section Headings. Section headings in these by-laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
these by-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these by-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given
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<PAGE>
full force and effect.
ARTICLE VIII
------------
AMENDMENTS
----------
These by-laws may be amended, altered, or repealed and new by-laws
adopted at any meeting of the board of directors by the affirmative vote of the
majority of the total number of directors then in office. The fact that the
power to adopt, amend, alter, or repeal the by-laws has been conferred upon the
board of directors shall not divest the stockholders of such powers as set forth
in the certificate of incorporation; provided, that Sections 2 and 11 of Article
II, Sections 2, 3, 4 and 5 of Article III and Article V of these By-laws of the
Corporation shall not be altered, amended or repealed by, and no provision
inconsistent therewith shall be adopted by, the stockholders without the
affirmative vote of the holders of at least 80% of the voting power of the
Corporation's outstanding Common Stock.
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<PAGE>
U.S. $80,000,000
CREDIT AGREEMENT
dated as of August 31, 1994
among
DURA AUTOMOTIVE SYSTEMS, INC.
as the Borrower,
and
CERTAIN COMMERCIAL LENDING INSTITUTIONS,
as the Lenders,
and
THE BANK OF NOVA SCOTIA, COMERICA BANK
AND THE CHASE MANHATTAN BANK, N.A.,
as Co-Agents for the Lenders
and
CONTINENTAL BANK,
as Agent for the Lenders
<PAGE>
TABLE OF CONTENTS
-----------------
Section Page
- ------- ----
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS................... 2
1.1. Defined Terms..................................................... 2
1.2. Use of Defined Terms.............................................. 29
1.3. Cross-References.................................................. 30
1.4. Accounting and Financial Determinations........................... 30
ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES,
NOTES AND LETTERS OF CREDIT............................ 31
2.1. Commitments....................................................... 31
2.1.1. Term Loan Commitments............................................. 31
2.1.2. Revolving Loan Commitment......................................... 31
2.1.3. Letter of Credit Terms............................................ 31
2.1.4. Lenders Not Permitted or Required to Make Loans................... 32
2.1.5. Issuer Not Permitted or Required to Issue Letters of
Credit............................................................ 32
2.2. Reduction of Commitment Amount.................................... 32
2.3. Borrowing Procedure and Funding Maintenance....................... 33
2.4. Continuation and Conversion Elections............................. 33
2.5. Funding........................................................... 34
2.6. Issuance Procedures............................................... 34
2.6.1. Other Lenders' Participation...................................... 34
2.6.2. Disbursements..................................................... 35
2.6.3. Reimbursement..................................................... 35
2.6.4. Deemed Disbursements.............................................. 35
2.6.5. Nature of Reimbursement Obligations............................... 36
2.7. Notes............................................................. 37
2.8. Recordkeeping..................................................... 37
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES ............. 37
3.1. Repayments and Prepayments........................................ 37
3.2. Interest Provisions............................................... 39
3.2.1. Rates............................................................. 40
3.2.2. Default Rates..................................................... 40
3.2.3. Payment Dates..................................................... 40
3.3. Fees.............................................................. 41
3.3.1. Commitment Fee.................................................... 41
3.3.2. Agent's Fee....................................................... 41
3.3.3. Letter of Credit Fee.............................................. 41
3.3.4. Upfront Fees...................................................... 41
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<PAGE>
ARTICLE IV
CERTAIN EURODOLLAR RATE AND OTHER PROVISIONS............. 41
4.1. Eurodollar Rate Lending Unlawful................................. 41
4.2. Deposits Unavailable............................................. 42
4.3. Increased Eurodollar Rate Loan Costs, etc........................ 42
4.4. Funding Losses................................................... 42
4.5. Increased Capital Costs.......................................... 43
4.6. Taxes............................................................ 43
4.7. Payments, Computations, etc...................................... 46
4.8. Sharing of Payments.............................................. 46
4.9. Setoff........................................................... 47
4.10. Use of Proceeds and Benefits of Credit Extensions................ 47
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS................... 47
5.1. Initial Credit Extensions........................................ 47
5.1.1. Resolutions, etc................................................. 47
5.1.2. Delivery of Notes................................................ 48
5.1.3. Guaranties; Subsidiary Security Documents........................ 48
5.1.4. Pledge Agreements................................................ 48
5.1.5. Security Agreement............................................... 48
5.1.6. Mortgages, Etc................................................... 48
5.1.7. Insurance........................................................ 48
5.1.8. Consummation of Joint Venture.................................... 49
5.1.9. Closing Date Certificate......................................... 49
5.1.10. Solvency, etc.................................................... 49
5.1.11. Environmental Due Diligence...................................... 49
5.1.12. Opinions of Counsel.............................................. 49
5.1.13. Borrowing Base Certificate....................................... 49
5.1.14. Closing Fees, Expenses, etc...................................... 50
5.1.15. Capital Contributions............................................ 50
5.2. All Credit Extensions............................................ 50
5.2.1. Compliance with Warranties, No Default etc....................... 50
5.2.2. Credit Extension Request, etc.................................... 50
5.2.3. Satisfactory Legal Form.......................................... 51
ARTICLE VI
REPRESENTATIONS AND WARRANTIES.................... 51
6.1. Organization, etc................................................ 51
6.2. Due Authorization, Non-Contravention, etc........................ 51
6.3. Government Approval, Regulation, etc............................. 52
6.4. Validity, etc.................................................... 52
6.5. Financial Information............................................ 52
6.6. No Material Adverse Change, etc.................................. 52
6.7. Subsidiaries..................................................... 53
6.8. Ownership of Properties.......................................... 53
6.9. Taxes............................................................ 53
6.10. Pension and Welfare Plans........................................ 53
6.11. Environmental Warranties......................................... 54
6.12. Regulations G, T, U and X........................................ 56
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<PAGE>
<TABLE>
<C> <S> <C>
6.13. Accuracy of Information........................ 56
ARTICLE VII
COVENANTS............... 56
7.1. Affirmative Covenants.......................... 56
7.1.1. Financial Information, Reports, Notices, etc... 56
7.1.2. Compliance with Laws, etc...................... 59
7.1.3. Maintenance of Properties...................... 60
7.1.4. Insurance...................................... 60
7.1.5. Books and Records.............................. 62
7.1.6. Environmental Covenant......................... 62
7.1.7 Interest Rate Risk Management Agreements....... 63
7.2. Negative Covenants............................. 63
7.2.1. Business Activities............................ 63
7.2.2. Indebtedness................................... 63
7.2.3. Liens.......................................... 63
7.2.4. Financial Condition............................ 64
7.2.5. Investments.................................... 66
7.2.6. Restricted Payments, etc....................... 67
7.2.7. Capital Expenditures, etc...................... 68
7.2.8. Rental Obligations............................. 69
7.2.9. Take or Pay Contracts.......................... 69
7.2.10. Consolidation, Merger, etc..................... 70
7.2.11. Asset Dispositions, etc........................ 70
7.2.12. Modification of Certain Agreements............. 70
7.2.13. Restriction on Fundamental Changes............. 70
7.2.14. Fiscal Year.................................... 71
7.2.15. Subsidiaries................................... 71
7.2.16. Transactions with Affiliates................... 71
7.2.17. Negative Pledges, Restrictive Agreements, etc.. 71
ARTICLE VIII
EVENTS OF DEFAULT............ 72
8.1. Listing of Events of Default................... 72
8.1.1. Non-Payment of Obligations..................... 72
8.1.2. Breach of Warranty............................. 72
8.1.3. Non-Performance of Certain Covenants
and Obligations............................... 72
8.1.4. Non-Performance of Other Covenants
and Obligations............................... 72
8.1.5. Default on Other Indebtedness.................. 72
8.1.6. Judgments...................................... 73
8.1.7. Pension Plans.................................. 73
8.1.8. Change in Control.............................. 73
8.1.9. Bankruptcy, Insolvency, etc.................... 73
8.1.10. Impairment of Security, etc.................... 74
8.1.11. Default in Other Agreements.................... 74
8.1.12. Injunction..................................... 74
8.1.13. Subordinated Promissory Notes.................. 74
8.2. Action if Bankruptcy........................... 74
8.3. Action if Other Event of Default............... 74
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE IX
THE AGENT...................... 75
9.1. Actions............................................... 75
9.2. Funding Reliance, etc................................. 76
9.3. Exculpation........................................... 76
9.4. Successor............................................. 77
9.5. Loans by Continental.................................. 77
9.6. Credit Decisions...................................... 77
9.7. Copies, etc........................................... 78
9.8. Co-Agents............................................. 78
ARTICLE X
MISCELLANEOUS PROVISIONS............... 78
10.1. Waivers, Amendments, etc.............................. 78
10.2. Notices............................................... 79
10.3. Payment of Costs and Expenses......................... 79
10.4. Indemnification....................................... 80
10.5. Survival.............................................. 82
10.6. Severability.......................................... 82
10.7. Headings.............................................. 82
10.8. Execution in Counterparts, Effectiveness, etc......... 82
10.9. Governing Law: Entire Agreement....................... 82
10.10. Successors and Assigns................................ 82
10.11. Assignments and Participations........................ 83
10.12. Other Transactions.................................... 88
10.13. Execution on Behalf of Corporation.................... 88
10.14. Forum Selection and Consent to Jurisdiction........... 88
10.15. Waiver of Jury Trial.................................. 89
</TABLE>
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<PAGE>
CREDIT AGREEMENT
----------------
THIS CREDIT AGREEMENT, dated as of August 31, 1994, among DURA
AUTOMOTIVE SYSTEMS, INC., a Delaware corporation (the "Borrower"), the various
financial institutions as are or may become parties hereto (collectively, the
"Lenders"), THE BANK OF NOVA SCOTIA, a Canadian chartered bank, COMERICA BANK, a
Michigan banking corporation, and THE CHASE MANHATTAN BANK, N.A., a national
banking association, as co-agents (collectively, the "Co-Agents"), and
CONTINENTAL BANK, an Illinois banking corporation ("Continental"), as agent (the
"Agent") for the Lenders.
W I T N E S S E T H:
-------------------
WHEREAS, the Borrower is a direct, wholly-owned Subsidiary of MC
Holding Corp., a Delaware corporation ("MC");
WHEREAS, MC has entered into a Joint Venture Agreement dated as of
August 31, 1994 (the "Joint Venture Agreement"), with Orscheln Co., a Delaware
corporation ("Orscheln"), certain stockholders of MC and Dura Automotive
Holding, Inc., a Delaware corporation ("Newco"), pursuant to which (i) the
stockholders of MC will contribute all of the capital stock of MC to Newco, (ii)
Onex U.S. Investments, Inc. and J2R Corporation will contribute in the aggregate
$2,000,000 in cash to MC, and (iii) Orscheln will contribute the Orscheln
Transferred Assets (as defined in the Joint Venture Agreement) to Newco;
WHEREAS, in consideration of the contributions referred to above, (i)
Newco will issue to the stockholders of MC an aggregate of 28,038.91 shares of
Class A Common Stock, par value $0.01 per share (the "Class A Stock"), 100,000
shares of Class B Common Stock, par value $0.01 per share (the "Class B Stock"),
and 25,000 shares of Class C Common Stock, par value $0.01 per share (the "Class
C Stock") and Newco will issue to Orscheln 125,213.65 shares of Class A Stock,
(ii) Newco will issue its Subordinated Promissory Note in the principal amount
of $2,000,000 to Orscheln and MC will issue its Subordinated Promissory Note in
the principal amount of $1,800,000 to Onex U.S. Investments, Inc. and its
Subordinated Promissory Note in the principal amount of $200,000 to J2R
Corporation, (iii) MC will repay its Promissory Note dated May 7, 1993 in the
principal amount of $675,000 and its Promissory Note dated May 7, 1993 in the
principal amount of $75,000, (iv) Orscheln will receive from Newco the cash
consideration set forth in the Joint Venture Agreement (the "Cash
Consideration"), and (v) Newco will assume certain notes payable, other funded
indebtedness and certain other liabilities of Orscheln as set forth in the Joint
Venture Agreement (the "Orscheln Transferred Liabilities");
WHEREAS, in connection with the transactions referred to above, Newco
will contribute the Orscheln Transferred Assets and Orscheln Transferred
Liabilities to the Borrower and in
<PAGE>
consideration thereof the Borrower will distribute to Newco the Cash
Consideration;
WHEREAS, the Borrower desires to refinance certain of its existing
Indebtedness and the Orscheln Transferred Liabilities and to obtain financing
for the Cash Consideration;
WHEREAS, to consummate the above described financing transactions and
to provide for its working capital needs, the Borrower desires to obtain from
the Lenders (i) Term Loans in the aggregate principal amount of $50,000,000 and
(ii) a Revolving Loan Commitment of up to a maximum principal amount of
$30,000,000; and
WHEREAS, the Lenders are willing, on the terms and subject to the
conditions hereinafter set forth (including Article V), to extend such
Commitments and make such Loans to the Borrower and to issue (or participate in)
Letters of Credit for the account of the Borrower;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms when used in
this Agreement, including the preamble and recitals, shall, except where the
context otherwise requires, have the following meanings (such meanings to be
equally applicable to the singular and plural forms thereof):
"Account Debtor" means any Person who is or who may become obligated
to the Borrower under, with respect to, or on account of an Account Receivable.
"Account Receivable" means any account of the Borrower and any other
right of the Borrower to payment for goods sold or leased or for services
rendered, whether or not evidenced by an instrument or chattel paper and whether
or not yet earned by performance.
"Additional Permitted Capital Expenditures" means, with respect to a
Fiscal Year, 100% of the Capital Expenditures permitted to be made in the
preceding Fiscal Year (excluding Additional Permitted Capital Expenditures for
such preceding Fiscal Year) as provided in Section 7.2.7 and not made in such
preceding Fiscal Year. For purposes of calculating Additional Permitted Capital
Expenditures in any Fiscal Year, the Additional Permitted Capital Expenditures
for such Fiscal Year shall be deemed to be the first Capital Expenditures made
during such Fiscal Year.
"Adjusted Management Fee" means, for an Orscheln Pre-Transfer Period,
(a) the amount of management fees paid by
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<PAGE>
Orscheln during such Orscheln Pre-Transfer Period and deducted in determining
Orscheln Net Income for such period; less (b) the amount of the increase in the
annual management fees to be paid by the Borrower to Hidden Creek Industries
after the transfer of the Orscheln Transferred Assets to the Borrower,
multiplied by a fraction, the numerator of which is the number of days in such
Orscheln Pre-Transfer Period, and the denominator of which is 365.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). For purposes hereof, "control" means the power to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise. Without limiting the foregoing, (i) a Person
shall be deemed to be "controlled by" any other Person if such other Person
possesses, directly or indirectly, power to vote 5% or more of the securities of
such Person (on a fully diluted basis) having ordinary voting power for the
election of directors or managing general partners of such Person and (ii) a
Person shall be deemed to "control" any other Person if such Person possesses,
directly or indirectly, the power to vote 5% or more of the securities of such
other Person (on a fully diluted basis) having ordinary voting power for the
election of directors or managing general partners of such other Person.
"Agent" is defined in the Preamble and includes each other Person
appointed as the successor Agent pursuant to Section 9.4.
"Agreement" means this Credit Agreement as amended, supplemented or
otherwise modified from time to time.
"Alternate Reference Rate" means, on any date, a fluctuating rate per
annum (rounded upward, if necessary, to the nearest 1/100 of 1%) equal to the
greater of (a) the Reference Rate in effect on such date, and (b) the Federal
Funds Rate in effect on such date plus 1/2 of 1%.
Changes in the rate of interest on any Loans maintained as Reference
Rate Loans will take effect simultaneously with each change in the Alternate
Reference Rate. The Agent will give prompt notice to the Borrower and the
Lenders of changes in the Alternate Reference Rate.
"Applicable Margin" means, at any time, (a) with respect to the unpaid
principal amount of each Eurodollar Rate Loan, the applicable percentage set
forth below in the column entitled "Applicable Margin for Eurodollar Rate Loans"
opposite the Leverage Ratio in effect at such time; and (b) with respect to the
unpaid principal amount of each Reference Rate Loan, the applicable percentage
set forth below in the column entitled "Applicable
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<PAGE>
Margin for Reference Rate Loans" opposite the Leverage Ratio in effect at such
time.
<TABLE>
<CAPTION>
Leverage Ratio Applicable Margin Applicable Margin
For Eurodollar For Reference
Rate Loans Rate Loans
<S> <C> <C>
Less than 2.0: 1.0 1.125% 0.00%
Equal to or greater than 1.625% 0.125%
2.0: 1.0 but less than
2.5: 1.0
Equal to or greater than 1.875% 0.375%
2.5: 1.0 but less than
3.25: 1.0
Equal to or greater than 2.25% 0.50%
3.25: 1.0 but less than
4.0: 1.0
Equal to or greater than 2.5% 0.75%
4.0: 1.0
</TABLE>
The initial Applicable Margin for Eurodollar Rate Loans shall be 2.5%
and the initial Applicable Margin for Reference Rate Loans shall be 0.75% and
each initial Applicable Margin shall remain in effect until the delivery of a
Compliance Certificate with respect to the Fourth Fiscal Quarter 1994.
Thereafter, the Applicable Margin shall be based on the Leverage Ratio in effect
as set forth in the Compliance Certificate most recently delivered by the
Borrower to the Agent. Changes in the Applicable Margin resulting from a change
in the Leverage Ratio shall become effective upon delivery by the Borrower to
the Agent of a new Compliance Certificate pursuant to clause (c) of Section
7.1.1. If the Borrower shall fail to deliver a Compliance Certificate within 45
days after the end of any Fiscal Quarter as required pursuant to clause (c) of
Section 7.1.1, the Applicable Margin from and including the 46th day after the
end of such Fiscal Quarter to but not including the date the Borrower delivers
to the Agent a Compliance Certificate shall conclusively be presumed to equal
the highest Applicable Margin.
"Asset Disposition" means the disposition whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise of any of the
assets of the Borrower or any of its Subsidiaries other than dispositions
permitted under Section 7.2.11.
"Assignable Advances" means a Lender's Term Loans, Revolving Loans and
participations in Letters of Credit.
"Assignment and Assumption Agreement" is defined in clause (b)(iv) of
Section 10.11.
-4-
<PAGE>
"Authorized Officer" means, with respect to any Obligor, those of its
officers whose signatures and incumbency shall have been certified to the Agent
and the Lenders pursuant to Section 5.1.1.
"Borrower" is defined in the Preamble.
"Borrowing" means the Loans of the same type and, in the case of
Eurodollar Rate Loans, having the same Interest Period, made by all Lenders on
the same Business Day and pursuant to the same Borrowing Request in accordance
with Section 2.1.
"Borrowing Base" means, as of any date of determination, the sum of
(a) 85% of the net amount (after deduction of such reserves and allowances as
the Agent reasonably deems proper and necessary from the perspective of a
prudent lender administering credits of this type involving borrowers of
comparable credit quality) of Eligible Accounts Receivable and Eligible Tooling
Accounts Receivable and (b) 50% of the net amount (determined on an FIFO basis,
after deduction of such reserves and allowances as the Agent reasonably deems
proper and necessary from the perspective of a prudent lender administering
credits of this type involving borrowers of comparable credit quality) of
Eligible Inventory and Eligible Tooling WIP.
"Borrowing Base Certificate" means a certificate duly completed and
executed by an Authorized Officer of the Borrower, substantially in the form of
Exhibit A hereto.
"Borrowing Request" means a loan request and certificate duly
completed and executed by an Authorized Officer of the Borrower, substantially
in the form of Exhibit B-1 hereto.
"Business Day" means any day which is neither a Saturday or Sunday nor
a legal holiday on which banks are authorized or required to be closed in
Chicago, Illinois or New York, New York; provided, that with respect to all
notices, determinations, continuances, conversions, fundings and payments in
connection with Eurodollar Rate Loans, a Business Day shall also not include any
day on which trading by and between banks in Dollar deposits may not be carried
on in the applicable interbank Eurodollar market.
"Capital Expenditures" means, for any period, the aggregate amount of
all expenditures (including, with respect to all leasing or similar arrangements
entered into during such period which, in accordance with GAAP, would be
classified as a capitalized lease, the aggregate amount of all rental payments
payable during the term of such lease, excluding the portion of such payments
allocable to interest expense) of the Borrower and its Subsidiaries for fixed or
capital assets made during such period which, in accordance with GAAP, would be
classified as capital expenditures.
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<PAGE>
"Capitalized Lease Liabilities" means all monetary obligations of the
Borrower and its Subsidiaries under any leasing or similar arrangement which, in
accordance with GAAP, would be classified as capitalized leases, and, for
purposes of this Agreement and each other Loan Document, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
"Cash Consideration" is defined in the Recitals.
"Cash Equivalent Investment" means (a) marketable direct obligations
issued or unconditionally guarantied by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof; (b) commercial paper maturing no more than 270 days from the date
issued and having a rating of at least A-1 from Standard & Poor's Corporation or
at least P-1 from Moody's Investors Services, Inc.; and (c) certificates of
deposit or bankers' acceptances maturing within one year from the date of
issuance thereof issued by, or overnight reverse repurchase agreements from, any
commercial bank organized under the laws of the United States of America or any
state thereof or the District of Columbia having combined capital and surplus of
not less than $500,000,000 and not subject to setoff rights in favor of such
bank.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"Change in Control" means any of the following events:
(a) The failure of Onex U.S. Investments, Inc. and J2R Corporation
to own, directly and free and clear of all Liens, at least 22% of the
issued and outstanding shares of capital stock of Newco, on a fully diluted
basis, or the failure of Onex U.S. Investments, Inc. and J2R Corporation to
be able to elect a majority of the members of the board of directors of
Newco (either directly or through proxy), or the failure of J2R Corporation
to own, directly and free and clear of all Liens, at least 4% of the issued
and outstanding shares of capital stock of Newco, on a fully diluted basis;
(b) The failure of Newco at any time to own, directly and free and
clear of all Liens, 100% of the issued and outstanding shares of capital
stock of MC, on a fully diluted basis (subject to the option in effect on
the date hereof of Kim Clark to acquire 1,000 shares of capital stock of
MC) (provided, that the merger of MC
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into Newco or the Borrower shall not constitute Change in Control);
(c) The failure of MC (or, upon the merger of MC into Newco or the
Borrower, Newco) at any time to own, directly and free and clear of all
Liens (other than the Liens of the Agent), 100% of the issued and
outstanding shares of capital stock of the Borrower, on a fully diluted
basis; or
(d) The failure of Sankey A. Johnson or his family members (or any
trust arrangement established for estate planning purposes for the benefit
of such family members) at any time to own, directly and free and clear of
all Liens, at least 51% of the issued and outstanding shares of capital
stock of J2R Corporation, on a fully diluted basis.
"Co-Agents" are defined in the Preamble.
"Code" means the Internal Revenue Code of 1986, as amended, reformed
or otherwise modified from time to time.
"Commitment" means, as the context may require, a Lender's Revolving
Loan Commitment or Term Loan Commitment; and "Commitments" means all of the
Revolving Loan Commitments and Term Loan Commitments.
"Commitment Amount" means, as the context may require, either the
Revolving Loan Commitment Amount or the Term Loan Commitment Amount.
"Commitment Termination Event" means (a) the occurrence of any Default
described in clauses (a) through (d) of Section 8.1.9; or (b) the occurrence and
continuance of any other Event of Default and either (i) the declaration of the
Loans to be due and payable pursuant to Section 8.3, or (ii) in the absence of
such declaration, the giving of notice by the Agent, acting at the direction of
the Required Lenders, to the Borrower that the Commitments have been terminated.
"Compliance Certificate" means a certificate duly completed and
executed by the chief financial Authorized Officer of the Borrower,
substantially in the form of Exhibit C hereto.
"Continental" is defined in the Preamble.
"Contingent Liability" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise is similarly contractually
contingently liable upon any indebtedness, obligation or any other liability of
any other Person (other than by endorsements of instruments in the course of
collection), including any agreement, undertaking or arrangement to
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(a) invest in, support or supply funds to any other Person, (b) assure any
creditor of any other Person against loss, or (c) guaranty the payment of
dividends or other distributions upon the shares of any other Person. The
amount of any Contingent Liability shall be deemed to be the maximum amount of
the liability guaranteed thereby.
"Continuation/Conversion Notice" means a notice of continuation or
conversion duly completed and executed by an Authorized Officer of the Borrower,
substantially in the form of Exhibit D hereto.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414(b) or 414(c) of the
Code or Section 4001(b)(1) of ERISA.
"Credit Extension" means, as the context may require, (a) the making
of a Loan by a Lender; or (b) the issuance of any Letter of Credit by the
Issuer.
"Current Assets" means, at any time, all amounts which, in accordance
with GAAP, would be included as current assets on a consolidated balance sheet
of the Borrower at such time.
"Current Liabilities" means, at any time, all amounts which, in
accordance with GAAP, would be included as current liabilities on a consolidated
balance sheet of the Borrower at such time.
"Debt" means, at any time, without duplication, the outstanding
principal amount of all Indebtedness of the Borrower and its Subsidiaries,
determined in accordance with GAAP.
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event of
Default.
"Disbursement" means any payment made under a Letter of Credit by the
Issuer to the beneficiary (or its assignee or transferee) of such Letter of
Credit.
"Disbursement Date" is defined in Section 2.6.2.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I.
"Dollar" and the sign "$" mean lawful money of the United States.
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<PAGE>
"Domestic Office" means, with respect to any Lender, the office of
such Lender designated as such below its signature hereto or designated in an
Assignment and Assumption Agreement, or such other office of a Lender within the
United States as may be designated from time to time by notice from such Lender
to each other Person party hereto.
"EBITDA" means, for any period, without duplication, the sum of (a)
Net Income for such period; (b) the amount of income taxes deducted in
determining Net Income for such period; (c) the amount of Interest Expense
deducted in determining Net Income for such period; and (d) the amount of
amortization and depreciation deducted in determining Net Income for such
period; provided, that the amount of any tax benefits included in determining
Net Income for such period shall be deducted from EBITDA for such period.
"Effective Date" means the date this Agreement becomes effective
pursuant to Section 10.8.
"Eligible Account Receivable" means an Account Receivable owing to the
Borrower which meets the following requirements:
(a) it is genuine and, except for immaterial errors which do not
impact on the validity of the Account Receivable or the ability to collect
the full amount of the Account Receivable, it is in all respects what it
purports to be;
(b) it arises from either (i) the performance of services by the
Borrower, which services have been fully performed and, if applicable,
acknowledged and/or accepted by the Account Debtor with respect thereto or
(ii) the sale or lease of goods by the Borrower; and if it arises from the
sale or lease of goods, (A) such goods substantially comply with such
Account Debtor's specifications (if any) and have been shipped to, or
delivered to and accepted by, such Account Debtor and (B) the Borrower has
possession of, or if requested by the Agent has delivered to the Agent,
shipping and delivery receipts evidencing such shipment, delivery and
acceptance;
(c) it (i) is evidenced by an invoice rendered to the Account
Debtor with respect thereto which (A) is dated not earlier than the date of
shipment or performance and (B) has payment terms of not greater than 60
days from invoice date, or other payment terms which are acceptable to the
Required Lenders, and in any case is not unpaid more than 90 days after its
invoice date and (ii) is not owing by an Account Debtor if 15% or more of
the Accounts Receivable owing by such Account Debtor are unpaid more than
90 days after the applicable invoice date;
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(d) it is not subject to any assignment, claim or Lien, other than a
Lien permitted under this Agreement;
(e) it is a valid, legally enforceable and unconditional obligation of
the Account Debtor with respect thereto, and no setoff, counterclaim,
credit or allowance has been asserted or threatened by the Account Debtor
(except any credit or allowance which has been deducted in computing the
net amount of the applicable invoice as shown in the Borrowing Base
Certificate furnished to the Agent and the Lenders identifying or including
such Account Receivable), such Account Debtor has not denied liability
thereunder in whole or in part, and such Account Debtor has not refused to
accept any of the goods or services which are the subject of such Account
Receivable or offered or attempted to return any of such goods;
(f) there are no proceedings or actions which are then pending against
the Account Debtor with respect thereto or to which such Account Debtor is
a party which could, in the Agent's reasonable determination, be expected
to result in any material adverse change in such Account Debtor's financial
condition or in its ability to pay any Account Receivable in full when due;
(g) it does not arise out of a contract or order which, by its terms,
forbids, restricts or makes void or unenforceable the assignment by the
Borrower to the Agent of the Account Receivable arising with respect
thereto;
(h) the Account Debtor with respect thereto is not an Affiliate of the
Borrower (provided, that Accounts Receivable owing by the General Products
Division of Orscheln or Otscon Co. shall be Eligible Accounts Receivable so
long as the transactions giving rise to such Accounts Receivable are
permitted under Section 7.2.16 and such Accounts Receivable are otherwise
Eligible Accounts Receivable);
(i) the Account Debtor with respect thereto is a resident or citizen
of, and is located within, the United States of America or the province of
Ontario, Canada, unless the sale of goods giving rise to the Account
Receivable is on letter of credit, banker's acceptance or other credit
support terms satisfactory to the Agent;
(j) it is not an Account Receivable arising from a "sale on approval,"
"sale or return" or "consignment," or subject to any other repurchase or
return agreement;
(k) it is not an Account Receivable with respect to which possession
and/or control of the goods sold giving
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rise thereto is held, maintained or retained by the Borrower or any
Affiliate of the Borrower for the account of or subject to further and/or
future direction from the Account Debtor thereof;
(l) it is not an Account Receivable which violates any warranty,
representation or covenant contained in this Agreement in any material
respect or which violates any warranty, representation or covenant
contained in any Loan Document in any material respect, relating directly
or indirectly to the Accounts Receivable;
(m) the Account Debtor thereunder is not located in the States of
New Jersey or Minnesota; provided, however, that such restriction shall not
apply to an Account Receivable if at the time the Account Receivable was
created and at all times thereafter (i) the Borrower had filed and has
maintained effective a current Notice of Business Activities Report with
the appropriate office or agency of the State of New Jersey or Minnesota,
as applicable or (ii) the Borrower was and has continued to be exempt from
the filing of such Report and has provided the Agent with satisfactory
evidence thereof;
(n) it arises in the ordinary course of the Borrower's business;
(o) if the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, the Borrower has assigned
its right to payment of such Account Receivable to the Agent pursuant to
the Assignment of Claims Act of 1940, as amended; and
(p) if the Account Receivable is evidenced by chattel paper or an
instrument, (i) the Agent shall have specifically agreed in writing to
include such Account Receivable as an Eligible Account Receivable, (ii)
only payments then due and payable under such chattel paper or instrument
shall be included as an Eligible Account Receivable and (iii) the originals
of such chattel paper or instruments have been endorsed and/or assigned and
delivered to the Agent in a manner satisfactory to the Agent.
An Account Receivable which is at any time an Eligible Account Receivable, but
which subsequently fails to meet any of the foregoing requirements, shall
forthwith cease to be an Eligible Account Receivable.
"Eligible Inventory" means Inventory which meets the following
requirements:
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<PAGE>
(a) it is owned by the Borrower, and is not subject to any prior
assignment, claim or Lien, other than a Lien permitted under this
Agreement;
(b) if it is held for sale or lease or furnishing under contracts
of service, it is (except as the Agent may otherwise consent in writing)
new and unused;
(c) except as the Agent may otherwise consent, it is in the possession
and control of the Borrower; provided, however, that if it is stored on
premises leased by the Borrower, the Agent is in possession of a landlord's
waiver (in form and substance acceptable to the Agent) duly executed by the
owner of such premises;
(d) if it is in the possession or control of a bailee, warehouseman,
processor or other Person other than the Borrower and the aggregate amount
of such Inventory in such possession or control of all such bailees,
warehousemen, processors and other Persons is in excess of $750,000, the
Agent is in possession of such agreements, instruments and documents as the
Agent may require (each in form and content acceptable to the Agent and
duly executed, as appropriate, by the bailee, warehouseman, processor or
other Person in possession or control of such Inventory, as applicable)
including but not limited to warehouse receipts in the Agent's name
covering such Inventory and a bailee's consent, processor's consent or
landlord's waiver, as applicable;
(e) it is not Inventory which has been delivered to a third party
pursuant to a consignment arrangement;
(f) the Agent has determined in its reasonable credit judgment (from
the perspective of a prudent lender administering credits of this type
involving borrowers of comparable credit quality) that it is not
unacceptable due to age, type, category, quality and/or quantity;
(g) it is not Inventory produced in violation of the Fair Labor
Standards Act and subject to the "hot goods" provisions contained in Title
29 U.S.C. (S) 215 or any successor statute or section;
(h) it is not "private label" Inventory bearing a servicemark,
trademark or name of any Person other than the Borrower or Ford Motor
Company, or with respect to which the use by the Borrower or the
manufacture or sale thereof by the Borrower is subject to any licensing,
patent, royalty, trademark, tradename or copyright agreement with any other
Person;
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<PAGE>
(i) it is not (i) packaging or shipping materials, (ii) goods used
in connection with maintenance or repair of the Borrower's business,
properties or assets or (iii) general supplies;
(j) it is not Inventory which is dedicated to, identifiable with,
or is otherwise specifically to be used in the manufacture of, goods which
are to be sold or leased to the United States of America or any department,
agency or instrumentality thereof and in respect of which Inventory, the
Borrower shall have received any progress or other advance payment which is
or may be against any Account Receivable generated upon the sale or lease
of any such goods; and
(k) it is not Inventory which violates any warranty, representation
or covenant contained in this Agreement in any material respect or which
violates any warranty, representation or covenant contained in any other
Loan Document in any material respect, relating directly or indirectly to
the Inventory.
Inventory of the Borrower which is at any time Eligible Inventory but which
subsequently fails to meet any of the foregoing requirements shall forthwith
cease to be Eligible Inventory.
"Eligible Tooling Account Receivable" means an Account Receivable
owing to the Borrower which meets the following requirements:
(a) it is genuine and, except for immaterial errors which do not
impact on the validity of the Tooling Account Receivable or the ability to
collect the full amount of the Tooling Account Receivable, it is in all
respects what it purports to be;
(b) it arises from the sale of tooling by the Borrower; and (i)
such tooling substantially complies with such Account Debtor's
specifications (if any) and has been accepted by the Account Debtor, but is
kept in possession of the Borrower or Borrower's vendors and (ii) the
Borrower has possession of, or if requested by the Agent has delivered to
the Agent, evidence of such acceptance;
(c) it (1) is evidenced by an invoice rendered to the Account
Debtor with respect thereto which (i) is dated not earlier than the date of
acceptance or performance and (ii) has payment terms of not greater than
sixty (60) days from invoice date, or other payment terms which are
acceptable to the Required Lenders, and in any case is not unpaid more than
90 days after its invoice date and (2) is not owing by an Account Debtor if
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15% or more of the Tooling Accounts Receivable owing by such Account Debtor
are unpaid more than 90 days after the applicable invoice date;
(d) it is not subject to any assignment, claim or Lien, other than
a Lien permitted under this Agreement;
(e) it is a valid, legally enforceable and unconditional obligation
of the Account Debtor with respect thereto, and no setoff, counterclaim,
credit or allowance has been asserted or threatened by the Account Debtor
(except any credit or allowance which has been deducted in computing the
net amount of the applicable invoice as shown in the original schedule or
Borrowing Base Certificate furnished to the Agent identifying or including
such Tooling Account Receivable), such Account Debtor has not denied
liability thereunder in whole or in part, and such Account Debtor has not
refused to accept any of the goods or services which are the subject of
such Tooling Account Receivable or offered or attempted to return any of
such goods;
(f) there are no proceedings or actions which are then pending
against the Account Debtor with respect thereto or to which such Account
Debtor is a party which could, in the Agent's reasonable determination, be
expected to result in any material adverse change in such Account Debtor's
financial condition or in its ability to pay any Tooling Account Receivable
in full when due;
(g) it does not arise out of a contract or order which, by its
terms, forbids, restricts or makes void or unenforceable the assignment by
the Borrower to the Agent of the Tooling Account Receivable arising with
respect thereto;
(h) the Account Debtor with respect thereto is not an Affiliate of
the Borrower (provided, that Tooling Accounts Receivable owing by the
General Products Division of Orscheln or Otscon Co. shall be Eligible
Tooling Accounts Receivable so long as the transactions giving rise to such
Tooling Accounts Receivable are permitted under Section 7.2.16 and such
Tooling Accounts Receivable are otherwise Eligible Tooling Accounts
Receivable);
(i) the Account Debtor with respect thereto is a resident or
citizen of, and is located within, the United States of America or the
province of Ontario, Canada, unless the tooling giving rise to the Tooling
Account Receivable is on letter of credit, banker's acceptance or other
credit support terms satisfactory to the Agent;
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(j) it is not a Tooling Account Receivable arising from a "sale on
approval," "sale or return" or "consignment," or subject to any other
repurchase or return agreement;
(k) it is not a Tooling Account Receivable which violates any
warranty, representation or covenant contained in this Agreement in any
material respect or which violates any warranty, representation or covenant
contained in any Loan Documents in any material respect, relating directly
or indirectly to the Borrower's Tooling Accounts Receivable;
(l) the Account Debtor thereunder is not located in the States of
New Jersey or Minnesota; provided, however, that such restriction shall not
apply to a Tooling Account Receivable if at the time the Tooling Account
Receivable was created and at all times thereafter (a) the Borrower had
filed and has maintained effective a current Notice of Business Activities
Report with the appropriate office or agency of the State of New Jersey or
Minnesota, as applicable or (b) the Borrower was and has continued to be
exempt from the filing of such Report and has provided the Agent with
satisfactory evidence thereof;
(m) it arises in the ordinary course of the Borrower's business;
(n) if the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, the Borrower has assigned
its right to payment of such Tooling Account Receivable to the Agent
pursuant to the Assignment of Claims Act of 1940, as amended; and
(o) if the Tooling Account Receivable is evidenced by chattel paper
or an instrument, (a) the Agent shall have specifically agreed in writing
to include such Tooling Account Receivable as an Eligible Tooling Account
Receivable, (b) only payments then due and payable under such chattel paper
or instrument shall be included as an Eligible Tooling Account Receivable
and (c) the originals of such chattel paper or instruments have been
endorsed and/or assigned and delivered to the Agent in a manner
satisfactory to the Agent.
A Tooling Account Receivable which is at any time an Eligible Tooling Account
Receivable, but which subsequently fails to meet any of the foregoing
requirements, shall forthwith cease to be an Eligible Tooling Account
Receivable.
"Eligible Tooling WIP" means Tooling WIP which meets the following
requirements:
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(a) it is owned by the Borrower, and is not subject to any prior
assignment, claim or Lien, other than a Lien permitted under this
Agreement;
(b) if it is held for sale or lease or furnishing under contracts
of service, it is (except as the Agent may otherwise consent in writing)
new and unused;
(c) except as the Agent may otherwise consent, it is in the
possession and control of the Borrower; provided, however, that if it is
stored on premises leased by the Borrower, the Agent is in possession of a
landlord's waiver (in form and substance acceptable to the Agent) duly
executed by the owner of such premises;
(d) if it is in the possession or control of a bailee,
warehouseman, processor or other Person other than the Borrower and the
aggregate amount of such Tooling WIP in such possession or control of all
such bailees, warehousemen, processors and other Persons is in excess of
$500,000, the Agent is in possession of such agreements, instruments and
documents as the Agent may require (each in form and content acceptable to
the Agent and duly executed, as appropriate, by the bailee, warehouseman,
processor or other Person in possession or control of such Tooling WIP, as
applicable) including but not limited to warehouse receipts in the Agent's
name covering such Tooling WIP and a bailee's consent, processor's consent
or landlord's waiver, as applicable;
(e) it is not Tooling WIP which has been delivered to a third party
pursuant to a consignment arrangement;
(f) the Agent has determined in its reasonable credit judgment
(from the perspective of a prudent lender administering credits of this
type involving borrowers of comparable credit quality) that it is not
unacceptable due to age, type, category, quality and/or quantity;
(g) it is not Tooling WIP produced in violation of the Fair Labor
Standards Act and subject to the 'hot goods' provisions contained in Title
29 U.S.C. (S) 215 or any successor statute or section;
(h) it is not Tooling WIP which is dedicated to, identifiable with,
or is otherwise specifically to be used in the manufacture of, goods which
are to be sold or leased to the United States of America or any department,
agency or instrumentality thereof and in respect of which Tooling WIP, the
Borrower shall have received any progress or other advance payment which is
or may be against any Account Receivable generated upon the sale or lease
of any such goods; and
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(i) it is not Tooling WIP which violates any warranty,
representation or covenant contained in this Agreement in any material
respect or which violates any warranty, representation or covenant
contained in any Loan Document in any material respect, relating directly
or indirectly to the Borrower's Tooling WIP.
Tooling WIP of the Borrower which is at any time Eligible Tooling WIP but which
subsequently fails to meet any of the foregoing requirements shall forthwith
cease to be Eligible Tooling WIP.
"Environmental Laws" means CERCLA, the Resource Conservation and
Recovery Act of 1987, the Toxic Substances Control Act and all federal, state or
local statutes, laws, ordinances, codes, rules and regulations (including
consent decrees and administrative orders), relating to the regulation,
conservation and protection of the environment and effects thereof on public
health and safety, including the health and safety of employees.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.
"Eurodollar Office" means with respect to any Lender, the office of
such Lender designated as such below its signature hereto or designated in an
Assignment and Assumption Agreement, or such other office of such Lender as
designated from time to time by notice from such Lender to each other Person
party hereto, whether or not outside the United States.
"Eurodollar Rate" means with respect to each Eurodollar Rate Loan
comprising all or any part of the same Borrowing for an Interest Period, the
rate of interest equal to the average (rounded upward, if necessary, to the
nearest 1/16 of 1%) of the rates per annum at which Dollar deposits in
immediately available funds are offered to the Agent's Eurodollar Office in the
interbank eurodollar market as at or about 10:00 a.m., Chicago time, two
Business Days prior to the beginning of such Interest Period, for delivery on
the first day of such Interest Period, in an amount approximately equal or
comparable to the amount of the Agent's Eurodollar Rate Loan comprising part of
such Borrowing and for a period equal to such Interest Period.
"Eurodollar Rate (Adjusted)" means with respect to any portion of a
Loan to be made, continued or maintained as, or converted into, a Eurodollar
Rate Loan for any Interest Period, a rate per annum (rounded upward, if
necessary, to the nearest 1/16 of 1%) determined pursuant to the following
formula:
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Eurodollar Rate = Eurodollar Rate (Adjusted)
----------------------
1 - the Eurodollar
Reserve Percentage
"Eurodollar Rate Loan" means a Loan bearing interest, at all times
during the Interest Period applicable to such Loan, at a rate of interest
determined by reference to the Eurodollar Rate (Adjusted).
"Eurodollar Reserve Percentage" means with respect to any Interest
Period, the reserve percentage (expressed as a decimal) equal to the maximum
aggregate reserve requirements (including all basic, emergency, supplemental,
marginal and other reserves and taking into account any transitional adjustments
or other scheduled changes in reserve requirements) specified under regulations
issued from time to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of and including "Eurocurrency Liabilities", as currently
defined in Regulation D of the F.R.S. Board, having a term approximately equal
or comparable to such Interest Period.
"Event of Default" is defined in Section 8.1.
"Excess Cash Flow" means, for any period, without duplication, (a)
EBITDA for such period; plus (b) net cash extraordinary gains included in
determining Net Income for such period; plus (c) decreases in Working Capital;
less (d) increases in Working Capital; less (e) the amount of income taxes
deducted in determining Net Income for such period; less (f) the amount of
Interest Expense deducted in determining Net Income for such period; less (g)
the unfinanced portion of Capital Expenditures for such period permitted
pursuant to Section 7.2.7; less (h) scheduled amortization of Debt actually paid
during such period; less (i) the aggregate of all voluntary prepayments of the
Term Loans made during such period in accordance with Section 3.1(a); less (j)
net cash extraordinary losses deducted in determining Net Income for such
period; less (k) Restructuring Costs paid by the Borrower during such period
permitted pursuant to Section 7.2.4(e) and not deducted in determining Net
Income for such period unless such period ends on the last day of the 1994
Fiscal Year in which case Excess Cash Flow shall be reduced by the greater of
(1) the Restructuring Costs paid by the Borrower during such period permitted
pursuant to Section 7.2.4(e) and not deducted in determining Net Income for such
period and (2) $2,000,000.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to (a) the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York; or (b) if such rate is not so published for
any day which is a Business Day, the average of the
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quotations for such day on such transactions received by Continental from three
federal funds brokers of recognized standing selected by it. In the case of a
day which is not a Business Day, the Federal Funds Rate for such day shall be
the Federal Funds Rate for the next preceding Business Day. For purposes of
this Agreement any change in the Alternate Reference Rate due to a change in the
Federal Funds Rate shall be effective on the effective date of such change in
the Federal Funds Rate.
"Fee Letter" means that certain confidential letter, dated as of
August 31, 1994, from the Borrower to Continental, relating to certain fees to
be paid in connection with this Agreement.
"Fiscal Quarter" means any of the four consecutive 13 week periods of
a Fiscal Year, the first of which periods commences on the first day of such
Fiscal Year and the last of which periods ends on the last day of such Fiscal
Year; provided, that with respect to a Fiscal Year ending on the Sunday nearest
December 31 of a calendar year consisting of 366 days, the first Fiscal Quarter
of such Fiscal Year shall be a 14 week period; references to the "First,"
"Second," Third" or "Fourth" Fiscal Quarter followed by a number corresponding
to any calendar year (e.g., the "Third Fiscal Quarter 1994") refers to the
first, second, third or fourth Fiscal Quarter, as the case may be, of the Fiscal
Year ending on the Sunday nearest December 31 occurring during such calendar
year.
"Fiscal Year" means any period of 52 consecutive weeks ending on the
Sunday nearest December 31; provided, that with respect to a Fiscal Year ending
on the Sunday nearest December 31 of a calendar year consisting of 366 days,
Fiscal Year means the period of 53 consecutive weeks ending on the Sunday
nearest December 31; references to a Fiscal Year with a number corresponding to
any calendar year (e.g., the "1994 Fiscal Year") refer to the Fiscal Year ending
on the Sunday nearest December 31 occurring during such calendar year.
"Fixed Charge Coverage Ratio" means, for any period, the ratio of (a)
EBITDA for such period, less income taxes paid in cash during such period; to
(b) the sum of, without duplication, (i) Interest Expense for such period, (ii)
fees payable pursuant to Section 3.3.2 and Section 3.3.4 and deducted in
determining Net Income for such period, (iii) scheduled principal payments of
Debt during such period, and (iv) dividends paid during such period to or on
behalf of MC to permit MC and Newco to pay regularly scheduled semi-annual
interest on the Subordinated Promissory Notes.
"Ford Recall Liability" means all of the liability of the Borrower to
Ford Motor Company now or hereafter arising in connection with the recall of the
1992, 1993 and 1994 Ford F-150, F-250, F-350 and Bronco; 1993 and 1994 Ranger
and Explorer; and
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1993 and 1994 Mazda B Series/Navajo vehicles relating to parking brakes.
"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP" is defined in Section 1.4.
"Guaranties" mean the Subsidiary Guaranty and the MC Guaranty.
"Hazardous Material" means (a) any "hazardous substance", as defined
by CERCLA; (b) any "hazardous waste", as defined by the Resource Conservation
and Recovery Act, as amended; (c) any pollutant or contaminant or hazardous,
dangerous or toxic chemical, material or substance (including any petroleum
product) within the meaning of any Environmental Laws; (d) any radioactive
material, including any source, special nuclear or by-product material as
defined at 42 U.S.C. (S)2011 et seq., as amended or hereafter amended; and (e)
asbestos in any form or condition which is or could become friable.
"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under interest rate swap agreements, interest rate
cap agreements and interest rate collar agreements, and all other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates or currency exchange rates.
"Impermissible Qualification" means, with respect to the opinion or
certification of any independent public accountant as to any financial statement
of the Borrower, any qualification or exception to such opinion or certification
(a) which is of a "going concern" or similar nature; (b) which relates to the
limited scope of examination of matters materially relevant to such financial
statement; or (c) which relates to the treatment or classification of any item
in such financial statement and which, as a condition to its removal, would
require an adjustment to such item the effect of which would be to cause the
Borrower to be in default of any of its obligations under Section 7.2.4.
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money and all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments; (b) all
obligations, contingent or otherwise, relative to the face amount of all letters
of credit, whether or not drawn, and banker's acceptances issued for the account
of such Person; (c) all obligations of such Person as lessee under leases which
have been or should be, in accordance with GAAP, recorded as Capitalized Lease
Liabilities; (d) net liabilities of such Person under all Hedging Obligations;
(e) whether or not so included as liabilities in accordance with GAAP, all
obligations of such Person to pay the deferred purchase price
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of property or services if such obligations are secured by a Lien on property
owned or being purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not such
obligations shall have been assumed by such Person or is limited in recourse;
and (f) all Contingent Liabilities of such Person in respect of any of the
foregoing. For all purposes of this Agreement, the Indebtedness of any Person
shall include the Indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer (except to the extent that the
express terms of the relevant partnership or joint venture agreement and
applicable law provide that liabilities incurred in connection therewith are
without recourse to such Person).
"Indemnified Liabilities" is defined in Section 10.4.
"Indemnified Parties" is defined in Section 10.4.
"Interest Coverage Ratio" means, for any period, the ratio of (a)
EBITDA for such period; to (b) Interest Expense for such period.
"Interest Expense" means for any period, the aggregate consolidated
interest expense, net of interest income, of the Borrower for such period, as
determined in accordance with GAAP, including, without duplication, (i)
commitment fees paid or owed pursuant to Section 3.3.1 with respect to the then
unused portion of the Revolving Loan Commitment for such period, (ii) amounts
paid (net of amounts received) under Hedging Obligations for such period, (iii)
the portion of any payments made in respect of Capitalized Lease Liabilities of
the Borrower allocable to interest expense for such period, and (iv) letter of
credit fees paid or owed pursuant to Section 3.3.3 for such period.
"Interest Period" means with respect to any Eurodollar Rate Loan, the
period beginning on (and including) the date on which such Eurodollar Rate Loan
is made or continued as, or converted into, a Eurodollar Rate Loan pursuant to
Section 2.3 or 2.4 and ending on (but excluding) the day which numerically
corresponds to such date one, two, three or, if available (in the determination
of the Agent) six months thereafter (or, if such month has no numerically
corresponding day, on the last Business Day of such month), as the Borrower may
select in its relevant notice pursuant to Section 2.3 or 2.4; provided, however,
that (a) there shall not be outstanding at any time, more than five Borrowings
of Eurodollar Rate Loans; (b) if such Interest Period would otherwise end on a
day which is not a Business Day, such Interest Period shall end on the next
following Business Day (unless such next following Business Day is the first
Business Day of a calendar month, in which case such Interest Period shall end
on the Business Day next preceding such numerically corresponding day); and (c)
no Interest Period for any Loan may end later than the Stated Maturity Date for
such Loan.
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"Inventory" means any and all of the Borrower's goods, (including,
without limitation, goods in transit) wheresoever located, which are or may at
any time be leased by the Borrower to a lessee, held for sale or lease,
furnished under any contract of service, or held as raw materials, work in
process, or supplies or materials used or consumed in the Borrower's business,
or which are held for use in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such goods, and all goods the sale or other
disposition of which has given rise to an Account Receivable which are returned
to and/or repossessed and/or stopped in transit by the Borrower or the Agent or
any agent or bailee of either of them, and all documents of title or other
documents representing the same.
"Investment" means, with respect to any Person, (a) any loan, advance
or deposit made by such Person to any other Person (excluding commission,
travel, petty cash and similar advances to officers and employees made in the
ordinary course of business); (b) any Contingent Liability of such Person
incurred in connection with loans, advances or deposits described in clause (a);
and (c) any ownership or similar interest held by such Person in any other
Person. The amount of any Investment shall be the original principal or capital
amount thereof less all returns of principal or equity thereon (without
adjustment by reason of the financial condition of such other Person) and, if
made by the transfer or exchange of property other than cash, the amount of any
such Investment shall be the fair market value of such property at the time of
such transfer or exchange.
"Issuance Request" means an issuance request duly completed and
executed by the chief executive, accounting or financial Authorized Officer of
the Borrower, substantially in the form of Exhibit B-2 hereto.
"Issuer" means Continental in its capacity as issuer of the Letters of
Credit.
"Joint Venture Agreement" is defined in the Recitals.
"Lenders" is defined in the preamble, and shall include the Issuer and
any financial institution that becomes a Lender pursuant to the terms of Section
10.11.
"Letter of Credit Outstandings" means, on any date, an amount equal to
the sum of (a) the then aggregate amount which is undrawn and available under
all issued and outstanding Letters of Credit; and (b) the then aggregate amount
of all unpaid and outstanding Reimbursement Obligations.
"Letters of Credit" is defined in Section 2.1.2.
"Leverage Ratio" means, as of the last day of any Fiscal Quarter, the
ratio of (a) the aggregate principal amount of Debt
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outstanding on the last day of such Fiscal Quarter; to (b) Net Operating Cash
Flow for the four Fiscal Quarter period ending on the last day of such Fiscal
Quarter; provided, that for the Fourth Fiscal Quarter 1994, First Fiscal Quarter
1995 and Second Fiscal Quarter 1995, Leverage Ratio means the ratio of (a) the
aggregate principal amount of Debt outstanding on the last day of such Fiscal
Quarter; to (b) the sum of (i) Net Operating Cash Flow for the four Fiscal
Quarter period ending on the last day of such Fiscal Quarter, and (ii) Orscheln
Net Operating Cash Flow for the applicable Orscheln Pre-Transfer Period.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"Loan" means, as the context may require, either a Revolving Loan or a
Term Loan of any type.
"Loan Documents" means this Agreement, the Notes, the Pledge
Agreement, the MC Pledge Agreement, the Guaranties, the Fee Letter, the Upfront
Fee Letters, the Mortgages, the Security Agreement, the Subsidiary Security
Documents and all other instruments, documents and agreements executed by or on
behalf of any Obligor in connection with the Loans and other financing
transactions relating to this Agreement, all as amended, supplemented or
modified from time to time, but excluding the Joint Venture Agreement.
"Material Adverse Effect" means (a) a material adverse effect upon the
business, operations, properties, assets or condition (financial or otherwise)
of the Borrower or the Borrower and its Subsidiaries taken as a whole or (b) the
material impairment of the ability of any Obligor to perform its obligations
under any Loan Document to which it is a party or of the Agent or any Lender to
enforce or collect any of the Obligations.
"MC" is defined in the Recitals.
"MC Guaranty" means the guaranty executed and delivered by MC pursuant
to Section 5.1.3, substantially in the form of Exhibit E, as amended,
supplemented or otherwise modified from time to time.
"MC Pledge Agreement" means the pledge agreement executed and
delivered by MC pursuant to Section 5.1.4, substantially in the form of Exhibit
F-1, as amended, supplemented or otherwise modified from time to time.
"Mortgage" means each of the mortgages, deeds of trust, leasehold
mortgages, leasehold deeds of trust, collateral
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assignment of leases or other real estate security documents executed and
delivered pursuant to Section 5.1.6, as each may be amended, supplemented or
otherwise modified from time to time.
"Net Disposition Proceeds" means the excess of (a) the gross cash
proceeds received by the Borrower or any of its Subsidiaries from an Asset
Disposition; over (b) the sum of (i) all fees and expenses with respect to
legal, investment banking, brokerage and accounting and other professional fees,
sales commissions and disbursements actually incurred in connection with such
Asset Disposition which have not been paid to Affiliates of the Borrower, (ii)
all taxes actually paid or payable in cash in connection with such Asset
Disposition, and (iii) all repayments of Indebtedness secured by a Lien on the
property disposed of to the extent such Lien is permitted under Section 7.2.3
and such Lien is senior to the Lien of the Agent.
"Net Income" means, for any period, the aggregate of all amounts
(exclusive of all amounts in respect of any extraordinary gain or loss) which,
in accordance with GAAP, would be included as net income on the consolidated
statements of income of the Borrower for such period.
"Net Operating Cash Flow" means, for any period, (a) EBITDA for such
period; less (b) Capital Expenditures for such period.
"Net Worth" means, at any time, the sum of all amounts which, in
accordance with GAAP (excluding the effects of the adoption of FASB 106) would
be included under shareholders' equity of the Borrower plus (to the extent not
included in shareholders' equity) preferred stock on the consolidated balance
sheet of the Borrower at such time.
"Note" means, as the context may require, either a Revolving Note or a
Term Note.
"Newco" is defined in the Recitals.
"Obligations" means all obligations, liabilities and indebtedness of
every nature of the Borrower from time to time owed to the Agent or any Lender
under the Loan Documents including the principal amount of all debts, claims and
indebtedness, accrued and unpaid interest and all fees, costs and expenses,
whether primary, secondary, direct, contingent, fixed or otherwise, heretofore,
now and/or from time to time hereafter owing, due or payable whether before or
after the filing of a proceeding under the Bankruptcy Code by or against the
Borrower.
"Obligor" means the Borrower and any other Person (other than the
Agent, any Co-Agent or any Lender) obligated under any Loan Document.
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"Organic Document" means with respect to any Obligor, its certificate
of incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements applicable to any of its authorized shares of capital
stock.
"Orscheln" is defined in the Recitals.
"Orscheln Capital Expenditures" means, for an Orscheln Pre-Transfer
Period, the aggregate amount of all expenditures (including, with respect to all
leasing or similar arrangements entered into during such period which, in
accordance with GAAP, would be classified as a capital lease, the aggregate
amount of all rental payments payable during the term of such lease, excluding
the portion of such payments allocable to Orscheln Interest Expense) of Orscheln
for fixed or capital assets made during such period which, in accordance with
GAAP, would be classified as Capital Expenditures, to the extent attributable to
the Orscheln Transferred Business.
"Orscheln EBITDA" means, for an Orscheln Pre-Transfer Period, without
duplication, the sum of (a) Orscheln Net Income for such period; (b) the amount
of income taxes deducted in determining Orscheln Net Income for such period; (c)
the amount of Orscheln Interest Expense deducted in determined Orscheln Net
Income for such period; (d) the amount of amortization and depreciation deducted
in determining Orscheln Net Income for such period; and (e) the amount of the
Adjusted Management Fee; provided, that the amount of any tax benefits included
in determining Orscheln Net Income for such period shall be deducted from
Orscheln EBITDA for such period.
"Orscheln Interest Expense" means, for an Orscheln Pre-Transfer
Period, the aggregate consolidated interest expense, net of interest income, of
Orscheln for such period, as determined in accordance with GAAP.
"Orscheln Net Income" means, for an Orscheln Pre-Transfer Period, the
aggregate of all amounts (exclusive of all amounts in respect of any
extraordinary gain or loss) which, in accordance with GAAP, would be included as
net income on the consolidated statements of income of Orscheln for such period,
to the extent such amounts are attributable to the Orscheln Transferred
Business.
"Orscheln Net Operating Cash Flow" means, for an Orscheln Pre-Transfer
Period, (a) Orscheln EBITDA for such period; less (b) Orscheln Capital
Expenditures for such period.
"Orscheln Pre-Transfer Period" means, (a) with respect to the
calculation of the Leverage Ratio as of the last day of the Fourth Fiscal
Quarter 1994, the period beginning on December 26, 1993 and ending on the date
of the initial Credit Extension, (b) with respect to the calculation of the
Leverage Ratio as of the last day of the First Fiscal Quarter 1995, the period
beginning on
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April 3, 1994 and ending on the date of the initial Credit Extension, and (c)
with respect to the calculation of the Leverage Ratio as of the last day of the
Second Fiscal Quarter 1995, the period beginning on July 3, 1994 and ending on
the date of the initial Credit Extension.
"Orscheln Transferred Business" has the meaning ascribed to such term
in the Joint Venture Agreement.
"Participant" is defined in Section 10.11.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the
Borrower or any corporation, trade or business that is, along with the Borrower,
a member of a Controlled Group, may have liability, including any liability by
reason of having been a substantial employer within the meaning of Section 4063
of ERISA at any time during the preceding five years, or by reason of being
deemed to be a contributing sponsor under Section 4069 of ERISA.
"Percentage" means, with respect to any Lender, the percentage set
forth opposite its signature hereto, as such percentage may be adjusted from
time to time pursuant to an Assignment and Assumption Agreement.
"Person" means any natural person, corporation, partnership, limited
liability company, firm, association, trust, government, governmental agency or
any other entity, whether acting in an individual, fiduciary or other capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreement" means the Pledge Agreement executed and delivered
by the Borrower pursuant to Section 5.1.4, substantially in the form of Exhibit
F-2 hereto, as amended, supplemented or otherwise modified from time to time.
"Quarterly Payment Date" means the last day of each March, June,
September, and December.
"Reference Rate" means, at any time, the rate of interest then most
recently announced by Continental at Chicago, Illinois as its reference rate.
The Reference Rate is not necessarily intended to be the lowest rate of interest
determined by Continental in connection with extensions of credit.
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"Reference Rate Loan" means a Loan bearing interest at a fluctuating
rate determined by reference to the Alternate Reference Rate.
"Register" is defined in clause (d) of Section 10.11.
"Reimbursement Obligation" is defined in Section 2.6.3.
"Release" means a "release", as such term is defined in CERCLA.
"Required Lenders" means, at any time, Lenders holding at least 60% of
the sum of then aggregate outstanding principal amount of the Term Loans, and
the Revolving Loan Commitments (or, if the Revolving Loan Commitments have been
terminated, the aggregate outstanding principal amount of the Revolving Loans
and Letter of Credit Outstandings).
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect
from time to time.
"Restructuring Costs" means, for any period, the expenditures made by
the Borrower (a) in connection with the amalgamation of the Orscheln Transferred
Business with its business and (b) deducted from the restructuring reserve
established on the Borrower's balance sheet.
"Revolving Loan" is defined in Section 2.1.2.
"Revolving Loan Commitment" means, with respect to any Lender, such
Lender's obligation to make Revolving Loans pursuant to Section 2.1.2.
"Revolving Loan Commitment Amount" means, on any day, $30,000,000, as
such amount may be permanently reduced from time to time pursuant to Section
2.2.
"Revolving Loan Commitment Termination Date" means the earliest of (a)
August 31, 2000; (b) the date on which the Revolving Loan Commitment Amount is
terminated in full or reduced to zero pursuant to Section 2.2; and (c) the date
on which any Commitment Termination Event occurs.
"Revolving Note" means a promissory note of the Borrower payable to a
Lender, in the form of Exhibit G-1 hereto (as such promissory note may be
amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of the Borrower to such Lender resulting from outstanding
Revolving Loans, and also means all other promissory notes accepted from time to
time in substitution therefor or renewal thereof.
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"Security Agreement" means the Security Agreement executed and
delivered by the Borrower pursuant to Section 5.1.5, substantially in the form
of Exhibit H hereto, as amended, supplemented or otherwise modified from time to
time.
"Stated Amount" of each Letter of Credit means the total amount
available to be drawn under such Letter of Credit upon the issuance thereof.
"Stated Expiry Date" is defined in Section 2.6.
"Stated Maturity Date" means (a) in the case of any Revolving Loan,
August 31, 2000; and (b) in the case of any Term Loan, June 30, 2001.
"Subordinated Debt" means all unsecured Indebtedness of the Borrower
for borrowed money which (a) is subject to, and is only entitled to the benefits
of, terms and provisions (including subordination, terms of payment, interest
rates, covenants, remedies, events of default, acceleration and redemption
provisions) satisfactory in form and substance to the Agent and the Required
Lenders and (b) has been approved in writing by the Agent (at the direction of
the Required Lenders) prior to the incurrence thereof.
"Subordinated Promissory Notes" means the Subordinated Promissory Note
dated August 31, 1994 in the original principal amount of $2,000,000, issued by
Newco to Orscheln, the Subordinated Promissory Note dated August 31, 1994, in
the original principal amount of $1,800,000, issued by MC to Onex U.S.
Investments, Inc. and the Subordinated Promissory Note dated August 31, 1994 in
the original principal amount of $200,000, issued by MC to J2R Corporation.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which more than 50% of the
total voting power of shares of stock (or equivalent ownership or controlling
interest) entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof.
"Subsidiary Guarantor" means Dura de Mexico S.A. de C.V., a Mexico
corporation.
"Subsidiary Guaranty" means the Subsidiary Guaranty executed and
delivered pursuant to Section 5.1.3, substantially in the form of Exhibit I
hereto, as amended, supplemented or otherwise modified from time to time.
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"Subsidiary Security Documents" means the Accounts Receivable Pledge
Agreement and Notice of Security Interest in Inventory and Equipment executed
and delivered pursuant to Section 5.1.3, as each may be amended, supplemented or
otherwise modified from time to time.
"Taxes" is defined in Section 4.6.
"Term Loan" is defined in Section 2.1.1.
"Term Loan Commitment" means, with respect to any Lender, such
Lender's obligation to make Term Loans pursuant to Section 2.1.1.
"Term Loan Commitment Amount" means $50,000,000.
"Term Note" means a promissory note of the Borrower payable to a
Lender, in the form of Exhibit G-2 hereto (as such promissory note may be
amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of the Borrower to such Lender resulting from outstanding
Term Loans, and also means all other promissory notes accepted from time to time
in substitution therefor or renewal thereof.
"Tooling Accounts Receivable" means an Account Receivable arising from
the sale of tooling.
"Tooling WIP" means tooling work-in-process of Borrower.
"Transferee" is defined in clause (g) of Section 10.11.
"U.C.C." means the Uniform Commercial Code as from time to time in
effect in the State of Illinois.
"United States" or "U.S." means the United States of America, its
fifty States and the District of Columbia.
"Upfront Fee Letters" means those certain confidential letters, each
dated August 31, 1994, from Borrower to each Lender, relating to certain fees to
be paid in connection with this Agreement.
"Welfare Plan" means a "welfare plan", as such term is defined in
Section 3(1) of ERISA.
"Working Capital" means, at any time, an amount equal to (a) Current
Assets; less (b) Current Liabilities.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in each Loan Document, Borrowing
Request, Issuance Request, Continuation/ Conversion Notice, Compliance
Certificate, notice or
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other communication delivered from time to time in connection with this
Agreement or any other Loan Document. The terms "herein," "hereof," "hereto,"
"hereunder" and similar terms contained in this Agreement or any other Loan
Document refer to this Agreement or such other Loan Document, as the case may
be, as a whole and not to any particular Section, paragraph or provision of this
Agreement or such other Loan Document. The terms "including" and "include" mean
including without limiting the generality of any description preceding such
term, and, for purposes of this Agreement and each other Loan Document, the
parties hereto agree that the rule of ejusdem generis shall not be applicable to
limit a general statement, which is followed by a referable to and enumeration
of specific matters, to matters similar to the matters specifically mentioned.
SECTION 1.3. Cross-References. Unless otherwise specified,
references in this Agreement and in each other Loan Document to any Article or
Section are references to such Article or Section of this Agreement or such
other Loan Document, as the case may be, and, unless otherwise specified,
references in any Article, Section or definition to any clause are references to
such clause of such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations. Unless
otherwise specified, all accounting terms used herein or in any other Loan
Document shall be interpreted, all accounting determinations and computations
hereunder or under any other Loan Document shall be made, and all financial
statements required to be delivered hereunder or under any other Loan Document
shall be prepared, in accordance with those generally accepted accounting
principles ("GAAP") applied in the preparation of the financial statements
referred to in Section 6.5; provided, however, that there shall be excluded from
the operation of the Loan Documents any effects of FASB 106. If any changes in
accounting principles from those used in the preparation of the financial
statements referred to in Section 6.5 hereafter occur as a result of the
promulgation of rules, regulations, pronouncements, or opinions by the Financial
Accounting Standards Board or the American Institute of Certified Public
Accountants (or successors thereto or agencies with similar functions) and
result in a change in the method of calculation of financial covenants,
standards, or terms found in this Agreement, the Borrower, the Agent and the
Required Lenders agree to enter into negotiations to amend such financial
covenants, standards or terms so as to equitably reflect such changes with the
desired result that the evaluations of the Borrower's financial condition shall
be the same after such changes as if such changes had not been made; provided,
however, that until the parties hereto have reached a definitive agreement on
such amendments, the Borrower's financial condition shall continue to be
evaluated on the same principles as those used in the preparation of the
financial statements referred to in Section 6.5 prior to such change in
accounting principles.
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ARTICLE II
COMMITMENTS, BORROWING AND ISSUANCE PROCEDURES,
NOTES AND LETTERS OF CREDIT
SECTION 2.1. Commitments. On the terms and subject to the conditions
of this Agreement (including Article V),
(a) each Lender severally agrees to make Loans pursuant
to the Commitments described in this Section 2.1; and
(b) the Issuer severally agrees that it will issue
Letters of Credit pursuant to Section 2.1.3, and each other
Lender severally agrees that it will purchase participation
interests in such Letters of Credit pursuant to Section 2.1.2
and Section 2.6.1.
SECTION 2.1.1. Term Loan Commitments. On the terms and subject to
the conditions of this Agreement (including Article V), each Lender will make a
single Loan (relative to such Lender, its "Term Loan") to the Borrower equal to
such Lender's Percentage of the aggregate amount of the Borrowing of Term Loans
requested by the Borrower to be made on the date of the initial Credit
Extension. The Commitment of each Lender described in this Section 2.1.1 is
herein referred to as its "Term Loan Commitment". No amounts paid or prepaid
with respect to any Term Loans may be reborrowed.
SECTION 2.1.2. Revolving Loan Commitment. From time to time on any
Business Day occurring prior to the Revolving Loan Commitment Termination Date,
each Lender will (i) make Loans (relative to such Lender, its "Revolving Loans")
to the Borrower equal to such Lender's Percentage of the aggregate amount of the
Borrowing of Revolving Loans requested by the Borrower to be made on such day
and (ii) participate in letters of credit issued by the Issuer (the "Letters of
Credit") for the account of the Borrower equal to such Lender's Percentage of
the aggregate face amount of such Letters of Credit requested to be issued by
the Borrower on such day. The Commitment of each Lender described in this
Section 2.1.2 is herein referred to as its "Revolving Loan Commitment". On the
terms and subject to the conditions hereof, the Borrower may from time to time
borrow, prepay and reborrow Revolving Loans.
SECTION 2.1.3. Letter of Credit Terms. From time to time on any
Business Day prior to the Revolving Loan Commitment Termination Date, the Issuer
will
(a) issue one or more Letters of Credit for the account
of the Borrower in Stated Amounts requested by the Borrower on
such day; or
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(b) extend the Stated Expiry Date of an existing Letter
of Credit previously issued hereunder to a date not later than
the earlier of (i) the Revolving Loan Commitment Termination
Date and (ii) one year from the date of such extension.
The form of each Letter of Credit shall be reasonably acceptable to the Issuer.
SECTION 2.1.4. Lenders Not Permitted or Required to Make Loans. No
Lender shall be permitted or required to make
(a) any Term Loan if, after giving effect thereto, the
aggregate original principal amount of all Term Loans
(i) of all Lenders would exceed the Term Loan
Commitment Amount, or
(ii) of such Lender would exceed such Lender's
Percentage of the Term Loan Commitment Amount; or
(b) any Revolving Loan if, after giving effect thereto,
the aggregate outstanding principal amount of all Revolving
Loans
(i) of all Lenders, together with the aggregate
principal amount of all Letter of Credit Outstandings,
would exceed the lesser of (A) Revolving Loan Commitment
Amount and (B) the Borrowing Base, or
(ii) of such Lender, together with such Lender's
Percentage of the aggregate principal amount of all Letter
of Credit Outstandings, would exceed the lesser of (A)
such Lender's Percentage of the Revolving Loan Commitment
Amount and (B) such Lender's Percentage of the Borrowing
Base.
SECTION 2.1.5. Issuer Not Permitted or Required to Issue Letters of
Credit. The Issuer shall not be permitted or required to issue any Letter of
Credit if, after giving effect thereto, the sum of all Letter of Credit
Outstandings plus the aggregate principal amount of all Revolving Loans then
outstanding would exceed the lesser of (A) Revolving Loan Commitment Amount and
(B) the Borrowing Base.
SECTION 2.2. Reduction of Commitment Amount. The Borrower may, from
time to time on any Business Day, voluntarily reduce the amount of the Revolving
Loan Commitment Amount; provided, however, that the Revolving Loan Commitment
Amount shall not be reduced to an amount below the Letter of Credit Outstandings
and any such reductions shall require at least two Business Days' prior written
notice to the Agent and be permanent, and any partial
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reduction of such Commitment Amount shall be in a minimum amount of $2,500,000
and in an integral multiple of $500,000.
SECTION 2.3. Borrowing Procedure and Funding Maintenance. The
Borrower may from time to time irrevocably request pursuant to a Borrowing
Request that a Borrowing be made in a minimum amount of $500,000 and in an
integral multiple of $250,000. If the request is for a Reference Rate Loan,
such Borrowing Request shall be delivered to the Agent on or before 10:00 a.m.
(Chicago time) at least one Business Day in advance and if the request is for a
Eurodollar Rate Loan, such Borrowing Request shall be delivered to the Agent on
or before 10:00 a.m. (Chicago time) at least three Business Days in advance. No
Borrowing Request shall be delivered more than five Business Days in advance.
On the terms and subject to the conditions of this Agreement, each Borrowing
shall be comprised of the type of Loans, and shall be made on the Business Day,
specified in such Borrowing Request. On or before 11:00 a.m. (Chicago, Illinois
time) on such Business Day each Lender shall deposit with the Agent same day
funds in an amount equal to such Lender's Percentage of the requested Borrowing.
Such deposit will be made to an account which the Agent shall specify from time
to time by notice to the Lenders. To the extent funds are received from the
Lenders, the Agent shall make such funds available to the Borrower by wire
transfer to the accounts the Borrower shall have specified in its Borrowing
Request. No Lender's obligation to make any Loan shall be affected by any other
Lender's failure to make any Loan.
SECTION 2.4. Continuation and Conversion Elections. The Borrower
may from time to time irrevocably elect pursuant to a Continuation/Conversion
Notice that all, or any portion of any Loans be, in the case of Reference Rate
Loans, converted into Eurodollar Rate Loans or, in the case of Eurodollar Rate
Loans, converted into Reference Rate Loans or continued as Eurodollar Rate
Loans; provided, however, that (i) in the absence of delivery of a
Continuation/Conversion Notice with respect to such Eurodollar Rate Loans at
least three Business Days before the last day of the then current Interest
Period with respect thereto, such Eurodollar Rate Loans shall, on such last day,
automatically convert to Reference Rate Loans, (ii) if a portion of such Loan is
converted or continued, the minimum amount of such portion shall be $500,000 and
in an integral multiple of $250,000, (iii) each such conversion or continuation
shall be pro rated among the applicable outstanding Loans of all Lenders, and
(iv) no portion of the outstanding principal amount of any Loans may be
continued as, or be converted into, Eurodollar Rate Loans when any Default has
occurred and is continuing. If the election is for a Reference Rate Loan to be
converted into a Eurodollar Rate Loan or to continue a Eurodollar Rate Loan,
such Continuation/Conversion Notice shall be delivered to the Agent on or before
10:00 a.m. (Chicago time) at least three Business Days in advance and if the
request is for a Eurodollar Rate Loan to be converted to a Reference Rate Loan,
such Continuation/Conversion Notice shall be delivered to the Agent on
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or before 10:00 a.m. (Chicago time) at least one Business Day in advance. No
Continuation/Conversion Notice shall be delivered more than five Business Days
in advance.
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill
its obligation to make, continue or convert Eurodollar Rate Loans hereunder by
causing one of its foreign branches or Affiliates (or an international banking
facility created by such Lender) to make or maintain such Eurodollar Rate Loan;
provided, however, that such Eurodollar Rate Loan shall nonetheless be deemed to
have been made and to be held by such Lender, and the obligation of the Borrower
to repay such Eurodollar Rate Loan shall nevertheless be to such Lender for the
account of such foreign branch, Affiliate or international banking facility; and
provided, further, that such Lender shall cause such foreign branch, Affiliate
or international banking facility to make the representations and agreements and
to furnish the information statements required of Transferees under clause (h)
of Section 10.11 hereof. In addition, the Borrower hereby consents and agrees
that, for purposes of any determination to be made for purposes of Sections 4.1,
4.2, 4.3 or 4.4, it shall be conclusively assumed that each Lender elected to
fund all Eurodollar Rate Loans by purchasing Dollar deposits in its Eurodollar
Office's interbank eurodollar market.
SECTION 2.6. Issuance Procedures. The Borrower may, from time
to time irrevocably request pursuant to an Issuance Request, on not less than
three Business Days' notice, that the Issuer issue, or extend the Stated Expiry
Date of, as the case may be, a Letter of Credit. Upon receipt of an Issuance
Request, the Agent shall promptly notify the Issuer and each Lender thereof.
Each Letter of Credit shall by its terms be stated to expire on a date (its
"Stated Expiry Date") no later than the earlier of (i) the Revolving Loan
Commitment Termination Date and (ii) one year from the date of issuance, as such
date may be extended pursuant to this Section 2.6.
SECTION 2.6.1. Other Lenders' Participation. Upon the issuance
of each Letter of Credit issued by the Issuer pursuant hereto, and without
further action, each Lender shall be deemed to have irrevocably purchased, to
the extent of its Percentage, a participation interest in such Letter of Credit
(including the Contingent Liability and any Reimbursement Obligation with
respect thereto) as provided in Section 2.1.2, and such Lender shall, to the
extent of its Percentage, be responsible for reimbursing promptly (and in any
event within one Business Day) the Issuer for Reimbursement Obligations which
have not been reimbursed by the Borrower in accordance with Section 2.6.2 and
Section 2.6.3. Upon such reimbursement by Lenders of the Issuer, the Borrower
shall be obligated to reimburse the Lenders. In addition, such Lender shall, to
the extent of its Percentage, be entitled to receive a ratable portion of the
letter of credit fees payable pursuant to
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Section 3.3 with respect to each Letter of Credit and of interest payable
pursuant to Section 3.2.
SECTION 2.6.2. Disbursements. The Issuer will notify the Borrower
and the Agent promptly of the presentment for payment of any Letter of Credit
issued by the Issuer, together with notice of the date (the "Disbursement Date")
such payment shall be made. Prior to 11:00 a.m., Chicago, Illinois time, on the
first Business Day following the Disbursement Date, the Borrower will reimburse
the Agent, for the account of the Issuer, or if the Lenders have reimbursed the
Agent, the Borrower will reimburse the Lenders, for all amounts which the Issuer
has disbursed under such Letter of Credit, together with interest thereon at the
rate per annum then applicable to the Revolving Loans.
SECTION 2.6.3. Reimbursement. The obligation (a "Reimbursement
Obligation") of the Borrower under Section 2.6.2 to reimburse the Issuer with
respect to each Disbursement (including interest thereon), and, upon the failure
of the Borrower to reimburse the Issuer, each Lender's obligation under Section
2.6.1 to reimburse the Issuer, shall be absolute and unconditional under any and
all circumstances and irrespective of any setoff, counterclaim or defense to
payment which the Borrower or such Lender, as the case may be, may have or have
had against the Issuer or any Lender, including any defense based upon the
failure of any Disbursement to conform to the terms of the applicable Letter of
Credit or any non-application or misapplication by the beneficiary of the
proceeds of such Letter of Credit; provided, however, that after paying in full
its reimbursement obligation hereunder, nothing herein shall adversely affect
the right of the Borrower or such Lender, as the case may be, to commence any
proceeding against the Issuer for any wrongful Disbursement made by the Issuer
under a Letter of Credit as a result of acts or omissions constituting gross
negligence or wilful misconduct on the part of the Issuer.
SECTION 2.6.4. Deemed Disbursements. Upon the occurrence and during
the continuation of any Default of the type described in Section 8.1.9 or, with
notice from the Agent at the direction of the Required Lenders, upon the
occurrence and during the continuation of any Event of Default
(a) an amount equal to that portion of all Letter of
Credit Outstandings attributable to the then aggregate amount
which is undrawn and available under all Letters of Credit
issued and outstanding for the account of the Borrower shall,
without demand upon or notice to the Borrower, be deemed to have
been paid or disbursed by the Issuer under such Letters of
Credit (notwithstanding that such amount may not in fact have
been so paid or disbursed); and
(b) upon notification by the Agent to the Borrower of
its obligations under this Section, the Borrower shall
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be immediately obligated to reimburse the Issuer for the amount
deemed to have been so paid or disbursed by such Issuer.
Any amounts so payable by the Borrower pursuant to this Section shall be applied
to the Revolving Loans, or if no Revolving Loans are then outstanding, deposited
in cash with the Agent and held as collateral security for the Obligations in
connection with the Letters of Credit issued by the Issuer. Monies held by the
Agent pursuant to this Section shall be invested in Cash Equivalent Investments,
and the proceeds of such investments shall be reinvested in Cash Equivalent
Investments at the Agent's discretion. All earnings thereon will be applied to
the Revolving Loans, or if no Revolving Loans are then outstanding, deposited in
cash with the Agent and held as collateral security for the Obligations in
connection with the Letters of Credit issued by the Issuer. The Agent will not
be responsible or liable for any loss resulting from the investment performance
of any investment or reinvestment of monies held by it in Cash Equivalent
Investments or from the sale or liquidation of any Cash Equivalent Investments,
other than loss directly resulting from the Agent's gross negligence or willful
misconduct. At such time when all Events of Default shall have been cured or
waived, the Agent shall return to the Borrower all amounts then on deposit with
the Agent pursuant to this Section.
SECTION 2.6.5. Nature of Reimbursement Obligations. The Borrower
and, to the extent set forth in Section 2.6.1, each Lender shall assume all
risks of the acts, omissions or misuse of any Letter of Credit by the
beneficiary thereof. The Issuer (except to the extent of its own gross
negligence or wilful misconduct) shall not be responsible for:
(a) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any Letter of Credit or any
document submitted by any party in connection with the
application for and issuance of a Letter of Credit, even if
it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any instrument transferring or
assigning or purporting to transfer or assign a Letter of
Credit or the rights or benefits thereunder or the proceeds
thereof in whole or in part, which may prove to be invalid
or ineffective for any reason;
(c) failure of the beneficiary to comply fully with
conditions required to demand payment under a Letter of Credit;
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(d) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise; or
(e) any loss or delay in the transmission or otherwise
of any document or draft required in order to make a Disbursement
under a Letter of Credit.
SECTION 2.7. Notes. Each Lender's Loans under a Commitment shall
be evidenced by a Note payable to the order of such Lender in a maximum
principal amount equal to such Lender's Percentage of the original applicable
Commitment Amount.
SECTION 2.8. Recordkeeping. Each Lender shall record in its
records, or at its option on the schedule attached to its applicable Note, the
date and amount of each Loan evidenced by such Note, each repayment or
conversion thereof and, in the case of each Eurodollar Rate Loan, the dates on
which each Interest Period for such Loan shall begin and end. The aggregate
unpaid principal amount so recorded shall be rebuttable presumptive evidence of
the principal amount owing and unpaid on such Note. The failure to so record any
such amount or any error in so recording any such amount shall not, however,
limit or otherwise affect the obligations of the Borrower hereunder or under any
Note to repay the principal amount of the Loans evidenced by such Note together
with all interest accruing thereon.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments. The Borrower shall repay
in full the unpaid principal amount of each Loan upon the Stated Maturity Date
therefor. Prior thereto, the Borrower
(a) may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, of the outstanding
principal amount of any Loans; provided, however, that
(i) any such prepayment shall be made pro rata among
Loans of the same type and, if applicable, having the same
Interest Period, of all Lenders;
(ii) no such prepayment of any Eurodollar Rate Loan
may be made on any day other than the last day of the
Interest Period for such Loan;
(iii) all such voluntary prepayments shall require
at least two Business Days' prior written notice to the
Agent; and
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(iv) all such voluntary partial prepayments shall
be in an aggregate minimum amount of $500,000 and in an
integral multiple of $250,000, or the balance then
outstanding;
(b) shall, on any date that the sum of the aggregate
outstanding principal amount of all Revolving Loans and Letter
of Credit Outstandings exceeds the lesser of (i) the Revolving
Loan Commitment Amount and (ii) the Borrowing Base, make a
mandatory prepayment of all Revolving Loans equal to such excess;
(c) shall, on each day set forth below, make a scheduled
repayment of the aggregate outstanding principal amount, if any,
of all Term Loans in the amount set forth opposite each such date:
Amount of Required
Payment Date Principal Payment
------------ -----------------
<TABLE>
<CAPTION>
<S> <C>
December 31, 1994 $ 500,000
March 31, 1995 $ 500,000
June 30, 1995 $ 500,000
September 30, 1995 $1,500,000
December 31, 1995 $1,500,000
March 31, 1996 $1,500,000
June 30, 1996 $1,500,000
September 30, 1996 $1,750,000
December 31, 1996 $1,750,000
March 31, 1997 $1,750,000
June 30, 1997 $1,750,000
September 30, 1997 $1,750,000
December 31, 1997 $1,750,000
March 31, 1998 $1,750,000
June 30, 1998 $1,750,000
September 30, 1998 $2,000,000
December 31, 1998 $2,000,000
March 31, 1999 $2,000,000
June 30, 1999 $2,000,000
September 30, 1999 $2,000,000
December 31, 1999 $2,000,000
March 31, 2000 $2,000,000
June 30, 2000 $2,000,000
September 30, 2000 $3,000,000
December 31, 2000 $3,000,000
March 31, 2001 $3,000,000
June 30, 2001 $3,500,000
</TABLE>
(d) shall, concurrently with the receipt of any Net
Disposition Proceeds, make a mandatory prepayment in respect
of the Term Loans in an amount equal to such proceeds (provided,
that the Borrower shall not be
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required to make a mandatory prepayment of any Net Disposition
Proceeds permitted to be utilized by the Borrower pursuant to
Section 7.1.4);
(e) shall, upon the receipt by Newco, MC or the Borrower
of any proceeds (net of underwriting discounts and commissions
and other reasonable costs associated therewith) in connection
with the issuance of capital stock and/or subordinated debt by
Newco, MC or the Borrower (other than proceeds from the issuance
of capital stock to management of Newco, MC, the Borrower or its
Subsidiaries), make a mandatory prepayment in respect of the Term
Loans in an amount equal to 50% of such net proceeds (provided,
that if an Event of Default exists, the Borrower shall make a
mandatory prepayment in respect of the Term Loans in an amount
equal to 100% of such net proceeds);
(f) shall, within 120 days after the end of each Fiscal
Year in which Debt at any time exceeded $40,000,000 (commencing
with the 1994 Fiscal Year), make a mandatory prepayment in
respect of the Term Loans in an amount equal to 75% of Excess
Cash Flow for such Fiscal Year, calculated on the basis of the
audited financial statements for such Fiscal Year delivered to
the Agent and the Lenders pursuant to Section 7.1.1(b) (provided,
that Excess Cash Flow for the 1994 Fiscal Year shall be
calculated for the period commencing on the date of the initial
Credit Extension and ending on the last day of the 1994 Fiscal
Year); and
(g) shall, immediately upon any acceleration of the
Stated Maturity Date of any Loans pursuant to Section 8.2 or
Section 8.3, repay all Loans, unless, pursuant to Section 8.3,
only a portion of all Loans is so accelerated.
Each voluntary prepayment of Term Loans made pursuant to clause (a) and
mandatory prepayments made pursuant to clauses (d) and (f) shall be applied, to
the extent of such prepayment, pro rata against all scheduled payments set forth
in clause (c). Each mandatory prepayment made pursuant to clause (e) shall be
applied, to the extent of such prepayment, against the scheduled payments set
forth in clause (c) in the inverse order of their maturities. Each prepayment
of any Loans made pursuant to this Section shall be without premium or penalty,
except as may be required by Section 4.4. Subject to Section 2.2, no prepayment
of principal of any Revolving Loans shall cause a reduction in the Revolving
Loan Commitment Amount.
SECTION 3.2. Interest Provisions. Interest on the outstanding
principal amount of Loans shall accrue and be payable in accordance with this
Section 3.2.
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SECTION 3.2.1. Rates. Pursuant to an appropriately delivered
Borrowing Request or Continuation/Conversion Notice, the Borrower may elect that
Loans comprising a Borrowing accrue interest at a rate per annum:
(a) on that portion maintained from time to time as a
Reference Rate Loan, equal to the sum of the Alternate Reference
Rate from time to time in effect plus the Applicable Margin; and
(b) on that portion maintained as a Eurodollar Rate Loan,
during each Interest Period applicable thereto, equal to the sum
of the Eurodollar Rate (Adjusted) for such Interest Period plus
the Applicable Margin.
All Eurodollar Rate Loans shall bear interest from and including the
first day of the applicable Interest Period to (but not including) the last day
of such Interest Period at the interest rate determined as applicable to such
Eurodollar Rate Loan.
SECTION 3.2.2. Default Rates. Upon notice from the Agent, at
the direction of the Required Lenders, of the occurrence of an Event of Default
and during the continuance thereof, the interest rates then in effect shall be
increased by increasing the Applicable Margin by 200 basis points.
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan
shall be payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) on the date of any prepayment of such Loan;
(c) with respect to Reference Rate Loans, on each
Quarterly Payment Date occurring after the Effective Date;
(d) with respect to Eurodollar Rate Loans, on the last
day of each applicable Interest Period (and, if such Interest
Period shall exceed three months, on the 90th day of such
Interest Period); and
(e) on that portion of any Loans the Stated Maturity
Date of which is accelerated pursuant to Section 8.2 or Section
8.3, immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document, or with respect to Reimbursement
Obligations, after the date such amount is due and payable (whether on the
Stated Maturity Date, upon acceleration or otherwise) shall be payable upon
demand.
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SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in
this Section 3.3. All such fees shall be nonrefundable.
SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to
the Agent for the pro rata account of each Lender, for the period (including any
portion thereof when any of its Commitments are suspended by reason of the
Borrower's inability to satisfy any condition of Article V) commencing on the
date of the initial Credit Extension and continuing through the Revolving Loan
Commitment Termination Date, a commitment fee at the rate of 1/2 of 1% per annum
on such Lender's Percentage of the sum of the average daily unused portion of
the Revolving Loan Commitment Amount. Such commitment fees shall be payable by
the Borrower in arrears on each Quarterly Payment Date, commencing with the
first such day following the Effective Date, and on the Revolving Loan
Commitment Termination Date.
SECTION 3.3.2. Agent's Fee. The Borrower agrees to pay to the
Agent, for its own account fees in the amounts and on the dates set forth in the
Fee Letter.
SECTION 3.3.3. Letter of Credit Fee. The Borrower agrees to pay
to the Agent, for the pro rata account of each Lender, a Letter of Credit fee in
an amount equal to 1.5% per annum times the Stated Amount of such Letter of
Credit, such fee being payable quarterly in arrears on each Quarterly Payment
Date and on the Revolving Loan Commitment Termination Date. The Borrower further
agrees to pay to the Issuer on the date of issuance or extension of each Letter
of Credit an issuance fee in the amount of 1/4 of 1% of the Stated Amount of
such Letter of Credit.
SECTION 3.3.4. Upfront Fees. The Borrower agrees to pay to each
Lender, for such Lender's own account, an upfront fee in the amounts and on the
dates set forth in the Upfront Fee Letter between the Borrower and such Lenders.
ARTICLE IV
CERTAIN EURODOLLAR RATE AND OTHER PROVISIONS
SECTION 4.1. Eurodollar Rate Lending Unlawful. If any Lender
shall determine (which determination shall, upon notice thereof to the Borrower
and the Lenders, be conclusive and binding on the Borrower) that the
introduction of or any change in or in the interpretation of any law (including
any governmental rule, regulation or order) makes it unlawful, or any central
bank or other governmental authority asserts that it is unlawful, for such
Lender to make, continue or maintain any Loan as, or to convert any Loan into, a
Eurodollar Rate Loan, the obligations of all Lenders to make, continue, maintain
or convert any such Loans shall, upon such determination, forthwith be suspended
until such Lender shall notify the Agent that the circumstances causing such
suspension no
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longer exist, and all Eurodollar Rate Loans shall automatically convert into
Reference Rate Loans at the end of the then current Interest Periods with
respect thereto or sooner, if required by such law or assertion.
SECTION 4.2. Deposits Unavailable. If any Lender shall have
determined that
(a) Dollar deposits in the relevant amount and for the relevant
Interest Period are not available to such Lender in its relevant market; or
(b) by reason of circumstances affecting such Lender's relevant
market, adequate means do not exist for ascertaining the interest rate
applicable hereunder to Eurodollar Rate Loans,
then, upon notice from such Lender to the Agent, the Borrower and the other
Lenders, the obligations of all Lenders under Section 2.3 and Section 2.4 to
make or continue any Loans as, or to convert any Loans into, Eurodollar Rate
Loans shall forthwith be suspended until such Lender shall notify the Agent, the
Borrower and the other Lenders that the circumstances causing such suspension no
longer exist.
SECTION 4.3. Increased Eurodollar Rate Loan Costs, etc. The
Borrower agrees to reimburse each Lender for any increase in the cost to such
Lender of, or any reduction in the amount of any sum receivable by such Lender
in respect of, making, continuing or maintaining (or of its obligation to make,
continue or maintain) any Loans as, or of converting (or of its obligation to
convert) any Loans into, Eurodollar Rate Loans that arise in connection with any
change in, or the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in of, any law, rule, regulation, directive,
guideline, treaty, decision or request (whether or not having the force of law)
of any court, central bank, regulator or other governmental authority. Such
Lender shall promptly notify the Agent and the Borrower in writing of the
occurrence of any such event, such notice to state, in reasonable detail, the
reasons therefor and the additional amount required fully to compensate such
Lender for such increased cost or reduced amount. Such additional amounts shall
be payable by the Borrower directly to such Lender within five days of its
receipt of such notice, and such notice shall, in the absence of manifest error,
be conclusive and binding on the Borrower.
SECTION 4.4. Funding Losses. In the event any Lender shall
incur any loss or expense (including any loss or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to make, continue or maintain any portion of the principal amount of any
Loan as, or to convert any portion of the principal amount of any Loan into, a
Eurodollar Rate Loan) as a result of
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(a) any conversion or repayment or prepayment of the principal
amount of any Eurodollar Rate Loans on a date other than the scheduled last
day of the Interest Period applicable thereto, whether pursuant to Section
3.1 or otherwise;
(b) any Loans not being made as Eurodollar Rate Loans in accordance
with the Borrowing Request therefor; or
(c) any Loans not being continued as, or converted into, Eurodollar
Rate Loans in accordance with the Continuation/Conversion Notice therefor;
then, upon the written notice by such Lender to the Borrower (with a copy to the
Agent), the Borrower shall, within five days of its receipt thereof, pay
directly to such Lender such amount as will (in the reasonable determination of
such Lender) reimburse such Lender for such loss or expense; provided, that the
Borrower shall not be required to reimburse a Lender for such loss or expense
arising as a result of the gross negligence or willful misconduct of such
Lender. Such written notice (which shall include calculations in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
the Borrower.
SECTION 4.5. Increased Capital Costs. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any law, rule, regulation, directive, treaty, guideline, decision
or request (whether or not having the force of law) of any court, central bank,
regulator or other governmental authority affects or would affect the amount of
capital or reserves required or expected to be maintained by any Lender or any
Person controlling such Lender, and such Lender determines that the rate of
return on its or such controlling Person's capital as a consequence of its
Commitment or the Loans made by or the Letters of Credit issued or participated
in by such Lender is reduced to a level below that which such Lender or such
controlling Person could have achieved but for the occurrence of any such
circumstance, then, in any such case upon notice from time to time by such
Lender to the Borrower, the Borrower shall immediately pay directly to such
Lender additional amounts sufficient to compensate such Lender or such
controlling Person for such reduction in rate of return. A statement of such
Lender as to any such additional amount or amounts (including calculations
thereof in reasonable detail) shall, in the absence of manifest error, be
conclusive and binding on the Borrower. In determining such amount, such Lender
may use any method of averaging and attribution that it shall deem applicable.
SECTION 4.6. Taxes. (a) All payments by the Borrower of principal
of, and interest on, the Loans and all other amounts payable hereunder
(including in respect of fees and Reimbursement Obligations) shall be made free
and clear of and without deduction
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for any present or future income, excise, stamp or franchise taxes and other
taxes, fees, duties, withholdings or other charges of any nature whatsoever
imposed by any taxing authority, but excluding franchise taxes and taxes imposed
on or measured by net income or receipts of the Agent or any Lender by any
jurisdiction with respect to which the Agent or such Lender is subject to tax
without regard to the transactions contemplated hereby (such non-excluded items
being called "Taxes"). In the event that any withholding or deduction from any
payment to be made by the Borrower hereunder is required in respect of any Taxes
pursuant to any applicable law, rule or regulation, then the Borrower will
(i) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(ii) promptly forward to the Agent an official receipt or other
documentation reasonably satisfactory to the Agent evidencing such payment
to such authority; and
(iii) pay to the Agent for the account of the Lenders such
additional amount or amounts as is necessary to ensure that the net amount
actually received by each Lender will equal the full amount such Lender
would have received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Agent or any Lender
with respect to any payment received by the Agent or such Lender hereunder, and
such Taxes are then due and payable in accordance with applicable law, the Agent
or such Lender shall pay such Taxes and the Borrower will promptly pay such
additional amounts (including any penalties, interest or expenses) as is
necessary in order that the net amount received by such Person after the payment
of such Taxes (including any Taxes on such additional amount) shall equal the
amount such Person would have received had no such Taxes been asserted.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent, for the account of the
respective Lenders, the required receipts or other required documentary
evidence, the Borrower shall indemnify the Lenders for any incremental Taxes,
interest or penalties that may become payable by any Lender as a result of any
such failure. For purposes of this Section 4.6, a distribution hereunder by the
Agent or any Lender to or for the account of any Lender shall be deemed a
payment by the Borrower.
(b) Each Lender hereby severally (but not jointly) represents that,
under applicable law and treaties in effect as of the date of the initial Credit
Extension, no United States federal taxes will be required to be withheld by the
Agent or the Borrower with respect to any payments to be made to such Lender in
respect of this Agreement and each Lender which itself is not incorporated
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under the laws of the United States or a state thereof or which is lending from
a Eurodollar Office that is not incorporated under the laws of the United States
or a state thereof agrees severally (but not jointly) that, prior to the date of
the initial Borrowing, it will deliver to the Borrower and the Agent two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224, or
successor applicable form, as the case may be, certifying in each case that such
Lender is entitled to receive payments under this Agreement and the Notes
payable to it, without deduction or withholding of any United States federal
income taxes. Each Lender which delivers to the Borrower and the Agent a Form
1001 or 4224, or successor applicable form, pursuant to the immediately
preceding sentence, further undertakes to deliver to the Borrower and the Agent
two further copies of said Form 1001 or 4224, or successor applicable form, or
other manner of certification, as the case may be, on or before the date that
any such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered by it to the
Borrower, and such extensions or renewals thereof as may reasonably be requested
by the Borrower, certifying that such Lender is entitled to receive payments
under this Agreement without deduction or withholding of any United States
federal income taxes, unless in any such case any change in law, rule,
regulation, treaty or directive, or in the interpretation or application
thereof, has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form with
respect to it and on or prior to the date occurring six months after the last
day of the Interest Period during which such change in law, rule, regulation,
treaty or directive, or in the interpretation or application thereof, shall
occur, such Lender advises the Borrower that it is not capable of receiving
payments without any deduction or withholding of United States federal income
tax. Notwithstanding any provision of clause (a) of Section 4.6 to the contrary,
the Borrower shall have no obligation to pay any Taxes (except to the extent
required by law) pursuant to clause (a) of Section 4.6, or to pay any amount to
the Agent or any Lender pursuant to clause (a) of Section 4.6, to the extent
that such amount results from (i) the failure of any Lender to comply with its
obligations pursuant to this clause (b) of Section 4.6 or Section 2.5 or the
failure of a Transferee to make the representations set forth in clause (h) of
Section 10.11 or to perform the acts set forth in such clause (h) or (ii) any
representation or warranty made or deemed to be made by any Lender pursuant to
this clause (b) of Section 4.6 or Section 2.5 or by a Transferee pursuant to
clause (h) of Section 10.11 proving to have been incorrect, false or misleading
in any material respect when so made or deemed to be made.
(c) If the Borrower pays or becomes obligated to pay to the Agent or
any Lender any additional amounts pursuant to clause (a) of Section 4.6, the
Agent or such Lender shall, if requested by the Borrower, designate a different
office or transfer its rights,
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benefits and obligations under any Loan hereunder to an Affiliate if such
designation or transfer would not be unreasonably burdensome to such Lender,
would reduce or eliminate such additional amounts and would not, in the
reasonable judgment of the Agent or such Lender, cause the Agent or such Lender
to incur any additional costs or expenditures not reimbursed by the Borrower or
suffer a material economic disadvantage.
(d) The agreements in this Section shall survive the termination of
this Agreement and the payment of the Notes and all other amounts payable
hereunder.
SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly
provided, all payments by the Borrower pursuant to this Agreement, the Notes,
each Letter of Credit or any other Loan Document shall be made by the Borrower
to the Agent for the pro rata account of the Lenders entitled to receive such
payment. All such payments required to be made to the Agent shall be made,
without setoff, deduction or counterclaim, not later than 11:00 a.m., Chicago,
Illinois time, on the date due, in same day or immediately available funds, to
such account as the Agent shall specify from time to time by notice to the
Borrower. Funds received after that time shall be deemed to have been received
by the Agent on the next succeeding Business Day. The Agent shall promptly remit
in same day funds to each Lender its share, if any, of such payments received by
the Agent for the account of such Lender. All interest and fees shall be
computed on the basis of the actual number of days including the first day but
excluding the last day) occurring during the period for which such interest or
fee is payable over a year comprised of 360 days. Whenever any payment to be
made shall otherwise be due on a day which is not a Business Day, such payment
shall (except as otherwise required by clause (c) of the definition of the term
"Interest Period" with respect to Eurodollar Rate Loans) be made on the next
succeeding Business Day and such extension of time shall be included in
computing interest and fees, if any, in connection with such payment.
SECTION 4.8. Sharing of Payments. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Loan or Reimbursement Obligation (other
than pursuant to the terms of Sections 4.3, 4.4 and 4.5) in excess of its pro
rata share of payments then or therewith obtained by all Lenders, such Lender
shall purchase from the other Lenders such participations in Credit Extensions
made by them as shall be necessary to cause such purchasing Lender to share the
excess payment or other recovery ratably with each of them; provided, however,
that if all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing Lender, the purchase shall be rescinded and each
Lender which has sold a participation to the purchasing Lender shall repay to
the purchasing Lender the purchase price to the ratable extent of such recovery.
The Borrower agrees
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that any Lender so purchasing a participation from another Lender pursuant to
this Section may, to the fullest extent permitted by law, exercise all its
rights of payment (including pursuant to Section 4.9) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured claim
in lieu of a setoff to which this Section applies, such Lender shall, to the
extent practicable, exercise its rights in respect of such secured claim in a
manner consistent with the rights of the Lenders entitled under this Section to
share in the benefits of any recovery on such secured claim.
SECTION 4.9. Setoff. Each Lender shall, upon the occurrence and
continuance of any Default described in clauses (a) through (d) of Section 8.1.9
or, with the consent of the Required Lenders, upon the occurrence and
continuance of any other Event of Default, have the right to appropriate and
apply to the payment of the Obligations owing to it (whether or not then due),
any and all balances, credits, deposits, accounts or moneys of the Borrower then
or thereafter maintained with such Lender; provided, however, that any such
appropriation and application shall be subject to the provisions of Section 4.8.
Each Lender agrees promptly to notify the Borrower and the Agent after any such
setoff and application made by such Lender; provided, however, that the failure
to give such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including other rights of setoff under applicable law
or otherwise) which such Lender may have.
SECTION 4.10. Use of Proceeds and Benefits of Credit Extensions. The
Borrower shall apply the proceeds of Term Loans and the Revolving Loans to
refinance certain Indebtedness, finance the Cash Consideration and for working
capital purposes and general corporate purposes of the Borrower and its
Subsidiaries.
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS
SECTION 5.1. Initial Credit Extensions. The obligations of the
Lenders to fund the initial Credit Extensions shall be subject to the prior or
concurrent satisfaction of each of the conditions precedent set forth in this
Section 5.1.
SECTION 5.1.1. Resolutions, etc. The Agent shall have received from
the Borrower and each other Obligor a certificate, dated the date of the initial
Credit Extensions, of its Secretary as to
(a) resolutions of its Board of Directors then in full force and
effect authorizing the execution, delivery
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and performance of this Agreement, the Notes and each other Loan Document
to be executed by it;
(b) the incumbency and signatures of those of its officers authorized
to act with respect to this Agreement, the Notes and each other Loan
Document executed by it; and
(c) the accuracy and completeness of its Organic Documents;
upon which certificate each Lender may conclusively rely.
SECTION 5.1.2. Delivery of Notes. The Agent shall have received, for
the account of each Lender, the Notes duly executed and delivered by the
Borrower.
SECTION 5.1.3. Guaranties; Subsidiary Security Documents. The Agent
shall have received the Subsidiary Guaranty and the Subsidiary Security
Documents duly executed and delivered by the Subsidiary Guarantor and the MC
Guaranty duly executed and delivered by MC.
SECTION 5.1.4. Pledge Agreements. The Agent shall have received of
the MC Pledge Agreement duly executed and delivered by MC and the Pledge
Agreement duly executed and delivered by the Borrower. The Agent shall retain
possession of the certificates, evidencing all of the issued and outstanding
shares of capital stock pledged pursuant to the MC Pledge Agreement and Pledge
Agreement, in each case accompanied by undated stock powers duly executed in
blank.
SECTION 5.1.5. Security Agreement. The Agent shall have received the
Security Agreement duly executed and delivered by the Borrower. The Agent shall
also have received satisfactory evidence that the Agent has a valid and
perfected first priority security interest in the property of the Borrower,
subject only to the Liens permitted under Section 7.2.3.
SECTION 5.1.6. Mortgages, Etc. The Agent shall have received
Mortgages covering certain of the real property owned or leased by the Borrower
and disclosed in Item 5.1.6 of the Disclosure Schedule as the Agent may
reasonably require, together with (a) title insurance policies and surveys as
reasonably required by the Agent; (b) evidence that counterparts of the
Mortgages have been recorded in all places to the extent necessary or desirable
in the reasonable judgment of the Agent, to create a valid and enforceable first
priority lien (subject only to the Liens permitted under Section 7.2.3); and (c)
opinions of local counsel with respect to such Mortgages.
SECTION 5.1.7. Insurance. The Agent shall have received policies of
insurance required to be maintained under this
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Agreement and the other Loan Documents together with endorsements satisfactory
to the Agent naming the Agent as loss payee and naming the Agent and the Lenders
as additional insureds under such policies.
SECTION 5.1.8. Consummation of Joint Venture. The transactions
contemplated by the Joint Venture Agreement shall have been consummated in
accordance with the terms of the Joint Venture Agreement.
SECTION 5.1.9. Closing Date Certificate. The Agent shall have
received, for its benefit and the benefit of each Lender, the Closing Date
Certificate in substantially the form of Exhibit J hereto, dated the date of the
initial Credit Extension and duly executed and delivered by an Authorized
Officer of the Borrower, in which such Closing Date Certificate the Borrower
shall agree and acknowledge that the statements made therein shall be deemed to
be true and correct representations and warranties in all material respects made
as of such date under this Agreement, and, at the time such certificate is
delivered, such statements shall in fact be true and correct in all material
respects. All documents and agreements required to be appended to the Closing
Date Certificate shall be in form and substance reasonably satisfactory to the
Agent and the Required Lenders.
SECTION 5.1.10. Solvency, etc. The Agent shall have received, for
its benefit and the benefit of each Lender, a solvency certificate of the
Borrower signed by the chief accounting, financial or other executive Authorized
Officer of the Borrower, dated the date of the initial Credit Extensions, in the
form of Exhibit K hereto.
SECTION 5.1.11. Environmental Due Diligence. The Agent shall have
completed its environmental due diligence review of the operations and
facilities of the Borrower and the Orscheln Transferred Assets and the results
of such review shall be reasonably satisfactory to the Agent.
SECTION 5.1.12. Opinions of Counsel. The Agent shall have received
opinions, dated the date of the initial Credit Extensions and addressed to the
Agent and all Lenders, from
(a) Kirkland & Ellis, counsel to the Obligors, substantially in the
form of Exhibit L hereto; and
(b) Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd., counsel
to the Agent, substantially in the form of Exhibit M hereto.
SECTION 5.1.13. Borrowing Base Certificate. The Agent shall have
received a Borrowing Base Certificate, dated as of the date hereof for the
period ending July 31, 1994, duly executed and delivered by the Borrower.
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SECTION 5.1.14. Closing Fees, Expenses, etc. The Agent shall have
received for its own account, or for the account of each Lender, as the case may
be, all fees, costs and expenses due and payable pursuant to this Agreement, the
Fee Letter and the Upfront Fee Letters.
SECTION 5.1.15. Capital Contributions. Onex U.S. Investments, Inc.
and J2R Corporation shall have contributed in the aggregate at least $2,000,000
in cash to MC in the form of subordinated debt on terms and conditions
satisfactory to the Agent and the Required Lenders, and MC shall have
contributed at least $2,000,000 in cash to the Borrower in the form of common
equity on terms and conditions satisfactory to the Agent and the Required
Lenders.
SECTION 5.2. All Credit Extensions. The obligation of each Lender to
make any Credit Extension on the occasion of any Borrowing (including the
initial Credit Extensions) shall be subject to the satisfaction of each of the
conditions precedent set forth in this Section 5.2.
SECTION 5.2.1. Compliance with Warranties, No Default etc. Both
before and after giving effect to any Credit Extension the following statements
shall be true and correct
(a) the representations and warranties set forth in the Agreement
(including Article VI) and the other Loan Documents shall be true and
correct in all material respects with the same effect as if then made
(unless stated to relate solely to an earlier date, in which case such
representations and warranties shall have been true and correct in all
material respects as of such earlier date);
(b) the sum of the aggregate outstanding principal amount of all (x)
Revolving Loans and (y) Letter of Credit Outstandings does not exceed the
lesser of Revolving Loan Commitment Amount and the Borrowing Base; and
(c) no Default shall have then occurred and be continuing.
SECTION 5.2.2. Credit Extension Request, etc. The Agent shall have
received a Borrowing Request if Loans are being requested, or an Issuance
Request, if a Letter of Credit is being requested. Each of the delivery of a
Borrowing Request or Issuance Request and the acceptance by the Borrower of the
proceeds of such Credit Extension shall constitute a representation and warranty
by the Borrower that on the date of such Credit Extension (both immediately
before and after giving effect to such Credit Extension and the application of
the proceeds thereof) the statements made in Section 5.2.1 are true and correct.
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SECTION 5.2.3. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower or any of its
Subsidiaries or any other Obligors shall be reasonably satisfactory in form and
substance to the Agent and its counsel; the Agent and its counsel shall have
received all information, approvals, opinions, documents or instruments as the
Agent or its counsel may reasonably request.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders, the Co-Agents and the Agent to enter
into this Agreement and to make Credit Extensions hereunder, the Borrower
represents and warrants unto the Lenders, the Co-Agents and the Agent as set
forth in this Article VI (after giving effect to the consummation of the
transactions contemplated by the Joint Venture Agreement).
SECTION 6.1. Organization, etc. The Borrower and each of its
Subsidiaries is a corporation validly organized and existing and in good
standing under the laws of the State of its incorporation, is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction where the nature of its business requires such qualification,
except where the failure to qualify could not reasonably be expected to have a
Material Adverse Effect, and has full power and authority and holds all
requisite governmental licenses, permits and other approvals to enter into and
perform its Obligations under this Agreement, the Notes and each other Loan
Document to which it is a party and to own and hold under lease its property and
to conduct its business (except for those licenses, permits or other approvals
the failure of which to obtain could not reasonably be expected to have a
Material Adverse Effect).
SECTION 6.2. Due Authorization, Non-Contravention, etc. The
execution, delivery and performance by the Borrower of this Agreement, the Notes
and each other Loan Document executed or to be executed by it, and the
execution, delivery and performance by each other Obligor of each Loan Document
executed or to be executed by it are within the Borrower's and each such
Obligor's corporate powers, have been duly authorized by all necessary corporate
action, and do not
(a) contravene the Borrower's or any such Obligor's Organic
Documents;
(b) contravene any contractual restriction, law or governmental
regulation or court decree or order binding on or affecting the Borrower or
any such Obligor which could not reasonably be expected to result in a
Material Adverse Effect; or
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(c) result in, or require the creation or imposition of, any Lien on
any of the Borrower's or any Obligor's properties (except as contemplated
hereunder).
SECTION 6.3. Government Approval, Regulation, etc. No authorization
or approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body or other Person is required (which has
not already been obtained or where the failure to obtain could not reasonably be
expected to have a Material Adverse Effect) for the due execution, delivery or
performance by the Borrower or any other Obligor of this Agreement, the Notes or
any other Loan Document to which it is a party, except for the filing of UCC
financing statements and recording of the Mortgages. Neither the Borrower nor
any of its Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
SECTION 6.4. Validity, etc. This Agreement constitutes, and each
other Loan Document executed by any Obligor will, on the due execution and
delivery thereof, constitute, the legal, valid and binding obligations of such
Obligor enforceable in accordance with their respective terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally and by
principles of equity).
SECTION 6.5. Financial Information. The Borrower's annual audited
report for the 1993 Fiscal Year, Orscheln's audited report for its fiscal year
ending December 25, 1993 and all balance sheets, all statements of operations,
shareholders' equity and cash flow, and all other financial information of each
of the Borrower, its Subsidiaries and Orscheln which have been or shall
hereafter be furnished pursuant to Section 7.1.1 have been or will be prepared
in accordance with GAAP consistently applied (except as expressly provided
herein), and do or will present fairly in all material respects the consolidated
financial condition of the corporations covered thereby as at the dates thereof
and the results of their operations for the periods then ended, except that
quarterly financial statements need not include footnote disclosure and may be
subject to ordinary year-end adjustment.
SECTION 6.6. No Material Adverse Change, etc. Since December 31, 1993
there has been no material adverse change in the financial condition, results of
operations, assets, business or properties of the Borrower, Orscheln or the
Borrower and its Subsidiaries taken as a whole; as of the date of the initial
Credit Extension, except as disclosed in Item 6.6 of the Disclosure Schedule,
there is no pending or, to the knowledge of the Borrower, threatened litigation,
arbitration, action, governmental
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investigation or proceeding or labor controversy affecting the Borrower or any
Subsidiary, or any of their respective properties, businesses, assets or
revenues, which could reasonably be expected to have a Material Adverse Effect;
and as of the date of the initial Credit Extension, no materially adverse
development has occurred in any such litigation, arbitration, action,
governmental investigation or proceeding or labor controversy disclosed in such
Item 6.6 of the Disclosure Schedule which could reasonably be expected to have a
Material Adverse Effect.
SECTION 6.7. Subsidiaries. As of the date of the initial Credit
Extension, the Borrower has no Subsidiaries, except those Subsidiaries which are
identified in Item 6.7 of the Disclosure Schedule.
SECTION 6.8. Ownership of Properties. Each of the Borrower and each
of its Subsidiaries owns good and marketable fee title or leasehold interest (as
the case may be) to all of its properties and assets, real and personal,
tangible and intangible, of any nature whatsoever (including patents,
trademarks, trade names, service marks and copyrights), free and clear of all
Liens or claims (including infringement claims with respect to patents,
trademarks, copyrights and the like) (except as permitted pursuant to Section
7.2.3 or as otherwise consented to by the Required Lenders) used in the
operation of its business.
SECTION 6.9. Taxes. The Borrower and each of its Subsidiaries has
filed all tax returns and reports required by law to have been filed by it and
has paid all taxes and governmental charges thereby shown to be owing, except
any such taxes or charges which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books.
SECTION 6.10. Pension and Welfare Plans. (a) During the twelve
consecutive month period prior to the date of the initial Credit Extension and
prior to the date of any other Credit Extension hereunder, no formal steps have
been taken to terminate any Pension Plan other than in a standard termination
under Section 4041(b) of ERISA, and no contribution failure has occurred with
respect to any Pension Plan sufficient to give rise to a Lien under Section
302(f) of ERISA. No condition exists or event or transaction has occurred with
respect to any Pension Plan which (i) could result in the incurrence by the
Borrower or any Subsidiary of any liability, fine or penalty, other than the
liability to make contributions when due in the ordinary course and to pay
premiums to the PBGC or (ii) could result in the incurrence by a member of the
Borrower's Controlled Group (other than the Borrower and its Subsidiaries) of
any material liability, fine or penalty other than conditions, events or
transactions which could not reasonably be expected to result in the incurrence
by the Borrower or any Subsidiary of any material liability.
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(b) Except for liabilities arising under the terms and conditions, as
in effect on the date of the initial Credit Extensions, of the Plans disclosed
in Item 6.10 of the Disclosure Schedule, neither the Borrower nor any Subsidiary
has any contingent liability with respect to any post-retirement benefit under a
Welfare Plan, other than (i) liability for continuation coverage described in
Part 6 of Title I of ERISA or (ii) a modification of, or addition to, the
retiree benefit obligations disclosed at Item 6.10 of the Disclosure Schedule
which when taken together with any other addition or modification since the
initial Credit Extensions does not materially increase the Borrower's and its
Subsidiaries annual cost of providing such benefits. For purposes of clause
(ii) of the preceding sentence, during the period prior to the effective date of
Financial Accounting Statement 106, "generally accepted accounting principles"
shall refer to the principles contained in such statement, as set forth in the
most recent version of such statement.
(c) All statistics provided to the Agent, any Co-Agent or any Lender
relating to the funded status of the Pension Plans or to post-retirement benefit
expenses and liabilities are based on actuarial assumptions that are reasonable
individually and in the aggregate.
SECTION 6.11. Environmental Warranties. Except as set forth in Item
6.11 of the Disclosure Schedule:
(a) all facilities and property (including underlying groundwater)
owned or leased by the Borrower or any of its Subsidiaries have been, and
continue to be, owned or leased by the Borrower and its Subsidiaries in
compliance with all Environmental Laws (except for such noncompliance which
could not reasonably be expected to have a Material Adverse Effect);
(b) As of the date hereof, there are no pending or, to the best of
the Borrower's knowledge, threatened claims, complaints, notices or
requests for information received by the Borrower or any of its
Subsidiaries with respect to any alleged violation of any Environmental Law
or potential liability under Environmental Law which could reasonably be
expected to have a Material Adverse Effect;
(c) there are or have been no Releases of, or conditions of
contamination by, Hazardous Materials at, on or under any property now or,
to the best knowledge of the Borrower, previously owned or leased by the
Borrower or any of its Subsidiaries that have, or could reasonably be
expected to have, a Material Adverse Effect;
(d) the Borrower and its Subsidiaries have been issued and are in
compliance with all permits,
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certificates, approvals, licenses and other authorizations relating to
environmental matters and necessary for their businesses except where the
failure to obtain or comply with such authorization could not reasonably be
expected to have a Material Adverse Effect;
(e) no property now or previously owned or leased by the Borrower
or any of its Subsidiaries is listed or proposed for listing in a federal
or state official publication on the National Priorities List pursuant to
CERCLA, on the CERCLIS or on any similar state list of sites requiring
investigation or clean-up;
(f) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any property now or, to the
best knowledge of the Borrower, previously owned or leased by the Borrower
or any of its Subsidiaries that have, or could reasonably be expected to
have, a Material Adverse Effect;
(g) neither the Borrower nor any Subsidiary of the Borrower has
directly transported or directly arranged for the transportation of any
Hazardous Material to any location which is listed or, to the best
knowledge of the Borrower, proposed for listing on the National Priorities
List pursuant to CERCLA, on the CERCLIS or on any similar state list or
which is, to the best knowledge of the Borrower, the subject of federal,
state or local enforcement actions or other investigations which could
reasonably be expected to lead to claims against the Borrower or such
Subsidiary thereof for any remedial work, damage to natural resources or
personal injury, including claims under CERCLA, which have, or could
reasonably be expected to have, a Material Adverse Effect;
(h) there are no polychlorinated biphenyls or friable asbestos
present at any property now or previously owned or leased by the Borrower
or any Subsidiary of the Borrower that have, or could reasonably be
expected to have, a Material Adverse Effect; and
(i) no conditions exist at, on or under any property now or, to the
best knowledge of the Borrower, previously owned or leased by the Borrower
which, with the passage of time, or the giving of notice or both, could
reasonably be expected to give rise to liability under any Environmental
Law which could reasonably be expected to have a Material Adverse Effect,
and no generation, manufacture, storage, treatment, transportation or
disposal of Hazardous Material has occurred or is occurring on or from any
property owned by the Borrower which generation, manufacture, storage,
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treatment, transportation or disposal has, or could reasonably be expected
to have, a Material Adverse Effect.
SECTION 6.12. Regulations G, T, U and X. The Borrower is not engaged
in the business of extending credit for the purpose of purchasing or carrying
margin stock, and no proceeds of any Credit Extensions will be used for a
purpose which violates, or would be inconsistent with, F.R.S. Board Regulation
G, T, U or X. Terms for which meanings are provided in F.R.S. Board Regulation
G, T, U or X or any regulations substituted therefor, as from time to time in
effect, are used in this Section with such meanings.
SECTION 6.13. Accuracy of Information. To the best knowledge of the
Borrower, all factual information heretofore or contemporaneously furnished by
or on behalf of the Borrower in writing to the Agent or any Lender for purposes
of or in connection with this Agreement or any transaction contemplated hereby
(including the Disclosure Schedule) is, and all other such factual information
hereafter furnished in connection with this Agreement or any other Loan Document
by or on behalf of the Borrower or any other Obligor to the Agent, any Co-Agent
or any Lender will be, true and accurate in all material respects on the date as
of which such information is dated or certified and as of the date of execution
and delivery of this Agreement by the Agent, each Co-Agent and each Lender, and
such information, to the best knowledge of the Borrower, is not, or shall not
be, as the case may be, incomplete by omitting to state any material fact
necessary to make such information not misleading. All projections prepared by
or on behalf of the Borrower or any other Obligor contained in any documents or
materials furnished to the Agent or any Lender have been prepared in good faith
and represent the Borrower's or such Obligor's best estimates as of the date of
preparation of reasonably expected future performance.
ARTICLE VII
COVENANTS
SECTION 7.1. Affirmative Covenants. The Borrower agrees with the
Agent, each Co-Agent and each Lender that, until all Commitments have terminated
and all Obligations have been paid and performed in full, the Borrower will
perform or caused to be performed the obligations set forth in this Section 7.1.
SECTION 7.1.1. Financial Information, Reports, Notices, etc. The
Borrower will furnish, or will cause to be furnished, to each Lender, each Co-
Agent and the Agent copies of the following financial statements, reports,
notices and information:
(a) as soon as available and in any event within 45 days after the
end of the first three Fiscal Quarters of each Fiscal Year of the Borrower,
a consolidated balance
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sheet of the Borrower and its Subsidiaries as of the end of such Fiscal
Quarter and consolidated and consolidating statements of earnings and
consolidated statements of cash flow of the Borrower and its Subsidiaries
for such Fiscal Quarter and for the period commencing at the end of the
previous Fiscal Year and ending with the end of such Fiscal Quarter,
certified by the chief accounting, financial or executive Authorized
Officer of the Borrower;
(b) as soon as available and in any event within 90 days after the
end of each Fiscal Year of the Borrower, a copy of the annual audited
report for such Fiscal Year for the Borrower and its Subsidiaries,
including therein a consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such Fiscal Year and consolidated statements
of earnings and consolidated statements of cash flow of the Borrower and
its Subsidiaries for such Fiscal Year, in each case certified (without any
Impermissible Qualification) by Arthur Andersen & Co. or other independent
public accountants reasonably acceptable to the Agent, together with (x) a
certificate from such accountants containing a statement to the effect
that, in making the audit necessary for the signing of such annual report
by such accountants, they are aware that the Agent and the Lenders are
relying on such annual report and audit and that they have not become aware
of any Default or Event of Default that has occurred and is continuing, or,
if they have become aware of such Default or Event of Default, describing
such Default or Event of Default and (y) unaudited consolidating statements
of earnings of the Borrower and its Subsidiaries for such Fiscal Year,
prepared on a consistent basis;
(c) as soon as available and in any event within 45 days after the
end of each Fiscal Quarter, a Compliance Certificate, executed by the chief
financial Authorized Officer of the Borrower;
(d) as soon as possible and in any event within five Business Days
after the Borrower's or any Subsidiary's knowledge of the occurrence of
each Default, a statement of an Authorized Officer of the Borrower setting
forth details of such Default and the action which the Borrower has taken
and proposes to take with respect thereto;
(e) as soon as possible and in any event within five Business Days
after the Borrower's or any Subsidiary's knowledge of (x) the occurrence of
any material adverse development with respect to any litigation, action,
proceeding, or labor controversy
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disclosed in Item 6.6 of the Disclosure Schedule or (y) the commencement of
any litigation, arbitration, action, governmental investigation or
proceeding or labor controversy of the type and materiality disclosed in
Item 6.6 of the Disclosure Schedule, notice thereof and, to the extent the
Agent reasonably requests, copies of such documentation relating thereto;
(f) promptly after the sending or filing thereof, copies of all
reports and registration statements which the Borrower or any of its
Subsidiaries files with the Securities and Exchange Commission or any
national securities exchange;
(g) promptly upon becoming aware of the institution of any steps by
the Borrower or any other Person to terminate any Pension Plan, or the
failure to make a required contribution to any Pension Plan if such failure
is sufficient to give rise to a Lien under Section 302(f) of ERISA, or the
taking of any action with respect to a Pension Plan which could result in
the requirement that the Borrower furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any event with respect to
any Pension Plan which could result in the incurrence by the Borrower of
any material liability, fine or penalty, or any material increase in the
contingent liability of the Borrower (including the incurrence of any
liability described in clause (b) of Section 6.10) with respect to any
post-retirement Welfare Plan benefit, notice thereof and copies of all
documentation relating thereto;
(h) promptly upon receipt thereof, copies of all detailed financial
and management reports submitted to the Borrower by the independent public
accountants referred to in clause (b) of this Section 7.1.1 in connection
with each audit made by such accountants of the books of the Borrower or
any Subsidiary;
(i) promptly when available and in any event within 30 days after
the end of each calendar month, a consolidated balance sheet and
consolidated statements of cash flow of the Borrower and its Subsidiaries
as of the end of such month and consolidated and consolidating statements
of earnings of the Borrower and its Subsidiaries for such month and for the
period commencing at the end of the previous Fiscal Year and ending with
the end of such month, certified by the chief financial, accounting or
executive Authorized Officer of the Borrower, together with comparative
entries from the annual budget then in effect;
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(j) within 10 days after the end of each month, a Borrowing Base
Certificate, executed by the chief financial Authorized Officer of the
Borrower, calculating the Borrowing Base as of the last day of such month;
(k) promptly when available and in any event within 30 Business
Days after the last day of each Fiscal Year of the Borrower, a budget for
the next three succeeding Fiscal Years, which budget shall be prepared on a
month by month basis for the next succeeding Fiscal Year and on an annual
basis for the next two succeeding Fiscal Years in a manner and form
permitting easy comparison to financial statements delivered pursuant to
clause (a) above, and shall contain a projected, consolidated balance sheet
and statement of cash flow and consolidated and consolidating statement of
earnings of the Borrower and its Subsidiaries for such succeeding Fiscal
Years, prepared in reasonable detail by the chief accounting, financial or
executive Authorized Officer of the Borrower;
(l) within 20 days after the end of each month, a tooling
certification report, in form and content acceptable to the Agent, as of
the end of the month describing (i) all purchases of tooling by the
Borrower (which purchases are authorized by the Borrower's automotive
customers), (ii) at the request of the Agent, invoices and checks for
tooling expenditures, (iii) completed tooling, (iv) tooling with respect to
which a Tooling Account Receivable is owing, (v) at the request of the
Agent invoices for Tooling Account Receivables, and (vi) any additional
information relating thereto, as reasonably requested by the Agent;
(m) as soon as available and in any event within 45 days after the
end of each Fiscal Quarter, a management report executed by an Authorized
Officer describing in narrative form the operations and financial condition
of the Borrower and its Subsidiaries for the Fiscal Quarter then ended; and
(n) such other information respecting the condition or operations,
financial or otherwise, of the Borrower or any of its Subsidiaries as the
Agent or any Lender through the Agent may from time to time reasonably
request.
SECTION 7.1.2. Compliance with Laws, etc. The Borrower will, and
will cause each of its Subsidiaries to, comply with all applicable laws, rules,
regulations and orders (except for such
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noncompliance which could not reasonably be expected to have a Material Adverse
Effect) such compliance to include:
(a) the maintenance and preservation of its corporate existence and
qualification as a foreign corporation in all jurisdictions in which such
qualification is necessary; and
(b) the payment, before the same become delinquent, of all taxes,
assessments and governmental charges imposed upon it or upon its property
except to the extent being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books.
SECTION 7.1.3. Maintenance of Properties. The Borrower will, and
will cause each of its Subsidiaries to, maintain, preserve, protect and keep its
properties in good repair, working order and condition, and make necessary and
proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times unless the Borrower
reasonably determines in good faith that the continued maintenance of any of its
properties is no longer economically desirable.
SECTION 7.1.4. Insurance. (a) The Borrower shall maintain, and shall
cause each Subsidiary to maintain:
(i) physical damage insurance on all real and personal property
(including Inventory) on an all-risk basis (including loss in transit,
earthquake, if available, and flood insurance), repair and replacement cost
of all such property and consequential loss coverage for business
interruption and extra expenses;
(ii) public liability insurance (including products and completed
operations liability coverage) in an aggregate amount of not less than
$3,000,000; and
(iii) such other additional insurance coverage in such amounts and
with respect to such risks as the Agent may reasonably request from time to
time which is customary for businesses similar to that of the Borrower and
its Subsidiaries.
(b) All such insurance shall be provided by insurers having an A.M.
Best policyholders rating of not less than A, or such other insurers as the
Agent may approve in writing.
(c) All premiums on insurance policies required under this Section
shall be paid when due and payable by their terms by the Borrower. All
insurance policies shall contain loss payable clauses in the form submitted to
the Borrower by the Agent or in
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other form and substance reasonably satisfactory to the Agent, naming the Agent
as loss payee, for the benefit of the Agent, the Co-Agents and the Lenders
(except the insurance policies referred to in clause (a)(ii) above), and the
Lenders, the Co-Agents and the Agent as additional insured parties, as their
interest may appear, and providing that
(i) all proceeds thereunder which relate to losses or damages
sustained in respect of any item thereunder shall be payable to the Agent
for the benefit of the Agent, the Co-Agents and the Lenders, as their
interest may appear, and
(ii) such insurance shall not be affected by any unintentional act
or negligence on the part of the Borrower or other owner of the policy or
the property described in such policy.
All such insurance policies shall provide that the insurer shall, simultaneously
with the delivery to the Borrower or such Subsidiary of any notice under such
policy, deliver to the Agent a copy of such notice. All such insurance policies
and loss payable clauses shall provide that they may not be cancelled, amended
or terminated unless the Agent is given at least the same number of days' notice
that the insurance company which issued such policies is required to give the
Borrower or any Subsidiary, but in no event less than 10 day's prior written
notice of cancellation or termination for the non-payment of insurance premiums
and 30 day's prior written notice for any other cancellation or termination. So
long as no Default has occurred and is continuing, proceeds of such insurance
for all losses equal to or less than $500,000 per occurrence shall be paid
directly to the Borrower to repair, replace, restore or substitute such damaged
property. Proceeds for all losses in excess of $500,000 per occurrence, at the
request of the Agent, shall be paid directly to the Agent for its benefit and
the benefit of the Co-Agents and the Lenders; provided, that if no Default has
occurred and is continuing, the Agent shall remit to the Borrower all or a
portion of such proceeds to permit the Borrower to repair, replace, restore or
substitute such damaged property, if the Agent has received written evidence
reasonably satisfactory to the Agent to the effect that (i) such proceeds are
necessary and in an amount sufficient to pay all costs of repair, replacement,
restoration or substitution of such damaged property and (ii) the damaged
property can be repaired, replaced, restored or substituted prior to the
termination of the Commitments to an economical unit of substantially the same
character and value as such property was prior to such damage. Unless remitted
to the Borrower hereunder, proceeds received by the Agent shall be applied to
the Obligations as provided in Section 13 of the Security Agreement.
(d) The Borrower will not, and will not permit any of its
Subsidiaries to, use any of its or their inventory, or permit
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the inventory to be used, unlawfully or in any manner inconsistent with the
terms of any insurance coverage.
The Borrower shall retain all the incidents of ownership of the
insurance maintained pursuant to this Section and shall not borrow upon or
otherwise impair its right to receive the proceeds of such insurance.
SECTION 7.1.5. Books and Records. The Borrower will, and will cause
each of its Subsidiaries to, keep books and records which accurately reflect in
all material respects its business affairs and transactions and permit the
Agent, any Lender or any of their representatives, at reasonable times and
intervals, upon reasonable notice, to visit all of the Borrower's and such
Subsidiaries' offices, to discuss its financial matters with the Borrower's and
such Subsidiaries' officers and independent public accountant (and the Borrower
hereby authorizes such independent public accountant to discuss the Borrower's
or such Subsidiaries' financial matters with the Agent, any Lender or their
representatives whether or not any representative of the Borrower or such
Subsidiary is available to be present) and to examine (and, at the expense of
the Borrower, photocopy extracts from) any of its books or other corporate
records; provided, that the Borrower shall not be liable for any expenses
incurred by the Agent or any Lender under this Section except for Agent's
reasonable expenses incurred in connection with an initial field examination
conducted prior to the first anniversary of the date hereof.
SECTION 7.1.6. Environmental Covenant. The Borrower will, and will
cause each of its Subsidiaries to,
(a) use and operate all of its facilities and properties and handle
all Hazardous Materials in compliance with all Environmental Laws (except
for such noncompliance which could not reasonably be expected to have a
Material Adverse Effect), and keep all necessary permits, approvals,
certificates, licenses and other authorizations relating to environmental
matters in effect, except for such of the foregoing, the failure to obtain
or maintain which could not reasonably be expected to have a Material
Adverse Effect;
(b) promptly notify the Agent and provide copies upon receipt of
all written claims, complaints, notices or inquiries relating to the
condition of its facilities and properties or compliance with Environmental
Laws which could reasonably be expected to have a Material Adverse Effect,
and shall promptly resolve any non-compliance with Environmental Laws,
through remediation or otherwise and keep its property free of any Lien
imposed by any Environmental Law, except as permitted under Section 7.2.3;
and
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(c) provide such information and certifications which the Agent may
reasonably request from time to time to evidence compliance with this
Section 7.1.6.
SECTION 7.1.7 Interest Rate Risk Management Agreements. Within 90 days
following the date hereof, the Borrower will enter into interest rate risk
management agreements acceptable to the Agent with respect to at least 50% of
the aggregate principal amount of the Term Loans then outstanding for a period
of at least three years.
SECTION 7.2. Negative Covenants. The Borrower agrees with the Agent,
each Co-Agent and each Lender that, until all Commitments have terminated and
all Loans and Letter of Credit Outstandings have been paid and performed in
full, the Borrower will perform the obligations set forth in this Section 7.2.
SECTION 7.2.1. Business Activities. The Borrower will not, and will
not permit any of its Subsidiaries to, engage in any business activity, except
those currently conducted by the Borrower and the manufacture of auto parts.
SECTION 7.2.2. Indebtedness. The Borrower will not, and will not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness, other than,
without duplication, the following:
(a) Indebtedness in respect of the Credit Extensions and other
Obligations (including Hedging Obligations in respect of such Credit
Extensions);
(b) Indebtedness existing as of the Effective Date and identified in
Item 7.2.2(b) of the Disclosure Schedule;
(c) Indebtedness which is incurred by the Borrower or any of its
Subsidiaries to a vendor of any assets permitted to be acquired pursuant to
Section 7.2.7 to finance its acquisition of such assets;
(d) Indebtedness in respect of Capitalized Lease Liabilities to the
extent permitted in Section 7.2.7; and
(e) other unsecured Indebtedness of the Borrower not to exceed
$2,000,000 in aggregate principal amount at any time outstanding.
SECTION 7.2.3. Liens. The Borrower will not, and will not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon
any of its property, revenues or assets, whether now owned or hereafter
acquired, except:
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(a) Liens securing payment of the Obligations, granted pursuant to
any Loan Document;
(b) Liens existing as of the Effective Date disclosed in Item 7.2.3(b)
of the Disclosure Schedule;
(c) Liens granted to secure payment of Indebtedness of the type
permitted and described in clause (c) of Section 7.2.2 and covering only
those assets acquired with the proceeds of such Indebtedness;
(d) Liens arising pursuant to Capitalized Lease Liabilities permitted
under clause (d) of Section 7.2.2;
(e) Liens for taxes, assessments or other governmental charges or
levies not at the time delinquent or being diligently contested in good
faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books;
(f) Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums not overdue
or being diligently contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with GAAP shall have been set
aside on its books;
(g) Liens incurred in the ordinary course of business in connection
with workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than for borrowed money)
entered into in the ordinary course of business or to secure obligations on
surety or appeal bonds; and
(h) Easements, rights-of-way, restrictions, and other similar charges
or encumbrances with respect to real property not interfering in any
material respect with the ordinary conduct of the business of the Borrower
or any of its Subsidiaries (including those described on any title
commitment delivered to the Agent pursuant to Section 5.1.6 with respect to
any of the owned or leased property).
SECTION 7.2.4. Financial Condition. The Borrower will not permit:
(a) Net Worth at any time to be less than 85% of the greater of (i)
Net Worth as of the date of the initial Credit Extension and (ii) Net Worth
as of the
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last day of any Fiscal Quarter ending on or after the Third Fiscal Quarter
1994.
(b) the Leverage Ratio for any period set forth below, to be greater
than the ratio set forth opposite such period:
=========================================================
PERIOD RATIO
---------------------------------------------------------
Four Fiscal Quarter period ending on the 7.5
last day of the Fourth Fiscal Quarter 1994
---------------------------------------------------------
Four Fiscal Quarter period ending on the 7.0
last day of the First Fiscal Quarter 1995
---------------------------------------------------------
Four Fiscal Quarter period ending on the 6.75
last day of the Second Fiscal Quarter 1995
---------------------------------------------------------
Four Fiscal Quarter period ending on the 6.25
last day of the Third Fiscal Quarter 1995
---------------------------------------------------------
Four Fiscal Quarter period ending on the 5.5
last day of the Fourth Fiscal Quarter 1995
---------------------------------------------------------
Four Fiscal Quarter period ending on the 4.5
last day of each Fiscal Quarter in the 1996
Fiscal Year
---------------------------------------------------------
Four Fiscal Quarter period ending on the 3.75
last day of each Fiscal Quarter in the 1997
Fiscal Year
=========================================================
Four Fiscal Quarter period ending on the 3.25
last day of the First Fiscal Quarter 1998
and on the last day of each Fiscal Quarter
thereafter
=========================================================
(c) the Interest Coverage Ratio for any period set forth below, to be
less than the ratio set forth opposite such period:
=========================================================
PERIOD RATIO
---------------------------------------------------------
From the date of the initial Credit 2.5
Extension through the last day of the Fourth
Fiscal Quarter 1994
---------------------------------------------------------
From the date of the initial Credit 2.75
Extension through the last day of the First
Fiscal Quarter 1995
---------------------------------------------------------
From the date of the initial Credit 3.0
Extension through the last day of the Second
Fiscal Quarter 1995
---------------------------------------------------------
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===========================================================
PERIOD RATIO
- -----------------------------------------------------------
Four Fiscal Quarter period ending on the 3.25
last day of the Third Fiscal Quarter 1995
- -----------------------------------------------------------
Four Fiscal Quarter period ending on the 3.5
last day of the Fourth Fiscal Quarter 1995
- -----------------------------------------------------------
Four Fiscal Quarter period ending on the 4.0
last day of the First Fiscal Quarter 1996
and on the last day of each Fiscal Quarter
thereafter
===========================================================
(d) the Fixed Charge Coverage Ratio for any period set forth below, to
be less than the ratio set forth opposite such period:
===========================================================
PERIOD RATIO
- -----------------------------------------------------------
From the date of the initial Credit 1.25
Extension through the last day of the Fourth
Fiscal Quarter 1994
- -----------------------------------------------------------
From the date of the initial Credit 1.25
Extension through the last day of the First
Fiscal Quarter 1995
- -----------------------------------------------------------
From the date of the initial Credit 1.25
Extension through the last day of the Second
Fiscal Quarter 1995
- -----------------------------------------------------------
Four Fiscal Quarter period ending on the 1.25
last day of the Third Fiscal Quarter 1995,
the last day of the Fourth Quarter 1995 and
on the last day of each Fiscal Quarter in
the 1996 Fiscal Year
===========================================================
Four Fiscal Quarter period ending on the 1.5
last day of the First Fiscal Quarter 1997
and on the last day of each Fiscal Quarter
thereafter
===========================================================
(e) Restructuring Costs during the period commencing on the date of
the initial Credit Extension and ending June 30, 2001, to exceed
$10,000,000.
SECTION 7.2.5. Investments. The Borrower will not, and will not permit
any of its Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
(a) Investments existing on the Effective Date and identified in Item
7.2.5(a) of the Disclosure Schedule;
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(b) Cash Equivalent Investments;
(c) Investments by the Borrower as of the Effective Date in any of its
Subsidiaries, or by any such Subsidiary in any of its Subsidiaries;
(d) Sales of Inventory on account in the ordinary course of business;
(e) Investments by the Borrower or any of its Subsidiaries in tooling
so long as the amount by which such Investments exceed the amount of the
contractual obligations to reimburse the Borrower and its Subsidiaries for
such tooling is not greater than $2,000,000 at any time; and
(f) other Investments in an aggregate amount at any one time not to
exceed $1,000,000.
SECTION 7.2.6. Restricted Payments, etc. On and at all times after the
Effective Date:
(a) the Borrower will not declare, pay or make any dividend or
distribution (in cash, property or obligations) on any shares of any class
of capital stock (now or hereafter outstanding) of the Borrower or on any
warrants, options or other rights with respect to any shares of any class
of capital stock (now or hereafter outstanding) of the Borrower (other than
dividends or distributions payable in its common stock or warrants to
purchase its common stock or splitups or reclassifications of its stock
into additional or other shares of its common stock) or apply, or permit
any of its Subsidiaries to apply, any of its funds, property or assets to
the purchase, redemption, sinking fund or other retirement of, or agree or
permit any of its Subsidiaries to purchase or redeem, any shares of any
class of capital stock (now or hereafter outstanding) of the Borrower, or
warrants, options or other rights with respect to any shares of any class
of capital stock (now or hereafter outstanding) of the Borrower; provided
that Borrower may (i) pay a dividend to or on behalf of MC in the amount of
the Cash Consideration to effectuate the transactions contemplated by the
Joint Venture Agreement and the transfer of the Orscheln Transferred Assets
to the Borrower, (ii) pay dividends to or on behalf of MC under a tax
sharing arrangement reasonably acceptable to the Agent so long as such tax
sharing arrangement is based on the method prescribed in Treas. Reg. (S)
1.1502-33(d)(2)(ii) and on the method prescribed in Treas. Reg. (S) 1.1552-
1(a)(2) (and using 100% percent as the percentage described in Treas. Reg.
(S) 1.1502-33(d)(2)(ii)(b)), (iii) pay dividends to or on behalf of
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MC to permit MC and Newco to pay regularly scheduled semi-annual interest
on the Subordinated Promissory Notes pursuant to the terms of the
Subordinated Promissory Notes so long as no Event of Default exists or
would be caused thereby, (iv) pay dividends to or on behalf of MC to permit
MC and Newco to prepay all or any part of the Subordinated Promissory Notes
so long as (A) no Event of Default exists or would be caused thereby, (B)
the Borrower has provided evidence satisfactory to the Required Lenders
that Ford Motor Company has agreed that all Ford Recall Liability has been
satisfied in full, and (C) the amount prepaid does not exceed the amount by
which $4,000,000 exceeds the aggregate amount paid by the Borrower in
connection with the Ford Recall Liability, (v) pay dividends to or on
behalf of MC to permit Newco to reimburse the parties to the Joint Venture
Agreement for their out-of-pocket transaction expenses incurred in
connection with the transactions contemplated by the Joint Venture
Agreement to the extent Newco is obligated to reimburse such parties
pursuant to the terms of the Joint Venture Agreement and the aggregate
amount of out-of-pocket transaction expenses reimbursed by Newco does not
exceed $3,000,000, (vi) pay dividends to or on behalf of MC in the amount
of MC's and Newco's franchise taxes and audit fees incurred in the ordinary
course of MC's and Newco's business, and (vii) repurchase the capital stock
of Newco owned by members of management whose employment has been
terminated so long as the aggregate amount of such repurchases in any
Fiscal Year does not exceed $500,000 and no Event of Default then exists or
would be caused thereby.
(b) the Borrower will not, and will not permit any Subsidiary to, make
any deposit for any of the foregoing purposes.
SECTION 7.2.7. Capital Expenditures, etc. The Borrower will not, and
will not permit any of its Subsidiaries to, make Capital Expenditures in any
period set forth below (or commit to make with respect to such period), except
Capital Expenditures which do not aggregate in excess of the amount set forth
below opposite such period:
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======================================================================
PERIOD AMOUNT
----------------------------------------------------------------------
1994 Fiscal Year $8,500,000 less the amount of the
Orscheln Capital Expenditures
incurred during the period beginning
on December 26, 1993 and ending on
the date of the initial Credit
Extension
----------------------------------------------------------------------
1995 Fiscal Year $6,700,000
----------------------------------------------------------------------
1996 Fiscal Year $6,800,000
----------------------------------------------------------------------
1997 Fiscal Year $6,400,000
----------------------------------------------------------------------
1998 Fiscal Year $6,400,000
----------------------------------------------------------------------
1999 Fiscal Year $6,400,000
----------------------------------------------------------------------
2000 Fiscal Year and each $6,400,000
Fiscal Year thereafter
======================================================================
SECTION 7.2.8. Rental Obligations. The Borrower will not, and will
not permit any of its Subsidiaries to, enter into at any time any arrangement
which involves the leasing by the Borrower or any of its Subsidiaries from any
lessor of any real or personal property (other than those which would create a
Capitalized Lease Liability), except arrangements which, together with all
other such arrangements which shall then be in effect, will not require the
payment of an aggregate amount of rentals by the Borrower and its Subsidiaries
in any period set forth below to exceed the amount set forth opposite such
period:
======================================================================
PERIOD AMOUNT
----------------------------------------------------------------------
From the date of the initial Credit Extension $1,050,000
through the last day of the 1994 Fiscal Year
----------------------------------------------------------------------
1995 Fiscal Year and each Fiscal Year thereafter $2,500,000
======================================================================
SECTION 7.2.9. Take or Pay Contracts. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into or be a party to any
arrangement for the purchase of materials, supplies, other property or services
if such arrangement by its express terms requires that payment be made by the
Borrower or such Subsidiary regardless of whether such materials, supplies,
other property or services are delivered or furnished to it.
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SECTION 7.2.10. Consolidation, Merger, etc. The Borrower will not,
and will not permit any of its Subsidiaries to, liquidate or dissolve,
consolidate with, or merge into or with, any other corporation, or purchase or
otherwise acquire all or substantially all of the assets of any Person (or of
any division thereof) except any such Subsidiary may liquidate or dissolve
voluntarily into, and may merge with and into, the Borrower or any other
Subsidiary and MC may merge with and into the Borrower.
SECTION 7.2.11. Asset Dispositions, etc. The Borrower will not, and
will not permit any of its Subsidiaries to, sell, transfer, lease, contribute or
otherwise convey, or grant options, warrants or other rights with respect to,
all or any substantial part of its assets (including accounts receivable and
capital stock of Subsidiaries) to any Person, except (a) bona fide sales of
Inventory to customers for fair value in the ordinary course of business, (b)
dispositions of obsolete equipment not used in its business, (c) dispositions of
equipment for fair value in the ordinary course of business to the extent the
proceeds of such disposition are used to acquire replacement equipment within
120 days of such disposition or to prepay the installments owing in respect of
the Term Loans pro-rata against all scheduled payments set forth in Section
3.1(c), (d) additional dispositions of property so long as the aggregate
proceeds from such additional dispositions in any Fiscal Year does not exceed
$100,000 and no Event of Default then exists or would otherwise be caused
thereby, and (e) the reconveyance to Orscheln of the Borrower's real property
commonly known as 445 East Helm Street, Brookfield, Missouri (Cabrook) pursuant
to the terms of the Joint Venture Agreement (free and clear of Agent's Lien).
SECTION 7.2.12. Modification of Certain Agreements. The Borrower
will not, and will not permit any of its Subsidiaries to, consent to any
amendment, supplement or other modification of any of the terms or provisions
contained in, or applicable to, (i) the Joint Venture Agreement which would
materially adversely affect the Borrower's ability to perform hereunder or which
would increase the purchase price thereunder or which would materially increase
the Borrower's obligations or liabilities, contingent or otherwise, (ii) the
Letter Agreement dated August 25, 1994 between Ford Motor Company and the
Borrower attached hereto as Item 7.2.12 of the Disclosure Schedule which would
increase the liability of the Borrower thereunder or which would materially
adversely affect the Borrower's ability to perform hereunder, or (ii) any
document or instrument evidencing or applicable to any Subordinated Debt.
SECTION 7.2.13. Restriction on Fundamental Changes. Neither the
Borrower nor any of its Subsidiaries will: (a) amend, modify or waive any term
or provision of its articles of incorporation or by-laws which would materially
adversely affect the Borrower's or any Subsidiary's ability to perform its
obligations under the Loan Documents; (b) liquidate, wind-up or dissolve itself
(or suffer any liquidation or dissolution); or (c)
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acquire by purchase or otherwise all or any substantial part of the business or
assets of, or stock or other evidence of beneficial ownership of, any Person.
SECTION 7.2.14. Fiscal Year. Neither the Borrower nor any Subsidiary
of the Borrower shall change its Fiscal Year.
SECTION 7.2.15. Subsidiaries. The Borrower will not, and will not
permit any of its Subsidiaries to, establish, create or acquire any new
Subsidiary.
SECTION 7.2.16. Transactions with Affiliates. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into, or cause, suffer or
permit to exist any arrangement or contract with any of its Affiliates unless
such arrangement or contract is fair and equitable to the Borrower or such
Subsidiary and is an arrangement or contract of the kind which would be entered
into by a prudent Person in the position of the Borrower or such Subsidiary with
a Person which is not one of its Affiliates; and the Borrower shall not pay any
management or similar fees to Hidden Creek Industries or any Affiliate except as
provided under Item 7.2.16 of the Disclosure Schedule.
SECTION 7.2.17. Negative Pledges, Restrictive Agreements, etc.
Except as otherwise permitted by this Agreement, the Borrower will not, and will
not permit any of its Subsidiaries to, enter into any agreement (excluding this
Agreement, any other Loan Document, any agreement governing any Indebtedness
permitted by clause (c) or (d) of Section 7.2.2 as to the assets financed with
the proceeds of such Indebtedness or, with respect to clause (a) below, the
agreements disclosed in Item 7.2.17(a) of the Disclosure Schedule) prohibiting
(a) the creation or assumption of any Lien upon its properties,
revenues or assets, whether now owned or hereafter acquired, or the ability
of the Borrower or any other Obligor to amend or otherwise modify this
Agreement or any other Loan Document; or
(b) the ability of any Subsidiary to make any payments, directly or
indirectly, to the Borrower by way of dividends, advances, repayments of
loans or advances, reimbursements of management and other intercompany
charges, expenses and accruals or other returns on investments, or any
other agreement or arrangement which restricts the ability of any such
Subsidiary to make any payment, directly or indirectly, to the Borrower.
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ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1. Listing of Events of Default. Each of the following
events or occurrences described in this Section 8.1 shall constitute an "Event
of Default".
SECTION 8.1.1. Non-Payment of Obligations. The Borrower shall
default in the payment when due of any principal in respect of the Loans; or the
Borrower shall default in the payment when due of any interest, fees or other
Obligations payable under the Loan Documents and such default shall continue
unremedied for five consecutive days.
SECTION 8.1.2. Breach of Warranty. Any representation or warranty of
the Borrower or any other Obligor made or deemed to be made hereunder or in any
other Loan Document executed by it or any other writing or certificate furnished
by or on behalf of the Borrower or any other Obligor to the Agent, any Co-Agent
or any Lender for the purposes of or in connection with this Agreement or any
such other Loan Document (including any certificates delivered pursuant to
Article V) is or shall be incorrect when made in any material respect.
SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations.
The Borrower shall default in the due performance and observance of any of its
obligations under Section 7.1.1(a), (b), (c), (i) or (j) or Section 7.2.
SECTION 8.1.4. Non-Performance of Other Covenants and Obligations.
Any Obligor shall default in the due performance and observance of any other
agreement contained herein or in any other Loan Document executed by it, and
such default shall continue unremedied for a period of 30 days after notice
thereof shall have been given to the Borrower by the Agent or the Required
Lenders.
SECTION 8.1.5. Default on Other Indebtedness. A default shall occur
in the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness (other than Indebtedness
described in Section 8.1.1) of the Borrower or any of its Subsidiaries having a
principal amount, individually or in the aggregate, in excess of $1,000,000 or a
default shall occur in the performance or observance of any obligation or
condition with respect to such Indebtedness if the effect of such default is to
accelerate the maturity of any such Indebtedness or such default shall continue
unremedied for any applicable period of time sufficient to permit the holder or
holders of such Indebtedness, or any trustee or agent for such holders, to cause
or declare such Indebtedness to become due and payable or required to be
prepaid, redeemed, purchased or defeased, or an offer to purchase or defease
such Indebtedness shall be required to be made, prior to its expressed maturity.
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SECTION 8.1.6. Judgments. Any one judgment or order for the payment
of money in excess of $1,000,000 or any judgments or orders in the aggregate in
excess of $2,000,000 shall be rendered against the Borrower or any of its
Subsidiaries or any Obligor and such judgment or judgments shall not have been
vacated, discharged or stayed or bonded pending appeal within 30 days after the
entry thereof.
SECTION 8.1.7. Pension Plans. Any of the following events shall
occur with respect to any Pension Plan
(a) the institution of any steps by the Borrower, any member of its
Controlled Group or any other Person to terminate or withdraw from a
Pension Plan if, as a result of such termination or withdrawal, the
Borrower or any of its Subsidiaries would be required to make a
contribution to such Pension Plan, or would be liable to such Pension Plan,
in excess of $1,000,000; or
(b) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA and such
failure continues for a period of 30 days (provided, that such contribution
failure shall immediately constitute an Event of Default as soon as such
Lien arises).
SECTION 8.1.8. Change in Control. Any Change in Control shall occur.
SECTION 8.1.9. Bankruptcy, Insolvency, etc. The Borrower, any of its
Subsidiaries or any Obligor shall
(a) generally fail to pay, or admit in writing its inability or
unwillingness to pay, debts as they become due or become insolvent;
(b) apply for, consent to, or acquiesce in, the appointment of a
trustee, receiver, sequestrator or other custodian or any property of any
thereof, or make a general assignment for the benefit of creditors;
(c) in the absence of such application, consent or acquiescence,
permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian or for a substantial part of the property
of any thereof, and such trustee, receiver, sequestrator or other custodian
shall not be discharged within 45 days;
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect thereof; or, if any such case or
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proceeding is not commenced by the Borrower, any of its Subsidiaries or any
Obligor, such case or proceeding shall be consented to or acquiesced in by
the Borrower, such Subsidiary or such Obligor or shall result in the entry
of an order for relief or shall remain for 45 days undismissed; or
(e) take any corporate action authorizing, or in furtherance of, any
of the foregoing.
SECTION 8.1.10. Impairment of Security, etc. Any Loan Document, or
any Lien granted thereunder, shall (except in accordance with its terms), in
whole or in part, terminate, cease to be effective or cease to be the legally
valid, binding and enforceable obligation of any Obligor party thereto; the
Borrower, any other Obligor or any other Person shall, directly or indirectly,
contest in any manner such effectiveness, validity, binding nature or
enforceability and, with respect to any such other Person, the Agent has
determined such contest to be material.
SECTION 8.1.11. Default in Other Agreements. Breach or default of
any Obligor under agreement not evidencing Indebtedness if the effect of such
breach or default could reasonably be expected to have a Material Adverse
Effect.
SECTION 8.1.12. Injunction. Any Obligor is enjoined, restrained or
in any way prevented by the order of any court or any administrative or
regulatory agency from conducting all or any part of its business which could
reasonably be expected to have a Material Adverse Effect and such order
continues for more than 30 days.
SECTION 8.1.13. Subordinated Promissory Notes. Any of the
Subordinated Promissory Notes shall be amended or modified without the prior
written consent of the Required Lenders, except to reduce or waive an interest
payment; or Newco or MC shall prepay all or any portion of the principal amount
of the Indebtedness evidenced by the Subordinated Promissory Notes without the
prior written consent of the Required Lenders, except in connection with the
proceeds of a dividend permitted under clause (iv) of the proviso to Section
7.2.6(a).
SECTION 8.2. Action if Bankruptcy. If any Event of Default described
in clauses (a) through (d) of Section 8.1.9 shall occur and continue, the
Commitments (if not theretofore terminated) shall automatically terminate and
the outstanding principal amount of all outstanding Loans and all other
Obligations shall automatically be and become immediately due and payable,
without notice or demand.
SECTION 8.3. Action if Other Event of Default. If any Event of
Default (other than any Event of Default described in clauses (a) through (d) of
Section 8.1.9) shall occur and continue
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for any reason, whether voluntary or involuntary, and be continuing, the Agent,
upon the direction of the Required Lenders, shall by notice to the Borrower
declare all or any portion of the outstanding principal amount of the Loans and
other Obligations to be due and payable and/or the Commitments (if not
theretofore terminated) to be terminated, whereupon the full unpaid amount of
such Loans and other Obligations which shall be so declared due and payable
shall be and become immediately due and payable, without further notice, demand
or presentment, and/or, as the case may be, the Commitments shall terminate.
ARTICLE IX
THE AGENT AND CO-AGENTS
SECTION 9.1. Actions. Each Lender hereby appoints Continental as its
Agent, under and for purposes of this Agreement and each other Loan Document.
Each Lender authorizes the Agent to act on behalf of such Lender under this
Agreement and each other Loan Document and, in the absence of other written
instructions from the Required Lenders received from time to time by the Agent
(with respect to which the Agent agrees that it will comply, except as otherwise
provided in this Section or as otherwise advised by counsel ), to exercise such
powers hereunder and thereunder as are specifically delegated to or required of
the Agent by the terms hereof and thereof, together with such powers as may be
reasonably incidental thereto. Each Lender hereby indemnifies (which indemnity
shall survive any termination of this Agreement) the Agent, pro rata according
to such Lender's Percentage, from and against any and all liabilities,
obligations, losses, damages, claims, costs or expenses of any kind or nature
whatsoever which may at any time be imposed on, incurred by, or asserted
against, the Agent in any way relating to or arising out of this Agreement and
any other Loan Document, including reasonable attorneys' fees, and as to which
the Agent is not reimbursed by the Borrower; provided, however, that no Lender
shall be liable for the payment of any portion of such liabilities, obligations,
losses, damages, claims, costs or expenses which are determined by a court of
competent jurisdiction in a final proceeding to have resulted solely from the
Agent's gross negligence or wilful misconduct. The Agent shall not be required
to prosecute or defend any suit in respect of this Agreement or any other Loan
Document, unless it is indemnified hereunder to its satisfaction. The Agent
shall have only those duties and responsibilities that are expressly specified
in this Agreement and the other Loan Documents and it may perform such duties by
or through its agents or employees. The Agent shall not have, by reason of this
Agreement or any other Loan Document, a fiduciary relationship in respect of any
Lender; and nothing in this Agreement or any other Loan Document, express or
implied, is intended or shall be so construed as to impose upon the Agent any
obligations in respect of this Agreement or any other Loan Document except as
expressly set forth herein or therein. If the Agent shall request instructions
from Lenders with respect to any act or
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action (including the failure to take an action) in connection with this
Agreement or any other Loan Document, the Agent shall be entitled to refrain
from such act or taking such action unless and until the Agent shall have
received instructions from the Required Lenders. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against the Agent
as a result of the Agent acting or (where so instructed) refraining from acting
under this Agreement or any other Loan Document in accordance with the
instructions of the Required Lenders. The Agent shall be entitled to refrain
from exercising any power, discretion or authority vested in it under this
Agreement or any other Loan Document unless and until it has obtained the
instructions of the Required Lenders.
SECTION 9.2. Funding Reliance, etc. Unless the Agent shall have been
notified by telephone, confirmed in writing by any Lender by 10:45 a.m., Chicago
time, on the day prior to a Credit Extension that such Lender will not make
available the amount which would constitute its Percentage of such Credit
Extension on the date specified therefor, the Agent may assume that such Lender
has made such amount available to the Agent and, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If such
amount is made available by such Lender to the Agent on a date after the date of
such Credit Extension, such Lender shall pay to the Agent on demand interest on
such amount at the Federal Funds Rate for the number of days from the date of
such Credit Extension to the date on which such amount becomes immediately
available to the Agent, together with such other compensatory amounts as may be
required to be paid by such Lender to the Agent pursuant to the Rules for
Interbank Compensation of the Council on International Banking or the
Clearinghouse Compensation Committee, as the case may be, as in effect from time
to time. A statement of the Agent submitted to any Lender with respect to any
amounts owing under this paragraph shall be conclusive, in the absence of
manifest error. If such amount is not in fact made available to the Agent by
such Lender on the same Business Day as the date of such Credit Extension, the
Agent shall be entitled to recover such amount, with interest thereon at the
rate per annum then applicable to the Loans comprising such Credit Extension, on
demand, from the Borrower.
SECTION 9.3. Exculpation. Neither the Agent nor any of its
directors, officers, employees or agents shall be liable to any Lender for any
action taken or omitted to be taken by it under this Agreement or any other Loan
Document, or in connection herewith or therewith, except for its own wilful
misconduct or gross negligence, nor responsible for any recitals or warranties
herein or therein, nor for the effectiveness, enforceability, validity or due
execution of this Agreement or any other Loan Document, nor for the creation,
perfection or priority of any Liens purported to be created by any of the Loan
Documents, or the validity, genuineness, enforceability, value or sufficiency of
any collateral security, nor to make any inquiry respecting the performance by
any Obligor of its obligations hereunder or under any other Loan Document. Any
such inquiry which may be made by the Agent shall not obligate it
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to make any further inquiry or to take any action. The Agent shall be entitled
to rely upon advice of counsel concerning legal matters and upon any notice,
consent, certificate, statement or writing which the Agent believes to be
genuine and to have been presented by a proper Person.
SECTION 9.4. Successor. The Agent may resign as such at any time
upon at least 30 days' prior notice to the Borrower and all Lenders. If the
Agent at any time shall resign, the Required Lenders may, if no Event of Default
exists, with the consent of the Borrower (not to be unreasonably withheld), or
if an Event of Default exists, without the consent of Borrower, appoint another
Lender as a successor Agent which shall thereupon become the Agent hereunder.
If no successor Agent shall have accepted an appointment by the Required Lenders
within 30 days after the retiring Agent's giving notice of resignation, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent which
shall be one of the Lenders or a commercial banking institution organized under
the laws of the U.S. (or any State thereof) or a U.S. branch or agency of a
commercial banking institution, and having a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as the Agent
hereunder by a successor Agent, such successor Agent shall be entitled to
receive from the retiring Agent such documents of transfer and assignment as
such successor Agent may reasonably request, and shall thereupon succeed to and
become vested with all rights, powers, privileges and duties of the retiring
Agent and the retiring Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring Agent's resignation hereunder as the
Agent the provisions of
(a) this Article IX shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Agent under this
Agreement; and
(b) Section 10.3 and Section 10.4 shall continue to inure to its
benefit.
SECTION 9.5. Loans by Continental. Continental shall have the same
rights and powers with respect to (x) the Credit Extensions made by it or any of
its Affiliates, and (y) the Notes held by it or any of its Affiliates as any
other Lender and may exercise the same as if it were not the Agent. Continental
and its Affiliates may accept deposits from, lend money to, and generally engage
in any kind of business with the Borrower or any Subsidiary or Affiliate of the
Borrower as if Continental was not the Agent hereunder.
SECTION 9.6. Credit Decisions. Each Lender acknowledges that it has,
independently of the Agent and each other Lender, and based on such Lender's
review of the financial information of the Borrower, this Agreement, the other
Loan Documents (the terms and provisions of which being satisfactory to
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such Lender) and such other documents, information and investigations as such
Lender has deemed appropriate, made its own credit decision to extend its
Commitment. Each Lender also acknowledges that it will, independently of the
Agent and each other Lender, and based on such other documents, information and
investigations as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising or not exercising from time to time any
rights and privileges available to it under this Agreement or any other Loan
Document.
SECTION 9.7. Copies, etc. The Agent shall give prompt notice to each
Lender of each notice or request required to be given to the Agent by the
Borrower pursuant to the terms of this Agreement (unless concurrently delivered
to the Lenders by the Borrower). The Agent will promptly distribute to each
Lender each document or instrument received for its account and copies of all
other communications received by the Agent from the Borrower for distribution to
the Lenders by the Agent in accordance with the terms of this Agreement.
SECTION 9.8. Co-Agents. Each Lender hereby appoints each of The Bank
of Nova Scotia, Comerica Bank and Chase Manhattan Bank, as its Co-Agents, under
and for the purposes of this Agreement and each other Loan Document.
Notwithstanding anything contained in the Loan Documents to the contrary, no Co-
Agent shall have any duties or responsibilities under the Loan Documents except
as a Lender under the Loan Documents.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Waivers, Amendments, etc. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Borrower and the Required Lenders; provided, however, that
no such amendment, modification or waiver shall:
(a) modify any requirement hereunder that any particular action be
taken by all the Lenders or by the Required Lenders unless consented to by
each Lender;
(b) modify this Section 10.1, change the definition of "Required
Lenders", increase any Commitment Amount or the Percentage of any Lender,
reduce any fees described in Article III, release collateral security
(including any guaranty) with an aggregate fair market value in excess of
$5,000,000 in any one transaction or series of related transactions (other
than the release of colla-teral described in Section 7.2.11(e) for which no
consent shall be required) or extend the Revolving Loan Commit-ment
Termination Date unless consented to by each Lender;
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(c) extend the Stated Maturity Date on any Loan (or reduce the
principal amount of or rate of interest on any Loan) or modify the payment
date or amount of any required interest payment or principal payment set
forth in clause (c) of Section 3.1 (it being understood and agreed,
however, that any modification of the application of prepayments required
pursuant to Section 3.1 (or any other similar provision of any Loan
Document) or a vote to rescind any acceleration made pursuant to Section
8.2 and Section 8.3 of amounts owing with respect to the Loans and other
Obligations shall only require the vote of the Required Lenders), unless
consented to by each Lender;
(d) affect adversely the interests, rights or obligations of the
Agent as the Agent unless consented to by the Agent; provided, however,
that nothing in this subparagraph shall be deemed to alter the voting
requirements of the Required Lenders; or
(e) modify any provision of Section 2.6, the fees to be paid pursuant
to Section 3.3, or the provisions of any Letter of Credit, unless consented
to by the Issuer.
No failure or delay on the part of the Agent, any Co-Agent or any Lender in
exercising any power or right under this Agreement or any other Loan Document
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power or right preclude any other or further exercise thereof or the
exercise of any other power or right. No notice to or demand on the Borrower in
any case shall entitle it to any notice or demand in similar or other
circumstances. No waiver or approval by the Agent, any Co-Agent or any Lender
shall, except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
SECTION 10.2. Notices. All notices and other communications provided
to any party hereto under this Agreement or any other Loan Document shall be in
writing or by facsimile and addressed, delivered or transmitted to such party at
its address or facsimile number set forth below its signature hereto or set
forth in an Assignment and Assumption Agreement or at such other address or
facsimile number as may be designated by such party in a notice to the other
Persons party hereto. Any notice, if mailed and properly addressed with postage
prepaid or if properly addressed and sent by pre-paid courier service, shall be
deemed given when received; any notice, if delivered by hand, shall be deemed
given when delivered, and if transmitted by facsimile, shall be deemed given
when transmitted.
SECTION 10.3. Payment of Costs and Expenses. The Borrower agrees to
pay, within 30 days of notice, all expenses of
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the Agent (including the reasonable fees and out-of-pocket expenses of counsel
to the Agent and local counsel, if any, who may be retained by counsel to the
Agent) in connection with
(a) the negotiation, preparation, execution and delivery of this
Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from time
to time hereafter be required, whether or not the transactions contemplated
hereby are consummated;
(b) the filing, recording, refiling or rerecording of the Mortgages
and/or any Uniform Commercial Code financing statements and all amendments,
supplements and modifications to any thereof and any and all other
documents or instruments of further assurance required to be filed or
recorded or refiled or rerecorded by the terms hereof or of the other Loan
Documents; and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save the Agent, the Co-Agents and the
Lenders harmless from all liability for, any stamp or other similar taxes which
may be payable in connection with the execution or delivery of this Agreement,
the borrowings hereunder, or the issuance of the Notes or Letters of Credit or
any other Loan Documents. The Borrower also agrees to reimburse the Agent, each
Co-Agent and each Lender upon demand for all reasonable out-of-pocket expenses
(including attorneys' fees and legal expenses of counsel) incurred by the Agent,
such Co-Agents or such Lenders in connection with (x) the negotiation of any
restructuring or "work-out", whether or not consummated, of any Obligations and
(y) the enforcement of any Obligations.
SECTION 10.4. Indemnification. In consideration of the execution and
delivery of this Agreement by the Agent and each Lender and the extension of the
Commitments, the Borrower hereby indemnifies, exonerates and holds the Agent,
each Lender and each of their respective officers, directors, employees and
agents (collectively, the "Indemnified Parties") free and harmless from and
against any and all actions, causes of action, suits, losses, costs, liabilities
and damages, and expenses incurred in connection therewith (irrespective of
whether any such Indemnified Party is a party to the action for which
indemnification hereunder is sought), including reasonable attorneys' fees and
disbursements, whether incurred in connection with actions between or among the
parties hereto or the parties hereto and third parties (collectively, the
"Indemnified Liabilities"), incurred by the Indemnified Parties or any of them
as a result of, or arising out of, or relating to
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(a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Loan;
(b) the entering into and performance of this Agreement and any
other Loan Document by any of the Indemnified Parties (including any action
brought by or on behalf of the Borrower as the result of any determination
by the Required Lenders pursuant to Article V not to fund any Credit
Extension);
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any portion of the stock or assets of any Person,
whether or not the Agent or any Lender is party thereto;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to the
protection of the environment or the Release by the Borrower or any of its
Subsidiaries of any Hazardous Material;
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by the Borrower or any Subsidiary thereof of any
Hazardous Material (including any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under any Environmental Law),
regardless of whether caused by, or within the control of, the Borrower or
such Subsidiary; and
(f) any violation by the Borrower or any of its Subsidiaries of any
Environmental Laws;
except to the extent any such Indemnified Liabilities arise for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or wilful misconduct. The Borrower, its successors and assigns,
hereby waive, release and agree not to make any claim or bring any cost recovery
action against, the Agent or any Lender under CERCLA or any state equivalent, or
any similar law now existing or hereafter enacted. It is expressly understood
and agreed that to the extent that any of such Persons is strictly liable under
any Environmental Laws, the Borrower's obligation to such Person under this
indemnity shall likewise be without regard to fault on the part of the Borrower
with respect to the violation or condition which results in liability of such
Person. If and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
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<PAGE>
SECTION 10.5. Survival. The obligations of the Borrower under
Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the Lenders
under Section 9.1, shall in each case survive any termination of this Agreement,
the payment in full of all Obligations and the termination or expiration of all
Commitments and Letters of Credit. The representations and warranties made by
the Borrower and each other Obligor in this Agreement and in each other Loan
Document shall survive the execution and delivery of this Agreement and each
such other Loan Document.
SECTION 10.6. Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 10.7. Headings. The various headings of this Agreement and
of each other Loan Document are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or such other Loan
Document or any provisions hereof or thereof.
SECTION 10.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be deemed to be an original and all of which shall constitute
together but one and the same agreement. This Agreement shall become effective
when counterparts hereof executed on behalf of the Borrower, the Agent, each Co-
Agent and each Lender.
SECTION 10.9. Governing Law: Entire Agreement. THIS AGREEMENT, THE
NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS. This
Agreement and the other Loan Documents constitute the entire understanding among
the parties hereto with respect to the subject matter hereof and supersede any
prior agreements, written or oral, with respect thereto.
SECTION 10.10. Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that:
(a) the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of the Agent and
all Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders are
subject to Section 10.11.
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<PAGE>
SECTION 10.11. Assignments and Participations. Assignments by the
Lenders of, and the granting of participations in, their rights and obligations
arising under and with respect to this Agreement shall be permitted as follows:
(a) Each Lender may, upon ten Business Days' prior written notice
assign to an Affiliate of such Lender or to another Lender without the
consent of the Borrower or the Agent or to a Person that is not a Lender or
an Affiliate of a Lender with the prior written consent of the Agent and
the Borrower, which consent shall not unreasonably be withheld or delayed,
all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitments,
Assignable Advances and the Notes held by it) subject only to the
conditions set forth in clause (b) below.
(b) Assignments made pursuant to this Section 10.11 shall comply
with the following conditions:
(i) each such assignment shall identify each of the facilities
being assigned, and while the Percentages assigned may vary by
Commitment, as to each such Commitment such assignment shall be of a
constant, and not a varying, percentage of the aggregate rights and
assignable obligations of the Lenders under this Agreement and shall
cover the same aggregate Percentage of such Lenders' Assignable
Advances and Commitments;
(ii) the amount of the Commitment of the assigning Lender being
assigned pursuant to each such assignment (determined as of the date
of the Assignment and Assumption Agreement (as defined below) with
respect to such assignment) shall (except in the case of assignments
to other Lenders) in no event be less than the lesser of (i)
$5,000,000 or (ii) the sum of the outstanding principal amount of such
assigning Lender's total Term Loans and such Lender's total Revolving
Loan Commitment;
(iii) no such assignment shall require the Borrower to file a
registration statement with the Securities and Exchange Commission or
apply to qualify any Commitment, Assignable Advance or Note, or any
interest in any thereof, under the "blue sky" or other securities law
of any jurisdiction; and
(iv) the parties to each such assignment shall execute and
deliver to the Agent, for its
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<PAGE>
acceptance and recording in the Register (as hereinafter defined), an
Assignment and Assumption Agreement substantially in the form of
Exhibit N hereto (an "Assignment and Assumption Agreement"), together
with any Note or Notes subject to such assignment and a processing and
recordation fee in the amount of $3,000. Upon such execution,
delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Assumption Agreement, (x) the
assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to
such Assignment and Assumption Agreement, have the rights and
obligations of a Lender hereunder and (y) the assigning Lender
thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Assumption
Agreement, relinquish its rights and be released from its unmatured
obligations under this Agreement (and, in the case of an Assignment
and Assumption Agreement covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto).
(c) By executing and delivering an Assignment and Assumption
Agreement, the assigning Lender thereunder and the assignee thereunder
confirm to and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment and Assumption
Agreement, such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statement, warranties or
representations made in or in connection with this Agreement or any other
Loan Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Loan
Document; (ii) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
the Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in Section 6.5 and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Assumption Agreement; (iv)
such assignee will, independently and without reliance upon the Agent, such
assigning Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to
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<PAGE>
make its own credit decisions in taking or not taking action under this
Agreement; (v) such assignee appoints and authorizes the Agent to take such
action as the Agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Agent by the terms hereof, together with
such powers as are reasonably incidental thereto as provided in Article IX;
and (vi) such assignee agrees that it will perform in accordance with such
terms all of the obligations which by the terms of this Agreement are
required to be performed by it as a Lender.
(d) The Agent shall maintain at the address of its Domestic Office
set forth on the signature page hereto a copy of each Assignment and
Assumption Agreement delivered to and accepted by it and a register for the
recordation of the names and addresses of the Lenders and the Commitments
of, and principal amount of the Loans owing to, each Lender from time to
time (the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the
Agent and the Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Lender at
any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Assumption Agreement
executed by an assigning Lender and an assignee, together with the Notes
subject to such assignment and the processing and recordation fee
identified above, the Agent shall, if such Assignment and Assumption
Agreement has been completed, (i) accept such Assignment and Assumption
Agreement, (ii) record the information contained therein in the Register
and (iii) give prompt notice thereof to the Borrower. Within five Business
Days after its receipt of such notice, the Borrower, at its own expense,
shall execute and deliver to the Agent in exchange for the surrendered
Revolving Note and Term Note a Revolving Note and Term Note payable to the
order of such assignee in an amount equal to the Commitments assumed by it
pursuant to such Assignment and Assumption Agreement and, if the assigning
Lender has retained a Commitment hereunder, a Revolving Note and Term Note
payable to the order of the assigning Lender in an amount equal to the
Commitments retained by it hereunder in substitution for such assigning
Lender's original Revolving Note and Term Note and not in payment thereof.
Such Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Notes, shall be dated the effective
date of such Assignment and Assumption and shall otherwise be in
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<PAGE>
substantially the form of Exhibit G-1 and Exhibit G-2 hereto, respectively.
(f) Each Lender may sell participations to one or more eligible
participants (a "Participant") in all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitments, Assignable Advances, and either of the Notes
held by it) to an Affiliate of such Lender or to another Lender without the
consent of the Borrower or to a Person that is not a Lender or an Affiliate
of a Lender with the prior written consent of the Borrower, which consent
shall not unreasonably be withheld or delayed; provided, however, that (i)
such Lender's obligations under this Agreement (including its Commitments
to the Borrower hereunder) shall remain unchanged; (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance
of such obligations; (iii) such Lender shall remain the holder of any such
Note or Notes for all purposes of this Agreement; (iv) the amount of the
Commitment of a Lender being participated shall (except in the case of
participation to other Lenders) in no event be less than the lesser of (i)
$5,000,000 or (ii) the sum of the outstanding principal amount of the total
Term Loans and total Revolving Loan Commitment of the Lender offering such
participation; (v) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement; (vi) any
Participant which is not an Affiliate of such Lender shall have no right to
require such Lender to take or omit to take any action under this Agreement
or any Note; provided, further, however, that a participation agreement
between a Lender and a Participant may require a Lender to take or omit to
take an action under this Agreement or a Note with respect to the extension
of the Stated Maturity Date of a Loan in which such participation was sold
(or a reduction or forgiveness of the principal amount of or rate of
interest or fees or commissions on a Loan in which such participation was
sold) or the release of all or substantially all of the collateral
security, or, if such Participant purchased its participation in the Term
Loans, the modification of the payment date or amount of any required
principal payment set forth in clause (c) of Section 3.1. Each Lender
agrees to incorporate no more than the requirements set forth in the
preceding sentence into each participation agreement which such Lender
enters into with any Participant. The Borrower agrees that if amounts
outstanding under this Agreement and the Notes are due and unpaid, or shall
have been declared or shall have become due and payable, each Participant
shall, to the extent permitted by applicable law, be deemed to have
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<PAGE>
the right of setoff in respect of its participating interest in amounts
owing under this Agreement and any Note to the same extent as if the amount
of its participating interest were owing directly to it as a Lender under
this Agreement or such Note; provided, that any Participant exercising such
right shall be obligated to share with the Lenders, as if such Participant
were a "Lender" hereunder, the amount of any such setoff. The Borrower
acknowledges and agrees that each Participant, for purposes of Sections
4.3, 4.4, 4.5, 4.6, 4.8, the last sentence of 10.3 and 10.4, shall be
considered (and deemed to be) a Lender.
(g) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section 10.11, disclose to the assignee or Participant (each a
"Transferee") or proposed Transferee, any information relating to the
Borrower furnished to such Lender by or on behalf of the Borrower;
provided, that, prior to any such disclosure, the assignee or participant
or proposed assignee or Participant shall agree to preserve the
confidentiality of any confidential information relating to the Borrower
received by it from such Lender to the same extent as the Lender hereunder.
(h) If, pursuant to this subsection, any interest in this Agreement
or any Note is transferred to any Transferee which is organized under the
laws of any jurisdiction other than the United States or any State thereof,
the transferor Lender shall cause such Transferee, concurrently with the
effectiveness of such transfer, (i) to represent to the transferor Lender
(for the benefit of the transferor Lender, the Agent and the Borrower)
that, under applicable law and treaties as then in effect, no taxes will be
required to be withheld by the Agent, the Borrower or the transferor Lender
with respect to any payments to be made to such Transferee in respect of
the Loans, (ii) to furnish to the transferor Lender, the Agent and the
Borrower either U.S. Internal Revenue Service Form 4224 or U.S. Internal
Revenue Service Form 1001 (wherein such Transferee claims entitlement to
complete exemption from U.S. federal withholding tax on all interest
payments hereunder), and (iii) to agree (for the benefit of the transferor
Lender, the Agent and the Borrower) to provide the transferor Lender, the
Agent and the Borrower a new Form 4224 or Form 1001 upon the obsolescence
of any previously delivered form and comparable statements in accordance
with applicable U.S. laws and regulations and amendments duly executed and
completed by such Transferee, and to comply from time to time with all
applicable U.S. laws and regulations with regard to such withholding tax
exemption.
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<PAGE>
(i) Notwithstanding the foregoing, nothing in this Section shall
prevent or prohibit any Lender from pledging its rights (but not its
obligations to make Loans and to issue or participate in Letters of Credit)
under this Agreement and/or its Loans and/or Notes hereunder to a Federal
Reserve Bank in support of borrowings made by such Lender from such Federal
Reserve Bank.
SECTION 10.12. Other Transactions. Nothing contained herein shall
preclude the Agent or any other Lender from engaging in any transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Affiliates in which the Borrower or such
Affiliate is not restricted hereby from engaging with any other Person.
SECTION 10.13. Execution on Behalf of Corporation. Any signature by
any Authorized Officer on this Agreement, any Loan Document and any other
instrument and certificate executed or to be executed pursuant to or in
connection with this Agreement or such other Loan Documents, instruments or
certificates is provided only in such Authorized Officer's capacity as a
corporate officer, and not in any way in such Authorized Officer's personal
capacity.
SECTION 10.14. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE
LENDERS OR THE BORROWER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE
COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO
THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE
WITHIN OR WITHOUT THE STATE OF ILLINOIS. THE BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE
BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN
RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
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<PAGE>
SECTION 10.15. Waiver of Jury Trial. THE AGENT, THE LENDERS AND THE
BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS OR THE BORROWER. THE BORROWER
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION
FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO
WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN
DOCUMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the day
and year first above written.
DURA AUTOMOTIVE SYSTEMS, INC.
By /s/ Robert Hibbs
----------------------------------
Its Vice Prsident
-------------------------------
Address: 1708 Northwood
Troy, Michigan 48084-5353
Facsimile No.: (810) 362-8377
Attention: David Bovee
with a copy to:
Hidden Creek Industries
4508 IDS Center
Minneapolis, Minnesota 55402
Facsimile No.: (612) 332-2012
Attention: Robert R. Hibbs
CONTINENTAL BANK, as Agent
By /s/ Robert A. Pierce
----------------------------------
Its Vice President
-------------------------------
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Facsimile No.: (312) 987-7384
(Answerback CONILLBK)
Attention: Robert A. Pierce
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<PAGE>
THE BANK OF NOVA SCOTIA, as Co-Agent
By /s/ James R. Trimble
----------------------------------
Its Senior Relationship Manager
-------------------------------
Address: One Liberty Plaza
26th Floor
New York, New York 10006
Facsimile No.: (212) 225-5090
Attention: Mr. James R. Trimble
COMERICA BANK, as Co-Agent
By /s/ David B. Marvin
----------------------------------
Its Vice President
-------------------------------
Address: P.O. Box 75000
Detroit, Michigan 48275
Mail Code 3241
Facsimile No.: (313) 222-5759
Attention: David B. Marvin
THE CHASE MANHATTAN BANK, N.A.,
as Co-Agent
By /s/ Patricia B. Bril
----------------------------------
Its Managing Director
-------------------------------
Address: One Chase Manhattan Plaza
New York, New York 10081
Facsimile No.: (212) 552-1457
Attention: Charles Kornberger
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<PAGE>
PERCENTAGE LENDERS
---------- -------
CONTINENTAL BANK,
Term Loan: 25% as a Lender and the Issuer
Revolving Loans: 25%
By: /s/ Robert A. Pierce
---------------------------------
Title: Vice President
---------------------------
Domestic
Office: 231 South LaSalle Street
Chicago, Illinois 60697
Facsimile No.: (312) 987-5891
Attention: Robert A. Pierce
Eurodollar
Office: 231 South LaSalle Street
Chicago, Illinois 60697
Facsimile No.: (312) 828-5891
Attention: Robert A. Pierce
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<PAGE>
PERCENTAGE LENDERS
---------- -------
THE BANK OF NOVA SCOTIA,
Term Loan: 18.75% as a Lender
Revolving Loans: 18.75%
By: /s/ James R. Trimble
--------------------------------
Title: Senior Relationship Mgr.
--------------------------
Domestic
Office: One Liberty Plaza
26th Floor
New York, New York 10006
Facsimile No.: (212) 225-5090
Attention: Mr. James R. Trimble
Eurodollar
Office: One Liberty Plaza
26th Floor
New York, New York 10006
Facsimile No.: (212) 225-5090
Attention: Mr. James R. Trimble
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<PAGE>
PERCENTAGE LENDERS
---------- -------
COMERICA BANK,
Term Loan: 18.75% as a Lender
Revolving Loans: 18.75%
By: /s/ David B. Marvin
------------------------------------
Title: Vice President
------------------------------
Metropolitan Loan Department C
Domestic
Office: P.O. Box 75000
Detroit, Michigan 48275
Mail Code 3241
Facsimile No.: (313) 222-5759
Attention: David B. Marvin
Eurodollar
Office: 100 Renaissance Center
9th Floor
Detroit, Michigan 48275
Facsimile No.: (313) 222-5759
Attention: David B. Marvin
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<PAGE>
PERCENTAGE LENDERS
---------- -------
THE CHASE MANHATTAN BANK, N.A.,
Term Loan: 18.75% as a Lender
Revolving Loans: 18.75%
By: /s/ George C. Hart
---------------------------------
Title: VP
--------------------------
Domestic
Office: One Chase Manhattan Plaza
New York, New York 10081
Facsimile No.: (212) 552-1457
Attention: Charles Kornberger
Eurodollar
Office: One Chase Manhattan Plaza
New York, New York 10081
Facsimile No.: (212) 552-1457
Attention: Charles Kornberger
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<PAGE>
PERCENTAGE LENDERS
---------- -------
FIRST BANK NATIONAL ASSOCIATION,
Term Loan: 9.375% as a Lender
Revolving Loans: 9.375%
By: /s/ Mark McDonald
---------------------------------
Title: Vice President
--------------------------
Domestic
Office: 601 Second Avenue South
Minneapolis, Minnesota 55402
Facsimile No.: (612) 973-0822
Attention: Mark R. McDonald or
Barbara DeVahl
Eurodollar
Office: 601 Second Avenue South
Minneapolis, Minnesota 55402
Facsimile No.: (612) 973-0822
Attention: Mark R. McDonald or
Barbara DeVahl
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<PAGE>
PERCENTAGE LENDERS
---------- -------
MERCANTILE BANK OF ST. LOUIS
Term Loan: 9.375% NATIONAL ASSOCIATION
Revolving Loans: 9.375% as a Lender
By:
---------------------------------
Title: Vice President
----------------------------
Domestic
Office: 721 Locust Street
St. Louis Missouri 63101
Facsimile No.: (314) 425-2162
Attention: Tim Hassler
Eurodollar
Office: 721 Locust Street
St. Louis, Missouri 63101
Facsimile No.: (314) 425-2162
Attention: Tim Hassler
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<PAGE>
EXHIBITS
--------
A Borrowing Base Certificate
B-1 Borrowing Request
B-2 Issuance Request
C Compliance Certificate
D Continuation/Conversion Notice
E MC Guaranty
F-1 MC Pledge Agreement
F-2 Pledge Agreement
G-1 Revolving Note
G-2 Term Note
H Security Agreement
I Subsidiary Guaranty
J Closing Certificate
K Solvency Certificate
L Kirkland & Ellis Opinion
M Goldberg, Kohn, Bell, Black, Rosenbloom & Moritz, Ltd. Opinion
N Assignment and Assumption Agreement
SCHEDULES
---------
5.1.6 Description of Real Estate
6.6 Litigation
6.7 Subsidiaries
6.10 ERISA
6.11 Environmental
7.2.2(b) Indebtedness
7.2.3(b) Permitted Liens
7.2.5(a) Investments
7.2.12 Ford Letter Agreement
7.2.16 Permitted Management Fees
7.2.17 Restrictive Agreements
<PAGE>
SECURITY AGREEMENT
------------------
AGREEMENT dated as of August 31, 1994 between Dura Automotive Systems,
Inc., a Delaware corporation ("BORROWER"), and Continental Bank, an Illinois
banking corporation, as agent ("AGENT") for the Lenders.
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to a Credit Agreement of even date herewith
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "CREDIT AGREEMENT") among Borrower, the various
commercial lending institutions as are, or may from time to time, become parties
thereto ("LENDERS"), The Bank of Nova Scotia, Comerica Bank and The Chase
Manhattan Bank, N.A., as co-agents (collectively, "CO-AGENTS") and Agent,
Lenders have extended commitments to make credit extensions to Borrower;
WHEREAS, it is a condition precedent to the making of the initial
Loans under the Credit Agreement that Borrower shall have granted the security
interests contemplated by this Agreement, and Borrower desires to grant such
security interests in order to induce Lenders to extend credit to Borrower under
the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and in order to
induce Lenders to make Loans and to issue Letters of Credit under the Credit
Agreement, Borrower hereby agrees with Agent for its benefit and the benefit of
Lenders as follows:
SECTION 1. Definitions
1.1 Certain Defined Terms. Terms defined in the Credit Agreement and
not otherwise defined herein have the respective meanings provided for in the
Credit Agreement. The following terms, as used herein, have the meanings set
forth below:
"Accounts" means all "accounts" (as defined in the UCC) now owned or
hereafter created or acquired by Borrower including, without limitation,
all of the following now owned or hereafter created or acquired by
Borrower: (a) accounts receivable, contract rights, book debts, notes,
drafts and other obligations or indebted-
<PAGE>
ness owing to Borrower arising from the sale, lease or exchange of goods or
other property and/or the performance of services; (b) Borrower's rights
in, to and under all purchase orders for goods, services or other property;
(c) Borrower's rights to any goods, services or other property represented
by any of the foregoing (including returned or repossessed goods and unpaid
sellers' rights of rescission, replevin, reclamation and rights to stoppage
in transit); (d) monies due to or to become due to Borrower under all
contracts for the sale, lease or exchange of goods or other property and/or
the performance of services including the right to payment of any interest
or finance charges with respect thereto (whether or not yet earned by
performance on the part of Borrower); (e) uncertificated securities; and
(f) Proceeds of any of the foregoing and all collateral security and
guaranties of any kind given by any Person with respect to any of the
foregoing.
"Collateral" has the meaning assigned to that term in Section 2.
"Collateral Copyright Security Agreement" means the Collateral
Copyright Security Agreement of even date herewith executed and delivered
by Borrower to Agent, as such agreement may hereafter be amended,
supplemented or otherwise modified from time to time.
"Collateral Patent Security Agreement" means the Collateral Patent
Security Agreement of even date herewith executed and delivered by Borrower
to Agent, as such agreement may hereafter be amended, supplemented or
otherwise modified from time to time.
"Collateral Trademark Security Agreement" means the Collateral
Trademark Security Agreement of even date herewith executed and delivered
by Borrower to Agent, as such agreement may hereafter be amended,
supplemented or otherwise modified from time to time.
"Copyrights" has the meaning assigned to that term in Section 1(a) of
the Collateral Copyright Security Agreement.
-2-
<PAGE>
"Depository Account" has the meaning assigned to such term in Section
7.
"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing goods now owned or hereafter
acquired by Borrower including, without limitation, all bills of lading,
dock warrants, dock receipts, warehouse receipts and orders for the
delivery of goods, and any other document which in the regular course of
business or financing is treated as adequately evidencing that the Person
in possession of it is entitled to receive, hold and dispose of the
document and the goods it covers.
"Equipment" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by Borrower including, without limitation, all
machinery, motor vehicles, trucks, trailers, vessels, aircraft, rolling
stock and all other tangible personal property (other than Inventory) and
all parts thereof and all additions and accessions thereto and replacements
therefor.
"Fixtures" means all of the following now owned or hereafter acquired
by Borrower: plant fixtures; trade fixtures, business fixtures; other
fixtures and storage office facilities, wherever located; and all additions
and accessions thereto and replacements therefor.
"General Intangibles" means all "general intangibles" (as defined in
the UCC) now owned or hereafter acquired by Borrower including, without
limitation, all right, title and interest of Borrower in and to: (a) all
agreements, leases, licenses and contracts to which Borrower is or may
become a party; (b) all obligations or indebtedness owing to Borrower
(other than Accounts) or other rights to receive payments of money from
whatever source arising and all collateral security therefor; (c) all tax
refunds and tax refund claims; (d) Intellectual Property; (e) all choses in
action and causes of action; and (f) all trade secrets and other
confidential information relating to the business of Borrower including by
way of illustration and not limitation: systems and techniques for the
analysis, diagnosis and correction of malfunctions of products used by
Borrower's customers;
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the names and addresses of, and credit and other business information
concerning, Borrower's past, present or future customers; the prices which
Borrower obtains for its services or at which it sells merchandise;
estimating and cost procedures; profit margins; policies and procedures
pertaining to the sale and design of equipment, components, devices and
services furnished by Borrower; information concerning suppliers of
Borrower; and information concerning the manner of operation, business
plans, pledges, projections, and all other information of any kind or
character, whether or not reduced to writing, with respect to the conduct
by Borrower of its business not generally known by the public.
"Instruments" means all "instruments", "chattel paper" or "letters of
credit", "certificated" and "uncertificated securities" (each as defined in
the UCC) including, without limitation, all checks, drafts, notes, bonds,
debentures, government securities, certificates of deposit, options and
warrants in which Borrower now has or hereafter acquires any rights.
"Intellectual Property" shall mean collectively all of the following:
Copyrights, Patents and Trademarks.
"Inventory" means all "inventory" (as defined in the UCC), now owned
or hereafter acquired by Borrower, wherever located including, without
limitation, finished goods, raw materials, work in process and other
materials and supplies (including packaging and shipping materials) used or
consumed in the manufacture or production thereof and goods which are
returned to or repossessed by Borrower.
"Patents" has the meaning assigned to that term in Section 1(a) of the
Collateral Patent Security Agreement.
"Payment Obligations" means all Loans, interest, fees and charges and
all other Secured Obligations of Borrower other than contingent liabilities
of Borrower with respect to which none of Agent, Co-Agents nor any Lender
has asserted a claim against Borrower; provided
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that Payment Obligations shall include the Letters of Credit.
"Permitted Encumbrances" means the Liens permitted under Section 7.2.3
of the Credit Agreement.
"Proceeds" means all "proceeds" (as defined in the UCC) of, and all
other profits, rentals or receipts, in whatever form, arising from the
collection, sale, lease, exchange, assignment, licensing or other
disposition of, or realization upon, any Collateral including, without
limitation, all claims of Borrower against third parties for loss of,
damage to or destruction of, or for proceeds payable under, or unearned
premiums with respect to, policies of insurance with respect to any
Collateral, and any condemnation or requisition payments with respect to
any Collateral, in each case whether now existing or hereafter arising.
"Secured Obligations" has the meaning assigned to that term in Section
3.
"Security Interests" means the security interests granted pursuant to
Section 2 hereof and pursuant to the Collateral Copyright Security
Agreement, Collateral Patent Security Agreement and Collateral Trademark
Security Agreement, as well as all other security interests created or
assigned as additional security for the Secured Obligations pursuant to the
provisions of this Agreement or the other Loan Documents.
"Trademarks" has the meaning assigned to that term in Section 1(a) of
the Collateral Trademark Security Agreement.
"UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of Illinois, provided that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-
perfection of the Security Interest in any Collateral or the availability
of any remedy hereunder is governed by the Uniform Commercial Code as in
effect on or after the date hereof in any other jurisdiction, "UCC" means
the Uniform Commercial Code as in effect in such other jurisdiction
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for purposes of the provisions hereof relating to such perfection or effect
of perfection or non-perfection or availability of such remedy.
1.2 Other Definition Provisions. References to "Sections",
"subsections", "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in subsection 1.1 may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference. All references to statutes and related regulations shall
include (unless otherwise specifically provided herein) any amendments of same
and any successor statutes and regulations.
SECTION 2. Grant of Security Interests
To secure the payment, performance and observance of the Secured
Obligations in accordance with the terms thereof, Borrower hereby grants to
Agent, for the benefit of Agent, Co-Agents and Lenders, a continuing security
interest in, a right of setoff against, and an assignment to Agent of, all
right, title and interest of Borrower in all personal property, whether now
owned or existing or hereafter acquired or arising and regardless of where
located including, without limitation, the following (all being collectively
referred to as the "Collateral"):
(a) Accounts;
(b) Inventory;
(c) General Intangibles;
(d) Documents;
(e) Instruments;
(f) Equipment;
(g) Fixtures;
(h) All deposit accounts of Borrower maintained with any bank or
financial institution (other than Depository Accounts);
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(i) All Depository Accounts, all cash deposited therein from time to
time and other monies and property of Borrower in the possession or under
the control of Agent, Co-Agents or any Lender;
(j) All books, records, ledger cards, files, correspondence, computer
programs, tapes, disks and related data processing software that at any
time evidence or contain information relating to any of the property
described in subparts (a) - (i) above or are otherwise necessary or helpful
in the collection thereof or realization thereon; and
(k) Proceeds of all or any of the property described in subparts (a) -
(j) above.
Notwithstanding the foregoing, so long as no Event of Default has occurred and
is continuing, Borrower shall have the exclusive, non-transferable right and
license to use the Intellectual Property.
SECTION 3. Security for Obligations
This Agreement secures the payment and performance of the Obligations,
including, without limitation, any renewals, extensions, restructurings and
refinancings of any of the above and any additional indebtedness which may be
extended to Borrower pursuant to any restructuring or refinancing of Borrower's
indebtedness under the Credit Agreement, and including any post-petition
interest accruing during any bankruptcy reorganization of Borrower or other
similar proceeding (all such debts, obligations and liabilities of Borrower
being collectively called the "Secured Obligations").
SECTION 4. Borrower Remains Liable
Anything herein to the contrary notwithstanding: (a) Borrower shall
remain liable under the contracts and agreements included in the Collateral to
the extent set forth therein to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed; (b)
the exercise by Agent of any of the rights hereunder shall not release Borrower
from any of its duties or obligations under the contracts and agreements
included in the Collateral; and (c) none of Agent, Co-Agents nor any Lender
shall have any obligation or liability under
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the contracts and agreements included in the Collateral by reason of this
Agreement, nor shall Agent, Co-Agents or any Lender be obligated to perform any
of the obligations or duties of Borrower thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
SECTION 5. Representations and Warranties
Borrower represents and warrants as follows:
5.1 Binding Obligation. This Agreement is the legally valid and
binding obligation of Borrower, enforceable against it in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, or similar laws or equitable principles relating to
or limiting creditor's rights generally.
5.2 Location of Equipment and Inventory and Fixtures. All of the
Equipment and Inventory and Fixtures is located at the places specified on
Schedule I. All hereafter acquired or arising Equipment, Inventory or Fixtures
will be located at the places specified on Schedule I hereto, except as
otherwise permitted hereunder. None of said locations are leased by Borrower as
lessee except those designated as such on Schedule I.
5.3 Ownership of Collateral; Bailees. Except for Permitted
Encumbrances and the Security Interests, Borrower owns the Collateral, and will
own all after-acquired Collateral, free and clear of any Lien. No effective
financing statement or other form of lien notice covering all or any part of the
Collateral is on file in any recording office, except for those in favor of
Agent and the Permitted Encumbrances. Except as noted on Schedule I, none of the
Collateral is in the possession of any consignee, bailee, warehouseman, agent or
processor. Borrower does not sell any Inventory to any customer on approval or
on any other basis which entitles the customer to return, or which may obligate
Borrower to repurchase, such Inventory.
5.4 Office Locations; Fictitious Names. The mailing address, chief
place of business, the chief executive office and the office where Borrower
keeps its books and records relating to the Accounts, Documents, General
Intangibles and Instruments are located at the places specified on Schedule I.
Borrower has no other places of business except those separately set forth on
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Schedule I. Borrower does not do business and has not done business during the
past five years under any trade-name or fictitious business name except as
disclosed on Schedule II.
5.5 Perfection. This Agreement and all necessary UCC filings and
recordings with the U.S. Patent and Trademark Office and the Copyright Office,
when filed and/or recorded, together create a valid, perfected and, except for
the Permitted Encumbrances, first priority security interest in the Collateral,
securing the payment of the Secured Obligations, and all filings (other than
continuation statements), registrations, recordings and other actions necessary
or desirable to create, perfect and protect such Security Interests have been
duly taken (other than the necessary UCC filings and recordings with the U.S.
Patent and Trademark Office and the Copyright Office), and such Security
Interests are entitled to all of the rights, priorities and benefits afforded by
the UCC or other relevant law as enacted in any relevant jurisdiction which
relates to perfected security interests.
5.6 Governmental Authorizations; Consents. No authorization, approval
or other action by, and no notice to or filing with, any domestic or foreign
governmental authority or regulatory body or consent of any other Person
(including without limitation any licensor of Intellectual Property) is
required, other than filing all necessary UCC filings and recordings with the
U.S. Patent and Trademark Office and Copyright Office, either (a) for the grant
by Borrower of the Security Interests granted hereby or for the execution,
delivery or performance of this Agreement by Borrower or (b) for the perfection
of or the exercise by Agent of its rights and remedies hereunder (except as may
have been taken by or at the direction of Borrower or Agent).
5.7 Accounts. Each existing Account constitutes, and each hereafter
arising Account will constitute, the legally valid and binding obligation of the
customer obligated to pay the same. The amount represented by Borrower to Agent
as owing by each customer is the correct amount actually and unconditionally
owing, except for normal cash discounts and allowances where applicable. No
customer has any defense, set-off, claim or counterclaim against Borrower that
can be asserted against Agent, whether in any proceeding to enforce Agent's
rights in the Collateral or otherwise except defenses, set-offs, claims or
counterclaims that are not, in the aggregate, material to the value of the
Accounts. None of the
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Accounts is, nor will any hereafter arising Account be, evidenced by a
promissory note or other Instrument other than a check.
5.8 Intellectual Property. Except as disclosed in the Collateral
Copyright Security Agreement, the Collateral Patent Security Agreement and the
Collateral Trademark Security Agreement, there are no federally registered
Copyrights, Patents and Trademarks.
5.9 Accurate Information. All information heretofore, herein or
hereafter supplied to Agent by or on behalf of Borrower with respect to the
Collateral is and will be accurate and complete in all material respects.
5.10 Inventory. All Inventory is of good and merchantable quality,
free from any material defects; except as disclosed in the Credit Agreement,
such Inventory is not subject to any licensing, patent, trademark, tradename or
copyright agreement with any Person that restricts Borrower's ability to
manufacture and/or sell the Inventory and the completion in manufacture of such
Inventory by a Person other than Borrower would be permitted under any contract
to which Borrower is a party or to which the Inventory is subject.
SECTION 6. Further Assurances; Covenants
6.1 Other Documents and Actions. Borrower will, from time to time, at
its expense, promptly execute and deliver all further instruments and documents
and take all further action that may be necessary or desirable, or that Agent
may reasonably request, in order to create, perfect and protect any security
interest granted or purported to be granted hereby or to enable Agent to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, Borrower will: (a)
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments, documents or notices, as may be necessary
or desirable, or as Agent may reasonably request, in order to create, perfect
and preserve the security interests granted or purported to be granted hereby;
(b) at any reasonable time, upon reasonable notice by Agent, exhibit the
Collateral to allow inspection of the Collateral by Agent and Persons designated
by Agent and permit Agent and Persons designated by Agent to examine and make
copies of the records of Borrower related thereto, and to discuss the
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Collateral and the records of Borrower with respect thereto with, and to be
advised as to the same by, Borrower's officers and employees and, after the
occurrence and during the continuance of an Event of Default, in the case of the
Accounts, Documents, General Intangibles and Instruments, with any Person which
is or may be obligated thereon; and (c) upon Agent's reasonable request, appear
in and defend any action or proceeding that may affect Borrower's title to or
Agent's security interest in the Collateral.
6.2 Corporate or Name Change. Borrower will give Agent at least
thirty (30) days prior written notice of any change in Borrower's name,
identity, mailing address or corporate structure. With respect to any such
change, Borrower will execute such documents and take such actions as Agent
reasonably deems necessary or desirable to create, perfect and protect the
Security Interests.
6.3 Business Locations. Subject to the next sentence, Borrower will
keep the Collateral (other than Collateral in the possession of Agent and cash
on deposit in Depository Accounts and other permitted depository accounts) at
the locations specified on Schedule I. Borrower will give Agent at least thirty
(30) days prior written notice of any change in Borrower's chief place of
business or of any new location of business or any new location for any of the
Collateral. With respect to any new location (which in any event shall be within
the continental United States), Borrower will execute such documents and take
such actions as Agent deems necessary to perfect and protect the Security
Interests.
6.4 Bailees. No Collateral shall at any time be in the possession or
control of any warehouseman, bailee or any of Borrower's agents or processors
without Agent's prior written consent and unless Agent, if Agent has so
requested, has received warehouse receipts or bailee letters satisfactory to
Agent prior to the commencement of such storage, except (a) Inventory (excluding
Tooling WIP) so long as the aggregate value of all such Inventory in the
possession or control of any warehouseman, bailee or any of Borrower's agents or
processors does not exceed $750,000 and (b) Tooling WIP so long as the aggregate
value of all Tooling WIP in the possessions or control of any warehouseman,
bailee or any of Borrower's agents or processor does not exceed $500,000.
Borrower shall, upon the request of Agent and solely upon the occurrence and
during the continuance of an Event of Default, notify any such warehouseman,
bailee, agent or processor of the Security Interests
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created hereby and shall instruct such Person to hold all such Collateral for
Agent's account subject to Agent's instructions.
6.5 Instruments. Borrower will deliver and pledge to Agent all
Instruments duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Agent.
Borrower will also deliver to Agent all security agreements securing any
Instruments and execute UCC-3 financing statements assigning to Agent any UCC
financing statements filed by Borrower in connection with such security
agreements. Borrower will mark conspicuously all chattel paper with a legend, in
form and substance satisfactory to Agent, indicating that such chattel paper is
subject to the Security Interests.
6.6 Filing Requirements. None of the Equipment (other than motor
vehicles not having a market value in excess of Fifty Thousand Dollars ($50,000)
in the aggregate) is covered by any certificate of title. Upon request of Agent,
Borrower shall promptly deliver to Agent any and all certificates of title,
applications for title or similar evidence of ownership of all Equipment and
shall cause Agent to be named as lienholder on any such certificate of title or
other evidence of ownership. None of the Collateral is of a type in which
security interests or liens may be registered, recorded or filed under, or
notice thereof given under, any federal statute or regulation except for
Collateral described on the respective schedules to the Collateral Copyright
Security Agreement, the Collateral Patent Security Agreement and the Collateral
Trademark Security Agreement. Borrower shall promptly notify Agent in writing
upon acquiring any interest hereafter in Collateral that is of a type where a
security interest or lien may be registered, recorded or filed under, or notice
thereof given under, any federal statute or regulation. Borrower shall promptly
inform Agent of any additions to or deletions (other than Asset Dispositions
permitted by Section 7.2.11 of the Credit Agreement) from the Equipment and
shall not permit any such items to become Fixtures to real estate other than
real estate described in the Mortgages. The legal description and street address
of the property on which any Fixtures are located is set forth on Schedule I,
together with the name and common address of the record owner of each such
property.
6.7 Uncertificated Securities Covenants. Borrower will, or will
permit Agent, from time to time to (a) cause the appro-
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priate issuers of uncertificated securities owned by Borrower or other
appropriate parties under Sections 8-313 and 8-321 of the UCC to mark their
books and records with the numbers and face amounts of all uncertificated
securities and all rollovers and replacements therefor to reflect the Security
Interests, (b) obtain from such issuers and other Persons, for the benefit of
Agent, Co-Agents and Lenders, written confirmation of the Security Interests in
such uncertificated securities, and (c) take or cause such parties to take all
action necessary or appropriate to create, perfect and maintain a first
perfected priority Lien in such uncertificated securities in favor of Agent.
6.8 Account Covenants. Except as otherwise provided in this
subsection 6.8, Borrower shall continue to collect, at its own expense, all
amounts due or to become due Borrower under the Accounts and apply such amounts
as are so collected to the outstanding balances of said Accounts. In connection
with such collections, Borrower may take such action as Borrower may deem
necessary or advisable to enforce collection of the Accounts; provided, that
Agent shall have the right at any time after the occurrence and during the
continuance of an Event of Default to: (a) notify the customers or obligors
under any Accounts of the assignment of such Accounts to Agent and to direct
such customers or obligors to make payment of all amounts due or to become due
directly to Agent; (b) enforce collection of any such Accounts; and (c) adjust,
settle or compromise the amount or payment of such Accounts. After the
occurrence and during the continuance of an Event of Default all amounts and
proceeds (including Instruments) received by Borrower with respect to the
Accounts shall, if requested in writing by Agent, be received in trust for the
benefit of Agent, Co-Agents and Lenders, shall be segregated from other funds of
Borrower and shall be forthwith paid over to Agent in the same form as so
received (with any necessary endorsement) to be held in the Depository Accounts
pursuant to Section 7 or applied pursuant to Section 13. After the occurrence
and during the continuance of an Event of Default, Borrower shall not adjust,
settle or compromise the amount or payment of any Account, or release wholly or
partly any customer or obligor thereof, or allow any credit or discount thereon
(other than credits and discounts in the ordinary course of business and in
amounts which are not material to Borrower) without the prior consent of Agent.
6.9 Intellectual Property Covenants. Borrower shall concurrently
herewith deliver to Agent the Collateral Copyright
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Security Agreement, the Collateral Patent Security Agreement, the Collateral
Trademark Security Agreement and all other documents, instruments and other
items as may be necessary for Agent to file such documents with the United
States Copyright Office, United States Patent and Trademark Office and any
similar domestic department or agency. Borrower represents and warrants to Agent
that the execution and delivery of this Agreement by Borrower will not violate
or cause a default under any of the Intellectual Property or any agreement in
connection therewith.
6.10 Equipment Covenants. Borrower shall cause the Equipment to be
maintained and preserved in the condition, repair and working order necessary
for the purposes for which such Equipment is being used, and shall promptly make
or cause to be made all repairs, replacements, and other improvements in
connection therewith that are necessary or desirable to such end unless Borrower
reasonably determines in good faith that the continued maintenance of its
Equipment is no longer economically desirable.
6.11 Protection of Collateral. Borrower will do nothing to impair
the rights of Agent, Co-Agents or the Lenders in the Collateral in any material
respect. Borrower will at all times keep the Collateral insured in favor of
Agent, Co-Agents and the Lenders in compliance with the requirements of the
Credit Agreement. Borrower assumes all liability and responsibility in
connection with the Collateral acquired by it, and the liability of Borrower to
pay the Secured Obligations shall in no way be affected or diminished by reason
of the fact that such Collateral may be lost, stolen, damaged, or for any reason
whatsoever unavailable to Borrower.
6.12 Taxes and Claims. Borrower will pay when due all property and
other taxes, assessments and governmental charges imposed upon, and all claims
against, the Collateral (including, without limitation, claims for labor,
services, materials and supplies); provided that no such tax, assessment or
charge need be paid if Borrower is contesting same in good faith by appropriate
proceedings promptly instituted and diligently conducted and if Borrower has
established such reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP.
6.13 Collateral Description. Borrower will furnish to Agent, from
time to time, statements and schedules further identifying and describing the
Collateral and such other reports in
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connection with the Collateral as Agent may reasonably request, all in
reasonable detail. Borrower will, promptly upon request, provide to Agent all
information and evidence it may reasonably request concerning the Collateral,
and in particular the Accounts, to enable Agent to enforce the provisions of
this Agreement.
6.14 Use of Collateral. Borrower will not use or permit any
Collateral to be used unlawfully or in violation of any provision of this
Agreement or any applicable statute, regulation or ordinance or any policy of
insurance covering any of the Collateral which could reasonably be expected to
cause a Material Adverse Effect.
6.15 Records of Collateral. Borrower shall keep full and accurate
books and records relating to the Collateral and shall stamp or otherwise mark
such books and records in such manner as Agent may reasonably request indicating
that the Collateral is subject to the Security Interests.
6.16 Certain Agreements on Accounts. Borrower will not make or agree
to make any discount, credit, rebate or other reduction in the original amount
owing on an Account or accept in satisfaction of an Account less than the
original amount thereof other than in the ordinary course of business and so
long as no Event of Default is then in existence.
6.17 Federal Claims. Borrower shall notify Agent of any Collateral
which, to its best knowledge, constitutes a claim against the United States
government or any instrumentality or agency thereof, the assignment of which
claim is restricted by federal law. Upon the request of Agent, Borrower shall
take such steps as may be necessary to comply with any applicable federal
assignment of claims laws.
6.18 Hot Goods. None of the Inventory of Borrower or any Subsidiary
has been or will be produced in violation of any provision of the Fair Labor
Standards Act of 1938, as amended, or in violation of any other law.
SECTION 7. Bank Accounts
Except for its payroll accounts, Borrower shall continue to maintain
all of its deposit accounts (general and special) with Continental Bank
(collectively, the "Depository Accounts");
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provided, that Borrower may maintain deposit accounts at other financial
institutions so long as Borrower and such other financial institutions
acknowledge and agree that during the continuance of an Event of Default all
proceeds in such accounts shall, at Agent's direction, be transferred to an
account with Agent. Pursuant hereto, Borrower grants and shall grant to Agent,
for the benefit of itself, Co-Agents and Lenders, a continuing lien upon, and
security interest in, all such accounts and all funds at any time paid,
deposited, credited or held in such accounts (whether for collection,
provisionally or otherwise) or otherwise in the possession of Continental Bank.
SECTION 8. Agent Appointed Attorney-in-Fact
Borrower hereby irrevocably appoints Agent as Borrower's attorney-in-
fact, with full authority in the place and stead of Borrower and in the name of
Borrower, Agent or otherwise or without the signature of Borrower where
permitted by law, from time to time in Agent's reasonable discretion to take any
action and to execute any instrument that Agent may deem necessary or advisable
to accomplish the purposes of this Agreement, including, without limitation:
(a) to sign and endorse any verifications of Accounts and other
documents (including without limitation financing or continuation
statements, and amendments thereto, and other documents necessary or
advisable to create, perfect, protect and maintain the perfection and
priority of the Security Interests) relating to the Collateral and, after
the occurrence and during the continuance of an Event of Default, to sign
and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, assignments and notices in connection with
the Accounts;
(b) subject to Borrower's right to contest taxes or Liens pursuant
to the Credit Agreement, to pay or discharge taxes or Liens, levied or
placed upon or threatened against the Collateral, the legality or validity
thereof and the amounts necessary to discharge the same to be determined by
Agent in its reasonable discretion, and such payments made by Agent to
become Obligations, due and payable immediately without demand;
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(c) after the occurrence and during the continuance of an Event of
Default, to obtain and adjust insurance required to be paid to Agent;
(d) after the occurrence and during the continuance of an Event of
Default, to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(e) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clauses (c)
and (d) above;
(f) after the occurrence and during the continuance of an Event of
Default, to file any claims or take any action or institute any proceedings
that Agent may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Agent with respect to any
of the Collateral; and
(g) after the occurrence and during the continuance of an Event of
Default, generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though Agent were the absolute owner thereof for all
purposes.
Borrower hereby ratifies and approves all acts of Agent made or taken pursuant
to this Section 8. Neither Agent nor any Person designated by Agent shall be
liable for any acts or omissions or for any error of judgment or mistake of fact
or law, unless it is determined by a judgment of a court of competent
jurisdiction, final and not subject to review on appeal, that such action,
omission, error or mistake constituted gross negligence or wilful misconduct.
This power, being coupled with an interest, is irrevocable so long as this
Agreement shall remain in force.
SECTION 9. Remedies
(a) If any Event of Default shall have occurred and be continuing,
Agent may exercise in respect of the Collateral, in addition to all other rights
and remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured
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party on default under the UCC (whether or not the UCC applies to the affected
Collateral) and also may: (i) require Borrower to, and Borrower hereby agrees
that it will, at its expense and upon request of Agent forthwith, assemble all
or part of the Collateral as directed by Agent and make it available to Agent at
any reasonable place or places designated by Agent, in which event Borrower
shall at its own expense (A) forthwith cause the same to be moved to the place
or places so designated by Agent and there delivered to Agent, (B) store and
keep any Collateral so delivered to Agent at such place or places pending
further action by Agent, and (C) while the Collateral shall be so stored and
kept, provide such guards and maintenance services as shall be necessary to
protect the same and to preserve and maintain the Collateral in good condition;
(ii) withdraw all cash in the Depository Accounts and apply such monies in
payment of the Secured Obligations in the manner provided in Section 11; and
(iii) without notice except as specified below, sell, lease or otherwise dispose
of the Collateral or any part thereof in one or more parcels at public or
private sale, and without the necessity of gathering at the place of sale the
property to be sold, at any of Agent's offices or elsewhere, at such time or
times, for cash, on credit or for future delivery, and at such price or prices
and upon such other terms as Agent may deem commercially reasonable. Borrower
agrees that, to the extent notice of sale shall be required by law, at least ten
(10) days notice to Borrower of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. At any sale of the Collateral, if permitted by law, Agent may bid
(which bid may be, in whole or in part, in the form of cancellation of
indebtedness) for the purchase of the Collateral or any portion thereof for the
account of Agent (on behalf of Co-Agents and Lenders). Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. To
the extent permitted by law, Borrower hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any law now
existing or hereafter enacted.
(b) Upon the occurrence and during the continuance of an Event of
Default, Agent or its agents or attorneys shall have the right without notice or
demand or legal process (unless the same shall be required by applicable law),
personally, or by agents or
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<PAGE>
attorneys, (i) to enter upon, occupy and use any premises owned or leased by
Borrower or where the Collateral is located (or is believed to be located) until
the Secured Obligations are paid in full without any obligation to pay rent to
Borrower, to render the Collateral useable or saleable and to remove the
Collateral or any part thereof therefrom to the premises of Agent or any agent
of Agent for such time as Agent may desire in order to effectively collect or
liquidate the Collateral and use in connection with such removal any and all
services, supplies and other facilities of Borrower; and (ii) to take possession
of Borrower's original books and records, to obtain access to Borrower's data
processing equipment, computer hardware and software relating to the Collateral
and to use all of the foregoing and the information contained therein in any
manner Agent deems appropriate; and Agent shall have the right to notify postal
authorities to change the address for delivery of Borrower's mail to an address
designated by Agent and to receive and open all mail addressed to Borrower.
(c) Borrower acknowledges and agrees that a breach of any of the
covenants contained in Sections 6.1(a), 6.1(b), 6.6, 6.8, 6,9, 6.17, 7 and 9
hereof will cause irreparable injury to Agent, Co-Agents and Lenders and that
Agent has no adequate remedy at law in respect of such breaches and therefore
agrees, without limiting the right of Agent to seek and obtain specific
performance of other obligations of Borrower contained in this Agreement, that
the covenants of Borrower contained in the Sections referred to in this Section
shall be specifically enforceable against Borrower.
SECTION 10. Limitation on Duty of Agent with Respect to Collateral
Beyond the safe custody thereof, Agent shall have no duty with respect
to any Collateral in its possession or control (or in the possession or control
of any agent or bailee) or with respect to any income thereon or the
preservation of rights against prior parties or any other rights pertaining
thereto. Agent shall be deemed to have exercised reasonable care in the custody
and preservation of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which it accords its own
property. Agent shall not be liable or responsible for any loss or damage to
any of the Collateral, or for any diminution in the value thereof, by reason of
the act or omission of any warehouseman, carrier, forwarding agency, consignee
or other agent or bailee selected by Agent in good faith.
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<PAGE>
SECTION 11. Application of Proceeds
Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held in the Depository Accounts shall be applied: first,
to all fees, costs and expenses incurred by Agent, Co-Agents or any Lender with
respect to the Credit Agreement, the other Loan Documents or the Collateral
including, without limitation, those described in Section 10.3 of the Credit
Agreement and in Section 14 hereof; second, to all fees due and owing to Agent,
Co-Agents or any Lender; third, to accrued and unpaid interest on the Secured
Obligations (including any interest which but for the provisions of the
Bankruptcy Code, would have accrued on such amounts); fourth, to the principal
amounts of the Secured Obligations outstanding; and fifth, to any other
indebtedness or obligations of Borrower owing to Agent or any Lender. Any
balance remaining shall be delivered to Borrower.
SECTION 12. Expenses
Borrower shall pay all insurance expenses and all expenses of
protecting, storing, warehousing, appraising, insuring, handling, maintaining
and shipping the Collateral, all costs, fees and expenses of perfecting and
maintaining the Security Interests, and any and all excise, property, sales and
use taxes imposed by any state, federal or local authority on any of the
Collateral, or with respect to periodic appraisals and inspections of the
Collateral as may be required under the terms of the Credit Agreement, or with
respect to the sale or other disposition thereof. If Borrower fails promptly to
pay any portion of the above expenses when due or to perform any other
obligation of Borrower under this Agreement, Agent, Co-Agents or any other
Lender may, at its option, but shall not be required to, pay or perform the same
and charge Borrower's account for all costs and expenses incurred therefor, and
Borrower agrees to reimburse Agent, Co-Agents or such Lender therefor on demand.
All sums so paid or incurred by Agent, Co-Agents or any other Lender for any of
the foregoing, any and all other sums for which Borrower may become liable
hereunder and all costs and expenses (including attorneys' fees, legal expenses
and court costs) incurred by Agent, Co-Agents or any other Lender in enforcing
or protecting the Security Interests or any of their rights or remedies under
this Agreement shall be payable on demand, shall constitute Obligations, shall
bear interest until paid at the rate applicable to the Revolving
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<PAGE>
Loan as provided in the Credit Agreement and shall be secured by the Collateral.
SECTION 13. Termination of Security Interests; Release of Collateral
Upon payment in full of all Payment Obligations and the termination of
all Commitments, the Security Interests shall terminate and all rights to the
Collateral shall revert to Borrower. Upon such termination of the Security
Interests or release of any Collateral, Agent will, at the expense of Borrower,
execute and deliver to Borrower such documents as Borrower shall reasonably
request to evidence the termination of the Security Interests or the release of
such Collateral, as the case may be.
SECTION 14. Notices
All notices, approvals, requests, demands and other communications
hereunder shall be given in accordance with the notice provision of the Credit
Agreement.
SECTION 15. Successors and Assigns
This Agreement is for the benefit of Agent, Co-Agents and Lenders and
their respective successors and assigns. This Agreement shall be binding on
Borrower and its successors and assigns; provided that Borrower may not assign
its obligations under this Agreement without Agent's prior written consent.
SECTION 16. Changes in Writing
No amendment, modification, termination or waiver of any provision of
this Agreement or consent to any departure by Borrower therefrom, shall in any
event be effective without the written concurrence of Agent and Borrower and
then only to the extent in such writing specifically set forth.
SECTION 17. Applicable Law
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES.
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<PAGE>
SECTION 18. Failure or Indulgence Not Waiver; Remedies Cumulative; Severability
(a) No failure or delay on the part of Agent, Co-Agents or any Lender
in the exercise of, and no course of dealing with respect to, any power, right
or privilege under the Credit Agreement or this Agreement or any other Loan
Document shall impair such power, right or privilege or be construed to be a
waiver of any Default or Event of Default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or any other right, power or privilege. All rights
and remedies existing under the Credit Agreement, this Agreement, the other Loan
Documents or by law afforded are cumulative to, and not exclusive of, any rights
or remedies otherwise available and shall be available to Agent until the
Secured Obligations have been paid in full and the termination of all
Commitments.
(b) The invalidity, illegality or unenforceability of any provision in
or obligation under this Agreement shall not affect or impair the validity,
legality or enforceability of the remaining provisions or obligations under this
Agreement.
SECTION 19. Headings
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
SECTION 20. Survival of Representations
All representations and warranties of Borrower contained in this
Agreement shall survive the execution and delivery of this Agreement.
SECTION 21. Counterparts
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Agreement by signing any such counterpart.
SECTION 22. Loan Document
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<PAGE>
This Agreement is a Loan Document executed pursuant to the Credit
Agreement and shall (unless otherwise expressly indicated herein) be construed,
administered and applied in accordance with the terms and provisions thereof.
Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the day first above written.
DURA AUTOMOTIVE SYSTEMS, INC.
By /s/ Robert Hibbs
---------------------------------
Title Vice President
----------------------------
CONTINENTAL BANK, as Agent
By /s/ Robert A. Pierce
---------------------------------
Title Vice President
----------------------------
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<PAGE>
SCHEDULE I
----------
Locations of Equipment, Inventory, Books and
Records, Chief Executive Office, Other Locations
1. Chief Executive Office:
Dura Automotive Systems, Inc.
1708 Northwood Avenue
Troy, Michigan 48084
2. Locations of Equipment, Inventory,
Books and Records:
Owned Real Property
___________________
CABROOK Facility
445 East Helm Street
Brookfield, Missouri 64628
HANNICON Facility
2011 U.S. Highway 61 South
Hannibal, Missouri 63401
RIVCON Facility
#5 Industrial Loop
Hannibal, Missouri 63401
7180 Rodgers Bridge Road
East Jordan, Michigan 49727
117 S. Lake
East Jordan, Michigan 49727
165 Spicer Drive
Gordonsville, Tennessee 38563
310 Palmer Park Road
Mancelona, Michigan 49659
114 Spicer Drive
Gordonsville, Tennessee 38563
Poniente 2 Street and Norte 7 Street NO-IA6
H. Matamoros, Tamaulupas, Mexico
Leased Property
_______________
1708 Northwood
Troy, Michigan 48084
United Kingdom Sales Office
Southfield Business Parke
3 Argent Drive
Basildon, England
Michigan Sales Office
23925 Industrial Park Drive
Farmington Hills, Michigan 48335
<PAGE>
SCHEDULE II
-----------
Trade-names and Fictitious Names
(Present and Past Five Years)
Dura Mechanical Components, Inc.
Dura Automotive Systems, Inc.
<PAGE>
PLEDGE AGREEMENT
This Pledge Agreement entered into by Dura Automotive Systems, Inc., a
Delaware corporation ("PLEDGOR"), is dated as of August 31, 1994.
1. SECURITY INTEREST.
1.1 Grant of Security Interest. Pledgor hereby grants to Continental
Bank, as agent ("AGENT") for the benefit of itself, the Co-Agents, and the
Lenders a continuing security interest in the following:
a. the shares of capital stock listed on Exhibit A attached hereto
(the "PLEDGED STOCK"); and
b. any proceeds of the Pledged Stock of whatever kind or nature, any
stock, any dividend or other distribution and any other right or property
which Pledgor shall receive or shall become entitled to receive for any
reason whatsoever in respect of, in addition to, in substitution for, or in
exchange for any shares of the Pledged Stock, whether in connection with
any reorganization, recapitalization, reclassification, increase or
reduction of capital or otherwise, and any stock, any right to receive
stock and any right to receive earnings in respect of the Pledged Stock, in
which Pledgor now has or hereafter acquires any right (all of the foregoing
are collectively referred to as the "STOCK RIGHTS").
The Pledged Stock and the Stock Rights, including all proceeds of each, are
collectively referred to as the "COLLATERAL." The security interest in the
Collateral granted pursuant to this Section 1 is granted to secure payment and
performance of all now-existing and future obligations and indebtedness of
Pledgor to Agent, the Co-Agents and the Lenders of every kind and description,
direct or indirect, absolute or contingent, whether arising under any written or
oral agreement, or by operation of law or otherwise, including without
limitation any obligations under the Credit Agreement of even date herewith
among Pledgor, the various financial institutions as are or may become parties
thereto (the "LENDERS"), The Bank of Nova Scotia, Comerica Bank and Chase
Manhattan Bank, as co-agents (collectively, the "CO-AGENTS") and Agent, as
amended and supplemented (the "AGREEMENT") (collectively called "OBLIGATIONS").
The security interest granted pursuant to this Section 1 shall be a first
security interest in the Collateral.
1.2 Delivery of Certificates. Concurrently with the execution of this
Pledge Agreement, Pledgor shall cause all of the certificates representing the
Pledged Stock to be delivered to Agent (endorsed in guaranty in favor of the
Agent if required by
<PAGE>
applicable law), together with appropriate stock powers duly executed in blank,
for the purposes of (i) perfecting the security interest granted pursuant to
Section 1.1 and (ii) permitting Agent to exercise all of the rights and remedies
with respect to the Collateral provided in this Pledge Agreement and under
applicable law.
1.3 Other Perfection Requirements. Pledgor shall cause (i) an entry
to be made in the Stock Register of Dura de Mexico S.A. de C.V evidencing the
creation of the security interest in the Pledged Stock granted herein and (ii)
if requested by the Agent a notice of the creation of the security interest in
the Pledged Stock granted herein to be sent to any governmental authority or
public registry of Mexico, each in form and substance satisfactory to Agent and
its counsel.
2. REPRESENTATIONS AND WARRANTIES.
Pledgor represents and warrants to Agent that:
2.1 Conflicting Laws and Contracts. None of the execution and
delivery of this Pledge Agreement, the creation and perfection of the security
interest granted pursuant to Section 1.1, or compliance by Pledgor with the
terms and provisions hereof will violate (i) any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on Pledgor or (ii) the
provisions of any indenture, instrument or agreement to which Pledgor is a party
or is subject, or by which it or its property is bound, or conflict with or
constitute a default thereunder, except for such violations and conflicts which
would not have a material adverse effect on Pledgor.
2.2 No Default. No event of default under this Agreement exists.
2.3 Ownership. Pledgor is the direct and beneficial owner of each
share of the Pledged Stock.
2.4 Liens. Each share of the Pledged Stock is owned by Pledgor free
and clear of any security interest, pledge, lien or encumbrance other than the
security interest granted pursuant to Section 1.1.
3. COVENANTS.
From the date of this Pledge Agreement, and thereafter until this
Pledge Agreement is terminated pursuant to Section 5.10,
3.1 Pledgor shall
3.1.1 Delivery of Certain Items. Hold in trust for Agent upon receipt
and immediately thereafter deliver to Agent any cash, stock certificate,
instrument or document evidencing or constituting Collateral, together with
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<PAGE>
stock powers duly executed by Pledgor in blank and such other instruments
and documents as Agent shall request.
3.1.2 Taxes. Pay when due all taxes, assessments and governmental
charges and levies upon the Collateral.
3.1.3 Financing Statements and Other Actions. Execute and deliver to
Agent all stock powers, financing statements and other documents and do
such other things from time to time requested by Agent or as required under
the laws of any applicable jurisdiction including those of Mexico, in order
to maintain the security interest granted pursuant to Section 1.1 as a
first perfected security interest and to effect a transfer of the
Collateral, or any part thereof.
3.1.4 Reports. Furnish to Agent such reports relating to the
Collateral as Agent shall reasonably request from time to time.
3.2 Pledgor shall not
3.2.1 Liens. Create, incur or suffer to exist any security interest,
lien, encumbrance or pledge on or of the Collateral except the security
interest granted pursuant to Section 1.1.
3.2.2 Disposition of Collateral. Sell or otherwise dispose of all or
any part of the Collateral or grant to any person any option or other right
with respect to any of the Collateral.
3.2.3 Changes in Capital Structure of Issuer. Permit or suffer any
issuer of the Pledged Stock (an "ISSUER") to dissolve, liquidate, retire
any of its capital stock, reduce its capital, merge or consolidate with any
other entity or transfer any of its assets out of the ordinary course of
its business, or vote any of the Pledged Stock in favor of any of the
foregoing.
3.2.4 Issuance of Additional Stock. Permit or suffer any Issuer to
issue any capital stock, any option, warrant or other right to subscribe
for or purchase any capital stock or right to receive earnings, or any
security convertible into capital stock or any right to receive earnings.
3.2.5 Amendments to By-Laws. Permit or suffer any Issuer, including
Dura Mexico, to amend its By-Laws without the prior written consent of
Agent.
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<PAGE>
4. EVENTS OF DEFAULT; RIGHTS AND REMEDIES.
4.1 Occurrence of Default. All Obligations shall become immediately
due and payable without notice or demand upon the occurrence of an "EVENT OF
DEFAULT" under the Agreement.
4.2 Rights and Remedies. Upon the occurrence of any such Event of
Default and at any time during the continuance thereof, Agent may, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived, and whether or not the Obligations or any portion thereof
become due and payable
4.2.1 Exercise any or all of the rights set forth in Section 4.2 and
any or all other rights and remedies provided in this Pledge Agreement or
in the "LOAN DOCUMENTS" (as defined in the Agreement).
4.2.2 Sell, give options to purchase, contract to sell or otherwise
dispose of all of the Collateral or any part thereof and all right, title
and interest of Pledgor therein at public auction or private sale in
accordance with the applicable laws of the State of Illinois. Such sale may
be made for such price as Agent may deem appropriate. Agent or its nominee
may become the purchaser at such sale.
4.2.3 Exercise any or all other rights and remedies provided (i) in the
Illinois Uniform Commercial Code to a secured party when a debtor is in
default under a security agreement and (ii) by any other applicable law.
4.3 Exercise of Rights in Pledged Stock. Unless such an Event of
Default shall have occurred and is continuing, Pledgor shall be entitled to
exercise all voting and corporate rights relating to the Collateral. During the
continuance of any such Event of Default, Agent may, at any time and from time
to time, exercise all voting and corporate rights relating to the Collateral,
including, without limitation, the right to exchange any or all of the
Collateral upon the merger, consolidation, reorganization, recapitalization or
other readjustment of the Issuer and any other exchange, conversion,
subscription or other rights, privileges or options pertaining to the
Collateral, all without liability to Pledgor except to account for property
actually received by it.
4.4 Notice of Disposition of Pledged Stock. Notice of the time and
place of any public sale or the time after which any private sale or other
disposition of all or any part of the Collateral may be made shall be reasonable
if given to Pledgor, addressed as set forth in the Agreement, at least five (5)
days prior to any such public sale or the time after which any such private sale
or other disposition may be made.
-4-
<PAGE>
4.5 Application of Proceeds. All proceeds of the sale or other
disposition of the Collateral shall be applied first, to the payment of the
costs and expenses incurred in connection with such sale or other disposition
pursuant to this Pledge Agreement, and second, to the payment of the
Obligations. Any surplus remaining after payment in full of the Obligations
shall be returned to Pledgor, unless otherwise delivered as required by law.
4.6 Expenses as Additional Obligations. If Agent elects, following
the occurrence of an Event of Default, to exercise any of the remedies provided
for in this Pledge Agreement, there shall be included as part of the Obligations
attorneys' fees, expenditures which may be paid or incurred by or on behalf of
Agent for publication and advertising costs, transfer taxes, and any other costs
and expenses incurred or paid in connection with any sale, transfer or
foreclosure of the Collateral.
5. GENERAL PROVISIONS.
5.1 Special Collateral Account. All cash received by Agent pursuant
to Section 3.1.1, or otherwise with respect to the Collateral, shall be
deposited in a special collateral account with a financial institution and shall
be held as further security for the payment of the Obligations. Pledgor shall
not have any control whatsoever over said special collateral account. If any
Event of Default occurs, Agent may apply any part of the credit balance in said
special collateral account to the payment of the Obligations, whether or not the
Obligations shall be then due.
5.2 Registration of Pledged Stock. At the option of Agent, any
registrable Collateral may at any time be registered in the name of Agent or its
nominee, for the benefit of itself, the Co-Agents and the Lenders.
5.3 Care of Collateral. Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if it takes such action for that purpose as Pledgor requests in
writing, but failure of Agent to comply with such request shall not, of itself
be deemed a failure to exercise reasonable care, and no failure of Agent to
preserve or protect any rights with respect to the preservation of such
Collateral against prior parties, or to do any act with respect to the
preservation of such Collateral not so requested by Pledgor, shall be deemed a
failure to exercise reasonable care in the custody or preservation of such
Collateral.
5.4 Definition of Certain Terms. Terms defined in the Illinois
Uniform Commercial Code which are not otherwise defined in this Pledge Agreement
are used in this Pledge Agreement as defined in the Illinois Uniform Commercial
Code as in effect on the date hereof.
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<PAGE>
5.5 Benefit of Agreement. The terms and provisions of this Pledge
Agreement shall be binding upon, and shall inure to the benefit of Pledgor,
Agent, the Co-Agents and the Lenders and their respective successors and
assigns.
5.6 Survival of Representations. All representations and warranties
of Pledgor contained in this Pledge Agreement shall survive the execution and
delivery of this Pledge Agreement and the delivery of the Pledged Stock.
5.7 Choice of Law. This Pledge Agreement shall be construed in
accordance with the laws of the State of Illinois applicable to contracts made
and performed wholly in Illinois.
5.8 Headings. Section headings in this Pledge Agreement are for
convenience of reference only, and shall not govern the interpretation or
construction of any of the terms and provisions of this Pledge Agreement.
5.9 Entire Agreement. This Pledge Agreement embodies the entire
agreement and understanding between Pledgor and Agent and supersedes all prior
agreements and understandings between Pledgor and Agent relating to the subject
matter thereof.
5.10 Termination. This Pledge Agreement shall continue in effect
until no Obligations shall be outstanding and the Agreement has been terminated,
whereupon this Pledge Agreement shall automatically terminate. Upon such
termination Agent shall return to Pledgor all Collateral not theretofore
disposed of or applied to satisfy the Obligations together with such stock
powers or other instruments as may be necessary to transfer record ownership of
any such Collateral from Agent or its nominee to Pledgor.
5.11 Severability. The provisions of this Pledge Agreement are
severable and if any clause or provision thereof shall be held invalid or
unenforceable in whole or in part, then such invalidity or unenforceability
shall attach only to such clause or provision, or part thereof, and shall not in
any manner affect such clause or provision in any other jurisdiction or any
other clause or provision in this Pledge Agreement in any jurisdiction.
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<PAGE>
IN WITNESS WHEREOF, Pledgor and Agent have executed this Pledge
Agreement as of the date first above written.
DURA AUTOMOTIVE SYSTEMS, INC.
By /s/ Robert Hibbs
-----------------------------
Its Vice President
-------------------------
AGREED TO AND ACCEPTED this
31st day of August, 1994.
CONTINENTAL BANK, as Agent
By /s/ Robert A. Pierce
----------------------------
Its Vice President
------------------------
-7-
<PAGE>
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
The foregoing Pledge Agreement was executed and acknowledged before
me this 31st day of August, 1994, by Robert Hibbs personally known to me to be
the Vice President of Dura Automotive Systems, Inc., a Delaware corporation, on
behalf of such corporation.
/s/ Ruth Ann Payton
-------------------------------
Notary Public
My Commission Expires:
(SEAL) Oct. 10, 1994
-------------------------------
"Official Seal" -
RUTH ANN PAYTON
Notary Public, State of Illinois
My Commission Expires Oct. 10, 1994
-8-
<PAGE>
GUARANTY
1. Guaranty of Payment. For value received and in consideration of
any loan or other financial accommodation heretofore or hereafter at any time
made or granted to DURA AUTOMOTIVE SYSTEMS, INC. (hereinafter called the
"DEBTOR") by CONTINENTAL BANK N.A., as agent (the "AGENT"), The Bank of Nova
Scotia, Comerica Bank and The Chase Manhattan Bank, as co-agents (the "CO-
AGENTS"), and various financial institutions (the "LENDERS"), the undersigned
hereby unconditionally guarantees the full and prompt payment when due, whether
by acceleration or otherwise, and at all times thereafter, of all obligations of
the Debtor to the Agent, Co-Agents and the Lenders, howsoever created, arising
or evidenced, whether direct or indirect, absolute or contingent, or now or
hereafter existing, or due or to become due (all such obligations being
hereinafter collectively called the "LIABILITIES"), and the undersigned further
agrees to pay all expenses (including fees of attorneys (who may be employees of
the Agent) and legal expenses) paid or incurred by the Agent in endeavoring to
collect the Liabilities, or any part thereof, and in enforcing this guaranty.
2. Acceleration of the Time of Payment of Amount Payable Under
Guaranty. The undersigned agrees that, in the event of the dissolution or
insolvency of the Debtor or the undersigned, or the inability of the Debtor or
the undersigned to pay debts as they mature, or an assignment by the Debtor or
the undersigned for the benefit of creditors, or the institution of any
proceeding by or against the Debtor or the undersigned alleging that the Debtor
or the undersigned is insolvent or unable to pay debts as they mature, and if
such event shall occur at a time when any of the Liabilities may not then be due
and payable, the undersigned will pay to the Agent, for the benefit of itself,
the Co-Agents and the Lenders forthwith the full amount which would be payable
hereunder by the undersigned if all Liabilities were then due and payable.
3. Security Interest in Deposits and Other Property. To secure all
obligations of the undersigned hereunder, the Agent, for the benefit of itself,
the Co-Agents and the Lenders, shall have a lien upon and security interest in
(and may, without demand or notice of any kind, at any time and from time to
time when any amount shall be due and payable by the undersigned hereunder,
appropriate and apply toward the payment of such amount, in such order of
application as the Agent may elect) any and all balances,
<PAGE>
credits, deposits (general or special, time or demand, provisional or final),
accounts or moneys of or in the name of the undersigned now or hereafter with
the Agent and any and all property of every kind or description of or in the
name of the undersigned now or hereafter, for any reason or purpose whatsoever,
in the possession or control of, or in transit to, the Agent or any agent or
bailee for the Agent. In addition, the Agent may offset any amounts owing by the
Agent, the Co-Agents or the Lenders to the undersigned against any amounts owing
by the undersigned to the Agent hereunder.
4. Continuing Guaranty. This guaranty shall in all respects be a
continuing, absolute and unconditional guaranty, and shall remain in full force
and effect (notwithstanding, without limitation, dissolution of the undersigned
or that at any time or from time to time all Liabilities may have been paid in
full), subject to discontinuance as to the undersigned only upon actual receipt
by the Agent of written notice from the undersigned, or any person duly
authorized and acting on behalf of the undersigned, of the discontinuance hereof
as to the undersigned; provided, however, that no such notice of discontinuance
shall affect or impair any of the agreements and obligations of the undersigned
hereunder with respect to any and all Liabilities existing prior to the time of
actual receipt of such notice by the Agent, any and all Liabilities created or
acquired thereafter pursuant to any previous commitments made by the Agent, the
Co-Agents or the Lenders, any and all extensions or renewals of any of the
foregoing, any and all interest on any of the foregoing, and any and all
expenses paid or incurred by the Agent in endeavoring to collect any of the
foregoing and in enforcing this guaranty against the undersigned; and all of the
agreements and obligations of the undersigned under this guaranty shall,
notwithstanding any such notice of discontinuance, remain fully in effect until
all such Liabilities (including any extensions or renewals of any thereof) and
all such interest and expenses shall have been paid in full.
5. Rescission or Return of Payment on Liabilities. The undersigned
further agrees that, if at any time all or any part of any payment theretofore
applied by the Agent to any of the Liabilities is or must be rescinded or
returned by the Agent for any reason whatsoever (including, without limitation,
the insolvency, bankruptcy or reorganization of the Debtor), such Liabilities
shall, for the purposes of this guaranty, to the extent that such payment is or
must be rescinded or returned, be deemed to have
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<PAGE>
continued in existence, notwithstanding such application by the Agent, and this
guaranty shall continue to be effective or be reinstated, as the case may be, as
to such Liabilities, all as though such application by the Agent had not been
made.
6. Agent Permitted to Take Certain Actions. The Agent may, from time
to time (but shall not be obligated to), whether before or after any
discontinuance of this guaranty, at its sole discretion and without notice to
the undersigned, take any or all of the following actions: (a) retain or obtain
a security interest in any property to secure any of the Liabilities or any
obligation hereunder; (b) retain or obtain the primary or secondary obligation
of any obligor or obligors, in addition to the undersigned, with respect to any
of the Liabilities; (c) extend or renew for one or more periods (whether or not
longer than the original period), alter or exchange any of the Liabilities, or
release or compromise any obligation of the undersigned hereunder or any
obligation of any nature of any other obligor with respect to any of the
Liabilities; (d) release its security interest in, or surrender, release or
permit any substitution or exchange for, all or any part of any property
securing any of the Liabilities or any obligation hereunder, or extend or renew
for one or more periods (whether or not longer than the original period) or
release, compromise, alter or exchange any obligations of any nature of any
obligor with respect to any such property; and (e) resort to the undersigned for
payment of any of the Liabilities, whether or not the Agent (i) shall have
resorted to any property securing any of the Liabilities or any obligation
hereunder or (ii) shall have proceeded against any other obligor primarily or
secondarily obligated with respect to any of the Liabilities (all of the actions
referred to in preceding clauses (i) and (ii) being hereby expressly waived by
the undersigned).
7. Application of Payments. Any amounts received by the Agent from
any source on account of the Liabilities may be applied by it toward the payment
of such of the Liabilities, and in such order of application, as the Agent may
from time to time elect.
8. No Subrogation. No payment made by or for the account of the
undersigned pursuant to this guaranty shall entitle the undersigned by
subrogation or otherwise to any payment by the Debtor or from or out of any
property of the Debtor, and the undersigned shall not exercise any right or
remedy against the
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<PAGE>
Debtor or any property of the Debtor by reason of any performance by the
undersigned of this guaranty.
9. Waiver of Notice and Other Matters. The undersigned hereby
expressly waives: (a) notice of the acceptance by the Agent, the Co-Agents and
the Lenders of this guaranty; (b) notice of the existence or creation or non-
payment of all or any of the Liabilities; (c) presentment, demand, notice of
dishonor, protest, and all other notices whatsoever; and (d) all diligence in
collection or protection of or realization upon the Liabilities or any thereof,
any obligation hereunder, or any security for or guaranty of any of the
foregoing.
10. Additional Liabilities of the Debtor Permitted. The creation or
existence from time to time of additional Liabilities is hereby authorized,
without notice to the undersigned, and shall in no way affect or impair the
rights of the Agent, the Co-Agents and the Lenders and the obligations of the
undersigned under this guaranty.
11. Assignment of Liabilities. The Agent, the Co-Agents and the
Lenders may, from time to time, whether before or after any discontinuance of
this guaranty, without notice to the undersigned, assign or transfer any or all
of the Liabilities or any interest therein; and, notwithstanding any such
assignment or transfer or any subsequent assignment or transfer thereof, such
Liabilities shall be and remain Liabilities for the purposes of this guaranty,
and each and every immediate and successive assignee or transferee of any of the
Liabilities or of any interest therein shall, to the extent of the interest of
such assignee or transferee in the Liabilities, be entitled to the benefits of
this guaranty to the same extent as if such assignee or transferee were the
Agent, the Co-Agents or the Lenders; provided, however, that, unless the Agent,
the Co-Agents or the Lenders shall otherwise consent in writing, the Agent, the
Co-Agents and the Lenders shall have an unimpaired right, prior and superior to
that of any such assignee or transferee, to enforce this guaranty, for the
benefit of the Agent, the Co-Agents and the Lenders, as to those of the
Liabilities which the Agent, the Co-Agent and the Lenders have not assigned or
transferred.
12. Information Concerning Debtor. The undersigned hereby warrants to
the Agent that the undersigned now has and will continue to have independent
means of obtaining information
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<PAGE>
concerning the affairs, financial condition and business of the Debtor. The
Agent shall not have any duty or responsibility to provide the undersigned with
any credit or other information concerning the affairs, financial condition or
business of the Debtor which may come into the Agent's possession.
13. Waiver and Modifications. No delay on the part of the Agent in
the exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by the Agent of any right or remedy shall preclude
other or further exercise thereof or the exercise of any other right or remedy;
nor shall any modification or waiver of any of the provisions of this guaranty
be binding upon the Agent except as expressly set forth in a writing duly signed
and delivered on behalf of the Agent.
14. Obligations Under Guaranty. No action of the Agent permitted
hereunder shall in any way affect or impair the rights of the Agent and the
obligations of the undersigned under this guaranty. For the purposes of this
guaranty, Liabilities shall include all obligations of the Debtor to the Agent,
the Co-Agents and the Lenders, notwithstanding any right or power of the Debtor
or anyone else to assert any claim or defense as to the invalidity or
unenforceability of any such obligation, and no such claim or defense shall
affect or impair the obligations of the undersigned hereunder. The obligations
of the undersigned under this guaranty shall be absolute and unconditional
irrespective of any circumstance whatsoever which might constitute a legal or
equitable discharge or defense of the undersigned. The undersigned hereby
acknowledges that there are no conditions to the effectiveness of this guaranty.
15. Successors. This guaranty shall be binding upon the undersigned,
and upon the heirs, legal representatives, successors and assigns of the
undersigned; and to the extent that the Debtor or the undersigned is either a
partnership or a corporation, all references herein to the Debtor and to the
undersigned, respectively, shall be deemed to include any successor or
successors, whether immediate or remote, to such partnership or corporation.
16. Severability. Wherever possible, each provision of this guaranty
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibi-
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<PAGE>
tion or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this guaranty.
17. Captions. Section captions used in this guaranty are for
convenience only, and shall not affect the construction of this guaranty.
18. CHOICE OF LAW; WAIVER OF JURY TRIAL. THIS GUARANTY HAS BEEN
EXECUTED, DELIVERED AND ACCEPTED AT AND SHALL BE DEEMED TO HAVE BEEN MADE AT
CHICAGO, ILLINOIS, AND SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF
THE LAWS AND DECISIONS OF THE STATE OF ILLINOIS, AND THE UNDERSIGNED AGREES TO
THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT WITHIN COOK COUNTY,
ILLINOIS. THE ABOVE PROVISIONS SHALL NOT LIMIT THE RIGHT OF AGENT TO FILE SUIT
AGAINST THE UNDERSIGNED BEFORE A COURT AT THE DOMICILE OF THE UNDERSIGNED OR AT
ANY OTHER PLACE WHERE ASSETS OF THE UNDERSIGNED MAY BE FOUND. THE UNDERSIGNED
WAIVES, AT THE OPTION OF THE AGENT, TRIAL BY JURY, ANY OBJECTION BASED ON FORUM
NON CONVENIENS AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY THE COURT.
SIGNED AND DELIVERED this 31st day of August, 1994.
DURA DE MEXICO S.A. de C.V.
By /s/ Robert Hibbs
-----------------------------
Its Vice President
--------------------------
Address: Poniente 2 y Norte
7 N' 1A6
Matamoros, Tamaulipas
MEXICO
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<PAGE>
ACCOUNTS RECEIVABLE PLEDGE AGREEMENT
This ACCOUNTS RECEIVABLE PLEDGE AGREEMENT (this "PLEDGE AGREEMENT"),
dated as of August 31, 1994 is entered into by and between Continental Bank, as
agent for itself and the Lenders (as hereinafter defined), as Pledgee
(hereinafter "AGENT")and Dura de Mexico, S.A. de C.V., as Pledgor (hereinafter
the "COMPANY") in accordance with the following Representations and Clauses:
REPRESENTATIONS AND WARRANTIES
------------------------------
WHEREAS, as of July 30, 1987 the Company entered into an Assembly
(Maquila) and Technical Assistance Agreement with Dura Corporation, which
Agreement was assigned to Dura Automotive Systems, Inc. (formerly known as Dura
Mechanical Components, Inc.), by means of which the Company has bound itself to
assemble and/or manufacture for Dura Automotive Systems, Inc. steel components
for the automotive industry;
WHEREAS, in consideration of such assembly and manufacturing services,
the Company is entitled to receive from Dura Automotive Systems, Inc. as profit
(such amounts whether now existing or hereafter arising hereinafter referred to
as the "RECEIVABLES"), an amount equal to one percent (1.00%) of the Company's
operating expenses, in addition to the reimbursement of its actual cost;
WHEREAS, the Company is to receive payment of the Receivables as a
continuous obligation of Dura Automotive Systems, Inc.;
WHEREAS, on even date herewith Dura Automotive Systems, Inc. entered
into a Credit Agreement (together with all amendments and other modifications,
if any, from time to time, hereafter made thereto) (the "CREDIT AGREEMENT") with
various financial institutions as are or may become parties thereto
(collectively, the "LENDERS"), The Bank of Nova Scotia, Comerica Bank and The
Chase Manhattan Bank, N.A., as co-agents (collectively, the "CO-AGENTS") and
Agent;
WHEREAS, the Company is willing to create a security interest on the
Receivables in order to secure the Guaranty of even date herewith executed by
the Company in favor of Agent, the Co-
<PAGE>
Agents and the Lenders of the obligations of Dura Automotive Systems, Inc. under
the Credit Agreement (the "OBLIGATIONS");
NOW, THEREFORE, the parties hereto agree to the following.
C L A U S E S:
-------------
1. The Company hereby creates a pledge in favor of Agent, for the
benefit of itself, the Co-Agents and the Lenders on the Receivables, as security
for the payment of the Obligations.
2. In order to perfect the creation of this Pledge under the terms of
inserts II and III of Article 334 of the Mexican Law of Negotiable instruments
and Credit Transactions, Dura Automotive Systems, Inc. as Debtor of the
Receivables is hereby notified of the creation of the security interest created
herein and therefore, through its signature herein it formally acknowledges the
execution of this Pledge Agreement and agrees to make payment of the Receivables
as provided in Clause 3 hereof.
3. Unless otherwise directed by Agent, from the date hereof, payment
of the Receivables will be made by Dura Automotive Systems, Inc. through credit
of an account of the Company acceptable to Agent (the "ACCOUNT"). Agent,
directly or through a third party designated by it, is hereby authorized to
carry out all steps necessary to collect the Receivables.
Any amounts deposited in the Account shall be applied by Agent to the
payment of any of the Obligations when due.
4. The Company binds itself to refrain from taking any steps for the
collection of any of the Receivables and in the event it should receive any
amount in payment of any Receivables, the Company hereby binds itself to
transfer such amount to the Account.
5. This Agreement constitutes sufficient evidence for purposes of
Article 337 of the General Law of Negotiable Instruments and Credit Transactions
of Mexico and, therefore is signed in three counterparts, one being delivered to
each of the parties.
6. This Pledge shall continue in effect until payment in full of the
Obligations. Once the Obligations have been paid in
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<PAGE>
full, this Pledge Agreement shall terminate and Agent shall return to the
Company any amounts deposited in the Account.
7. For all matters related to this Pledge Agreement, the parties
designate the following as their domicile:
If to Company: Dura de Mexico, S.A. de C.V.
Pontiente 2 y Norte 7 No. 1A6
Matamoros, Tamaulipas Mexico
Attn:
------------------------
and to Agent: Continental Bank
231 South LaSalle Street
Chicago, Illinois 60601
with a copy to: Dura Automotive Systems, Inc.
1708 Northwood
Troy, Michigan 48084
Attn: Scott Rued
8. This Pledge Agreement shall be construed and governed in
accordance with the laws of the United Mexican States.
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<PAGE>
IN WITNESS WHEREOF, the Company and Agent have executed this Pledge
Agreement as of the date first above written.
DURA DE MEXICO, S.A. DE C.V.
By /s/ Robert Hibbs
-----------------------------
Title Vice President
------------------------
CONTINENTAL BANK, as Agent
By /s/ Robert A. Pierce
-----------------------------
Title Vice President
------------------------
AGREED TO, this 31st day
of August, 1994.
DURA AUTOMOTIVE SYSTEMS, INC.
By /s/ Robert Hibbs
----------------------------
Title Vice President
-----------------------
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<PAGE>
CORPORATE GUARANTY
I. RECITALS
Reference is made to that certain Credit Agreement of even date
herewith (as the same may be amended, modified or supplemented from time to
time, the "Credit Agreement") among Dura Automotive Systems, Inc. , a Delaware
corporation (the "Borrower"), the various commercial lending institutions as
are, or may from time to time become, parties thereto (the "Lenders"), The Bank
of Nova Scotia, Comerica Bank and The Chase Manhattan Bank N.A., as co-aqents
(collectively, the "Co-Agents") and Continental Bank, an Illinois banking
corporation, as agent ("Agent") for the Lenders, pursuant to which certain
financial accommodations are provided to the Borrower. As one of the conditions
to providing such financial accommodations, Agent has required that the
undersigned, MC Holding Corp., a Delaware corporation ("Guarantor"), which owns
100% of the issued and outstanding stock of the Borrower, guaranty the
obligations of the Borrower to Agent, Co-Agents and Lenders. Unless otherwise
defined herein, capitalized terms used herein shall have the meanings ascribed
to such terms in the Credit Agreement.
II. GUARANTY
Therefore, for value received, and in consideration of any loan,
advance or financial accommodation of any kind whatsoever heretofore, now or
hereafter made, given or granted to the Borrower by Agent, Co-Agents and/or
Lenders, Guarantor hereby unconditionally guaranties the full and prompt payment
when due, whether at maturity or earlier, by reason of acceleration or
otherwise, and at all times thereafter, of all indebtedness, liabilities and
obligations of every kind and nature of the Borrower to Agent, Co-Agents and/or
Lenders, howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, joint or several, now or hereafter existing, or due or
to become due, and howsoever owned, held or acquired by Agent, Co-Agents and/or
Lenders, whether through discount, overdraft, purchase, direct loan or as
collateral or otherwise, arising under or relating to the Credit Agreement,
including, without limitation any post-petition bankruptcy interest (all such
indebtedness, liabilities and obligations being hereinafter referred to as
"Borrower's Obligations"). Guarantor further agrees to pay all costs and
expenses including, without limitation, all court costs and reasonable
attorneys' and paralegals' fees and expenses, paid or incurred by Agent, Co-
Agents and/or Lenders in endeavoring to collect all or any part of Borrower's
Obligations from, or in prosecuting any action against, Guarantor of all or any
part of Borrower's Obligations.
Guarantor hereby agrees that its obligations under this Corporate
Guaranty shall be unconditional, irrespective of (i) the validity or
enforceability of Borrower's Obligations or any part thereof, or of any
promissory note or other document evidencing all or any part of Borrower's
Obligations, (ii) the absence of any attempt to collect Borrower's Obligations
from the Borrower or any other guarantor or other action to enforce the same,
(iii) the waiver or consent by Agent, Co-Agents or Lenders with respect to any
provision of any agreement,
<PAGE>
instrument or document evidencing or securing all or any part of Borrower's
Obligations, or any other agreement, instrument or document now or hereafter
executed by the Borrower and delivered to Agent, Co-Agents or Lenders, (iv) the
failure by Agent to take any steps to perfect and maintain its security interest
in, or to preserve its rights to, any security or collateral for Borrower's
Obligations, for its benefit or the ratable benefit of Co-Agents and Lenders,
(v) Agent's election, in any proceeding instituted under Chapter 11 of Title 11
of the United States Code (11 U.S.C. Section 101 et seq.), as amended (the
"Bankruptcy Code") of the application of Section 1111(b)(2) of the Bankruptcy
Code, (vi) any borrowing or grant of a security interest by the Borrower as
debtor-in-possession, under Section 364 of the Bankruptcy Code, (vii) the
disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of
Agent's, Co-Agents' or Lenders' claim(s) for repayment of Borrower's
Obligations, or (viii) any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of the Borrower or a guarantor.
No payment made by or for the account or benefit of Guarantor
(including, without limitation, (i) a payment made by the Borrower in respect of
Borrower's Obligations, (ii) a payment made by any Person under any other
guaranty of Borrower's Obligations or (iii) a payment made by means of set-off
or other application of funds by Agent, Co-Agents or any of Lenders) pursuant to
this Corporate Guaranty shall entitle Guarantor, by subrogation or otherwise, to
any payment by the Borrower or from or out of any property of the Borrower, and
Guarantor shall not exercise any right or remedy against the Borrower or any
property of the Borrower including, without limitation, any right of
contribution or reimbursement by reason of any performance by Guarantor under
this Corporate Guaranty. The provisions of this paragraph shall survive the
termination of this Corporate Guaranty or the release or discharge of Guarantor
from liability hereunder. Guarantor and Agent hereby agree that the Borrower is
and shall be a third party beneficiary of the provisions of this paragraph.
Guarantor hereby waives diligence, presentment, demand of payment,
filing of claims with a court in the event of receivership or bankruptcy of the
Borrower, protest or notice with respect to Borrower's Obligations and all
demands whatsoever, and covenants that this Corporate Guaranty will not be
discharged, except by complete and irrevocable payment and performance of the
obligations and liabilities contained herein. No notice to Guarantor or any
other party shall be required for Agent, on behalf of itself, Co-Agents and
Lenders, to make demand hereunder. Such demand shall constitute a mature and
liquidated claim against Guarantor. Upon the occurrence and during the
continuance of any Event of Default, Agent may, at its sole election, proceed
directly and at once, without notice, against Guarantor to collect and recover
the full amount or any portion of Borrower's Obligations, without first
proceeding against the Borrower, any other person, firm, corporation, or any
security or collateral for Borrower's Obligations. Agent shall have the
exclusive right to determine the application of payments and credits, if any,
from Guarantor, the Borrower, any other person, firm or corporation, or any
security or collateral for Borrower's Obligations, on account of Borrower's
Obligations or of any other liability of Guarantor to Agent, Co-Agents and
Lenders arising hereunder.
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<PAGE>
To the extent permitted under the Credit Agreement, Agent, Co-Agents
and Lenders are hereby authorized, without notice or demand to Guarantor and
without affecting or impairing the liability of Guarantor hereunder, to, from
time to time, (i) renew, extend, accelerate or otherwise change the time for
payment of, or other terms relating to, Borrower's Obligations or otherwise
modify, amend or change the terms of any promissory note or other agreement,
document or instrument now or hereafter executed by the Borrower and delivered
to Agent, Co-Agents or Lenders, (ii) accept partial payments on Borrower's
Obligations, (iii) take and hold collateral for the payment of Borrower's
Obligations, or for the payment of this Corporate Guaranty, or for the payment
of any other guaranties of Borrower's Obligations or other liabilities of the
Borrower, and exchange, enforce, waive and release any such collateral, (iv)
apply such collateral and direct the order or manner of sale thereof as in their
sole discretion they may determine, and (v) settle, release, compromise, collect
or otherwise liquidate Borrower's Obligations and any collateral therefor in any
manner.
At any time after maturity of Borrower's Obligations, Agent, Co-Agents
and Lenders may, in their sole discretion, without notice to Guarantor and
regardless of the acceptance of any collateral for the payment hereof,
appropriate and apply toward payment of Borrower's Obligations (i) any
indebtedness due or to become due from Agent, Co-Agents or any of Lenders to
Guarantor and (ii) any moneys, credits or other property belonging to Guarantor
at any time held by or coming into the possession of Agent, Co-Agents or any of
Lenders or any affiliates thereof, whether for deposit or otherwise.
Guarantor hereby assumes responsibility for keeping itself informed of
the financial condition of the Borrower, and any and all endorsers and other
guarantors of any agreement, instrument or document evidencing or securing all
or any part of Borrower's Obligations and of all other circumstances bearing
upon the risk of nonpayment of Borrower's Obligations or any part thereof that
diligent inquiry would reveal, and Guarantor hereby agrees that none of Agent,
Co-Agents nor Lenders shall have any duty to advise Guarantor of information
known to Agent, Co-Agents or Lenders regarding such condition or any such
circumstances. Guarantor hereby acknowledges familiarity with the Borrower's
financial condition and has not relied on any statements by Agent, Co-Agents or
Lenders in obtaining such information. In the event Agent, Co-Agents or any
Lender, in their sole discretion, undertakes at any time or from time to time to
provide any such information to Guarantor, none of Agent, Co-Agents nor any
Lender shall be under any obligation (i) to undertake any investigation with
respect thereto, (ii) to disclose any information which, pursuant to accepted or
reasonable commercial finance practices, Agent, Co-Agents or any Lender wishes
to maintain confidential or (iii) to make any other or future disclosures of
such information, or any other information, to Guarantor.
Guarantor consents and agrees that Agent shall be under no obligation
to marshal any assets in favor of Guarantor or against or in payment of any or
all of Borrower's Obligations. Guarantor further agrees that, to the extent
that the Borrower makes a payment or payments to Agent, Co-Agents or Lenders, or
Agent receives any proceeds of collateral, for its benefit and the ratable
benefit of Co-Agents and
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<PAGE>
Lenders, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to the Borrower, its estate, trustee, receiver or any other party,
including without limitation Guarantor, under any bankruptcy law, state or
federal law, common law or equitable cause, then to the extent of such payment
or repayment, Borrower's Obligations or the part thereof which has been paid,
reduced or satisfied by such amount shall be reinstated and continued in full
force and effect as of the date such initial payment, reduction or satisfaction
occurred, and this Corporate Guaranty shall continue to be in existence and in
full force and effect, irrespective of whether any evidence of indebtedness has
been surrendered or cancelled.
Guarantor also waives all setoffs and counterclaims and all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor, and notices of acceptance of this
Corporate Guaranty. Guarantor further waives all notices of the existence,
creation or incurring of new or additional indebtedness, arising either from
additional loans extended to the Borrower or otherwise, and also waives all
notices that the principal amount, or any portion thereof, or any interest on
any agreement, instrument or document evidencing or securing all or any part of
Borrower's Obligations is due, notices of any and all proceedings to collect
from the maker, any endorser or any other guarantor of all or any part of
Borrower's Obligations, or from anyone else, and, to the extent permitted by
law, notices of exchange, sale, surrender or other handling of any security or
collateral given to Agent, for its benefit and the ratable benefit of Co-Agents
and Lenders, to secure payment of Borrower's Obligations.
III. COVENANTS
1. Restriction on Fundamental Change. Guarantor covenants and agrees
that, so long as any Borrower's Obligations remain outstanding, Guarantor shall
not acquire by purchase or otherwise all or any substantial part of the business
or assets of, or stock or other evidence of beneficial ownership, of any Person.
2. Conduct of Business. From and after the date hereof, Guarantor
shall not engage in any type of business activity other than ownership of the
capital stock of Borrower and the performance of its obligations under this
Corporate Guaranty and any other Loan Documents to which it is a party.
3. Subsidiaries. Guarantor will not establish, create or acquire any
new Subsidiary.
IV. MISCELLANEOUS
No delay on the part of Agent in the exercise of any right or remedy
shall operate as a waiver thereof, and no single or partial exercise by Agent of
any right or remedy shall preclude any further exercise thereof; nor shall any
modification or waiver of any of the
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<PAGE>
provisions of this Corporate Guaranty be binding upon Agent, Co-Agents or
Lenders, except as expressly set forth in a writing duly signed and delivered on
Agent's behalf by an authorized officer or agent of Agent. Agent's, Co-Agents'
or Lenders' failure at any time or times hereafter to require strict performance
by the Borrower or Guarantor of any of the provisions, warranties, terms and
conditions contained in any promissory note, security agreement, agreement,
guaranty, instrument or document now or at any time or times hereafter executed
by the Borrower or Guarantor and delivered to Agent, Co-Agents or Lenders shall
not waive, affect or diminish any right of Agent, Co-Agents and Lenders at any
time or times hereafter to demand strict performance thereof and such right
shall not be deemed to have been waived by any act or knowledge of Agent, Co-
Agents or Lenders, or their respective agents, officers or employees, unless
such waiver is contained in an instrument in writing signed by an officer or
agent of Agent, and directed to the Borrower or Guarantor, as applicable,
specifying such waiver. No waiver by Agent, Co-Agents and Lenders of any
default shall operate as a waiver of any other default or the same default on a
future occasion, and no action by Agent, Co-Agents or Lenders permitted
hereunder shall in any way affect or impair Agent's, Co-Agents' or Lenders'
rights or the obligations of Guarantor under this Corporate Guaranty. Any
determination by a court of competent jurisdiction of the amount of any
principal or interest owing by the Borrower to Agent, Co-Agents and Lenders
shall be conclusive and binding on Guarantor irrespective of whether Guarantor
was a party to the suit or action in which such determination was made.
This Corporate Guaranty shall be binding upon Guarantor and upon the
successors and permitted assigns of Guarantor and shall inure to the benefit of
Agent's, Co-Agents' and Lenders' respective successors and assigns; all
references herein to the Borrower shall be deemed to include its successors and
permitted assigns and all references herein to Agent, Co-Agents or Lenders shall
be deemed to include their respective successors and assigns. The Borrower's
successors and permitted assigns shall include, without limitation, a receiver,
trustee or debtor in possession of or for the Borrower. All references to the
singular shall be deemed to include the plural, and vice versa, where the
context so requires.
Wherever possible each provision of this Corporate Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Corporate Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Corporate Guaranty.
THIS CORPORATE GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS. THIS CORPORATE
GUARANTY AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE ENTIRE UNDERSTANDING WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN
OR ORAL, WITH RESPECT THERETO.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH, THIS CORPORATE GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
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<PAGE>
AGENT, CO-AGENT, LENDERS OR GUARANTOR SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. GUARANTOR HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS
AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. GUARANTOR FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS.
GUARANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
FROM JURISDICTION OR ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION
OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, GUARANTOR HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
CORPORATE GUARANTY.
AGENT, CO-AGENTS, LENDERS AND GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS CORPORATE GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF AGENT, CO-AGENTS, LENDERS OR GUARANTOR.
GUARANTOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR AGENT ENTERING INTO THE CREDIT AGREEMENT.
Guarantor hereby certifies that it has all necessary corporate
authority to grant and execute this Corporate Guaranty.
The obligations of Guarantor are secured by, among other things, that
certain Pledge Agreement, of even date herewith, between Agent and Guarantor.
IN WITNESS WHEREOF, this Corporate Guaranty has been duly executed by
Guarantor this 31st day of August, 1994.
MC HOLDING CORP.
By /s/ Robert Hibbs
Its VICE PRESIDENT
Address: Hidden Creek Industries
4508 IDS Center
Minneapolis, Minnesota 55402
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PLEDGE AGREEMENT
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(MC HOLDING CORP.)
THIS PLEDGE AGREEMENT (this "PLEDGE AGREEMENT"), dated as of August
31, 1994, made by MC HOLDING CORP., a Delaware corporation (the "PLEDGOR"), in
favor of CONTINENTAL BANK, an Illinois banking corporation, as agent, (the
"AGENT") for the Lenders (as defined below).
W I T N E S S E T H:
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WHEREAS, pursuant to a Credit Agreement of even date herewith
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "CREDIT AGREEMENT"), among Dura Automotive Systems,
Inc., a Delaware corporation (the "BORROWER"), the various commercial lending
institutions as are, or may from time to time become, parties thereto (the
"LENDERS"), The Bank of Nova Scotia, Comerica Bank and The Chase Manhattan Bank,
N.A., as co-agents (collectively, "CO-AGENTS") and the Agent, the Lenders have
extended Commitments to make Credit Extensions to the Borrower;
WHEREAS, as a condition precedent to the making of the initial Credit
Extensions under the Credit Agreement, the Pledgor is required to execute and
deliver this Pledge Agreement;
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement;
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Lenders to make Loans
(including the initial Loans) to the Borrower pursuant to the Credit Agreement,
the Pledgor agrees, for the benefit of the Agent and the Lenders, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Pledge Agreement, including its preamble and
recitals, shall have the following meanings (such definitions to be equally
applicable to the singular and plural forms thereof):
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"Agent" is defined in the Preamble.
"Co-Agents" is defined in the Recitals.
"Collateral" is defined in Section 2.1.
"Credit Agreement" is defined in the Recitals.
"Distributions" means all stock dividends, liquidating dividends,
shares of stock resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock constituting Collateral.
"Dividends" means cash dividends and cash distributions with respect
to any Pledged Shares or other Pledged Property and not a liquidating dividend.
"Federal Securities Laws" is defined in Section 6.2.
"Lenders" are defined in the Recitals.
"MC Guaranty" means that certain Corporate Guaranty of even date
herewith executed by MC Holding Corp. in favor of Agent, Co-Agents and Lenders.
"Obligations" is defined in Section 2.2.
"Payment Obligations" means all Loans, interest, fees and charges and
all other Obligations of Borrower other than contingent liabilities of Borrower
with respect to which none of Agent, Co-Agents nor any Lender has asserted a
claim against Borrower; provided that Payment Obligations shall include the
Letters of Credit.
"Pledge Agreement" is defined in the Preamble.
"Pledged Property" means all Pledged Shares and all other pledged
shares of capital stock owned by Pledgor, all other securities owned by Pledgor,
and all other instruments owned by Pledgor which are now being delivered by the
Pledgor to the Agent or may from time to time hereafter be delivered by the
Pledgor to
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the Agent for the purpose of pledge under this Pledge Agreement or any other
Loan Document, and all proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Attachment 1
hereto as the issuer of the Pledged Shares identified opposite the name of such
Person.
"Pledged Shares" means all shares of capital stock of any Pledged
Share Issuer.
"Pledgor" is defined in the Preamble.
"UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of Illinois, provided that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the Security Interest in any Collateral or the availability of any remedy
hereunder is governed by the Uniform Commercial Code as in effect on or after
the date hereof in any other jurisdiction, "UCC" means the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such perfection or effect of perfection or non-perfection or
availability of such remedy.
SECTION 1.2. Credit Agreement Definitions. Subject to Section
1.3, unless otherwise defined herein or the context otherwise requires, terms
used in this Pledge Agreement, including its Preamble and Recitals, have the
meanings provided in the Credit Agreement.
SECTION 1.3. UCC Definitions. Unless otherwise defined herein
or the context otherwise requires, terms for which meanings are provided in the
UCC are used in this Pledge Agreement, including its Preamble and Recitals, with
such meanings.
ARTICLE II
PLEDGE
SECTION 2.1. Grant of Security Interest. The Pledgor hereby
pledges, hypothecates, assigns, charges, mortgages, delivers, and transfers to
the Agent, for its benefit and the benefit of the Lenders, and hereby grants to
the Agent, for its benefit and the benefit of the Lenders, a continuing security
interest in, all of the following property (the "COLLATERAL"):
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(a) all Pledged Shares issued from time to time, including the issued
and outstanding shares of capital stock of each Pledged Stock Issuer
identified on Attachment 1 hereto;
(b) all other Pledged Property, whether now or hereafter delivered to
the Agent in connection with this Pledge Agreement;
(c) all Dividends, Distributions, interest, and other payments with
respect to any Pledged Property; and
(d) all proceeds of any of the foregoing.
SECTION 2.2. Security for Obligations. This Pledge Agreement
secures the payment in full of all obligations, indebtedness and liabilities now
or hereafter existing under the MC Guaranty (the "OBLIGATIONS"), whether for
principal, interest, costs, fees, expenses, or otherwise.
SECTION 2.3. Delivery of Pledged Property. All certificates or
instruments representing or evidencing any Collateral, including all Pledged
Shares, shall be delivered to and held by or on behalf of the Agent pursuant
hereto, shall be in suitable form for transfer by delivery, and shall be
accompanied by all necessary instruments of transfer or assignment, duly
executed in blank.
SECTION 2.4. Dividends on Pledged Shares. In the event that any
Dividend is to be paid on any Pledged Share at a time when no Event of Default
has occurred and is continuing, such Dividend or payment may be paid directly to
the Pledgor. If any such Event of Default has occurred and is continuing, then
any such Dividend or payment shall be paid directly to the Agent for application
to the Obligations as provided in Section 6.4.
SECTION 2.5. Continuing Security Interest; Transfer of Note.
This Pledge Agreement shall create a continuing security interest in the
Collateral and shall
(a) remain in full force and effect until payment in full of all
Payment Obligations and the termination of all Commitments,
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(b) be binding upon the Pledgor and its successors and assigns, and
(c) inure, together with the rights and remedies of the Agent
hereunder, to the benefit of the Agent and the Lenders.
Upon the payment in full of all Payment Obligations and the termination of all
Commitments, the security interest granted herein shall terminate and all rights
to the Collateral shall revert to the Pledgor. Upon any such termination, the
Agent will, at the Pledgor's sole expense, deliver to the Pledgor, without any
representations, warranties or recourse of any kind whatsoever, all certificates
and instruments representing or evidencing all Pledged Shares, together with all
other Collateral held by the Agent hereunder, and execute and deliver to the
Pledgor such documents as the Pledgor shall reasonably request to evidence such
termination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Warranties, etc. The Pledgor represents and
warrants unto the Agent and the Lenders, as at the date of each pledge and
delivery hereunder by the Pledgor to the Agent of any Collateral, as set forth
in this Article.
SECTION 3.1.1. Ownership, No Liens. etc. The Pledgor is the
legal and beneficial owner of, and has good and marketable title to (and has
full right and authority to pledge and assign) such Collateral, free and clear
of all Liens, except any Lien granted pursuant hereto in favor of the Agent.
SECTION 3.1.2. Valid Security Interest. The delivery of such
Collateral to the Agent is effective to create a valid, perfected, first
priority security interest in such Collateral and all proceeds thereof, securing
the Obligations. No filing or other action will be necessary to perfect or
protect such security interest.
SECTION 3.1.3. As to Pledged Shares. All Pledged Shares are
duly authorized and validly issued, fully paid, and nonassessable, and
constitute all of the issued and outstanding shares of capital stock of each
Pledged Share Issuer. The Pledgor has no
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<PAGE>
Subsidiary other than the Pledged Share Issuers and Dura de Mexico S.A. de C.V.
SECTION 3.1.4. Authorization, Approval, etc. No authorization,
approval, or other action by, and no notice to or filing with, any governmental
authority, regulatory body or any other Person is required either
(a) for the pledge by the Pledgor of any Collateral pursuant to
this Pledge Agreement or for the execution, delivery, and performance of
this Pledge Agreement by the Pledgor, or
(b) for the exercise by the Agent of the voting or other rights
provided for in this Pledge Agreement, or, except with respect to any
Pledged Shares, as may be required in connection with a disposition of such
Pledged Shares by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this
Pledge Agreement.
SECTION 3.1.5. Compliance with Laws. The Pledgor is in compliance
with the requirements of all applicable laws, rules, regulations and orders of
every governmental authority, the non-compliance with which could reasonably be
expected to materially adversely affect the value of the Collateral or the worth
of the Collateral as collateral security.
ARTICLE IV
COVENANTS
SECTION 4.1. Protect Collateral; Further Assurances, etc. The
Pledgor will not sell, assign, transfer, pledge, or encumber in any other manner
the Collateral, except in favor of the Agent hereunder. The Pledgor will
warrant and defend the right and title herein granted unto the Agent in and to
the Collateral (and all right, title, and interest represented by the
Collateral) against the claims and demands of all Persons whomsoever. The
Pledgor agrees that at any reasonable time, and from time to time, at the
expense of the Pledgor, the Pledgor will promptly execute and deliver all
further instruments, and take all further action, that may be necessary or
desirable, or that the Agent may reasonably request, in order to perfect and
protect any security interest
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<PAGE>
granted or purported to be granted hereby or to enable the Agent to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
SECTION 4.2. Stock Powers, etc. The Pledgor agrees that all
Pledged Shares (and all other shares of capital stock constituting Collateral)
delivered by the Pledgor pursuant to this Pledge Agreement will be accompanied
by duly executed undated blank stock powers, or other equivalent instruments of
transfer acceptable to the Agent. The Pledgor will, from time to time upon the
request of the Agent, promptly deliver to the Agent such stock powers,
instruments, and similar documents, reasonably satisfactory in form and
substance to the Agent, with respect to the Collateral as the Agent may
reasonably request and will, from time to time upon the request of the Agent
after the occurrence and during the continuance of any Event of Default, cause
the Pledged Share Issuer of any Pledged Shares promptly to transfer any Pledged
Shares or other shares of common stock constituting Collateral into the name of
any nominee designated by the Agent.
SECTION 4.3. Continuous Pledge. Subject to Section 2.4, the
Pledgor will, at all times, keep pledged to the Agent pursuant hereto all
Pledged Shares and all other shares of capital stock constituting Collateral,
all Dividends and Distributions with respect thereto, and all other Collateral
and other securities, instruments, proceeds, and rights from time to time
received by or distributable to the Pledgor in respect of any Collateral.
SECTION 4.4. Voting Rights; Dividends, etc. The Pledgor agrees:
(a) after an Event of Default shall have occurred and be
continuing, promptly upon receipt thereof by the Pledgor and without any
request therefor by the Agent, to deliver (properly endorsed where required
hereby or requested by the Agent) to the Agent all Dividends,
Distributions, all interest, all principal, all other cash payments, and
all proceeds of the Collateral, all of which shall be held by the Agent as
additional Collateral for use in accordance with Section 6.4; and
(b) after any Event of Default shall have occurred and be
continuing and the Agent has notified the Pledgor
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of the Agent's intention to exercise its voting power under this Section
4.4(b)
(i) the Agent may exercise (to the exclusion of the Pledgor)
the voting power and all other incidental rights of ownership with
respect to any Pledged Shares or other shares of capital stock
constituting Collateral and the Pledgor hereby grants the Agent an
irrevocable proxy, exercisable under such circumstances, to vote the
Pledged Shares and such other Collateral; and
(ii) promptly to deliver to the Agent such additional proxies
and other documents as may be necessary to allow the Agent to exercise
such voting power.
All Dividends, Distributions, cash payments, and proceeds that may at any time
and from time to time be held by the Pledgor but that the Pledgor is then
obligated to deliver to the Agent, shall, until delivery to the Agent, be held
by the Pledgor separate and apart from its other property in trust for the
Agent. The Agent agrees that unless an Event of Default shall have occurred and
be continuing and the Agent shall have given the notice referred to in Section
4.4(b), the Pledgor shall have the exclusive voting power with respect to any
shares of capital stock (including any of the Pledged Shares) constituting
Collateral and the Agent shall, upon the written request of the Pledgor,
promptly deliver such proxies and other documents, if any, as shall be
reasonably requested by the Pledgor which are necessary to allow the Pledgor to
exercise voting power with respect to any such share of capital stock (including
any of the Pledged Shares) constituting Collateral.
ARTICLE V
THE AGENT
SECTION 5.1. Agent Appointed Attorney-in-Fact. The Pledgor
hereby irrevocably appoints the Agent the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time in the Agent's discretion, to take any action
and to execute any instrument which the Agent may deem necessary or advisable to
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<PAGE>
accomplish the purposes of this Pledge Agreement, including, after the
occurrence and continuance of an Event of Default:
(a) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral:
(b) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a)
above; and
(c) to file any claims or take any action or institute any
proceedings which the Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Agent with respect to any of the Collateral.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 5.2. Agent Has No Duty. The powers conferred on the Agent
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty on it to exercise any such powers. Except for reasonable care of
any Collateral in its possession and the accounting for moneys actually received
by it hereunder, the Agent shall have no duty as to any Collateral or
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relative to any
Pledged Property, whether or not the Agent has or is deemed to have knowledge of
such matters, or (b) taking any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.3. Reasonable Care. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral if it takes such action for that purpose as the Pledgor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Agent to comply with any
such request at any time shall not in itself be deemed a failure to exercise
reasonable care.
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ARTICLE VI
REMEDIES
SECTION 6.1. Certain Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the UCC (whether or not the UCC applies to the affected Collateral)
and also may, without notice except as specified below, sell the Collateral
or any part thereof in one or more parcels at public or private sale, at
any of the Agent's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Agent may deem commercially
reasonable. The Pledgor agrees that, to the extent notice of sale shall be
required by law, at least ten days' prior notice to the Pledgor of the time
and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. The Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it
was so adjourned.
(b) The Agent may
(i) transfer all or any part of the Collateral into the name
of the Agent or its nominee, with or without disclosing that such
Collateral is subject to the Lien hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Agent of any amount due or to become due
thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or
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compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party
with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
SECTION 6.2. Securities Laws. In view of the position of the
Pledgor in relation to the Pledged Shares, or because of other present or future
circumstances, a question may arise under the Securities Act of 1933, as
amended, or any similar statute hereafter enacted analogous in purpose or effect
(such Act and any such similar statute as from time to time in effect being
called the "FEDERAL SECURITIES LAWS") with respect to any disposition of the
Pledged Shares permitted hereunder. The Pledgor understands that compliance
with the Federal Securities Laws might materially limit the course of conduct of
the Agent if the Agent were to attempt to dispose of all or any part of the
Pledged Shares in a public offering, and might also materially limit the extent
to which or the manner in which any subsequent transferee of any Pledged Shares
could dispose of the same. Similarly, there may be other legal restrictions or
limitations affecting the Agent in any attempt to dispose of all or part of the
Pledged Shares in a public offering under applicable Blue Sky or other state
securities laws or similar laws analogous in purpose or effect. The Pledgor
understands and agrees that the Agent is not to have any duty or obligation to
the Pledgor to attempt to dispose of the Pledged Shares pursuant to a public
offering thereof, and the Pledgor will not attempt to hold the Agent responsible
for selling all or any part of the Pledged Shares at an inadequate price even if
the disposition of the Pledged Shares pursuant to a public offering might have
resulted in a higher price being paid for the Pledged Shares. Without limiting
the generality of the foregoing, the
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provisions of this Section would apply if, for example, the Agent were to place
all or any part of the Pledged Shares for private placement by an investment
banking firm, or if such investment banking firm purchased all or any part of
the Pledged Shares for its own account, or if the Agent placed all or any part
of the Pledged Shares privately with a purchaser or purchasers. The provisions
of this Section 6.2 will apply notwithstanding the existence of a public or
private market upon which the quotations or sales prices for the Pledged Shares
may substantially exceed the price at which the Agent sells them.
SECTION 6.3. Compliance with Restrictions. The Pledgor agrees
that in any sale of any of the Collateral whenever an Event of Default shall
have occurred and be continuing, the Agent is hereby authorized to comply with
any limitation or restriction in connection with such sale as it may be advised
by counsel is necessary in order to avoid any violation of applicable law
(including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications, and restrict such prospective bidders
and purchasers to persons who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental regulatory authority or official,
and the Pledgor further agrees that such compliance shall not result in such
sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall the Agent be liable nor accountable to the Pledgor
for any discount allowed by the reason of the fact that such Collateral is sold
in compliance with any such limitation or restriction.
SECTION 6.4. Application of Collateral Proceeds and Pledged Note
Payments. All cash proceeds received by the Agent in respect of any sale of,
collection from, or other realization upon, all or any part of the Collateral
(including Dividends) shall be applied: first, to all fees, costs and expenses
incurred by Agent or any Lender with respect to the Credit Agreement, the other
Loan Documents or the Collateral including, without limitation, those described
in Section 10.3 of the Credit Agreement and in Section 6.5 hereof; second, to
all fees due and owing to Agent or any Lender; third, to accrued and unpaid
interest on the Obligations (including any interest which but for the provisions
of the
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Bankruptcy Code, would have accrued on such amounts); fourth, to the principal
amounts of the Obligations outstanding; and fifth, to any other indebtedness or
obligations of Borrower owing to Agent or any Lender. Any balance remaining
shall be delivered to Pledgor.
SECTION 6.5. Indemnity and Expenses. The Pledgor hereby
indemnifies and holds harmless the Agent from and against any and all claims,
losses, and liabilities arising out of or resulting from this Pledge Agreement
(including enforcement of this Pledge Agreement), except claims, losses, or
liabilities resulting from the Agent's gross negligence or wilful misconduct.
Upon demand, the Pledgor will pay to the Agent the amount of any and all
reasonable expenses, including the reasonable fees and disbursements of its
counsel and of any experts and agents, which the Agent may incur in connection
with:
(a) the administration of this Pledge Agreement, the Credit
Agreement and each other Loan Document;
(b) the custody, preservation, use, or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Agent
hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1. Loan Document. This Pledge Agreement is a Loan
Document executed pursuant to the Credit Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered and applied in accordance
with the terms and provisions thereof.
SECTION 7.2. Amendments, etc. No amendment to or waiver of any
provision of this Pledge Agreement nor consent to any departure by the Pledgor
herefrom shall in any event be effective unless the same shall be in writing and
signed by the Agent and Pledgor, and then such waiver or consent shall be
effective only in
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the specific instance and for the specific purpose for which it is given.
SECTION 7.3. Protection of Collateral. The Agent may from time
to time, at its option, perform or cause to be performed any act which the
Pledgor agrees hereunder to perform and which the Pledgor shall fail to perform
after being requested in writing so to perform (it being understood that no such
request need be given after the occurrence and during the continuance of an
Event of Default) and the reasonable expenses of the Agent incurred in
connection therewith shall be payable by the Pledgor pursuant to Section 6.5 and
the Agent may from time to time take or cause to be taken any other action which
the Agent reasonably deems necessary for the maintenance, preservation or
protection of any of the Collateral or of its security interest therein.
SECTION 7.4. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including telegraphic
communication) and, if to the Pledgor, mailed or telegraphed or delivered to it
at the address set forth below its signature hereto, if to the Agent, mailed or
delivered to it, addressed to it at the address of the Agent specified in the
Credit Agreement or, as to either party, at such other address as shall be
designated by such party in a written notice to each other party complying as to
delivery with the terms of this Section. All such notices and other
communications shall, when mailed or telegraphed, respectively, be effective
when deposited in the mails or delivered to the telegraph company, respectively,
addressed as aforesaid.
SECTION 7.5. Section Captions. Section captions used in this
Pledge Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.6. Severability. Wherever possible each provision of
this Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
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SECTION 7.7. Governing Law Entire Agreement, etc. THIS PLEDGE
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF ILLINOIS, EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF ILLINOIS. THIS PLEDGE AGREEMENT AND THE OTHER LOAN DOCUMENTS
CONSTITUTE THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT MATTER HEREOF AND SUPERSEDE ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH
RESPECT THERETO.
SECTION 7.8. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
PLEDGE AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS OR THE PLEDGOR
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF
ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ILLINOIS; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION, IN THE
COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.
THE PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE. THE PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT
THE STATE OF ILLINOIS. THE PLEDGOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR
HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE PLEDGOR HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OR ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, THE PLEDGOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS PLEDGE AGREEMENT.
SECTION 7.9. Waiver of Jury Trial. THE AGENT, THE LENDERS AND
THE PLEDGOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS
THEY MAY HAVE TO A TRIAL BY JURY IN
-15-
<PAGE>
RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS PLEDGE AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE
LENDERS OR THE PLEDGOR. THE PLEDGOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED
FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE AGENT ENTERING INTO THIS PLEDGE AGREEMENT.
-16-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
MC HOLDING CORP.
By /s/ Robert Hibbs
-----------------------------
Title Vice President
------------------------
Address: c/o Hidden Creek Industries
4508 IDS Center
Minneapolis, MN 55402
Telecopy No.: (612) 332-2012
Attention: Sankey A. (Tony) Johnson
CONTINENTAL BANK, as Agent
By /s/ Robert A. Pierce
-----------------------------
Title Vice President
------------------------
Address: 231 South LaSalle St.
Chicago, IL 60697
Telecopy No.: 312-987-5891
Telex No.: 253864
(Answerback: CONILLBK)
Attention: Robert A. Pierce
-17-
<PAGE>
ATTACHMENT 1
------------
<TABLE>
<CAPTION>
==============================================================================
Common Stock
______________________________________________________________________________
Authorized Outstanding % of Shares
Pledged Share Issuer Shares Shares Pledged
______________________________________________________________________________
<S> <C> <C> <C>
Dura Automotive
Systems, Inc. 1,000 1,000 100%
==============================================================================
</TABLE>
-18-
<PAGE>
[LETTER HEAD]
August 16, 1994
Mr. Craig L. Lamiman
103 Jonathan Drive
Stamford, CT 06903
Dear Craig:
I am very pleased to extend the following offer to join our Dura Automotive
Management Team. I know that the process has been intense, and I appreciate your
perseverance in answering our questions.
Position: Vice President Human Resources - Reporting to Karl F. Storrie
Base Salary: $125,000 per year, to be paid twice monthly.
Bonus: A copy of the Dura Annual Bonus Plan accompanies this letter, and I will
elaborate here to clarify some important points. As a vice president, your
individual bonus factor (BFI) will be 50%. For calendar year 1994, based on your
hire date, you will be eligible to earn a prorated portion of your bonus for a
period of four months. At a rating of "1.0" this would provide you a bonus for
1994 in the amount of $19,200. If the company makes its budget and achieves at
least the "1" rating, you will be awarded that amount. However, in view of the
limited impact you will have on the 1994 overall company performance, you will
be guaranteed a minimum sum of $15,000, payable at the normal bonus distribution
timing early in 1995, regardless of company performance.
As part of our management objectives program, I would expect you to develop and
submit for approval personal objectives for 1994/95, once you have established
yourself with Dura and have become familiar with our strategic plan and our
annual business plan.
Dura Equity: As you know, we encourage management ownership of the company and
will provide you the opportunity to purchase up to 1700 shares of Class A
Common Stock of MC Holding Corporation at a per share cost of $32.34. A loan
program will be available to assist in one half of your equity investment. You
will have a six-month window of opportunity to make your decision.
Perquisites: A copy of the Dura Executive Flexible Perquisite Program is
included with this letter. The annual dollar amount established for your
position is $15,000.
<PAGE>
Mr. Craig A. Lamiman
Page 2
August 16, 1994
Benefits: Dura provides its employees a full array of benefits, and included
with this letter is some descriptive material on our various insurance programs.
I would suggest that we make an appointment with our benefits coordinator to
provide you a full description of the package.
Relocation: We will reimburse all reasonable and documented costs to sell your
current home, search for and buy a new home in our area, and move your family's
personal belongings. We will gross up the amounts reimbursed to you to offset
your personal tax implications. We encourage the executive to employ an agent to
sell his current home if selling is his choice. If your good faith effort to
sell your home is unsuccessful after a reasonable period, Dura will arrange for
a real estate buy out of your current home. Our relocation philosophy is to
minimize the executive's worries on this issue, and we will assist wherever
possible. We further encourage the executive to find local quarters as soon as
possible, and we will assist with the several options for temporary quarters for
him, and his family, if necessary.
Miscellaneous:
Vacation: At the company officer level, we do not specify a set period of time
for vacations, but, rather, expect you to take time with your family as time
will allow.
Holidays: Currently, we have 10 paid holidays a year.
401(k) Program: We have an active program that you can join after 12 months of
employment, and Dura currently matches you contribution 25%, up to a maximum 6%
investment.
Pension: Defined in data provided with this letter.
Company Auto: Part of the Flex Perks Program. We do not attempt to define the
type of auto for the executive other than to suggest it be appropriate for
customer transportation.
Contract Provisions: If you choose to leave Dura, this agreement is terminated
as of the date you resign employment. In the unlikely event that Dura decides,
for whatever reason other than cause, that you should no longer be employed by
the company, Dura will continue to pay your base salary, perk payments, and
provide benefits coverage for a period of six months. This provision will apply
to a change of control of company ownership, and the company will require any
successors to agree and perform this agreement.
<PAGE>
Mr. Craig A. Lamiman
Page 3
August 16, 1994
Craig, I am certain that you will have additional questions about this offer, so
feel free to call me or Chuck Kepler, and we will clear up any open issues. I
also know that you will do your own math on this offer, but I will point that
the first full year value of the total compensation package is nearly $200,000,
including salary, bonus at 100%, flex perks, and 401(k) matching, but excluding
any relocation reimbursements.
We have exciting times ahead of us at Dura, and I am convinced that you will be
making the right move in joining our management team. You will bring the added
professional skills that we need to carry out our business strategy, and Dave,
Milt, and Joe join me in encouraging you to give our offer your most serious
consideration.
Very best regards,
/s/ Karl F. Storrie
Karl F. Storrie
KFS4.816/tlc
Enclosures
<PAGE>
September 1, 1994
[LOGO OF DURA]
Mr. David Klosterman
1335 Conestoga
Moberly, MO 65270
Dear Dave:
I am very pleased to extend the following offer to join our Dura Automotive
Management Team. I know that the process has been long, and I look forward to
working with the new team.
Position: Vice President, Advanced Technology, Reporting to Karl F. Storrie
Base Salary: $95,000 per year, to be paid twice monthly.
Bonus: A copy of the Dura Annual Bonus Plan accompanies this letter, and I will
elaborate here to clarify some important points. As a director, your individual
bonus factor (BF1) will be 50%. For calendar year 1994, based on your hire
date, you will be eligible to earn a prorated portion of your bonus for a period
of four months. At a rating of "1.0" this would provide you a bonus for 1994 in
the amount of $15,832. If the company makes its budget and achieves at least
the "1" rating, you will be awarded that amount.
As part of our management objectives program, I would expect you to develop and
submit for approval personal objectives for 1994/95, once you have established
yourself with Dura and have become familiar with our strategic plan and our
annual business plan.
Dura Equity: As you know, we encourage management ownership of the company and
will provide you the opportunity to purchase a target amount subject to board
approval of up to 1700 shares of Class A Common Stock of MC Holding Corporation
at a per share cost of $32.34. A loan program will be available to assist in
one half of your equity investment. You will have a six-month window of
opportunity to make your decision.
Perquisites: A copy of the Dura Executive Flexible Perquisite Program is
included with this letter. The annual dollar amount established for your
position is $15,000.
Benefits: Dura provides its employees a full array of benefits, and included
with this letter is some descriptive material on our various insurance programs.
I would suggest that we make an appointment with our benefits coordinator to
provide you a full description of the package.
<PAGE>
Mr. David Klosterman
September 1, 1994
Page 2
Relocation: We will reimburse all reasonable and documented costs to sell your
current home, search for and buy a new home in our area, and move your family's
personal belongings. We will gross up the amounts reimbursed to you to offset
your personal tax implications. We encourage the executive to employ an agent
to sell his current home if selling is his choice. If your good faith effort to
sell your hone is unsuccessful after a reasonable period, Dura will arrange for
a real estate buy out of your current home. Our relocation philosophy is to
minimize the executive's worries on this issue, and we will assist wherever
possible. We further encourage the executive to find local quarters as soon as
possible, and we will assist with the several options for temporary quarters for
him, and his family, if necessary. We will provide you a one time net
relocation bonus of $18,000 payable at the time of your physical move.
Miscellaneous:
Vacation: At the company officer level, we do not specify a set period of time
for vacations, but, rather, expect you to take time with your family as time
will allow.
Holidays: Currently, we have 10 paid holidays a year.
401(k) Program: You will be eligible to participate in the Dura program at time
of transfer, and Dura currently matches your contribution 25%, up to a maximum
6% investment.
Pension: Defined in data provided with this letter.
Company Auto: Part of the Flex Perks Program. We do not attempt to define the
type of auto for the executive other than to suggest it be appropriate for
customer transportation.
Contract Provisions: If you choose to leave Dura, this agreement is terminated
as of the date you resign employment. In the unlikely event that Dura decides,
for whatever reason other than cause, that you should no longer be employed by
the company, Dura will continue to pay your base salary, perk payments, and
provide benefits coverage for a period of six months. This provision will apply
to a change of control of company ownership, and the company will require any
successors to agree and perform this agreement.
Dave, I am certain that you will have additional questions about this offer, so
feel free to call Craig Lamiman or me to clear up any open issues.
<PAGE>
Mr. David Klosterman
September 1, 1994
Page 3
We have exciting times ahead of us at Dura, and I am convinced that you will
bring the added professional skills that we need to carry out our business
strategy.
Very best regards,
/s/ Karl F. Storrie
Karl F. Storrie
Enclosures
[Countersigned by David Klosterman 9/26/94]
<PAGE>
July 19, 1996 Draft
================================================================================
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
DURA AUTOMOTIVE SYSTEMS, INC.
August __, 1996
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I
Certain Definitions
-------------------
<TABLE>
<CAPTION>
<C> <S> <C>
1.1 Certain Definitions................................. 2
"Affiliate"......................................... 2
"Alkin"............................................. 2
"Alkin Director".................................... 2
"Alkin Stockholders"................................ 2
"Ancillary Agreements".............................. 2
"Board"............................................. 2
"Class A Common".................................... 2
"Class B Common".................................... 2
"Co-Investment Agreement"........................... 2
"Common Stock"...................................... 3
"Company"........................................... 3
"control"........................................... 3
"executive officer"................................. 3
"Five Percent Owner"................................ 3
"Independent Director".............................. 3
"Independent Third Party"........................... 3
"Joint Venture Agreement"........................... 3
"Management Contribution Agreement"................. 4
"Managementholder".................................. 4
"MC Director"....................................... 4
"MC Stockholders"................................... 4
"MC Stockholders Agreement"......................... 4
"Person"............................................ 4
"Private Transferee"................................ 4
"Public Offering"................................... 4
"Public Sale"....................................... 4
"Sale of the Company"............................... 4
"Securities Act".................................... 5
"Shares"............................................ 5
"Stockholders"...................................... 5
"Subsidiary"........................................ 5
"Supermajority Approval"............................ 5
ARTICLE II
Boards of Directors and Committees
2.1 Board Composition................................... 5
2.2 Board Vacancies..................................... 7
2.3 Board Member Expenses and Compensation.............. 7
2.4 Audit Committees.................................... 7
2.5 Independent Directors Election...................... 8
2.6 Termination......................................... 8
</TABLE>
-i-
<PAGE>
Page
----
ARTICLE III
Covenants
<TABLE>
<CAPTION>
<C> <S> <C>
3.1 By-laws............................................. 8
3.2 Maintenance of Books and Records.................... 9
3.3 Financial Information............................... 9
3.4 Inspection Rights................................... 10
3.5 Accountants......................................... 10
3.6 Issuance of Preferred Stock......................... 11
ARTICLE IV
Tag-Along Right
4.1 Tag-Along Right..................................... 11
4.2 Representations and Warranties on a
Disposition or Sale of the Company.................. 12
4.3 Exception to Tag-Along Right........................ 12
ARTICLE V
Transfers by Management Stockholders
5.1 Transfers in Accordance with this Agreement......... 13
5.2 Registration of Transfers........................... 13
5.3 Restrictions on Transfer............................ 13
5.4 Pledge of Common Stock as Security.................. 13
5.5 Sales to be Free of Encumbrances.................... 14
5.6 Closing of Sale of Managementholder's Stock......... 14
5.7 Sale Upon Cessation of Employment When the
Company Is Not a Public Company..................... 15
5.8 Sale Upon Cessation of Employment When the
Company is a Public Company......................... 16
5.9 Defined Terms and Expressions....................... 17
(a) "Book Value Per Share"......................... 17
(b) "Permanent Disability"......................... 18
(c) "Retirement"................................... 18
(d) "termination by the Company or one of its
Subsidiaries without cause".................... 18
(e) "termination by the Company or one of its
Subsidiaries".................................. 18
5.10 Sale Upon Default of Indebtedness.................. 18
5.11 Closing............................................ 19
5.12 Existing Pledge Agreements......................... 19
5.13 Voting of Managementholders' Shares................ 19
</TABLE>
ii
<PAGE>
Page
----
ARTICLE VI
Transfers of Common Stock and
Appointment of Proxy
<TABLE>
<CAPTION>
<C> <S> <C>
6.1 Transfers in Accordance with Agreement.............. 20
6.2 Legending of Share Certificates..................... 20
6.3 Default of Delivery................................. 21
6.4 Distributions upon Sale of the Company.............. 22
ARTICLE VII
Noncompete Agreement
7.1 Noncompete with Business of Company................. 22
7.2 Noncompete with Business of GPD..................... 23
ARTICLE VIII
Miscellaneous
8.1 Management Representatives.......................... 24
8.2 Acknowledgement..................................... 25
8.3 Notices............................................. 25
8.4 Extended Meanings................................... 26
8.5 Captions............................................ 26
8.6 Applicable Law...................................... 27
8.7 Severability........................................ 27
8.8 Currency............................................ 27
8.9 Successors and Assigns.............................. 27
8.10 Amendment and Waiver............................... 27
8.11 Remedies........................................... 27
8.12 Counterparts....................................... 28
8.13 Complete Agreement................................. 28
8.14 Arbitration........................................ 28
8.15 Effectiveness...................................... 29
</TABLE>
-iii-
<PAGE>
STOCKHOLDERS AGREEMENT
----------------------
DATED as of the ___ day of August, 1996,
BY AND AMONG:
DURA AUTOMOTIVE SYSTEMS, INC., a Delaware corporation formerly known as
Dura Automotive Holding, Inc. (the "Company");
- and -
ONEX DHC LLC, a Wyoming limited liability company ("Onex");
- and -
J2R CORPORATION, a Delaware corporation ("J2R");
- and -
ALKIN CO., a Delaware corporation formerly known as Orscheln Co. ("Alkin");
- and -
Each of the persons listed on Schedule I to this Agreement (the "HCI
Stockholders");
- and -
Each of the persons listed on Schedule II to this Agreement (the
"Management Stockholders");
- and -
Such other stockholders of the Company as may, from time to time, become
parties to this Agreement in accordance with the provisions hereof.
WHEREAS:
A. The Company, Onex, J2R, Alkin, the HCI Stockholders and the
Management Stockholders are parties to that certain Stockholders Agreement dated
August 31, 1994, as amended on May 17, 1995 (as amended, the "Original
Stockholders Agreement") and wish to amend and restate, in its entirety, the
Original Stockholders Agreement.
<PAGE>
B. Certain capitalized terms used and not otherwise defined in this
Agreement are defined in Article I of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:
ARTICLE I
Certain Definitions
-------------------
1.1 Certain Definitions. When used in this Agreement the following
capitalized terms shall have the respective meanings shown:
"Affiliate" means, with respect to any Person, any of (a) a director or
executive officer of such Person, and (b) any other Person that, directly or
indirectly, controls or is controlled by or is under common control with such
Person.
"Alkin" includes any successor or successors to Alkin resulting from any
merger, consolidation or other reorganization of or including Alkin or any
liquidation, dissolution or winding-up of Alkin.
"Alkin Director" means a member of the Board of the Company designated
by the Alkin Stockholders pursuant to Section 2.1(b)(ii).
"Alkin Stockholders" means, collectively, Alkin and any Private
Transferee to which Alkin or any of its private transferees transfers Common
Stock.
"Ancillary Agreements" means the agreements described or included in
Schedule 5.5 to the Joint Venture Agreement.
"Board" means the board of directors or other governing body of a
Person.
"Class A Common" means the Company's Class A Common Stock, par value of
$.01.
"Class B Common" means the Company's Class B Common Stock, par value
$.01.
"Co-Investment Agreement" means the Co-Investment Agreement, dated as of
March 30, 1990, between Onex and J2R, as amended from time to time.
-2-
<PAGE>
"Common Stock" means (i) the Class A Common and the Class B Common, (ii)
any Class A Common or Class B Common issued or issuable by the Company upon
exercise of any options issued by the Company (including, without limitation,
the Alkin Option) and (iii) any equity securities issued or issuable by the
Company with respect to the securities referred to in clauses (i) and (ii)
hereof in connection with any stock split, stock dividend, combination of
shares, recapitalization, merger, consolidation or other reorganization.
"Company" includes any successor to the Company resulting from any
merger, consolidation or other reorganization of or including the Company.
"control" (including with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities
or by contract or agency or otherwise.
"executive officer," when used with respect to a Person, means the
Chairman of the Board, President, any officer in charge of a principal business
function or any manager reporting to the President of such Person if a
corporation, or an individual performing a similar function in the case of
Persons other than corporations.
"Five Percent Owner" means any Person owning of record or beneficially
more than five percent of the Common Stock of the Company of any class at the
time outstanding.
"Independent Director" means an independent director of the Company
within the meaning of the Nasdaq National Market rules.
"Independent Third Party" means any Person who, immediately prior to the
contemplated transaction, is neither an Affiliate of the Company nor a Five
Percent Owner, is not controlling, controlled by or under common control with
any Five Percent Owner and is not the spouse or descendent (by birth or
adoption) of any Five Percent Owner or a trust for the benefit of any Five
Percent Owner and/or such other Persons.
"Joint Venture Agreement" means that certain joint venture agreement
dated as of August 31, 1994 between Alkin, MC Holding Corp., Onex, J2R and the
Company.
-3-
<PAGE>
"Management Contribution Agreement" means that certain management
contribution agreement dated as of August 31, 1994, by and between the Company,
Kim B. Clark and the Management Stockholders (as defined therein).
"Managementholder" means each Management Stockholder.
"MC Director" means a member of the Board of the Company designated by
the MC Stockholders pursuant to Section 2.1(b)(i).
"MC Stockholders" means, collectively, Onex and J2R (and any successor
or successors to the foregoing resulting from any merger, consolidation,
liquidation, dissolution or other reorganization of the foregoing) and the HCI
Stockholders and the Management Stockholders (and any Private Transferee to
which any such Stockholder or any of its private transferees transfers Common
Stock).
"MC Stockholders Agreement" means the Stockholders Agreement dated as of
August 31, 1994 among Onex, J2R and the HCI Stockholders.
"Person" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization or a government or any department or agency thereof.
"Private Transferee" means any Person to which a Stockholder transfers
Shares other than in a Public Sale or a Sale of the Company.
"Public Offering" means an underwritten firm commitment public offering
and sale of shares of Common Stock pursuant to an effective registration
statement under the Securities Act.
"Public Sale" means any sale of Common Stock to the public pursuant to
an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 (or any
similar provision hereafter in force) adopted under the Securities Act.
"Sale of the Company" means the sale of the Company to an Independent
Third Party or a group of Independent Third Parties pursuant to which such
party or parties acquire (i) capital stock of the Company possessing the voting
power to elect a majority of the Company's Board (whether by merger,
consolidation, recapitalization, reor-
-4-
<PAGE>
ganization or sale of a majority of the Company's outstanding Common Stock and
Common Stock equivalents) or (ii) all or substantially all of the Company's
consolidated assets.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Shares" means any shares of Common Stock.
"Stockholders" means the holders of Common Stock of the Company who are
bound by and subject to this Agreement.
"Subsidiary" means any corporation or other Person of which the shares
of stock or other interests having a majority of the general voting power in
electing the Board are, at the time as of which any determination is being made,
owned or controlled by the Company either directly or indirectly.
"Supermajority Approval" of any matter, with respect to any Person,
means the approval of such matter (a) at a meeting of the Board of such Person
by at least two-thirds of the members of the Board of such Person then in office
or (b) without a meeting of such Board pursuant to written consent executed by
all of the members of the Board of such Person then in office.
ARTICLE II
Boards of Directors and Committees
----------------------------------
2.1 Board Composition. From and after the date hereof and for so long
as the provisions of this Article II remain in effect, each Stockholder will
vote all of the Common Stock owned by such Stockholder and will take, and will
cause any Persons controlled by it to take, all other necessary or desirable
actions within its control (whether in its capacity as a stockholder, director,
member of a committee or officer of the Company or otherwise), and the Company
will take all necessary or desirable action within its control, in order to
cause:
(a) (i) the authorized number of members of the Board of the Company to be
established at eleven and (ii) the authorized number of members of the Board of
each Subsidiary to be established at an odd number not less than five nor more
than nine;
-5-
<PAGE>
(b) the election to the applicable Board of
(i) five members designated by the holders of a majority of the
Shares held by the MC Stockholders in the case of the Company and the
minimum number of authorized members necessary to constitute a majority
of the entire Board in the case of Subsidiaries (by written notice to
the Company or the applicable Subsidiary, which shall furnish copies of
such notice to Alkin);
(ii) four members designated by the holders of a majority of the
Shares held by the Alkin Stockholders in the case of the Company and a
number equal to the total number of authorized members minus the number
of members that the holders of a majority of the Shares held by MC
Stockholders are entitled to designate under clause (i) above in the
case of Subsidiaries (by written notice to the Company or the
applicable Subsidiary, which shall furnish copies of such notice to
each of the MC Stockholders); and
(iii) two Independent Directors designated by Onex in the case of
the Company.
(c) at the written request of the holders of a majority of the Shares held
by the MC Stockholders, the removal from the applicable Board (with or without
cause) of any member designated by the holders of a majority of the Shares held
by MC Stockholders, but only upon such written request and under no other
circumstances;
(d) at the written request of the holders of a majority of the Shares held
by the Alkin Stockholders, the removal from the applicable Board (with or
without cause) of any member designated by the holders of a majority of the
Shares held by the Alkin Stockholders, but only upon such written request and
under no other circumstances;
(e) in the event that any member of a Board designated by the holders of a
majority of the Shares held by the MC Stockholders, by the holders of a majority
of the Shares held by the Alkin Stockholders or by Onex for any reason ceases to
serve as such
-6-
<PAGE>
member before the expiration of his or her term of office, the resulting vacancy
on the applicable Board to be filled by a member designated by the holders of a
majority of the Shares held by the MC Stockholders, by the holders of a majority
of the Shares held by the Alkin Stockholders or by Onex, as the case may be, as
provided herein.
2.2 Board Vacancies. If the holders of a majority of the Shares held by
the MC Stockholders, the holders of a majority of the Shares held by the Alkin
Stockholders or Onex, as the case may be, shall fail to designate a member to
fill a vacancy pursuant to the terms of this Article II within 30 days after
such vacancy occurs, or if the right of the holders of a majority of the Shares
held by the MC Stockholders, the holders of a majority of the Shares held by the
Alkin Stockholders or Onex, as the case may be, shall be terminated pursuant to
Section 2.6, the election of a person to such vacancy shall be accomplished in
accordance with the Company's or the applicable Subsidiary's By-laws or other
governing instruments and applicable law; provided that if, in the case of a
failure to designate a member, the holders of a majority of the Shares held by
the MC Stockholders; the holders of a majority of the Shares held by the Alkin
Stockholders or Onex, as the case may be, shall subsequently designate a member,
such designee will replace the person elected.
2.3 Board Member Expenses and Compensation. The Company shall pay the
reasonable out-of-pocket expenses incurred by each member of a Board in
connection with attending the meetings of such Board or any committee thereof.
In addition, the members of the Board of the Company who are not officers or
employees of the Company or its Subsidiaries shall receive such compensation
from the Company for such service as may be determined from time to time by the
applicable Board.
2.4 Audit Committees. The audit committee of the Company shall consist
of five members elected or appointed from time to time by the Board of the
Company, at least two of whom shall be Alkin Directors. If any Subsidiary
establishes an audit committee, such audit committee shall consist of five
members elected or appointed from time to time by the Board of such Subsidiary,
at least two of whom shall be Alkin Directors. The audit committee of the
Company shall, among other things, have the responsibility to review and approve
all federal, state and local income and franchise tax returns prior to the
filing thereof by the Company or any subsidiary.
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2.5 Independent Directors Election. Alkin shall, solely on matters
relating to the election of Independent Directors, at all times vote its Common
Stock (to the extent it is entitled to vote the same) in the same manner as the
Common Stock held by Onex is voted (except to the extent such vote or consent
would violate any applicable law) and, for this purpose, shall execute and
deliver to Onex (or its designee) a proxy to vote such Common Stock in the same
manner as the Common Stock held by Onex is voted. To the extent permitted by
law, Alkin by its execution of this Agreement, irrevocably constitutes and
appoints the Person who is at any time the president of Onex, its proxy to vote
all of its Common Stock at any meeting of stockholders of the Company, or to
give consent in lieu of voting, solely on any such matter relating to the
election of Independent Directors (except to the extent such vote or consent
would violate any applicable law), provided that such Common Stock is voted or
consent is given with respect to it in the same manner as the Common Stock held
by Onex.
2.6 Termination. The provisions of this Article II will terminate
automatically and be of no further force and effect, unless earlier terminated
by amendment of this Agreement, on the date on which the Alkin Stockholders
cease to own in the aggregate at least 10% of the outstanding shares of Common
Stock.
ARTICLE III
Covenants
---------
3.1 By-laws. The By-laws of the Company and each of its Subsidiaries
shall at all times provide, to the extent permitted by law, that:
(a) notice of every meeting of the Board of the Company or such Subsidiary
shall be given to each member of the Board not less than three days prior to the
meeting;
(b) a special meeting of the Board of the Company or such Subsidiary may
be called, to be held at the registered office of the Company, by holders of at
least 10% of the Company's outstanding Common Stock, upon at least 10 days'
notice, stating the purpose of the meeting and proposing an agenda therefor;
(c) any member of the Board of the Company or such Subsidiary may require
the Company or such Subsidiary, by notice given not less than 10 days in advance
of any regularly scheduled meeting of such
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Board, to include in the business to be discussed at the meeting any one or more
proposals submitted by such member;
(d) members of the Board or any committee thereof may participate in
meetings by telephone;
(e) members of the Board or any committee thereof may take action by
unanimous written consent;
(f) notice of any meeting may be waived by any member of the Board or any
committee thereof;
(g) at least one MC Director and one Alkin Director must be present at any
meeting of the Board for a quorum to exist; and
(h) the act of a majority of the members present at any meeting of the
Board at which a quorum is present shall be the act of the Board.
3.2 Maintenance of Books and Records. The Company shall, and shall
cause each Subsidiary to, maintain its accounting and financial records so as to
permit the preparation of the Company's consolidated financial statements in
accordance with generally accepted accounting principles consistently applied.
3.3 Financial Information. The Company shall furnish to each
Stockholder the following:
(a) as soon as available, and in any event within 120 days after the end
of each fiscal year of the Company, a copy of the audited consolidated financial
statements of the Company and its Subsidiaries reported on by Arthur Andersen
LLP or another firm of independent certified public accountants selected by the
Board of the Company, including a consolidated balance sheet of the Company and
its Subsidiaries as at the end of such fiscal year and consolidated statements
of income and cash flows of the Company and its Subsidiaries for such fiscal
year, and stating in comparative form the figures as of the end of and for the
previous fiscal year, accompanied by a report thereon containing an opinion by
such independent certified public accountants that such consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles consistently applied, except as may be otherwise noted;
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(b) as promptly as practicable, and in any event within 45 days after
the end of each fiscal quarter of the Company, a copy of its unaudited
consolidated financial statements prepared by the Company, including a
consolidated balance sheet of the Company and its Subsidiaries as at the end of
such fiscal quarter and consolidated statements of income and cash flows of the
Company and its Subsidiaries for such fiscal quarter, and stating in comparative
form the figures as of the end of and for the corresponding fiscal quarter in
the previous fiscal year, in all cases prepared in accordance with generally
accepted accounting principles consistently applied, except as may be otherwise
noted; and
(c) copies of all press releases issued by the Company.
Except as otherwise required by law or judicial order or decree or by any
governmental agency or authority, each Stockholder entitled to receive
information regarding the Company and its Subsidiaries pursuant to this Section
3.4 shall maintain the confidentiality of all nonpublic information obtained by
it hereunder which the Company has designated as proprietary or confidential in
nature; provided that any such Stockholder may disclose such information to the
extent required by law or court order; provided that if any Stockholder believes
it is required by law to disclose any such information such Stockholder shall
notify the Company and, if requested by the Company, such Stockholder shall use
reasonable efforts to obtain a protective order with respect to such information
and ensure that only the information required to be disclosed is actually
disclosed.
3.4 Inspection Rights. So long as any of Onex, J2R or Alkin shall be
and remain a Stockholder, the Company shall permit any representatives
designated by any of them, upon reasonable notice and during normal business
hours, to (i) visit and inspect any of the properties of the Company and its
Subsidiaries, (ii) examine the corporate, financial and other records of the
Company and its Subsidiaries and make copies thereof or extracts therefrom and
(iii) discuss the affairs, finances and accounts of any such entities with the
directors, executive officers, key employees and independent accountants of the
Company and its Subsidiaries.
3.5 Accountants. The Company shall retain the firm of Arthur Andersen
LLP as independent accountants for the Company and its Subsidiaries, unless and
until changed by the Board of the Company.
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3.6 Issuance of Preferred Stock. The Company shall not issue any of its
authorized but unissued preferred stock, par value $.01 per share, unless such
action is authorized by Supermajority Approval.
ARTICLE IV
Tag-Along Right
---------------
4.1 Tag-Along Right.
(a) Except as provided in Section 4.3, if at any time any Stockholder
proposes to Transfer any or all of its Shares to any Person other than Alkin in
any sale which is not a Public Sale or a transfer to an Affiliate of the
transferring holder (a "Disposition"), the transferring holder (the
"Transferring Stockholder") shall, at least 20 days prior to the consummation of
such sale, give notice (a "Disposition Notice") to the other Stockholders
describing the terms and conditions of the sale in reasonable detail, including
the proposed price per share, the method of payment, the anticipated closing
date and the identity of the proposed purchaser, and stating that each of such
other Stockholders may elect to participate in such Disposition on terms and
conditions no less favorable than those applicable to the Transferring
Stockholder.
(b) The election pursuant to Section 4.1(a) shall be exercised by notice to
the Transferring Stockholder given within the time period specified in the
Disposition Notice, which time period shall not be less than 10 days after such
Disposition Notice is given. If a Stockholder gives notice of its election to
sell, it shall be obligated to sell the Common Stock specified in its notice
upon the terms and subject to the conditions specified in Section 5.1(a) to the
proposed purchaser, conditional upon the closing of the Disposition.
(c) If the purchaser pursuant to the Disposition has specified a limited
number of shares of Common Stock which it is willing to purchase in the
aggregate, each of the Stockholders shall have the right to sell to the
purchaser up to that number of shares of Common Stock owned by such Stockholder
which is in the same proportion to its total ownership of Common Stock as the
number of shares of the Common Stock being sold by all Stockholders to such
purchaser is to the total ownership of Common Stock of all Stockholders electing
to participate in such sale.
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(d) If any Stockholder does not elect to sell the full number of shares of
Common Stock which it is entitled to sell pursuant to this Section 4.1, or if
the aggregate number of shares of Common Stock which the Stockholders are
entitled to sell is less than the number of shares of Common Stock which the
purchaser is willing to purchase, the remaining Stockholders shall be entitled
to sell additional shares of Common Stock pro rata (as described in Section
4.1(c) above) to the number of shares of Common Stock owned by each of them to
make up the aggregate number of shares of Common Stock the purchaser is willing
to purchase.
4.2 Representations and Warranties on a Disposition or Sale of the Company.
In connection with any Disposition or Approved Sale of the Company in which
Common Stock is to be sold by a Stockholder, if a designee of such Stockholder
is at the time of such a Disposition or Approved Sale of the Company an MC
Director, Onex may require such Stockholder to enter into agreements with the
purchaser representing and warranting that, except as specifically disclosed to
the purchaser in writing, such Stockholder, at the time of the closing of the
Disposition or Approved Sale of the Company, does not have actual knowledge
(which actual knowledge shall be limited solely to the actual knowledge of such
Stockholder's designee director(s)) that any representation or warranty made by
the Company or any other stockholder in connection with the Disposition or
Approved Sale of the Company was untrue in any material respect when made or is
untrue in any material respect as of the closing. The liability of the selling
Stockholder under such representation and warranty shall be several (and not
joint or joint and several with the Company and any other stockholder) and shall
be limited to the amount which it receives from the sale of its Common Stock in
connection with the Disposition or Approved Sale of the Company and shall be pro
rata in accordance with the number of shares of Common Stock sold by such
Stockholder in relation to the Common Stock being sold by all stockholders as
part of the Disposition or Approved Sale of the Company.
4.3 Exceptions to Tag-Along Right.
(a) Section 4.1 shall not apply to any Public Sale of Common Stock.
(b) Section 4.1 shall not apply to any transfer to an Affiliate of the
Transferring Stockholder.
(c) Section 4.1 shall not apply to any Transfer by a Stockholder of
Common Stock pursuant to exercise of a
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tag-along right with respect to a Transfer of Common Stock by any other
Stockholder.
(d) Notwithstanding anything herein to the contrary, as between Onex and
any Private Transferee and J2R and any Private Transferee, the provisions of
Article IV of this Agreement shall not apply to any Transfer and the provisions
of the Co-Investment Agreement shall govern any such Transfer.
ARTICLE V
Transfers by Management Stockholders
------------------------------------
5.1 Transfers in Accordance with this Agreement. Each Managementholder
agrees that the Shares held by such Managementholder will not be transferred in
violation of this Article V, the Securities Act, or any other applicable law.
5.2 Registration of Transfers. The Company may refuse to register any
transfer by the registered holder of Shares held by a Managementholder in its
transfer books if such transfer in not in accordance with this Article V, the
other provisions of this Agreement, the Securities Act, or any other applicable
law.
5.3 Restrictions on Transfer. Except as expressly provided in Articles
IV and V of this Agreement, Shares held by a Managementholder may not be
transferred without the consent of Onex. A Managementholder's Shares may be
transferred only in a sale for cash or cash plus assumption of indebtedness in
accordance with this Article V or in accordance with the provisions of Article
IV of this Agreement. Any purported transfer in any manner contrary to the
terms of this Agreement shall be void.
5.4 Pledge of Common Stock as Security. The Managementholder's Shares may
be pledged to the Company or to a bank or other bona fide financial institution
(a "secured party") acting at arm's length with any Managementholder and
approved by the Company, as security for indebtedness incurred solely to finance
up to one-half of the purchase price paid by such Managementholder for his
Shares (or any refinancing of indebtedness incurred to purchase the shares of
capital stock of MC Holding held by such Managementholder immediately prior to
the August 31, 1994), on condition that such secured party executes and delivers
to the Company a written agreement satisfactory to
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the Company that such pledge is subject to the terms of this Agreement if so
requested by the Company.
5.5 Sales to be Free of Encumbrances.
(a) In connection with any sale of Managementholder's Shares pursuant to
this Agreement, the Managementholder shall discharge any indebtedness referred
to in Section 5.4 and deliver the Managementholder's Shares being sold free and
clear of any claim, mortgage, charge, pledge, lien, security interest or other
encumbrance of any kind.
(b) If the Managementholder fails to comply with Section 5.5(a), the
purchaser may withhold from the purchase price for the Managementholder's Shares
an amount equal to the indebtedness secured by any such claim, mortgage, charge,
pledge, lien, security interest or other encumbrance or, if the amount of such
indebtedness is not known by the purchaser, an amount equal to the purchaser's
good faith estimate thereof, and shall pay such withheld amount to the person to
whom such indebtedness is owed. Any such payment of such withheld amount shall
discharge the purchaser's obligation to make payment for the purchased shares to
the extent of such withheld amount.
5.6 Closing of Sale of Managementholder's Stock.
(a) At the closing of any sale of Managementholder's Shares pursuant to
this Article V, the Managementholder selling Shares shall deliver to the
purchaser the share certificates and other instruments representing such
Managementholder's Shares, together with stock powers and other instruments
transferring such shares, duly endorsed for transfer and free and clear of any
claim, mortgage, charge, pledge, lien, security interest or encumbrance of any
kind, and the purchaser shall deliver to the Managementholder the consideration
payable upon closing. If Section 5.7(b) is applicable to the sale and the
purchaser is other than the Company or Onex, the purchaser shall also deliver to
the Managementholder an undertaking to pay the increased purchase price for the
Managementholder's Shares in accordance with Section 5.7(b) in the events
therein described, as if such purchaser were a party to this Agreement.
(b) Each Managementholder irrevocably constitutes and appoints the
Secretary from time to time of the Company (the "Secretary") as his attorney and
agent authorized, in his name and on his behalf, to execute and deliver (i) all
such assignments, transfers, deeds and instruments as may be necessary to
effectively transfer the Shares being trans-
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ferred to the purchaser on the books of the Company and (ii) any other document
required under Section 5.6(a) to be delivered by him at closing. Such
appointment and power of attorney, being coupled with an interest, shall not be
revoked by the insolvency, bankruptcy, death or incapacity of the
Managementholder and the Managementholder hereby agrees to ratify and confirm
any act taken by the Secretary on his behalf hereunder and agrees that the
receipt of the Secretary as attorney shall be a good discharge to the
Managementholder.
(c) The Secretary of the Company (or another officer designated by the
Company's Board to act in his stead) shall, at all times, hold the certificates
representing all Managementholder's Shares. The Secretary or such other
officer shall hold such certificates in safekeeping to the order of the
registered holder of the Shares represented by the certificates (but subject to
the terms of this Agreement); provided that, upon being satisfied that a lender
reasonably requires possession of any certificate for the purposes of an
arrangement permitted by Section 5.4, the Secretary may release the certificate
to the lender upon receipt of an irrevocable direction from the registered
holder to the lender to return the certificates to the Secretary if the
registered holder would otherwise be entitled to the return of the certificates.
(d) Nothing in this Section 5.6 is intended to limit any other remedy
available to a purchaser of a Managementholder's Shares.
5.7 Sale Upon Cessation of Employment When the Company Is Not a Public
Company.
(a) If a Managementholder ceases to be employed in a full-time capacity
by the Company or its Subsidiaries for any reason (including but not limited to
such Managementholder's death, Permanent Disability or Retirement) prior to the
time the Company (or, if Onex so elects, Onex or one of its Affiliates) shall
purchase, and the Managmentholders shall sell, all of the Shares owned by such
Managementholder. The purchase price payable per share in any sale of Shares
pursuant to this Section 5.7 shall be equal to Book Value Per Share.
(b) If the Company effects a Public Offering of securities of the same
class as the Managementholder's Shares purchased pursuant to this Section 5.7
within six months after the closing of such purchase, the purchase price per
share shall be increased by an amount equal to the excess, if any, of the public
offering price per share
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pursuant to such Public Offering (after deduction of any applicable
underwriters' commissions or discounts and expenses of such offering on a per
share basis) over the Book Value Per Share used in calculating the original
purchase price.
(c) The purchase price for Shares purchased pursuant to this Section 5.7
shall be paid 100% in cash at the closing of such purchase.
(d) If so required by a selling Managementholder, the Company shall
deliver a copy of the balance sheet on which the determination of Book Value Per
Share was based and, in reasonable detail, a calculation of the purchase price
payable to the selling Managementholder. The selling Managementholder, upon
request, shall also receive a copy of a letter from the auditors of the Company
to the effect that they have reviewed the calculation of the purchase price
payable, and that nothing has come to their attention that caused them to
believe that such calculation was not in accordance with this Article V. If the
Company delivers the balance sheet, calculation and letter, the determination of
the purchase price payable set forth therein shall be conclusive and binding on
all parties.
(e) If a Managementholder acquires any Common Stock following the
termination of his employment with the Company and its Subsidiaries through the
exercise of any option pursuant to the terms of a plan for the benefit of
management employees of the Company and its Subsidiaries, the Company (or, if
Onex so elects, Onex or one of its Affiliates) shall purchase, and the
Managementholder shall sell, all such Common Stock at a purchase price of 100%
of Book Value Per Share.
5.8 Sale Upon Cessation of Employment When the Company is a Public
Company.
Notwithstanding Section 5.7, if a Managementholder ceases to be employed
in a full-time capacity by the Company and its Subsidiaries for any reason
(including but not limited to the Managementholder's voluntary termination,
termination by the Company or one of its Subsidiaries, with or without cause, or
the Managementholder's death, Permanent Disability or Retirement) after the
Company has completed a Public Offering, the Managementholder shall be entitled
to sell his Shares through the Nasdaq National Market ("Nasdaq"); provided such
sales are made in the normal course and in a manner which complies with
applicable securities laws and regulations and Nasdaq rules; and provided
further that no more than one-half of his Shares
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may be sold prior to the first anniversary of such termination of employment.
Notwithstanding the previous sentence, (a) in the event of the death of the
Managementholder, his executors or administrators shall not be restricted as to
the proportion of his Shares that may be sold during the year following
termination of employment, (b) in the event of the termination of his employment
by reason of his Permanent Disability, the Managementholder shall not be
restricted as to the proportion of his Shares that may be sold during the year
following termination of employment, and (c) in the event of the Retirement of
the Managementholder, up to 75% of his Shares may be sold during the year
following termination of employment.
5.9 Defined Terms and Expressions. As used in this Article V:
(a) "Book Value Per Share" as of any date means the sum of (i) the
quotient obtained by dividing (A) the consolidated common stockholders' equity
of MC Holding and its subsidiaries as of August 31, 1994, immediately prior to
the closing of the transactions contemplated by the Joint Venture Agreement and
the Management Contribution Agreement, determined in accordance with generally
accepted accounting principles in effect in the United States on August 31,
1994, by (B) the number of shares of common stock of MC Holding outstanding on
August 31, 1994 and (ii) the quotient obtained by dividing (A) an amount (which
may be negative) equal to (1) the consolidated common stockholders' equity of
the Company and its Subsidiaries as of the later of August 31, 1994 and the end
of the fiscal quarter immediately preceding the date of the event that required
the purchase and sale pursuant to Article V, determined in accordance with
generally accepted accounting principles in effect in the United States on
August 31, 1994, minus (2) the consolidated common stockholders' equity of the
Company and its Subsidiaries as of August 31, 1994, immediately after giving
effect to the transactions contemplated by the Joint Venture Agreement and the
Management Contribution Agreement, determined in accordance with generally
accepted accounting principles in effect in the United States on August 31,
1994, by (B) the number of shares of Common Stock outstanding on such date. In
making calculations for purposes of clauses (i) and (ii) it shall be assumed
that all options and rights to purchase shares of common stock and securities
convertible or exchangeable into common stock outstanding on the date as of
which the calculation is being made had been exercised or converted to the
extent that the exercise price or conversion price (expressed in terms of
principal amount of debt or liquidation preference in the case of shares) does
not exceed Book Value Per Share
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(determined without regard to this sentence) and any purchase price for shares
of common stock payable upon such exercise had been paid. The determination of
Book Value Per Share shall be based upon the audited (in the case of the end of
a fiscal year or August 31, 1994) or unaudited (in the case of the end of any of
the first three quarters of a fiscal year) consolidated balance sheet of the
Company and its Subsidiaries or MC Holding and its subsidiaries, as the case may
be, as at the end of the fiscal quarter in question or August 31, 1994.
Notwithstanding the foregoing, Book Value Per Share shall be equitably adjusted
by the Company's Board if a stock dividend, recapitalization or other material
event occurs outside of the ordinary course of business after the end of such
fiscal quarter and before the closing of the sale in respect of which the
determination is being made.
(b) "Permanent Disability" means the inability of a Managementholder to
fulfill his duties as an employee of the Company and its Subsidiaries as a
result of illness, accident or physical or mental disability either for a period
of six consecutive months or for any 180 days in any 365-day period.
(c) "Retirement" means retirement of a Managementholder in accordance
with the retirement policy provided for in the Company's and its Subsidiaries'
employment policies in effect from time to time.
(d) "termination by the Company or one of its Subsidiaries without
cause" shall mean termination by the Company or one of its Subsidiaries on
grounds other than gross or continued neglect of duty, serious and wilful
misconduct, theft, embezzlement, fraud, breach of fiduciary duty or other like
cause.
(e) "termination by the Company or one of its Subsidiaries" shall
include a refusal by the Company or one of its Subsidiaries to renew an
employment contract at the end of its stated term.
5.10 Sale Upon Default of Indebtedness. If a Managementholder defaults
on any indebtedness referred to in Section 5.4, the Company (or, if Onex so
elects, Onex or one of its Affiliates) shall have the option to purchase the
Shares held by such Managementholder at a purchase price per share determined in
accordance with Section 5.7(a) exercisable by notice (for purposes of this
Section, a "Notice") to such Managementholder.
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5.11 Closing.
(a) The closing of any purchase and sale of Shares pursuant to exercise
by the Company, Onex or an Affiliate of Onex of a right, or fulfillment of an
obligation under this Article V shall be held at the registered office of the
Company at a date and time designated by the purchaser, but in any event not
later than 60 days (or, in the case of a purchase and sale pursuant to Section
5.7(e), 120 days) after the date of receipt of the Notice, cessation of
employment or date of acquisition of Common Stock following termination of
employment referred to in Section 5.7(e), as the case may be.
(b) Any Shares purchased by Onex, the Company or an Affiliate of Onex,
pursuant to the exercise of a right, or fulfillment of an obligation, under this
Article V shall be free and clear of all liens, charges, encumbrances or
restrictions, except for restrictions imposed by this Agreement (other than this
Article V) where such Shares are purchased by Onex or an Affiliate of Onex.
5.12 Existing Pledge Agreements. Certain of the Management
Stockholders are parties to separate Management Stock Pledge Agreements with MC
Holding pursuant to which such Management Stockholders pledged their MC Holding
common stock to MC Holding (collectively, the "Pledge Agreements"). Each
Management Stockholder who is a party to a Pledge Agreement hereby reaffirms his
or her obligations thereunder and agrees that (i) such Pledge Agreement shall
remain in full force and effect and (ii) all of such Management Stockholder's
Common Stock shall be subject to such Pledge Agreement as if it were common
stock of MC Holding.
5.13 Voting of Managementholders' Shares. Each Managementholder shall
at all times vote his Shares in the same manner as the Shares held by Onex are
voted, in the election of directors and on all other matters which are submitted
to a vote (or consent in lieu of voting) of the Company's stockholders, and for
this purpose shall execute and deliver to Onex (or its designees) proxies to
vote such Managementholder's Shares in the same manner as the Shares held by
Onex are voted. To the extent permitted by law, each Managementholder, by his
execution of this Agreement, irrevocably constitutes and appoints the person who
is at any time the president of Onex his proxy to vote all of his
Managementholder's Shares at any meeting of stockholders of the Company, or to
give consent in lieu of voting, on any matter which is submitted for a vote or
consent to the stockholders, provided that such Managementholder's Shares are
voted or consent is given with respect to them in the
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same manner as the Shares held by Onex. Notwithstanding anything contained in
this Section 5.13, no Management holder's Shares shall, except with the express
consent of such Managementholder, be voted in favor of any resolution the effect
of which will be to change such Management holder's Shares or Onex's Shares, or
convert or exchange such Managementholder's Shares or Onex Shares into or for
different securities, unless in every such case the Managementholder's Shares
and the Onex Shares are thereby changed identically or converted into or
exchanged for the same type of securities in proportion to their respective
holdings of Common Stock, in each case on terms consistent with the rights and
preferences set forth in the Company's Certificate of Incorporation as is
reasonably determined by Onex.
ARTICLE VI
Transfers of Common Stock and
Appointment of Proxy
-----------------------------
6.1 Transfers in Accordance with Agreement. The Company may refuse to
register any transfer of Common Stock on its transfer books if such transfer is
not in accordance with this Agreement and state and federal securities laws.
Notwithstanding anything herein to the contrary, if upon receipt of a Transfer
of Shares a Person becomes a Stockholder pursuant to the terms and provisions of
this Agreement, such Person shall have the same rights and shall be subject to
the same restrictions and obligations under this Agreement with respect to the
transferred Shares as if such Person were the transferring Stockholder, and all
references to Shares of the transferor shall be deemed to include the Shares of
the transferee; provided that any Shares transferred to the Company or an
existing Stockholder shall be treated as all other Shares held by the Company or
such existing Stockholder, respectively. Prior to the transfer of any Shares by
any Stockholder other than in a Public Sale or a Sale of the Company, the Person
to which such Shares are transferred shall agree in writing to be bound by all
of the provisions of this Agreement as a Stockholder hereunder. Notwithstanding
anything herein to the contrary, any transferee in a Public Sale or a Sale of
the Company need not be or become a party to this Agreement.
6.2 Legending of Share Certificates. All certificates representing
Common Stock held by a Stockholder (and by any permitted or required transferees
who are bound by or subject to this Agreement) shall bear the following legend:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED
UNLESS REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNLESS AN EXEMPTION
FROM SUCH REGISTRATION IS AVAILABLE AND ARE ALSO SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER CONTAINED IN THE AMENDED AND RESTATED STOCKHOLDERS
AGREEMENT, DATED AS OF JULY __, 1996, AMONG THE ISSUER OF SUCH SECURITIES
(THE "COMPANY") AND CERTAIN OF THE COMPANY'S STOCKHOLDERS. A COPY OF SUCH
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT WILL BE FURNISHED WITHOUT
CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.
6.3 Default of Delivery.
(a) In the event that any Stockholder or its assignees have the right to
acquire Common Stock from any other Stockholder or the right to require any such
other Stockholder to sell its Common Stock to any other Person, pursuant to the
terms of this Agreement (such selling Stockholder hereinafter referred to as the
"Transferor" and the Person to whom the Transferor is required to transfer
Common Stock, as applicable, hereinafter referred to as the "Transferee"), and
the Transferor is not present at the closing, or is present but for any reason
fails to produce and deliver to the Transferee the certificates or other
instruments representing any of the Common Stock being transferred, then the
cash purchase price, as and when payable, may be deposited into a special
account in the name of the Company at a branch of the Company's bankers and any
other consideration permitted or required to be delivered in satisfaction of the
purchase price shall be deposited with the Company. Such deposits shall
constitute valid and effective payment to the Transferor of the purchase price
for the Common Stock being transferred notwithstanding the fact that the
Transferor may have voluntarily attempted to encumber or dispose of any of the
Common Stock contrary to the terms hereof, or that one or more certificates or
other evidences of ownership of such Common Stock may have been delivered to any
other Person. From and after the date of such deposits (even though the share
certificates in the name of the Transferor have not been delivered to the
Transferee), the purchase and transfer of the Common Stock shall be deemed to
have been fully completed and all right, title, benefit and interest of the
Transferor in and to all such Common Stock, both at law and in equity, shall be
conclusively deemed to have been transferred and assigned to and become vested
in the Transferee and the Transferee will have the right to request that the
Company enter the
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transfer into the stock register and the Company shall be entitled to so enter
the transfer.
(b) Where the Transferee has made a deposit in accordance with Section
6.3(a), the Transferor shall be entitled to receive the cash purchase price of
the Common Stock deposited with the Company's bankers, and to receive any other
consideration deposited with the Company, upon delivery to the Company of (i)
the certificates or other instruments representing the Common Stock duly
endorsed for transfer and (ii) any other document required to be delivered by
the Transferor at closing, including, without limitation, the release or
discharge of any encumbrance relating to the Common Stock and stock transfer
stamps, if necessary.
6.4 Distributions upon Sale of the Company. In the event of a sale or
exchange by the Stockholders of all or substantially all of the Common Stock
held by the Stockholders, each Stockholder shall receive the same portion of
the aggregate consideration from such sale or exchange that such Stockholder
would have received if such aggregate consideration had been distributed by the
Company in complete liquidation.
ARTICLE VII
Noncompete Agreement
--------------------
7.1 Noncompete with Business of Company. Each of Alkin, Onex, J2R and
each HCI Stockholder (each a "Restricted Person") agrees that until August 31,
1999, such Restricted Person will not, nor will it permit any of its Affiliates
to, engage, directly or indirectly, alone or in association with any other
Person, in the design, development, manufacture, marketing, sale or distribution
of parking brake cables, parking brake systems, light duty cables, window
regulators, shifters and latches for use in automobiles and light trucks (the
"Business"), or hold the capital stock (or other equity interest) of any person
or entity engaged in any aspect of the Business (a "Competing Person"); provided
that nothing contained in this Section 7.1 shall in any way:
(a) prohibit any Restricted Person or any of their Affiliates from
owning up to 5% of the outstanding securities of any class of a corporation
which is publicly traded;
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<PAGE>
(b) apply to actions taken pursuant to the terms of the Joint Venture
Agreement or any of the Ancillary Agreements;
(c) restrict or preclude Alkin from operating the businesses relating
to the Alkin Excluded Assets (as defined in the Joint Venture Agreement),
as conducted as of August 31, 1994;
(d) restrict or preclude Otscon Co. from engaging in the business in
which it was engaged on August 31, 1994 or restrict or preclude Alkin or
any Affiliate of Alkin from owning a partnership, equity or similar
interest in Otscon Co.;
(e) restrict or preclude Onex, J2R, the HCI Stockholders or their
Affiliates from acquiring and operating any business not more than the
lesser of (A) 10% or (B) $10 million of the total revenue of which is
derived from businesses which compete with the Business;
(f) restrict or preclude Alkin or its Affiliates from acquiring and
operating any business not more than the lesser of (A) 10% or (B) $10
million of the total revenue of which is derived from businesses which
compete with the Business;
(g) restrict or preclude Onex, J2R, the HCI Stockholders, Alkin or
their Affiliates from acquiring and operating any business a substantial
portion of the total revenue of which is derived from businesses which
compete with the Business, provided that prior to any such acquisition the
Person who wishes to acquire such business shall discuss with the Company
the terms of such proposed acquisition and such proposed acquisition shall
be approved by Supermajority Approval; or
(h) restrict Automotive Industries Holding, Inc. and its subsidiaries
or R J Tower Holding Corp. and its subsidiaries (in each case whether or
not existing as of August 31, 1994) or any other company in which J2R, any
HCI Stockholder, or Onex or their Affiliates own a direct or indirect
interest from engaging in the businesses in which they are engaged as of
the August 31, 1994.
7.2 Noncompete with Business of GPD. Each of the Company, Onex, J2R and
each HCI Stockholder (each a "GPD Restricted Person") agrees that until August
31, 1999, such GPD Restricted Person will not (and the Company will not
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<PAGE>
permit any Subsidiary to, and Onex, J2R and the HCI Stockholders will not permit
any of their respective Affiliates to), directly or indirectly, alone or in
association with any other Person, utilize any proprietary technology,
intellectual property or know-how acquired by the Company or any of its
Subsidiaries from Alkin to engage in or carry on any business in direct
competition with the business operated by Alkin from and after August 31, 1994
(the "GPD Business"); provided that nothing contained in this Section 7.2 shall
in any way:
(a) prohibit any GPD Restricted Person or any of its Affiliates from
owning up to 5% of the outstanding securities of any class of a corporation
which is publicly traded;
(b) apply to actions taken pursuant to the terms of the Joint Venture
Agreement or any of the Ancillary Agreements; or
(c) restrict Automotive Industries Holding, Inc. and its subsidiaries
or R J Tower Holding Corp. and its subsidiaries (in each case whether or
not existing as of August 31, 1994) or any other company in which J2R, any
HCI Stockholder, Onex or their Affiliates own a direct or indirect interest
from engaging in the businesses in which they are engaged as of the date of
this Agreement.
ARTICLE VIII
Miscellaneous
-------------
8.1 Management Representatives. Each Management Stockholder and each
Private Transferee of such Management Stockholder hereby irrevocably constitutes
and appoints the Management Representatives (as defined below in this Section
8.1) as his representatives to take all actions on his behalf in connection with
this Agreement, in their sole and absolute discretion, including but not limited
to executing any consents or waivers in connection with, or any amendments to,
this Agreement (with the exception of any decision to sell his Shares pursuant
to Article V). In the event of a disagreement among the Management
Representatives, a majority of them shall have all authority granted to the
Management Representatives by the Management Stockholders under this Agreement.
The term "Management Representatives" shall mean the President of Dura Operating
Corp. and any two Vice-Presidents of Dura Operating Corp.
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<PAGE>
designated from time to time by the President of Dura Operating Corp.
8.2 Acknowledgement. The parties hereto acknowledge that they have
read and understood the Company's Certificate of Incorporation and By-Laws.
8.3 Notices. All notices, consents and other communications required or
permitted to be given under or by reason of this Agreement shall be in writing,
shall be delivered personally or by telex or telecopy as described below or by
reputable overnight courier, and shall be deemed given on the date on which such
delivery is made. If delivered by telex or telecopy, such notices or
communications shall be confirmed by a registered or certified letter (return
receipt requested), postage prepaid. Any such delivery shall be addressed to (i)
the HCI Stockholders at the addresses set forth on Schedule I hereto, (ii) the
Management Stockholders at the addresses set forth on Schedule II hereto, and
(iii) to the other parties at the following addresses (or at such other address
for a party as shall be specified by such party by like notice to the other
parties):
(a) if to J2R or the Company:
c/o Hidden Creek Industries
4806 IDS Center
Minneapolis, Minnesota 55402
Attention: Scott D. Rued
Telecopy: (612) 332-2012
with a copy to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, Illinois 60601
Attention: Jeffrey C. Hammes, Esq.
Telecopy: (312) 861-2200
(b) if to Onex:
169 Bay Street, 29th Floor (P.O. Box 700)
Toronto, Ontario M5J 2S1
Attention: President
Telecopy: (416) 362-5765
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<PAGE>
with a copy to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, Illinois 60601
Attention: Jeffrey C. Hammes, Esq.
Telecopy: (312) 861-2200
(c) if to Alkin:
Alkin Co.
2000 U.S. Highway 63 South, P.O. Box 280
Moberly, Missouri 65270
Attn: James L. O'Loughlin, General Counsel
Telecopy: (816) 269-4530
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attention: Richard R. Howe, Esq.
Telecopy: (212) 558-3111
(d) if to any other person which becomes a party to this Agreement in
accordance with the terms hereof, at the address for delivery of notices or
communications given to all other parties by such party at such time.
Notices to any director of the Company or any Subsidiary shall be given:
(a) by telephone or delivery in person to such director at the address
(or telephone number) desig nated by him from time to time by notice to
Onex and the Company (in the case of Alkin Directors) or to Alkin and the
Company (in the case of MC Directors), confirmed by letter to such address;
or
(b) by registered mail with postage prepaid. If a director has not
designated an address, notice to such director may be given to his address
last known to the Company.
8.4 Extended Meanings. In this Agreement, words importing the singular
number include the plural and vice versa and words importing gender include all
genders.
8.5 Captions. The captions in this Agreement are for convenience of
reference only and shall not be given any effect in the interpretation of this
Agreement.
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<PAGE>
8.6 Applicable Law. The corporate law of Delaware will govern all
issues concerning the Company's Certificate of Incorporation and By-Laws and the
relative rights of the Company and its stockholders. All other questions
concerning the construction, validity and interpretation of this Agreement will
be governed by the internal law, and not the law of conflicts, of the State of
New York.
8.7 Severability. The provisions of this Agreement are intended to be
and shall be deemed severable. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
8.8 Currency. References in this Agreement to monetary amounts shall
be in United States currency unless otherwise expressly stated.
8.9 Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Shares and the respective successors and assigns of each of them, so
long as they hold Shares.
8.10 Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement will be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company, Alkin, J2R and Onex;
provided that any modification, amendment or waiver of Article V hereof shall
also require the approval in writing of the Management Representatives in
accordance with Section 8.1. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. No purported waiver
shall be effective unless in writing. The waiver by any party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent or other breach.
8.11 Remedies. The Stockholders shall be entitled to enforce their
rights under this Agreement specifically to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights
existing in their favor. The parties hereto agree and acknowledge that money
damages may not be an adequate
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<PAGE>
remedy for any breach of the provisions of this Agreement and that any
Stockholder may in its sole discretion, subject to Section 8.14, apply to any
court of law or equity of competent jurisdiction for temporary preliminary
relief (specific performance and/or injunctive relief), without posting a bond
or other security) in order to enforce or prevent any violation of the
provisions of this Agreement.
8.12 Counterparts. This Agreement may be executed in counterparts,
each of which shall be considered an original, but all of which together shall
constitute one and the same instrument.
8.13 Complete Agreement. This Agreement and the documents expressly
referred to herein (including the MC Stockholders Agreement and the Registration
Agreement) embody the complete agreement and understanding among the parties and
supersede and preempt any prior understanding, agreements or representations by
or among the parties, written or oral, that may be related to the subject matter
hereof in any way, except for the Co-Investment Agreement which will not be
superseded or preempted as between Onex and J2R and the MC Stockholders
Agreement which will not be superseded or preempted as between the MC
Stockholders.
8.14 Arbitration. Any and all differences and disputes which may arise
between the parties to this Agreement, their heirs, successors, assigns,
employees, officers, directors, Affiliates, Subsidiaries or Stock holders which
are related to this Agreement shall be submitted for resolution to binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. Prior to initiating arbitration, the parties shall
first meet face-to-face to attempt to resolve the differences. Any differences
which the parties are unable to resolve in said face-to-face meeting shall be
heard and finally settled in New York, New York, or in any other location
mutually agreed upon by the parties. Such arbitration shall be initiated in the
New York City office of the American Arbitration Association. Any award entered
in any such arbitration shall be final and binding and may be entered and
enforced in any court of competent jurisdiction. The arbitrator shall make such
orders, conduct and schedule all proceedings in connection with the arbitration
so that final arbitration commences no less than thirty (30) days and concludes
no later than seventy-five (75) days after a party files the initial notice of
arbitration, and so that the final arbitration award is made and delivered to
the parties within ninety (90) days after the filing of the initial notice of
arbitration. Nothing herein contained shall be construed as
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<PAGE>
preventing any party from instituting legal or equitable action in any
jurisdiction against any of the other parties for temporary or similar
provisional relief to the full extent permitted under the laws applicable to
this Agreement, or any such other written agreement between the parties or the
performance hereof or thereof or otherwise pending final settlement of any
dispute, difference or question by arbitration. Any such provisional relief may
be modified or amended in any way by the arbitrator at any time after his
appointment.
8.15 Effectiveness. The Company anticipates the sale of 2,700,000
shares of the Company's Class A Common Stock, par value $.01 per share, to the
public in an Initial Public Stock Offering (the "Initial Public Stock
Offering"). This Amended and Restated Stockholders Agreement shall become
effective only upon the consummation of the Initial Public Stock Offering.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Stockholders Agreement as of the date first above written.
THIS AGREEMENT IS SUBJECT TO A BINDING ARBITRATION AGREEMENT.
DURA AUTOMOTIVE SYSTEMS, INC.
By
---------------------------
Its
--------------------------
ONEX DHC LLC
By
---------------------------
Its
--------------------------
J2R CORPORATION
By
---------------------------
Its
---------------------------
ALKIN CO.
By
---------------------------
Its
--------------------------
------------------------------
S.A. Johnson
------------------------------
Scott D. Rued
------------------------------
Robert R. Hibbs
------------------------------
Mary L. Johnson
<PAGE>
- ------------------------------- ----------------------------
David R. Bovee Carl W. Kucsera
- ------------------------------- ----------------------------
Joe A. Bubenzer Michael J. Kukla
- ------------------------------- ----------------------------
Miles G. Doolittle J. Frank Mack
- ------------------------------- ----------------------------
Douglas Elliott David A. Skrzyniarz
- ------------------------------- ----------------------------
John A. Fritz Karl F. Storrie
- ------------------------------- ----------------------------
Henry L. Huber John B. Truckey
- -------------------------------
Milton D. Kniss
<PAGE>
SCHEDULE I - HCI STOCKHOLDERS
-----------------------------
S.A. Johnson
Scott D. Rued
Robert R. Hibbs
Mary L. Johnson
<PAGE>
SCHEDULE II - MANAGEMENT STOCKHOLDERS
-------------------------------------
David R. Bovee
Joe A. Bubenzer
Miles G. Doolittle
Douglas Elliott
John A. Fritz
Henry L. Huber
Milton D. Kniss
Carl W. Kucsera
Michael J. Kukla
J. Frank Mack
David A. Skrzyniarz
Karl F. Storrie
John B. Truckey
<PAGE>
AMENDED AND RESTATED
--------------------
INVESTOR STOCKHOLDERS AGREEMENT
-------------------------------
DATED as of the _____ day of August, 1996,
BY AND AMONG:
DURA AUTOMOTIVE SYSTEMS, INC., a Delaware corporation formerly known as
Dura Automotive Holding, Inc. (the "Company");
- and -
Onex DHC LLC, a Wyoming limited liability company ("Onex");
- and -
J2R CORPORATION, a Delaware corporation ("J2R");
- and -
The other stockholders listed on the signature pages hereto;
- and -
Such other stockholders of the Company as may, from time to time, become
parties to this Agreement in accordance with the provisions hereof.
WHEREAS:
A. The Company, Onex, J2R and the other stockholders are parties to an
Investor Stockholders Agreement dated as of August 31, 1994 (the "Original
Stockholders Agreement") and wish to amend and restate, in its entirety, the
Original Stockholders Agreement.
B. Certain terms used in this Agreement are defined in Article 1 of this
Agreement.
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are acknowledged, the parties agree as follows:
ARTICLE I
Certain Definitions
-------------------
1.1 Certain Definitions. When used in this Agreement the following terms
shall have the respective meanings shown:
<PAGE>
"Affiliate" shall mean, with respect to any Person, any of (a) a director
or executive officer of such Person, (b) a spouse, parent, sibling or descendant
of such Person (or spouse, parent, sibling or descendant of any director or
executive officer of such Person), and (c) any other Person that, directly or
indirectly, controls or is controlled by or is under common control with such
Person. For the purpose of this definition and the definition of Independent
Third Party, "control" (including with correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
agency or otherwise.
"Business day" means any day which is neither a Saturday or Sunday nor a
legal holiday on which banks are authorized or required to be closed in New York
City.
"Class A Common" means the Company's Class A Common Stock, par value $.01
per share.
"Class B Common" means the Company's Class B Common Stock, par value $.01
per share.
"Co-Investment Agreement" means that certain Co-Investment Agreement, dated
as of March 30, 1990, between Onex and J2R, as amended from time to time.
"Common Stock" means (i) any Class A Common or Class B Common purchased,
issued to or otherwise acquired by any Stockholder and (ii) any equity
securities issued or issuable, directly or indirectly, with respect to the
securities referred to in clause (i) above by way of stock dividend or stock
split or conversion or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular shares constituting Common Stock, such shares will continue to be
Common Stock in the hands of any holder of such Common Stock (other than
purchasers pursuant to a Public Sale).
"Company" includes any successor to the Company resulting from any merger,
consolidation or other reorganization of or including the Company.
"Institutional Investor" means a "qualified institutional buyer" as defined
in Rule 144A promulgated under the Securities Act (codified at 17 C.F.R.
(S)230.144A (1990)).
"Other Stockholder" means any holder of Common Stock which is bound by and
subject to this Agreement other than (i) Onex and its Affiliates and (ii) the
transferees of Onex or its Affiliates.
"Person" means an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization or a government or any
department or agency thereof.
"Public Sale" means any sale of Common Stock to the public pursuant to an
offering registered under the Securities Act or to the public through a broker,
dealer or market maker
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<PAGE>
pursuant to the provisions of Rule 144 (or any similar provision then in force)
adopted under the Securities Act.
"Registration Agreement" means the Registration Agreement, dated as of
August 31, 1994, among the Company, Alkin Co. and the MC Stockholders (as
defined therein), as such agreement may be amended, supplemented or modified
from time to time.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Stockholder Shares" means any Common Stock, except that such Common
Stock shall cease to constitute Stockholder Shares when it has been (i)
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering it or (ii) sold to the public through a
broker, dealer or market maker pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act.
"Stockholders" means Other Stockholders, Onex and its Affiliates and
any of the transferees of Onex or its Affiliates which are bound by and subject
to this Agreement.
"Stockholders Agreement" means the Amended and Restated Stockholders
Agreement, dated as of the date hereof, among the Company, Onex, J2R, Alkin Co.,
the HCI Stockholders (as defined therein) and the Management Stockholders (as
defined therein), as such agreement may be amended, supplemented or modified
from time to time.
ARTICLE II
Board of Directors of the Company
2.1 Board of Directors. From and after the date hereof and until the
provisions of this Article 2 cease to be effective, each of the Stockholders
will vote all of its voting stock of the Company, and will take, and will cause
any Persons controlled by it to take, all other necessary or desirable actions
within its control (whether in its capacity as a stockholder, director, member
of the executive committee or an officer of the Company or otherwise), and the
Company will take all necessary or desirable action within its control, in order
to cause:
(a) Subject to the Stockholders Agreement, the authorized number of
directors on the Company's board of directors (the "Board") to be established at
the number determined by Onex;
(b) the election to the Board of:
(i) two representatives designated by J2R (by written notice to
the Company, which shall furnish copies of such notice to each other
party hereto) as MC Directors (as defined in the Stockholders
Agreement);
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<PAGE>
(ii) individuals designated by Onex (the "Onex Directors") as the
remaining MC Directors;
(c) at Onex's written request, the removal from the Board (with or
without cause) of any representative designated hereunder by Onex, but only upon
such written request and under no other circumstances;
(d) at J2R's written request, the removal from the Board (with or
without cause) of any representative designated by J2R, but only upon such
written request and under no other circumstances; and
(e) in the event that any representative designated hereunder by Onex
or J2R for any reason ceases to serve as a member of the Board during his term
of office, the resulting vacancy on the Board to be filled by a representative
designated by Onex or J2R as provided hereunder.
ARTICLE III
Restrictions on Transfer of Common Stock
3.1 Transfer of Stockholder Stock. No Other Stockholder shall sell,
transfer, assign, pledge, exchange or otherwise dispose of (a "Transfer") any
interest in Common Stock except pursuant to the provisions of this Article III,
the provisions of the Stockholders Agreement or pursuant to a Public Sale;
provided that as between Onex and J2R, the provisions of the Co-Investment
Agreement will govern any "transfer" (as defined for this purpose in the Co-
Investment Agreement) and the provisions of Article III of this Agreement and
the provisions of the Stockholders Agreement will not apply. Each Other
Stockholder agrees not to consummate any Transfer pursuant to the provisions of
Section 3.2 until at least the minimum number of days required by Section 3.2
after the delivery of such other Stockholder's Offer Notice (as hereinafter
defined), unless the parties to the Transfer have been finally determined
pursuant to this Article III prior to the expiration of such period.
3.2 First Offer Right.
(a) In addition to Transfers pursuant to the Stockholders Agreement or
a Public Sale, an Other Stockholder may Transfer an interest in Common Stock by
complying with this Section 3.2. At least 60 days prior to making any Transfer
by any Other Stockholder of any Common Stock (other than pursuant to the
Stockholders Agreement or a Public Sale), the transferring Other Stockholder
(the "Transferring Stockholder") will deliver a written notice (the "Offer
Notice") to Onex. The Offer Notice will disclose the proposed number of shares
of Common Stock (the "Subject Shares") to be transferred and, in reasonable
detail, the proposed terms and conditions of the Transfer. First, Onex may elect
to purchase all (but not less than all) of the Common Stock specified in the
Offer Notice at the price in cash and on the terms specified therein by
delivering written notice of such election to the Transferring Stockholder as
soon as practical but in any event within 45 days after the delivery of the
Offer Notice. If Onex has elected to purchase the Subject Shares from the
Transferring Stockholder, the transfer of such shares will be
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<PAGE>
consummated as soon as practical after the delivery of the election notice, but
in any event within 60 days after delivery of the Offer Notice (the
"Consummation Period"). If Onex has not elected to purchase all of the Subject
Shares being offered or if Onex elects to purchase the Subject Shares but does
not consummate the purchase within the 60-day Consummation Period, the
Transferring Stockholder may, within 60 days after the later of 45 days after
delivery of the Offer Notice or if Onex does not consummate a purchase it
elected to make, the expiration of the 60-day Consummation Period, Transfer such
Subject Shares to one or more third parties at a price in cash and on other
terms no more favorable to the transferees than offered to Onex in the offer
Notice; provided that prior to such Transfer, such transferees shall have agreed
in writing to be bound by the provisions of this Agreement. Any Subject Shares
not transferred within such 60-day period will be subject to the provisions of
this Section 3.2(a) upon subsequent Transfer and the Transferring Stockholder
will not be entitled to deliver another Offer Notice for 90 days after the
Transferring Stockholder has again become subject to this Section 3.2(a).
(b) Onex may Transfer any of its rights under Section 3.2(a) to any
of its Affiliates.
(c) At least 15 days prior to the consummation of a Transfer pursuant
to Section 3.2(a) where neither Onex nor J2R is a transferee (such 15-day period
referred to herein as the "Exercise Period"), the Transferring Stockholder will
deliver a notice to Onex and J2R stating the identity of the proposed
transferee. In the event that Onex and J2R have a reasonable basis for
objecting to such proposed transferee (such reasonable basis including, but not
limited to, the status of such transferee as a competitor (or an Affiliate of a
competitor) of Onex, an Affiliate of Onex, J2R, an Affiliate of J2R or the
Company or a transferee being, in the good faith opinion of Onex and J2R, a
Person which is incompatible with the business philosophy or integrity of Onex
or J2R), Onex and J2R shall deliver to the Transferring Stockholder, during the
Exercise Period, a notice of such objection setting forth the basis for the
objection and the Transferring Stockholder shall not proceed with any further
steps relating to the offer made by such transferee, shall not complete the
transfer of the Subject Shares to such transferee and the offer so made shall no
longer be considered an offer for the purposes of this Section 3.2; provided
that this Section 3.2(c) will not apply to any Transfer made to an Institutional
Investor that is not reasonably determined to be a competitor (or an Affiliate
of a competitor) of Onex, J2R, an Affiliate of Onex, an Affiliate of J2R or the
Company. No person will be deemed to be a competitor of Onex, J2R, an Affiliate
of Onex, an Affiliate of J2R or the Company solely by reason of the engagement
by such Person in financing or investment activities.
3.3 Permitted Transfers.
(a) The restrictions contained in this Article III shall not apply
with respect to (i) any Transfer of Common Stock by any Stockholder to or among
its Affiliates or (ii) any Transfer of Common Stock by any Other Stockholder to
any other Other Stockholder; provided that the restrictions contained in this
Article III shall continue to be applicable to the Common Stock after any
such Transfer and provided further that the transferees of such Common Stock
shall have agreed in writing to be bound by the provisions of this Agreement
affecting the Common Stock so transferred.
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<PAGE>
(b) In the case of any Transfer pursuant to Section 3.3(a)(i) above to
an Affiliate other than a Person described in clause (b) of the definition of
"Affiliate", a transferee may at any time, and shall forthwith in the event that
such transferee ceases to be an Affiliate of the transferor (other than a
transferee pursuant to Section 3.3(a)(ii) above), Transfer back to such
transferee all of the Common Stock held by it.
3.4 Consents to Stock Transfers Pursuant to this Agreement. The
Stockholders hereby consent, to the extent required by the Company's Amended and
Restated Certificate of Incorporation, to any Transfer of Common Stock made as
permitted by this Agreement and shall execute any more formal consents which
counsel for the Company may determine to be reasonably necessary for that
purpose.
ARTICLE IV
Miscellaneous
4.1 Voting Agreement. The Other Stockholders shall at all times vote
their Common Stock (to the extent they are entitled to vote the same) in the
same manner as the Common Stock held by Onex is voted, on the election of
directors and on all other matters which are submitted to a vote (or consent in
lieu of voting) of the Company's stockholders and on which such Common Stock is
entitled to vote (except to the extent such vote or consent would violate any
applicable law and except with respect to stockholder voting on the merger or
consolidation of the Company with another corporation or the sale of all or
substantially all of the Company's assets), and for this purpose, shall execute
and deliver to Onex (or its designees) proxies to vote such Common Stock in the
same manner as the Common Stock held by Onex is voted. To the extent permitted
by law, each Other Stockholder by its execution of this Agreement, irrevocably
constitutes and appoints the Person who is at any time the president of Onex,
its proxy to vote all of its Common Stock at any meeting of stockholders of the
Company, or to give consent in lieu of voting, on any matter which is submitted
for a vote or consent to the stockholders and on which such Common Stock is
entitled to vote (except to the extent such vote or consent would violate any
applicable law and except with respect to stockholder voting on the merger or
consolidation of the Company with another corporation or the sale of all or
substantially all of the Company's assets), provided that such Common Stock is
voted or consent is given with respect to it in the same manner as the Common
Stock held by Onex. Notwithstanding anything contained in this paragraph, such
Stockholder's Common Stock shall not, except with the express consent of such
Stockholder, be voted in favor of any resolution the effect of which will be to
change such Stockholder's Common Stock or Onex's Common Stock, or convert or
exchange such Stockholder's Common Stock or Onex's Common Stock into or for
different securities, unless in every such case such Stockholder's Common Stock
and Onex's Common Stock are thereby changed identically or converted into or
exchanged for the same type of securities pro rata.
4.2 Acknowledgement. The parties hereto acknowledge that, except as
provided in the Company's Amended and Restated Certificate of Incorporation, the
Class A Common and Class B Common will vote together as a single class and none
of the classes of Common Stock will be entitled to a separate class vote, except
as required by law.
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<PAGE>
4.3 Legend. Each certificate evidencing Stockholder Shares and each
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares as defined herein after
such transfer) shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The securities represented by this certificate are subject to an
Amended and Restated Investor Stockholders Agreement, dated as of
August __, 1996, among the issuer of such securities (the
"Company") and certain of the Company's stockholders. A copy of
such Amended and Restated Investors Stockholders Agreement will
be furnished without charge by the Company to the holder hereof
upon written request."
The Company shall imprint such legend on certificates evidencing Stockholder
Shares outstanding prior to the date hereof. The legend set forth above shall
be removed from the certificates evidencing any shares which cease to be
Stockholder Shares in accordance with Section 1.1 hereof.
4.4 Notices. All notices, consents and other communications
required or permitted to be given under or by reason of this Agreement shall be
in writing, shall be delivered personally or by telex or telecopy as described
below or by reputable overnight courier, and shall be deemed given on the date
on which such delivery is made. If delivered by telex or telecopy, such notices
or communications shall be confirmed by a registered or certified letter (return
receipt requested), postage prepaid. Any such delivery shall be addressed to
the intended recipient at the following addresses and telecopy numbers (or at
such other address or telecopy number for a party as shall be specified by such
party by like notice to the other parties):
(a) if to J2R or the Company:
c/o Hidden Creek Industries
4806 IDS Center
Minneapolis, Minnesota 55402
Attention: Scott D. Rued
Telecopy: (612) 332-2012
with a copy to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, Illinois 60601
Attention: Jeffrey C. Hammes, Esq.
Telecopy: (312) 861-2200
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<PAGE>
(b) if to Onex:
29th Floor (P.O. Box 153)
Commerce Court West
Toronto, Ontario
M5L 1E7
Attention: President
Telecopy: (416) 362-5765
with a copy to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, Illinois 60601
Attention: Jeffrey C. Hammes, Esq.
Telecopy: (312) 861-2200
(c) if to any other person which becomes a party to this
Agreement in accordance with the terms hereof, at the address or telecopy number
for delivery of notices or communications given to all other parties by such
party at such time.
Notices to any director of the Company shall be given:
(a) by telephone or delivery in person to such director at the
address (or telephone number) designated by him from time to time by notice to
Onex and the Company (in the case of directors designated by an Other
Stockholder) or to the Other Stockholders and the Company (in the case of
directors designated by Onex), confirmed by letter to such address; or
(b) by registered mail with postage prepaid. If a director has
not designated an address, notice to such director may be given to his address
last known to the Company.
4.5 Extended Meanings. In this Agreement, words importing the
singular number include the plural and vice versa and words importing gender
include all genders.
4.6 Captions. The captions in this Agreement are for convenience
of reference only and shall not be given any effect in the interpretation of
this Agreement.
4.7 Applicable Law. The corporate law of Delaware will govern
all issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity and interpretation of
this Agreement will be governed by the internal law, and not the law of
conflicts, of the State of New York.
4.8 Time. Time shall be of the essence of this Agreement.
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<PAGE>
4.9 Severability. The provisions of this Agreement are intended
to be and shall be deemed severable. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
4.10 Currency. References in this Agreement to monetary amounts
shall be in United States currency unless otherwise expressly stated.
4.11 Assignment. This Agreement shall be binding upon the parties
hereto, all Other Stockholders and, to the extent expressly provided elsewhere
in this Agreement, their respective permitted transferees and assigns (other
than purchasers of Common Stock pursuant to a Public Sale), together with in
each case all successors, heirs, executors and administrators thereof, and shall
inure to the benefit of the parties hereto, all Other Stockholders and, to the
extent expressly provided elsewhere in this Agreement, assigns of Onex,
together, in each case, with all successors, heirs, executors and administrators
thereof. The parties hereto agree that the rights of Onex contained in this
Agreement are personal to Onex and may not be assigned to, and will not inure to
the benefit of any transferees of Onex other than its Affiliates or, as
expressly provided herein, the Company. Except an otherwise provided herein, no
party may assign any of its rights or delegate any of its duties under this
Agreement.
4.12 Amendment and Waiver. Except as otherwise provided herein,
no modification, amendment or waiver of any provision of this Agreement will be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company and the holders of at
least a majority of the shares of Common Stock and, to the extent that any
modification, amendment or waiver adversely affects the rights of the holders of
any class of Common Stock, by the holders of at least a majority of shares of
such adversely affected class of Common Stock. The failure of a party to insist
upon strict adherence to any term of this Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Agreement. No purported
waiver shall be effective unless in writing. The waiver by any party of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent or other breach.
4.13 Remedies. The Stockholders shall be entitled to enforce
their rights under this Agreement specifically to recover damages by reason of
any breach of any provision of this Agreement and to exercise all other rights
existing in their favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any Stockholder may in its sole discretion apply to any court
of law or equity of competent jurisdiction for specific performance and/or
injunctive relief (without posting a bond or other security) in order to enforce
or prevent any violation of the provisions of this Agreement.
4.14 Counterparts. This Agreement may be executed in counterparts,
each of which shall be considered an original, but all of which together shall
constitute one and the same instrument.
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<PAGE>
4.15 Complete Agreement. This Agreement, the documents expressly
referred to herein and the Registration Agreement embody the complete agreement
and understanding among the parties and supersede and preempt any prior
understanding, agreements or representations by or among the parties, written or
oral, that may be related to the subject matter hereof in any way, except for
the Co-Investment Agreement which will not be superseded or preempted as between
Onex, J2R and their Affiliates.
* * * * * * *
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto, all as of the date first above written.
DURA AUTOMOTIVE HOLDING, INC.
By
---------------------------
Its
--------------------------
ONEX U.S. INVESTMENTS, INC.
By
---------------------------
Its
--------------------------
J2R CORPORATION
By
---------------------------
Its
--------------------------
_____________________________
S.A. Johnson
_____________________________
Scott D. Rued
_____________________________
Robert R. Hibbs
_____________________________
Mary L. Johnson
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
July 22, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Kansas City, Missouri,
July 22, 1996
